Houston et al v. Federal National Mortgage Association et al

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF TEXAS
HOUSTON DIVISION
RILEY HOUSTON AND §
JENNIFER HOUSTON, §
Plaintiffs, §
§
v. § CIVIL ACTION NO. 25-CV-0538
§
FEDERAL NATIONAL MORTGAGE §
ASSOCIATION AND ROCKET MORTGAGE, §
LLC, §
Defendants. §
MEMORANDUM OPINION AND ORDER
Plaintiffs initiated this case by filing an Original Petition in state court
challenging the validity of their Texas Home Equity Loan under the Texas
Constitution.1 ECF 1-1. Defendants removed the case to this federal court based on
diversity jurisdiction. ECF 1. Before the Court is Defendants’ Motion to Dismiss
for lack of subject matter jurisdiction, which has been fully briefed and is ripe for
determination. ECF 30; ECF 38; ECF 42. Having considered the parties’
submissions and the law, Defendants’ Motion is GRANTED IN PART AND
DENIED IN PART.
1 The parties have consented to the jurisdiction of this Magistrate Judge for all purposes, including
final judgment. ECF 40.
United States District Court
Southern District of Texas
ENTERED
February 13, 2026
Nathan Ochsner, Clerk
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I. Background
“On or about March 25, 2021, Plaintiffs entered into a home equity loan
transaction with Quicken Loans LLC in which Plaintiffs borrowed $324,800 secured
by the Propery [located at 6739 Honeycrest Lane, Spring, Texas] (the ‘Loan’).”2
ECF 1-1 ¶9. The Loan is owned by Fannie Mae and the current mortgage servicer
is Rocket Mortgage, LLC. Id. ¶¶10-11. The Loan closing occurred at a co-working
space at 118 Vintage Park, Houston, Texas 77070. Id. ¶12. Plaintiffs allege that the
co-working space is not “a lender’s office, title company, or attorney’s office” as
required by the Texas Constitution, Article XVI, § 50(a)(6)(N). Id. Plaintiffs
notified Defendant Rocket Mortgage of this defect on November 14, 2024, years
after loan closing. Id. ¶13. Defendants did not cure the deficiency within 60 days.
Id. Plaintiffs admit that they are not in default on their mortgage loan. ECF 38 at 4.
Further, Plaintiffs fail to allege that Defendants have put them on notice of default
or indicated any intent to foreclose, or that Plaintiffs have incurred actual damages.
Based on the single alleged violation of the Texas Constitution, Plaintiff sued
Defendants seeking a declaration “(a). . . the Loan is not compliant with the
requirements of the Texas Constitution, art. XVI, section 50(a)(6); (b) . . . violations
of the Texas Constitution, art. XVI, section 50(a)(6) are uncured causing the loan to
2 The Original Petition identifies the Property as15318 Climbing Branch Drive, Houston, Texas,
77068 (ECF 1-1 ¶5), but this is clearly a mistake as the Loan documents reference the Honeycrest
Lane address. ECF 1-1 at 12, 33.
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be void; (c) Defendants’ time to cure violations of the Texas Constitution, art. XVI,
section 50(a) has expired; and (d) . . . in Plaintiffs’ favor all other matters necessary
to completely resolve uncertainty in the rights, status, and legal relations in general
under the Loan, Loan Assignments, Property, and Texas law.” Id. ¶16. Plaintiffs
also assert claims for quiet title and breach of contract. Id. ¶¶ 14-26. Defendants
seek dismissal of all three claims based on lack of subject matter jurisdiction. ECF
30.
II. Rule 12(b)(1) Motion to Dismiss Standards
A court properly dismisses a case for lack of subject matter jurisdiction “when
the court lacks the statutory or constitutional power to adjudicate the case.”
Wingfield v. Garner, No. 23-40547, 2025 WL 1040649, at *1 (5th Cir. Apr. 8, 2025)
(citing Home Builders Ass'n of Miss., Inc. v. City of Madison, 143 F.3d 1006, 1010
(5th Cir. 1998)); Smith v. Reg’l Transit Auth., 756 F.3d 340, 347 (5th Cir. 2014)).
