In re Gemini Services, Inc.

• Citation: 350 B.R. 74
• Decision Date: 29 August 2006
• Docket Number: Adversary No. 05-3190.,Bankruptcy No. 05-31317
• Parties: In re GEMINI SERVICES, INC., Debtor. Gemini Services, Inc., Plaintiff, v. Mortgage Electronic Registration Systems, Inc., et al., Defendants.
• Court: United States Bankruptcy Courts. Sixth Circuit. U.S. Bankruptcy Court — Southern District of Ohio

350 B.R. 74

In re GEMINI SERVICES, INC., Debtor.

Gemini Services, Inc., Plaintiff, v. Mortgage Electronic Registration Systems, Inc., et al., Defendants.

Bankruptcy No. 05-31317, Adversary No. 05-3190.

United States Bankruptcy Court, S.D. Ohio, Western Division at Dayton.

August 29, 2006.

COPYRIGHT MATERIAL OMITTED

Thomas R. Noland; Statman, Harris, Siegel and Eyrich, Dayton, OH, for Debtor.

Patricia L. Hill, Statman, Harris, Siegel and Eyrich, Dayton, OH, for Debtor/Plaintiff.

Douglas N. Hawkins, Cincinnati, OH, Mary Anne Wilsbacher, Columbus, OH, for U.S. Trustee.

John L. Day, Laura R. Faulkner, Weltman, Weinberg & Reis Co. LPA, Cincinnati, OH, Michael A. Axel, KeyBank National Association, Cleveland, OH, Tami Hart Kirby, Dayton, OH, Alejandro L. Bertoldo, U.S. Department of Justice, Alan Shapiro, Washington, DC, for Defendants.

DECISION DENYING PLAINTIFF'S MOTION FOR SUMMARY JUDGMENT (DOC. 74) AND GRANTING DEL NORTE REFI, LLC'S AMENDED MOTION FOR SUMMARY JUDGMENT (DOC. 79)

THOMAS F. WALDRON, Bankruptcy Judge.

Background

Gemini Services, Inc. (Gemini) is the Debtor in possession in this chapter 11 case, which was filed on February 18, 2005. On April 29, 2005, Gemini filed a complaint against Mortgage Electronic Registration Systems, Inc. ("MERS"), Del Norte Refi, LLC ("Del Norte"), Key Bank National Association ("Key Bank") and the United States of America, Internal Revenue Service (the "I.R.S."). (Doc. 1) An amended complaint was filed on May 2, 2005 to include various attachments. (Doc. 2) The amended complaint sought to determine the validity of a mortgage against the Debtor's business property 8721 Washington Church Road, Miamisburg, Ohio 45342 (the "property") and to determine two proofs of claim filed by the I.R.S. All the parties, except MERS, answered the complaint. See Docs. 24 (Del Norte), 25 (the I.R.S.) and 30 (Key Bank).

Following a pretrial conference on July 27, 2005, Key Bank was dismissed because it disclaimed any interest in the property. See Order of Dismissal (Doc. 37).

On October 5, 2005, the court held another pretrial conference at which it was agreed that the issues between Del Norte and the Debtor could be resolved by summary judgment and a discovery cutoff was established. See Order: Fixing Discovery Cut-Off Establishing Dates For Filing Motions For Summary Judgment and Ordering Other Matters — October 5, 2005 — Doc. 45.

On October 27, 2005, a default judgment was entered against MERS. It failed to answer or respond to a Motion for Default Judgment (Doc. 50).

On November 7, 2005, the Debtor and the I.R.S. entered into an Agreed Entry on Count Two of Plaintiff's Amended Complaint. (Doc. 52) The agreement determined the I.R.S.' third proof of claim superseded the previously filed proofs of claim and set the amount of the secured, unsecured priority and general unsecured portion of the I.R.S. claim. Id.

On December 6, 2005, the Debtor and Del Norte stipulated to various facts and exhibits. (Doc. 54) Without detailing various filings, pretrial conferences and hearings, it became apparent that, although all parties, including the IRS, had previously agreed to a summary judgment procedure involving only Gemini and Del Norte, all parties subsequently determined the IRS should participate in the proposed summary judgment proceedings in connection with the remaining causes of action of the Debtor's amended complaint.¹

Accordingly, on January 25, 2006, the court issued its Order Vacating Prior Order, Fixing Discovery Cutoff Date and Ordering Other Matters. (Doc. 62) The discovery cutoff was set at February 28, 2006 for all parties, including the I.R.S. The discovery cutoff was subsequently extended until April 28, 2006. (Doc. 67) At that time, all the parties agreed discovery was completed and that the remaining issues in the Debtor's amended complaint (Doc. 2) could be resolved as a matter of law.

