Hinton v. Fed Natl Mtge Assn ( 1998 )

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this opinion should not be published and is not precedent except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
2
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.”).
5