In re Bernadin, Bky. No. 18-12717 ELF

CourtUnited States Bankruptcy Courts. Third Circuit. U.S. Bankruptcy Court — Eastern District of Pennsylvania
Writing for the CourtERIC L. FRANK, U.S. BANKRUPTCY JUDGE
Citation609 B.R. 26
Parties IN RE Geraldine BERNADIN, Debtor Geraldine Bernadin, Plaintiff U.S. Bank National Association, as Trustee, Successor in Interest to Wachovia Bank, National Association as Trustee for Merrill Lynch Mortgage Investors Trust, Mortgage Loan Asset-Backed Certificates, Series 2005-A6, and Ocwen Loan Servicing, LLC, Defendants
Decision Date28 October 2019
Docket NumberBky. No. 18-12717 ELF,Adv. No. 18-281

609 B.R. 26

IN RE Geraldine BERNADIN, Debtor

Geraldine Bernadin, Plaintiff

U.S. Bank National Association, as Trustee, Successor in Interest to Wachovia Bank, National Association as Trustee for Merrill Lynch Mortgage Investors Trust, Mortgage Loan Asset-Backed Certificates, Series 2005-A6,
and
Ocwen Loan Servicing, LLC, Defendants

Bky. No. 18-12717 ELF
Adv. No. 18-281

United States Bankruptcy Court, E.D. Pennsylvania.

Signed October 28, 2019


609 B.R. 30

Irwin Lee Trauss, Philadelphia Legal Services Philadelphia, PA, Plaintiff.

David A. Deflece, Blank Rome LLP, Princeton, NJ, Sherri J. Smith, Phelan Hallinan Diamond & Jones LLP, Philadelphia, PA, for Defendants.

AMENDED MEMORANDUM

ERIC L. FRANK, U.S. BANKRUPTCY JUDGE

I. INTRODUCTION

In this adversary proceeding, Plaintiff Geraldine Bernadin ("the Debtor"), a chapter 13 debtor, seeks the entire or partial disallowance of a proof of claim ("the POC" or "the Claim") filed by Defendant U.S. Bank National Association ("U.S. Bank"). The Debtor also seeks affirmative relief under the Fair Debt Collections Practices Act ("the FDCPA"), 15 U.S.C. §§ 1692 et seq.

U.S. Bank holds the mortgage on the Debtor's residential real property. Ocwen Loan Servicing, LLC ("Ocwen") services the mortgage and also is a named defendant.1 The law firm Phelan Hallinan Diamond & Jones, LLP ("Phelan Hallinan") signed and filed the POC on behalf of U.S. Bank. Phelan Hallinan was initially named as a co-defendant, but the Debtor withdrew her claims against the law firm.

U.S. Bank and Ocwen filed a motion to dismiss the Complaint ("the Motion").

For the reasons that follow, I will grant the Motion in large part. The claims in the Complaint against U.S. Bank will be dismissed with prejudice except for Count II. Count II will be dismissed in part, but survives the Motion insofar as the Debtor seeks partial disallowance of the charges included in the POC for escrow advances made by U.S. Bank after it obtained a judgment in foreclosure against the Debtor's property.

As for Ocwen, I conclude that the Debtor's FDCPA claim fails to state a claim. However, as explained in Part V, below, I lack authority to enter a final judgment in favor of Ocwen and against the Debtor. Therefore, my order will include a recommendation that the district court dismiss Count IV of the Complaint and provide for transmission of the matter to the district court for further action.

II. FACTUAL BACKGROUND

The following is a summary of the relevant facts alleged in the Complaint.

The Debtor has a 49% interest as a tenant in common in the residential property located at 1205 Stirling Street in Philadelphia, Pennsylvania ("the Property").

609 B.R. 31

The other tenants in common are Daunoun Dubuisson, a\k\a Daudouin Dubuisson ("Daudouin"), who has a 49% interest, and Nativita Dubuisson Gregory ("Nativita"), who has 2% interest.

On June 16, 2015, U.S. Bank obtained a foreclosure judgment by default against the Debtor and her co-owners in the amount of $161,958.16 ("the Foreclosure Judgment").

After the Debtor filed this bankruptcy case in 2018, U.S. Bank filed the POC. In the POC, U.S. Bank asserts a secured claim against the Debtor in the amount of $192,536.07.

The POC states that the basis of U.S. Bank's secured position is a mortgage ("the Mortgage") dated May 31, 2005 in favor of Mortgage Electronic Registration System "as nominee for Lender and Lender's successors and assigns." The "Lender" is defined in the Mortgage as "GreenPoint Mortgage Funding, Inc." ("GreenPoint").

The underlying note, a promissory note in the original principal amount of $144,400.00 ("the Note"), dated May 31, 2005, is also attached to the POC. Significantly, the Note provides that the loan is payable over thirty (30) years with a maturity date of June 1, 2035.

