In re: MICHAEL JACQUES JACOBS, Debtor.
MICHAEL JACQUES JACOBS, Plaintiff,
v.
DLJ MORTGAGE CAPITAL, INC. et al.; Defendants.
No. 19-12591-j11
Adversary No. 20-1053-j
United States Bankruptcy Court, D. New Mexico
April 5, 2022
Michael Jacques Jacobs, Elizabeth Dranttel Rose L. Brand & Associates, PC Attorneys for DLJ Mortgage, Inc. Selene Finance, LP Selene CS Participation Mortgage Electronic Registration Systems, Inc.
Janelle Ewing The Sayer Law Group Attorneys for Nationstar Mortgage, LLC, d/b/a Mr. Cooper Group, Inc.
MEMORANDUM OPINION
ROBERT H. JACOBVITZ United States Bankruptcy Judge
This matter is before the Court on the following motions: 1) Motion to Dismiss filed by DLJ Mortgage Capital Inc. ("DLJ Mortgage" or "DLJ"), Selene Finance, LP ("Selene Finance), Selene CS Participation LLC ("Selene CS"), and Mortgage Electronic Registration, Systems Inc. ("MERS") (sometimes, "DLJ/Selene/MERS's MTD" - Doc. 11); and 2) Nationstar Mortgage, LLC's Motions to Set Aside Entry of Default and Dismiss (sometimes, "Nationstar's MTD" - Doc. 15) (together, the "Motions to Dismiss").[1], [2] For the reasons explained below, the Court will grant the Motions to Dismiss, in part, and dismiss all claims in this adversary proceeding asserted against the Movants, except for the claim asserted against Selene Finance for violation of the Fair Debt Collection Practices Act ("FDCPA").
I. General Background
The Complaint initiating this adversary proceeding alleges four claims: (1) fraudulent misrepresentation; (2) violation of the FDCPA, (3) intentional infliction of emotional distress, and (4) a request for declaratory a declaratory judgment. Plaintiff asserts claims (1), (3) and (4) against all Defendants, and claim (2) only against Defendants DLJ and Selene Finance. The Motions to Dismiss together seek dismissal of all claims asserted against each of the Movants.
Plaintiff filed an objection to DLJ/Selene/MERS's MTD (Doc. 23), arguing that the Court should deny the motion because it was not timely filed. Plaintiff also objected to Nationstar's MTD (Doc. 24), responding individually to each allegation contained in the motion and requesting the Court to deny the requested relief.
A. Procedural Background
1. Procedural Background Relating to the Chapter 11 Case
Plaintiff Michael Jacobs, d/b/a Michael Jacobs Photojournalism filed a voluntary petition under chapter 11 of the Bankruptcy Code, 11 U.S.C. § 101 et. seq on November 13, 2019. See Case No. 19-12591-j11 ("Bankruptcy Case" - Doc. 1). Plaintiff filed his chapter 11 case for the purpose of keeping the residential property where he and his wife reside (the "Property").
On April 2, 2020, DLJ filed a motion for in rem relief from the automatic stay to permit it to foreclose a mortgage against the Property ("Mortgage") under a foreclosure judgment entered on June 5, 2018 (the "Foreclosure Judgment") following a trial on the merits in an action styled, DLJ Mortgage Capital, Inc. v. Ruby Handler Jacobs a/k/a Ruby Jacobs, Michael Jacobs, et al., Case No. D-202-CV-2012-09237 (the "Foreclosure Action"). Bankruptcy Case - Doc. 27.[3] The Foreclosure Judgment was entered prior to commencement of the Bankruptcy Case.
In its Memorandum Opinion relating to an Order Granting Motion for Issue/Claim Preclusion (Bankruptcy Case - Docs. 117 and 118, respectively), the Court concluded that the Foreclosure Judgment, which was entered after a trial on the merits, together with the State Court's Findings of Fact and Conclusions of Law ("Findings and Conclusions") supporting its Foreclosure Judgment, were entitled to preclusive effect in subsequent litigation between DLJ and Mr. Jacobs under the doctrine of issue preclusion as adopted in the State of New Mexico and barred Mr. Jacobs from challenging DLJ's standing to foreclose the Mortgage. The Court ruled on the issue in connection with a motion for relief from the automatic stay filed by DLJ. The Court also ruled, for the reasons set forth in the Memorandum Opinion (Bankruptcy Case - Doc. 117), that "Debtor is precluded from asserting that DLJ lacks standing to seek relief from the automatic stay." In a Memorandum Opinion and Order entered April 16, 2021, the Court denied Debtor's motion to reconsider its ruling that the Foreclosure Judgment and Findings and Conclusions have issue preclusive effect. Bankruptcy Case - Doc. 148.
