Cao v. BSI Financial Services, Inc. et al

Filing 95

ORDER OVERRULING 90 Amended emergency objections to a memorandum and recommendation. (Signed by Judge Gray H Miller) Parties notified.(rkonieczny, 4)

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF TEXAS
HOUSTON DIVISION
ANGELA CAO,
Plaintiff,
v.
BSI FINANCIAL SERVICES, INC., et al.,
Defendants.

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CIVIL ACTION H-17-321

ORDER
Pending before the court are amended emergency objections to a memorandum and
recommendation (“M&R”) issued by the Magistrate Judge on April 24, 2019. Dkt. 90 (amended
objections); Dkt. 86 (M&R). The court ruled on plaintiff Angela Cao’s objections before her
amended objections were entered into the court’s electronic filing system. See Dkt. 91. This order
supplements the order ruling on the original objections. The time has not passed for all objections
to be filed, so the court rules herein only on the amended emergency objections. The court has
conducted a de novo review and finds that the amended objections should be OVERRULED.
It appears that the amended objections add an additional argument related to defendant BSI
Financial Services, Inc.’s notice of rescission sent in 2018. Compare Dkt. 88, with Dkt. 90. The
notice rescinds a November 2016 acceleration. Dkt. 88, Ex. 7 (Dkt. 88-4). Cao appears to
understand the notice of rescission as evidencing that her defaults were cured. Dkt. 90. However,
the notice actually states that the note and deed of trust were in effect “in accordance with their
original terms and conditions, as though no acceleration took place.” Dkt. 88, Ex. 7. The Magistrate
Judge explained what this means to Cao during the injunction hearing. See Dkt. 84 at 35–36 (“It
didn’t – it didn’t say you didn’t owe any money. It just was trying to let you – it’s rescinding the
acceleration so you can try to work it out.”).

Cao argues in her amended objections that BSI could not abandon its acceleration without
the agreement of both parties, citing Khan v. GBAK Properties, Inc., 371 S.W.3d 347, 353 (Tex.
App.—Houston [1st Dist.] 2012, no pet.). The Khan court stated: “A note holder who exercises its
option to accelerate may ‘abandon acceleration if the holder continues to accept payments without
exacting any remedies available to it upon declared maturity.’ . . . In addition, acceleration can be
abandoned by agreement or other action of the parties. . . . Abandonment of acceleration has the
effect of restoring the contract to its original condition, including restoring the note’s original
maturity date.” 371 S.W.3d at 343 (emphasis added) (citation omitted). Thus, while certainly
abandonment can be agreed upon by the parties, there are other ways in which acceleration may be
abandoned. One of these ways is under Texas Civil Practices and Remedies Code section 16.038,
which permits a lender to rescind acceleration by written notice of rescission via first class or
certified mail. See also Boren v. U.S. Nat’l Bank Ass’n, 807 F.3d 99, 106 (5th Cir. 2015) (noting that
section 16.038 “provides a specific mechanism by which a lender can waive its earlier acceleration”
and can be “construed as a ‘best practice’ for a lender seeking to effectuate its abandonment”). As
the Magistrate Judge noted in her M&R, the “notice simply rescinded the acceleration of the Loan
without waiving any remedies for Plaintiff’s alleged defaults.” Dkt. 86.
As the court stated in its order regarding the original objections, Cao has not presented any
arguments that demonstrate a substantial likelihood of success on the merits of her claims. The
amended objections do not change this conclusion. Accordingly, her amended objections are
OVERRULED.
Signed at Houston, Texas on May 8, 2019.

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Gray H. Miller
Senior United States District Judge
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