When there is a challenge to the Court’s subject matter jurisdiction, the party
asserting jurisdiction bears the burden of establishing jurisdiction exists. Alabama-
Coushatta Tribe of Tex. v. U.S., 757 F.3d 484, 487 (5th Cir. 2014); Ramming v. U.S.,
281 F.3d 158, 161 (5th Cir. 2001)). “Lack of subject matter jurisdiction may be
found in any one of three instances: (1) the complaint alone; (2) the complaint
supplemented by undisputed facts evidenced in the record; or (3) the complaint
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supplemented by undisputed facts plus the court's resolution of disputed facts.”
Ramming v. U.S., 281 F.3d at 161.
In this case, Defendants move for dismissal based solely on the allegations in
the Original Petition, to which the Texas Home Equity Security Instrument (First
Lien) (ECF 1-1 at 9-29), and the Texas Home Equity Planned Unit Development
Rider (ECF 1-1 at 30-34) (collectively the “Loan”) are attached.3 The Court thus
decides the pending motion based on the facts asserted in the Original Petition and
evidenced by the Loan.
III. Analysis
A. Legal Standards
1. Subject Matter Jurisdiction
Ripeness is a component of subject matter jurisdiction. United States v.
Dubuisson, No. 24-50509, 2025 WL 2604465, at *4 (5th Cir. Sept. 9, 2025)
(“‘[R]ipeness is a component of subject matter jurisdiction, because a court has no
power to decide disputes that are not yet justiciable.’” (citing United States v.
Magana, 837 F.3d 457, 459 (5th Cir. 2016))). According to Fifth Circuit precedent:
A court should dismiss a case for lack of ‘ripeness’ when the case is
abstract or hypothetical. The key considerations are ‘the fitness of the
issues for judicial decision and the hardship to the parties of
withholding court consideration.’ A case is generally ripe if any
3 The Note referenced in the Security Agreement is not attached or incorporated into Plaintiff’s
definition of the Loan.
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remaining questions are purely legal ones; conversely, a case is not ripe
if further factual development is required.
New Orleans Public Service, Inc. v. Council of New Orleans, 833 F.2d 583 586-87
(5th Cir. 1987).
As with any other claim, a declaratory judgment action must meet the test for
ripeness. See Orix Credit All., Inc. v. Wolfe, 212 F.3d 891, 896 (5th Cir. 2000)
(holding “a declaratory judgment action, like any other action, must be ripe in order
to be justiciable.”). Applying the ripeness doctrine in the declaratory judgment
context present a “unique challenge,” because such actions are often brought before
the actual injury is incurred. Id. In the declaratory judgment context, the Court must
determine “[w]hether particular facts are sufficiently immediate to establish an
actual controversy.” Id.
2. Texas Constitutional Protections From Foreclosure on Home
Equity Loans
Article XVI, § 50 of the Texas Constitution protects a homestead from
foreclosure subject to eight exceptions. TEX. CONST. ART. XVI, § 50(a)(1-8);
Garofolo v. Ocwen Loan Servicing, L.L.C., 497 S.W.3d 477 (Tex. 2016). One of the
exceptions allows foreclosure on a home equity loan as long as the loan meets all of
the requirements set forth in § 50(a)(6). TEX. CONST. art. XVI, § 50(a)(6)(A-Q).
One of the requirements for a home equity loan in § 50(a)(6) is the requirement that
the loan “is closed only at the office of the lender, an attorney at law, or a title
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company.” TEX. CONST. ART. XVI, § 50(a)(6)(N). Another requirement for the
exception to the foreclosure bar on a home equity loan is the condition that “the
security instruments securing the extension of credit contain a disclosure that the
extension of credit is the type of credit defined by Subsection (a)(6)[.]” TEX. CONST.
ART. XVI, § 50(a)(6)(Q)(vi). If the lender or note holder fails to comply with the
constitutional requirements for a home equity loan, the Texas Constitution provides
that the lender/note holder “shall forfeit all principal and interest of the extension of
credit” if the lender/note holder is notified by the borrower of a failure to comply
with 50(a)(6) and fails to correct the failure within 60 days.4 TEX. CONST. ART. XVI,
§ 50(a)(6)(Q)(x). Next, subsections (a)-(f) of § 50(a)(6)(Q)(x) list six specific ways
in which the holder of the note may “cure” or correct a failure to comply and
therefore avoid forfeiture of all principal and interest on the loan. 5
4 Section § 50(a)(6)(Q)(x) states:
except as provided by Subparagraph (xi) of this paragraph, the lender or any holder
of the note for the extension of credit shall forfeit all principal and interest of the
extension of credit if the lender or holder fails to comply with the lender’s or
holder’s obligations under the extension of credit and fails to correct the failure to
comply not later than the 60th day after the date the lender’s failure to comply [by
taking corrective measures set forth in subsections (a)-(f)].
