Jennings v. Nationstar Mortg. (In re Jennings)

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IN RE: JAMES DARREN JENNINGS, Debtor.

JAMES DARREN JENNINGS, Plaintiff, v. NATIONSTAR MORTGAGE LLC D/B/A MR. COOPER, Defendant.

No. 22-40694-BEM

Adversary Proceeding No. 22-04017-BEM

United States Bankruptcy Court, N.D. Georgia, Atlanta Division

May 9, 2023

CHAPTER 13

ORDER

This matter is before the Court on Nationstar Mortgage, LLC's ("Defendant") Motion to Dismiss ("Motion") James Darren Jennings's ("Plaintiff") Complaint ("Complaint"). [Doc. 10]. On August 9, 2022, Plaintiff filed the Complaint seeking to set aside a foreclosure sale that allegedly violated the automatic stay and seeking damages for the stay violation. [Doc. 1]. On September 8, 2022, Defendant filed an answer ("Answer"). [Doc. 4]. The Parties filed a Joint Report and Proposed Scheduling Order on October 13 2022 that provided for filing dispositive motions by February 10, 2023. [Doc. 7]. Defendant then filed the Motion on February 7, 2023. [Doc. 10]. A response was due February 21 2023. Plaintiff did not file a response and Defendant's Motion is ripe for determination.

Although the Motion is styled as a motion to dismiss, because an answer has been filed, the Court will treat it as a motion for judgment on the pleadings under Federal Rule of Civil Procedure 12(c), made applicable in adversary proceedings by Federal Rule of Bankruptcy Procedure 7012(b), as the same standard applies to both types of motion. See United States v. Georgia, 574 F.Supp.3d 1245, 1248 (N.D.Ga. 2021).

I. Legal Standards

"Judgment on the pleadings is appropriate where there are no material facts in dispute and the moving party is entitled to judgment as a matter of law." Perez v. Wells Fargo N.A., 774 F.3d 1329, 1335 (11th Cir. 2014). "In determining whether a party is entitled to judgment on the pleadings, we accept as true all material facts alleged in the non-moving party's pleading, and we view those facts in the light most favorable to the non-moving party." Id. If there is a "material dispute of fact, judgment on the pleadings must be denied." Id.

Both the Complaint and the Motion include exhibits. On a motion to dismiss or motion for judgment on the pleadings, if the Court considers matters outside the pleadings, the motion must be converted to one for summary judgment. Fed.R.Civ.P. 12(d). The Complaint includes Exhibit A, which is a copy of a dispossessory petition filed in the Magistrate Court of Floyd County, Georgia on August 4, 2022. [Doc. 1, Ex. A]. As an exhibit to the Complaint, it is "part of the pleading for all purposes" and may be considered on this Motion. Fed.R.Civ.P. 10(c). The Motion includes a copy of a Warranty Deed dated April 29, 2016 for real property known as #14 Lionel Lane in Floyd County, Georgia (the "Property"). [Doc. 10, Ex. 1]. With respect to this exhibit, the Court may consider it without converting the Motion to one for summary judgment "only if the attached document is: (1) central to the plaintiff's claim; and (2) undisputed." Horsley v. Feldt, 304 F.3d 1125, 1134 (11th Cir. 2002). A document is "undisputed" if its authenticity is not challenged. Id. Here, Plaintiff has not challenged the authenticity of the document. Arguably, the document is central to Plaintiff's claim because as shown below, he has asserted a marital interest in the Property, which makes ownership of the Property relevant. Nevertheless, because the Court takes the assertion of a marital interest as true, the Court need not consider Defendant's exhibit in deciding the Motion. For the reasons stated herein, the Court will grant Defendant's Motion and dismiss the case.

II. Facts

The following facts alleged in the Complaint are either undisputed, having been admitted in the Answer, or are taken as true for purposes of the Motion. Conclusions and opinions asserted in the Complaint are excluded. In late April 2022, Defendant initiated the foreclosure process on its security deed recorded against the Property, which is Plaintiff's residence. [Doc. 1 at 1 & ¶ 10]. Defendant set the foreclosure sale for June 7, 2022. [Doc. 1 ¶ 11; Doc. 4 ¶ 11]. On June 6, 2022, Plaintiff filed a petition under Chapter 13 of the Bankruptcy Code and filed an initial plan, schedules, and statements. [Doc. 1 ¶ 7, 9]. On June 6, 2022, Plaintiff's attorney gave Defendant's foreclosure counsel notice of the bankruptcy. [Doc. 1 ¶ 12; Doc. 4 ¶ 12]. Prior to the foreclosure sale, Defendant's foreclosure counsel contacted Plaintiff's counsel "to dispute the applicability of Plaintiff's bankruptcy" to the foreclosure process. [Doc. 1 ¶ 13; Doc. 4 ¶ 13]. Plaintiff's counsel made it clear that Plaintiff asserted an interest in the Property both as his residence and as marital property. [Doc. 1 ¶ 14; Doc. 4 ¶ 14]. Defendant prosecuted the non-judicial foreclosure on June 7, 2022. [Doc. 1 ¶ 16; Doc. 4 ¶ 16]. Defendant moved for eviction on August 4, 2022 against Selena Jennings and "Occupants and or Tenants." [Doc. 1 ¶ 17, 18 & Ex. A]. Plaintiff's counsel was presented with the eviction pleading on August 8, 2022. [Doc. 1 ¶ 18].

