### T E X A S C O U R T O F A P P E A L S , T H I R D D I S T R I C T , A T A U S T I N

NO. 03-10-00756- CV

Ellen E . Abernathy, Appellan t

v. Deutsche Bank National T rust Com pany, i n Trust f or the Benefit of the Cert if icate Holders of S ound view Home Loan T rust 2005-OP T1, Asset-Backed Ce rtificates Ser ies OP T1, Appellee

F ROM TH E DISTRI CT COURT O F WI LLIAM SO N COUNTY , 26TH JUDICI AL DISTRICT NO. 06- 516- C26, H ONO RAB LE B ILLY RAY STUB B LEF IELD, JUDGE P RESIDING

M E M O R A N D U M O P I N I O N

This dispute conce rns whether fee s char g ed Appellant to obtain a home equity loan violated the Texas Constit ution. Both parties filed motions for summary judgme nt. The trial court g rante d the bank’s motion and denied Appellant’s motion. We will aff irm the summary judgme nt.

BACK GR OUND Appellant Ell en E. Aber

nathy obt ai n ed a home-e quity loan i n 2005. She executed

a Texas Home Equity Adjustable Rate Note d at ed Fe bruar y 22, 2005, in the principal amount of $88,000.00, pay able to Option One Mor tg ag e Corporation (her eaf ter “Option One” or “the L ender ”). She also executed a Dee d of Trust secur ing the loan. Option One assig ned the note and deed of trust to D eutsche Ba

nk (her eaf

ter “the Ba

nk”), which stepped into the shoes of Option O ne. Aber nathy

cea sed making pay

ments a fe w months after the loan closing

.Aber nathy executed a HUD- 1 Settlement Statement (her eaf ter “HUD -1”) setting out

an acc ounting of the financ ial transac tion and settlement costs in connec tion with the closing of the loan. I n addition, she executed a Texas Equity Discount Points Acknow l ed gm en t form, acknow ledg ing that she paid $1,760.00 in points to obtain a better interest rate
. The lender al so signe d a Discount Points Acknowle dg ment confirming the points Aber nathy paid. The rec ord also i ncludes a form Aber

nathy signe d and ag ree d to entitled “Te x as I nstructions to Closing Age n t , ” which sets out instructions to the closing a g ent for disburse ment of pay ments to the Br oker a

nd to the L ender

. The loan proce eds paid off Aber nathy ’s exis ting loan of $49,628.02, and she rec eived $32,863.09. The issue on appea l conce rns the balanc e re m ai n i n g at closing and whether the fee s char g ed Abe rnathy

to obtain the loan violated the Te x as Constitut ion.

STANDARD OF REVIEW Appellate revie w of a summary judgme nt is de novo. Where both sides file motions for summary judgme nt and the trial court g rants one and denies the other, the appellate court revie ws the evidenc e submitt ed by both parties, deter mines all questions prese nted, and rende rs the judgme nt that the trial court should have rende red. Dow Chem. Co. v. Bright , 89 S.W .3d 60 2 , 6 0 5 (T ex . 2002); FM Props. Ope rating Co. v. Ci ty of Austin , 22 S.W .3d 868, 872 (Tex. 2000).

DISCUSSIO N An adult person’ s homestead is protec ted by the Texas Constit ution from forc ed sale for the pa y ment of all debts, except for an extension of cre dit that

2does not r equire the owner or the owner ’s spouse to pay , in addition to any interest,

fee s to any person that are nece ssary to orig inate, maintain, rec ord, insure, or service the extension of cre dit that exceed, in the ag g reg ate, three perc ent of the orig inal principal a mount of the extension of credit . . . .

Tex. Const. art. XVI , § 50(a) (6)( E) (her eaf ter “the Three Perce nt Fe e Cap” or “the Fe e Cap”). Thus,

a home-e quity borrowe r cannot be require d to pay fee s for these purposes that exceed three perc ent of the princ ipal amount of the loan.

Three perc ent of Aber

nathy ’s $88,000.00 loan is $2,640.00, the Fe e Cap on her transac tion. The parties ag ree that Aber nathy could not be require d to pay fee s in excess of this amount—in addition to interest—to orig inate, maintain, rec ord, insure, o r s ervice her loan. The char g es for Aber

nathy ’s loan exceede d the Fe e Cap. The part i es agr ee that Option One g ave Aber nathy a L ender Credit of $2,640.00, the exact amount of the Three Perce nt Fe e Cap, to reduc e her f ees a t closing.

