United States District Court, S.D. Texas, Houston Division
MEMORANDUM AND ORDER
ROSENTHAL CHIEF UNITED STATES DISTRICT JUDGE
and Kimberly Rideau sued IMPAC Mortgage Corporation and the
Federal National Mortgage Association (“Fannie
Mae”) in Harris County District Court, alleging
violations of the Texas Constitution's provisions on home
equity loans and seeking damages, quiet title, declaratory
judgment, a permanent injunction, and attorney's fees.
(Docket Entry No. 1-1). IMPAC and Fannie Mae timely removed,
and the Rideaus amended their complaint. (Docket Entry Nos.
1, 18). IMPAC and Fannie Mae have moved for summary judgment,
the Rideaus responded, and IMPAC and Fannie Mae replied.
(Docket Entry Nos. 19, 21, 22).
on the motion, response, reply, the record evidence, and the
applicable law, the court grants the summary judgment motion
and enters final judgment by separate order. The reasons for
this ruling are explained in detail below.
2016, Joseph and Kimberly Rideau refinanced their home with a
home equity loan from IMPAC Mortgage Corporation. (Docket
Entry No. 8 at ¶ 6; Docket Entry No. 20-1 at 7). Their
Home Equity Security Agreement with IMPAC securing the loan
stated that it was structured “to conform to the
provisions of the Texas Constitution applicable to Extension
of Credit as defined by Section 50(a)(6), Article XVI of the
Texas Constitution.” (Docket Entry No. 20-1 at 8). In
March 2018, the Rideaus sent IMPAC a letter stating that
their home equity loan violated several provisions of the
Texas Constitution. (Docket Entry No. 21-3). In September
2018, the Rideaus filed their original state-court petition
against Fannie Mae and IMPAC, and the defendants timely
removed to federal court. (See Docket Entry No. 1).
Rideaus contend that Fannie Mae and IMPAC violated provisions
of the Texas Constitution that regulate home equity loans
within the State. The amended complaint alleges that: (1) the
loan closed before 12 days after the original loan
application was submitted to the lender or 12 days after the
borrower received notice that Article XVI governed the loan,
in violation of Tex. Const. art. XVI, § 50(a)(6)(M)(i);
(2) the loan did not close one business day after the date
that the owner received a final itemized disclosure, in
violation of Tex. Const. art. XVI, § 50(a)(6)(M)(ii);
(3) the loan did not close in the appropriate office, in
violation of Tex. Const. art. XVI, § 50(a)(6)(N); (4)
Fannie Mae and IMPAC did not provide the Rideaus a copy of
the final loan application and documents signed at the
closing, in violation of Tex. Const. art. XVI, §
50(a)(6)(Q)(v); and (5) the lender did not provide an
acknowledgment of the fair market value of the property on
the date that the extension of credit was made, in violation
of Tex. Const. art. XVI, § 50(a)(6)(Q)(ix).
(See Docket Entry No. 8 at ¶¶ 13(a)-(e)).
Rideaus argue that these alleged violations breached the
security agreement. (Id. at ¶¶ 14-16). The
Rideaus allege that they suffered damages “in the
amount of all payments made to [Fannie Mae and IMPAC] since
the inception of the loan, ” because the breaches made
the lien void. (Id. at ¶ 16). The Rideaus seek
a quiet-title ruling, arguing that “[t]he Note and Deed
of Trust upon which the Defendant asserts an interest,
although facially valid, is in fact invalid and of no force
or effect because Defendant's uncured constitutional
violations have rendered Defendant's underlying lien void
ab initio.” (Id. at ¶ 20). They
seek a declaratory judgment stating that their home equity
loan is void because Fannie Mae and IMPAC failed to cure the
constitutional defects in the loan documents. (Id.
at ¶¶ 21, 23, 25). The Rideaus seek an injunction
against foreclosure and reasonable attorneys' fees under
Texas Civil Practice & Remedies Code § 38.001,
et seq. (Id. at ¶ 26).
The Legal Standard
judgment is required when ‘the movant shows that there
is no genuine dispute as to any material fact and the movant
is entitled to judgment as a matter of law.'”
