Giuffre v. Deutsche Bank Nat'l Trust Co. (In re Giuffre)

In re GUY L. GIUFFRE, Debtor

GUY L. GIUFFRE, Plaintiff, v. DEUTSCHE BANK NATIONAL TRUST COMPANY,

AS TRUSTEE FOR SOUNDVIEW HOME LOAN TRUST 2006-OPT5,

ASSET-BACKED CERTIFICATES, SERIES 2006-OPT5, Defendant

Case No. 15-14223-JNF

Adv. P. No. 16-1095

UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF MASSACHUSETTS

October 18, 2016

Chapter 13

MEMORANDUM

I. INTRODUCTION

The matter before the Court is the Motion to Dismiss filed by Deutsche Bank National Trust Company, as Trustee for Soundview Home Loan Trust 2006-OPT5, Asset-Backed Certificates, Series 2006-OPT5 (the "Defendant" or "Deutsche Bank") with respect to the two-count Verified Complaint filed by Guy L. Giuffre (the "Plaintiff" or the "Debtor"). The Court heard the Motion, as well as the Debtor's Objection and Deutsche Bank's Reply to the Debtor's Objection, on September 16, 2016 and took the Motion under advisement.

In his Verified Complaint, the Debtor set forth two counts, one captioned "Objection to Claim" and the other, "Statute of Limitations." Pursuant to his Verified Complaint, the Debtor seeks a judgment declaring that the mortgage held by Deutsche Bank which encumbers his personal residence located at 28 Vineyard Avenue, Oak Bluffs, Massachusetts (the "property") is "void and has no effect as an encumbrance on the title to the property." The Debtor alleges that, because he did not execute the note secured by the mortgage on his property and although Deutsche Bank may have a claim, the claim is unenforceable against him personally and his property pursuant to 11 U.S.C. § 502(b)(1) (emphasis supplied).¹ In addition, the Debtor alleges that the note secured by the mortgage is subject to a six-year statute of limitations and "[m]ore than six years has passed since the promissory note (given by Alec Sohmer) went into default" rendering it and the mortgage encumbering the property unenforceable.

Deutsche Bank contends that the Debtor's claims are barred by the doctrine of res judicata because the United States Court of Appeals for the First Circuit affirmed an orderof the United States District Court for the District of Massachusetts granting, pursuant to Fed. R. Civ. P. 12(b)(6), Deutsche Bank's motion to dismiss Giuffre's complaint seeking a declaration that the mortgage on his property was void due to fraud. See Giuffre v. Deutsche Bank Nat'l Trust Co., 759 F.3d 134 (1st Cir. 2014), aff'g C.A. No. 12-11510-JLT, 2013 WL 4587301, at 2 (D. Mass. Aug. 27, 2013). Thus, the issue presented is whether the Debtor's Verified Complaint is barred by the doctrine of res judicata or otherwise must be dismissed because it fails to set forth claims that are plausible on their face. See Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009).

II. BACKGROUND

The Debtor filed a Chapter 13 case on October 30, 2015.² On April 20, 2016, his former counsel filed a surrogate proof of claim on behalf of "Deutsche Bank/Ocwen." The next day, the clerk issued a "Notice of Proof of Claim filed under Fed. R. Bankr. P. 3004." The Notice provided, in pertinent part, the following:

If you disagree with the amount or any aspect of this proof of claim, you must file an amended proof of claim. The deadline to file with the court an amended proof of claim is on or before JUNE 6, 2016. The amended proof of claim shall be filed with the court at the address provided below, or you may file electronically if you are a registered user of CM/ECF in this court. See MLBR Appendix 8. You shall also file a certificate of service with the court within seven (7) days of the filing of the amended proof of claim reflecting service of the amended proof of claim on the Debtor, the Debtor's attorney and the Trustee. To obtain a proof of claim form (Official Form 410) or to learn more about filing the amended claim form electronically, please visit www.mab.uscourts.gov.

FAILURE TO FILE AN AMENDED PROOF OF CLAIM BY THIS DEADLINE MAY PERMANENTLY AFFECT YOUR RIGHTS TO DISTRIBUTION, IF ANY, UNDER THE PLAN, YOUR RIGHTS AGAINST THE DEBTOR(S), AND ANY RIGHTS AFTER THE PLAN COMPLETION AND DISCHARGE.

Deutsche Bank did not respond to the Court's Notice by either amending the proof of claim or moving to withdraw it before the June 6, 2016 deadline set forth in the Notice, although, as discussed below, it filed an Objection to the Debtor's initial Chapter 13 plan.

