O'Hara v. Napolitano

EDWARD O'HARA, Appellant-Debtor, v. ROBERTA NAPOLITANO et al., Appellees.

No. 3:18-cv-01899 (JAM)

UNITED STATES DISTRICT COURT DISTRICT OF CONNECTICUT

May 10, 2019

ORDER AFFIRMING DECISION OF BANKRUPTCY COURT

Appellant-debtor Edward O'Hara co-signed a mortgage with Francis O'Hara in 2006. Under the terms of the agreement, Edward O'Hara would not be personally liable in the event of a default on the loan. When he declared bankruptcy a decade later, the bank noticed a claim against Edward O'Hara based solely on the mortgage. The United States Bankruptcy Court eventually dismissed his case, see Doc. #127 to In re O'Hara, No. 16-51249 (Bankr. D. Conn. 2018) (Manning, C.J.), then denied his subsequent motion to reopen, see Doc. #146 to id., and then denied his motion for reconsideration of that denial, see Doc. #149 to id. O'Hara now appeals from that final order denying reconsideration of his motion to reopen. Doc. #1. For the reasons stated herein, I will affirm the Bankruptcy Court's order.

BACKGROUND

In 2006, Edward O'Hara and Francis O'Hara jointly signed a mortgage for property in Greenwich, Connecticut in 2006. Doc. #10-2 at 12, 23. The mortgage secured payment for a loan of nearly $700,000, id. at 11, and Francis O'Hara alone signed a separate promissory note pledging to pay that amount back to the lender, see id. at 4, 8. The lender and mortgagee was an entity named "MORTGAGEIT, INC." Id. at 8, 10. In relevant part, the mortgage provided that anyone who co-signed the mortgage but who did not sign the promissory note agreed "only to mortgage . . . the co-signer's interest in the property," and that a co-signer was "not personally obligated to pay the sums secured by" the mortgage. Id. at 19.

Ten years later, Edward O'Hara filed a Chapter 13 bankruptcy petition in the United States Bankruptcy Court on September 19, 2016. See Doc. #1 to In re O'Hara, No. 16-51249 (Bankr. D. Conn. 2017). As part of the bankruptcy proceeding, Ocwen Loan Servicing—purporting to work on behalf of creditor U.S. Bank National Association, as Trustee for the Lehman XS Trust Mortgage Pass-Through Certificates, Series 2006-12N ("Lehman XS")—filed a proof of claim for the mortgaged Greenwich property. See Doc. #10 at 6; Doc. #10-1 at 4-6.

O'Hara made various challenges to this claim in the Bankruptcy Court. As one piece of evidence among many, O'Hara filed with the Bankruptcy Court the affidavit of securities attorney Martin Mushkin, and with it an attestation from the Securities and Exchange Commission (SEC). See Doc. #91 at 45-49 to In re O'Hara, No. 16-51249 (Bankr. D. Conn. 2017). On January 24, 2018, the Bankruptcy Court dismissed O'Hara's Chapter 13 case, and in the same ruling, overruled O'Hara's objections to the Lehman XS claim. The Bankruptcy Court ruled in relevant part:

ORDERED: Pursuant to Fed. R. Bankr. P. 3001(f), "[a] proof of claim executed and filed in accordance with.. [the Bankruptcy Rules] shall constitute prima facie evidence of the validity and amount of the claim." The burden of persuasion under the bankruptcy claims procedure always lies with the claimant, who must comply with Fed. R. Bankr. P. 3001 by alleging facts in the proof of claim that are sufficient to support the claim. If the claimant satisfies these requirements, the burden of going forward with the evidence then shifts to the objecting party to produce evidence at least equal in probative force to that offered by the proof of claim and which, if believed, would refute at least one of the allegations that is essential to the claim's legal sufficiency. In re Jorczak, 314 B.R. 474, 481 (Bankr. D. Conn. 2004) (internal citations omitted). The Creditor satisfied the requirements of the Bankruptcy Rules and therefore, the burden shifted to the Debtor to overcome the prima facie validity and amount of the claim. The Debtor has not put forth sufficient evidence to rebut the Creditor's claim and therefore Objections to Claim No. 6 areOVERRULED and Claim No. 6 is deemed to be an allowed secured claim in accordance with 11 U.S.C. § 502.

Doc. #127 to id.

O'Hara filed a motion for reconsideration on February 2, 2018. Doc. #131 to id. The Bankruptcy Court denied this motion on February 9, 2018. Doc. #133 to id. The Bankruptcy Court then closed O'Hara's case on February 28, 2018.

Several months later, O'Hara moved the Bankruptcy Court to reopen his case on August 30, 2018, Doc. #136 to id., and amended his motion to reopen three times, see Docs. ##140, 144, 145 to id. The third amended motion to reopen argued that the proof of claim was fraudulent for several reasons: (1) because O'Hara had not signed the promissory note, such that "the mortgagee has no claim whatsoever" on the debtor, Doc. #145 at 1 to id.; (2) because new evidence from SEC filings showed that "at least five (5) other securitized REMIC trusts are claiming an ownership interest" in the loan, such that the claim by the "putative creditor" must be "a forgery and [is] most likely fraudulent," id. at 2; (3) because "SEC filings of ownership" showed that the original mortgagee had not validly assigned the mortgage, id. at 4; and (4) because the loan servicing company for the creditor was not registered or licensed in the State of Connecticut as a consumer debt collector, such that the documents submitted in support of the claim by the loan servicing company "are void and judgments rendered on using them as evidence are void," Doc. #145 id. at 5.

