Brannan v. Wells Fargo Home Mortg., Inc. (In re Brannan)

• Decision Date: 08 January 2013
• Docket Number: Bankruptcy No. 02–16647.,Adversary No. 04–01037.
• Citation: 485 B.R. 443
• Parties: In re Mark Joseph BRANNAN, Kelly Ann Brannan, Debtors. Mark Joseph Brannan, Kelly Ann Brannan, Plaintiffs, v. Wells Fargo Home Mortgage, Inc. f/k/a Norwest Mortgage, Inc., Defendant.
• Court: U.S. Bankruptcy Court — Southern District of Alabama

485 B.R. 443

In re Mark Joseph BRANNAN, Kelly Ann Brannan, Debtors.

Mark Joseph Brannan, Kelly Ann Brannan, Plaintiffs,

v.Wells Fargo Home Mortgage, Inc. f/k/a Norwest Mortgage, Inc., Defendant.

Bankruptcy No. 02–16647.

Adversary No. 04–01037.

United States Bankruptcy Court,

S.D. Alabama.

Jan. 8, 2013.

Steve Olen, Steven L. Nicholas, Benjamin T. Rowe, Ian David Rosenthal, Mobile, AL, for Plaintiffs.

Henry A. Callaway, III, Jennifer S. Morgan, Mobile, AL, for Defendant.

ORDER GRANTING PLAINTIFFS' MOTION FOR CLASS CERTIFICATION

MARGARET A. MAHONEY, Chief Judge.

This case involves the affidavit preparation, signing and filing practices of Wells Fargo Home Mortgage, Inc. through its employees and law firms representing it over the period from 1996 through 2008 in the Southern District of Alabama Bankruptcy Court. The plaintiffs assert that the practices of the defendant and its representatives were so pervasively improper or fraudulent as to require relief for all debtors who had affidavits filed in their cases in this district even if the information contained in any debtor's particular affidavit was true. The Court has jurisdiction to hear this matter pursuant to 28 U.S.C. §§ 157 and 1334 and the Order of Reference of the District Court. This is a core proceeding pursuant to 28 U.S.C. § 157(b)(2) and the Court has the authority to enter a final order. For the reasons indicated below, the Court is granting the plaintiffs' class certification motion.

FACTS

A.

The Court incorporates the findings of fact in its order dated November 7, 2011. There is no need to restate those findings.

Since that time, two additional plaintiffs, Minnie and Johnny Lee Ward, have been added to the case. They filed bankruptcy on April 13, 2004. Two affidavits were filed by Wells Fargo and Judge Shulman entered two orders conditionally denying relief from the stay after submission of the affidavits.

The first affidavit, filed on July 11, 2004, was filed without a motion for relief from stay being filed.¹ The affidavit stated that the note and mortgage were attached to the motion. The affidavit has attached to it a Lost Note Affidavit stating that the note cannot be found. The affidavit also states that the Wards had not paid installment payments for May through July 2004. However, the affidavit was dated June 29, 2004, before the July payment was due. The signature page of the affidavit has nothing on it but the affiant's signature and the notarization. The first two pages of the affidavit show no fax transmittal information on the bottom of each page, but the signature page has fax transmittal data.

On February 7, 2008, Wells Fargo filed another affidavit. The affiant stated she was an “Assistant Secretary” for Wells Fargo which she testified in her deposition was incorrect. The affidavit stated that the note and mortgage were attached to the motion for relief from stay and they were not attached. The same Lost Note affidavit was attached to the affidavit as was attached to the 2004 affidavit.

For the relief from stay order entered in 2004, Wells Fargo charged attorneys fees and costs of $750. For the motion and affidavit filed in 2008, Wells Fargo's attorneys charged $750 in fees and costs.

The plaintiffs also offered into evidence the Inspector General's Consent Judgment dated April 4, 2012, and the Executive Summary of Multistate/Federal Settlement of Foreclosure Misconduct Claims that settled claims between the state attorneys general, federal authorities, and five banks, including Wells Fargo. The claims were for mortgage foreclosure irregularities, including allegations by the plaintiffs of “robo-signing” by the banks of “thousands of foreclosure affidavits without reviewing the validity or accuracy of the sworn statements.” The settlement related only to mortgage foreclosure practices and affidavits. Wells Fargo and the other banks did not admit that the allegations were true but did allow the judgment to be entered and agreed to pay $25 billion dollarsin monetary sanctions. According to the Executive Summary, “the settlement represents the largest financial recovery obtained by the attorneys general except for the 1998 Master Tobacco Settlement.”