TEX. CONST. ART. XVI, § 50(a)(6)(Q)(x).
5 The six corrective measures listed in subsections (a)-(f) of § 50(a)(6)(Q)(x) are:
(a) paying to the owner an amount equal to any overcharge paid by the owner under or
related to the extension of credit if the owner has paid an amount that exceeds an amount
stated in the applicable Paragraph (E), (G), or (O) of this subdivision;
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3. Case Law Interpreting Texas Constitutional Protections
From Foreclosure
In Garofolo v. Ocwen Loan Servicing, L.L.C, the Texas Supreme Court made
several significant rulings regarding § 50(a) of the Texas Constitution in the context
of a home equity loan. The Garofolo case reached the Texas Supreme Court when
it accepted and answered two certified questions presented by the Fifth Circuit Court
of Appeals: (1) Does the Texas Constitution provide a borrower on a home equity
loan with a constitutional right to forfeiture? or, alternatively, (2) is the forfeiture
remedy available through a breach-of-contract action under the facts of the case? Id
at 475.
(b) sending the owner a written acknowledgement that the lien is valid only in the amount
that the extension of credit does not exceed the percentage described by Paragraph (B) of
this subdivision, if applicable, or is not secured by property described under Paragraph (H)
of this subdivision, if applicable;
(c) sending the owner a written notice modifying any other amount, percentage, term, or
other provision prohibited by this section to a permitted amount, percentage, term, or other
provision and adjusting the account of the borrower to ensure that the borrower is not
required to pay more than an amount permitted by this section and is not subject to any
other term or provision prohibited by this section;
(d) delivering the required documents to the borrower if the lender fails to comply with
Subparagraph (v) of this paragraph or obtaining the appropriate signatures if the lender
fails to comply with Subparagraph (ix) of this paragraph;
(e) sending the owner a written acknowledgement, if the failure to comply is prohibited by
Paragraph (K) of this subdivision, that the accrual of interest and all of the owner's
obligations under the extension of credit are abated while any prior lien prohibited under
Paragraph (K) remains secured by the homestead; or
(f) if the failure to comply cannot be cured under Subparagraphs (x)(a)-(e) of this
paragraph, curing the failure to comply by a refund or credit to the owner of $1,000 and
offering the owner the right to refinance the extension of credit with the lender or holder
for the remaining term of the loan at no cost to the owner on the same terms, including
interest, as the original extension of credit with any modifications necessary to comply
with this section or on terms on which the owner and the lender or holder otherwise agree
that comply with this section;
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First, the Texas Supreme Court held that § 50(a) of the Texas Constitution
“simply describes what a home-equity loan must look like if a lender wants the
option to foreclose on a homestead upon borrower default.” 497 S.W.3d at 478.
Further, the Court wrote that § 50(a) creates only one constitutional right: “freedom
from forced sale to satisfy debts other than those described in its exceptions.” Id. In
addition, the Texas Supreme Court determined that the protections of § 50(a) “only
assume constitutional significance when their absence in a loan's terms is used as a
shield from foreclosure.” Id. In summary, The Texas Supreme Court in Garofolo
answered the certified question “Is there a constitutional right to forfeiture?” in the
negative and clearly stated that “[§] 50(a) simply has no applicability outside of
foreclosure.” Id. at 479.
