In re Rojas, Case No. 07-70058 (Bankr. S.D. Tex. 8/12/2009), Case No. 07-70058.
| Decision Date | 12 August 2009 |
| Docket Number | Adversary No. 09-07003.,Case No. 07-70058. |
| Court | U.S. Bankruptcy Court — Southern District of Texas |
| Parties | IN RE: ANGEL ROJAS, et al, Chapter 13, Debtor(s). ANGEL ROJAS, et al, Plaintiff(s), v. CITI CORP TRUST BANK FSB; fka TRAVELERS BANK & TRUST, Defendant(s). |
Angel and Yanett Rojas, on behalf of a putative nationwide class, seek relief based on defendant Citicorp Trust Bank's alleged practice of filing false proofs of claim. The Rojases allege that Citi filed proofs of claim in Plaintiffs' bankruptcy cases asserting amounts for fees and costs that were not in fact incurred or warranted under Plaintiffs' mortgage contracts. Plaintiffs seek damages and declaratory and injunctive relief pursuant to the Court's § 105 power to issue orders and judgments necessary to effectuate the provisions of the Bankruptcy Code. Citi seeks dismissal of the adversary, contending that this Court lacks subject matter jurisdiction over a nationwide class action and that § 105 does not authorize the Court to issue the relief Plaintiffs seek.
The Court denies Citi's motion. Section 1334 of Title 28 of the United States Code vests district courts with subject matter jurisdiction over claims based on alleged violations of the Bankruptcy Code. Section 157 of Title 28 of the United States Code allows the District Court to refer bankruptcy matters to bankruptcy judges. Pursuant to the District Court's General Order of Reference, bankruptcy matters in this District have been referred to the bankruptcy judges of this District.
Plaintiffs' claims are core bankruptcy claims that arise under the Bankruptcy Code and could only arise in the context of a bankruptcy case. Nothing in the jurisdictional statute limits the District Court's subject matter jurisdiction (and, by extension, the matters that can be referred to the bankruptcy judges) to claims filed by debtors with bankruptcy cases pending in this District. Nor is § 105's reach as limited as Citi contends. Section 105 affords courts broad authority to issue any order or judgment necessary or appropriate to carry out the purposes of the Bankruptcy Code. An order or judgment for all or some of the relief Plaintiffs seek may be necessary or appropriate. No relief may also be appropriate. What is necessary or appropriate can only be determined after the Court has had the opportunity to consider evidence at trial. The Court only holds that it cannot dismiss Plaintiffs' claims before it knows what, if any, remedy is necessary or appropriate.
In 2000, the Rojases executed a $55,985.65 promissory note and a deed of trust in favor of Citi. The Rojases used the note proceeds to purchase their residence; the deed of trust secured the note with the residence. In February of 2007, the Rojases filed a chapter 13 bankruptcy petition. Citi timely filed a proof of claim. The proof of claim listed a principal balance owed of $53,794.92 and arrearages of $29,044.19. In addition to missed monthly payments, the arrearages included the following amounts:
The Rojases allege that most of the listed arrearage items were not owed. The Rojases allege that they repeatedly requested an explanation of the amounts from Citi and never received an adequate response. After filing an objection to Citi's proof of claim and requesting discovery, the Rojases allege that Citi's responses to discovery admitted inaccuracies and otherwise failed to explain the arrearage amounts. For example, the Rojases allege that Citi admitted that the $6,102.66 attorney fee amount actually arose from at least five different fees, including fees for title search and recording, and tax search and payment.
On February 2, 2009, the Rojases filed an adversary proceeding against Citi. The Rojases filed the adversary on behalf of a putative nationwide class consisting of: "Individual debtors who filed for protection under the United States Bankruptcy Code after January 1, 1999, and in which Citicorp filed a proof of claim."
The Rojases allege that Citi's conduct violates §§ 501 and 502 of the Bankruptcy Code and Rule 3001 of the Federal Rules of Bankruptcy Procedure. Sections 501 and 502 and Rule 3001 provide for the manner in which proofs of claim must be filed and when claims must be allowed or disallowed. Plaintiffs seek actual and punitive damages, legal fees, and declaratory and injunctive relief based on the Court's § 105 power.
On March 13, 2009, Citi filed a motion to dismiss. The motion to dismiss argues that this Court lacks the authority to adjudicate the Rojases' complaint and issue the remedies the Rojases seek. Citi alleges that this Court lacks subject matter jurisdiction over a nationwide class of debtors who have or had bankruptcy cases in courts around the country. Citi also alleges that nothing in the Bankruptcy Code, including § 105, authorizes the Rojases to bring this lawsuit. Instead, Citi alleges that the putative classes' remedy is limited to contempt sanctions under Rule 9011 and each putative class member can only seek contempt sanctions individually and before the court in which the separate bankruptcy petitions were filed.
