Albanes v. Wells Fargo Bank, NA (In re Albanes)

• Decision Date: 05 July 2016
• Docket Number: Case No.: 15–31598 VFP,Adv. Pro. No.: 16–1187 VFP
• Citation: 560 B.R. 155
• Parties: In re: Victor M. Albanes and Yolanda D. Albanes, Debtors. Victor Albanes and Yolanda Albanes, Plaintiffs, v. Wells Fargo Bank, NA, as Trustee for Waterfall Victoria Mortgage Trust 2011-SBCI, Waterfall Victoria Mortgage Trust 2011-SBCI, Jemcap LLC, Peter Marsh, Saul Ewing LLP, and John Does 1-100, Defendants.
• Court: U.S. Bankruptcy Court — District of New Jersey

560 B.R. 155

In re: Victor M. Albanes and Yolanda D. Albanes, Debtors.Victor Albanes and Yolanda Albanes, Plaintiffs,

v.Wells Fargo Bank, NA, as Trustee for Waterfall Victoria Mortgage Trust 2011-SBCI, Waterfall Victoria Mortgage Trust 2011-SBCI, Jemcap LLC, Peter Marsh, Saul Ewing LLP, and John Does 1-100, Defendants.

Case No.: 15–31598 VFP

Adv. Pro. No.: 16–1187 VFP

United States Bankruptcy Court, D. New Jersey.

Signed July 5, 2016

VICTOR M. ALBANES, YOLANDA ALBANES, Debtors, 128 1st Street, Apt. 3, Elizabeth, NJ 07206

LAW OFFICES OF WEBER AND PERSKIE, Nicole L. Perskie, Esq., 551 New Road, Ste. B, Somers Point, NJ 08244, Counsel to Debtors/Plaintiffs

SAUL EWING LLP, Dipesh Patel, Esq., One Riverfront Plaza, Ste. 1520, 1037 Raymond Boulevard, Newark, NJ 07102, Counsel to Wells Fargo Bank, NA

OPINION

HONORABLE VINCENT F. PAPALIA, United States Bankruptcy Judge

I. INTRODUCTION

This matter is before the Court on the motion of the following Defendants to dismiss with prejudice the adversary proceeding filed by the Debtors for failure to state a claim upon which relief can be granted and for procedural bars including res judicata, collateral estoppel and the Rooker– Feldman doctrine based on prior proceedings in this Court and in the Superior Court of New Jersey, Chancery Division, General Equity Part, Union County (the “State Court”). The Defendants are:

(1) Wells Fargo Bank NA as Trustee for Waterfall Victoria Mortgage Trust 2011–SBC1 (“Wells Fargo”)

(2) Waterfall Victoria Mortgage Trust 2011–SBC1 (“Waterfall”)

(3) Jemcap LLC

(4) Peter Marsh

(5) Saul Ewing LLP

Peter Marsh in his certification describes Jemcap, LLC, as “Special Servicer to Wells Fargo Bank NA, as Trustee for Waterfall Victoria Mortgage Trust 2011–SBC1” (Dkt. No. 15, ¶ 1). The Debtors, represented by Nicole Perskie, Esq., first filed in opposition only an unsigned document which purported to be their Affidavit (Dkt. No. 19) and then, after adjournments granted by this Court at the Debtors' request and over Wells Fargo's objection, filed a pro se Brief and Affidavit on June 27, 2016 (Dkt. No. 21). For the reasons set forth below, the Court grants the Defendants' motion and dismisses the Debtors' adversary proceeding with prejudice.

II. JURISDICTIONAL STATEMENT

The Court has jurisdiction over this matter under 28 U.S.C. § 1334(b) and the Standing Orders of Reference entered by the United States District Court on July 10, 1984 and amended on October 17, 2013. This is a core proceeding under 28 U.S.C. § 157(b)(2)(A), (K) and (O). Venue is proper in this Court under 28 U.S.C. § 1408. The Court issues the following findings of fact and conclusions of law pursuant to Fed. R. Bankr.P. 7052. To the extent that any of the findings of fact might constitute conclusions of law, they are adopted as such. Conversely, to the extent that any conclusions of law constitute findings of fact, they are adopted as such.

