Dials v. HSBC Bank United States, N.A. (In re Dials)

• Decision Date: 30 September 2017
• Docket Number: ADVERSARY PROCEEDING NO. 6:17–ap–6000,CASE NO. 6:16–bk–60085
• Citation: 575 B.R. 137
• Court: U.S. Bankruptcy Court — Southern District of West Virginia
• Parties: IN RE: Timothy Hugh DIALS, Debtor. Timothy Hugh Dials, Plaintiff, v. HSBC Bank USA, N.A., Reisenfeld & Associates, LPA, LLC, and Christopher Dawson, Defendants.

575 B.R. 137

IN RE: Timothy Hugh DIALS, Debtor.Timothy Hugh Dials, Plaintiff,

v.HSBC Bank USA, N.A., Reisenfeld & Associates, LPA, LLC, and Christopher Dawson, Defendants.

CASE NO. 6:16–bk–60085

ADVERSARY PROCEEDING NO. 6:17–ap–6000

United States Bankruptcy Court, S.D. West Virginia, at Parkersburg.

Dated: September 30, 2017

Timothy Hugh Dials, pro se.

Christopher A. Dawson, Reisenfeld & Associates, LPA, LLC, Cincinnati, OH, for HSBC Bank USA, N.A.

Gregory A. Stout, Reisenfeld & Associates, LPA, LLC, Cincinnati, OH, for Reisenfeld & Associates and Christopher Dawson.

MEMORANDUM OPINION AND ORDER

Frank W. Volk, Chief Judge

Pending in the main case is the Amended Motion for In rem Relief from Automatic Stay by Creditor, HSBC Bank USA, N.A., as Trustee on behalf of ACE Securities Corp. Home Equity Loan Trust and for the registered holders of ACE Securities Corp. Home Equity Loan Trust, Series 2006–ASAP3, Asset Backed Pass–Through Certificates ("HSBC"), filed February 14, 2017 [Dckt. 95]. Also pending are Debtor Timothy Hugh Dials' Motion for 9011(b) Sanctions against HSBC and Counsel Christopher Dawson, filed February 27, 2017 [Dckt. 120], Mr. Dials' Notice of Filing, Objection, Conditional Motion for Damages and Costs, filed April 19, 2017 [Dckt. 184], and Mr. Dials' Motion to Strike Exhibits and Testimony of Robert Montoya, filed June 7, 2017 [Dckt. 221].

Pending in the adversary proceeding are Motions to Dismiss by Christopher Dawson and Reisenfeld & Associates, LPA, LLC ("Reisenfeld") [Dckt. 9] and by HSBC Bank USA, N.A. ("HSBC") [Dckt. 15], along with Plaintiff Timothy Hugh Dials' Response in Opposition to the Motions to Dismiss [Dckt. 20]. Mr. Dawson, Reisenfeld, and HSBC filed Replies in support of their motions to dismiss as well [Dckts. 33 & 34].

In the main case, the Court held evidentiary hearings on HSBC's Motion for In rem Relief and Dials' Motion for 9011(b) Sanctions on April 6, 2017, and May 30, 2017. At the May 30 hearing, the Court also heard Mr. Dials' Notice of Filing Objection. During these evidentiary hearings, the Court heard testimony and argument. The Court also received exhibits from the parties, but deferred ruling on their admissibility. Afterwards, the Court entered an order that gave the parties one week to file objections to the exhibits and to submit any additional documents regarding the matters. The parties having tendered their final filings regarding these issues on June 14, 2017, the matters are ready for adjudication.

In the adversary proceeding, the Motions to Dismiss were filed on June 12, 2017 and June 22, 2017. Mr. Dials filed his Response to the motions on July 13, 2017, and the Defendants filed their Replies on August 25, 2017. The matters are fully briefed and ready for adjudication.

This is a core proceeding pursuant to 28 U.S.C. §§ 157(b)(2)(G) and (K). The Court has jurisdiction pursuant to 11 U.S.C. § 362 and 28 U.S.C. § 1334.

I.

The Court notes at the outset that it is permitted to take judicial notice of court records from another jurisdiction. See Colonial Penn Ins. Co. v. Coil , 887 F.2d 1236,1239 (4th Cir. 1989) (taking judicial notice of the content of court records); see also St. Louis Baptist Temple, Inc. v. FDIC , 605 F.2d 1169, 1172 (10th Cir. 1979) ("federal courts, in appropriate circumstances, may take notice of proceedings in other courts, both within and without the federal judicial system, if those proceedings have a direct relation to matters at issue") (citations omitted); Rodic v. Thistledown Racing Club, Inc. , 615 F.2d 736,738 (6th Cir. 1980), cert. denied , 449 U.S. 996, 101 S.Ct. 535, 66 L.Ed.2d 294 (1980) (federal courts may take judicial notice of proceedings in other courts of record) (citation omitted). The Court is aware that it may only take judicial notice of indisputable facts. When disputable facts are found herein, they are added only for context and given no weight in the evidentiary calculus.