On October 15, 2018, the Bankruptcy Court denied the third amended motion to reopen by means of the following docket order:

ORDER DENYING THIRD AMENDED MOTION TO REOPEN DEBTOR'S CHAPTER 13 CASE: On September 19, 2018, the Debtor filed a Third Amended Motion to Reopen Debtor's Chapter 13 Case (the "Motion," ECF No. 145) arguing that newly discovered informationshowed evidence of fraud. After reviewing the Motion and the record in the Debtor's case, it is hereby

ORDERED: The Motion is DENIED. No cause has been shown to grant the relief requested. See, 11 U.S.C. § 350(b).(RE: 145). Signed by Chief Judge Julie A. Manning on October 15, 2018. (Rai, Sujata) (Entered: 10/15/2018).

Doc. #146 to id.

On October 23, 2018, O'Hara filed a motion for reconsideration of the Bankruptcy Court's October 15 order. This motion for reconsideration focused solely on the first of the arguments raised in the third amended motion to reopen: that the proof of claim was false or fraudulent because "the debtor is not personally obligated on the mortgage if he has not signed the NOTE, but has only co-signed the MORTGAGE." Doc. #148 at 1 to id.

On November 9, 2018, the Bankruptcy Court denied the motion for reconsideration by means of the following docket order:

ORDER DENYING MOTION TO RECONSIDER DEBTOR'S THIRD AMENDED MOTION TO REOPEN: On September 19, 2018, the Debtor filed a Third Amended Motion to Reopen Debtor's Chapter 13 case (the "Motion to Reopen", ECF No. 145), arguing that newly discovered information showed evidence of fraud. On October 15, 2018, the Court entered an Order Denying the Motion to Reopen (the "Order", ECF No. 146), because no cause has been shown to grant the relief requested. On October 23, 2018, the Debtor filed a Motion to Reconsider the Order Denying the Motion to Reopen (the "Motion to Reconsider," ECF No. 148), arguing, again, that newly discovered information showed evidence of fraud. After reviewing the Motion and the records in the Debtor's case, it is hereby

ORDERED: The Motion to Reconsider is DENIED for no cause shown. See, 11 U.S.C. § 350(b) and Federal Rules of Bankruptcy Procedure 9024.

On or before 4:00 PM November 9, 2018 the Clerk's Office shall serve this Order on Edward James O'Hara the Pro Se filer/litigant, via first class mail to the address listed on the Pro Se filer/litigant's petition. Signed by Chief Judge Julie A. Manning on November 9, 2018. (Senteio, Renee) (Entered: 11/09/2018)

Doc. #149 to id.; Doc. #1-1.

O'Hara has now appealed to this Court. Although O'Hara's notice of appeal designates only the Bankruptcy Court's order denying reconsideration as the order from which he appeals, Doc. # 1, I will construe it to include as the subject for appeal not only the Bankruptcy Court's denial of his motion for reconsideration but also its denial of his third amended motion to reopen. See Elliott v. City of Hartford, 823 F.3d 170, 172-73 (2d Cir. 2016) (per curiam) (discussing rule of liberal interpretation for notices of appeal filed by pro se litigants).

DISCUSSION

A district court has appellate jurisdiction over a final judgment or order of a bankruptcy court. See 28 U.S.C. § 158(a)(1). The standards governing the Court's exercise of that jurisdiction are well-established. The Court reviews the Bankruptcy Court's findings of fact for clear error and legal conclusions de novo, see Maverick Long Enhanced Fund, Ltd. v. Lehman Bros. Holdings Inc., 594 B.R. 564, 567 (S.D.N.Y. 2018), and reviews a denial of a motion to reopen or for reconsideration for abuse of discretion, see Davidson v. AMR Corp., 566 B.R. 657, 665 (S.D.N.Y. 2017).

O'Hara first and principally argues that Ocwen's claim was fraudulent because O'Hara did not sign the promissory note that was associated with the mortgage. According to O'Hara, because he did not sign the mortgage, he "has no obligation to pay and the mortgagee has no claim whatsoever" on him. Doc. #10 at 7.

In Connecticut, a promissory note and a mortgage securing it are separate instruments with separate purposes. See New Milford Sav. Bank v. Jajer, 244 Conn. 251, 266 (1998). The note creates and governs the contractual right to a certain sum of money from a person, while themortgage creates and governs the equitable right to foreclose on a property in the event of a default on the obligation created by the note. See JP Morgan Chase Bank v. Winthrop Props., 312 Conn. 662, 673-74 (2014). "Upon a mortgagor's default on an underlying obligation, the mortgagee is entitled to pursue various remedies against the mortgagor...