Francisco v. Martinez

FRANCISCO v. MARTINEZ and DIANA A. MARTINEZ, Plaintiffs

v.AMERICAN HOME MORTGAGE SERVICING, INC. and BRICE, VANDER LINDEN & WERNICK, P.C.Defendants

Case No. 06-52009-LMC

Adversary No. 10-05001

United States Bankruptcy Court, W.D. Texas

July 22, 2010

ORDER DENYING DEFENDANT AMERICAN HOME MORTGAGE SERVICING, INC.'S REQUEST FOR A JURY TRIAL AND FINDING CERTAIN OF THE PLAINTIFFS' CAUSES OF ACTION TO BE CORE PROCEEDINGS

On October 4, 2006, the above-captioned plaintiffs / debtors (the "Plaintiffs" or "Debtors") filed a voluntary petition for relief under chapter 13 of the Bankruptcy Code. On October 12, 2006, American Home Mortgage Servicing, Inc. ("AHMS") filed proof of claim number 3-1 against the Plaintiffs' estate asserting a secured claim in the amount of $7,401.50 (the "AHMS Claim"). On December 7, 2006, the Plaintiffs' chapter 13 plan was confirmed [Docket No. 22 in case number 06-52009]. On January 4, 2010, the Plaintiffs commenced the above-captioned adversary proceeding (the "AP") against AHMS and Brice, Vander Linden & Wernick, P.C. ("Brice Vander," and, together with AHMS, the "Defendants"). On April 5, 2010, the Plaintiffs filed an amended complaint (the "Amended Complaint") [Docket No. 20]. On April 19, 2010, AHMS filed its answer to the Amended Complaint and demanded a jury trial [Docket No. 21]; also on April 19, 2010, AHMS filed its statement regarding consent and demanded a jury trial (the "Jury Demand") [Docket No. 22].¹ Lastly, on May 18, 2010, the Plaintiffs filed their objection to AHMS's Jury Demand (the "Objection") [Docket No. 27]. For the following reasons, the court denies AHMS's Jury Demand and finds that certain of the Plaintiffs' causes of action are non-core.

In addition to filing the AHMS Claim, AHMS otherwise participated in the Debtors' bankruptcy on a number of occasions (prior to the AP being filed). On April 27, 2007, AHMS filed a motion for relief from stay alleging that the Plaintiffs were in default on their post-petition mortgage payments [Docket No. 28]. On May 22, 2007, the court signed an agreed order on the motion (the "Agreed Order") [Docket No. 34]. On March 19, 2009, AHMS filed a certificate of non-compliance alleging that the Debtors failed to comply with the terms of the Agreed Order [Docket No. 50]; on July 7, 2009, AHMS withdrew the March certificate [Docket No. 51]. On November 3, 2009, AHMS filed another certificate of non-compliance again alleging that the Plaintiffs failed to comply with the terms of the Agreed Order [Docket No. 52]. The Plaintiffs filed an objection to the November certificate [Docket No. 53] and soon thereafter filed the AP.

A. The Pleadings

Since the Plaintiffs' allegations in the Amended Complaint are relevant to matters before the court, a summary of the Amended Complaint is important. The relationship between the Plaintiffs and the Defendants has to do with a note and mortgage on real property located at 115 Frances Jean Dr., San Antonio, TX 78223 (the "Property"). Amended Compl., ¶ 6. According to the Plaintiffs, beginning in December 2007, AHMS has not applied post-petition mortgage payments that the Plaintiffs have made, has sought to collect money from the Plaintiffs that they do not owe, and has referred the account to its bankruptcy counsel to assert defaults in the Agreed Order. Amended Compl., ¶ 16. As noted above, AHMS filed two certificates of default in this court alleging that the Plaintiffs did not comply with the terms of the Agreed Order. In December 2008, Brice Vander again notified the Plaintiffs that they were past-due on postpetition mortgage payments and Plaintiffs' counsel provided AHMS and its counsel with proof of payments. Id., ¶ 17. In January 2009, Brice Vander once again notified the Plaintiffs that they were past-due on post-petition mortgage obligations and Plaintiffs' counsel provided proof of such payments. Id., ¶ 18. This merry-go-round happened again in March 2009 (although, at this point in time AHMS had hired a different law firm: Balcom Law Firm, P.C.), Id., ¶ 20-22, July and August 2009, Id., ¶ 24-26, and September through November 2009. Id.,} 27-29. While the March 2009 events between the Plaintiffs and AHMS were taking place, AHMS hired Brice Vander to foreclose on the Property and the Plaintiffs got a notice that AHMS' loan was accelerated and that the Property had been posted for a non-judicial foreclosure sale. Id., ¶ 22. Apparently, the foreclosure never occurred in March. However, in a letter dated December 11, 2009, Brice Vander informed the Plaintiffs that AHMS had accelerated the loan and that the Property was posted for non-judicial foreclosure sale on January 5, 2010. Id., ¶ 30.