On May 26, 2006, the court issued a final scheduling order which required all stipulations by June 9, 2006 and set dates for summary judgment filings. (Doc. 72) The I.R.S., although participating in the extended discovery in this adversary proceeding, did not file any documents after the court issued the May 26, 2006 order. On July 12, 2006, Del Norte and the Debtor filed additional stipulations to supplement the filings of December 2005. (Doc. 75) This filing was superseded by a corrected set of supplemental exhibits on July 17, 2006. (Doc. 77) On June 8, 2006, the Debtor filed for Summary Judgment. (Doc. 74) Del Norte filed a cross-motion for summary judgment and a response to the Debtor's Motion (Doc. 79) on July 19, 2006.² On July 27, 2006, the Debtor filed a reply brief in support of its Motion (Doc. 74) and a response to Del Norte's cross-motion. (Doc. 80)

Facts

The parties have stipulated to most of the relevant facts. The remaining uncontested facts are determined, for this decision, based on the agreed set of exhibits filed by the parties.³

On March 3, 2000, Key Bank loaned Gemini $390,000. In consideration for this loan, the Debtor executed a promissory note (the "note") and a mortgage (the "mortgage") in favor of Key Bank. (Doc. 77 — ¶ 8, 9) The mortgage was properly recorded. (Doc. 77 — ¶ 10) On July 31, 2003, Key Bank endorsed the note to Del Norte. (Doc. 77 — ¶ 11; Exhibit J) As stipulated to by the parties, "on. November 10, 2003, Key Bank executed an Assignment of Mortgage to MERS (the `Assignment'). The Assignment was filed with the Montgomery County Recorder's Office on December 9, 2003 at A/M XX-XXXXXX." (Doc. 77 — ¶ 12; Exhibit L) On February 19, 2004, MERS filed a court action for judgment on the note and for foreclosure on the property (the "foreclosure action"). (Doc. 77 — ¶ 14; Exhibit C) On March 4, 2004, Del North filed a separate action for a cognovit money judgment for the balance due on the note. (Doc. 77 — ¶ 15; Exhibit H) On March 18, 2004, Del Norte was granted judgment on the note (Doc. 77 — ¶ 16; Exhibit I) and filed a certificate of judgment against the property the same day (Doc. 77 — ¶ 17; Exhibit T). On July 10, 2004, MERS dismissed the cause of action on the note from the foreclosure action. (Doc. 77 — ¶ 18; Exhibit D)

On September 7, 2004, MERS filed a Motion for Default Judgment in the Court of Common Pleas, Montgomery County. (Exhibit E) On September 14, 2004, the state court entered its Judgment Entry/Foreclosure Decree. (Exhibit F) The state court unambiguously found the Debtor in default. The court found that "the Plaintiff" was due $370,014.30, plus interest on the note. "The Plaintiff', as referenced in the state court order, is not identified except on the caption of the document which refers to "Mortgage Electronic Registration Systems, Inc., Its Successors and Assigns." The court also ordered foreclosure on the mortgage. Del Norte was not a named party to the state court proceedings in the foreclosure action.

On October 19, 2005, the note was registered with MERS. (Doc. 77 — ¶ 19) The servicing agent for the note held by Del North is SN Servicing Corporation. (Doc. 77 — ¶ 21; see also Exhibit M — Security National Servicing Corporation Ledger for Gemini Loan dated October 19, 2005 and Exhibit N — SN Servicing Corporation payoff balance calculations dated October 19, 2005 for Gemini Loan).

Jurisdiction

This court has jurisdiction pursuant to 28 U.S.C. § 1334 and the Standing Order of Reference entered in this District. This is a core proceeding pursuant to 28 U.S.C. § 157(b)(2)(K).

The Rooker Feldman Doctrine Does Not Bar This Court From Exercising Jurisdiction

As a preliminary issue, Del North asserts that the Rooker Feldman doctrine bars this Court from exercising jurisdiction in this adversary. The court determines the Rooker Feldman doctrine does not bar this court from exercising subject matter jurisdiction in connection with the remaining issues in this adversary proceeding. The Court recognizes that, since the Rooker Feldman doctrine addresses subject matter jurisdiction, it must be considered at any point in a proceeding. See Federal Rule of Civil Procedure 12(h)(3), applicable to adversary proceedings by Bankruptcy Rule 7012(b) ("Whenever it appears by suggestion of the parties or otherwise that the court lacks jurisdiction of the subject matter, the court shall dismiss the action.") The Court notes, however, it appears to be, at a minimum, inconsistent, if not disingenuous, for Del Norte, after participating in multiple proceedings in this case and this adversary, to, for the first time, substantively urge that this court has no jurisdiction, particularly when Del Norte, during the pretrial stage of this adversary, declined this court's invitation to consider abstention in favor of an alternate court forum. Nevertheless, the Court considers Del Norte's argument that this court cannot determine the validity or priority of Del Norte's lien, since any review of the prior state court proceedings would constitute the bankruptcy court acting as an appellate court in review of the state court decisions and such action is prohibited by the Rooker Feldman Doctrine.

Based on two United States Supreme Court decisions, the Rooker Feldman doctrine limits the subject matter of jurisdiction of the lower federal courts to review state court judgments:

"The Rooker/Feldman doctrine derives its name from two cases District of Columbia Court of Appeals v. Feldman, 460 U.S. 462, 103 S.Ct. 1303, 75 L.Ed.2d 206 (1983), which revived a doctrine of federal court jurisdiction established by Rooker v. Fidelity Trust Co., 263 U.S. 413, 44 S.Ct. 149, 68 L.Ed. 362 (1923)." Grendell v. Ohio Supreme Court, 252 F.3d 828, 835 n. 1 (6th Cir.2001). "The doctrine expresses the principle that federal trial courts have only original subject matter, and not appellate, jurisdiction and . . . may not entertain appellate review of or collateral attack on a state court judgment.'" Singleton v. Fifth Third Bank (In re Singleton), 230 B.R. 533, 536 (6th

...