Johnson v. Wells Fargo Bank, N.A. (In re Johnson)
| Decision Date | 22 August 2014 |
| Docket Number | Adv. Pro. No. 13-01445,Case No. 09-49420 |
| Court | United States Bankruptcy Courts. Second Circuit. U.S. Bankruptcy Court — Eastern District of New York |
| Parties | In re: VAN E. JOHNSON, Debtor. VAN E. JOHNSON Plaintiff, v. WELLS FARGO BANK, N.A. d/b/a AMERICA'S SERVICING COMPANY, BANK OF AMERICA, NATIONAL ASSOCIATION as Trustee for MORGAN STANLEY TRUST 2006-6AR, MORGAN STANLEY CAPITAL 1 INC., A DELAWARE CORPORATION, as Depositor, MORGAN STANLEY & CO. as Underwriter, MORGAN STANLEY MORTGAGE CAPITAL INC., as Seller, IDEAL MORTGAGE BANKERS d/b/a LEND AMERICA, KR MANAGEMENT LLC & MALCO REAL ESTATE INC., and JOHN AND JANE DOES 1 THROUGH 10, Defendants. |
Appearances:
Karamvir Dahiya, Esq.
Dahiya Law Offices, LLC
75 Maiden Lane
Suite 506
New York, NY 10038
Brian J. Grieco, Esq.
Jonathan E. Samon, Esq.
N.A. d/b/a America's Servicing
Company and Bank of America,
National Association as Trustee for
Mary Gail Gearns, Esq.
David M Marcus, Esq.
Colleen J O'Loughlin, Esq.
Bingham McCutchen LLP
399 Park Avenue
New York, NY 10022
Attorneys for Morgan Stanley
Capital 1 Inc., a Delaware
Corporation, as Depositor, Morgan
Stanley & Co. as Underwriter, and
Morgan Stanley Mortgage Capital
This adversary proceeding was commenced by Van E. Johnson, the debtor in this Chapter 13 case, against defendants Wells Fargo Bank, N.A. d/b/a America's Servicing Company ("Wells Fargo"); Bank of America, National Association as Trustee for Morgan Stanley Trust 2006-6AR ("Bank of America"); Morgan Stanley Capital I Inc., Morgan Stanley & Co. LLC, and Morgan Stanley Mortgage Capital Inc. (together, "Morgan Stanley"); Ideal Mortgage Bankers d/b/a Lend America ("Lend America"); KR Management and Malco Real Estate Inc. ("KR Management"); and John and Jane Does 1 through 10 (together, the "Defendants").
Johnson's claims arise out of a loan and mortgage that he entered into in connection with purchasing his home in January 2006. He alleges that Lend America, the originator of the loan, made misrepresentations during the loan originating process as part of a larger scheme designed to extend credit on unfavorable terms to African-American borrowers. In addition to Lend America, Johnson names as defendants Wells Fargo and Bank of America, the mortgage servicing agents and creditors in his bankruptcy case; Morgan Stanley, which allegedly enabled Lend America's discriminatory credit policies by purchasing and funding loans originated by Lend America in the secondary mortgage market; and KR Management, the mortgage broker.
Johnson attempts to assert several claims, and seeks relief in several forms. He alleges violations of Section 6-l of New York State's Banking Law, which prohibits certain abusive loan practices. He also seeks relief under the federal Fair Housing Act, 42 U.S.C. §§ 3601-19 ("FHA"); the Equal Credit Opportunity Act, 15 U.S.C. § 1691 ("ECOA"); and the Civil Rights Act, 42 U.S.C. §§ 1981 and 1982. Johnson seeks a declaratory judgment that the Defendants violated Section 6-l of the New York Banking Law, a judgment that his home loan is void underNew York Banking Law, a declaratory judgment that the Defendants violated the FHA, the ECOA, and the Civil Rights Act, return of all the payments he made under his home loan, rescission of the home loan, avoidance of the lien on his residence, legal fees, actual and punitive damages, and restitution. He also seeks an order disallowing Wells Fargo's proof of claim.
Defendants Wells Fargo, Bank of America, and Morgan Stanley (together, the "Moving Defendants"), move to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6), made applicable here by Federal Rule of Bankruptcy Procedure 7012, on several grounds. They argue that Johnson's causes of action are barred by the applicable statutes of limitations and that Johnson does not set forth factual allegations that support a plausible claim for relief. Wells Fargo and Bank of America also assert that Johnson's objection to the proof of claim is untimely.
This adversary proceeding, two prior adversary proceedings, and Johnson's Chapter 13 bankruptcy case have followed a long path in this Court. Certain of those proceedings provide some context for the issues presented by these motions to dismiss, as follows.
