Meredith v. Wells Fargo Bank, N.A. (In re Meredith)

IN RE: JOSEPH P. MEREDITH, Debtor.

JOSEPH P. MEREDITH, Plaintiff, v. WELLS FARGO BANK, N.A., etc., Defendant.

Case No. 10-32366-KRH

AP No. 14-03123-KRH

UNITED STATES BANKRUPTCY COURT EASTERN DISTRICT OF VIRGINIA Richmond Division

November 26, 2014

Chapter 13

MEMORANDUM OPINION

Before the Court in this Adversary Proceeding is the Motion of Defendant Wells Fargo Bank, N.A. ("Wells Fargo") to Dismiss (the "Motion to Dismiss") pursuant to Rule 7012 of the Federal Rules of Bankruptcy Procedure (the "Bankruptcy Rules"). The issue presented by the Motion to Dismiss is whether the Complaint (the "Complaint") filed by Plaintiff, Joseph P. Meredith ("Meredith"), states sufficient facts to present a plausible cause of action on its face to survive a challenge under Bankruptcy Rule 7012(b). A hearing on the Motion to Dismiss was held on October 14, 2014 (the "Hearing"). At the conclusion of the Hearing the Court ruled that it would dismiss the Complaint. The Court subsequently entered an order on October 31, 2014, commemorating the ruling it made at the Hearing. On November 10, 2014, Meredith timely noted an appeal to the Court's decision. This memorandum opinion supplements the findings offact and conclusions of law orally announced by the Court on the record at the conclusion of the Hearing in accordance with Bankruptcy Rule 7052.

Factual and Procedural Background

On June 30, 2003, Meredith executed a Promissory Note in the original principal amount of $95,200 (the "Promissory Note") made payable to Aegis Funding Corporation ("Aegis"). The Promissory Note was secured by a Deed of Trust of even date given by Meredith for the benefit of Aegis¹ encumbering Meredith's home at 3809 Ruslander Court in Henrico County, Virginia (the "Real Property"). As part of a securitization transaction involving Meredith's Promissory Note, Aegis assigned its beneficial interest in the Deed of Trust to Wells Fargo Bank, N.A., successor by merger to Wells Fargo Bank Minnesota, N.A., as Trustee for Aegis Asset Backed Securities Trust Mortgage Pass-Through Certificates, Series 2003-2. Chase Mortgage was the servicer-in-fact for the Promissory Note secured by the Real Property.

On April 1, 2010 (the "Petition Date"), Meredith filed a voluntary petition under Chapter 13 of Title 11 of the United States Code (the "Bankruptcy Code"). Throughout his Chapter 13 bankruptcy case (the "Bankruptcy Case"), Meredith was represented by experienced bankruptcy counsel. Meredith filed his Chapter 13 plan on April 2, 2010 (the "Original Plan"). Wells Fargo filed an objection to confirmation of the Original Plan on May 10, 2010, which objection it subsequently supplemented on July 28, 2010 (the "Wells Fargo Objection"). The Court sustained the Wells Fargo Objection and denied confirmation of the Original Plan on August 25, 2010. Meredith timely filed an amended plan on September 14, 2010 (the "Amended Plan"). Meanwhile, Wells Fargo filed a motion for relief from the automatic stay under 11 U.S.C. § 362(the "Wells Fargo Motion for Relief from Stay") on September 13, 2010.² Meredith did not file a response or any other type of opposition to the Wells Fargo Motion for Relief from Stay. The Court confirmed Meredith's Amended Plan by order entered on October 25, 2010. The Court thereafter conducted a hearing on the Wells Fargo Motion for Relief from Stay on November 10, 2010. The Court granted the motion by order entered November 16, 2010 (the "2010 Order Granting Relief from Stay").³

For the next four years Meredith made all of his payments under the confirmed Amended Plan to the Chapter 13 Trustee. Wells Fargo, meanwhile, waited until the spring of 2014, to conduct a foreclosure sale on Meredith's Real Property (the "Foreclosure Sale").⁴ Wells Fargo was the successful purchaser at the Foreclosure Sale of the Real Property. Meredith successfully completed his performance under the confirmed Amended Plan in his Bankruptcy Case; and he received a discharge on June 23, 2014. The Bankruptcy Case closed on August 14, 2014.

On the same day that the Bankruptcy Case was closed, Meredith, pro se, filed his Complaint against Wells Fargo, initiating this Adversary Proceeding. On September 17, 2014, Wells Fargo filed its Motion to Dismiss pursuant to Bankruptcy Rules 7012(b)(1) and7012(b)(6).⁵ Meredith filed a Response to the Defendant's Motion to Dismiss on October 3, 2014.

