In re Krause
| Decision Date | 02 September 2009 |
| Docket Number | Bankruptcy No. 07-35568.,Adversary No. 08-3111. |
| Citation | 414 B.R. 243 |
| Parties | In re Kenneth W. KRAUSE, Rachel E. Krause, Debtors. Donald F. Harker, III, Trustee, Plaintiff v. Wells Fargo Bank, NA, et al., Defendants. |
| Court | U.S. Bankruptcy Court — Southern District of Ohio |
Donald F. Harker, III, Dayton, OH, Plaintiff Trustee.
Hannah Hutman, Dayton, OH, for Plaintiff.
Hannah Hutman, Alan J. Statman, Elizabeth L. Hutton, Jeffrey P. Harris, W. Kelly Lundrigan, Cincinnati, OH, for Plaintiff.
Jennifer L. Maffett, Scott A. King, Dayton, OH, for Defendant.
W/E Mortgage, Inc., c/o Service Agent, Anthony J. Wickersham, Cincinnati, OH, Defendant.
Decision Granting Motion of Wells Fargo Bank, NA to Dismiss Amended Complaint
Through this adversary proceeding, Donald F. Harker, the Chapter 7 trustee appointed in the estate case of the debtors, Kenneth and Rachel Krause, seeks a declaratory judgment that Wells Fargo Bank, NA is not a creditor of the debtors and to avoid a mortgage lien filed for record in the name of W/E Mortgage, Inc. based on the allegation that a valid assignment of the mortgage was not recorded on behalf of the holder of the note secured by such mortgage, as required by Ohio law. Based on these claims, the trustee also seeks declaratory and injunctive relief related to Wells Fargo's or its affiliated entities' alleged misconduct and misrepresentations.
In addition to challenging the status of Wells Fargo as a creditor and the validity of its mortgage and requesting equitable relief for Wells Fargo's alleged misconduct, the trustee seeks to certify this adversary proceeding as a class action and requests to be appointed as the class representative for a national class comprised of several sub-classes of all current trustees for bankruptcy estates in which any of the entities affiliated with Wells Fargo (i) claim to be the holder of mortgages but do not hold the notes related to the mortgages; (ii) hold the notes but the mortgages related to those notes were not assigned to those entities, or (iii) with respect to certain states, claim to be the holder of notes but mortgage assignments related to those notes were not recorded under applicable state law.
For the reasons discussed below, Wells Fargo's motion to dismiss is being granted.
Solely for the purpose of determining whether the Chapter 7 Trustee's First Amended Complaint to Determine Creditor Status, Secured Status and Avoid Mortgages, Declaratory Judgment, Preliminary and Permanent Injunctive Relief And For Other Relief (Adv. Docs. 29 and 37) (the "Amended Complaint") should be dismissed, the court deems the facts as alleged in the Amended Complaint to be true.
On February 21, 2003 Kenneth and Rachel Krause, the Debtors (the "Debtors") executed and delivered to W/E Mortgage, Inc. ("W/E Mortgage") a promissory note in the original principal amount of $90,298 (the "Note"). Concurrently, to secure the Note, the Debtors executed and delivered to W/E Mortgage an open-end mortgage (the "Mortgage") on a parcel of real property located at 1405 Gayhart Drive, Xenia, Ohio 45385 (the "Property"). W/E Mortgage recorded the Mortgage with the Greene County, Ohio Recorder on February 26, 2003.
The Note was endorsed on February 21, 2003 by W/E Mortgage to Wells Fargo Home Mortgage, Inc. ("Wells Fargo Home Mortgage") without recourse by way of an allonge to the Note. No assignment of mortgage was recorded evidencing the transfer of the Note from W/E Mortgage to Wells Fargo Home Mortgage.
On May 5, 2004 Wells Fargo Home Mortgage merged with Wells Fargo Bank, NA ("Wells Fargo"), with Wells Fargo being the surviving entity and Wells Fargo Home Mortgage operating as a division of Wells Fargo.
