Cruz v. Highlands Residential Mortgage, Ltd.

IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF TEXAS
HOUSTON DIVISION
COWANA SANTA CRUZ,
Plaintiff,
V.
HIGHLANDS RESIDENTIAL
MORTGAGE, LTD.,
Defendant.
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§ 	Civil Action No. H-25-4698
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ORDER
Pending before the Court is Defendant Highlands Residential Mortgage,
Ltd.'s Motion to Dismiss (Document No. 4). Having considered the Defendant's
motion, submissions, and applicable law, the Court determines that the motion
should be granted.
I. 	BACKGROUND
This is a matter involving an alleged wrongful foreclosure. In February 2022,
Plaintiff Cowana Santa Cruz purchased personal property at 12007 Via Palazzo
Lane, Cypress, Texas 77429 (the "Property"), financed with a Note of $550,000
through Defendant Highlands Residential Mortgage, Ltd. ("Highlands"). On July 2,
2025, the Property was sold at a foreclosure sale for $727,000. Plaintiff alleges that
he did not receive notice of default or notice of sale prior to the foreclosure sale.
United States District Court
Southern District of Texas
ENTERED
November 18, 2025
Nathan Ochsner, Clerk
Case 4:25-cv-04698 Document 8 Filed on 11/18/25 in TXSD Page 1 of 12

Based on the foregoing, on September 2, 2025, Plaintiff filed suit in the 189th
District Court of Harris County, Texas, asserting the following claims: (1) "suit to
set aside the foreclsure [sic] sale and cancel trustee's deed"; (2) negligence; (3)
•"violation of the real estate settlement procedures act ("RESPA") and regulation X";
and (4) declaratory judgment. 1 On October 1, 2025, Defendant removed this matter
to this Court pursuant to Federal Question Jurisdiction. 2 On October 20, 2025,
Defendant moved to dismiss Plaintiffs claims for failure to state a claim upon which
relief can be granted. 3 Plaintiff did not respond to Defendant's motion to dismiss
either by the date required under the Federal Rules of Civil Procedure or the date of
this Order.
IL 	STANDARD OF REVIEW
Rule 12(b)(6) allows dismissal if a plaintiff fails "to state a claim upon which
relief can be granted." Fed. R. Civ. P. 12(b)(6). Under Rule 8(a)(2), a pleading must
contain "a short and plain statement of the claim showing that the pleader is entitled
to relief." Fed. R. Civ. P. 8(a)(2). Although "the pleading standard Rule 8 announces
does not require 'detailed factual allegations,' ... it demands more than ... 'labels
1 Notice of Removal, Document No. 1 Exhibit A at 6-10 (Plaintiff's Complaint).
2 Notice of Removal, Document No. 1 at 1.
3 Defendant Highlands Residential Mortgage, Ltd. 's Motion to Dismiss, Document
No. 4 at 1.
2
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and conclusions.'" Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl.
Corp. 	v. 	Twombly, 	550 U.S. 544, 555 (2007)). "[A] formulaic recitation of the
elements of a cause of action will not do." Id. (quoting Twombly, 550 U.S. at 555).
In deciding a Rule 12(b)( 6) motion to dismiss for failure to state a claim, "[t]he
'court accepts all well-pleaded facts as true, viewing them in the light most favorable
to the plaintiff."' In re Katrina Canal Breeches Litig., 495 F.3d 191, 205 (5th Cir.
2007) (quoting Martin K. Eby Constr. Co. v. Dall. Area Rapid Transit, 369 F .3d 464,
467 (5th Cir. 2004)). To survive the motion, a plaintiff must plead "enough facts to
state a claim to relief that is· plausible on its face." 	Twombly, 	550 U.S. at 570.
"Conversely, 'when the allegations in a complaint, however true, could not raise a
claim of entitlement to relief, this basic deficiency should ... be exposed at the point
of minimum expenditure of time and money by the parties and the court."' Cuvillier
v. Taylor, 503 F.3d 397, 401 (5th Cir. 2007) (quoting Twombly, 550 U.S. at 558).
III. LAW & ANALYSIS
Defendant moves to dismiss Plaintiffs claims contending that Plaintiff fails
to state a claim upon which relief can be granted. Plaintiff did not respond to
Defendant's motions to dismiss, failing to rebut or offer evidence to 	counter
Defendants' contentions. Pursuant to Local Rule 7.4, failure to respond is taken as a
representation of no opposition. S.D. Tex. Local R. 7.4. Regardless of Plaintiffs
3
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failure to respond to Defendan~'s motion to dismiss, the Court will consider, in tum,
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the merits of each of Plaintiff'.s claims.
