IN THE UNITED STATES COURT OF APPEALS

FOR THE FIFTH CIRCUIT

No. 13-50086

CHARLES J. HAWKINS, on behalf of himself and all others similarly 

situated; WILLIAM J. CUSICK, on behalf of himself and all others similarly 

situated; MICHELLE E. CUSICK, on behalf of herself and all others 

similarly situated; MARIA C. BROOKS,

 Plaintiffs - Appellants

v.

JP MORGAN CHASE BANK, N.A., 

 Defendant - Appellee

Appeal from the United States District Court

for the Western District of Texas

USDC No. 1:12-CV-892

ON PETITION FOR REHEARING

Before STEWART, Chief Judge, and SOUTHWICK and COSTA, Circuit 

Judges.

PER CURIAM:*

IT IS ORDERED that the petition for panel rehearing is GRANTED and

the opinion previously filed in this case, Hawkins v. JP Morgan Chase Bank, 

 

* Pursuant to 5TH CIR. R. 47.5, the court has determined that this opinion should not 

be published and is not precedent except under the limited circumstances set forth in 5TH 

CIR. R. 47.5.4.

United States Court of Appeals

Fifth Circuit

FILED

June 4, 2015

Lyle W. Cayce

Clerk

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N.A., No. 13-50086, 597 F. App’x 287, 2015 WL 1142804, is WITHDRAWN. 

The following opinion is substituted therefor:

This case involves Texas home equity loan restructurings that 

capitalized past-due interest, fees, taxes, and escrow into the principal of 

Appellants’ home equity loans. Appellants allege the restructurings were 

actually extensions of credit, which would require compliance with Article XVI, 

Section 50(a)(6) of the Texas Constitution. The Texas Supreme Court recently 

answered this question, holding that transactions of this sort are loan 

modifications that do not require compliance with Section 50(a)(6), unless the 

restructuring “involve[s] the satisfaction or replacement of the original note, 

an advancement of new funds, or an increase in the obligations created by the 

original note.” Sims v. Carrington Mortg. Servs., L.L.C., 440 S.W.3d 10, 17 

(Tex. 2014). Because it is unclear on our record whether Appellant Maria C. 

Brooks’s restructuring involved an increase in the obligations created by the 

original note via a balloon payment, we VACATE the judgment of the district 

court and REMAND as to her claim. Because the remaining restructurings 

did not involve satisfaction and replacement of the original notes, any increase 

in obligations under the original notes, or any advancement of new funds, we 

AFFIRM the dismissal of those claims. 

I

Maria C. Brooks (Brooks), Charles J. Hawkins (Hawkins), and William 

J. Cusick and Michelle E. Cusick (the Cusicks) on behalf of themselves and all 

others similarly situated (collectively, Appellants) brought suit in federal 

district court against JPMorgan Chase Bank, N.A. (JPMC) alleging various 

violations of Article XVI, Section 50(a)(6) of the Texas Constitution (Section 

50(a)(6)). JPMC was servicing Appellants’ loans, each of which originated with 

third-party lenders. The crux of Appellants’ claims is that their transactions 

with JPMC were refinances of their home equity loans that required 

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compliance with various provisions of Section 50(a)(6), instead of modifications 

that would not require Section 50(a)(6) compliance as JPMC contends. 

Hawkins obtained a $320,000 home equity loan from Town & Country 

Credit Corporation in 2005. Hawkins defaulted on this loan some time before 

February 18, 2009. Hawkins and JPMC entered into an agreement to modify 

the loan in a manner that would capitalize past-due interest, property taxes, 

and insurance into the principal of the loan in the amount of $15,873.49, and 

the term of the loan was extended to April 1, 2035. The modification also 

allowed interest-only payments during the first five years following the

modification. At the conclusion of this five-year period, JPMC would reamortize the loan.

The Cusicks obtained a $268,000 home equity loan from CTX Mortgage 

Company, LLC in 2005. The Cusicks defaulted on this loan before April 1, 

2009. The Cusicks and JPMC entered into an agreement to modify the loan 

that would increase the amount payable under the loan to $291,834.39. The 

increase represented a capitalization of past-due interest and escrow on the 

loan and did not alter the maturity date of the loan.

Brooks obtained a $190,000 home equity loan from Long Beach Mortgage 

Company in 2004. Brooks defaulted on this loan some time before March 1, 

2012. Brooks and JPMC agreed to modify the loan under the Home Affordable 

Modification Program. Unpaid interest and escrow were to be capitalized into 

the principal of the loan in an amount more than $45,590.91, and the 

modification allowed for a balloon payment of $146,102.76 due at the end of 

the loan term on June 1, 2034.

JPMC brought a motion to dismiss for failure to state a claim under 

Federal Rule of Civil Procedure 12(b)(6), which the district court granted. 

Appellants filed this appeal. 

