In re Holmes
| Decision Date | 14 May 2008 |
| Docket Number | Bankruptcy No. 06-50236.,Adversary No. 06-5035. |
| Citation | 387 B.R. 591 |
| Parties | In re Robert T. HOLMES and Julie A. Holmes, Debtors. Robert T. Holmes and Julie A. Holmes, Plaintiffs, v. Deutsche Bank National Trust Company, as Trustee of Ameriquest Mortgage Securities, Inc., Defendant. |
| Court | U.S. Bankruptcy Court — District of Minnesota |
Peter Greenlee, Greenlee Law Office, Twig, MN, for Plaintiffs.
Bryan C. Keane, Monica L. Clark, Dorsey & Whitney LLP, Minneapolis, MN, for Defendant.
ORDER DENYING DEFENDANT'S MOTION FOR LEAVE TO FILE A THIRD-PARTY COMPLAINT, AND DETERMINING JURISDICTION OVER PLAINTIFFS' COMPLAINT
This adversary proceeding came on before the Court for hearing on the motion of the Defendant ("Deutsche Bank") for leave to file and serve a third-party complaint. Deutsche Bank appeared by its attorney, Bryan C. Keane. The Plaintiffs ("the Debtors") appeared by their attorney, Peter C. Greenlee. Acting sua sponte, the Court raised the issue of whether the bankruptcy jurisdiction of the federal courts would extend to Deutsche Bank's claims under the proposed third-party complaint, and whether the Debtors' claims that were already in suit are within the bankruptcy jurisdiction. Counsel completed post-hearing briefing as directed.1 This order memorializes the analysis of the jurisdictional issues, and the resultant disposition of the Defendant's motion.
1. The Debtors are residents of Duluth, Minnesota. They filed a voluntary petition under Chapter 7 on June 20, 2006. Their case is still pending in this Court.
2. Deutsche Bank holds the status of trustee under a securitization of mortgagesecured debt that includes all rights related to a mortgage against the Debtors' homestead. The associated individual mortgage instrument is of record in the office of the St. Louis County, Minnesota Registrar of Titles. The mortgagee under the instrument was identified as Ameriquest Mortgage Company.
3. The proposed third-party defendant, Great Minds, Inc., d/b/a Signature Closing Service ("Signature"), administered the closing of the loan that is identified to the mortgage described above. Deutsche Bank alleges that Signature acted improperly in connection with the documenting of the mortgage.
The events, acts, and circumstances that are relevant to the jurisdictional issues are all memorialized in the Court's records, for this adversary proceeding and for the underlying bankruptcy case.2
1. In the Schedule A that they filed with their bankruptcy petition, for "real property," the Debtors noted an interest in real estate located at 164 West Ideal Street, Duluth, Minnesota 55811. They assigned a current value of $145,000.00 to it. They noted the associated "Amount of Secured Claim" as "0.00." Their entry included the following recitation:
AMERIQUEST CLAIMS A MORTGAGE INTEREST OF APPROXIMATELY $134,000; DISPUTED BY DEBTORS AS INVALID UNDER MINN STAT.507.04 SUBD. 6.
2. In their Schedule B, the Debtors included an entry for an asset described as:
CLASS ACTION MEMBERSHISTATES V AMERIQUEST MORTGAGE CO, TOWN' & COUNTRY CREDIT CORP/ AMC MORTGAGE SERVICES INC.-DEBTORS ARE EIGIBLE FOR MEMBERSHIP IN RESTITUTION PAYMENT OF AN UNKNOWN VALUE.
They assigned a value of "$1.00" to this asset.
3. In their Schedule C, the Debtors claimed an exemption for the full identified value of their interest in the real estate noted in paragraph 1, i.e., $145,000.00. They elected the homestead exemption provisions of Minn.Stat. §§ 510.01-.02. No creditor or party in interest timely objected to this claim of exemption.
4. In their Schedule F, for "Creditors Holding Unsecured Nonpriority Claims," the Debtors noted a claim in favor of "Ameriquest Mortgage Co.," in the amount of $135,000.00.
5. On July 10, 2006, Deutsche Bank filed a motion for relief from stay, seeking leave to foreclose the mortgage that is at issue in this adversary proceeding. On August 3, 2006, after the Debtors commenced this adversary proceeding, Deutsche Bank withdrew that motion.
6. No creditor or party in interest objected to the Debtors' claim of exemption in the real estate, timely or otherwise.
7. On September 18, 2006, the Trustee of the Debtors' bankruptcy estate filed a notice that payment of a dividend to creditors appeared possible. This notice, which contained a deadline for the timely filing of claims, was sent to all creditors. The deadline has now passed, though it still is open to creditors to amend their claims.
8. As of the date of this order, the Trustee has not completed her administration of the bankruptcy estate. On May 7, 2008, the Court granted her motion to compel the Debtors to turn over to her a check recently received by them, apparently in settlement of the mortgage-related litigation noted in Finding 2. The court file does not reflect whether the Trustee is still pursuing the recovery of other assets, or whether she has collected any other monies yet.
9. On September 26, 2006, the Debtors were granted a discharge under Chapter 7.
Pleadings and Procedural Posture: ADV 06-5035.
