Court Opinion

ID: 9931463
Source: CourtListenerOpinion
Date Created: 2024-02-09 01:00:39.829558+00
Date Added: 2024-06-11T12:16:51.230794
License: Public Domain

Case: 23-40370        Document: 00517060806             Page: 1      Date Filed: 02/08/2024

             United States Court of Appeals
                  for the Fifth Circuit                                United States Court of Appeals
                                                                                Fifth Circuit
                                     ____________                             FILED
                                                                       February 8, 2024
                                      No. 23-40370
                                                                         Lyle W. Cayce
                                     ____________                             Clerk

   HSBC Bank USA, N.A., as trustee for Merrill Lynch
   Mortgage Investors, Incorporated, Mortgage Pass-
   Through Certiﬁcates, MANA Series 2007-AFI,

                                                                     Plaintiﬀ—Appellee,

                                            versus

   Paul Wesley Klinger, Jr.; Mindee Karine Klinger,

                                             Defendants—Appellants.
                     ______________________________

                     Appeal from the United States District Court
                         for the Southern District of Texas
                               USDC No. 3:21-CV-148
                     ______________________________

   Before Elrod, Willett, and Duncan, Circuit Judges.
   Per Curiam: *
         Defendants-Appellants Paul and Mindee Klinger appeal the district
   court’s grant of summary judgment to Plaintiﬀ-Appellee HSBC Bank in this
   mortgage-foreclosure suit. Because the bank did not demonstrate a clear and
   unequivocal intent to abandon acceleration of the Klingers’ loan, we
   AFFIRM.

         *
             This opinion is not designated for publication. See 5th Cir. R. 47.5.
Case: 23-40370      Document: 00517060806             Page: 2   Date Filed: 02/08/2024

                                       No. 23-40370

                                            I
          In 2006, the Klingers executed a home equity note payable to
   GreenPoint Mortgage Funding, Inc. for the amount of $1,200,000.00. In
   addition, they signed a corresponding Texas Home Equity Security
   Instrument, which is referred to here as the Deed of Trust. The Deed of
   Trust granted GreenPoint a security interest in the real property located at
   15141 Lakeview Drive, Beach City, Texas, 77520. GreenPoint then assigned
   its interest to the bank in 2019.
          Under the terms of the loan agreement, the Klingers were required to
   pay the principal and interest on the debt evidenced by the Note, as well as
   any charges and fees due under the Note. The loan agreement further
   provided that the lender may enforce the Deed of Trust by selling the
   property according to law and in accordance with the provisions set out in
   the loan agreement if the borrowers failed to make payments.
          In 2013, the Klingers defaulted on the mortgage.            Accordingly,
   Ocwen, the bank’s loan servicer, sent the Klingers a Notice of Default. The
   Notice informed the Klingers that they needed to make payment of the entire
   amount past due plus any amount becoming due on or before December 13,
   2018, to cure the default. The Notice further stated that failure to cure the
   default would result in the acceleration of the sums secured by the Deed of
   Trust and the sale of the property. The default was not cured.
          The bank or its loan servicer then communicated with the Klingers
   three times.    First, in January 2019, the Klingers received notice of
   acceleration. Then, in March 2019, the loan servicer informed the Klingers
   that they were approved for a Trial Period Plan. Under the Trial Period Plan,
   the Klingers would be required to make three payments of $9,872.08, due on
   April 1, 2019, May 1, 2019, and June 1, 2019. Compliance with the plan would
   lead to a modiﬁed payment agreement. Notably, the Trial-Period-Plan letter