A. Litigation of the Subject Property Prior to the Instant Case

In April 2006, Santana Cline, the alleged stepdaughter of Mr. Dials, executed a promissory note (the "Note) for $433,200.00 with CBSK Financial Group ("CBSK"). The Note was held by Mortgage Electronic Recording Systems, Inc. ("MERS") and was secured by a mortgage against real property located at 8243 Chippenham Drive, Dublin, Ohio (the "subject property"). The mortgage was later assigned to HSBC. On March 13, 2007, shortly after the assignment, HSBC filed a foreclosure complaint against Ms. Cline in Franklin County, Ohio. Originally, HSBC filed an Affidavit as to the Lost Promissory Note, which stated that the original promissory note had been misplaced as a result of mishandling. However, on December 28, 2007, HSBC filed a Motion to Incorporate Mortgage Note, which attached the Note as Exhibit A. Although this copy of the Note did not have the endorsement copied to a separate page, the Court notes that the endorsement clearly bled-through on page 5 and can easily be seen. Ms. Cline did not object to entry of the Note at that time. On January 24, 2008, the Court of Common Pleas of Franklin County granted summary judgment and specifically found that the mortgage and note were duly recorded and validly assigned to HSBC (hereinafter the "foreclosure action"). See HSBC Bank v. Cline , No. 07–cv–3604 (Franklin Cty. Ct. C.P.). Ms. Cline unsuccessfully appealed the foreclosure action. A sheriff's sale was scheduled.

In April 2008, Ms. Cline filed a Chapter 13 bankruptcy petition, and the automatic stay halted the scheduled sheriff's sale of the property. See In re Santana Cline , No. 2:08–bk–53519 (Bankr. S.D. Ohio). In July 2008, Ms. Cline's Chapter 13 case was dismissed for failure to present a plan in a posture for confirmation. Subsequently, a second sheriff's sale was set. However, Ms. Cline filed a Chapter 7 bankruptcy petition in October 2008 to once again halt the sale. See In re Santana Cline , No. 2:08–bk–60588 (Bankr. S.D. Ohio). Importantly, in that case Ms. Cline listed the property as an asset, scheduled HSBC's mortgage as a secured debt, and filed a statement of intention to surrender the property. She received a discharge in February 2009, but she never surrendered the property as promised.

After HSBC attempted an unsuccessful loss mitigation with Ms. Cline, a third sheriff's sale was schedule for July 9, 2010. On May 26, 2010, Ms. Cline filed a motion to stay sale and a motion for relief from judgment in the Franklin County foreclosure action from 2008. In her motions, she contended that her signature and the assignment were forged. The crux of her forgery challenge throughout the rest of her litigation campaign was that CSBK had ceased operations well before the assignment to HSBC, and thus the assignment had to have been forged. Additionally, Ms. Cline and Mr. Dials alleged and continue to allege that the physical appearance of the assignment is evidence that it was forged. Both of Ms. Cline's motions were denied as untimely on June 29, 2010.

On July 7, 2010, Ms. Cline filed another Chapter 13 petition, which stayed the sheriff's sale. See In re Santana Cline , No. 2:10–bk–58115 (Bankr. S.D. Ohio). She also filed two adversary proceedings that challenged the validity of the mortgage lien. See Cline v. HSBC, et al. , No. 2:10–ap–2482 (Bankr. S.D. Ohio); see also Cline v. HSBC, et al. , No. 2:10–ap–2618 (Bankr. S.D. Ohio). After the defendants moved to dismiss, Ms. Cline voluntarily dismissed the first adversary proceeding in January 2011. That same month, her Chapter 13 case was dismissed for failure to present a plan in posture for confirmation. In September 2011, the second adversary proceeding was dismissed with the court finding that Ms. Cline did not intend to pursue prosecution.

Following Ms. Cline's Chapter 13 dismissal in January 2011, a sheriff's sale was scheduled anew for May 6, 2011. Once again, in March 2011, Ms. Cline moved for relief from judgment and to stay the sale in the foreclosure action. She did so in the form of a Motion to Vacate, again, the judgment of the Franklin County Court of Common Pleas from 2008. In her motion, Ms. Cline again argued forgery. The motion was denied as meritless, in part because Ms. Cline had previously argued forgery and did not present any new evidence. See HSBC v. Cline, et al. , No. 07CVE–03–3604 (Franklin Cty. Ct. C.P).

On May 5, 2011, Ms. Cline filed a third Chapter 13 case, which again stayed the sheriff's sale. See In re Santana Cline , No. 2:11–bk–54893 (Bankr. S.D. Ohio). She also filed an adversary proceeding against HSBC and once again challenged its mortgage lien. See Cline v. HSBC, et al. , No. 2:11–ap–2336 (Bankr. S.D. Ohio). The Chapter 13 trustee moved to dismiss the bankruptcy case on various grounds, including Ms. Cline's repeated filing of failed bankruptcy petitions. On November 8, 2011, the bankruptcy court granted the motion to dismiss. On appeal, the bankruptcy court's order was affirmed. See In re Santana Cline , No. 11–54893 (B.A.P. 6th Cir.). Because of the dismissal of the bankruptcy case, the adversary proceeding was also dismissed.

Afterward, the Franklin County foreclosure action was reopened to allow re-appraisal and to schedule a sheriff's sale for March 30, 2012, four years after it was originally scheduled in 2008. On February 21, 2012, Ms. Cline filed a quiet title action in state court, which again stayed the sheriff's sale. See Cline v. MERS, et al. , No. 12–cv–2287 (Franklin Cty. Ct. C.P.). In her complaint, Ms. Cline alleged that the assignment of the mortgage was defective and invalid. On February 20, 2013, the state court granted summary judgment to the defendants on the grounds of claim and issue preclusion, concluding that she sought to re-litigate matters that were raised or could have been raised in the Franklin County foreclosure action.

Despite denial of her quiet title request, Ms. Cline again tried to re-litigate the same claim and issue. On April 25, 2013, Ms. Cline filed suit in the ...