1. 	Plaintiff's Claim 	to/ 	"Set Aside the Foreclsure [sic] Sale and Cancel
Trustee's Deed" 4
Plaintiff alleges that D¢fendant "failed to comply with the Texas Property
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Code's notice requirements" 1
and that, as such, the foreclosure sale should be set
aside. 5 In response, Defendan~ contends that Plaintiffs claim should be construed as
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a claim for wrongful foreclo~ure and dismissed for failure to state a claim upon
which relief can be granted. P;laintiff offers no rebuttal.
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Claims under the Te~as Property Code § 51.002 for lack of notice are
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generally construed as claims (for wrongful foreclosure. See Bittinger v. Wells Fargo
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Bank NA, NO. H-10-1745, 2011 WL 3568206, at *4-5 (S.D. Tex. Aug. 15, 2011);
Ashton v. BAC Home Loans $ervicing, L.P., No. 4:13-cv-810, 2013 WL 3807756,
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I 	•
at *4 (S.D. Tex. Feb. 5, 2025). "Under Texas law, a wrongful foreclosure claim
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ordinarily requires a showinJ of (i) 'a defect in the foreclosure sale proceedings';
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(ii) 'a grossly inadequate selling price'; and (iii) 'a causal connection between the
defect and the grossly inadequate selling price."' Miller v. 	BAC Home Loans
'
4 Plaintiff's Complaint, IDocument No 1 at 6.
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5 Plaintiff's Complaint, IDocument No 1 at 6-7.
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4
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Servicing, L.P., 726 F.3d 717, 726 (5th Cir. 2013) (quoting Sauceda v. 	GMAC
Mortg. Corp., 268 S.W.3d 135, 139 (Tex. App.-Corpus Christi 2008).
Here, Plaintiff alleges that the sale of the property was in violation of the
Texas Property Code and the terms of the Deed of Trust because he never received
notice of the sale. 6 In response, Defendant contends that Plaintiff fails to "allege facts
showing[:] (1) that the Property was sold for a grossly inadequate sale price[;] or (2)
a causal connection between the defect and the grossly inadequate selling price." 7
Furthermore, Defendant contends that Plaintiff alleges that the Property sold for
$1 77 ;000 more than the debt owed, but fails to allege "facts regarding the Property's
fair market value, a depressed sale price, or any irregularity that produced an
inequitably low price." 8 Lastly, Defendant contends that "[b]ecause Cruz [Plaintiff]
has not alleged a grossly inadequate sale price, she has likewise failed to allege a
causal connection[.]" 9 Plaintiff offers no rebuttal.
6 Given the long history of the District Courts construing claims under Texas
Property Code § 51.002 as wrongful foreclosure claims, the Court construes Plaintiffs
claim to "Set Aside the Foreclsure [sic] Sale and Cancel Trustee's Deed" as a claim for
wrongful foreclosure. See Plaintiff's Complaint, Document No. 1 at 6.
7 Defendant Highlands Residential Mortgage, Ltd. 's Motion to Dismiss, Document
No. 4 at 11.
8 Defendant Highlands Residential Mortgage, Ltd. 's Motion to Dismiss, Document
No. 4 at 12.
9 Defendant Highlands Residential Mortgage, Ltd. 's Motion to Dismiss, Document
No. 4 at 13.
5
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The Court has reviewed Plaintiffs complaint in detail. A review of the record
in this matter reveals that Plaintiff states only that the "foreclosure bid was more
than $177,000 above the debt owed."10 Accordingly, the Court finds that Plaintiff
failed to sufficiently plead facts showing that the Property was sold for a grossly
inadequate sales price. Based on the foregoing, and Texas appellate courts' clear
guidance that a Plaintiff must allege both that: ( 1) the Property was sold for a grossly
inadequate sale price; and (2) a causal connection between the defect and the grossly
inadequate sales price, the Court finds that Plaintiff has failed to sufficiently plead
her wrongful foreclosure claim, and thus, her claim should be dismissed. 11 The Court
will now consider Plaintiffs negligence claim.