The parties further acknow ledg e that not al l expenses rela ting to obtaining a h o m e- eq u i t y loan in excess of three perc ent violate the Fe e Cap. For example, they ag ree that discount points, per diem interest char g es, and funds place d in escr ow rese rve are not counted ag ainst the Three Perce nt Fe e Cap. Aber nathy ’s char g es for these expenses totaled $2,904.19, and the parties do not dispute that Aber nathy ’s pay

ment of these costs in addition to the Fe e Cap did not violate the constitution. The par ties’ positions diverg e at this point. A b e r n a th y a g r e e s th a

t O p ti o n O n e corr ectly calc ulated the amount of its L ender Cred it at $2,640.00, an amount that could reduc e her fee s to a leg al amount. Howeve r, she asser ts that the L ender failed to apply the cr ed i t t o t h e cl osing costs in a manner that resulted in her pay ing fee s

3within the constitutional limit

. She asser ts that her summary -judg ment evidenc e proves that she paid fee s of more than three perc ent of the loan amount to obtain her loan and, there fore , judgme nt should be re ndere d in her fa

vor. As Aber nathy states, this appea l does not involve the i n t erpr etation of the constitution, nor does it involve a deter mination of the kind s o f ch ar g es includable in the Three Perce nt Fe e Cap. We note also that it does not include a question of what char g es constitute interest. See F inance Comm’ n of Tex. v. Norwood , No. 10-0121, 2013 WL 3119481 (Tex. J une 21, 2013). I nstead, Abernathy asser

ts that this case is a matter of si mple acc ountin g and turns solely on how the L ender Credit was applied at closing

. She contends that if, at closing , the cre dit

was applied by the closing ag ent to costs wholly includable within the Three Perce nt Fe e Cap, so as to red u ce the remaining fees she paid t o three perc ent of the l oan or less, then t he transaction was constitutional. I f, howe ver, the closing ag ent applied some or all of the L ender Credit to c osts not includable within the Fe e Cap, leaving an excessive balanc e of Fe e Cap fee s for her to pay , then the

manner in which the closing ag ent di sbursed the funds caused her to pay more than three perc ent, and, there fore , her loan runs afoul of the constitution. Both parties cite to the case of Maluski v. US Bank NA , 349 Fe d. Appx. 971 (5th Cir. 2009) (per curia m) , as s u p p o rt fo r their positions. I n Maluski , the court held that the HUD- 1 showed that the amount of lender cre dit g iven the borrowe r broug ht the fee s within the cap and declined to specula te how the lender cre dit ap p l i ed

. Id

. at 972-73. The borrowe r in Maluski arg ued, like Aber nathy , that the L ender Credit was corr ect but that the credit was applied to expenses in such a way as t o cause him to pay excessive fees. There the court looked to the H UD-1 in the a bsence of proof

as to how the c redit wa s applied. Id.

4Aber nathy claims that she has proof. She relies primarily upon the document entitled Texas I nstruction to Closing Ag ent, rathe r than the HUD- 1, as conclusive proof of her position. By her theory , the instructions pr ove that the L ender Credit was not applied so as to reduc e her fee s to

a constitutional level. Unlike the borrowe r in the Maluski ca s e, wh o h ad only the HUD- 1 as evidenc e on which to specula te, Aber nathy arg ues that the closing instructions prove how the L ender Credit was applied in her transac tion. She contends that it was applied to char g es that included both Fe e Cap a nd non-F ee Ca

p expenses, leaving her to pa y a balanc e that included Fe e Cap char g es in excess of three perc ent.

The instructions show that the closing ag ent reduc ed the cash amount to be disbursed to the L ender by the amount the L ender was obliga ted to g ive Aber nathy for the L ender Credit, leavin g t he net sum of $996.19 due the L ender