The "Borrower" and signatories on the mortgage are Daudouin, Nativita, and the Debtor. The Note was signed only by Daudouin and Nativita, and not by the Debtor.

Subsequently, GreenPoint endorsed the Note in favor of Wachovia Bank National Association as Trustee ("Wachovia"). The Note contains no further endorsements. However, in August 2011, GreenPoint executed an assignment of the Mortgage in favor of "U.S. Bank, National Association, as Successor Trustee to Wachovia Bank, N.A., as Trustee."

The POC and the attached payment history seek payment for advances that U.S. Bank made for real estate taxes and insurance premiums arising after the entry of the Foreclosure Judgment. The POC does not refer to the Foreclosure Judgment.

The Mortgage and Note do not specify that the borrower's duties to pay taxes and maintain insurance and to reimburse the mortgagee for advances made by the mortgagee survive the merger of the Mortgage into the Foreclosure Judgment.

III. PROCEDURAL HISTORY

The Debtor commenced a chapter 13 bankruptcy case on April 23, 2018. On June 26, 2018, U.S. Bank filed its POC, asserting a claim secured by the Debtor's residence in the amount of $192,536.07.

The Debtor initiated this adversary proceeding by filing the Complaint on December 4, 2018, naming U.S. Bank, Ocwen, and Phelan Hallinan as defendants.

Two (2) motions to dismiss were filed on January 28, 2019, one (1) by Phelan Hallinan and the other by U.S. Bank with Ocwen. (See Adv. Doc. #'s 11, 12). The Debtor timely responded to both motions. (See Adv. Doc. #'s 20, 22).

In response to Phelan Hallinan's motion, the Debtor voluntarily withdrew Count IV of the Complaint as to Phelan Hallinan, effectively dismissing the firm from this litigation. (See Adv. Doc. #'s 22, 23). In her response to the pending U.S. Bank/Ocwen Motion, the Debtor also withdrew several of her causes of action. See n.1, supra.

The following claims remain for purposes of the Motion.

In Count I, the Debtor seeks disallowance of the Claim in its entirety. The Debtor asserts that U.S. Bank lacks the authority to enforce the Claim because it is neither the holder nor the possessor of the Note on which the POC is based.

609 B.R. 32

In Count II, asserted as an alternative to Count I, the Debtor contends that even if U.S. Bank has standing to assert its Claim, the Claim must be limited to the amount of the Foreclosure Judgment, $161.958.16, plus accrued interest,2 minus payments made since the entry of the judgment. The crux of the cause of action is the Debtor's contention that the merger doctrine prevents U.S. Bank from collecting advances made after the entry of the Foreclosure Judgment.

In Count III, the Debtor asserts two (2) distinct causes of action. The first is a request for a determination that the allowed secured claim be limited to the value of U.S. Bank's interest in the bankruptcy estate's interest in the real property serving as collateral for the claim. See 11 U.S.C. § 506(a). The second is a request under the FDCPA for damages and attorney's fees to be used to reduce U.S. Bank's allowed secured claim.3

In Count IV, the Debtor asserts a claim against Ocwen for violation of the FDCPA.

IV. LEGAL STANDARD – MOTION TO DISMISS

A motion to dismiss under Fed. R. Civ. P. 12(b)(6) tests the legal sufficiency of the factual allegations of a complaint, see Kost v. Kozakiewicz, 1 F.3d 176, 183 (3d Cir. 1993), and determines whether the plaintiff is entitled to offer evidence to support the claims, Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 563 n.8, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007). A defendant is entitled to dismissal of a complaint only if the plaintiff has not pled enough facts to state a claim for relief that is plausible on its face. Twombly, 550 U.S. at 547, 127 S.Ct. 1955. A claim is facially plausible where the facts set forth in the complaint allow the court to draw the reasonable inference that the defendant is liable for the misconduct alleged. Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009).

The Third Circuit has set forth a three (3) part test for evaluating a motion to dismiss:

First, the court must take note of the elements a plaintiff must plead to state a claim. Second, the court should identify allegations that, because they are no more than conclusions, are not entitled to the assumption of truth. Finally, where there are well-pled factual allegations, a court should assume their veracity and then determine whether they plausibly give rise to an entitlement for relief.

Santiago v. Warminster Twp., 629 F.3d 121, 130 (3d Cir. 2010) (quotations and citations omitted).

When considering the merits of a motion to dismiss, the court is required to accept as true all allegations in the complaint and all reasonable inferences that can be drawn therefrom, viewed in the light most favorable to the plaintiff. E.g., Hishon v. King & Spalding, 467 U.S. 69, 104 S.Ct. 2229, 81 L.Ed.2d 59 (1984) ; Taliaferro v. Darby Twp. Zoning Board, 458 F.3d 181, 188 (3d Cir. 2006). In doing so, the court may "consider the allegations in the complaint, exhibits attached to the complaint and matters of public...