Based on these facts, the Plaintiffs request the following relief:

I. Count I: Violation of the automatic stay and relief under 11 U.S.C. § 362(k). Id., 3235. The Plaintiffs ask for "judgment against Defendants for their actual damages, including costs and attorney's fees... [and] punitive damages." Id., ¶¶34-35. II. Count II: Recovery of property of the estate under 11 U.S.C. § 542. Id., ¶¶36-37. The Plaintiffs ask that they be returned their "cashier's checks and money orders received but apparently not posted to the Debtor's mortgage account." Id.,} 37.

III. Count III: Declaratory judgment pursuant to the Federal Declaratory Judgment Act in 28 U.S.C. §§ 2201-2202. Id., ¶¶38-40. The Plaintiffs ask for a "declaration from the Court as to the status and amount due on their mortgage loan serviced by Defendant AHMS, as AHMS and its bankruptcy counsel have demanded vastly differing sums." Id., ¶ 40.

IV. Count IV: Violation of the Fair Debt Collection Practices Act under 15 U.S.C. §§ 1692 et. seq. Id., ¶¶41-44. Plaintiffs ask for "actual damages and reasonable attorney's fees and costs incurred. [and] statutory damages."

V. Count V: Violation of the Texas Debt Collection Practices Act under Tex. Fin. Code Ann. § 392.001 et. seq. Id., ¶¶ 45-48. Plaintiffs "hereby sue for injunctive relief to prevent or restrain further violations of this chapter, and for their actual damages sustained as a result of the violations of this chapter.... [and] reasonable attorney's fees and costs." Id., ¶ 48.

VI. Count VI: Request for a Temporary Restraining Order and Preliminary Injunction. Ultimately, based on the allegations made in the Amended Complaint, the Plaintiffs requested:

A. Judgment for their actual damages proven at trial, and such statutory damages as are imposed by law;

B. A declaratory judgment as requested herein;

C. An order directing Defendant AHMS to either properly apply Plaintiffs' mortgage payments that it might be holding, or turnover such payments to Plaintiffs;

D. A specific injunction prohibiting Defendants from attempting to collect sums from Plaintiffs which they have paid;

E. Pre and Postjudgment interest as provided by law;

F. Reasonable attorney's fees and expenses incurred through the trial of this cause, and for any appeal taken therefrom;

G. Costs of suit; and

H. Such other and further relief to which Plaintiff may be justly entitled.

Amended Compl., ¶ 49. On January 20, 2010, the court granted the Plaintiffs' request for a preliminary injunction (the "Injunction") [Docket No. 7] enjoining the Defendants from "directly or indirectly selling, attempting to sell, noticing another foreclosure sale, or foreclosing upon the real property located at 115 Frances Jean Drive, San Antonio, Texas 78223." Injunction, at 2.

In its Jury Demand, AHMS not only argues that it has a right to a jury trial but it also states that it does not consent to such jury trial being held in the bankruptcy court. Jury Demand, at 2. More specifically, AHMS argues that it has a right to a jury trial as to the Plaintiffs' claims under the Fair Debt Collection Practices Act (the "FDCPA") and the Texas Debt Collection Act (the "TDCA"). Id. at 2-4. At the heart of AHMS's argument is that "Plaintiffs' causes of action seek money damages, thus the claims are properly characterized as legal." Id. at 3. AHMS notes that the Plaintiffs assert their claims under the FDCPA and the TDCA for the first time in the Amended Complaint, and the Plaintiffs seek only monetary relief in association with those claims. Id. at 2-3. Indeed, AHMS argues, "equitable relief is not even available under the FDCPA." Id. at 3 (citations omitted). AHMS contends that the FDCPA and TDCA claims "resemble tort actions for collection violations, which were traditionally viewed as matters of law not equity." Id. at 4. Consequently, AHMS believes it "has a right to a jury trial with respect to these causes of action." Id. Additionally, AHMS asserts that the AP is not a core proceeding and does not consent to the bankruptcy court entering a final judgment in this matter. Id., at 5-6. AHMS does not believe that the Plaintiffs' FDCPA and TDCA claims are core proceedings since they could have been raised outside of the bankruptcy case. Id. at 4-5. Lastly, AHMS "does not consent to an entry of final judgment by the Bankruptcy Court in this non-core proceeding." Id. at 6.

Not surprisingly, the Plaintiffs argue that AHMS does not a right to a jury trial in this AP. See generally, Objection. More specifically, the Plaintiffs note that AHMS "ignores these crucial facts-it filed a proof of claim and has participated in the Plaintiffs' bankruptcy case." Objection, at 3. The Plaintiffs then list the actions-as described above-that AHMS has taken in their bankruptcy case. Id. at 4. In short, the Plaintiffs assert that their "claims center around sums claimed by AHMS during this bankruptcy case, AHMS' attempts to collect such sums, and the Plaintiffs' dispute that such sums were even owed. All of these claims are 'closely intertwined with the claims allowance process.'" Id. at 5. Lastly, to the extent AHMS does not consent to a jury trial in this court, the Plaintiffs argue that it is forum shopping. Id. at 6. For all these reasons, the Plaintiffs ask that you overrule AHMS' Jury...