Doresca v. IndyMac Bank (In re Doresca)

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In re: Daphnee Doresca, Debtor.

Daphnee Doresca, Plaintiff, v. IndyMac Bank, FSB, OneWest Bank, FSB, Ocwen Loan Servicing, LLC, et al., Defendants.

No. 8-16-75006-las

Adv. Pro. No. 8-17-08213-las

United States Bankruptcy Court, E.D. New York

June 14, 2024

Chapter 7

MEMORANDUM DECISION AND ORDER ON DEBTOR'S RENEWED CROSS-MOTION

LOUIS A. SCARCELLA, UNITED STATES BANKRUPTCY JUDGE

In this adversary proceeding, plaintiff and debtor Daphnee Doresca ("Debtor"), now appearing pro se,^[1] asks this Court to determine the validity priority, or extent of a mortgage lien asserted by defendants PHH Mortgage Corporation ("PHH"), successor by merger with Ocwen Loan Servicing, LLC ("Ocwen") and OneWest Bank, FSB ("One West" and, together with PHH, "Defendants") against the real property located at 199 William Street, Hempstead, New York (the "Property"). See generally First Amended Adversary Complaint (the "First Amended Complaint" or "FAC").^[2] [Dkt. No. 81.]^[3] In the First Amended Complaint, Debtor alleged that after she acquired the Property pursuant to a default judgment entered against the original borrower, Carla Desrouilleres, in the Supreme Court of the State of New York, County of Nassau, Ocwen assigned its mortgage to N City Corporate Builders, Inc. ("N City") and Debtor thereafter satisfied the mortgage debt by remitting payment to N City. Debtor further alleged that to the extent it is determined that Defendants hold a mortgage against the Property, Defendants are time-barred under the relevant statute of limitations from seeking to foreclose the mortgage.

For their part, Defendants have contested the validity of the alleged assignment and satisfaction of the mortgage and argue that the applicable statute of limitations has yet to expire. See generally Answer and Counterclaim. [Dkt. Nos 96, 99.] PHH asserted a counterclaim, and Debtor answered the counterclaim. [Dkt. No. 109.] Defendants also filed a third-party action against Debtor and N City seeking a determination as to the parties' respective rights in and to the Property and to expunge both the assignment of mortgage and the subsequent satisfaction of mortgage. The third-party action as against Debtor was dismissed solely on procedural grounds, and N City was joined as an additional party to Defendants' counterclaim. See Memorandum Decision and Order on Motion to Dismiss Third-Party Complaint. [Dkt. No. 211.] After joinder, Corporate Capital Brokers, LLC ("CCB"), successor-in-interest to N City^[4], filed an answer to Defendants' counterclaim. [Dkt. No. 213.]

Now before the Court are Debtor's remaining requests for relief in her self-styled cross-motion [Dkt. No. 244] (the "Renewed Cross-Motion" or "Cross-Mot.^[5]"). Debtor filed the Renewed Cross-Motion in response to Defendants' motion, pursuant to Rule 37 of the Federal Rules of Civil Procedure, seeking case-terminating sanctions against both Debtor and CCB for failing to perform their obligations under the discovery rules and the discovery scheduling order entered by the Court [Dkt. No. 219] (the "Rule 37 Motion" or "Rule 37 Mot.").

In the Renewed Cross-Motion, Debtor seeks an order: (i) dismissing the counterclaim asserted against Debtor pursuant to Federal Rules of Civil Procedure 12(b)(1), 12(b)(6), and 9(b)^[6] (the "First Request for Relief'); (ii) cancelling and discharging the mortgage on the Property pursuant to N.Y. R.P.A.P.L. § 1501(4) (the "Second Request for Relief'); (iii) relieving Debtor of the March 24 Order^[7] pursuant to Rule 60(b)(1)-(5)^[8] (the "Third Request for Relief'); and (iv) denying the Rule 37 Motion as moot, because the statute of limitations precludes the Court from adjudicating this matter (the "Fourth Request for Relief').^[9] On April 19, 2024, the Court issued its decision on the Rule 37 Motion [Dkt. No. 290] (the "Rule 37 Decision"). In addition to ruling on the merits of Defendants' motion, the Court addressed several of Debtor's arguments in the Renewed Cross-Motion, to the extent Debtor maintained that such arguments bore on the resolution of the Rule 37 Motion. See Rule 37 Decision at 16-21. The Court reserved its ruling on the First, Second, and Third Requests for Relief, as well the statute-of-limitations issue raised by Debtor^[10], and noted that a separate decision disposing of the remaining issues in the Renewed Cross-Motion was forthcoming. Id. at 5 n.10, 16, 21.

Following careful review of the parties' submissions, the Court denies the First and Third Requests for Relief and reserves its ruling on the Second Request for Relief for the reasons set forth below.

JURISDICTION

The Court has subject matter jurisdiction over this adversary proceeding pursuant to 28 U.S.C. § 1334(b) and the Standing Order of Reference of the United States District Court for the Eastern District of New York, dated August 28 1986 (Weinstein, C.J.), as amended by Order dated December 5, 2012 (Amon, C.J.) entered in accordance with 28 U.S.C. § 157(a). This is a core proceeding pursuant to 28 U.S.C. § 157(b)(2)(K).

