Giacchetti v. Everhome Mortg. & Fed. Nat'l Mortg. Ass'n (In re Giacchetti)
| Decision Date | 02 April 2018 |
| Docket Number | Adversary Proceeding No. 17–1038,Case No. 17–10641–MSH |
| Citation | 584 B.R. 441 |
| Parties | IN RE: Tracy GIACCHETTI, Debtor Tracy Giacchetti, Plaintiff v. Everhome Mortgage and Federal National Mortgage Association, Defendants |
| Court | U.S. Bankruptcy Court — District of Massachusetts |
Carmenelisa Perez–Kudzma, Esq., Perez–Kudzma Law Office, Weston, MA, for plaintiff, Tracy Giacchetti
David Merritt, Esq., Bernkoff Goodman LLP, Boston, MA, for the defendants, EverBank and Federal National Mortgage Association
The defendants in this adversary proceeding, Everhome Mortgage, now known as EverBank, and Federal National Mortgage Association ("Fannie Mae"), have moved under Fed. R. Civ. P. 12(b)(1) and (6)1 to dismiss the three-count complaint filed by the plaintiff, Tracy Giacchetti, the debtor in the main case, on the grounds that Ms. Giachetti lacks standing to raise the claims asserted and that the claims are barred under the doctrine of claim preclusion.
In count I of her complaint, Ms. Giacchetti seeks to set aside a foreclosure sale of her home in Sherborn, Massachusetts conducted by EverBank on January 29, 2015, invoking the powers of a trustee as a hypothetical bona fide purchaser under Bankruptcy Code § 544(a)(3).2 In count II she seeks to avoid the foreclosure sale as a fraudulent transfer using the power of a trustee under Bankruptcy Code § 548. Finally, in count III she seeks to preserve the avoided transfer for the benefit of the bankruptcy estate under Code § 551.
The facts alleged in the complaint, which for purposes of ruling on a motion to dismiss are accepted as true, Langadinos v. American Airlines, Inc. , 199 F.3d 68, 69 (1st Cir. 2000), are as follows. Ms. Giacchetti purchased her home in Sherborn in 2005 for $754,000, borrowing a portion of the purchase price and securing the loan with a mortgage on her property. By 2012, her mortgage debt, which had been refinanced on multiple occasions, had an outstanding balance of $217,000. At that time, Ms. Giacchetti began experiencing financial problems and fell behind on her mortgage payments prompting the mortgage servicer, Bank of America, to begin the process of foreclosure. Ms. Giacchetti applied to Bank of America for a loan modification and was approved. But on the day she was to begin making her modification trial payments Bank of America transferred servicing of the loan to EverBank, which refused to accept the payments. EverBank required Ms. Giachetti to re-apply for a loan modification, which she did. She also submitted a loan modification application to Fannie Mae, the owner of the loan, after Fannie Mae solicited her application. Fannie Mae approved Ms. Giacchetti's loan modification request,but EverBank denied it.
EverBank notified Ms. Giacchetti that it would be conducting a foreclosure sale of the Sherborn property on January 29, 2015. Ms. Giacchetti then spoke to a representative of EverBank, told the representative that she was considering filing bankruptcy and was told by the representative that the foreclosure sale would be postponed. The complaint is less than clear as to whether EverBank's representative may have meant that once Ms. Giacchetti filed her bankruptcy petition the sale would be postponed. In any event, Ms. Giacchetti understood the representative to be telling her that on the strength of her expressed intention to file bankruptcy, the sale would be postponed. Relying on her understanding of EverBank's representation, Ms. Giacchetti did not file a bankruptcy petition prior to January 29, 2015. EverBank proceeded with its scheduled sale and sold the property on January 29, 2015, at public auction. The high bidder was David Michael, who signed a memorandum of sale at the conclusion of the auction agreeing to pay $441,000 for the Sherborn property. According to Ms. Giacchetti, at the time of the sale the property was worth $759,000. Mr. Michael has never completed the purchase of the property and no foreclosure deed has ever been recorded.
Following the foreclosure sale, Ms. Giacchetti filed suit against EverBank, Fannie Mae and the foreclosure sale high bidder in the Massachusetts state court. In her complaint she sought to have the foreclosure sale "rescinded" and requested injunctive relief and damages because the conduct of EverBank and Fannie Mae, including the conduct described above, violated the Massachusetts foreclosure statute, Mass. Gen. Laws ch. 244, § 14, and the state's consumer protection statute, Mass. Gen. Laws ch. 93A, and because no assignment of her mortgage to EverBank had been recorded.
