Velazquez v. Countrywide Home Loans Servicing, L.P.
- Summarized by John Jones , J. R. Jones Law PLLC
- 14 years 4 months ago
- Citation:
- Case No. 10-20609 (5th Cir. October 17, 2011)
- Tag(s):
-
- Ruling:
- Reversed and Remanded. In a very detailed examination of principles of contract interpretation, the Fifth Circuit held lender's ability to collect fees from Chapter 13 estate is governed by loan documents and primary concern of court is to ascertain true intent of parties and to examine and harmonize instrument so no provisions are rendered meaningless. In this case, use of "and" should have been interpreted as "either or both" because to do otherwise would render Section 9 of deed of trust meaningless and frustrate intentions of party.
- Procedural context:
- Countrywide, a secured creditor, filed a fee application that included $200.00 for "Post-Petition Bnk Attys Fees" included in timely filed proof of claim. At the hearing on fee application, issue of entitlement to attorney's fees based on construction of langauge in note and deed of trust and whether Countrywide should be subjected to Federal Rule of Civil Procedure 2016. Countrywide argued that Rule 2016 was not required because it filed proof of claim, no party in interest objected and therefore, claim for attorney's fees should be deemed allowed under 11 U.S.C. 502(a) and that language of deed of trust entitled it to fees. Bankruptcy court held (1) Countrywide not entitled to attorney's fees sought because Countrywide's interest cannot be affected by the Velazquezes' Chapter 13 proceeding because Section 1322(b)(2) expressly provides that a chapter 13 may not modify a home owner's contract rights and the language of deed of trust and note allowed for recovery only for limited set of activities that protect both Countrywide's interest in the property and rights under deed of trust; (2) no justiciable issue regarding FRBP 2016 and issued opinion. In re Rangel, 408 B.R. 650, 674 (Bankr. S.D.Tex. 2009).
- Facts:
- In 2006, the Velazquezes executed a note secured by a deed of trust for the purchase of a home in Pasadena Texas. The Velazqueses defaulted on the note and deed of trust and filed a petition for relief under Chapter 13. Sections 9 of the Deed of Trust stated that "Lender may do and pay for whatever is reasonable or appropriate to protect Lender's interest in the Property and rights under this Security Instrument, including...(c) paying reasonable attorneys' fees to protect its interest in the Property and/or rights under this Security Interest, including its secured position in the bankruptcy." Under Section 9, Countrywide was not obligated to take action but could take action if it desired to do so. Section 14 of the Deed of Trust allowed Countrywide to charge the Velazqueses for the attorneys fees incurred by making the amount incurred additional debt. Countrywide's filed a proof of claim in the Velazquez Chapter 13 and the proof of claim contained as part of the breakdown of arrearage $200.00 as "Post-Petition Bnk Attys Fees". Countrywide filed a fee application to recover its attorneys in the proof of claim plus $150.00 in attorneys fees incurred in preparing and prosecuting the fee application. At the hearing on fee application, issue of entitlement to attorney's fees based on construction of langauge in note and deed of trust and whether Countrywide should be subjected to Federal Rule of Civil Procedure 2016. Countrywide argued that Rule 2016 was not required because it filed proof of claim, no party in interest objected and therefore, claim for attorney's fees should be deemed allowed under 11 U.S.C. 502(a) and that language of deed of trust entitled it to fees. Bankruptcy court held (1) Countrywide not entitled to attorney's fees sought because Countrywide's interest cannot be affected by the Velazquezes' Chapter 13 proceeding because Section 1322(b)(2) expressly provides that a chapter 13 may not modify a home owner's contract rights and the language of deed of trust and note allowed for recovery only for limited set of activities that protect both Countrywide's interest in the property and rights under deed of trust; (2) no justiciable issue regarding FRBP 2016 and issued opinion. In re Rangel, 408 B.R. 650, 674 (Bankr. S.D.Tex. 2009). Countrywide argued "and" should be interpreted as "either or both" and Section 9 of deed of trust entitled it to pay to protect its interest in proerty, protect rights under deed of trust, or protect its interest in property and rights under deed of trust.
- Judge(s):
- King, Davis and Garza, Circuit Judges
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