Garcia v. Fed. Home Loan Mortg. Corp.
| Decision Date | 02 September 2022 |
| Docket Number | Civil Action 3:20-cv-01458-L |
| Parties | BELINDA BILLALBA GARCIA, Plaintiff, v. FEDERAL HOME LOAN MORTGAGE CORPORATION and NEXBANK SSB, Defendants. |
| Court | U.S. District Court — Northern District of Texas |
BELINDA BILLALBA GARCIA, Plaintiff,
v.
FEDERAL HOME LOAN MORTGAGE CORPORATION and NEXBANK SSB, Defendants.
Civil Action No. 3:20-cv-01458-L
United States District Court, N.D. Texas, Dallas Division
September 2, 2022
MEMORANDUM OPINION AND ORDER
Before the court are (1) the objections of Plaintiff Belinda Billalba Garcia (“Ms. Garcia” or “Plaintiff”) (Doc. 20) to that portion of the January 20, 2021 Findings, Conclusions, and Recommendation of the United States Magistrate Judge (“Report”) (Doc. 19), recommending that the court grant Defendant NexBank SSB's Motion and Application for Attorney's Fees (Doc. 10), and award it $60,375 in attorney's fees from Plaintiff; (2) the response of Defendant NexBank SSB (“NexBank” or “Defendant”) to Ms. Garcia's objections (Doc. 21); and (3) supplemental briefing filed by the parties following a July 30, 2021 hearing on the motion. For the reasons discussed below, the court sustains Ms. Garcia's objections in part and overrules as moot her remaining objections, and it rejects in part and accepts in part the magistrate judge's recommendations.
I. Background Facts and Procedural History
On April 10, 2019, Ms. Garcia obtained a home-equity loan in the amount of $116,000 from the Federal Home Loan Mortgage Corporation (“Freddie Mac”). LoanDepot.com LLC was her initial loan servicer, and NexBank is the current servicer of her loan. Ms. Garcia's closing
documents included a Texas Home Equity Note (“Note”) (Ex. A to Def.'s Mot. Attorney's Fees, Doc. 11-1), a Texas Home Equity Security Instrument (“Security Instrument”) (id. at Ex. B, Doc. 11-2), and a Texas Home Equity Affidavit (id. at Ex. C, Doc. 11-3). The Security Instrument granted the lender a security interest in the real property located at 726 Echo Drive, Grand Prairie, Texas (“Property”), and stated that “[i]t is the intention of Lender and Borrower to structure this Extension of Credit as defined by Section 50(a)(6), Article XVI of the Texas Constitution.” Id. at Ex. B (Doc. 11-2 at 13).
On March 9, 2020, Ms. Garcia sent a notice to Freddie Mac asserting that there were certain constitutional violations on the loan closing that needed to be cured, including, in relevant part, that “[t]he loan was closed somewhere that wasn't your office, a title company's office, or an attorney's office.” Ex. 2 to Pl.'s Orig. Pet. (Doc. 2-2 at 37). Section 50(a)(6)(N) of the Texas Constitution requires the closing of a home equity loan to occur “only at the office of the lender, an attorney at law, or a title company.” Tex. Const. art. XVI, § 50(a)(6)(N). Defendants failed to cure the defect. Pl.'s Orig. Pet. 3 (Doc. 2-2 at 3).[1]
On May 11, 2020, Ms. Garcia sued Freddie Mac and NexBank, alleging that they violated § 50(a)(6) of the Texas Constitution, which was incorporated into her closing documents. Specifically, in her state court petition, Ms. Garcia alleged that the home equity loan was void because it was not closed “at the office of the lender, an attorney at law, or a title company” in violation of § 50(a)(6)(N) of the Texas Constitution. Id. She also alleged that Defendants were in breach of the Security Instrument because they failed to cure a constitutional defect after receiving notice. Id. She asserted claims for breach of contract and declaratory relief under the Texas
Declaratory Judgment Act (“TDJA”), including a judgment that declares the Security Instrument and Note void and quiets title. Id. at 4-10.
On June 8, 2020, Defendants removed the case to this court. On June 15, 2020, Defendants filed a motion to dismiss the action under Federal Rule of Civil Procedure 12(b)(6) for failure to state a claim. On June 23, 2020, Ms. Garcia voluntarily dismissed the case without prejudice under Rule 41(a)(1)(A)(i) of the Federal Rules of Civil Procedure.[2]
On July 6, 2020, NexBank filed its Motion and Application for Attorney's Fees, seeking $60,375 in attorney's fees against Ms. Garcia pursuant to: (i) Section 38.001(8) of the Texas Civil Practice & Remedies Code (asserting that it was the “prevailing party”); (ii) Section 9 of the Security Instrument; (iii) the court's inherent power, and (iv) the TDJA. NexBank also sought attorney's fees against Ms. Garcia's counsel under 28 U.S.C. § 1927, contending he initiated this litigation knowing that Ms. Garcia did not have a viable claim.