2. 	Plaintiff's Negligence Claim
Plaintiff alleges that Defendant was negligent in "failing to provide accurate
information regarding the scheduled foreclosure sale" and that such negligence
"caused her to lose her home." 12 Defendant contends that Plaintiffs negligence
10 Plaintiff's Complaint, Document No. 1 at 5.
11 To the extent that Plaintiff intends to bring a claim to recover title, the Court notes
that a review of the record reveals that Plaintiff has not paid the outstanding debt. Based
on the foregoing, and Texas courts' clear guidance that a prerequisite to recoverh1g title is
paying the debt owed on the note, the Court finds that Plaintiff has failed to complete the
required prerequisite to recover title, and thus, Plaintiffs claim to recover title, to the extent
she is bringing one, is dismissed.
12 Plaintiff's Complaint, Document No. 1 at 9.
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claim should be dismissed as it is inapplicable because tort law does not govern
"[d]uties in the mortgage context." 13
When exercising jurisdiction over a question based upon state law, federal
•courts should apply the substantive law of that state. Crisalli v. ARX Holding Corp.,
177 F. App'x 417, 419 (5th Cir. 2006) (citing Erie R.R. Co. v. Tompkins, 304 U.S.
64, 72 (1938)). Tort law is a matter of state law. See Erie R.R. Co. v. Tompkins, 304
U.S. 64, 87 (1938). To allege a negligence action under Texas law, a Plaintiff must
allege sufficient facts to show "a legal duty owed by one person to another, a breach
of that duty, and damages proximately caused by the breach." Nabors Drilling, USA,
Inc. v. Escoto, 288 S.W.3d 401,404 (Tex. 2009); Lane v. Halliburton, 529 F.3d 548,
565 (5th Cir. 2008) (applying Texas State law). Whether or not a legal duty exists is
a question of law determined by considering the surrounding facts. Tri v. J. T. T., 162
S.W.3d 552, 563 (Tex. 2005).
Most pertinent here, there is no special relationship between a mortgagor and
a mortgagee. See Thigpen v. Locke, 363 S.W.2d 247, 253 (Tex. 1962) (finding no
fiduciary relationship between a lender and borrower). As such, the duty owed is
governed by contract, not tort. Miller v. CitiMortgage, Inc., 970 F .Supp.2d 568, 585
13 Defendant Highlands Residential Mortgage, Ltd. 's Motion to Dismiss, Document
No. 4 at 16. 	•
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(N.D. Tex. Sep. 5, 2013) (quoting UMLIC VP LLC v. T&M Sales & Envtl. Sys., Inc.,
176 S.W.3d 595, 613-15 (Tex. App.-Corpus Christi 2005)).
Here, Plaintiff alleges that Defendant owed her a duty of care, that Defendant
breached said duty, and that said breach caused Plaintiffs damages. 14 In response,
Defendant contends that "because Texas law imposes no common-law duty of care
or fiduciary duty on a lender to a borrower ... there can be no negligence claim." 15
Plaintiff offers no rebuttal. Given Texas appellate courts' clear guidance that no
special relationship exists between a mortgagor and mortgagee, the Court finds that
no legal duty was owed to Plaintiff by Defendant. Based on the foregoing, and the
Texas courts' clear guidance that a negligence cause of action requires the presence
of a legal duty, the Court finds that Plaintiffs negligence claim should be dismissed.
The Court will now 	consider Plaintiffs claim for violations 	of RESP A and
Regulation X.
3. 	Plaintiff's Claim for Violations of RESPA and Regulation X
Plaintiff alleges that she is entitled to remedies 	under 	RESP A because
Defendant was in violation of Regulation X of the Code of Federal Regulations.
Defendant contends that Plaintiffs RESP A claim is inadequately pled and must be
14 Plaintiff's Complaint, Document No. 1 at 8.
15 Defendant Highlands Residential Mortgage, Ltd. 's Motion to Dismiss, Document
No. 4 at 7.
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dismissed for failure to state a claim upon which relief can be granted. Plaintiff offers
no rebuttal.
Regulation X regulates loss mitigation procedures provides by loan services.
See 12 C.F .R. § 1024. RESP A allows a Plaintiff to bring a private cause of action to
enforce Regulation X. See 12 U.S.C. § 2605(f). Most pertinent here, a Plaintiff who
seeks to recover under RESP A for violations of Regulation X must allege that their
complete loss mitigation application "was their first complete loss mitigation
application" 	or 	that they 	became 	current 	on 	their 	payments 	following 	the
consideration of a previous complete loss mitigation application. Solis v. US. Bank,
N.A., 726 F. App'x 221, 223 (5th Cir. 2018).