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   expressly disclaimed any intent to waive the bank’s January 2019
   acceleration. Finally, in June 2019, the Klingers were notiﬁed that the
   servicing of the loan agreement would be transferred from Ocwen to PHH
   Mortgage Services as the result of a merger. The transfer letter noted that
   the loan’s required monthly payment was $9,211.00 and that the “next
   monthly payment” was “due on 12/1/2013.”
          Mr. Klinger ﬁrst responded to the Trial Period Plan oﬀer by saying
   that he was “agreeable” to the Plan and requesting that the ﬁrst payment be
   moved to May 1, 2019. Ocwen rejected this request but gave the Klingers
   until the end of April to submit their ﬁrst payment. The Klingers then made
   their ﬁrst payment on April 27, 2019. Ocwen accepted and applied this
   payment. But the Klingers failed to make the subsequent two payments
   required under the Trial Period Plan.
                                           II
          The bank ﬁled suit against the Klingers seeking a declaratory
   judgment allowing non-judicial foreclosure of the property for failure to make
   monthly payments due on the Note.            The bank moved for summary
   judgment. The district court granted the motion, allowing the bank to
   proceed with foreclosure of the mortgaged real property. The Klingers
   timely appealed.
                                        III
          “We review a district court’s grant of summary judgment de novo,
   applying the same standard as the district court.” Wilmington Tr., Nat’l
   Ass’n v. Rob, 891 F.3d 174, 176 (5th Cir. 2018). Summary judgment is proper
   when “there is no genuine dispute as to any material fact and the movant is
   entitled to judgment as a matter of law.” Fed. R. Civ. P. 56(a). “A genuine
   dispute of material fact exists if the evidence is such that a reasonable jury
   could return a verdict for the nonmoving party.” Jatera Corp. v. US Bank

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   Nat’l Ass’n, 917 F.3d 831, 834 (5th Cir. 2019) (quoting Bitterroot Holdings,
   L.L.C. v. MTGLQ Invs., L.P., 648 F. App’x 414, 417 (5th Cir. 2016)).
                                          IV
          The Klingers argue that the district court erred by granting summary
   judgment to the bank because the Klingers did not receive proper notice of
   default and acceleration, as required for a non-judicial foreclosure under the
   Texas Property Code. We disagree.
          To foreclose under a security instrument in Texas, the lender must
   demonstrate that: “(1) a debt exists; (2) the debt is secured by a lien created
   under Art. 16, § 50(a)(6) of the Texas Constitution; (3) plaintiﬀs are in
   default under the note and security instrument; and (4) plaintiﬀs received
   notice of default and acceleration.” Bowman v. CitiMortgage Inc., 768 F.
   App’x 220, 223 (5th Cir. 2019) (quoting Huston v. United States Bank Nat’l
   Ass’n, 988 F. Supp.2d 732, 740 (S.D. Tex. 2013), aﬀ’d, 583 F. App’x 306 (5th
   Cir. 2014)); Tex. Prop. Code § 51.002. The Klingers concede that the bank
   satisﬁed the ﬁrst three requirements. However, they argue that the bank is
   not entitled to foreclose because it abandoned its January 2019 acceleration
   before ﬁling for non-judicial foreclosure.
          In Texas, “[e]ﬀective acceleration requires two acts: (1) notice of
   intent to accelerate, and (2) notice of acceleration.” Holy Cross Church of God
   in Christ v. Wolf, 44 S.W.3d 562, 566 (Tex. 2001). “Both notices must be
   ʻclear and unequivocal.’” Id. (quoting Shumway v. Horizon Credit Corp., 801
   S.W.2d 890, 893 (Tex. 1991)). Whether an acceleration is abandoned is “a
   question of law when the facts that are relevant to a party’s relinquishment
   of an existing right are undisputed,” as is true here. See Boren v. United States
   Nat’l Bank Ass’n, 807 F.3d 99, 106 (5th Cir. 2015). The issue is analyzed “by
   reference to the traditional principles of waiver.” Id. at 105.

