Harrell v. Carrington Mortg. Servs.
| Decision Date | 22 June 2020 |
| Docket Number | CIVIL ACTION NO. 20-2359 |
| Parties | TERESA HARRELL v. CARRINGTON MORTGAGE SERVICES, LLC, et al. |
| Court | U.S. District Court — Eastern District of Pennsylvania |
A Florida borrower upset with her mortgage lenders filing an erroneous proof of claim in her bankruptcy pending in the Middle District of Florida turned and sued those creditors in the Philadelphia state court before they amended their proof of claim. The mortgage creditors removed the state court case here arguing a nexus to the ongoing Florida bankruptcy case and then moved to transfer to the Florida federal courts. The Florida borrower objects to transfer and moves to remand the case to the Philadelphia state court arguing the mortgage creditors removed too late. The Florida borrower admitted she failed to properly serve until late April 2020; removal on May 20, 2020 is timely. We agree with the mortgage creditors, deny remand, and transfer to the United States Bankruptcy Court for the Middle District of Florida to address whether the bankruptcy court should abstain or proceed as part of its supervision of the post-confirmation plan.
Teresa Harrell purchased a home in Philadelphia in 1992.1 She used it for a time as her primary residence, but currently resides in Jacksonville, Florida.2 Her daughter and her daughter's family now use the Philadelphia property as their primary residence.3
In 2006, Ms. Harrell borrowed money secured by a $76,000 mortgage on the Philadelphia property from Freemont Investment and Loan.4 On August 20, 2010, Wells Fargo Bank, N.A. took over the loan and succeeded to the rights on the mortgage.5 Wells Fargo delegated servicing the loan to Carrington Mortgage Services, LLC.6 Carrington then acted as the disclosed agent of Wells Fargo.7 In 2015, Ms. Harrell and Carrington signed a Home Affordable Modification Agreement for the Philadelphia property.8
Ms. Harrell's first state court case
As disputed by the parties from Fall 2015 into 2016, Ms. Harrell either fell behind on payments on the Philadelphia mortgage, or Carrington misapplied payments intended for the Philadelphia property to a Florida mortgage also serviced by Carrington.9 Carrington sued to foreclose on the Philadelphia property in the Court of Common Pleas of Philadelphia County in 2017.10 Ms. Harrell raised an affirmative defense in Carrington's foreclosure lawsuit and brought her own claim in 2018; in the affirmative defense and the lawsuit, Ms. Harrell alleged Carrington misapplied payments to the incorrect mortgage loan and ignored her attempts to direct the payments to the correct loan.11 Before trial, Ms. Harrell and Carrington agreed to settle both the original foreclosure action and Ms. Harrell's separate claim.12 They agreed Ms. Harrell could reinstate the loan by January 15, 2019 if she so chose, and "[a]ll fees and costs, other than the principle [sic], interest, taxes, and insurances would be waived."13 Ms. Harrell dropped her counterclaim against Carrington, and Carrington agreed to pay her $3,500 in legal fees.14 Carrington also agreed even if Ms. Harrell didn't reinstate the loan by January 15, 2019, it would still waive the challenged fees.15
Carrington never removed the fees and costs from the Ms. Harrell's account. It continued seeking the disputed fees16 and never paid Ms. Harrell $3,500 for legal fees.17Ms. Harrell files bankruptcy in Florida18
On July 2, 2019, Ms. Harrell petitioned for relief under Chapter 13 of the Bankruptcy Code in her home district of the United States Bankruptcy Court for the Middle District of Florida.19 Wells Fargo Bank asserted four secured claims against Ms. Harrell's properties.20 For one of those four claims, Wells Fargo filed a proof of claim evidencing a mortgage debt inclusive of the disputed fees previously resolved in the Court of Common Pleas.21 On December 15, 2019, Ms. Harrell objected to the proof of claim, arguing Wells Fargo overstated arrears by $10,467.16, a reference to the 2018 settlement agreement.22 Defendants resolved the objection on January 17, 2020 by amending the proof of claim, reducing the debt's principal from $123,727.27 to $113,260.11, and reducing the arrears from $39,318.25 to $28,851.09.23 Ms. Harrell withdrew the claim objection on March 3, 2020, and the Bankruptcy Court confirmed Ms. Harrell's reorganization plan on April 8, 2020.24 Ms. Harrell is under a "continuing duty to disclose any changes in financial circumstances and new assets or potential rights to assets [she] acquires post-petition by promptly filing amended schedules with the Court."25
Ms. Harrell's second state court case26
Four days before objecting to the proof of claim in Florida and before Defendants could amend their proof of claim, Ms. Harrell sued Carrington Mortgage Services, LLC and Wells Fargo Bank back here in Philadelphia.27 She then needed to effect service.