. The Broke r was to rec eive $2,911.70 for charg es that fall within the Fe e Cap such as appra isal, broker fee , proce ssing fee , and other costs that rela te to obtaining the loan. No deductions wer e made to these costs, as the Br oker was entitled to rec eive the fu l l amount. That does not prove the source of funds from which the Br oker rec eived his p aym en t
. Aber

nathy contends, howeve r, that beca use the L ender Credit reduc ed the amou n t disbursed to the L ender rathe r than the amount disbursed to the Br oker, she clea rly paid $2,911.70 in f ee costs—a sum above the three perc ent level. The instructions she relies upon only ref lect the amount of the rema ining cash the closing ag ent was to disburse to the L ender and to the Br oker for such expenses as c losing c osts, interest, and esc row. I t is not a full accounting of the tra nsaction. Aber nathy al s o re lies upon the deposit ion of L isa Clary , an Option One employ ee, who was questioned about the instruction sheet. Clary was not the closing ag ent on Abernathy ’s

5transa ct i o n and had no persona l knowledg e of the matter. She tender ed an aff idavit stating that Aber nathy was g iven a cre dit on her fee s of $ 2 , 6 4 0

. 0 0

. At her deposition, she revie wed the instruction sheet and stated, as is clea rly shown, that the L ender ’s side of the ledg er was reduc ed by the amount of t he credit and the Br oker’ s side of t he l ed ger wa s not. That fact i s not inconsistent with a constitutional transac tion.

The Ba nk, on the other hand, relies upon the HUD- 1 s et t l em en t statement of the actua l settlement costs to r e f le ct the total acc ounting of rec eipts and disbursements of the transac tion. Under the Ba

nk’s theory , this document provides evidenc e that the transac tion met the constitutional restric tions. The trial court a g ree d.

The first pag e o f t h e HUD- 1 settlement statement ref lects funds to Aber

nathy of $88,000.00 loan proceeds plus a L ender Credit to Aber nathy of $2,640.00 paid by Optio n One by

o r i n behalf of the borrowe r. The second pag e lists all of the char g es in connec tion with th e transac tion, showing total settlement char g es of $8,148.89. This list of expenses includes $2,904.19 i n co s t s t h at both parties ag ree do not count ag ainst the Fe e Cap. Thus, the statement ref lects $5,244

. 7 0 i n charg es includable within the Fe e Cap. The Ba nk contends that the L ender Credit sho uld be applied to this balanc e. See Cerda v. 2004-EQR1 L.L.C

. , 612 F.3d 781, 793 (5th Cir. 2010). Once the $5,244.70 balanc e i s reduc ed by the L ender Credit of $2,640.00, the amount char g eable to and pay able by Aber nathy totalled $2,604.70, a sum less than the Fe e Cap. The Ba nk contends that this evidenc e prove s that Abernathy did not pay

fee s that exceed the F ee Ca p. None of the s umm ary -judg ment proof reflec ts the ex act order in which the cre dits, deductions, and disbursements wer e made or the chec ks wr i t t en , an d we do not believe that this

6step-by -step proof is require d to deter mine the issue at hand. A closing ag ent’s cler ical proce ss and

manner of disbursing funds ca

nnot determine the constitutionalit y of a tra nsaction. Aber nathy ’s position require s the court to view the total transac tion in a manner that violates the constitution, ra ther than complies with the constitution. The proof shows that the fee s for the transac tion totaled $8,148.89. I n deter mining the Fe e Cap, non-F ee Cap char g es of $2,904.19 must be deducte d. Thus, fee s attributable to the Fe e Cap for this transac tion totaled $5,244.70. The lender g ave Aber

nathy a $2,640.00 cre dit to reduc e her costs in connec tion with obtaining this loan,

an amount that exactly matched the Fe e Cap. The fac t that the disbursing ag ent reduc ed the Ba nk’s disbursement by this amount mere ly ref lects the ag ent’s method of deter mining the net cash due the Ba n k af t er pay ment of the L ender Credit. I t does not prove wher e the cre dit was applied. T h e L ender Credit was for the borrowe r, and afte r cr ed i t i n g the borrowe r with the L ender Credit of $2,640.00 to reduc e her fee s, we hold that Aber nathy paid only $2,604.70 in fee s, a sum within the constitutional li mit.

CONCLUSION

We hold that Aber

nathy ’s motion for summary judgme nt was proper ly denied. We aff irm the trial cour

t’s summary

judgme nt in favor of

the B ank.

7_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ Marily n Aboussie, J ustice Be fore J ustices Pemberton, Rose, a nd Aboussie* Affir med Filed: Aug ust 8, 2013 * Be fore Marily

n Aboussie, Chief J ustice (re tired), Third Court of Appea ls, sitti ng by assig nment. See Tex. Gov’t Code § 74.003(b).

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