Brandao v. Fed. Nat'l Mortg. Ass'n (In re Brandao)

• Citation: 567 B.R. 396
• Decision Date: 07 April 2017
• Docket Number: Adversary Proceeding No. 13–1432,Case No. 13–15357–FJB
• Parties: IN RE Viviane Christine BRANDAO and Tulio Lima, Debtors Viviane Brandao, Plaintiff v. Federal National Mortgage Association and GMAC Mortgage, LLC, Defendants
• Court: United States Bankruptcy Courts. First Circuit. U.S. Bankruptcy Court — District of Massachusetts

567 B.R. 396

IN RE Viviane Christine BRANDAO and Tulio Lima, DebtorsViviane Brandao, Plaintiff

v.Federal National Mortgage Association and GMAC Mortgage, LLC, Defendants

Case No. 13–15357–FJB

Adversary Proceeding No. 13–1432

United States Bankruptcy Court, D. Massachusetts.

Signed April 7, 2017

Carmenelisa Perez–Kudzma, Perez–Kudzma Law Office, Weston, MA, for Plaintiff.

Timothy Larson, Orlans Moran, Waltham, MA, for Defendant.

PROPOSED FINDINGS OF FACT AND CONCLUSIONS OF LAW PURSUANT TO 28 U.S.C. § 157(c)(1)

Frank J. Bailey, United States Bankruptcy Judge

I. Overview

In the summer of 2012, GMAC Mortgage, LLC ("GMAC") conducted a foreclosure sale of certain real property located at 193 Salem Street in Woburn, Massachusetts (the "Woburn Property") through which GMAC conveyed the Woburn Property to Federal National Mortgage Association ("Fannie Mae"). Fannie Mae still holds title to the Woburn Property. By her complaint in this adversary proceeding, Viviane Brandao, the plaintiff and chapter 13 debtor, seeks to set aside the foreclosure sale on the basis of alleged wrongful conduct by GMAC in the pre-foreclosure period. After a trial, the Court now and hereby enters the following proposed findings of fact and proposed conclusions of law pursuant to 28 U.S.C. § 157(c)(1) and proposes that the complaint be dismissed on its merits.

II. Procedural History

On June 14, 2012, GMAC conducted a real estate foreclosure auction sale of the Woburn Property. GMAC, the highest bidder in the auction, assigned its bid to Fannie Mae and later executed a foreclosure deed conveying the Woburn Property to Fannie Mae. Brandao continued to occupy the Woburn Property after the foreclosure sale, and Fannie Mae subsequently commenced a summary process action against her in Woburn District Court.

In the summary process action, Brandao asserted that the foreclosure sale was void due to GMAC's failure to comply with the noticing requirements for a foreclosure under Massachusetts law. Brandao also attempted to assert a counterclaim against GMAC alleging certain bad faith conduct by GMAC in the pre-foreclosure period. On August 13, 2013, the Woburn District Court granted summary judgment in favor of Fannie Mae, finding that "[t]here was no substantial defect in notice" and that "[e]ven if the notice of right to cure had been defective it would not have invalidated the foreclosure sale." The court declined to address the merits of Brandao's attempted counterclaim and instead ruled that the issue of bad faith as either a defense or a counterclaim is not available to a defendant in a summary process action. Accordingly, the Woburn District Court awarded Fannie Mae judgment for possession. Brandao subsequently filed a notice of appeal of this judgment. Following a hearing, the Woburn District Court set an appeal bond of $2,200 per month, with the first payment due on September 1, 2013.

On September 9, 2013, Brandao and Tulio Lima filed a petition for relief under chapter 13 of the Bankruptcy Code, commencing the present bankruptcy case.¹ They did not list the Woburn Property on their schedules, but they did list a claim against GMAC for "fraud and wrongful foreclosure" on their Schedule B. Neither GMAC nor Fannie Mae filed a proof of claim in the chapter 13 case. The chapter 13 plan eventually confirmed by this Court is silent with respect to both GMAC and Fannie Mae. It does not seek to cure any arrears on the mortgage, pay any type of secured claim to either defendant, or include any unsecured liability owed to either defendant in the plan's distribution to unsecured creditors.

Shortly after the filing of the petition, Fannie Mae moved for relief from the automatic stay in order to file a motion to dismiss Brandao's state court appeal for failure to make the required appeal bond payments and then to evict Brandao from the Woburn Property in the event her appeal was dismissed. At a hearing on Fannie Mae's motion for relief from the automatic stay, Brandao's counsel asserted that Brandao intended to file an adversary proceeding against GMAC and Fannie Mae to bring claims that had not been resolved in the summary process action. Finding sufficient cause to grant Fannie Mae's requested relief, the Court allowed the motion for relief from the automatic stay effective ten days following entry of the order.

