Jones v. Nationstar Mortg., LLC (In re Jones), Case # 13–10734

CourtUnited States Bankruptcy Courts. Second Circuit. U.S. Bankruptcy Court —District of Vermont
Writing for the CourtColleen A. Brown, United States Bankruptcy Judge
Citation534 B.R. 588
PartiesIn re: Douglas Richard Jones and Sandy Lee Jones, Debtors. Douglas Richard Jones and Sandy Lee Jones, Plaintiffs, v. Nationstar Mortgage, LLC, Defendant.
Decision Date23 July 2015
Docket NumberAdversary Proceeding # 13–1019,Case # 13–10734

534 B.R. 588

In re: Douglas Richard Jones and Sandy Lee Jones, Debtors.

Douglas Richard Jones and Sandy Lee Jones, Plaintiffs
v.
Nationstar Mortgage, LLC, Defendant.

Case # 13–10734
Adversary Proceeding # 13–1019

United States Bankruptcy Court, D. Vermont.

Signed July 23, 2015


534 B.R. 591

Rebecca A. Rice, Esq., Rutland, Vermont, for the Plaintiffs

Grant C. Rees, Esq., Lobe, Fortin, and Rees, PLC, South Burlington, Vermont, for the Defendant

MEMORANDUM OF DECISION

Granting in Part Each of the Cross Motions for Summary Judgment and Determining Amount and Classification of the Defendant's Claim

Colleen A. Brown, United States Bankruptcy Judge

Douglas and Sandy Jones, as husband and wife, own real property in Sharon, Vermont, which they occupy as their homestead. That homestead property is subject to a mortgage held by Nationstar Mortgage, LLC. Mr. and Mrs. Jones commenced this proceeding to obtain a declaration that the Nationstar mortgage is unenforceable. The parties have stipulated the mortgage does not satisfy the statutory requirements of Vermont law. However, Nationstar asserts that, notwithstanding the legal defect in its mortgage, the equities weigh in its favor and the mortgage should be declared valid on equitable grounds. Each party has filed a motion for summary judgment asserting there are no material facts in dispute and they are entitled to judgment, based upon the controlling law and applicable equitable principles.

For the reasons set forth below, the Court finds there are no material facts in dispute, summary judgment is proper and, based upon the equities presented, the record warrants entry of judgment that (i) subrogates Nationstar to the extent of the amount of the mortgage and property taxes Nationstar paid on behalf of Mr. and Mrs. Jones, (ii) allows that portion of Nationstar's claim as secured, (iii) grants Nationstar an equitable lien for a portion of its remaining claim, (iv) allows that portion of Nationstar's claim as secured, and (v) allows the balance of Nationstar's claim as a general unsecured claim.

Jurisdiction

This Court has jurisdiction over this adversary proceeding pursuant to 28 U.S.C. §§ 157 and 1334, and the Amended Order of Reference entered in this District on June 22, 2012. The Court declares the claims presented by these cross motions for summary judgment are core matters under 28 U.S.C. §§ 157(b)(2)(B) and (K), over which this Court has constitutional authority to enter a final judgment.

534 B.R. 592

Procedural History

On October 21, 2013, Douglas and Sandy Jones (the “Plaintiffs”) filed a petition for relief under Chapter 13 of the Bankruptcy Code (doc. # 1 in main case # 13–10734). The Plaintiffs commenced this adversary proceeding with the filing of a complaint on December 9, 2013 (the “Complaint”) (doc. # 1 in adversary proceeding # 13–1019)1 challenging the validity of the mortgage held by Nationstar Mortgage, LLC (the “Defendant”). On January 7, 2014, the Defendant filed an answer to the Complaint (the “Answer”). On November 14, 2014, the parties each filed a motion for summary judgment (doc. # 21, the “Defendant's MSJ” and doc. # 22, the “Plaintiffs' MSJ”), as well as a joint statement of undisputed material facts (doc. # 21–2, the “SUMF”). The Plaintiffs filed an objection to Defendant's MSJ on December 5, 2014 (doc. # 23) (the “Plaintiffs' Objection”).2

Thereafter, pursuant to the Court's directive to file supplemental memoranda to clarify the parties' positions on the applicability of the state and federal equitable doctrines of unjust enrichment, the Defendant filed a supplement to its MSJ (doc. # 26), the Plaintiffs filed a response to that supplement (doc. # 28) and the Defendant filed a reply (doc. # 29). The cross motions for summary judgment are fully submitted.

Issues Presented

The cross motions for summary judgment raise two issues. The first issue is whether the facts and circumstances warrant granting the Defendant relief based upon the doctrine of equitable subrogation, and if so, the amount of the Defendant's subrogated claim. The second issue is whether the pertinent facts and circumstances weigh in favor of granting the Defendant additional relief based upon the equitable doctrine of unjust enrichment. Resolution of these issues will enable the Court to classify and fix the amount of the Defendant's allowed claim in the Plaintiffs' bankruptcy case.

