Marketic v. U.S. Bank Nat. Ass'n

• Decision Date: 15 June 2006
• Docket Number: Civil Action 7:05-cv-131-R.
• Citation: 436 F.Supp.2d 842
• Parties: Shannon Larrea MARKETIC, Plaintiff, v. U.S. BANK NATIONAL ASSOC., Defendant.
• Court: U.S. District Court — Northern District of Texas

436 F.Supp.2d 842

Shannon Larrea MARKETIC, Plaintiff, v. U.S. BANK NATIONAL ASSOC., Defendant.

Civil Action 7:05-cv-131-R.

United States District Court, N.D. Texas, Wichita Falls Division.

June 15, 2006.

COPYRIGHT MATERIAL OMITTED

Jack H. Garrett, Law Office of Jack H. Garrett, Fort Worth, TX, Michael Brinkley, Law Office of Michael Brinkley, Fort Worth, TX, for Plaintiff.

Allison R. Hughes, Lindsay L. Lambert, Hughes Watters & Askanase, Houston, TX, for Defendant.

MEMORANDUM OPINION AND ORDER

BUCHMEYER, District Judge.

Now before the Court is defendant U.S. Bank National Association's Motion for Partial Summary Judgment (Dkt. No. 27). For the reasons explained below, the Court GRANTS, IN PART, and DENIES, IN PART, Defendant's motion.

I. BACKGROUND

In November 2001, plaintiff Sharon Larhea Marketic obtained a $195,000 home equity loan from New Century Mortgage Corp. ("New Century"). As security for the loan, New Century obtained a first lien mortgage on her property-10 acres of land located in Montague County, Texas. Another company, Premier USA Mortgage, Inc. ("Premier USA"), served as the Marketic's broker on the deal.

To consummate the transaction, Marketic and New Century executed three documents (1) a promissory note evincing Marketic's indebtedness to New Century (the "Note"); (2) a home equity affidavit signed by Marketic which represented that the property to be mortgaged was in fact homestead property and was not designated for agricultural use under the relevant statutes governing property taxes (the "Home Equity Affidavit"); and (3) a security instrument creating a first lien on the property referred to in the home equity affidavit (the "Security Instrument"). The security instrument authorized the Note-holder to accelerate Marketic's indebtedness and foreclose upon the property if she defaulted upon the note and failed to cure the default within a reasonable time. Plaintiff also claims that she received a Truth-in-Lending Disclosure Statement and a HUD-1 Settlement Statement at the time of closing.

On November 16, 2001, the Note and the Security Instrument were subsequently assigned to defendant U.S. Bank National Association ("Defendant" or "US Bank"). (Mot.App.33). By March 2004, Marketic had defaulted on the Note by failing to make several monthly payments. As a result, Defendant accelerated her debt as contemplated by the Security Instrument. Plaintiff failed to cure her default or reinstate her debt.

Plaintiff has filed this lawsuit seeking declaratory and injunctive relief to prevent Defendant from foreclosing on her property. She alleges that the home equity loan documents that New Century provided to her did not comply with several requirements of section 50(a)(6) of Article XVI of the Texas Constitution, which relates to home equity liens on homestead property. Marketic also alleges that, as a matter of state constitutional law, Defendant cannot foreclose upon her property because it is designated for agricultural use under the relevant property tax statutes. She contends that her property was originally designated for agricultural use but that the designation "was changed prior to closing ... at the instance and request of Premier USA[] and, to [her] understanding, New Century [] as a condition of making the loan." (Pl.'s Ex. B; Marketic Decl. ¶¶4-5). Marketic also seeks damages against U.S. Bank for breach of contract; the Texas Deceptive Trade Practices Act, Tex. Bus. & Comm.Code §§ 17.41 et seq.; the Truth-in-Lending Act, 15 U.S.C. §§ 1601 et seq.; the Texas Debt Collection Act, Tex. Fin.Code Ann. §§ 392 et seq.; the federal Fair Debt Collection Act, 15 U.S.C. §§ 1692 et seq.; the Real Estate Settlement Procedures Act, 12 U.S.C. §§ 2601 et seq.; and constructive fraud.

Defendant has counterclaimed for common law and statutory fraud based on Marketic's representation that the property was not designated for agricultural use. It seeks an order allowing it to foreclose on the property. Defendant has now moved for summary judgment on all of Plaintiff's claims except her claims under the Truth In Lending Act and the Real Estate Settlement Procedures Act.

II. ANALYSIS

A. Summary Judgment Standard

Summary judgment under Rule 56(c) of the Federal Rules of Civil Procedure is appropriate when there is no genuine issue as to any material fact in the case and the moving party is entitled to judgment as a matter of law. See Fed.R.Civ.P. 56(c); Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S.Ct. 2548, 91 L.E d.2d 265, (1986); Melton v. Teachers Ins. & Annuity Ass'n of Am., 114 F.3d 557, 559 (5th Cir.1997).