The day after the hearing on Fannie Mae's motion for relief from stay, Brandao filed the complaint commencing the present adversary proceeding, naming both GMAC and Fannie Mae as defendants. The complaint sought a reversal of the foreclosure sale as well as awards of damages against both defendants. It listed eight counts: Count I–Breach of the Duty of Good Faith and Reasonable Diligence, Count II–Violation of MASS. GEN. LAWS ch. 244, § 35A, Count III–Violation of MASS. GEN. LAWS ch. 244, § 1, Count IV–Fraud, Count V–Unfair or Deceptive Acts or Practices under MASS. GEN. LAWS ch. 93A, Count VI–Turnover of Property of the Estate pursuant to 11 U.S.C. § 542, Count VII–Quiet Title, and Count VIII–Turnover of Property of the Estate pursuant to 11 U.S.C. § 548.

On the same day she filed the complaint, Brandao filed an emergency motion for a preliminary injunction enjoining Fannie Mae from evicting her from the Woburn Property or from selling the Woburn Property to a third party. Following a hearing, the Court denied Brandao's motion for a preliminary injunction. Brandao subsequently appealed this Court's order denying the motion for a preliminary injunction to the Bankruptcy Appellate Panel for the First Circuit (the "BAP"), which appeal the BAP dismissed for lack of jurisdiction on the basis that this Court's order was not a final order and did not meet any of the requirements for conferring appellate jurisdiction over interlocutory appeals.

Fannie Mae subsequently filed a motion to dismiss the complaint or, in the alternative, for summary judgment on the basis that the claims and issues raised in the complaint had been or could have been litigated in the state court summary process action. Following a hearing, the Court granted Fannie Mae's motion in part by dismissing Counts II and III of the complaint. The Court denied the motion as to the remaining counts, stating that the remaining counts all relied on an allegation of bad faith in the foreclosure process, an issue that the Woburn District Court had explicitly stated could not be raised in the summary process action.

On February 27, 2014, GMAC filed a suggestion of bankruptcy indicating that it had filed a petition for relief under chapter 11 of the Bankruptcy Code in the United States Bankruptcy Court for the Southern District of New York on May 12, 2012, and that this adversary proceeding was stayed to the extent Brandao was seeking monetary damages from GMAC.

Fannie Mae and GMAC subsequently filed an answer as to the remaining counts. The answer contained a counterclaim seeking adequate protection payments to Fannie Mae during the pendency of the adversary proceeding. The Court struck the counterclaim for adequate protection payments without prejudice to Fannie Mae seeking the same relief by a motion filed in the chapter 13 bankruptcy case. Fannie Mae later filed an amended answer adding two affirmative defenses.

In August 2014, Fannie Mae filed a motion in the Woburn District Court to dismiss Brandao's appeal of the judgment for possession, based on Brandao's failure to pay any of the monthly $2,200 appeal bond payments. Brandao did not appear at a hearing to contest this motion, and on September 25, 2014, her appeal was dismissed.

In the course of discovery, Fannie Mae and GMAC served Brandao with a request for admissions pursuant to Fed. R. Civ. P. 36. Brandao failed to respond to this request. On February 27, 2015, Fannie Mae and GMAC filed a motion for summary judgment on all remaining counts, relying in part on the argument that the requests were deemed admitted and that based on those admissions, the defendants were entitled to judgment as a matter of law. Fannie Mae also argued that it was entitled to summary judgment to the extent Brandao sought to obtain damages against it for the alleged wrongful actions of GMAC. Finally, Fannie Mae and GMAC again argued that Brandao was precluded from bringing the remaining claims because they had been or could have been fully litigated in the summary process action. Brandao opposed the motion except to the extent Fannie Mae sought summary judgment as to the request for damages. Brandao acknowledged that the alleged wrongful conduct giving rise to a claim for damages was attributable only to GMAC and that she only sought equitable relief with respect to Fannie Mae. Following a hearing, the Court granted the motion for summary judgment to the extent the complaint sought damages against Fannie Mae. The Court denied the remainder of the motion. The Court afforded Brandao an opportunity to file a late response to the request for admissions but awarded the defendants $1,000 in attorneys' fees, to be paid by Brandao's counsel for the failure to respond the initial request for admissions.

On October 27, 2015, GMAC filed a status report indicating that the United States Bankruptcy Court for the Southern District of New York had confirmed GMAC's chapter 11 bankruptcy plan on December 11, 2013, which plan contained a provision that the claim of any creditor of GMAC that had failed to file a proof of claim "shall be deemed disallowed, discharged, released, and expunged [.]" Additionally, the confirmation order enjoined all parties from "commencing or continuing in any manner or action other proceeding of any kind" relating to claims released in the plan. As a result of this confirmation order, Brandao no longer has any right to a recovery against GMAC for the wrongful conduct alleged in the complaint.

At a hearing subsequent to the filing this status report, Brandao acknowledged that in view of the Court's ruling on the motion for summary judgment, she could not pursue a claim...