Plaintiff is seeking relief from the Court by recission of the foreclosure, the return of the Property to the bankruptcy estate, and damages including attorney's fees. [Doc. 1 ¶ 31]. Defendant contends the Complaint fails to state a claim for relief because the Property is not property of Plaintiff's bankruptcy estate.

III. Analysis

As an initial matter, the Court notes that Plaintiff's bankruptcy case was dismissed on October 25, 2022 for failure to make plan payments, without expressly retaining jurisdiction over this proceeding. [Case No. 22-40694, Doc. 19]. "Although dismissal of the bankruptcy case usually results in dismissal of all remaining adversary proceedings, 11 U.S.C. § 349 gives the bankruptcy court the power to alter the normal effects of the dismissal of a bankruptcy case if cause is shown." Fidelity & Deposit Co. of Md. v. Morris (In re Morris), 950 F.2d 1531, 1535 (11th Cir. 1992). Courts consider three factors in deciding whether to retain jurisdiction: "(1) judicial economy; (2) fairness and convenience to the litigants; and (3) the degree of difficulty of the related legal issues involved." Id. The Bankruptcy Court's expertise on matters pertaining to the automatic stay weighs in favor of retaining jurisdiction under all three factors. Additionally, it is unlikely that Debtor could obtain complete relief in any other forum. See In Matter of Vanbrocklin, No. 15-11761-WHD, 2016 WL 3135786, at *4 (Bankr. N.D.Ga. May 16, 2016) (Drake, J) (noting that the bankruptcy court "maintains exclusive jurisdiction over enforcement of the automatic stay."); compare Carver v. Carver, 954 F.2d 1573, 1578 (11th Cir. 1992) (bankruptcy court should have abstained from considering motion for contempt for stay violation when the alleged violation involved a proceeding in state court "to attempt collection of arrearages in alimony, maintenance, or support" while also noting that the "automatic stay is essentially a court-ordered injunction[.]"). Therefore, the Court will retain jurisdiction over this proceeding.

The automatic stay arises upon the filing of a bankruptcy case and prohibits, among other things, "the commencement … of a judicial, administrative, or other action or proceeding against the debtor … [or] any act to obtain possession of property of the estate … or to exercise control over property of the estate[.]" 11 U.S.C. § 362(a)(1), (3).^[1] Property of the estate includes "all legal or equitable interests of the debtor in property as of the commencement of the case." Id. § 541(a)(1). Actions taken in violation of the automatic stay are void. Borg-Warner Acceptance Corp. v. Hall, 685 F.2d 1306, 1308 (11th Cir. 1982). Additionally, an individual injured by a willful violation of the automatic stay may seek to recover actual and punitive damages. 11 U.S.C. § 362(k). Plaintiff contends the foreclosure of the Property violated the automatic stay.

Plaintiff has asserted an interest in the Property on two grounds: a possessory interest and a marital interest. Plaintiff does not allege that he is on the deed to the Property. The Court takes as true for purposes of the Motion that Plaintiff resides in the Property and is married to the owner of the Property. "While the question of whether a debtor's interest constitutes property of the estate is a federal question … the nature and existence of the [debtor's] right to property is determined by looking at state law." Two Trees v. Builders Transp., Inc. (In re Builders Transp., Inc.), 471 F.3d 1178, 1185 (11th Cir. 2006) (quotation marks and citations omitted).

First the Court considers whether the alleged marital interest in the Property is property of the bankruptcy estate. Under Georgia law, "property that is brought into a marriage by one spouse remains the separate property of that spouse … except where a spouse has manifested an intent to transform his or her own separate property into marital property." Ga. Jur. Fam. Law § 3:4. However property acquired by spouses during their marriage, other than nonspousal gifts and bequests, is generally regarded as marital property subject to equitable division upon dissolution of the marriage. Mallard v. Mallard, 297 Ga. 274, 277, 773 S.E.2d 274, 277 (2015). Additionally, when separate property "appreciates in value during the marriage, and the appreciation is attributable to the efforts of that spouse, or the other party, and is not due to outside market forces, such appreciation in value may be subject to equitable division." Ga. Jur. Fam. Law § 3:4. As noted above, the Court takes as true that the Property is marital property. However, "Debtor's entitlement to an interest in the … Property does not arise under Georgia law until either Debtor or [Debtor's spouse] ...