French v. Fed. Home Loan Mortg. Corp. (In re French)

• Citation: 619 B.R. 285
• Decision Date: 28 August 2020
• Docket Number: Adv. Pro. No. 18-01501 (MBK),Case No. 18-24468 (MBK)
• Parties: Veronica D. FRENCH, Debtor. Veronica D. French, Plaintiff, v. Federal Home Loan Mortgage Corporation, Defendant.
• Court: U.S. Bankruptcy Court — District of New Jersey

619 B.R. 285

Veronica D. FRENCH, Debtor.Veronica D. French, Plaintiff,

v.Federal Home Loan Mortgage Corporation, Defendant.

Case No. 18-24468 (MBK)

Adv. Pro. No. 18-01501 (MBK)

United States Bankruptcy Court, D. New Jersey.

Hearing Date: August 6, 2020

Dated: August 28, 2020

Joseph M. Pinto, Esq., Polino & Pinto, P.C., Moorestown Times Square, 720 E. Main St., Suite 1C, Moorestown, NJ 08057, Counsel for Plaintiff Veronica D. French

Betsy Ann Rosenbloom, Esq., Williams, Caliri, Miller & Otley, P.C., 1428 Route 23, PO Box 995, Wayne, NJ 07470, Counsel for Defendant Federal Home Loan Mortgage Corporation

Ethan R. Buttner, Esq., Reed Smith, LLP, 136 Main Street, Suite 250, Princeton, NJ 08540, Counsel for Defendant Federal Home Loan Mortgage Corporation

MEMORANDUM OPINION

Honorable Michael B. Kaplan United States Bankruptcy Judge This matter comes before the Court on a Motion for Reconsideration of Motion to Dismiss, and Other Relief ("Motion") (ECF No. 37) filed by Defendant Federal Home Loan Mortgage Corporation ("FHLMC" or "Defendant"). Plaintiff-Debtor, Veronica French, ("Debtor") filed an Opposition (ECF No. 38) and the Defendant Submitted a Reply (ECF No. 44). The Court has reviewed the parties' submissions and has considered fully the arguments presented during oral argument on August 6, 2020. For the reasons set forth below, the Defendant's Motion will be DENIED. However, the Court determines that it is without subject matter jurisdiction to consider the Debtor's claims; therefore, the Complaint will be dismissed without prejudice. The parties are granted stay relief to pursue their respective rights in other appropriate forums.

I. Background

The factual background and procedural history of this matter are well known to the parties and will not be repeated in detail here. In relevant part, the Debtor purchased the property located at 2 Grant Court, Columbus, New Jersey 08022 (the "Property") as new construction in 2000 for $226,766.89. Her purchase was financed with a $155,550.00 purchase money mortgage which, after a series of assignments, was held by Bank of New York. Debtor defaulted on her mortgage in 2002. The lender obtained a judgment of foreclosure in 2003, but did not proceed to sheriff's sale. The lender then brought a second foreclosure action in 2004, which concluded in a second uncontested foreclosure judgment against the Debtor in 2004.

The Debtor states that prior to a sheriff's sale in connection with the second foreclosure judgment, she consulted a financial firm, JP Global Property Management ("Global") in an attempt to save her home. As a result of her dealings with Global, title to the Property was transferred to an individual named Mary Ann Sorvino ("Sorvino"), an agent of Global, for stated consideration of $370,000.00. The Debtor maintains that this transfer was accomplished by way of a forged deed and without the Debtor's knowledge. Sorvino then executed a mortgage to Argent Mortgage Co., LLC in the amount of $296,000.00 (the "Argent Mortgage") and used the proceeds to satisfy the foreclosure judgment held by Bank of New York. The Debtor was permitted to remain in the Property and—for some period of time—made payments to Global which she alleges were for principal, interest, taxes and insurance.

On October 15, 2007, Sorvino executed a deed transferring the Property to another agent of Global, an individual named Vincent LaTorre ("LaTorre"). LaTorre then gave a mortgage on the Property to Wells Fargo Bank, N.A. in the amount of $375,250.00 (the "Wells Fargo mortgage"). The Complaint alleges that the Argent mortgage was paid off and discharged of record on October 31, 2006.¹ LaTorre defaulted on the Wells Fargo mortgage and Wells Fargo commenced a foreclosure action in 2008.

On October 15, 2008, the New Jersey Attorney General filed a complaint against, among others, Global, Sorvino, and LaTorre alleging they were involved in an illegal foreclosure rescue scheme. The Debtor was identified as an injured party. On April 2, 2009, the New Jersey Attorney General sent a letter to foreclosure counsel for Wells Fargo informing them of the consumer fraud action and advising, on the Debtor's behalf, that the Debtor was living in the Property and wished to continue to do so. It is undisputed that Wells Fargo did not amend its foreclosure complaint to name the Debtor as a party in interest; nor did the Debtor attempt to contact Wells Fargo to pursue a resolution.