In the surrogate proof of claim, the Debtor listed the amount of Deutsche Bank's claim as $500,000 and the value of the property securing the claim as $466,475, as well as an arrearage of $5,500. On December 1, 2015, the Debtor filed a 60-month Chapter 13 plan through which he proposed a monthly plan payment of $102 and payment of $5,500 to Deutsche Bank for pre-petition arrears over the life of the plan. On January 12, 2016, Ocwen Loan Servicing, LLC, as servicer for Deutsche Bank filed an Objection to the Debtor's Chapter 13 plan in which it stated:

It is anticipated that Secured Creditor's claim will show the pre-petition arrearage due Secured Creditor is $485,044.07, whereas the Plan proposes to pay only $5,500.00. Therefore, the Plan is not in compliance with the requirements of 11 U.S.C. §§ 1322(b)(3) and 1325(a)(5) and cannot be confirmed. Secured Creditor objects to any plan which proposes to pay it anything less than $485,044.07 as the pre-petition arrearage over the life of the plan.

(emphasis supplied). The Debtor responded to the Objection, stating: "Debtor does not dispute that he has pre-petition arrears. However, currently disputes [sic] the pre-petition arrears amount stated because Ocwen Loan Servicing, LLC has not filed a Proof of Claim and as such, requests an accounting from the bank [sic]." On May 16, 2016, however, the Debtor, through new counsel, filed a "Withdrawal of Response to Objectionto Confirmation." The Court then entered the following order: "In light of the Debtor's withdrawal of his Response, the Objection is sustained. The Debtor shall file an amended plan within 30 days which comports with the Objection, failing which the case shall be dismissed. The 05/20/16 hearing is canceled."

The Debtor filed an amended Chapter 13 plan on June 18, 2016, approximately two weeks after filing his Verified Complaint. Pursuant to his amended 36-month plan, the Debtor proposed no payments to Deutsche Bank, averring that

[T]he mortgage & promissory note are not enforceable for the reasons stated in Adversary Proceeding no. 16-1095. No payments will be made to Deutsche Bank or its servicer. In the event that the debtor is not successful in the Adversary, the property will be surrendered to Deutsche Bank or its assignee, and the debt will be discharged.³

On September 23, 2016, Deutsche Bank filed a "Withdrawal of Proof of Claim No. 2" to which the Debtor filed an Objection, stating DB [Deutsche Bank] does not have the absolute right to withdraw its claim because an Adversary Proceeding has been filed; DB has accepted its treatment under the plan by failing to object to it, see United Student Aid Funds, Inc. v. Espinosa, 130 S. Ct. 1367, 559 US 260, 176 L. Ed. 2d 158 (2010)."

III. THE DEBTOR'S VERIFIED COMPLAINT

The Debtor, represented by Shaun M. Ellis, previously filed a Chapter 13 case almost ten years ago on January 23, 2006.⁴ As part of a "foreclosure rescue scheme," theDebtor voluntarily dismissed his Chapter 13 case and conveyed the property to Alec G. Sohmer ("Sohmer") on March 24, 2006. The circumstances surrounding the Debtor's voluntary dismissal of his prior Chapter 13 case are set forth in his Verified Complaint and are summarized in the decision of the United States Court of Appeals for the First Circuit in Giuffre v. Deutsche Bank Nat'l Trust Co., 759 F.3d 134 (1st Cir. 2014). In that case, the court of appeals, while noting that the Debtor got his home back but had made "no payment on the loan secured by the mortgage and [was] facing foreclosure as a result" id. at 135, stated:

In 2006, struggling to pay the mortgage on his house in Massachusetts, Giuffre filed for bankruptcy. On the advice of his attorney, however, he voluntarily dismissed his bankruptcy to pursue an alternative "foreclosure rescue" scheme. Under the scheme, Giuffre sold his home to a different attorney, Alec Sohmer, for $625,000, as reflected in a recorded deed, and paid off his preexisting mortgage, on which he apparently owed slightly more than $400,000. Sohmer obtained a new mortgage on the property in the amount of $500,000 from Option One Mortgage Corporation (which later transferred the mortgage to Deutsche Bank). At the same time, Sohmer transferred the property for a nominal price to a trust of which he was the trustee and Giuffre was the main but not sole beneficiary. Giuffre's complaint is silent as to whether he ultimately received any funds from these transactions. Sohmer had assured Giuffre that although Giuffre no longer owned the property he could reside there while paying rent to Sohmer, which would presumably go to the mortgagee, and obtain a new mortgage in his own name after two years. This plan soon failed, because Sohmer demanded rent payments that Giuffre could not afford—and that exceeded the mortgage payments that drove Giuffre into bankruptcy. Sohmer eventually initiated eviction proceedings. Sohmer also failed to make payments on the new mortgage, and the bank sought to foreclose. Soon after, Sohmer filed for bankruptcy, putting the foreclosure on hold. Meanwhile, reacting to Sohmer's mistreatment of Giuffre and other homeowners, the Massachusetts Attorney General pursued various legal remedies. Ultimately, the bankruptcy court approved a settlement that aimed to "restore [Sohmer's victims], to the extent possible, to the positions they occupied prior to the Foreclosure Avoidance Transactions." SeeIn re Sohmer, No. 06-14073 (Bankr. D. Mass. 2006), Dkt. 716, at 3. In thesettlement, several lenders to which Sohmer gave mortgages, including Option One, agreed to make certain efforts to mitigate the harm arising from Sohmer's

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