Barzelis v. Flagstar Bank, F.S.B., No. 14-10782 (5th Cir. 2015)
Annotate this CaseStacy Barzelis appealed the dismissal of her various state-law claims against Flagstar Bank, F.S.B. as preempted under the Home Owners' Loan Act of 1933 ("HOLA"), as well as a summary judgment on her claim under the Real Estate Settlement Procedures Act of 1974 ("RESPA"). In 2007, Stacy Barzelis and her husband Nicholas Barzelis refinanced their home loan with Fairway Independent Mortgage Corporation. For the refinancing, they executed a Texas Home Equity Security Instrument granting the bank a security interest in the property, but only Nicholas signed the promissory note. The loan was later assigned to Flagstar. In October 2009, Nicholas died, and Stacy submitted the death certificate to Flagstar in March 2010. She then filed for Chapter 13 bankruptcy relief, and the trustee continued to send loan payments to Flagstar on her behalf. But the bank refused them, stating that it would accept payments only from Nicholas, who had signed the Note. Stacy then sent Flagstar two Qualified Written Request, Complaint, and Dispute of Debt and Validation of Debt letters ("QWR"), asking Flagstar for information about the status of the loan and why it was refusing her payments. Flagstar replied to the first letter, but only to say that it would not supply her with the requested information because she was not a borrower under the Note, and she needed to provide "letters of authority from a probate attorney" to show that she was acting as the agent of the estate. Flagstar then began foreclosure proceedings. Barzelis sued in state court for wrongful foreclosure. Flagstar removed to federal court, and Barzelis amended her complaint to include an array of state and federal claims, including, in relevant part, breach of contract, negligent misrepresentation, violations of the Texas Debt Collection Act (TDCA), and violation of RESPA. The district court dismissed all the state-law claims as preempted by HOLA and granted summary judgment to Flagstar on the RESPA claim. The issue this case presented for the Fifth Circuit's review centered on which if any of Barzelis's state-law claims (breach of contract, negligent misrepresentation, and TDCA violations) were preempted by HOLA. The Fifth Circuit affirmed in part, reversed in part, and remanded: (1) despite finding that certain state-law claims with regard to Barzelis' breach of contract claim was preempted, the Court reversed dismissal of the contract claim insofar as it did not address alleged breaches of the Security Instrument; (2) Barzelis' negligent misrepresentation claim was pre-empted; (3) Barzelis' claims under the Texas Debt Collection Act (TDCA) were not pre-empted; and (4) because the district court did not consider the legal implications of Texas's community-property system and estate laws as they related to Barzelis's borrower status, the Court reversed the summary judgment on the RESPA claim.
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