Court Opinion

ID: 14101
Source: CourtListenerOpinion
Date Created: 2010-04-25 06:32:47+00
Date Added: 2024-06-11T15:04:30.357582
License: Public Domain

IN THE UNITED STATES COURT OF APPEALS
                        FOR THE FIFTH CIRCUIT

                    ______________________________

                      Nos. 96-21155 and 97-20424
                          (Summary Calendar)
                    ______________________________

EDDIE G. HINTON, and all others
similarly situated,

                                                       Plaintiff-Appellant,

                                    versus

FEDERAL NATIONAL MORTGAGE
ASSOCIATION and MAGNOLIA
FEDERAL BANK FOR SAVINGS,

                                                       Defendants-Appellees.

          _______________________________________________

            Appeal from the United States District Court
                 for the Southern District of Texas
                            (96-CV-2070)
          _______________________________________________

                               February 11, 1998

Before WIENER, BARKSDALE, and EMILIO M. GARZA, Circuit Judges.

PER CURIAM:*

     In 96-21155, Plaintiff-Appellant Eddie G. Hinton, on behalf of

himself   and   others   similarly    situated,1   appeals    the   district

court’s grant of Defendants-Appellees Federal National Mortgage

Association     (FNMA)   and    Magnolia     Federal   Bank   for   Savings’

     *
      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this opinion should not be published and is not precedent except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.
     1
      A class was never certified in this action.
(Magnolia) motion to dismiss.       Hinton, a homeowner, sued FNMA, the

current holder of his mortgage, and Magnolia, FNMA’s contract

service agent, in state court, alleging that they required him to

pay for private mortgage insurance when he was no longer obligated

to maintain such insurance.        The suit was subsequently removed to

federal district court.        Although Hinton’s mortgage documents

provide that he will pay for private mortgage insurance for the

life of his loan, he claims that he should have been relieved of

that obligation for two reasons.          He first contends that he is a

third party beneficiary of the service contract between FNMA and

Magnolia, and is therefore entitled to invoke an FNMA policy ——

contained only in its internal guidelines —— that, upon request

from a borrower, a servicer must cancel mortgage insurance if the

current loan-to-original value ratio falls to 80 percent or less.

Second,   Hinton   argues   that   FNMA    and   Magnolia   breached   their

fiduciary duties to him by not disclosing that he could cancel his

private mortgage insurance when he acquired the specified level of

equity in his home.         He seeks, inter alia, (1) an injunction

requiring that notice be issued to all borrowers regarding their

right to cancel their private mortgage insurance when they meet the

appropriate equity level, and (2) the automatic cancellation of the

private mortgage insurance of any putative class members who have

attained the required equity levels.

     Following careful review of the record, the arguments of

counsel, the district court’s opinion, and the applicable Texas

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law, we reach the same conclusions as did the district court for

the same reasons espoused by that court.           As the district court’s

opinion provides a comprehensive, well-reasoned analysis of these

issues,2 we adopt that court’s opinion as our own and incorporate

it by reference herein, affirming the district court’s dismissal of

Hinton’s suit.

      In the appeal consolidated herewith, 97-20424, Hinton asserts

that his counsel is entitled to attorney’s fees under the “common

fund” doctrine. Having learned from post-litigation press releases

that FNMA was considering amending its policy on private mortgage

insurance, Hinton’s counsel demanded that they receive 25 percent

of   any   refunds   made   to   mortgagors   if   FNMA   does   change   its

guidelines to make them more favorable to mortgagors. The district

court denied the requested fees. We review that decision for abuse

of discretion.3

      Although attorney’s fees are traditionally not awarded in the

absence of statutory or contractual authorization,4 Texas courts

have adopted the so-called common fund exception to that rule.            As

      2
      Hinton v. Federal Mortgage Assoc., 945 F. Supp. 1052 (S.D.
Tex. 1996).
      3
      DSC Communications Corp. v. Next Level Communications, 107
F.3d 322, 330 (5th Cir. 1997); Forbush v. J.C. Penney Co., 98 F.3d
817, 821 (5th Cir. 1996).
      4
      Knebel v. Capital Nat’l Bank in Austin, 518 S.W.2d 795, 799
(Tex. 1974) (citing Hall v. Cole, 412 U.S. 1 (1973)); Texas Farmers
Ins. Co. v. Seals, 948 S.W.2d 532, 533 n.1 (Tex. App. —— Fort Worth
1997, no writ); Lancer Corp. v. Murillo, 909 S.W.2d 122, 126 (Tex.
App. —— San Antonio 1995, no writ).

                                      3
explained in Knebel v. Capital National Bank in Austin:

     [A] court of equity will allow reasonable attorney’s fees
     to a complainant who at his own expense has maintained a
     successful suit or proceeding for the preservation,
     protection, or increase of a common fund. . . . The rule
     is founded upon the principle that one who preserves or
     protects a common fund works for others as well as for
     himself, and the others so benefited should bear their
     just share of the expenses, including a reasonable
     attorney’s fee; and that the most equitable way of
     securing such contribution is to make such expenses a
     charge on the fund so protected or recovered.5

“Although the common fund doctrine has been infrequently asserted

in Texas, the courts have applied it to class actions, shareholder

derivative suits, and insurance subrogation.”6

     The district court ruled that the common fund doctrine was

inapplicable in this case.   It reasoned that the doctrine “applies

only to counsel who prevail and create a specific monetary fund

under the control of the court.”       Here, Hinton did not prevail; in

fact, he did not even survive a motion to dismiss.7       Furthermore,

there is no fund over which the court has control.8       Finally, the

     5
      Knebel, 518 S.W.2d at 799 (quoting Brand v. Denson, 81 S.W.2d
111, 112 (Tex. Civ. App. 1935, writ dism’d)).
     6
      Lancer Corp., 909 S.W.2d at 126 (internal citations omitted).
     7
      See Wolf v. General Motors, 569 F.2d 1266, 1268 (3d Cir.
1978) (“Not the least of appellants’ problems is that the merits of
this litigation ended in dismissal of the complaints.”).
     8
      See, e.g., State ex rel. Poulos v. State Bd. of Equalization
for the State of Oklahoma, 646 P.2d 1269, 1275 (Okla. 1982)
(“[T]here is no creation of a common fund as a result of the
litigation which is under the control of this Court . . . .”);
Hamer v. Kirk, 356 N.E.2d 524, 527 (Ill. 1976) (“Since no fund had
been placed under control of the court in the instant case, the
trial court was without authority to award attorney’s fees to the

                                   4
district court specifically noted in its opinion in the underlying

case that FNMA had the power to change its policy unilaterally.   In

sum, the court concluded that “Hinton may have succeeded in causing

a change of policy, but he did not do it by succeeding in this

case.”   Considering all these factors, we perceive no abuse of

discretion in the district court’s ruling.       Accordingly, the

judgment of the district court is, in all respects,

AFFIRMED.

petitioner.”).

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