When Ms. Giacchetti failed to respond to the defendants' discovery requests in the state court action, they moved for a judgment of dismissal pursuant to Mass. R. Civ. P. 33(a).3 On February 27, 2017, prior to the hearing on the defendants' motion, Ms. Giacchetti filed a voluntary petition under chapter 13 of the Bankruptcy Code commencing the main case. This prompted the state court to stay Ms. Giacchetti's law suit. In her schedules of assets and liabilities filed in support of her chapter 13 petition, Ms. Giacchetti listed the Sherborn property as her asset and claimed a homestead exemption in the property of $125,000 under Mass. Gen. Laws ch. 188, § 4.
On April 27, 2017, I granted EverBank relief from the automatic stay to return to the state court to complete disposition of the motion to dismiss. On May 12, 2017, the state court entered final judgment in favor of the defendants on their motion to dismiss. Ms. Giacchetti did not appeal from the state court's judgment, presumably electing to vindicate her rights through this adversary proceeding, which she had commenced on April 26, 2017.
The questions presented by the defendants' motion to dismiss are: does the final judgment entered in the state court action preclude Ms. Giacchetti from asserting her claims against EverBank here, and even if the answer is no, does she have standing as a chapter 13 debtor to assert those claims?
Under Massachusetts law, "[t]he doctrine of claim preclusion makes a valid, final judgment conclusive on the parties and their privies, and bars further litigation of all matters that were or should have been adjudicated in the action." Brandao v. Federal Nat. Mtg. Assoc. , 567 B.R. 396, 404 (Bankr. D. Mass. 2017), ( citing Heacock v. Heacock , 402 Mass. 21, 23, 520 N.E.2d 151 (1988) ). To trigger claim preclusion, "[t]hree elements must be present: (1) identity or privity of the parties in the present and prior actions; (2) identity of the cause of action; and (3) a prior final judgment on the merits." Brandao , 567 B.R. at 404, (citing, inter alia , Gloucester Marine Rys. Corp. v. Charles Parisi, Inc. , 36 Mass. App. Ct. 386, 390, 631 N.E.2d 1021 (1994) ).
There is no question that the first of the three criteria for invoking preclusion against Ms. Giacchetti has been met. The parties in this adversary proceeding are the same as those in the state court action.
Jumping to the third element, the existence of a prior final judgment on the merits, the issue is whether a Rule 33(a) judgment satisfies this requirement. The answer in this instance is yes. When a judgment, even one entered by default, becomes final, it satisfies the third element of the claims preclusion test. In re Brennan , 275 B.R. 172, 176 (Bankr. D. Mass. 2002) (). See also United States v. $23,000 in U.S. Currency , 356 F.3d 157, 163 (1st Cir. 2004) (). Once the state court entered judgment in favor of the defendants and Ms. Giacchetti allowed the appeal period to lapse, there was nothing left to be done for the judgment to become final. Cf. Inst. for Sav. in Newburyport & its Vicinity v. Langis , 92 Mass. App. Ct. 815, 96 N.E.3d 174 (2018) (). Ms. Giacchetti was well aware of the state court action, having initiated it, and she could have easily avoided the default judgment by complying with the discovery requests.
Backtracking to the second of the three preclusion elements, the identity of the cause of action, that requirement is satisfied " where the prior claim arises from the same transaction or series of transaction ‘even though a party is prepared in a second action to present different evidence or legal theories to support his claim.’ " Noel v. Workout World, Inc. , C.A. No. 10-11966-RWZ, 2011 WL 2784571, *2 (D.Mass. July 14, 2011), ( citing Baby Furniture Warehouse Store, Inc. v. Meubles D & F Ltee, 75 Mass. App. Ct. 27, 33, 911 N.E.2d 800 (2009) ). Giuffre v. Deutsche Bank Nat. Trust Co. , Adv. P. No. 16-1095-JNF, 2016 WL 6090844, *8 (Bankr. D. Mass. Oct. 18, 2016) (internal citation omitted).
In reviewing the three counts of Ms. Giacchetti's complaint in this adversary proceeding, I conclude that only count II meets the second prong of the test for preclusion. In count II of her complaint, Ms. Giacchetti seeks to set aside the foreclosure sale as a fraudulent transfer under Bankruptcy Code § 548. Even though this is a cause of action not asserted by her in the state court action, the facts upon which the claim is based are identical to the facts upon which Ms. Giacchetti's state court complaint is based. With respect to counts I and III of Ms. Giacchetti's complaint, however, neither the causes of action nor their factual or transactional underpinnings are related to her state court complaint. Count I asserts a garden-variety trustee strong-arm claim under...
To continue reading
Request your trial
-
Steele v. United States Dep't of Hous. & Urban Dev.
...of the case and an appealable order' that has the same effect as a judgment rendered after a trial on the merits.”); In re Giacchetti, 584 B.R. 441, 446 (Bankr. D. Mass. 2018) (“When a judgment, even one entered by default, becomes final, it satisfies the third element of the claims preclus......