Following an evidentiary hearing held April 22, 2021, the Court entered an order granting DLJ in rem relief from the automatic stay on May 24, 2021 (the "Stay Relief Order," Bankruptcy Case - Doc. 160) supported by a Memorandum Opinion filed the same date. (Bankruptcy Case - Doc. 159). At the hearing, the Court admitted into evidence by stipulation of the parties the Amended Complaint filed in the Foreclosure Action (Exhibit 9), the Findings and Conclusions (Exhibit 12) that are incorporated by reference into the Foreclosure Judgment, and the Foreclosure Judgment (Exhibit 13). See Minutes filed April 23, 2021 (Bankruptcy Case - Doc. 153) (reciting the date of the final hearing and the exhibits admitted into evidence by stipulation).
On June 23, 2021 the Court entered an order denying Mr. Jacob's motion to alter or amend the Stay Relief Order under Fed.R.Civ.P. 59, made applicable by Fed.R.Bankr.P. 9023,
because the motion was untimely. Bankruptcy Case - Doc. 173. On March 8, 2022, the Court entered an order (Bankruptcy Case - Doc. 229), supported by a Memorandum Opinion (Bankruptcy Case - Doc. 228), denying Mr. Jacob's motion for relief from the Stay Relief Order under Fed.R.Civ.P. 60(b), made applicable by Fed.R.Bankr.P. 9024.
2. Procedural Background Relating to this Adversary Proceeding.
Nearly a year after Mr. Jacobs commenced his chapter 11 case, on September 15, 2020, he initiated this adversary proceeding by filing a Complaint for Damages and Declaratory Judgment with Demand for Jury Trial ("Complaint" - Doc. 1). The Complaint initiating this adversary proceeding relates to a promissory note ("Note") secured by the Mortgage against the Property where Mr. Jacobs and his wife resides, and the Mortgage, and alleges defects in the chain of who holds and is entitled to enforce the Note and the chain of title relating to the Mortgage encumbering the Property.
The Court issued a summons in this adversary proceeding on September 18, 2020. Doc. 2. Plaintiff filed a Certificate of Service on September 25, 2020, certifying that service of the summons and a copy of the Complaint was made on all seven named Defendants by regular first-class United States mail, postage pre-paid. Doc. 4.
The Court held a scheduling conference on October 30, 2020. None of the seven named Defendants appeared and none of the Defendants had answered or otherwise responded to the Complaint. Concerned about whether service of process was made properly, the Court entered an order requiring the Plaintiff to mail any motion for default judgment to all affected parties at the addresses where process can be served by mail on the parties under Fed.R.Bankr.P. 7004. Doc. 6.
On November 3, 2020, Plaintiff filed Plaintiff's (I) Request for Entry of Default and (II) Motion for Entry of Judgment by Default ("Motion for Default Judgment"). Doc. 8. The Court
issued a Notice of Deadline to Object to Motion for Default Judgment (“Notice”) which fixed a deadline of November 16, 2020 to file an objection to the Motion for Default Judgment, and provided further that the Court intended to enter default judgment against any Defendant that did not timely file an objection. Doc. 9. The Notice was sent to all Defendants at their addresses of record. Id.
The Clerk issued the Clerk's Entry of Default (Doc. 10) on November 6, 2020 as to the following Defendants:
Bank of New York Mellon as Trustee
DLJ Mortgage Capital, Inc.
Mortgage Electronic Registration Systems, Inc.
Nationstar Mortgage LLC
[Selene] CS Participation, LLC
Selene Finance, LP
US Bank National Association as Trustee
On the same day, DLJ, Selene Finance, Selene CS, and MERS filed their motion to dismiss under Fed.R.Civ.P. 12(b)(6) (Doc. 11).[4] On November 16, 2020, DLJ, Selene Finance, Selene CS, and MERS filed a Motion to Set Aside Entry of Default (Doc. 17) and an objection to the Motion for Default Judgment (Doc. 16). Also on November 16, 2020, Nationstar filed Nationstar Mortgage LLC's Motions to Set Aside Entry of Default and Dismiss under Rule 12(b)(6). Doc. 15.
On March 17, 2022, the Court entered a Memorandum Opinion and order setting aside the Clerk's Entry of Default as to DLJ, Selene Finance, Selene CS, MERS, and Nationstar for good cause. Doc. 42. Under the circumstances, the Court found that these Defendants' failure to timely file an answer or otherwise respond to the Complaint was not willful, that they have a sufficiently meritorious defense so as to warrant setting aside the Clerk's Entry of Default, and
that Plaintiff will not be legally prejudiced by setting aside the Entry of Default. The Court also recognized the strong public policy of resolving cases on their merits.
B. The Court Will Not Deny DLJ/Selene/MERS's MTD Based on Untimeliness
Plaintiff asserts that DLJ/Selene/MERS's MTD is untimely because it was filed after the answer deadline fixed in the Summons for filing an answer to the Complaint. Though the recited timing is accurate, the Court will not deny DLJ/Selene/MERS's MTD because it was filed after the answer deadline specified in the Summons. As stated above, at a scheduling conference held after the answer deadline at which none of the seven named Defendants appeared, the Court was concerned that Defendants may not have been properly served with process and issued an order requiring Plaintiff to send a copy of any motion for default judgment by mail to all affected parties at the addresses where process can be served on such parties under Fed.R.Bankr.P...