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          “Under Texas Law, the elements of waiver include: (1) an existing
   right, beneﬁt, or advantage held by a party; (2) the party’s actual knowledge
   of its existence; and (3) the party’s actual intent to relinquish the right, or
   intentional conduct inconsistent with the right.” Id. (quoting Thompson v.
   Bank of Am. Nat’l Ass’n, 783 F.3d 1022, 1025 (5th Cir. 2015)).
          As the district court properly recognized, “[w]aiver is largely a matter
   of intent.” Jernigan v. Langley, 111 S.W.3d 153, 156 (Tex. 2003). Indeed,
   “intent to abandon [acceleration] must be ʻunequivocally manifested’” by a
   noteholder. Sexton v. Deutsche Bank Nat’l Tr. Co., 731 F. App’x 302, 305 (5th
   Cir. 2018) (quoting Thompson, 783 F.3d at 1025). Although a noteholder can
   abandon acceleration by acceptance of payments in some circumstances, the
   mere acceptance of payment is not an automatic abandonment of
   acceleration. Cf. Rivera v. Bank of Am., N.A., 607 F. App’x 358, 360–61 (5th
   Cir. 2015) (holding that a noteholder can abandon acceleration if it continues
   to accept payments without exacting any remedies available to it upon
   declared maturity). Instead, the circumstances must show an undisputed
   intent to abandon acceleration. See Sexton, 731 F. App’x at 306.
          Here, the bank did not intentionally and unequivocally manifest its
   intent to abandon the acceleration. Although the bank oﬀered the Klingers
   the potential to modify their loan through the Trial Period Plan and accepted
   the Klingers’ ﬁrst payment under that Plan, the bank clearly preserved its
   January 2019 acceleration by stating, “Our acceptance and posting of
   payment during the Trial Period Plan will not be deemed a waiver of the
   acceleration and related activities, including the right to resume or continue
   foreclosure actions if there is failure to comply with the terms of the
   plan . . . .” The Plan further explained, “Any pending foreclosure action or
   proceeding that has been suspended may be resumed if there is a failure to
   comply with the terms of the plan or the account no longer qualiﬁes for
   Permanent Mortgage Modiﬁcation.” This language preserved the bank’s

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                                     No. 23-40370

   prior acceleration despite the bank’s acceptance of the ﬁrst payment under
   the Plan. See Hollenshead v. Bank of Am., N.A., No.4:18-CV-00724-ALM-
   CAN, 2020 WL 4615096, at *15 (E.D. Tex. May 19, 2020), report and
   recommendation adopted, No.4:18-cv-724, 2020 WL 3496335 (E.D. Tex. June
   29, 2020) (holding that similar language in a loan modiﬁcation agreement
   preserved a prior acceleration); cf. DeFranceschi v. Seterus, Inc., 731 F. App’x
   309, 312 (5th Cir. 2018) (concluding that correspondence stating that
   acceleration would occur if payment on a modiﬁcation plan was not made was
   evidence of intent to abandon acceleration).
          Likewise, to the extent that the Klingers rely on the notice of service
   transfer from Ocwen to PHH Mortgage Services as evidence of the bank’s
   intent to abandon acceleration, that argument is unconvincing. As the
   district court correctly held, there is nothing in the transfer of service letter
   that suggests that the bank “represent[ed] to the mortgagor that payment of
   less than the entire obligation [would] bring the loan current.” Martin v. Fed.
   Nat’l Mortg. Ass’n, 814 F.3d 315, 318–19 (5th Cir. 2016). The notice-of-
   service-transfer letter stated that the next monthly payment was due on
   December 1, 2013, indicating that the loan remained in default. Even if the
   letter expressed the bank’s intent to accept a payment that was less than the
   Klingers’ full obligation at that time, the letter cannot be understood to show
   abandonment of the remainder of the payments. Indeed, in addition to
   stating the amount required in the next monthly payment, the letter also
   stated the total amount due and date of default, which implied the bank’s
   ongoing intent to proceed with acceleration.
          Because neither the bank’s acceptance of the Klingers’ ﬁrst payment
   under the Trial Period Plan nor the notice-of-service-transfer letter
   unequivocally manifested the bank’s intent to abandon the January 2019
   acceleration, we AFFIRM the district court’s grant of summary judgment.

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