The plaintiffs also offered a Memorandum of Review from the Inspector General of the U.S. Department of Housing and Urban Development dated March 12, 2012. It is a review of the Wells Fargo Bank Foreclosure and Claims Process in Fort Mill, SC. The review speaks for itself. However, the findings included the following:

The affiants routinely signed and certified that they had personal knowledge of the contents of documents, including affidavits, without the benefit of supporting documentation and without reviewing the source documents referred to in the affidavits and verifying the accuracy of the foreclosure information stated in the affidavits. A number of affidavit signers admitted having signed up to 600 documents per day.

Employees who notarized documents, including affidavits, routinely did not witness the signature of the documents and notarized up to 1,000 documents per day.

Overall, the interviews indicated that the affidavit signers signed the great majority of the judgment affidavits without personal knowledge of or otherwise verifying the data and information contained in the affidavits they signed. Affidavit signers signed hundreds of foreclosure affidavits per day, and most only verified that their name was properly typed on the document as the signer of the affidavit. Many said that they did not read the affidavits. Many told us that a notary was not present when they signed the affidavits.

Affidavit signers and midlevel managers responsible for the affidavits told us that Wells Fargo management was aware that they did not read or verify the information in the affidavits that they signed. Several persons we interviewed said that they had expressed concerns about signing the affidavits (such as swearing that they had personal knowledge of the loan and had verified the document's content when they had not). Affidavit signers informed upper management that they could not handle the workload. Wells Fargo management did not correct the problem and, instead, in a March 2008 email, reduced the timeframes for processing the affidavits from 5 to 7 days to 24 to 48 hours, and the affidavit signers were required to sign the affidavits they received each day at 9 a.m. by 12 p.m. that same day, often signing in excess of 100 affidavits during that time.

The Inspector General concluded that “Wells Fargo did not establish an effective control environment to ensure the integrity of its foreclosure process.” The IG found that Wells Fargo engaged in improper practices that did not comply with federal regulations.

B.

The plaintiffs ask that two classes be certified. The classes are:

1. All individuals who:

(i) Have filed a Chapter 13 or Chapter 7 bankruptcy case in the Southern District of Alabama in which the defendant filed, or caused to be filed, an affidavit in support of a motion for relief from stay, motion for adequate protection, or similar motion filed from January 1, 1996 through December 31, 2008; and

(ii) Made any payment to Defendant (directly or indirectly) for attorneys fees and/or filing fees associated with such motions.

1. All individuals who

(i) Have filed a Chapter 13 or Chapter 7 bankruptcy case in the Southern District of Alabama in which the defendant filed, or caused to be filed, an affidavit in support of a motion for relief from stay, motion for adequate protection, or similar motion filed from January 1, 1996 through December 31, 2008; and

(ii) Have any charges posted to their mortgage account for attorneys fees and/or filing fees associated with such motions.

LAW

The issue to be decided is whether one or both of the classes can be certified pursuant to Fed. R. Bankr.P. 7023 for purposes of prosecuting a fraud on the court claim under the inherent powers of the court or an abuse of process by fraud claim pursuant to 11 U.S.C. § 105. Rule 7023 incorporates Fed.R.Civ.P. 23 into adversary proceedings in bankruptcy cases. The plaintiffs bear the burden of proof by a preponderance of the evidence. In re HealthSouth Corp. Securities Litigation, 257 F.R.D. 260, 270 (N.D.Ala.2009); All Family Clinic of Daytona Beach Inc. v. State Farm Mut. Auto. Ins., Co., 280 F.R.D. 688, 690 (S.D.Fla.2012). At a class certification hearing, the plaintiffs must “establish that the proposed class satisfies the requirements of Rule 23.” M.D. ex rel. Stukenberg v. Perry, 675 F.3d 832, 837 (5th Cir.2012). The requirements for a class certification that must be proved are set forth in the rule.

(a) Prerequisites. One or more members of a class may sue or be sued as representative parties on behalf of all members only if:

(1) The class is so numerous that joinder of all members is impracticable;

(2) There are questions of law or fact common to the class;

(3) The claims or defenses of the representative parties are typical of the claims or defenses of the class; and

(4) The representative parties will fairly and adequately protect the interests of the class.

These prerequisites are usually designated as (1) numerosity, (2) commonality, (3) typicality, and (4) adequacy. Amchem Products, Inc. v. Windsor, 521 U.S. 591, 117 S.Ct. 2231, 138 L.Ed.2d 689 (1997). The court will discuss each requirement in turn.

However, several other issues raised by Wells Fargo must be addressed prior to discussing the class action requirements. These issues relate to the propriety of the causes of action in general. Is there a private cause of action for abuse of process or fraud on the court and do Wells Fargo's actions constitute such an abuse, if the facts as pleaded are true? Are Wells Fargo's due process rights being protected? Is an adversary proceeding the proper procedural posture for these claims?

1. Preliminary Issues

A.Abuse of Process and Fraud on the Court

Why are Wells Fargo's actions a fraud...