III. STATEMENT OF FACTS

On August 8, 2003 Greenpoint Mortgage Funding, Inc. (“Greenpoint”) made a $227,500 loan to co-Debtor Yolanda Albanes (“Yolanda”) (Dkt. No. 11–3, Ex. B) in connection with the Debtors' acquisition of the real property and improvements commonly known as 128 1st Street, Elizabeth, New Jersey (the “Property”). See also Dkt. No. 11–6, Ex. E, at 26, ¶ 1 (Debtors' counterclaim asserting that the Debtors purchased the Property on that date). The loan was secured by a mortgage given by both Debtors to Greenpoint on August 8, 2003, with respect to the Property, which was recorded on August 20, 2003 (Dkt. No. 11–4, Ex. C). The note and mortgage were ultimately assigned to Wells Fargo Bank NA as Trustee for Waterfall Victoria Mortgage Trust 2011–SBC1 on March 8, 2011 (recorded on October 4, 2011 and re-recorded on October 19, 2011 (“Wells Fargo,” or, collectively, the “Lender”) (Dkt. No. 11–5, Ex. D). On or about October 1, 2009, the Debtors defaulted on their mortgage payments (Dkt. No. 11–8, Ex. G, Foreclosure Judgment, at 2, ¶ 1).¹

After the default, Wells Fargo filed a foreclosure action in the Superior Court of New Jersey, Chancery Division, General Equity Part, Union County, on or about September 23, 2011 under Dkt. No. F–7933–12 (Dkt. No. 11–7, Ex. F, 1/19/15 State Court Hr'g Tr. 24:6–12) (“1st Foreclosure Action”). As the State Court recited and found on January 9, 2015 during the Lender's motion for summary judgment, the State Court granted summary judgment to Wells Fargo in the 1st Foreclosure Action, but the Office of Foreclosure did not enter a Final Foreclosure Judgment for failure by Wells Fargo to comply with the Notice of Intent to Foreclose requirement (Dkt. No. 11–7, Ex. F, 1/19/15 Hr'g Tr. 27:17–24). The State Court then dismissed the 1st Foreclosure Action without prejudice (Dkt. No. 11–7, Ex. F, 1/19/15 Hr'g Tr. 28:1–3).

Wells Fargo filed the 2nd Foreclosure Action on February 2, 2014 under Dkt. No. 04916–14 (Dkt. No. 11–7, Ex. F, 1/19/15 Hr'g Tr. 28:4–5). The Debtors filed an Answer and six-count Counterclaim (the “Answer”) (Dkt. No. 11, Ex. E). The Answer asserted various defenses and counterclaims summarized by the Defendants in their Brief (Dkt. No. 11–1, Br. 5 and in the footnote below).² On January 9, 2015, the 2nd Foreclosure Action came before the State Court on Wells Fargo's ultimate motion for summary judgment.

The State Court on January 9, 2015 did not specifically address each of Debtors' many defenses line by line, but applied the standard for summary judgment on a foreclosure complaint:

[W]hen a summary judgment is made for a mortgage foreclosure the only material issues are the validity of the mortgage ... the existence of the debt, and the plaintiff's right to foreclose under [Great Falls Bank v. Pardo, 263 N.J.Super. 388, 394, 622 A.2d 1353 (Ch. Div. 1993), aff'd 273 N.J.Super. 542, 545, 642 A.2d 1037 (App.Div.1994) ].

Under New Jersey law, where there's proof of execution, recording a non-payment of the note and mortgage, the mortgagee has established a prima facie case....

Here, the issues of indebtedness and validity of the mortgage were decided by Judge Malone in March 2, 2012 [in the 1st Foreclosure Action]. He found that the plaintiff had standing. The sole issue left to determine is whether the plaintiff has a right to foreclose.

