Coppola v. Wells Fargo Bank, N.A. (In re Coppola), Case No.: 17-14944 VFP

Decision Date01 November 2018
Docket NumberAdv. Pro. No.: 17-1621 VFP,Case No.: 17-14944 VFP
Citation596 B.R. 140
Parties IN RE: Christine R. COPPOLA, Debtor. Christine R. Coppola, Plaintiff, v. Wells Fargo Bank, N.A., Defendant.
CourtU.S. Bankruptcy Court — District of New Jersey

LAW OFFICES OF ANDY WINCHELL, PC, 100 Connell Drive, Ste. 2300, Berkeley Heights, NJ 07922, Andy Winchell, Esq., Attorney for Debtor/Plaintiff, Christine R. Coppola

REED SMITH LLP, Henry F. Reichner, Esq., Three Logan Square, Ste. 3100, 1717 Arch Street, Philadelphia, PA 19103-7301, Attorneys for Defendant, Wells Fargo Bank, N.A.


VINCENT F. PAPALIA, Bankruptcy Judge


This matter is before the Court on the Motion (the "Motion") filed by the Debtor, Christine R. Coppola (the "Debtor"), to file a First Amended Complaint. Defendant Wells Fargo Bank, N.A. ("Wells Fargo" or the "Bank") has filed an Objection on the grounds that amendment would be futile,1 and the Debtor, a Reply.2 The Complaint arises from Debtor's contention that the Bank did not properly process or respond to Debtor's application for a post-petition mortgage loan modification, resulting in alleged violations of federal and state statutes and federal regulations.


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 September 18, 2012.3 The Debtor alleges in the Complaint that this is "primarily a non-core proceeding" outside 28 U.S.C. § 157(b)(2), but consents to entry of final judgment by this Court.4 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 Wells Fargo does not consent to entry of final judgment by this Court, these are the Court's proposed findings of fact and conclusions of law. To the extent that any of the findings of fact (final or proposed) 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.

A. Immediate Procedural Background

This is the second round of motion practice between Debtor and the Bank in this adversary proceeding that Debtor initiated by filing a two-count Complaint on September 19, 2017. In the first round, the Debtor sought to:

(1) disallow the proof of claim filed by Wells Fargo, as servicer for present trustee/mortgagee, U.S. Bank, N.A., on the grounds that it does not have standing to file the claim; and
(2) charge Wells Fargo with violations of 12 U.S.C. § 2601 et seq. , the Real Estate Settlement Procedures Acts ("RESPA"), and 12 C.F.R. § 1024 et seq. ("Regulation X"), for Wells Fargo's management of the loss mitigation/loan modification process post-petition.5

The Debtor made clear at that time and reiterates in her instant Motion that, as a remedy, she seeks RESPA damages only and not a loan modification.6

On October 20, 2017, the Bank moved to dismiss the Complaint under FED. R. BANKR. P. 12(b)(1) and (b)(6). After a hearing and oral argument on March 27, 2018, the Court issued an oral decision on that date. The Court's ruling was memorialized in an April 4, 2018 Order that dismissed the First Claim for Relief ("Count I") with prejudice and granted Debtor leave to move to amend her Second Claim for Relief ("Count II") by May 22, 2018 with related instructions, including requiring the submission of the May 22, 2017 letter from the Bank that denied Debtor's loan modification and on which Debtor's Notice of Error and appeal were based.7

The Debtor filed the instant Motion in compliance with the April 4, 2018 Order, including with it the proposed First Amended Complaint, the May 22, 2017 letter and certain other letters generated after the initial motion practice.8 Specifically, the Proposed First Amended Complaint (the "Amended Complaint") does the following:

(i) modifies Count II (as discussed below) and renumbers it as Count I;
(ii) adds Count II, alleging violation of New Jersey Law Against Discrimination ("NJLAD"), N.J.S.A. § 10:5-12, on the grounds that the Bank failed or refused to consider the income of Debtor's spouse in determining her creditworthiness; and
(iii) adds Count III, alleging violation of New Jersey Consumer Fraud Act ("NJCFA"), N.J.S.A. § 56:8-2, unconscionable commercial practice, as a function of the NJLAD violation.9
B. The Loan and State Court Proceedings

The Debtor signed a Note for $371,500 to NJ Lenders Corp. on April 5, 2006 and the Debtor and her nondebtor spouse, Robert John Coppola, signed a Mortgage securing the Note with the borrowers' real property at 46 Hamilton Road, Verona, New Jersey 07044 (the "Property").10 The Mortgage was recorded on April 21, 2006.11