10. On July 19, 2006, the Debtors filed the complaint that commenced this adversary proceeding.
11. In paragraph 1 of the complaint, the Debtors state:
This is an action by debtors and plaintiffs Robert T and Julie A Holmes to determine the validity and extent of a mortgage interest in property by the defendant Deutsche Bank National Trust Company.
In paragraph 2, they identify the basis of the Court's jurisdiction as "28 U.S.C. Sec. 157(b)(2)(K) and 1334." They also state: "This is a core proceeding."
12. Via paragraphs 6 through 8 of the complaint, the Debtors allege that the instrument that granted the mortgage "appears to be executed by both Robert and Julie Holmes"; that it "was in fact not reviewed, signed or executed by" Robert Holmes; and that "the signature `Robert Holmes' contained in said mortgage was signed by person(s) unknown to" the Debtors. They allege that on the date recited in the acknowledgment on the mortgage instrument, Robert Holmes was incarcerated in the Minnesota state prison at Rush City.
13. In paragraph 9 of the complaint, the Debtors state that the notary public who gave the "signature witness statements" for the acknowledgment "did not witness the' signature of ... Robert T. Holmes."
14. The Debtors recite that the mortgage instrument "is invalid pursuant to Minnesota Statutes Sec. 507.04, subdivision 6." They pray for a declaratory judgment to that effect as their relief.
15. Deutsche Bank interposed its answer through a Minneapolis law firm.
16. Deutsche Bank pleads that it "is unable to admit or deny the allegations of the paragraphs of the complaint that are material to the Debtors' theory of statutory invalidity. It raises the affirmative defenses of ratification and equitable subrogation. It prays for dismissal with prejudice of the Debtors' action.
17. At an initial scheduling conference held on December 5, 2006, the attorney who then represented Deutsche Bank requested the setting of a discovery period somewhat longer than typical. She stated that this would permit her client's further investigation into the actions of the business entities and persons that had been involved in the closing for the mortgage. That request was granted. A scheduling order fixing deadlines for the completion of discovery and the filing of dispositive motions was entered on December 6, 2006.
18. When neither party filed a dispositive motion, the Court issued an order on July 23, 2007, setting this matter for trial.
19. Shortly thereafter, new counsel for Deutsche Bank substituted in. In very short order, the parties stipulated to a general extension of all deadlines for trial preparation and a continuance sine die of the trial. The Court granted that relief, on the understanding that a scheduling conference would be reconvened to address the status of this matter.
20. A week after a date was set for the scheduling conference, counsel for Deutsche Bank filed the motion at bar. Deutsche Bank seeks leave to file a third-party complaint against Signature, under which it would seek judgment against Signature "in the event that [the Debtors] prevail on their claims against Ameriquest."
21. In the introduction to the memorandum to support this motion, Deutsche Bank's current counsel states:
Through the course of discovery, it has become clear that Signature ..., not a current party to this action, is or may be liable to Ameriquest for all or part of [the Debtors'] claim against Ameriquest.
In sum, Deutsche Bank alleges that the closing agent who acted on behalf of Signature to handle the mortgage transaction for Ameriquest "improperly executed the Vesting page,'" i.e., the notarized acknowledgment purportedly signed by both of the Debtors. It alleges that she did not obtain the actual signature of Robert Holmes himself before she presented a set of signature-bearing mortgage documents to Ameriquest, contrary to Signature's contractual obligation to Ameriquest. Thus, under the proposed third-party complaint, Deutsche Bank would seek judgment against Signature if the Debtors succeed in voiding the mortgage. It frames the substantive basis for its relief in three different counts, sounding under breach of contract, indemnification and contribution, and negligence.
During the hearing on Deutsche Bank's motion, the Debtors' counsel stated that he did not "necessarily oppose the Plaintiffs' motion, but the Court [was] not required to take jurisdiction over [the] claim" in the proposed third-party complaint. He pointed out that Deutsche Bank could bring an action for contribution in the Minnesota state courts, and he opined that the disposition of this motion was "up to the Court's discretion."
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In re Price
...The Eastern District of Arkansas provides for automatic referral of such proceedings by Local Rule 83.1. 3. See also In re Holmes, 387 B.R. 591, 599 (Bankr.D.Minn.2008) ("The courts have articulated a test that turns on `whether the outcome of that proceeding could conceivably have any effe......
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Le v. Wells Fargo Bank, N.A. (In re Le)
...is no longer property of the bankruptcy estate the proceeding no longer has core status under 28 U.S.C. § 157(b)(2)(K). In re Holmes, 387 B.R. 591, 598–599 (Bankr.D.Minn.2008) (relying on holding in Abramowitz v. Palmer, 999 F.2d at 1276–1277, that core-proceeding status of action to determ......
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Loos v. Koperski (In re Koperski)
...unsettled under local precedent, were subject to conflicting policy considerations, and presented local sensitivities); In re Holmes,387 B.R. 591, 601 (Bankr.D.Minn.2008)(in action by debtors in bankruptcy to have mortgage invalidated, abstaining from hearing and determining defendant mortg......
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Le v. Wells Fargo Bank, N.A. (In re Le)
...longer property of the bankruptcy estate the proceeding no longer has core status under 28 U.S.C. § 157(b)(2)(K). In re Holmes, 387 B.R. 591, 598-599 (Bankr. D. Minn. 2008) (relying on holding in Abramowitz v. Palmer, 999 F.2d at 1276-1277, that core-proceeding status of action to determine......