LSR Consulting, LLC Ex Rel. Karna v. Wells Fargo Bank, N.A.
835 F.3d 530
| 5th Cir. | 2016Background
- In 2006 Mridula and Viday Karna purchased two Houston properties; Wells Fargo serviced both mortgages. The Karnas defaulted and Wells Fargo foreclosed in 2010.
- The Karnas requested debt verification under 15 U.S.C. § 1692g before foreclosure; they later assigned alleged claims to their wholly owned company LSR Consulting, LLC, which sued Wells Fargo in state court; Wells Fargo removed.
- LSR’s complaint asserted wrongful foreclosure and FDCPA claims. The district court granted summary judgment for Wells Fargo on wrongful foreclosure and awarded Wells Fargo attorneys’ fees under the FDCPA; LSR appealed.
- Central dispute on wrongful foreclosure: whether Wells Fargo strictly complied with deed-of-trust notice requirements (notice of intent to accelerate) before accelerating and foreclosing.
- The district court relied on mailed Notices of Default and Intent to Foreclose and affidavits attesting to mailing; LSR challenged admissibility and sufficiency of that evidence and argued homeowners’ testimony of non-receipt created a fact issue.
- On FDCPA fees, the court found LSR brought its claim in bad faith and for harassment because Wells Fargo is not a “debt collector” under the FDCPA and LSR filed just before the statute of limitations expired and repeatedly used the same theory against multiple lenders.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Wells Fargo strictly complied with deed-of-trust notice/acceleration requirements (wrongful foreclosure) | Notices were not properly shown to be sent; Karnas’ non-receipt creates triable issue | Notices and affidavits show mailing; deed provision and Tex. law treat notice as complete when mailed | Affirmed: no genuine issue; constructive/service by mailing suffices |
| Admissibility/sufficiency of the notices and supporting declarations at summary judgment | Notices not self-authenticating and declarations were untimely or lacking personal knowledge | Materials could be presented in admissible form and declarations plus supporting docs suffice for summary judgment | Affirmed: documents and declarations adequate under Rule 56 standard |
| Whether homeowners’ affidavits of non-receipt create a fact question | Karnas’ sworn non-receipt contradicts mailing evidence and creates dispute | Deed and Tex. Property Code analog treat service as complete upon mailing; non-receipt alone insufficient if mail evidence exists | Affirmed: non-receipt alone does not create fact issue when mailing evidence exists |
| Whether FDCPA claim was brought in bad faith (entitling defendant to fees) | LSR contends fees were improper; argues procedural/ pleading points (later waived) | Wells Fargo: not a debt collector; LSR filed repeatedly near limitations and used an assignee to press claims to pressure settlements | Affirmed: district court did not abuse discretion in awarding fees for bad-faith FDCPA suit |
Key Cases Cited
- Univ. Sav. Ass’n v. Springwoods Shopping Ctr., 644 S.W.2d 705 (Tex. 1982) (deed-of-trust terms must be strictly followed)
- Hous. First Am. Sav. v. Musick, 650 S.W.2d 764 (Tex. 1983) (compliance with deed-of-trust notice is prerequisite to trustee sale)
- Charter Nat’l Bank–Houston v. Stevens, 781 S.W.2d 368 (Tex. App.—Houston [14th Dist.] 1989) (wrongful-foreclosure elements)
- Gossett v. Du‑Ra‑Kel Corp., 569 F.2d 869 (5th Cir. 1978) (limits on conclusory affidavit evidence at summary judgment)
- Perry v. Stewart Title Co., 756 F.2d 1197 (5th Cir. 1985) (standards for reviewing FDCPA § 1692k(a)(3) attorney‑fee determinations)
- Flex Frac Logistics, L.L.C. v. N.L.R.B., 746 F.3d 205 (5th Cir. 2014) (argument raised first in reply brief is waived)