In re Kline, Bankruptcy No. 13-05-12174 JS.

• Citation: 420 B.R. 541
• Decision Date: 25 November 2009
• Docket Number: Adversary No. 09-01035 J.,Bankruptcy No. 13-05-12174 JS.
• Parties: In re Karen Marie KLINE, Debtor. Karen Marie Kline, Plaintiff, v. Deutsche Bank National Trust Company, and Richard Leverick, Defendants.
• Court: United States Bankruptcy Courts. Tenth Circuit. U.S. Bankruptcy Court — District of New Mexico

420 B.R. 541

In re Karen Marie KLINE, Debtor.

Karen Marie Kline, Plaintiff, v. Deutsche Bank National Trust Company, and Richard Leverick, Defendants.

Bankruptcy No. 13-05-12174 JS.

Adversary No. 09-01035 J.

United States Bankruptcy Court, D. New Mexico.

November 25, 2009.

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Karen Marie Kline, Santa Fe, NM, Pro se.

Richard Leverick, Albuquerque, NM, for Deutsche Bank National Trust Company and Richard Leverick.

MEMORANDUM OPINION

ROBERT H. JACOBVITZ, Bankruptcy Judge.

This matter is before the Court on the various motions for summary judgment filed by the parties. Defendants Deutsche Bank National Trust Company ("Deutsche Bank") and Richard Leverick ("Leverick") filed three separate Motions for Summary Judgment, on March 23, 2009 and August 10, 2009. Karen Marie Kline ("Plaintiff," "Debtor" or "Kline"), acting pro se, filed a Motion for Summary Judgment and Memorandum and Affidavit in Support on August 14, 2009.

This adversary proceeding arises from Plaintiff's claims of alleged stay violations based on conduct occurring during litigation in a state court foreclosure proceeding brought by Deutsche Bank, represented by Mr. Leverick, against Plaintiff. On March 5, 2009, Plaintiff filed her Adversary Proceeding Complaint for Damages for Willful Violation of the Automatic Stay alleging that Defendants willfully violated 11 U.S.C. § 362(a)(1), (3), (4), (5), and (6) in pursuing foreclosure of her property located at 729 W. Manhattan Avenue # 3, Santa Fe, New Mexico, and alleging that Mr. Leverick engaged in deceit or collusion in violation of NMSA § 36-2-17 in his conduct during the foreclosure proceeding. Plaintiff seeks recovery of compensatory damages, damages for emotional distress, punitive damages, costs and interest pursuant to 11 U.S.C. § 362(h)¹ for Defendants' alleged violation of the automatic stay. Additionally, Plaintiff seeks treble damages from Mr. Leverick for violation of NMSA § 36-2-17.

Defendants filed their Motion for Summary Judgment ("First Motion") (Docket No. 8) and accompanying Memorandum in Support (Docket No. 9) asserting that Defendants did not violate the automatic stay, and that Plaintiff's claim of a stay violation is barred by res judicata. Defendants contend that this claim was fully litigated in the state court, and that both the state district court and state court of appeals found Plaintiff's claim lacked merit. Plaintiff in her response to the First Motion does not address the res judicata issue, and reiterates her stay violation claims. See Plaintiff's Objection to Motion for Summary Judgment and Memorandum and Affidavit in Support (Docket No. 13).

Defendants' Second Motion for Summary Judgment ("Second Motion") (Docket No. 34) asserts that Defendants are entitled to summary judgment on the stay violation claim under the doctrine of collateral estoppel. Defendants contend that Ms. Kline seeks to re-litigate ultimate facts or issues actually and necessarily decided in the state court foreclosure. Ms. Kline in response asserts that her "federal bankruptcy court issues" were not litigated in the state court because the state court lacked jurisdiction. See Plaintiff's Response to Defendants' Second Motion for Summary Judgment and Their Memorandum (Docket No. 44).

Defendants' Third Motion for Summary Judgment ("Third Motion") (Docket No. 36) asserts that Defendants are entitled to summary judgment on Plaintiff's claims against Mr. Leverick for violation of NMSA § 36-2-17 on the ground that Plaintiff has not produced any evidence to support a finding that Mr. Leverick's conduct was done with "intent to deceive the court, judge or party," or that he in fact deceived the state court or that any deceit resulted in the entry of the foreclosure judgment. In her response, Plaintiff reasserts that she seeks damages under the statutory provision for Mr. Leverick's allegedly deceitful conduct during the foreclosure proceeding. See Plaintiff's Objection to Defendants' (sic) Third Motion for Summary Judgment and Their Memorandum (Docket No. 45).

Plaintiff filed her own Motion for Summary Judgment and Memorandum and Affidavit in Support ("Plaintiff's Motion") (Docket No. 46) asserting that she is entitled to summary judgment on her claims for damages for willful violation of the automatic stay under 11 U.S.C. § 362(a)(1), (2), (3), (4), (5), and (6) as well as on her claim for deceit or collusion in violation of NMSA § 36-2-17. Plaintiff asserts that the exhibits attached to Plaintiff's Motion establish that there are no genuine issues of material fact and that she is entitled to judgment as a matter of law. She contends that Defendants' conduct during the foreclosure litigation shows that they willfully violated the automatic stay, that they failed to take affirmative action to undo or reverse their violation, and that Mr. Leverick used deceit to accomplish the foreclosure sale. Defendants' response to Plaintiff's Motion incorporated by reference their three Motions for Summary Judgment. Defendants again assert that Plaintiff has already litigated the issues of service and stay violation in the state court foreclosure action, and that these issues are barred by res judicata and collateral estoppel.

