Reported / Citable
Background
Michelle Kelly executed a $281,310 promissory note in November 2019, secured by a deed of trust on residential property at 903 Chaparral Street in Midland, Texas. Lakeview Loan Servicing alleged that it owns the note and is the beneficiary of the deed of trust, and that Kelly stopped making payments beginning July 1, 2024.
Lakeview sued Kelly and other parties claiming interests in the property. Aqua Finance was named because of a UCC financing statement that Lakeview alleged was subordinate to its lien; Lakeview sought no monetary relief from Aqua Finance. Kelly and Aqua Finance were served but did not answer, respond to a show-cause order, or otherwise appear, and the clerk entered default against them. Lakeview then moved for default judgment. The claims involving the homeowners association and the United States had previously been addressed by consent orders.
The Court’s Holding
Magistrate Judge Ronald C. Griffin recommended granting Lakeview’s motion for default judgment against Kelly and Aqua Finance. He concluded that default judgment was procedurally warranted because the defendants remained entirely unresponsive, leaving no material factual dispute and halting the adversarial process without evidence of excusable neglect.
The magistrate judge also found that Lakeview’s well-pleaded allegations established a breach-of-contract claim against Kelly and the elements required for judicial foreclosure under Texas law: Lakeview owned a note secured by the property, part of the debt was due and unpaid, and the property subject to the lien was the property Lakeview sought to foreclose. The recommended judgment would authorize judicial foreclosure, award $4,000 in reasonable attorney fees, and allow federal post-judgment interest. The magistrate judge recommended denying costs because Lakeview did not timely submit supporting evidence for them.
Key Takeaways
- The ruling is a report and recommendation, not a final judgment; the parties were given 14 days after service to object.
- Kelly’s default admitted the complaint’s well-pleaded factual allegations, but the court still examined whether those allegations supplied a sufficient legal basis for breach of contract and foreclosure.
- The recommended judgment would permit foreclosure and recovery of $363,660.63, with interest continuing to accrue as specified, but would not award unsupported litigation costs.
Why It Matters
The recommendation illustrates that a clerk’s entry of default does not automatically entitle a mortgage holder to judgment. Even when defendants do not appear, the lender must plead and support its contractual claim, establish its right to foreclose the identified property, and substantiate the requested relief.
It also underscores the distinction between attorney fees and costs: the magistrate judge accepted counsel’s declaration supporting $4,000 in fees but declined to recommend costs because Lakeview failed to provide the requested evidentiary support by the deadline.