On December 15, 2007 (the "Petition Date") the Debtors filed a voluntary petition (the "Petition") for relief under Chapter 7 of Title 11 of the United States Bankruptcy Code (the "Bankruptcy Code" or the "Code")1. The Plaintiff was appointed Chapter 7 Trustee on that same day (the "Plaintiff").
On their Schedule D (Creditors Holding Secured Claims), the Debtors listed Wells Fargo Home Mortgage as the holder of a secured claim on the Property. The last date for non-governmental entities to file proofs of claim in the Debtors' case was August 4, 2008. No entity, including W/E Mortgage and Wells Fargo, has filed a proof of claim contending to be secured by the Property. See Claims Register and Doc. 50 ().
On January 23, 2008 W/E Mortgage filed a Motion For Relief From Stay and Notice and Certificate of W/E Mortgage, Inc., c/o Wells Fargo Bank, N.A. (Property Address: 1905 Gayhart Drive, Xenia, Ohio 45385) (Doc. 12), which the court denied on procedural grounds on February 13, 2008 (Doc. 17). On February 15, 2008 "W/E Mortgage, Inc. c/o Wells Fargo Bank, N.A., a secured creditor herein" filed another Motion For Relief From Stay and Notice and Certificate of W/E Mortgage, Inc., c/o Wells Fargo Bank, N.A. (Property Address: 1905 Gayhart Drive, Xenia, Ohio 45385) (Doc. 19) (the "Stay Motion"). Attached to the Stay Motion were copies of the Note and Mortgage. A copy of the allonge attached to the original Note was not attached. The Stay Motion states in pertinent part that:
W/E Mortgage, Inc. c/o Wells Fargo Bank, N.A., a secured creditor herein, for its Motion to modify the automatic stay imposed by Section 362 of the Bankruptcy Code hereby states as follows:
1. Movant is the holder of a promissory note and a mortgage on certain real property owned by the debtors known as 1905 Gayhart Drive, Xenia, Ohio 45385, and its mortgage is filed for record in the Greene County Recorder's Office. Copies of the movant's note and mortgage are attached hereto as Exhibit "A" and "B".
No objection was filed to the Stay Motion and on March 17, 2008, pursuant to Local Bankruptcy Rule 9021-1 and based upon the movant's certification that no response to the Stay Motion had been filed (Doc. 26), the Clerk of Court entered a default order for the court granting W/E Mortgage relief from the stay (Doc. 30). Neither the Plaintiff nor any other party has sought relief from the order granting W/E Mortgage relief from the stay.
On February 20, 2008 "W/E Mortgage, Inc. c/o Wells Fargo Bank, N.A." filed a Notice of Proposed Abandonment of Property (Doc. 21). On March 11, 2008 the Plaintiff filed a Trustee's Objection to Notice of Proposed Abandonment of Real Property Located at 1905 Gayhart drive, Xenia, Ohio 45385 (Doc. 23) and on April 11, 2008 W/E Mortgage, Inc. c/o Wells Fargo, N.A. filed a reply to that objection (Doc. 39). The Notice of Proposed Abandonment was withdrawn on April 22, 2008 (Doc. 44).
The Debtors were granted their discharge on April 24, 2008 (Doc. 45).
On April 11, 2008 the Plaintiff initiated this adversary proceeding by filing and serving on W/E Mortgage and Wells Fargo a Class Action Complaint to Avoid Mortgages, Declaratory Judgment, Preliminary And Permanent Injunctive Relief, and for Other Relief (Doc. 38; Adv. Doc. 1) (the "Complaint"). Wells Fargo moved to dismiss the Complaint (Adv. Doc.10). On August 14, 2008 the Plaintiff filed and served on W/E Mortgage and Wells Fargo a Motion of Plaintiff Donald F. Harker, Trustee, to File First Amended Complaint Combined with Notice of Right to Object and attached a proposed first amended complaint (Adv.Doc.29). On September 10, 2008 the Plaintiff and Wells Fargo filed an Agreed Order Stipulating to The Filing of Plaintiff's First Amended Complaint Nunc Pro Tunc And Extending Plaintiff's Time to Respond to Motion of Wells Fargo Bank NA to Dismiss First Amended Complaint (Adv.Doc.37). Pursuant to the agreed order, the First Amended Complaint (the "Amended Complaint") was deemed filed as of August 14, 2008.