Here, 	Plaintiff alleges 	that 	"[t]he 	acts, 	conduct, 	and/or 	om1ss1ons 	of
Defendant, which at all material times hereto was acting in its alleged capacity as a
'mortgage holder and servicer', also constitute violations of Regulation X[.]" 16 In
response, Defendant contends that "Cruz does not-because she cannot-allege that
the April 2025 loan modification package was her first complete loss mitigation
application or that she became current on her mortgage payment after Highlands.
considered her first complete loan modification package." 17 Defendant further
16 Plaintiff's Complaint, Document No. 1 at 9.
11 Defendant Highlands Residential Mortgage, Ltd. 's Motion to Dismiss, Document
No. 4 at 18.
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contends that "[t]his is fatal to Cruz's RESPA claim" and that Plaintiffs RESPA
claim must be dismissed. 18 Plaintiff offers no rebuttal.
A review of the record in this matter reveals that Plaintiff failed to plead any
facts suggesting that the complete loss mitigation application in question was her
first complete loss mitigation application. Based on the foregoing, and the Fifth
Circuit's clear guidance that a plaintiff must plead facts suggesting that the loan
modification application in question is their first loan modification application, the
Court finds that Plaintiff has failed to sufficiently plead her RESPA claim, and thus,
it should be dismissed. The Court will now consider Plaintiffs claim for declaratory
judgment.
4. 	Plaintiff's Claim for Declaratory Judgment
Plaintiff "seeks a determination of the rights of the parties" and requests that
the Court determine that a legal duty exists between Plaintiff and Defendant entitling
Plaintiff to 	recover. damages. 	Defendant 	contends 	that 	Plaintiffs 	claim 	for
declaratory judgment must be dismissed because Plaintiffs "substantive claims fail
as a matter of law." 19 Plaintiff offers no rebuttal.
18 Defendant Highlands Residential Mortgage, Ltd. 's Motion to Dismiss, Document
No. 4 at 18.
19 Defendant Highlands Residential Mortgage, Ltd. 's Motion to Dismiss, Document
No. 4 at 19.
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"'When a declaratory judgment action filed in state court is removed to federal
court ... courts analyze claims under the federal Declaratory Judgment Act"' Ankus,
LLC v. PHH Mortgage Corp., No. H-22-0355, 2022 WL 4279721, at *2 (S.D. Tex.
Sep. 15, 2022) (quoting Collins v. National Football League, 566 F. Supp. 3d 586,
602-03 (E.D. Tex. 2021)). The Declaratory Judgment Act allows any court to
declare the rights of interested parties seeking such a declaration. See 28 U.S.C. §
2201(a). However, declaratory judgment "is merely a procedural device and does
not create any substantive rights or causes of action." Smitherman v. Bayview Loan
Servicing, LLC, 727 F. App'x 787, 792 (5th Cir. 2018).
Here, Plaintiff "seeks a determination of the rights of the parties [. ]" 20 In
response, Defendant contends that declaratory judgment "is merely a procedural
device" and that "[b]ecause Cruz's substantive claims fair as a matter of law ...
Cruz's declaratory judgment claim should also be dismissed." 21 Based on the
foregoing, and the Fifth Circuit's clear guidance that declaratory judgment is a
procedural devise and not a cause of action, the Court finds that Plaintiffs claim for
declaratory judgment should be dismissed.
20 Plaintiff's Complaint, Document No. 1 at 10.
21 Defendant Highlands Residential Mortgage, Ltd. 's Motion to Dismiss, Document
No. 4 at 19.
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IV. CONCLUSION
Based on the foregoing, the Court hereby
ORDERS that Defendant Highlands Residential Mortgage, Ltd.'s Motion to
Dismiss (Document No. 4) is GRANTED. The Court furth~r
ORDERS that Plaintiff Cowana Santa- Cruz's claims against Defendant
Highlands Residential Mortgage, Ltd. are DISMISSED WITHOUT PREJUDICE.
THIS IS A FINAL JUDGMENT
SIGNED at Houston, Texas, on this 	f'Sday ofNovember, 2025.
United States District Judge
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