Wells Fargo Bank, N.A. v. Stewart (In Re Stewart)
647 F.3d 553
| 5th Cir. | 2011Background
- Dorothy Stewart, an elderly widow, filed for bankruptcy in 2007 and Wells Fargo filed a proof of claim for her mortgage debt.
- Stewart hired counsel to obtain a full itemized accounting; Wells Fargo provided only a categorized list without amounts, dates, payees, invoices, or proof of payments.
- Multiple hearings revealed numerous billing errors; Wells Fargo eventually produced a full reconciliation showing overstatements of more than $10,000.
- Bankruptcy court found systematic errors in Wells Fargo's claim, including incorrect calculations, questionable late fees, erroneous drive-by inspection charges, undocumented BPOs, and invalid attorney fees, and issued an injunction requiring Wells Fargo to audit all proofs and provide complete loan histories and amended claims.
- Wells Fargo appealed, challenging the injunction and the claimed debt amount; the district court affirmed.
- The Fifth Circuit vacated the injunction for lack of jurisdiction and standing and dismissed as moot the appeal of the other legal rulings related to the mortgage.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the injunction was jurisdictionally valid | Stewart argued Wells Fargo's claim review warranted injunctive relief. | Wells Fargo contended the injunction was within the bankruptcy court's powers to prevent abuse of process. | Injunction vacated for lack of jurisdiction/standing. |
| Whether the appeal of other mortgage-related rulings is moot | Stewart's position on the remaining issues relied on the court's remedial authority. | Wells Fargo maintained review of those rulings was proper. | Appeal of other issues dismissed as moot; injunction vacated. |
Key Cases Cited
- City of Los Angeles v. Lyons, 461 U.S. 95 (1983) (injunction requires a real and immediate threat of future injury; standing separate from past harm)
- O'Shea v. Littleton, 414 U.S. 488 (1974) (standing and ongoing controversy required for injunctive relief)
- Adarand Constructors, Inc. v. Peña, 515 U.S. 200 (1995) (strict scrutiny applied to racial classifications; used for broader standing/justiciability considerations)
- Gratz v. Bollinger, 539 U.S. 244 (2003) (imminent future harm considerations in class-based challenges)
- In re Coho Energy, Inc., 395 F.3d 198 (5th Cir. 2004) (standing and injunctive relief principles in bankruptcy contexts)
- In re Hudson Shipbuilders, Inc., 794 F.2d 1051 (5th Cir. 1986) (cases guiding recognition of abusive practices in bankruptcy liquidation)
- Farguson v. MBank Houston, N.A., 808 F.2d 358 (5th Cir. 1986) (inherent powers of courts to control process and prevent abuse)
- Cooter & Gell v. Harmarx Corp., 496 U.S. 384 (1990) (inherent powers to manage dockets and protect judgments)
- Jones, In re, 366 B.R. 584 (Bankr.E.D.La.2007) (illustrates accounting complexities in lender proofs of claim)
- Stewart I, 391 B.R. 327 (Bankr.E.D.La.2008) (initial findings of errors in Wells Fargo's claim and injunction framework)