Undisputed Material Facts

The parties have stipulated to the following facts, which the Court finds to be material and undisputed:

1. Debtor, Douglas Jones, in his sole name, acquired real property located at 3600 Faybrook Road in Sharon, Vermont (hereafter the “Property”) by quitclaim deed from Everett Jones, Jr. and Scott Jones that was dated February 13, 1996, and properly recorded on February 22, 1996. (¶ 1, SUMF)
2. Judy Jones, Douglas Jones' former spouse, executed a quitclaim deed to the Property in favor of Douglas Jones that was dated February 27, 1998, and properly recorded on March 19, 1998. (¶ 2, SUMF)
3. Douglas Jones and Sandy Jones were married on July 21, 1999. (¶ 3, SUMF)
4. Since 1999, the Plaintiffs have occupied the Property as their principal
534 B.R. 593
dwelling place and homestead. (¶¶ 4–5, SUMF)
5. On April 16, 2007, as part of a refinance, Douglas Jones executed a promissory note in the original principal amount of $149,607.50 in favor of the Defendant (the “Promissory Note”). (¶ 9, SUMF)
6. On April 16, 2007, Douglas Jones executed a mortgage deed in favor of the Defendant to secure the Promissory Note (the “Mortgage”). (¶ 10, SUMF)
7. At closing the proceeds of the refinance were distributed as follows:
a. $74,788.31 was used to satisfy a first mortgage interest in the Property in favor of Select Portfolio Servicing (“SPS”);
b. $2,769.95 was used to pay all delinquent property taxes owed to the Town of Sharon;
c. $18,343.00 was used to satisfy a VW Credit secured debt, incurred to purchase (and secured by) a John Deere tractor;
d. $9,711.00 was used to satisfy a Citifinancial secured debt, incurred to purchase (and secured by) a 2004 Ford Explorer;
e. $14,825.00 was used to satisfy a Green Tree Servicing secured debt, incurred to purchase (and secured by) a mobile home;
f. $14,762.67 was used to satisfy various unsecured debts, including credit card obligations; and
g. the balance of $14,407.57 was retained by the Plaintiffs. (¶ 13, SUMF)
8. When Douglas Jones applied for the instant mortgage loan, he indicated on the application both that he would hold title to the Property as “single” and that he was currently married. (¶ 18, SUMF)
9. That loan application also indicated the purpose of the loan was to refinance the debt encumbering his primary residence. (¶ 19, SUMF)
10. Sandy Jones did not execute the Promissory Note or the Mortgage. (¶¶ 11–12, SUMF)
11. The Property was appraised by a residential appraiser as having a value as of February 25, 2014, of $146,000. (¶ 6, SUMF)
12. The Defendant filed an amended proof of claim on March 19, 2015 (claim # 13 in the main case) asserting a secured claim in the amount of $153,359.70.

Discussion

A. Summary Judgment Standard

Summary judgment is proper if the record shows no genuine issue as to any material fact such that the moving party is entitled to judgment as a matter of law. See Fed. R. Civ. P. 56 ; Fed. R. Bankr. P. 7056 ; see also Bronx Household of Faith v. Bd. of Educ. of the City of New York, 492 F.3d 89, 96 (2d Cir.2007). The moving party bears the burden of showing there is no genuine issue of material fact. See Vermont Teddy Bear Co. v. 1–800 Beargram Co., 373 F.3d 241, 244 (2d Cir.2004). A genuine issue exists only when “the evidence is such that a reasonable [trier of fact] could return a verdict for the nonmoving party.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986) ; see also Celotex Corp. v. Catrett, 477 U.S. 317, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). In making its determination, the court's sole function is to determine whether there is any material dispute of fact that requires a trial. Anderson, 477 U.S. at 249, 106 S.Ct. 2505 ; see...

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2 practice notes
  • In re Ampal-American Isr. Corp., Case No. 12–13689 SMB
    • United States
    • United States Bankruptcy Courts. Second Circuit. U.S. Bankruptcy Court — Southern District of New York
    • July 27, 2015
    ...approve that application. While it may be easy to err on the side of disqualification in what may appear to some to be a close case, the 534 B.R. 588bankruptcy court presiding over the case is in the best position to assess the surrounding circumstances and consider the interests of the est......
  • Rubino v. Deutsche Bank Nat'l Trust Co. (In re Rubino), Case # 08-11041
    • United States
    • United States Bankruptcy Courts. Second Circuit. U.S. Bankruptcy Court —District of Vermont
    • March 4, 2016
    ...(3) the subrogee must have paid the entire debt, and (4) the subrogation must not work any injustice to the rights of others. In re Jones, 534 B.R. 588, 596-597 (Bankr. D. Vt. 2015). The undisputed material facts pertinent to this inquiry are:6. In 2004, in connection with their purchase of......
2 cases
  • In re Ampal-American Isr. Corp., Case No. 12–13689 SMB
    • United States
    • United States Bankruptcy Courts. Second Circuit. U.S. Bankruptcy Court — Southern District of New York
    • July 27, 2015
    ...approve that application. While it may be easy to err on the side of disqualification in what may appear to some to be a close case, the 534 B.R. 588bankruptcy court presiding over the case is in the best position to assess the surrounding circumstances and consider the interests of the est......
  • Rubino v. Deutsche Bank Nat'l Trust Co. (In re Rubino), Case # 08-11041
    • United States
    • United States Bankruptcy Courts. Second Circuit. U.S. Bankruptcy Court —District of Vermont
    • March 4, 2016
    ...(3) the subrogee must have paid the entire debt, and (4) the subrogation must not work any injustice to the rights of others. In re Jones, 534 B.R. 588, 596-597 (Bankr. D. Vt. 2015). The undisputed material facts pertinent to this inquiry are:6. In 2004, in connection with their purchase of......

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