W/E Mortgage did not file an answer to the Amended Complaint or otherwise defend this adversary proceeding. Wells Fargo moved again to dismiss the Amended Complaint (the "Motion to Dismiss") (Adv.Doc.33).
On November 4, 2008 the Plaintiff filed a Motion of Plaintiff Requesting Oral Argument With Notice of Opportunity to Object (Adv.Doc. 41), which the court granted (Adv.Doc.42). The court heard oral argument on January 23, 2009. On February 3, 2009, the Plaintiff filed Plaintiff's Motion for Leave to File Supplemental Brief in Opposition to Defendant's Motion to Dismiss which included the Supplemental Brief as attached Exhibit A (Adv.Doc.47).
On February 27, 2009, Wells Fargo filed its Memorandum of Wells Fargo Bank, NA in Response to Supplemental Brief in Opposition to Motion to Dismiss (Adv. Doc.52) and on March 6, 2009, the Plaintiff filed a Plaintiff's Reply in Support of Its Supplement Brief in Opposition to Defendant's Motion to Dismiss (Adv.Doc.53).
In Count I of the Amended Complaint, the Plaintiff seeks the disallowance of Wells Fargo's claim pursuant to §§ 501, 502 and 506 based on Wells Fargo's alleged failure to "own or hold" the Note. Through Count II, the Plaintiff seeks to avoid the Mortgage based on his avoidance power under § 544(a)(3) as a hypothetical bona fide purchaser of real property, alleging that the Mortgage was not properly assigned to the entity holding the Note as of the Petition Date, and particularly, that the assignment of the Mortgage was not recorded with the Greene County, Ohio Recorder as required by Ohio Revised Code ("ORC") § 5301.25(A). Through Count III, the Plaintiff seeks to retain the equity, if any, in the Property pursuant to §§ 551 and 554 based on his avoidance of the Mortgage. Count IV seeks an order from this court pursuant to § 105(a) to prevent the alleged abuse of the bankruptcy process by Wells Fargo or any entities related to Wells...
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In re Homaidan
...exclusive forum to hear debtor complaints regarding violations of the Bankruptcy Code." Id . See Harker v. Wells Fargo Bank, NA (In re Krause ), 414 B.R. 243, 255-56 (Bankr. S.D. Ohio 2009) (finding that "[ Section] 1334(e) must be read narrowly to limit the ‘home court’ exclusive jurisdict......
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Nyamusevya v. Internal Revenue Serv. (In re Nyamusevya)
... ... (9th Cir. 2014) ("The Debtors have identified no other ... relevant provisions of the Bankruptcy Code. We therefore ... conclude that the Debtors cannot state a claim under § ... 105(a)."); Harker v. Wells Fargo Bank, NA ... (In re Krause) , 414 B.R. 243, 263 (Bankr. S.D. Ohio ... 2009) (holding that the plaintiff failed to state a claim ... under § 105(a) because it may only "be invoked to ... preserve a right elsewhere in the Code."). The claims ... for relief asserted in the Second Amended Complaint that ... ...
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In re Homaidan
... ... at 854. But equally, ... "[Section] 1334(e) does not make the 'home ... court' the exclusive forum to hear debtor complaints ... regarding violations of the Bankruptcy Code." ... Id ... See Harker v. Wells Fargo Bank, NA ... ( In re Krause ), 414 B.R. 243, 255-56 (Bankr. S.D ... Ohio 2009) (finding that "[Section] 1334(e) must be read ... narrowly to limit the 'home court' exclusive ... jurisdiction of bankruptcy courts strictly to in rem ... matters involving property of the debtor or property of the ... ...
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In re Homaidan
...that might be available to debtors and trustees." In re Golden , 630 B.R. at 921 (quoting Krause v. Wells Fargo Bank, N.A. (In re Krause ), 414 B.R. 243, 255-56 (Bankr. S.D. Ohio 2009) ). And as this Court has previously noted, " ‘[Judiciary Code] Section 1334(b) grants subject matter juris......