Ms. Harrell attempted to serve process on Carrington on December 13, 2019 by mail.28 Ms. Harrell's counsel never received the return receipt. A lawyer emailed Ms. Harrell's lawyer on December 30, 2019 saying Defendants retained him to defend the case, and he knew a response from Carrington due by January 6, 2020, and a response from an improperly named "Wells entity"due January 20, 2020.29 He then requested multiple extensions to respond,30 and Ms. Harrell reinstated the claim in state court in April 2020.31
Ms. Harrell adduced no evidence as to when she properly served Wells Fargo. On March 27, 2020, Ms. Harrell's lawyer admitted he had not yet served original process. He then asked Carrington's and Wells Fargo's lawyer to accept service by affidavit in lieu of personal service to avoid additional costs.32 Defendants' lawyer, Stuart Seiden, signed the "Acceptance of Service" on April 30, 2020 confirming effective service.33 Ms. Harrell adduced no evidence as to what defect in service led counsel for Ms. Harrell to admit service had not been properly effected on the parties.34
On May 20, 2020, both defendants removed from state court.35 Ms. Harrell seeks less than $75,000 from Carrington and Wells Fargo for allegedly violating the Fair Credit Extension Uniformity Act and the Unfair Trade Practices and Consumer Protection Law by filing an improper proof of claim with fees in her bankruptcy case in Florida.36 She also claims Carrington breached the 2018 settlement agreement.37 The bankruptcy court included this case in the approved Chapter 13 plan, and the bankruptcy trustee will distribute net recovery to creditors.38
Ms. Harrell now moves to remand to the state court arguing either untimely removal or the matter is not a core proceeding and therefore we lack jurisdiction over the claims. Alternatively, Ms. Harrell asks we exercise our equitable authority to abstain and remand on such basis.39 Defendants simultaneously move to transfer to the United States District Court or Bankruptcy Court for the Middle District of Florida and Ms. Harrell opposes.40 Both parties agree this Court is not the appropriate forum. We also agree. The question is whether to remand or transfer. We find removal is timely, deny remand based on improper removal procedure or lack of jurisdiction,and transfer to the United States Bankruptcy Court for the Middle District of Florida to decide whether it should abstain or consider equitable remand.
Ms. Harrell moves for remand arguing Defendants' removal is untimely. Defendants argue they timely removed because Ms. Harrell did not effect service until April 30, 2020 and they removed on May 20, 2020. We agree with Defendants.
We look to the applicable federal laws to determine if removal is timely. Congress provides a mechanism for a party to remove state court cases related to a bankruptcy case to federal court.41 Federal Rule of Bankruptcy 9027 sets the time limits for removal, and if a state court action is filed after a pending bankruptcy matter "a notice of removal may be filed with the clerk only within the shorter of (A) 30 days after receipt, through service or otherwise, of a copy of the initial pleading setting forth the claim or cause of action sought to be removed, or (B) 30 days after receipt of the summons if the initial pleading has been filed with the court but not served with the summons."42 Although the "service or otherwise" language of the statute suggests mere awareness of a lawsuit might start the clock running on the removal window, in Murphy Bros. the Supreme Court interpreted identical "service or otherwise" language in section 1446 to mean only a proper service of process under applicable law or rules.43
Ms. Harrell argues we should find the removal untimely as falling outside of the thirty day period to remove under Federal Rule of Bankruptcy Procedure 902744 because she first served process on Carrington in December 2019.45 Defendants argue Ms. Harrell did not properly effect until April 30, 2020. Under the Pennsylvania Rules of Civil Procedure, service of process on out-of-state defendants by mail requires a signed receipt.46 Ms. Harrell allegedly sent the service of process in December 2019 by first class mail, return receipt requested.47 Ms. Harrell's lawyernever received the return receipt, but Defendants arguably knew of the lawsuit as evidenced by a December 30, 2019 email from their lawyer to Ms. Harrell's lawyer.48 The Defendants' lawyer admitted being retained to defend the case and knowing Carrington owed a response by January 6, 2020, and needing to file a response from an improperly named "Wells entity" by January 20, 2020.49
But Ms. Harrell adduced no evidence as to when she properly served Wells Fargo.50 On March 27, 2020, Ms. Harrell's lawyer admitted he had not yet served original process and asked Carrington's and Wells Fargo's lawyer to accept service by affidavit in lieu of personal service to avoid additional costs.51 The Defendants' lawyer signed the "Acceptance of Service" on April 30, 2020...
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