Garofolo also answered the second certified question, i.e., “Can a borrower
seek forfeiture through a breach of contract claim based on the alleged violation of
§ 50(a) without pleading actual damages? in the negative. Id. Garofolo’s note
incorporated the constitutional requirement to deliver a release of lien and the
language of the Texas Constitution’s forfeiture provision. Garofolo provided notice
to Ocwen of its failure to deliver a release of lien, and Ocwen failed to cure within
the 60 day period. Garofolo acknowledged that she had not suffered any damages
from Ocwen’s failure to deliver the release of lien, but sought the forfeiture remedy
which had been incorporated into the loan documents. The question to the Texas
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Supreme Court was whether the constitutional forfeiture remedy, which had been
incorporated into the loan documents, was an available remedy for breach of contract
where Garofolo had not suffered any actual damages. The Texas Supreme Court
explained that if a lender cannot cure its constitutional non-compliance by
performing one of the six corrective measures listed in § 50(a)(6)(Q)(x)(a)-(f), the
remedy of “forfeiture is simply unavailable.” Id. at 482; see also Staub v. BBVA
USA, Civil Action No. 05-23-00890, 2024 WL 4647554, *6-7 (Tex. App. —Dallas
(Nov. 1, 2024, pet. granted) (holding that the forfeiture remedy was not available in
breach of contract action because use of an improper interest rate could not be
corrected by any of the six corrective measures set forth in § 50(a)(6)(Q)(x)). Thus,
in order to maintain a breach of contract claim based on a § 50(a) violation,
“Garofolo must show actual damages . . . or seek some other remedy, such as specific
performance.” Id.
On the same day it delivered the Garofolo opinion, the Texas Supreme Court
delivered its opinion in Wood v. HSBC Bank USA, N.A., 505 S.W.3d 542 (Tex.
2016). In Wood, the Texas Supreme Court addressed: (1) whether a statute of
limitations applies to an action to quiet title where the lien securing a home-equity
loan fails to comply with the parameters set forth in the Texas Constitution; and (2)
whether the petitioners in that case were entitled to a declaration that respondents
forfeited all principal and interest on the underlying loan. Id. The Court reiterated
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the holdings in Garofolo that § 50(a) does not create constitutional rights beyond a
defense to foreclosure, and that borrowers may, in some cases, obtain the forfeiture
remedy via a breach of contract action if the terms from the Texas Constitution are
included in the loan documents. Id. at 546. The Wood opinion, however, addressed
an issue not before the Garofolo court, specifically: whether a constitutionally
noncompliant lien is void versus voidable; and relatedly, whether the statute of
limitations provides a defense to a quiet title action involving a constitutionally
noncompliant lien. Id.
Section 50(c) declares that no lien on a homestead “shall ever be valid unless
it secures a debt described by this section . . ..” TEX. CONST. art. XVI, § 50(c). Based
on this language, the Wood Court held that a home equity loan that fails to comply
with the requirements of § 50(a) is void until cured, not merely voidable. 505
S.W.3d at 549. In Wood, the Texas Supreme Court also held that because § 50(c)
renders a constitutionally noncompliant lien void until cured, the statute of
limitations does not bar a quiet title claim on an uncured, constitutionally
noncompliant lien. Id. at 551. However, the Wood court’s holding that the
borrowers could pursue a quiet title action did not extend to their claim for a
declaration that they were entitled to forfeiture of all principal and interest paid on
the noncompliant home equity loan. The Wood court held that the declaration for
the remedy of forfeiture was foreclosed by the holding in Garofolo. While the quiet
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title action was based on section 50(c), the declaration for constitutional forfeiture
relied upon a constitutional cause of action under section 50(a). Garofolo holds that
the forfeiture remedy in 50(a) provides a defense to a foreclosure action on a
constitutionally noncompliant home equity lien but does not provide any other
substantive rights. Therefore, in the absence of the threat of foreclosure, the
forfeiture provision could only be enforced through a breach of contract action which
requires actual damages.
A few years later, in an unpublished opinion, the Fifth Circuit signaled a dim
view of a homeowner’s action invoking “§ 50(a)(6)(N) as an offensive means to
receive a free home; not as a defensive provision to prevent coercion.” Dill v. Fed.
Home Loan Mortg. Corp., No. 21-20533, 2022 WL 1532634, at *1 (5th Cir. May
16, 2022). In Dill, the Fifth Circuit wrote that the constitutional provision regarding
the proper location for closing “does not serve as a weapon for refinancing
homeowners who are not in default or threat of foreclosure to get a free loan.” Id.
