In re Howes
| Decision Date | 30 September 2015 |
| Docket Number | Civil Action No. ELH-14-2814 |
| Parties | JEFFREY V. HOWES, et al. Appellants, v. WELLS FARGO BANK, N.A., et al., Appellees. |
| Court | U.S. District Court — District of Maryland |
This bankruptcy appeal is rooted in the dismissal of an adversary proceeding filed in a Chapter 13 bankruptcy case.1
On November 15, 2012, Jeffrey Howes filed a Chapter 13 bankruptcy proceeding to prevent a foreclosure sale of his home in Fulton, Maryland. See In re Jeffrey Howes, Bankr. Case No. RAG-12-30614; ECF 19 at 3, 17 n.2 (Appellants' "Second Amended Brief"). Months later, on September 3, 2013, Howes and his wife, Tonya Howes, filed an adversary proceeding in the bankruptcy case, titled "Complaint to Determine Secured Status, Sanctions, and OtherRelief."2 ECF 1-4. The adversary proceeding "challenge[d] the validity and/or extent of the secured claim asserted in Amended Proof of Claim No. 4 . . . filed by Wells Fargo Bank N.A [in the bankruptcy case,] on the basis [that] Wells Fargo lacked standing to file [it], it is excessive, and subject to [other claims]." See Howes, et al. v. Wells Fargo Bank, N.A., et al., Adv. Proc. No. 13-510, ECF 1-4, ¶ 1; Apx. 23 ("Complaint"). The allegations also challenge efforts by the defendants to enforce a promissory note ("Note") executed by the Howes in November 2001, and secured by a Deed of Trust that they executed as to their home. Apx. 22-76, Complaint. The Bankruptcy Court (Gordon, J.) dismissed the Complaint. The Howes then noted an appeal to this Court on August 5, 2014 (ECF 38 in Adv. Proc. No. 13-510), which was docketed on September 4, 2014. ECF 1.
In the adversary proceeding, the Howes sued "Wells Fargo Bank N.A." ("Wells Fargo");3 U.S. Bank, National Association ("US Bank");4 Carrington Mortgage Services, LLC ("Carrington"); and Christiana Trust ("Christiana"), a Division of Wilmington Savings Fund Society, FSB ("WSFS"), as trustee for Stanwich Mortgage Loan Trust, Series 2013-2 ("Stanwich" or "Stanwich Trust");5 and "Unknown Defendants 1 through 10."6 Apx 22,Complaint at 1. Selene Finance, LP ("Selene"), which was not named as a defendant in the adversary proceeding, has joined the appellees' brief submitted by Christiana and Carrington (ECF 15), without objection.7 Numerous exhibits were appended to the suit.8
The Complaint contains nine counts, as follows: "Fraud Upon the Court" as to Wells Fargo and US Bank, pursuant to 11. U.S.C. § 105 and Fed. R. Bankr. P. 9011 (Count I); "Determination of Scope, Extent and Validity of Lien," as to all defendants, pursuant to 11 U.S.C. §§ 105, 506 (Count II); "Sanctions for Defective Proof of Claim," as to Wells Fargo and US Bank, pursuant to Fed. R. Bankr. P. 3001(c)(2)(D) (Count III); "Unlawful Inspection Fees" as to Wells Fargo, US Bank, and Christiana, pursuant to Md. Code , § 12-1027 of the Commercial Law Article ("C.L.") (Count IV); violations of the Truth in Lending Act ("TILA"), 15 U.S.C. §§ 1601 et seq., as to Wells Fargo, US Bank, Christiana, and "Unknown Defendant" (Count V); violations of the Fair Debt Collection Practices Act ("FDCPA"), 15 U.S.C. §§ 1692 et seq., as to Wells Fargo, US Bank, and Christiana (Count VI);violations of the Maryland Consumer Debt Collection Act ("MCDCA"), C.L. §§ 14-201 et seq., as to Wells Fargo, US Bank, and Christiana (Count VII); violations of the Maryland Consumer Protection Act ("MCPA"), C.L. §§ 13-101 et seq., as to Wells Fargo and US Bank (Count VIII); and an "Objection to Claim," pursuant to 11 U.S.C. § 502 (Count IX).
The Howes' Note, which is central to the case, was pooled at some point with several other notes in a residential mortgage-backed securitization trust. Apx 32-33, Complaint ¶¶ 42-43. Plaintiffs maintain that the trust was terminated in January 2012, and therefore any effort to collect on the Note, whether as a successor-in-interest to the trust or as an assignee of the trust, was invalid, because the trust ceased to exist. The Howes also insist that confusion as to ownership of their Note upon the trust's termination precludes any of the defendants from enforcing it. Apx. 38, Complaint ¶ 62. In addition, plaintiffs assert, inter alia, that Wells Fargo misrepresented itself as a creditor in a claim filed in the bankruptcy case (Apx. 39, Complaint ¶ 67), and both Wells Fargo and US Bank defrauded the Bankruptcy Court by filing a "false arrearage claim for $200,196.79," related to payments and fees due on the promissory note. Apx. 38, id. ¶ 66.