Plaintiffs' class action is one of four class actions filed by debtors against mortgage lenders in the McAllen and Brownsville divisions of the Southern District of Texas. Many of the same attorneys have represented the plaintiff classes and mortgage lender defendants. The Court has issued lengthy memorandum opinions and reports and recommendations in the other class actions. Citi's motion to dismiss largely asserts the same arguments this Court has resolved in its prior rulings. With one exception, Citi's briefs did not present arguments or cases not previously considered in the prior rulings.
During the April 20, 2009 hearing, the parties agreed that the Court's prior rulings considered all but one issue raised in Citi's motion. Accordingly, the Court denies the bulk of Citi's motion based on its prior rulings. Cano v. GMAC Mortgage Corp. (In re Cano), Case No. 02-70359, Adv. No. 08-07019 (Bankr. S.D. Tex. August 10, 2009); Rodriguez v. Countrywide Home Loans, Inc. (In re Rodriguez), 396 B.R. 436 (Bankr. S.D. Tex. 2008); Padilla v. Wells Fargo Home Mortgage, Inc. (In re Padilla), 379 B.R. 643 (Bankr. S.D. Tex. 2007).
The Court does note a significant distinction between the Rojases' claims and claims presented by Plaintiffs in the GMAC case. In GMAC, the Court dismissed Plaintiffs' claims under chapter 13 of the Bankruptcy Code. Cano v. GMAC Mortgage Corp. (In re Cano), Case No. 02-70359, Adv. No. 08-07019 (Bankr. S.D. Tex. August 10, 2009). The Court noted that the chapter 13 provisions are permissive provisions that provide what a debtor can put in a plan. The provisions have no effect prior to plan confirmation. Rights only arise from the provisions after the court has issued an order confirming a plan that incorporates those rights. Ultimately, the court order gives rise to the rights.
Section 502, unlike chapter 13 provisions, creates a right independent of a court order. Under § 502, a claim filed pursuant to § 501 and Rule 3001 is deemed allowed upon filing. In re Today's Destiny, Inc., 2008 WL 5479109 (Bankr. S.D. Tex. Nov. 26, 2008). Upon filing, the claim creates a right to payment from the bankruptcy estate. In most instances, the court never issues an order allowing the claim. Accordingly, filing a false proof of claim in contravention of § 501 and Rule 3001 would constitute an abuse of process. Just as the Court must enforce Rule 2016 to ensure compliance with court orders confirming plans and the Code provisions incorporated by the plans, the Court must also enforce the Code provisions and Rules governing filing proofs of claim to prevent an abuse of process.
The Court now considers whether § 105 authorizes this Court to afford the relief sought by the Rojases.
The Court has jurisdiction over this matter pursuant to 28 U.S.C. § 1334. Venue is proper in this District pursuant to 28 U.S.C. § 1409. This is a core proceeding under § 157(b)(2).
Under Federal Rule of Civil Procedure 12(b)(6), a court may dismiss a complaint for "failure to state a claim upon which relief can be granted." FED. R. CIV. P. 12(b)(6). The issue in a 12(b)(6) motion is whether a plaintiff is entitled to offer evidence to support his claim. Scheuer v. Rhodes, 416 U.S. 232, 236, 94 S. Ct. 1683, 40 L. Ed. 2d 90 (1974), overruled on other grounds, Davis v. Scherer, 468 U.S. 183, S. Ct. 3012, 82 L. Ed. 2d 139 (1984). The Court must determine, "in the light most favorable to the plaintiff, whether the complaint states any valid claim for relief." Cinel v. Connick, 15 F.3d 1338, 1341 (5th Cir. 1994). All facts plead must be specific, not merely conclusory. Guidry v. Bank of LaPlace, 954 F.2d 278, 281 (5th Cir. 1992). All well-pleaded allegations contained in the plaintiff's complaint must be accepted by the court as true. Albright v. Oliver, 510 U.S. 266, 268, 114 S. Ct. 807, 127 L. Ed. 2d 114 (1994). A plaintiff needs to plead "only enough facts to state a claim to relief that is plausible on its face." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570, 127 S. Ct. 1955, 167 L. Ed. 2d 929 (2007).
The Supreme Court recently further clarified a plaintiff's pleading requirement. Ashcroft v. Iqbal, 129 S. Ct. 1937, 173 L. Ed. 2d 868 (2009). The Court noted two principles courts should follow when evaluating a pleading. "First, the tenet that a court must accept as true all of the allegations contained in a complaint is...
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