The debtor entered into a loan agreement with the bank, which consisted of a note and a security interest in the debtor’s property. The debtor promised to pay periodic payments of the original sum with interest. However, after the debtor passed away, the bank still sent notice of default on the loan to the property’s address, and the default was not cured. The bank sought a declaratory judgment and foreclosure on the property owned by the debtor’s heirs (hereinafter referred to as debtors). The debtors failed to answer the bank’s process, so the bank requested the entry of a default. The Clerk of Court entered the default, and then the bank moved for a default judgment based on non-judicial foreclosure.
In US Bank N.A. v. White, No. 3:24-cv-1212-K-BN, 2025 WL 714250, 2025 U.S. Dist. LEXIS 40688 (N.D. Tex. Feb. 10, 2025) (opinion not yet released for publication), the district court granted the bank’s motion for default judgment. To obtain a default judgment in the Fifth Circuit, one must receive: “(1) default by the defendant; (2) entry of default by the Clerk's office; and (3) entry of a default judgment by the district court.” See N.Y. Life Ins. Co. v. Brown, 84 F.3d 137, 141 (5th Cir. 1996). The court analyzed that “In Texas, to foreclose under a security instrument with a power of sale, the lender is required to show that: (1) a debt exists; (2) the debt is secured by a lien created under Texas law; (3) the borrower is in default under the note and security instrument; and (4) the borrower has been properly served with notice of default and acceleration." Singleton v. United States Bank N.A., No. 4:15-cv-100-A, 2016 U.S. Dist. LEXIS 53019, 2016 WL 1611378, at *7 (N.D. Tex. Apr. 20, 2016). The court concluded that the bank had met all the elements for non-judicial foreclosure because (1) the bank alleged a debt exists; (2) the debt is secured by a lien on the Property under Article 16, Section 50(a)(6) of the Texas Constitution; (3) there is a default on the loan; and (4) the bank sent notice of default via certified mail to the address of the decedent. "Service of notice is complete when the notice is sent via certified mail." Martins v. BAC Home Loans Servicing, L.P., 722 F.3d 249, 256 (5th Cir. 2013). Next, the court explained that because the bank referred to the loan agreement as a “mortgage contract,” it needed to analyze whether the bank adequately pleaded a breach of contract claim. The bank showed that (1) a valid contract existed as a loan agreement; (2) the bank fully performed under the loan agreement; (3) the debtors failed to pay under the loan agreement; and (4) the bank suffered damages for the unpaid payments from the breach of contract. Therefore, the court concluded the bank satisfied the elements required for a breach of contract claim. The court also concluded that the bank had standing to initiate a non-judicial foreclosure because it was a “mortgagee” under Chapter 51 of the Texas Property Code. The bank could also recover attorneys’ fees because the loan agreement had a provision that stated: "the Note Holder will have the right to be paid back by [borrower] for all of its costs and expenses in enforcing this Note to the extent not prohibited by applicable law. Those expenses include, for example, reasonable attorneys' fees." Finally, the court considered relevant factors before it entered the default judgment. It found that no substantial prejudice was present, there were “clearly established grounds for default,” and no indication that the debtor’s “default was caused by good faith or excusable neglect.” Therefore, the court granted the bank’s motion for default judgment against the debtors.
By Olivia Lewis [email protected]
Edited By Jace Brown [email protected]
Edited By Callighan Ard [email protected]
Edited By Hayden Mariott [email protected]