The Court having reviewed the motions and responses, and being fully sufficiently advised, finds that the evidence presented is not sufficient to grant summary judgment on the First Motion, the Second Motion or Plaintiff's Motion, and therefore will deny those motions. The Court further finds that it does not have jurisdiction to adjudicate any claims arising from the alleged violation under NMSA § 36-2-17, and therefore will deny the Third Motion and dismiss Plaintiff's claims under NMSA § 36-2-17.

SUMMARY JUDGMENT STANDARD

Summary judgment is appropriate when there are no genuine issues of material fact, and the moving party is entitled to judgment as a matter of law. Rule 56(c), Fed.R.Civ.P., made applicable to adversary proceedings by Rule 7056, Fed. R.Bankr.P. The party requesting summary judgment must demonstrate to the Court that the undisputed facts entitle the movant to judgment as matter of law.² The party opposing summary judgment may not rest upon allegations or denials contained in its own pleading, but must "set out specific facts showing a genuine issue for trial." Rule 56(e)(2), Fed.R.Civ.P. To successfully defend against a motion for summary judgment, the affidavits and/or other documentation offered by the party opposing summary judgment must contain probative evidence that would allow a trier of fact to find in Defendant's favor. In determining whether summary judgment should be granted, the Court must view the facts in the light most favorable to the party opposing summary judgment.³

UNDISPUTED FACTS

Ms. Kline filed her voluntary petition under Chapter 13 of the United States Bankruptcy Code, 11 U.S.C. § 101 et. seq, on March 21, 2005 commencing a bankruptcy case assigned No. 05-12174 (the "Chapter 13 Case"). Deutsche Bank was the holder of a residential note secured by a mortgage granted by the Debtor to Deutsche Bank against property having the street address of 729 W. Manhattan Avenue # 3, Santa Fe, New Mexico (the "Condo"). Deutsche Bank filed a Complaint For Foreclosure ("Complaint") in Cause No. D-101-CV-2005-0515, Santa Fe County District Court, New Mexico, on March 9, 2005, to foreclose the mortgage (the "State Court Action"). Deutsche Bank filed an Amended Complaint (the "Amended Complaint") for foreclosure on March 16, 2005 to add parties to the litigation. Deutsche Bank served the original Complaint on Ms. Kline pre-petition on March 18, 2009 by personal service, and served the Amended Complaint on Ms. Kline post-petition on March 29, 2009.

Ms. Kline listed the Condo on Schedule A of her schedules filed in the Chapter 13 Case on March 21, 2005 (the "Schedules") (Docket No. 1 in the Chapter 13 Case)⁴. On Schedule D, Ms. Kline listed the Condo as subject to a lien in favor of Ocwen Federal Bank FSB. Neither Deutsche Bank nor Richard Leverick are listed as creditors in the Schedules, and neither was included on the mailing list generated by the Clerk of Court for the Chapter 13 Case when the case was filed. A Certificate of Service filed of record in the Chapter 13 Case reflects service on March 25, 2005 of the Notice of Chapter 13 Bankruptcy Case, which gave notice of the commencement of the Chapter 13 Case, on Ocwen Federal Bank, 12650 Ingenuity Dr., Orlando, FL 32826-2717 but does not reflect service of the Notice on Deutsche Bank or Richard Leverick. (Docket No. 4 in the Chapter 13 Case).

On June 1, 2005, "Ocwen Federal Bank FSB, loan servicing agent for Deutsche Bank" filed a Motion for Relief from Stay to permit it to proceed with the State Court Action. (Docket No. 20 in the Chapter 13 Case). As a result of Ms. Kline having failed to file a timely objection to the stay motion, the Court entered a Default Order Granting Relief From Stay on July 1, 2005 modifying the automatic stay to allow Deutsche Bank to proceed with the State Court Action. (Docket No. 27 in the Chapter 13 Case). Thereafter, Deutsche Bank prosecuted the foreclosure action in state court. On July 13, 2005, Plaintiff's bankruptcy case was dismissed.

DISCUSSION

A. Claims For Willful Violation of the Stay.

1. Defendants Have Not Established that They Had No Knowledge of the Chapter 13 Case.

Upon the filing of a voluntary petition under the Bankruptcy Code, 11 U.S.C. § 362 imposes an automatic stay applicable to all entities that prohibits actions against the debtor or against property of the bankruptcy estate. 11 U.S.C. § 362(a). The scope of the automatic stay is broad⁵ and specifically prohibits, among other things

the commencement or continuation, including the issuance of employment of process, of a judicial, administrative, or other action or proceeding against the debtor that was or could have been commenced before the...