S. Williams v. Wells Fargo Bank, N.A., et a
884 F.3d 239
| 5th Cir. | 2018Background
- Swis Community, a low-income housing partnership controlled by S. Jay Williams, financed its project with a loan secured by a Deed of Trust; Fannie Mae ultimately acquired the note and was servicer, Wells Fargo acted as loan servicer at default.
- Swis Community defaulted after ~10 years; Fannie Mae elected to accelerate and proceed with nonjudicial foreclosure; substitute trustees were appointed and requested borrower/principal addresses.
- Wells Fargo provided addresses from the Deed of Trust; notices of acceleration and foreclosure were sent to those addresses, but Williams and Swis Community did not receive them because Wells Fargo had been using a different address for Williams; foreclosure sale occurred and Fannie Mae bought the property.
- The foreclosure caused the IRS to recapture approximately $1.2 million in low-income housing tax credits; Fannie Mae paid the IRS an amount corresponding to its interest.
- Williams (holding assigned claims) sued Fannie Mae and Wells Fargo for breach of contract (Deed of Trust notice provisions), Texas Property Code violations, and wrongful foreclosure; summary judgment proceedings followed.
- The district court initially granted partial summary judgment for Williams on breach, but on reconsideration dismissed breach claims against Fannie Mae (citing Villarreal/Dobbins) and granted summary judgment for Wells Fargo; Williams appealed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Wells Fargo can be liable for breach of the Deed of Trust | Wells (Williams) argued Wells Fargo’s servicing role gives it contractual liability | Wells Fargo argued it was never a party or assignee of the Deed of Trust and thus owed no contractual duties | Affirmed for Wells Fargo — no liability because it was not a party/assignee |
| Whether a defaulting obligor may sue for breach of the Deed of Trust failure-to-notify provision | Williams argued exceptions to Dobbins/Villarreal apply and notice obligation is independent so breach suit is viable | Fannie Mae argued prior material breach/default bars contract suit under Dobbins/Villarreal | Reversed district court dismissal as to Fannie Mae — court held notice obligation is independent and a breach claim may proceed; remanded for further fact work |
| Whether the district court properly granted reconsideration to entertain Fannie Mae’s prior-breach defense | Williams argued reconsideration was improper and raised new arguments late | Fannie Mae argued the court could reconsider because the defense undermined an element (plaintiff performance) and the issue was not previously addressed | Affirmed — district court did not abuse discretion in granting reconsideration |
| Whether loss of tax credits are recoverable damages causally linked to failure to give notice | Williams sought recoupment of recaptured tax credits and interest as damages | Fannie Mae disputed that those damages were recoverable or causally traceable to notice failures | Not decided on the merits — the court left damages (tax-credit loss and causation) open and remanded for further proceedings |
Key Cases Cited
- Villarreal v. Wells Fargo Bank, N.A., 814 F.3d 763 (5th Cir. 2016) (previous panel applying Dobbins to reject breach claim by defaulting obligor)
- Dobbins v. Redden, 785 S.W.2d 377 (Tex. 1990) (per curiam) (Texas rule that a contracting party in default cannot maintain suit for its breach)
- Sauceda v. GMAC Mortg. Corp., 268 S.W.3d 135 (Tex. App.—Corpus Christi 2008) (holding breach-of-deed-of-trust claim for failure to give required notice survives summary judgment)
- Kelley-Coppedge, Inc. v. Highlands Ins. Co., 980 S.W.2d 462 (Tex. 1998) (courts must give effect to all contract provisions)