Wells Fargo Bank, N.A. v. Patrick O'brien Murphy A/K/A O'brien Murphy and Beverly Murphy, 458 S.W.3d 912

Background

Patrick and Beverly Murphy obtained a $252,000 home‑equity loan from Wells Fargo in 2006; the loan documents expressly state it is an “extension of credit as defined by Section 50(a)(6), Article XVI” and that the note is “given without personal liability against each owner.”
The Murphys defaulted (late payments, unpaid taxes) and Wells Fargo filed for expedited foreclosure under Tex. R. Civ. P. 736.1.
The Murphys filed a separate and original declaratory‑judgment action invoking Rule 736.11 to automatically stay and require dismissal of the foreclosure application; they asserted claims including specific performance, declaratory relief, fraud, and DTPA violations, and sought attorney’s fees.
Wells Fargo filed an amended answer and counterclaim seeking declaratory relief and affirmatively pleaded entitlement to attorney’s fees under the UDJA (Tex. Civ. Prac. & Rem. Code § 37.009).
The trial court granted summary judgment for Wells Fargo, found the Murphys in default, and awarded Wells Fargo $116,505.75 in attorney’s fees. The court of appeals affirmed default but reversed the fee award, holding the pleadings did not support declaratory relief and the home‑equity loan’s nonrecourse language barred personal fee recovery.
The Texas Supreme Court granted review and reinstated the trial court’s judgment in part, holding the parties had pleaded declaratory relief and the nonrecourse clause did not bar personal liability for fees incurred in the Murphys’ separate and original action.

Issues

Issue	Plaintiff's Argument (Murphy)	Defendant's Argument (Wells Fargo)	Held
Whether pleadings supported recovery of attorney’s fees under the UDJA	Murphys argued (on appeal) their own pleadings did not state a cognizable declaratory‑judgment claim; thus fee recovery was improper	Wells Fargo argued both sides pleaded declaratory relief and Wells Fargo affirmatively pleaded entitlement to fees under §37.009	Court held both parties pleaded declaratory relief; Murphys failed to preserve re‑characterization; UDJA authorized fee award
Whether the loan’s “without personal liability” / nonrecourse language bars personal fee judgments for fees incurred defending a separate and original Rule 736.11 action	Murphys argued the nonrecourse status prevents personal liability for any deficiency or fee award tied to the loan	Wells Fargo argued the constitutional/nonrecourse language does not prohibit recovery of attorney’s fees incurred defending a separate declaratory action challenging foreclosure	Court held the loan and constitution do not bar personal liability for fees incurred in the Murphys’ separate and original action; fee award permissible
Scope of “extension of credit” under §50(a)(6) and loan terms as to fees	Murphys urged a broad reading that would encompass fees related to challenges to foreclosure so nonrecourse protection applies	Wells Fargo relied on narrower reading: fees for defending separate action are not enforcement of the loan and thus fall outside nonrecourse limitation	Court applied Sims and the loan’s terms; concluded the particular separate‑original proceeding falls outside enumerated protections in Section 9 and Murphys cannot hide behind nonrecourse status
Whether trial court’s fee award amount and segregation were properly addressed	Murphys argued (below) fees should be limited/segregated between recoverable and unrecoverable claims	Wells Fargo argued stipulated fees were recoverable under UDJA	Court did not reach merits of amount/segregation because Murphys failed to raise those challenges below; reinstated the full fee award

Key Cases Cited

Akin, Gump, Strauss, Hauer & Feld, L.L.P. v. Nat’l Dev. & Research Corp., 299 S.W.3d 106 (Tex. 2009) (attorney’s fees generally recoverable only if authorized by statute or contract)
Sims v. Carrington Mortg. Servs., L.L.C., 440 S.W.3d 10 (Tex. 2014) (definition of “extension of credit” under §50(a)(6) includes all terms of the loan transaction)
Doody v. Ameriquest Mortg. Co., 49 S.W.3d 342 (Tex. 2001) (homestead liens valid only if authorized by the Texas Constitution)
State v. Morales, 869 S.W.2d 941 (Tex. 1994) (UDJA is procedural; does not confer jurisdiction)
Davis v. Campbell, 572 S.W.2d 660 (Tex. 1978) (parties and appellate courts are restricted to theories tried in the trial court)
San Jacinto River Auth. v. Duke, 783 S.W.2d 209 (Tex. 1990) (appellate courts should not sua sponte raise unbriefed grounds to reverse summary judgment)
Tex. Ass’n of Bus. v. Tex. Air Control Bd., 852 S.W.2d 440 (Tex. 1993) (jurisdictional issues may be raised for first time on appeal)
Bocquet v. Herring, 972 S.W.2d 19 (Tex. 1998) (UDJA fee awards limited by equity and justice; court may award reasonable and necessary fees)
Tony Gullo Motors I, L.P. v. Chapa, 212 S.W.3d 299 (Tex. 2006) (requirement to segregate attorney’s fees when some claims permit fee recovery and others do not)
Fein v. R.P.H., Inc., 68 S.W.3d 260 (Tex. App.—Houston [14th Dist.] 2002, pet. denied) (nonrecourse note makes obligation payable only from collateral proceeds)
Hinckley v. Eggers, 587 S.W.2d 448 (Tex. Civ. App.—Dallas 1979, writ ref’d n.r.e.) (nonrecourse provisions limit lender to proceeds of sale of secured property)