Wells Fargo continued its foreclosure action and obtained a final judgment of foreclosure against LaTorre on May 28, 2009. An amended final judgment was entered on August 3, 2015, in the amount of $405,525.04. Wells Fargo was the successful bidder at a sheriff's sale in March 2016 and the bid was assigned to the Defendant. The Defendant commenced an action seeking to evict the Debtor in October of 2016. At that time, the Debtor retained an attorney and sought to intervene in the foreclosure action and vacate the sheriff's sale. On February 7, 2017, the Debtor's motion to intervene was denied and the parties were ordered to participate in mediation; however, the parties failed to reach a settlement. The Debtor did not appeal the denial of her motion to intervene. On May 25, 2018, the Debtor—through new counsel—sought an emergent order staying her eviction and reopening mediation. The motion likewise was denied and the Debtor did not appeal.

On July 13, 2018, the Debtor filed the instant Complaint in the United States District Court for the District of New Jersey, seeking to quiet title to the Property and seeking title to the Property free and clear. Shortly thereafter, on July 19, 2018, the Debtor filed for bankruptcy under chapter 13. On October 2, 2018, the Complaint was referred to this Court and opened as an adversary proceeding (Adv. Pro. No. 18-01501). In response to the Complaint, the Defendant filed a Motion to Dismiss. After briefing and oral argument, this Court denied the Motion to Dismiss for reasons discussed on the record during the hearing on April 9, 2020. Order Denying Motion to Dismiss , April 10, 2020, ECF No. 17. The Defendant filed an Answer and the case proceeded. With the assistance of the Court, the parties engaged in settlement discussions; however, the negotiations were unsuccessful. On July 24, 2020, the Defendant filed the instant Motion seeking reconsideration of this Court's April 10, 2020 Order denying the Defendant's initial motion to dismiss. The Defendant again seeks dismissal of the adversary proceeding based on theories of res judicata, collateral estoppel, Rooker-Feldman , and abstention. The Motion alternatively seeks summary judgment and stay relief.

II. Discussion

A. Motion for Reconsideration

The Federal Rules of Bankruptcy Procedure do not recognize a "motion for reconsideration." Such a motion is not mentioned in the Federal Rules of Civil Procedure, nor is it provided for in our Local Bankruptcy Rules. Nevertheless, this Court has previously determined that it possesses the inherent power to reconsider its orders at any time before final judgment. See In re Dots, LLC , 562 B.R. 286, 291 (Bankr. D.N.J. 2017) (collecting cases and discussing bankruptcy court's authority to reconsider its interlocutory orders at any time when it is consonant with justice to do so); see also In re Kara Homes, Inc. , No. 06-19626, 2019 WL 4897010, at *3 (Bankr. D.N.J. Oct. 3, 2019), adopted , No. 19-CV-17223, 2020 WL 3496958 (D.N.J. June 29, 2020). The Third Circuit has likewise reached this conclusion. In re Energy Future Holdings Corp., 904 F.3d 298 (3d Cir. 2018), cert. denied sub nom. NextEra Energy, Inc. v. Elliott Assocs., L.P. , ––– U.S. ––––, 139 S. Ct. 1620, 203 L. Ed. 2d 898 (2019) (holding that while the bankruptcy rules do not expressly authorize motions for reconsideration, bankruptcy courts, like any other federal court, possess inherent authority and such authority permits courts to reconsider prior interlocutory orders at any point during which the litigation continues, as long as the court retains jurisdiction over the case).

The Court notes that, in support of its motion, the Defendant cites to Federal Rule of Civil Procedure 59(e), which is made applicable to the bankruptcy court under Federal Rule of Bankruptcy Procedure 9023. Rule 59 encompasses a Motion for a New Trial or to Alter or Amend a Judgment and "the rule only applies to final judgments, not interlocutory orders." Zitter v. Petruccelli , No. 15-6488, 2017 WL 1837850, at *2 (D.N.J. May 8, 2017) ; see also In re Kara Homes, Inc. , 2019 WL 4897010, at *3. Here, the Court is tasked with reconsideration of an interlocutory order; thus, Rule 59(e) does not apply. However, in discussing the appropriate standard to be used by bankruptcy courts when exercising their inherent powers of reconsideration, the Third Circuit has on at least one occasion approved use of the same standards governing motions under Rule 59. See In re Energy Future Holdings Corp. , 904 F.3d at 311 (approving of the use of the Rule 59 standard in the context of an order approving a merger agreement and accompanying termination fee provision). Thus, it may be appropriate for a court to exercise its inherent power to reconsider an interlocutory order where there is: "(1) an intervening change in the controlling law; (2) the availability of new evidence that was not available when the court [made its initial decision]; or (3) the need to correct a clear error of law or fact or to prevent manifest injustice." FED. R. CIV. P. 59(e) ; see also In re Energy Future Holdings Corp. , 904 F.3d at 311 ; § 4478 Law of the Case, 18B Fed. Prac. & Proc. Juris. § 4478 (2d ed.) § 4478.1 Law of the Case—Trial Courts, 18B Fed. Prac. & Proc. Juris. § 4478.1 (2d ed.) (approving use of this standard in a discussion on the court's "necessary authority to correct itself").

In this case, the Court's denial of the Defendant's initial motion to dismiss was premised on the Court's concern that, at that time, it...