Teresa Garofolo v. Ocwen Loan Servicing, L.L.C.
669 F. App'x 219
| 5th Cir. | 2016Background
- Garofolo sued Ocwen alleging (1) violation of Tex. Const. art. XVI, §50(a)(6)(Q)(vii) and (2) breach of contract after full payoff of a mortgage-loan note; she sought forfeiture of principal and interest as a remedy.
- The district court dismissed both claims; Garofolo appealed to the Fifth Circuit.
- The Fifth Circuit certified two Texas-law questions to the Texas Supreme Court because state supreme-court guidance was lacking.
- The Texas Supreme Court answered both certified questions “no”: failure to return a cancelled note and release within 60 days (after notice) does not trigger constitutional forfeiture, and forfeiture is not available as a contract remedy under the facts.
- Based on that answer and because Garofolo did not plead actual damages (and did not plead the elements for valid liquidated damages), the Fifth Circuit affirmed dismissal of both the constitutional and breach-of-contract claims.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether failure to return cancelled note and release within 60 days (after borrower notice) violates Tex. Const. art. XVI, §50(a)(6)(Q)(vii) and triggers forfeiture of principal and interest | Garofolo: Contract incorporated §50 protections; failure to return cancelled note/release after notice makes lender liable for forfeiture | Ocwen: Failure to return documents does not invoke constitutional forfeiture remedy | No — Texas Supreme Court answered “no”; Fifth Circuit affirmed dismissal of constitutional claim |
| Whether, if constitutional remedy unavailable, forfeiture is available as a breach-of-contract remedy absent actual damages when loan contract incorporates §50 protections but cancelled note/release not returned (despite filing release) | Garofolo: Forfeiture may be recovered as contractual/ liquidated damages based on incorporated §50 protections | Ocwen: Contract damages require actual damages; forfeiture is not an available contract remedy here | No — forfeiture not available; plaintiff failed to plead actual damages or valid liquidated-damages elements; breach claim dismissed |
Key Cases Cited
- Lawyers Title Ins. Corp. v. Doubletree Partners, L.P., 739 F.3d 848 (5th Cir. 2014) (elements of Texas breach-of-contract claim)
- Intercontinental Grp. P’ship v. KB Home Lone Star L.P., 295 S.W.3d 650 (Tex. 2009) (money damages essential for contract claims seeking money)
- Flores v. Millennium Interests, Inc., 185 S.W.3d 427 (Tex. 2005) (definition and prerequisites for liquidated damages)
- Phillips v. Phillips, 820 S.W.2d 785 (Tex. 1991) (standard for enforceability of liquidated damages)