(citing Garofolo, 497 S.W.3d at 478). Significantly, the Fifth Circuit also upheld
the jury’s finding that the homeowner “falsely signed the closing documents with an
intent to deceive” because the lender “had no means of knowing where Dill signed
the documents” and “relied on Dill’s sworn misrepresentation to their detriment.”
Id. at 2 (emphasis in original).
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In December 2024, the Houston 14th District Court of Appeals issued its
decision in Est. of McMahon v. Fed. Nat'l Mortg. Ass'n, No. 14-23-00707-CV, 2024
WL 5051215, at *1 (Tex. App.—Houston [14th Dist.] Dec. 10, 2024), pet. denied),
a case involving facts similar to those at hand. McMahon closed on a home equity
loan “at a Regus office-share conference room,” purportedly the office of “Attorney
Carter.” Id. Three years later, McMahon sent the defendants a notice that the loan
violated the Texas Constitution because it was not signed at a lender’s office, title
company, or attorney’s office. Id. Defendants did not and could not cure the failure
to sign in the office of a lender, attorney or title company, and in February 2021
McMahon sued, asserting claims for declaratory relief, breach of contract, and quiet
title. Id.
The Texas Court of Appeals raised the issue of subject matter jurisdiction sua
sponte. Id. at *3. Noting that “a declaratory judgment is appropriate only if a
justiciable controversy exists concerning the rights and status of the parties and the
controversy will be resolved by the declaration sought,” the court held the request
for declaratory relief presented no justiciable controversy, or in other words was not
ripe, “because foreclosure had not occurred nor had Lenders attempted foreclosure.”
Id. (citing Garofolo, 497 S.W.3d at 479). However, the McMahon court found the
trial court had jurisdiction over the breach of contract claim. Id. at *4. It also held
the trial court did not err in granting summary judgment to the lenders because
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plaintiff failed to demonstrate actual damages as a result of the alleged non-
compliance with § 50(a)(6)(N), or that the forfeiture provision in the loan documents
constituted a liquidated damages provision. Id.
B. Plaintiffs’ Claims in this Case
Defendants here argue that none of Plaintiffs’ claims—for declaratory
judgment, quiet title, or breach of contract—are ripe. ECF 30. Defendants also
argue that Plaintiffs cannot circumvent Garofolo by characterizing the terms of a
forfeiture provision in the Loan as a liquidated damages provision. Id. at 8-9. The
Court addresses each claim independently.
1. Defendants’ Motion to Dismiss Plaintiffs’ declaratory
judgment claim is granted.
Simply put, Plaintiffs seek a declaration that their Home Equity Loan violates
Texas Constitution, art. XVI, section 50(a)(6)(N). ECF 1-1 ¶¶14-16 and at 8.
However, “[§] 50(a) simply has no applicability outside of foreclosure.” Garofolo,
497 S.W.3d at 479. As discussed above, Garofolo held:
[t]he constitution guarantees freedom from forced sale of a homestead
to satisfy the debt on a home-equity loan that does not include the
required terms and provisions—nothing more.
Id. at 484. Therefore, a claim seeking a declaration that a home equity loan violated
§ 50(a)(6) is not ripe outside the context of foreclosure. This result is further
supported by the reasoning in Estate of McMahon in which, applying Garofolo, the
Texas Court of Appeals held the plaintiff’s claim for declaratory relief was unripe
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“because foreclosure had not occurred nor had Lenders attempted foreclosure.”
2024 WL 5051215, at *1.
Plaintiffs here fail to allege that Defendants have taken any steps toward
foreclosure on the Property. See, generally, ECF 1-1. Therefore, Defendants’
Motion to Dismiss the declaratory judgment claim is granted and the claim is
dismissed without prejudice for lack of subject matter jurisdiction.6
2. Defendants’ Motion to Dismiss Plaintiffs’ quiet title
claim is denied.
Plaintiffs seek a judgment for quiet title precluding Defendants from
interfering with their interest in the Property. ECF 1-1 ¶¶17-20 and at 8. The
elements of a quiet title action under Texas law are:
(1) the plaintiff has an interest in a specific property; (2) title to the
property is affected by the defendant's claim; and (3) the defendant's
claim, although facially valid, is invalid or unenforceable. A suit to
quiet title is an equitable proceeding, and the principle issue in such suit
is ‘the existence of a cloud on the title that equity will remove.’