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  • Bernadin v. U.S. Bank Nat'l Ass'n (In re Bernadin), Bky. No. 18-12717 ELF
    • United States
    • United States Bankruptcy Courts. Third Circuit. U.S. Bankruptcy Court — Eastern District of Pennsylvania
    • December 20, 2019
    ...which asserts a claim for violation of the FDCPA.2 The Order was accompanied by a lengthy memorandum, now reported as In re Bernadin, 609 B.R. 26 (Bankr. E.D. Pa. 2019) ( Bernadin I ).3 On November 7, 2019, the Debtor filed a Motion to Reconsider the Order ("the Reconsideration Motion"), as......
  • Heidt v. BV001 Reo Blocker LLC (In re Heidt), Case No.: 19-32789 (RG)
    • United States
    • U.S. Bankruptcy Court — District of New Jersey
    • March 9, 2021
    ...should apply, First Nat. Fidelity Corp. v. Perry , 945 F.2d 61 (3d Cir. 1991), superseded by statute , as stated in In re Bernadin , 609 B.R. 26 (Bankr. E.D. Pa. 2019) was overturned by Congress in the 1994 Bankruptcy amendments and therefore should not apply.Debtor also argues that Defenda......
  • Koola v. Ditech Fin. LLC, Civil Action No. 2:19-cv-429-RMG
    • United States
    • United States District Courts. 4th Circuit. United States District Court of South Carolina
    • December 26, 2019
    ...by bankruptcy courts addressing almost identical arguments have come to the same, well-reasoned, conclusion. See In re Bernadin , 609 B.R. 26, 46 (Bankr. E.D. Pa. 2019) ("The language ‘original payment schedule’ is plain and clear. It can only refer to the last payment due under the origina......
  • In re Thomas, Bky. No. 20-12232 (PMM)
    • United States
    • United States Bankruptcy Courts. Third Circuit. U.S. Bankruptcy Court — Eastern District of Pennsylvania
    • March 23, 2021
    ...the present value of the secured claim during the plan, requires a debtor to fully satisfy the foreclosure judgment. In re Bernadin, 609 B.R. 26, 44 n. 20 (Bankr. E.D. Pa. 2019), opinion vacated in part on reconsideration, 610 B.R. 787 (Bankr. E.D. Pa. 2019) ; ("§ 1325(a)(5) requires that t......
  • Request a trial to view additional results
6 cases
  • Bernadin v. U.S. Bank Nat'l Ass'n (In re Bernadin), Bky. No. 18-12717 ELF
    • United States
    • United States Bankruptcy Courts. Third Circuit. U.S. Bankruptcy Court — Eastern District of Pennsylvania
    • December 20, 2019
    ...which asserts a claim for violation of the FDCPA.2 The Order was accompanied by a lengthy memorandum, now reported as In re Bernadin, 609 B.R. 26 (Bankr. E.D. Pa. 2019) ( Bernadin I ).3 On November 7, 2019, the Debtor filed a Motion to Reconsider the Order ("the Reconsideration Motion"), as......
  • Heidt v. BV001 Reo Blocker LLC (In re Heidt), Case No.: 19-32789 (RG)
    • United States
    • U.S. Bankruptcy Court — District of New Jersey
    • March 9, 2021
    ...should apply, First Nat. Fidelity Corp. v. Perry , 945 F.2d 61 (3d Cir. 1991), superseded by statute , as stated in In re Bernadin , 609 B.R. 26 (Bankr. E.D. Pa. 2019) was overturned by Congress in the 1994 Bankruptcy amendments and therefore should not apply.Debtor also argues that Defenda......
  • Koola v. Ditech Fin. LLC, Civil Action No. 2:19-cv-429-RMG
    • United States
    • United States District Courts. 4th Circuit. United States District Court of South Carolina
    • December 26, 2019
    ...by bankruptcy courts addressing almost identical arguments have come to the same, well-reasoned, conclusion. See In re Bernadin , 609 B.R. 26, 46 (Bankr. E.D. Pa. 2019) ("The language ‘original payment schedule’ is plain and clear. It can only refer to the last payment due under the origina......
  • In re Thomas, Bky. No. 20-12232 (PMM)
    • United States
    • United States Bankruptcy Courts. Third Circuit. U.S. Bankruptcy Court — Eastern District of Pennsylvania
    • March 23, 2021
    ...the present value of the secured claim during the plan, requires a debtor to fully satisfy the foreclosure judgment. In re Bernadin, 609 B.R. 26, 44 n. 20 (Bankr. E.D. Pa. 2019), opinion vacated in part on reconsideration, 610 B.R. 787 (Bankr. E.D. Pa. 2019) ; ("§ 1325(a)(5) requires that t......
  • Request a trial to view additional results

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