On October 9, 2013, Carrington and Christiana moved to dismiss the Complaint,9 which they amended on December 18, 2013. Apx. 165-171 ("Carrington MTD"). On October 17, 2013, US Bank and Wells Fargo also moved to dismiss the Complaint. Apx. 77-126 ("Wells Fargo MTD"). The Howes opposed all motions. See Apx. 127-57 ("Howes Opposition to Wells Fargo MTD"); Apx. 172-81 ("Howes Opposition to Carrington MTD"). The Bankruptcy Court heard argument on the motions on January 6, 2014 (Apx. 324-51), and permitted supplemental briefing concerning the effect of the trust's termination on the enforceability of the note. Apx.349-50. US Bank and Wells Fargo filed a supplemental brief on January 21, 2014 (Apx. 182-199), to which the Howes responded on February 5, 2014. Apx. 200-06.
In an oral ruling on March 4, 2014, the Bankruptcy Court granted the motions to dismiss. Apx. 207-33; see also ECF 1-32. Judge Gordon dismissed Count I (Fraud Upon the Court), with prejudice, and dismissed the remaining counts, without prejudice, and with leave to amend or to file a claim objection by May 3, 2014. Apx. 223-230. Plaintiffs did not amend or object by that date. Instead, on May 5, 2014, they moved for reconsideration of the oral ruling. Apx. 238-49. On May 12, 2014, the Bankruptcy Court entered an "Order Dismissing Complaint For Failure To State A Claim," memorializing its oral ruling ("MTD Order"). Apx. 285-87. Plaintiffs then moved to reconsider the MTD Order. Apx. 294-96.
After briefing on the motions to reconsider, the Bankruptcy Court heard argument on July 16, 2014 (Apx. 352), and orally denied the motions to reconsider. Apx. 361, 367. And, it extended until July 23, 2014, appellants' time to amend or file a claim objection. Id. at 367. On July 22, 2014, the Bankruptcy Court entered an Order embodying its oral ruling. Apx. 297-98. Plaintiffs did not amend or object. Instead, they noted this appeal on August 5, 2014. See ECF 38 in Adv. Proc. No. 13-510; ECF 1. Specifically, the Howes have appealed both the MTD Order of May 12, 2014 (Apx. 238-49), and the Reconsideration Order of July 22, 2014. Apx. 297-98.
The appeal was transmitted to this Court on September 4, 2014. ECF 1. Plaintiffs filed their initial brief on September 29, 2014. Two days later, on October 1, 2014, plaintiffs filed an amended brief (ECF 8), without explanation. Then, on October 5, 2014, with leave of Court (ECF 14), plaintiffs filed the 417-page Appendix (ECF 9), which apparently included several documents not previously designated by plaintiffs. See ECF 1, ECF 2, ECF 4.
Wells Fargo, US Bank, Carrington, and Christiana did not object to the submission of the Appendix. Indeed, all parties cite to it. Nor did they object to the inclusion of documents not previously designated in the record, or to plaintiffs' submission of the initial amended brief.
Wells Fargo and US Bank submitted their brief on October 13, 2014. ECF 11 ("Wells Fargo Brief"). On October 16, 2014, Carrington and Christiana submitted their brief. ECF 15 ("Christiana Brief"). As noted, Selene joined the Christiana Brief. Id. Plaintiffs submitted their reply on October 30, 2014. ECF 18 ("Reply"). On that same date, without explanation, plaintiffs filed a "Second Amended Brief," i.e., their third brief (ECF 19), without leave of court or a redlined version.
On October 31, 2014, pursuant to Fed. R. Bankr. P. 8009(a), US Bank and Wells Fargo filed a motion to strike the Second Amended Brief. ECF 20, Motion to Strike. Plaintiffs opposed the Motion to Strike, and it remains pending. ECF 22 ("Opposition to Motion to Strike"). No hearing is necessary to resolve it. See Local Rule 105.6.
On November 5, 2014, i.e., after the appeal was filed, the Bankruptcy Court issued a "Memorandum Opinion In Support of Orders Dismissing Complaint And Denying Motions To Reconsider." ECF 51 in Adv. Proc. No. 13-510.10
On December 2, 2014, plaintiffs asked the Bankruptcy Court to stay the bankruptcy proceeding. ECF 25-2. The Bankruptcy Court denied the request on December 9, 2014. Bankruptcy Docket, ECF 142. Plaintiffs then filed in this Court an "Emergency Motion to Stay Plan Confirmation Pending Appeal." ECF 23 ¶ 6 ("Motion to Stay"). Pursuant to the Court'srequest (ECF 24), appellees responded and opposed the stay. See ECF 25 (Christiana and Carrington); ECF 26 (Wells Fargo, US Bank). In addition, the Chapter 13 Trustee filed a response in opposition. ECF 28. By Order dated December 16, 2014 (ECF 29), I granted the Motion to Stay (ECF 23), subject to the posting of a security bond by plaintiffs.11
On November 30, 2001, the Howes executed a "Construction Note" payable to the order of The Columbia Bank13 (Apx. 26, Complaint ¶ 15), in the amount of $696,130.00. Apx. 58, Note. As security for the Note, the Howes also executed a Deed of Trust, conveying their interest in real property to the Trustee for The Columbia Bank. Apx. 26, Complaint ¶ 15; Apx. 67, Declaration of Substitution of Trustees by Wells Fargo, N.A., dated October 28, 2011 ("Declaration of Substitution of Trustees" or "Dec. of Sub. Trustees"). The property that is the subject of the Deed of Trust is located in Howard County, Maryland and serves as the principal residence of the Howes (the "Property"). Apx. 26, Complaint ¶ 16; Apx. 58, Note.
The Note was amended by a Loan Modification Agreement dated April 16, 2003, recorded in the Land Records of Howard County...
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