Roberson v. Odom, 529 S.W.3d 498, 502 (Tex. App.—Texarkana 2017, no pet.)
(citations omitted). As with the declaratory judgment claim, Plaintiffs do not seek
monetary damages in connection with this claim. Defendants argue, again relying
on Garofolo, that this claim is not ripe because there has been no attempted
foreclosure. ECF 30 at 6-7. However, Defendants’ argument overlooks the
6 Plaintiffs all but concede this result by focusing almost exclusively on their quiet title and breach
of contract claims in their Response. See ECF 38.
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distinction between a claim seeking a declaration of a violation under section 50(a)
of the Texas Constitution, and a claim seeking to adjudicate the validity of an lien
under section 50(c).
As to Plaintiffs’ quiet title claim, the Texas Supreme Court’s opinion in Wood
is controlling. Because § 50(c) provides that no “lien on the homestead shall ever
be valid unless it secures a debt described by this section,” the Wood Court held that
a constitutionally noncompliant lien is void, not merely voidable. 505 S.W.3d at
549. To paraphrase the reasoning in Wood: if the Houstons accurately allege that
they did not close the loan in the office of a lender, title company, or attorney, the
lien on their homestead does not “secure a debt described by this section,” and
therefore the lien is not valid. See id. at 550. In Wood, plaintiffs waited nearly eight
years to complain about their loan’s failure to comply with § 50(a)(6). Nothing in
the Wood opinion indicates the defendants had attempted to foreclose before the
plaintiffs filed suit. Although Wood specifically held the statute of limitations
cannot bar a quiet title action involving a void lien, the holding necessarily requires
that a quiet title action involving a void lien is ripe even absent a threat of
foreclosure. Therefore, Defendants’ Motion to Dismiss the quiet title claim is
denied.
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3. Defendants’ Motion to Dismiss Plaintiffs’ breach of
contract claim is granted.
The Security Instrument in this case incorporates the requirements of §
50(a)(6) and contains a provision for the remedy of forfeiture.7 Plaintiffs assert that
Defendants breached the Loan, entitling them to forfeiture, because, after notice,
Defendants did not cure the alleged violation of § 50(a)(6)(N) as required by §
50(a)(6)(Q)(x). ECF 1-1 ¶¶21-26. Defendants argue this claim is not ripe because
there has been no effort to foreclose and therefore Plaintiffs have suffered no actual
injury. Defendants further argue the forfeiture provision is not a liquidated damages
provision. ECF 30 at ¶¶17-20.
The elements of a breach of contract claim under Texas law are: (1) the
existence of a valid contract; (2) performance or tendered performance by the
plaintiff; (3) breach of the contract by the defendant; and (4) damages sustained by
the plaintiff as a result of the breach. Mullins v. TestAmerica, Inc., 564 F.3d 386,
418 (5th Cir. 2009) (citing Aguiar v. Segal, 167 S.W.3d 443, 450 (Tex.App.—
7 The Security Instrument provides in relevant part:
Except as otherwise required by Applicable Law, Lender shall forfeit all principal and
interest of the Extension of Credit only if: (a) Lender receives said notice, the failure to
comply may be corrected by one of the methods set forth in Section 50(a)(6)(Q)(x), Article
XVI of the Texas Constitution, and Lender fails to correct the failure to comply within
sixty (60) days after it receives the notice; . . .
ECF 1-1 at 23.
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Houston [14th Dist.] 2005, pet. denied); Est. of McMahon v. Fed. Nat'l Mortg. Ass'n,
No. 14-23-00707-CV, 2024 WL 5051215, at *4 (Tex. App.—Houston [14th Dist.]
Dec. 10, 2024), pet. denied).
Garofolo recognized that plaintiffs may state a claim for a contractual
forfeiture remedy by showing: (1) their loan incorporates the requires of § 50(a); (2)
plaintiffs notified the lender of a § 50(a) violation; (3) the lender failed to cure the
deficiency in one of the ways listed in § 50(a)(6)(Q)(x); and (4) actual or liquidated
damages. 497 S.W.3d at 484. Plaintiffs do not allege actual damages and instead
argue the forfeiture provision in the Loan is a liquidated damages provision.