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II

“We review de novo a district court order granting a Rule 12(b)(6) motion 

to dismiss for failure to state a claim and may affirm on any basis supported 

by the record.” Asadi v. G.E. Energy (USA), L.L.C., 720 F.3d 620, 622 (5th Cir. 

2013) (citing Torch Liquidating Trust ex rel. Bridge Assocs. v. Stockstill, 561 

F.3d 377, 384 (5th Cir. 2009)). To survive a Rule 12(b)(6) motion, a complaint 

must set out “enough facts to state a claim to relief that is plausible on its face.” 

Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007). 

After this appeal was filed, the Texas Supreme Court answered 

questions certified by this court in a similar case presenting similar claims, 

Sims v. Carrington Mortg. Servs., L.L.C., 538 F. App’x 537, 547 (5th Cir. 2013). 

The Texas Supreme Court held that: 

the restructuring of a home equity loan that . . . involves 

capitalization of past-due amounts owed under the terms of the 

initial loan and a lowering of the interest rate and the amount of 

installment payments, but does not involve the satisfaction or 

replacement of the original note, an advancement of new funds, or 

an increase in the obligations created by the original note, is not a 

new extension of credit that must meet the requirements of Section 

50. 

Sims, 440 S.W.3d at 17. The Hawkins and Cusick transactions each involved 

capitalization of past-due amounts under the loan without satisfying or 

replacing the original note, advancing new funds, or increasing the obligations 

created by the original note. Thus, the restructurings of these loans were 

modifications, which do not require compliance with Section 50(a)(6). Id. 

Therefore, we affirm the dismissal of Hawkins’s and Cusicks’ claims. 

III

It is unclear from the record, however, whether Brooks’s transaction 

involves an “increase in the obligations created by the original note.” Id. at 17. 

The total payments due after the restructuring under Brooks’s payment 

schedule equal $247,132.60. Following this schedule, the loan restructuring 

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documents also included a provision stating: “Notwithstanding the foregoing 

schedule, I agree that unless sooner paid, I will have a final balloon payment 

in the amount of $146,102.76 due and payable on the New Maturity Date.” The 

district court found this provision to be a balloon payment—an apparent 

violation of Section 50(a)(6)(L)(i), which requires extensions of credit to be 

repaid “in substantially equal successive periodic installments.”1 

In Sims, the Texas Supreme Court held that a restructuring capitalizing

past-due amounts owed under the initial loan is not an extension of credit 

requiring Section 50 compliance if the modification does not involve, among 

other things, “an increase in the obligations created by the original note.” 440 

S.W.3d at 17. On our record, it is uncertain whether Brooks’s modification in 

fact represents an increase in the obligation created by her original home 

equity loan. On one hand, it is possible that the final payment does not 

increase the obligations under the original loan because many of Brooks’s 

monthly payments are not much more than the accumulated interest. On the 

other hand, it is possible that the modified payment schedule accounts for the 

entire loan, recapitalization, and interest for the life of the loan, in which case 

the final payment, if owed in addition to the scheduled amounts, may represent 

an increase in the original obligation. 

Although the district court stated that Brooks’s restructuring was an 

apparent violation of Section 50, it relied on a savings clause in JPMC’s 

standard security agreement that allows JPMC to reform loan documents that 

violate Section 50 by providing written notice to the borrower after JPMC 

receives notice of the violation. Brooks did not allege she had provided any 

written notice to JPMC other than via her First Amended Complaint in this 

case. The district court found the complaint insufficient to count as notice to 

 

1 The Texas Administrative Code, interpreting Section 50(a)(6)(L)(i), states that “[t]his 

requirement prohibits balloon payments.” 7 Tex. Admin. Code § 153.11(3). 

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JPMC. 

However, a Texas Court of Appeals recently held, in Wells Fargo Bank, 

N.A. v. Leath, 425 S.W.3d 525, 532 (Tex. App.—Dallas 2014, pet. denied), that 

a pleading in a lawsuit can constitute notice that triggers a 60-day lender cure 

period under Section 50(a)(6)(Q)(x). In Leath, the court held that an answer to 

a bank’s application for foreclosure constituted sufficient notice of a 

constitutional violation where the answer stated that the loan violated the 

Texas Constitution by exceeding 80 percent of the value of the property. Id. at 

532−33. The Texas Supreme Court denied the petition in Leath.

Because it is unclear on our record whether Brooks’s modification 

represented an increase in the obligation created by her original loan, we

VACATE and REMAND the dismissal of Brooks’s claim for a determination of

whether her modification violated Section 50. On remand, the district court 

should consider whether, in light of Sims, Brooks’s modification violates 

Section 50(a)(6)(L)(i) and whether, in light of Leath, Brooks’s First Amended 

Complaint constituted sufficient notice to JPMC. As to the dismissal of 

Hawkins’s and the Cusicks’ claims, we AFFIRM. 

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