BACKGROUND^[11]

Following a series of discovery disputes^[12], on June 23, 2023, Defendants filed the Rule 37 Motion seeking entry of an order: (1) striking and dismissing Debtor's complaint; (2) striking CCB's answer and awarding default judgment against CCB in PHH's favor; and (3) awarding attorneys' fees and costs incurred by Defendants in connection with the failure of Debtor and CCB to respond to Defendants' discovery requests, together with such other and further relief as the Court deems just and proper.

On July 25, 2023, Debtor filed the July Cross-Motion, purportedly in response to the Rule 37 Motion, seeking an order: (1) dismissing the causes of action asserted against her in the Third-Party Complaint^[13] pursuant to Rules 12(b)(1), 12(b)(6) and 9(b); (2) cancelling and discharging of record the mortgage asserted by Defendants on the Property pursuant to N.Y. R.P.A.P.L § 1501(4); (3) determining that Debtor is a bona fide purchaser for value pursuant to N.Y. R.P.L. § 266;^[14] (4) imposing sanctions against Andrea Roberts, Esq., Blank Rome LLP, and PHH for a violation of the automatic stay pursuant to § 362(a)(4),(5), § 362(k)(1) and § 105, and expunging the alleged post-petition lien created in favor of PHH on September 24, 2019 and filed on October 27, 2019 by Blank Rome, IndyMac Bank, F.S.B., OneWest, Ocwen, and PHH encumbering the Property; (5) relieving Debtor of the March 24 Order pursuant to Rule 60(a); (6) for sanctions striking PHH's answer to Debtor's First Amended Complaint pursuant to Rule 37; (7) for sanctions expunging post-petition mortgage lien; and (8) awarding such other relief as the Court deems proper. [Dkt. No. 229]. Debtor also opposed the Rule 37 Motion. [Id.] Defendants filed their reply in support of the Rule 37 Motion and in opposition to the July Cross-Motion on July 28, 2023 (the "July Cross-Motion Opposition" or "July Cross-Mot. Opp."). [Dkt. No. 232]. On July 31, 2023, Debtor filed a memorandum of law in support of the July Cross-Motion, along with an accompanying declaration. [Dkt. Nos. 235, 236].

At a hearing held on August 1, 2023 (the "August 1 Hearing"), the Court advised Debtor that the July Cross-Motion was improper because the relief requested could not be brought as a cross-motion. See Aug. 1 Hear'g Tr. at 11:25-12:23; id. at 20:3-15. On August 16, 2023, Debtor filed the Renewed Cross-Motion, including arguments and requests for relief substantially similar to those made in the July Cross-Motion. [Dkt. No. 244]. On September 13, 2023, Defendants timely filed their declaration in opposition to the Renewed Cross-Motion. [Dkt. No. 246]. Debtor filed an untimely declaration and memorandum of law in further support of the Renewed Cross-Motion on September 19, 2023. [Dkt. Nos. 247, 249].

The Court held a hearing on the Rule 37 Motion on September 20, 2023 (the "September 20 Hearing"). On November 17, 2023, counsel for Defendants^[15] filed a supplemental memorandum of law in support of the Rule 37 Motion and in opposition to the Renewed Cross-Motion [Dkt. No. 273] (the "Supplemental Cross-Motion Opposition" or "Supp. Cross-Mot. Opp.")^[16], along with accompanying Victor Declaration ("Victor Decl.") [Dkt. Nos. 272] and Schulte Declaration ("Schulte Decl.") [Dkt. No. 275]. On December 22, 2023, Debtor filed a supplemental brief in response thereto, along with accompanying materials. [Dkt. Nos. 280-82].

The Court issued the Rule 37 Decision on April 19, 2024. In the Rule 37 Decision, the Court found that Debtor and CCB failed to comply with their discovery obligations and exercised its discretion to preclude Debtor and CCB from offering documents in evidence at a hearing or trial in support of their respective claims and defenses that were not produced in discovery. Rule 37 Decision at 4-5, 35-36. Additionally, the Court granted Defendants' request for reasonable attorneys' fees and costs for prosecution of the Rule 37 Motion, the specific amount of which was to be determined after submission of supplemental documents. Id. at 5-6, 36.

The Court also responded to several of Debtor's arguments in the Renewed Cross-Motion, to the extent Debtor endeavored to frame such arguments as somehow dispositive of the Rule 37 Motion. While reserving its ruling on the statute-of-limitations issue raised by Debtor until the parties have presented arguments and evidence at trial, the Court denied the Debtor's Fourth Request for Relief in the Renewed Cross-Motion. See id. at 16-21. In sum the Court rejected Debtor's argument that the Rule 37 Motion should be denied as "moot" on statute-of-limitations grounds, observing that (i) Debtor's argument was raised in a procedurally improper cross-motion, (ii) resolution of the statute...