The Debtor defaulted on the loan, and U.S. Bank, as assignee, filed a foreclosure complaint on June 17, 2013.12 The State Court held a trial on May 20, 2015 and June 4, 2015.13 The State Court rejected the Debtor's challenge of the standing of U.S. Bank to file the foreclosure action and Debtor's other alleged claims and defenses.14 The State Court therefore struck Debtor's answer and returned the case to the Foreclosure Unit.15 Final Judgment of Foreclosure was entered on July 19, 2016 for $452,684.38.16 The Debtor appealed the Judgment, and the Appellate Division upheld the Judgment in a decision entered post-petition on November 8, 2017.17

C. The Bankruptcy Proceeding

The Debtor filed the instant Chapter 13 petition (her first case) on March 13, 2017 and scheduled the Property with a value of $480,000 and a debt of $470,461.80 due to the Bank.18 The Plan proposed a loan modification by August 2017.19 U.S. Bank filed an objection to confirmation on March 23, 2017 on the grounds that Debtor provided no treatment for its claim in the Plan other than through loan modification.20 There appears to be no dispute that the Debtor's Plan cannot be confirmed absent a loan modification.

The Debtor applied for loss mitigation under the Court's program on March 23, 2017.21 The Court entered an Order for loss mitigation on April 12, 2017 with an end date of July 10, 2017.22 Debtor did not seek an extension of that date, and the deadline expired.

D. The U.S. Bank Proof of Claim and Motion to Expunge

U.S. Bank filed Claim No. 2-1 on April 11, 2017 for $486,254 (secured). The Debtor filed a motion objecting to the Claim on May 17, 2017, and U.S. Bank filed a response on August 10, 2017.23 That motion was marked "moot" on September 21, 2017 after the Debtor filed the instant adversary proceeding on September 19, 2017. As noted above, by Order entered on April 4, 2018, the Court dismissed with prejudice Count I of the original Complaint, which sought to disallow Claim No. 2-1 and to declare that the Bank, which serviced the loan for U.S. Bank, lacked standing to file a proof of claim.24 Thus, Claim No. 2-1 is an allowed claim, and the Debtor's objection to that Claim was overruled.25

E. The Loss Mitigation/Loan Modification Application

The course of the Debtor's loss mitigation/loan modification application is described in letters attached to the Proposed Amended Complaint at Exhibits A-H (only Exhibits B through E were attached to the original Complaint):26

Ex. A: May 22, 2017 letter from Bank (signed by Amanda Solsma, Home Preservation Specialist) to Debtor denying loan modification on the grounds that her gross monthly income, at $5,836, was too low.
Ex. B: May 29, 2017 letter from Debtor's counsel, Andy Winchell, Esq. ("Winchell") to Bank couched as a "Notice of Error under 12 C.F.R. § 1024.35 of Regulation X of the Mortgage Servicing Act under [RESPA]" indicating that the Debtor submitted a complete loan modification package on May 16, 2017 and was denied a loan modification in a "May 20, 2017" letter.27 Winchell states in his May 29, 2017 letter that the lender miscalculated Debtor's income as $5,860, rather than as $8,968.
Ex. C: June 7, 2017 letter from Bank (again signed by Amanda Solsma, Home Preservation Specialist) denying appeal of May 29, 2017 without further explanation; stating that Debtor still does not qualify for a loan modification; but suggesting short sale or deed in lieu of foreclosure if Debtor qualifies for those options.28
Ex. D: June 12, 2017 letter from Winchell to Bank, also couched as "Notice of Error," reiterating much of the language of Debtor's May 29, 2017 letter and claiming that the lender's "Appeal Denial" of June 7, 2017 was inadequate and did not conform to 12 C.F.R. § 1024.41(d).
Ex. E: June 28, 2017 letter from Henry F. Reichner, Esq., of ReedSmith LLP, on behalf of the Bank ("Reichner") to Winchell responding to the Debtor's letters and advising the Debtor that a "Notice of Error" was not the proper mechanism for appealing the denial of loan modification, citing Wiggins v. Hudson City Savings Bank , 2015 WL 4638452, at *8 (Bankr. D.N.J. Aug. 4, 2015).

The remaining three exhibits are new and arise from the Debtor's having submitted a second "loss mitigation" application on March 6, 2018:29

Ex. F: March 19, 2018 letter from Bank (signed by Hiliary Phillips, Home Preservation Specialist) to Debtor:
(i) advising her that she is eligible for a short sale; and
(ii) denying her loan modification based on a gross monthly income of $5,503.
Ex. G: April 5, 2018 letter from Winchell to Reichner couched as:
(i) a Request for Information under 12 C.F.R. §§ 1024.36(c) and (d) of Regulation X; and
(ii) a Notice of Error under 12 C.F.R. § 1024.35 of Regulation X, specifically for denying loan modification on a finding of $5,503 in gross monthly income, where Debtor claims that her gross, bi-monthly [sic, bi-weekly] paystubs are $2,993.05 (for a monthly total of $6,484.94) and that her nondebtor spouse's monthly income is $5,373.33 for a grand total of $11,858.27, as calculated by Winchell.30 Winchell demanded an explanation "for discounting

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