The party moving for summary judgment bears the initial burden of identifying those portions of the pleadings, depositions, answers to interrogatories, and admissions on file, together with affidavits, if any, which it believes demonstrate the absence of a genuine issue of material fact. See Celotex, 477 U.S. at 323, 106 S.Ct. 2548; Calbillo v. Cavender Oldsmobile, Inc., 288 F.3d 721, 725 (5th Cir.2002). Where the non-movant bears the burden of proof on a claim upon which summary judgment is sought, the movant may also discharge its initial burden by showing that there is an absence of evidence to support the nonmoving party's case. See Celotex, 477 U.S. at 325, 106 S.Ct. 2548. Once the movant has met its initial burden, the non-movant must set forth specific facts, by affidavits or otherwise, showing that there is a genuine issue for trial. See Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986); Edwards v. Your Credit, Inc., 148 F.3d 427, 431-32 (5th Cir.1998). Summary judgment will be granted "against a party who fails to make a showing sufficient to establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial." Celotex, 477 U.S. at 322, 106 S.Ct. 2548.

When weighing the evidence on a motion for summary judgment, the court must decide all reasonable doubts and inferences in the light most favorable to the non-movant. See Hotard v. State Farm Fire & Cas. Co., 286 F.3d 814, 817 (5th Cir.2002); Walker v. Sears, Roebuck & Co., 853 F.2d 355, 358 (5th Cir.1988). The court cannot make a credibility determination in light of conflicting evidence or competing inferences. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). As long as there appears to be some support for the disputed allegations such that "reasonable minds could differ as to the import of the evidence," the motion for summary judgment must be denied. Id. at 250, 106 S.Ct. 2505.

B. Validity of the Lien under Article XVI, Section 50(a) of the Texas Constitution

Section 50 of Article XVI of the Texas Constitution generally protects a homestead from foreclosure (i.e., a "forced sale") for the payment of debts. Tex. Const. art. XVI, § 50(a) (Vernon Supp. 2005). In 1997, the Texas Constitution was amended to expand the types of liens that a lender could place against homestead property with the homeowner's consent. Doody v. Ameriquest Mort. Co., 49 S.W.3d 342, 343 (Tex.2001). Currently, section 50(a) of Article XVI of the Texas Constitution sets forth eight types of loans or extensions of credit that may be validly secured by a borrower's homestead. See Tex. Const. art. XVI, §§ 50(a)(1)-(8).

One of the 1997 amendments to § 50—subsection (a)(6)—permitted home equity lending against homestead property. See Doody, 49 S.W.3d at 343. In order for a home equity lien to be valid, the home equity loan must comply with the numerous requirements set forth in subsections (A)-(Q) of section 50(a)(6). Those provisions detail the terms and conditions that may be placed on such loans and list the rights and obligations of borrowers and home-equity lenders. See Tex. Const. art. XVI, §§ 50(a)(6)(A)-(Q).¹ Marketic has challenged the validity of U.S. Bank's lien on her home under two of those provisions—subsections (E) and (I) of § 50(a)(6).

1. Invalidity for Excessive Fees

Section 50(a)(6)(E) of Article XVI of the Texas Constitution prohibits foreclosure on property to pay a debt that arises from a line of credit that "requires the owner .. . to pay, in addition to any interest, fees to any person that are necessary to originate, evaluate, maintain, record, insure, or service the extension of credit that exceed[ed], in the aggregate, three percent of the original principal amount of the extension of credit . " Tex. Const. Art. XVI, § 50(a)(6)(E). Plaintiff claims that the home equity loan that she received violated this 3% cap on fees and, therefore, cannot be subject to forced sale.

Defendant alleges that Plaintiff has provided no evidence that she paid fees in excess of $5,850-3% of the value of her loan. Rather, Defendant alleges that the HUD-1 Settlement Statement, which Plaintiff signed, states that she paid only $5,391.90 in total fees. (Def.'s Mot. Br. at 10, citing Mot.App. 60, line items 801, 1108, 1111-13, 1201, 1203, and 1303).

Notably absent from Defendant's calculation is a loan discount fee that Marketic paid in connection with obtaining the loan. The HUD-1 settlement statement submitted as evidence to the court reveals that Marketic paid an additional $3,900 in exchange for a 2% "Loan Discount." (Jt.App. 60, line 802). When added to the amounts that defendant has previously mentioned, Plaintiff contends that the aggregate amount paid exceeds the 3% constitutional limit on fees under § 50(a)(6)(E). For that reason, she argues that the lien on her property is invalidated by § 50(a)(6)(E) as a matter of state constitutional law. (Pl.'s Resp. Br. at 2-4).

The Court disagrees with Plaintiff's analysis. As Defendant correctly notes, the 3% percent cap on fees was not exceeded because the $3,900 that Marketic paid for discount points qualifies as "interest" under § 50(a)(6)(E). In Texas, "discount points" that are charged to originate a home-equity loan are...