On October 27, 2009, Johnson commenced a case under Chapter 13 of the Bankruptcy Code, and on November 25, 2009, Johnson filed his first Chapter 13 plan. On December 30, 2009, America's Servicing Company filed a proof of claim on behalf of Bank of America for $288,794.92, and on January 5, 2010, Bank of America objected to confirmation of Johnson's Chapter 13 plan.
On June 13, 2010, Johnson commenced an adversary proceeding (the "First Adversary Proceeding") (Case No. 10-01138) against ten defendants, including America's Servicing Company, Bank of America, Lend America, KR Management, and others, alleging violations ofthe FHA, the ECOA, the Truth in Lending Act, the Civil Rights Act, and New York State's General Business Laws, among other causes of action.
On January 6, 2011, Johnson filed his fourth Chapter 13 plan, and on January 19, 2011, Bank of America withdrew its objection to confirmation. Soon thereafter, on February 16, 2011, Johnson filed an objection to Bank of America's proof of claim. On March 17, 2011, the Court directed Johnson and Bank of America, on consent, to participate in the Court's loss mitigation program, to see if the parties could agree on the terms of a consensual loan modification. No agreement was reached, and on October 28, 2011, the loss mitigation period was terminated. On November 1, 2011, in connection with resolving Johnson's objection to Bank of America's proof of claim, the Court directed Bank of America, again on consent, to file an amended proof of claim.
On August 13, 2012, this Court dismissed the First Adversary Proceeding without prejudice in response to Johnson's letter request that it be dismissed and this Court's order to show cause why the case should not be dismissed. On August 29, 2012, Johnson filed his ninth Chapter 13 plan and on September 18, 2012, without objection, this Court confirmed that Chapter 13 plan.
But confirmation of Johnson's Chapter 13 plan did not bring closure to his dispute with the Defendants. Nine days later, on September 27, 2012, Johnson filed another adversary proceeding (the "Second Adversary Proceeding") (Case No. 12-01282) against America's Servicing Company, Bank of America, Lend America, Ideal Mortgage Bankers, and John and Jane Does 1 through 10, alleging violations of Section 6-l of the New York Banking Law and objecting to the proof of claim. On March 5, 2013, this Court dismissed the Second AdversaryProceeding, again on consent and without prejudice, and with leave to replead an amended complaint by March 19, 2013. No amended complaint was filed, and the Second Adversary Proceeding was closed on July 11, 2013.
More than five months after the deadline to replead had passed, on August 27, 2013, Johnson commenced this Adversary Proceeding and on October 4, 2013, Johnson filed an amended complaint. That complaint is the operative complaint for the purposes of these motions to dismiss.
On November 11, 2013, Wells Fargo filed an amended proof of claim for $352,447.77 and attached an affidavit in support of Wells Fargo's standing, as holder of the note and mortgage, to file a proof of claim.
On November 6, 2013, Wells Fargo and Bank of America jointly filed a motion to dismiss, and on January 15, 2014, Morgan Stanley filed a motion to dismiss. To date, no other defendants have responded to the Amended Complaint.
Johnson alleges that sometime in 2006, he contacted KR Management about obtaining a home loan. He also alleges that he was able to make only a small down payment and had limited income, but was nevertheless approved. Johnson took out a loan originated by Lend America to purchase a home at 128 Howard Avenue in Brooklyn. The Amended Complaint states that instead of working within Johnson's financial constraints, Lend America artificially inflated the purchase price of the home and encouraged Johnson to take out a second loan and mortgage secured by the property. In this way, Johnson avers, the second mortgage proceeds could be used as a down payment on the first mortgage, so that the first mortgage would meet federalhousing guidelines and be marketable in the secondary mortgage market. Johnson alleges that Lend America perpetrated a similar scheme on many of its borrowers, and that a disproportionate number of mortgage loans originated by Lend America were made to minority borrowers, especially African-Americans.
Johnson alleges that Morgan Stanley is liable because it authorized Lend America to accept mortgage applications on its behalf, quote financing rates, inform credit applicants of Morgan Stanley's financing options and originate loans according to Morgan Stanley's credit policies. Johnson alleges that Wells Fargo and Bank of America are liable as assignees of the loan and because Lend America originated loans in reliance on their credit policies.
"Congress has divided bankruptcy proceedings into three categories: those that 'aris[e] under title 11'; those that 'aris[e] in' a Title 11 case; and those that are 'related to a case under title 11.'" Stern v. Marshall, 131 S. Ct. 2594, 2603 (2011) (citing 28 U.S.C. § 157(a)) (alterations in original).
The district courts have original, but not exclusive, jurisdiction over all cases "arising under" the Bankruptcy Code or "arising in or related to" cases under the Bankruptcy Code. 28 U.S.C. § 1334(b). "[A] proceeding is related to a case under the ...
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