Trent v. Wade, 776 F.3d 368, 376 (5th Cir. 2015)
(quoting Fed.R.Civ.P. 56(a)). “A genuine dispute of
material fact exists when the ‘evidence is such that a
reasonable jury could return a verdict for the nonmoving
party.'” Nola Spice Designs, LLC v. Haydel
Enters., Inc., 783 F.3d 527, 536 (5th Cir. 2015)
(quoting Anderson v. Liberty Lobby, 477 U.S. 242,
248 (1986)). “The moving party ‘bears the initial
responsibility of informing the district court of the basis
for its motion, and identifying those portions of [the
record] which it believes demonstrate the absence of a
genuine issue of material fact.'” Id.
(quoting EEOC v. LHC Grp., Inc., 773 F.3d 688, 694
(5th Cir. 2014)); see also Celotex Corp. v. Catrett,
477 U.S. 317, 323 (1986).
the non-movant bears the burden of proof at trial, the movant
may merely point to the absence of evidence and thereby shift
to the non-movant the burden of demonstrating by competent
summary judgment proof that there is an issue of material
fact warranting trial.” Id. (quotation marks
omitted); see also Celotex, 477 U.S. at 325.
Although the party moving for summary judgment must
demonstrate the absence of a genuine issue of material fact,
it does not need to negate the elements of the
nonmovant's case. Boudreaux v. Swift Transp.
Co., 402 F.3d 536, 540 (5th Cir. 2005). “A fact is
‘material' if its resolution in favor of one party
might affect the outcome of the lawsuit under governing
law.” Sossamon v. Lone Star State of Tex., 560
F.3d 316, 326 (5th Cir. 2009) (quotation omitted). “If
the moving party fails to meet [its] initial burden, the
motion [for summary judgment] must be denied, regardless of
the nonmovant's response.” United States v.
$92, 203.00 in U.S. Currency, 537 F.3d 504, 507 (5th
Cir. 2008) (quoting Little v. Liquid Air Corp., 37
F.3d 1069, 1075 (5th Cir. 1994) (en banc)).
the moving party [meets its initial burden], the non-moving
party must ‘go beyond the pleadings and by her own
affidavits, or by the depositions, answers to
interrogatories, and admissions on file, designate specific
facts showing that there is a genuine issue for
trial.'” Nola Spice, 783 F.3d at 536
(quoting LHC Grp., 773 F.3d at 694). The nonmovant
must identify specific evidence in the record and articulate
how that evidence supports that party's claim.
Baranowski v. Hart, 486 F.3d 112, 119 (5th Cir.
2007). “This burden will not be satisfied by
‘some metaphysical doubt as to the material facts, by
conclusory allegations, by unsubstantiated assertions, or by
only a scintilla of evidence.'” Boudreaux,
402 F.3d at 540 (quoting Little, 37 F.3d at 1075).
In deciding a summary judgment motion, the court draws all
reasonable inferences in the light most favorable to the
nonmoving party. Connors v. Graves, 538 F.3d 373,
376 (5th Cir. 2008); see also Nola Spice, 783 F.3d
Texas, “the homestead has always been protected from
forced sale, not merely by statute as in most states, but by
the Constitution.” Garofolo v. Ocwen Loan
Servicing, LLC, 497 S.W.3d 474, 477 (Tex. 2016) (quoting
Fin. Comm'n of Tex. v. Norwood, 418 S.W.3d 566,
570 (Tex. 2013)). Article XVI, § 50(a)(6) of the Texas
Constitution lists requirements that home equity loans must
meet in order for a lender to have a valid lien on a
borrower's homestead property. See T ex. Const.
art. XVI, § 50(c); see Garofolo, 497 S.W.3d at
478 (“[Section 50(a)(6)] simply describes what a
home-equity loan must look like if a lender wants the option
to foreclose on a homestead upon borrower default.”). A
plaintiff must allege violations of § 50(a)(6) in
conjunction with a cause of action to state a claim.
Garofolo, 497 S.W.3d at 478.
50(a)(6)(Q)(x) allows a lender that is in violation of the
obligations of this section to cure its noncompliance. Tex.
Const. art. XVI, § 50(a)(6)(Q)(x). To trigger the
lender's obligation to cure, the borrower must notify the
lender of its noncompliance. Id. The lender then has
60 days to cure. Id. If the lender does not, it
“shall forfeit all principal and interest of the
extension of credit.” Tex. Const. art. XVI, §
50(a)(6)(Q)(x). This provision does not create a