(Dkt. No. 11–7 1/9/15 Hr'g Tr. 28:24–29:23). The Court determined that the Notice of Intent deficit had been cured (Dkt. No. 11–7, 1/9/15 Hr'g Tr. 29:24–30:6). The State Court noted that the Court in the 1st Foreclosure Action had determined that the Lender was in possession of the note and that Debtors had been provided a certified copy, so that the Debtors had no right to contest ownership of the note (Dkt. No. 11–7, 1/9/15 Hr'g Tr. 29:19–34:4; 35:2–36:11). Because the Lender had “demonstrated the execution of the documents, standing and indebtedness” and the “validity of the mortgage,” the Court determined that the Lender was entitled to summary judgment (Dkt. No. 11–7, 1/9/15 Hr'g Tr. 30:7–10 and 29:19–23).

At the end of the January 9, 2015 hearing, the State Court granted the Lender summary judgment, struck Debtors' answer with prejudice, severed and dismissed the Debtors' counterclaim and sent the case to the foreclosure department as an uncontested matter (Dkt. No. 11–7, Ex. F, 1/9/15 Hr'g Tr. 36:9–37:24). The Order for Summary Judgment was entered on January 9, 2015 (Dkt. No. 11–7, Ex. F, 22–23). On May 22, 2015, the State Court entered Final Judgment of Foreclosure against the Debtors in the amount of $295,028.39 plus interest and fees (Dkt. No. 11–8, Ex. G, Final Judgment dated May 22, 2015).

On November 14, 2015, Debtors sent the Bank a Notice of Rescission of the note and mortgage, ostensibly under 15 U.S.C. § 1635 (“Right of rescission as to certain transactions”) (the “Notice”) (Main Dkt. No. 30, Debtors' Cert., Ex. A). The State Court did not address the rescission argument at the January 9, 2015 hearing because the Debtors did not send the Notice until November 14, 2015 nearly six months after entry of Final Judgment.

On November 17, 2015, three days after the putative Notice of Rescission, the Debtors pro se filed this bankruptcy case as a voluntary Chapter 7 (Main Dkt. No. 1, Petition). On February 11, 2016, Wells Fargo moved for stay relief under 11 U.S.C. § 362(d)(1) and (2) on the bases that there is no equity in the Property (which is not necessary for reorganization in this Chapter 7) and that the Debtors had made no postpetition payments. Debtors objected, arguing primarily that the note and mortgage were rescinded by Debtors' unilateral Notice of Rescission mailed to the Bank on November 14, 2015 (Main Dkt. No. 30, Debtors' Cert., Ex. A). Debtors also argued that Wells Fargo is not the real party-in-interest and may be oversecured but provided no evidence to counter the Lender's report of $284,000 value (Main Dkt. No. 30, 7–8). Debtors scheduled the property with a value of $350,000 on Schedule A and then amended their value to $285,000. At the hearing on March 8, 2016 and by Order entered on March 14, 2016, this Court granted stay relief to Wells Fargo (Dkt. No. 11–9, Ex. H; Dkt. No. 11–9, Ex. I, 3/8/16 Hr'g Tr.) During that hearing, the Debtors raised virtually identical defenses which the Court overruled for the reasons indicated. For many of the same reasons, the Court will grant the motion to dismiss.

On March 8, 2016, immediately after the stay relief hearing, the Debtors filed the instant three-count, 109–paragraph Adversary Complaint against the Defendants seeking the following relief. Paragraph numbers highlight significant allegations (including those in the preamble):

(1) rescission of the mortgage and related relief (¶¶ 1–5); including an argument at ¶ 29 that the loan was never “consummated” in an attempt to extend the rescission-notice period. As set forth below, rescission does not apply to the Debtors' mortgage. 15 U.S.C. § 1635(e)(1) ;

(2) damages for fraud by omission; such as failing to tell the Debtor(s) that the loan could be assigned, sold, pooled (

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