On July 15, 2020, the court referred NexBank's Motion and Application for Attorney's Fees to the magistrate judge. See Order of Reference (Doc. 14). On January 20, 2021, the magistrate judge issued her Report (Doc. 19).[3] After analyzing the Security Instrument, the
magistrate judge concluded that NexBank had “shown that [it] is entitled to [its] attorneys' fees under the Security Instrument.” Report 8 (Doc. 19). Specifically, she concluded:
Here, the Security Instrument provides that Plaintiff shall pay the reasonable attorneys' fees incurred by Defendant to protect its interest in the Property or rights under the Security Instrument. (doc. 2-2 at 19-20 (If . . . there is a legal proceeding that might significantly affect Lender's interest in the Property and/or rights under this Security Instrument . . . then Lender may do and pay for whatever is reasonable or appropriate to protect Lender's interest in the Property and rights under this Security Instrument includ[ing], but are not limited to . . . paying reasonable attorneys' fees to protect its interest in the Property and/or rights under this Security Instrument .... Any amounts disbursed by Lender under this Section 9 shall become additional debt of Borrower secured by this Security Instrument.”).) Because Plaintiff's suit threatened Defendants' interest in the Property as well as their rights under the Security Instrument, under Texas law, its language entitles Defendants to recover the attorneys' fees incurred while protecting their rights.
Id. at 6 (citations omitted).
The magistrate judge further concluded that the “prevailing party requirement of § 38.001 does not apply[,]” because NexBank sought attorney's fees under the Security Instrument, which did not condition recovery of attorney's fees and costs on prevailing party status. Id. at 7. She also explained that “[c]ontractual agreements providing for the recovery of attorney's fees supersede the statutory provisions for the recovery of fees found in Texas Civil Practice & Remedies Code chapter 38.” Id. (quoting Garcia v. Wells Fargo Bank, N.A., No. 3:12-CV-645-P, 2012 WL 12873202, at *6 (N.D. Tex. Oct. 26, 2012)).
Based on her findings and conclusions, she recommended that, pursuant to Section 9 of the Security Instrument, the court grant NexBank's request for attorney's fees in the amount of $60,375 against Ms. Garcia for services performed by its attorneys Robert L. Negrin of Aldridge Pite, LLP and Jason Goldsmith of Goldsmith Associates, PLLC. Because the magistrate judge recommended granting the motion pursuant to a provision of the Security Instrument, she did not reach NexBank's remaining arguments in support of its motion. She also recommended that the court deny NexBank's request for attorney's fees against Ms. Garcia's counsel. Id. at 11-13.
Ms. Garcia filed her objections (Doc. 20) on February 3, 2021. NexBank filed its response to Ms. Garcia's objections (Doc. 21) on February 24, 2021. NexBank did not file any objections.
On July 30, 2021, the court held a hearing on NexBank's motion, after which the parties filed supplemental briefing. Much of the hearing focused on NexBank's argument that it was entitled to attorney's fees based on Section 38.001(8) of the Texas Civil Practice & Remedies Code, which the court questioned given that Ms. Garcia voluntarily dismissed her lawsuit without prejudice under Federal Rule of Civil Procedure 41(a)(1)(A)(i), and NexBank did not assert a claim against her and did not recover damages.
Following the hearing, NexBank withdrew any argument that it was entitled to attorney's fees as the “prevailing party” under Texas Civil Practice and Remedies Code § 38.001(8). See Def.'s Second Corrected Supplemental Brief in Support of Motion and Application for Attorney's Fees 6 (Doc. 31) (“Based on counsel's further review of the case law, NexBank withdraws its argument that it is entitled to attorneys' fees based on Section 38.001(8) of the Texas Civil Practice & Remedies Code.”); Id. at 7 (“Here, NexBank did not assert a claim against Plaintiff and did not recover damages. Therefore, section 38.001 cannot form the basis for an award of attorneys' fees.”). NexBank's decision to withdraw its contention that, as a “prevailing party” it was entitled to attorney's fees under section 38.001, moots Ms. Garcia's numerous objections to NexBank's contention that it was a “prevailing party” under Section 38.001(8) of the Texas Civil Practice & Remedies Code and to the magistrate judge's conclusion that she did not need to reach the issue of whether NexBank was a “prevailing party.” Accordingly, the court overrules as moot Ms. Garcia's objections to the magistrate judge's Report related to the magistrate judge's conclusion that she did not need to decide whether NexBank was a “prevailing party” under Section 38.001(8) of the Texas Civil Practice & Remedies Code.
II. Analysis
A. Standard of Review
Federal Rule of Civil Procedure 72 sets forth the standard of review for the district court's consideration of the magistrate judge's findings and recommendations. Fed.R.Civ.P. 72. Although Rule 72 generally applies only to pretrial orders, a district court may refer motions for attorney's fees “to a magistrate judge under Rule 72(b) as if it were a dispositive pretrial matter.” Fed.R.Civ.P. 54(d)(2)(D). When a magistrate judge has ruled on a dispositive motion to which timely objections have been filed, Rule 72(b) requires the district court to “make a de novo determination.” Fed.R.Civ.P. 72(b)...
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