Jurisdiction and Venue

The Court has subject matter jurisdiction over this Adversary Proceeding pursuant to 28 U.S.C. §§ 157 and 1334, and the general order of reference from the United States District Court for the Eastern District of Virginia dated August 15, 1984. To the extent that certain claims asserted by Meredith may be non-core proceedings as described in 28 U.S.C. § 157(b)(2), such proceedings are "related to" the bankruptcy case and the Court may issue proposed findings of fact and conclusions of law pursuant to 28 U.S.C. § 157(c)(1). As Wells Fargo has requested that the Court grant it the relief presented by its Motion to Dismiss, Wells Fargo is deemed to have consented to entry of a dispositive order in that regard. See 28 U.S.C. § 157(c)(2). Venue is appropriate pursuant to 28 U.S.C. § 1409(a).

Parties' Allegations

Meredith's Complaint seeks relief from the Court's 2010 Order Granting Relief from Stay on the grounds that Wells Fargo lacked "legal standing" to move for the relief it was granted. Meredith argues that the subsequently conducted Foreclosure Sale was therefore invalid. Meredith requests the Court to vacate its 2010 Order Granting Relief from Stay and reinstate Meredith as owner of the Real Property.

Wells Fargo sets forth numerous arguments in Response. Wells Fargo contends that (i) the Court lacks jurisdiction over this matter because Meredith's Bankruptcy Case is closed; (ii) the Complaint is untimely under Bankruptcy Rule 8002(c); (iii) res judicata bars the Complaint;(iv) Meredith has no standing to challenge any assignment of the Deed of Trust; (v) the assignment of the Deed of Trust is valid; (vi) Meredith's claims are substantially improper in a non-judicial foreclosure jurisdiction; and (vii) declaratory relief is improper inasmuch as the Foreclosure Sale has already occurred.

The Court need not address these arguments, as it concludes that Wells Fargo's Motion to Dismiss should be granted because the subject matter of this litigation will have no meaningful impact upon the bankruptcy estate and the issues at bar are best left for adjudication in the Virginia state courts.

Standard of Review

A pleading that states a claim for relief must contain "a short and plain statement of the claim showing that the pleader is entitled to relief." Fed. R. Civ. P. 8(a)(2). For a complaint to survive a Bankruptcy Rule 7012(b)(6) motion to dismiss, the complaint must contain "enough facts to state a claim to relief that is plausible on its face." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007). The Court must accept all well-pleaded factual allegations as truthful. Id. at 555. The facts presented need to demonstrate that the plaintiff's claims are not simply conceivable or possible, but plausible. Id. (emphasis added). Thus, the "[f]actual allegations must be enough to raise a right to relief above the speculative level on the assumption that all of the complaint's allegations are true." Id. at 545; Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (noting the standard for the complaint "demands more than an unadorned, the-defendant-unlawfully-harmed-me accusation"). The court need not accept as true allegations that are conclusory in nature or lack factual support, unwarranted deductions of fact, arguments asserted in the complaint, or unreasonable inferences. See E. Shore Mkts., Inc. v. J.D. Assocs. Ltd.P'ship, 213 F.3d 175, 180 (4th Cir. 2000); Edwards v. City of Goldsboro, 178 F.3d 231, 244 (4th Cir. 1999).

Analysis

Wells Fargo asserts that the Court lacks jurisdiction over this Adversary Proceeding because Meredith has received a discharge and his Chapter 13 Bankruptcy Case is closed. The dismissal of Meredith's Bankruptcy Case does not automatically strip the Court of jurisdiction over an adversary proceeding related to the Bankruptcy Case. In re Porges, 44 F.3d 159, 162 (2nd Cir. 1995)

Section 350 of the Bankruptcy Code permits a court to reopen a case that was closed in order "to administer assets, to accord relief to the debtor, or for other cause." 11 U.S.C. § 350(b); Hawkins v. Landmark Fin. Co., 727 F.2d 324, 326 (4th Cir. 1984) (concluding that the right to re-open a closed case is subject to the court's discretion). Meredith contends that reopening the case at bar would not unduly prejudice Wells Fargo. In In re Young, the court reopened a bankruptcy case even though the debtor had filed her motion to re-open nine months after the case had closed and even though the defendant had already expended considerable funds to sell the property. 70 B.R. 968, 972 (Bankr. E.D. Pa.). The court held that a case can be re-opened without prejudice unless "fraud or intentional design on the part of the moving party or those in privity to him or her is established." Id.; see also Hawkins, 727 F.2d at 327 (finding prejudice where the defendant would incur further court costs and counsel fees). Meredith filed his Complaint on the very day his Bankruptcy Case was closed. The Court finds no indication of fraud or bad faith. Clearly, the Court could exercise its discretionary authority and re-open Meredith's case in order to address the arguments set forth in Meredith's Complaint.

If it were to exercise its discretion and re-open Meredith's Bankruptcy Case, the Court still must determine whether it should hear this Adversary Proceeding. "Bankruptcy judges may hear and determine all cases under title 11 and all core proceedings arising under title 11, or arising in a case under title 11 . . . and may enter appropriate orders and judgments, subject to review under section 158 of [title 28]." 28 U.S.C. §...