Because actual damages are not required if a plaintiff pleads liquidated
damages, the Court rejects Defendants’ argument that Plaintiffs claims are not ripe
because there has been no foreclosure. Nonetheless, Plaintiffs fail to state a breach
of contract claim as recognized by Garofolo because they fail to allege how the
failure to close at a constitutionally required location could be cured by one of the
actions listed in § 50(a)(6)(Q)(x). In their Response, Plaintiffs rely on the catch-all
provision of § 50(a)(6)(Q)(x)(f).8 ECF 38 at 9. However, “subsection (f) cannot
8 Section 50(a)(6)(Q)(x)(f) provides:
if the failure to comply cannot be cured under Subparagraphs (x)(a)-(e) of this paragraph,
curing the failure to comply by a refund or credit to the owner of $1,000 and offering the
owner the right to refinance the extension of credit with the lender or holder for the
remaining term of the loan at no cost to the owner on the same terms, including interest, as
the original extension of credit with any modifications necessary to comply with this
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apply to every deficiency not addressed by the other five corrective measures
because the forfeiture provision still assumes performance will actually correct the
underlying complaint.” Garofolo, 497 S.W.3d at 483. The remedy in subsection
(f), which calls for payment of $1,000 and refinancing on the original terms, cannot
cure the original failure to close at one of the locations specified in § 50(a)(6)(N).
This result is supported by the post-Garofolo decision Staub v. BBVA USA, 726
S.W.3d 506 (Tex. App.—Dallas 2024, pet granted), currently under review by the
Texas Supreme Court. In holding that forfeiture was not an available remedy for the
Staub plaintiffs, the Texas appellate court reiterated that forfeiture is an available
remedy only if one of the six corrective measures in subparagraph 50(a)(6)(Q)(x)
could actually correct the underlying problem. Id. at 511-512 (citing Garofolo, 497
S.W.3d at 483).
Moreover, Garofolo recognized that a post-origination breach of § 50(a)
requirements may give rise to a breach-of-contract claim for forfeiture. Id. (citing
Garofolo, 497 S.W.3d at 479-84). But the parties cite no Texas precedent
authorizing forfeiture as a breach of contract remedy when the loan failed to comply
with § 50(a) at origination. The court did not address this issue in Estate of
McMahon because it dismissed plaintiff’s breach of contract claim for failing to
section or on terms on which the owner and the lender or holder otherwise agree that
comply with this section[.]
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plead actual or liquidated damages. 2024 WL 5051215, at *4. Limiting the remedy
of forfeiture to breach of contract claims alleging a post-origination breach is
consistent with Woods’ holding that a constitutionally noncompliant home-equity
loan is void, not voidable. 505 S.W.3d at 549 (citing TEXAS CONSTITUTION, ART.
XVI § 50(c)). In other words, non-compliance at origination results in a void lien
that has no effect unless non-compliance is cured by one of the six corrective actions
listed § 50(a)(6)(Q)(x). Although Plaintiffs’ breach of contract claim alleges “the
loan is a valid contract by offer and acceptance,” (ECF 1-1 ¶22), they simultaneously
seek a declaration that Loan is void (ECF 1-1 ¶16). This is not mere alternative
pleading. Because Plaintiffs here allege the Loan was breached at origination by
failing to comport with the requirements of the Texas Constitution as incorporated
into the Loan documents, they cannot demonstrate a valid contract entitling them to
forfeiture as a remedy for breach. For these reasons, Plaintiffs’ breach of contract
claim is dismissed.
IV. Conclusion and Order
For the reasons discussed above, it is
ORDERED that Defendants’ Motion to Dismiss Plaintiffs’ declaratory
judgment and breach of contract claims is GRANTED. It is further
ORDERED that Defendants’ Motion to Dismiss Plaintiffs’ quiet title claim is
DENIED. It is further
Case 4:25-cv-00538 Document 46 Filed 02/13/26 in TXSD Page 19 of 20

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ORDERED that the parties shall confer and submit an agreed, if possible,
Scheduling and Docket Control Order to govern this case going forward.
Christina A. Bryan
United States Magistrate Judge
Signed on February 12, 2026, at Houston, Texas.
Case 4:25-cv-00538 Document 46 Filed 02/13/26 in TXSD Page 20 of 20