Meyer v. Wells Fargo Bank, N.A. (In re Meyer)

• Decision Date: 04 April 2018
• Docket Number: Case Number: 1-12-bk-04042-RNO,Adversary Number: 1-17-ap-00138-RNO
• Parties: IN RE: ALLEN J. MEYER Debtor(s) ALLEN J. MEYER Plaintiff(s) v. WELLS FARGO BANK, N.A., WILMINGTON SAVINGS FUND SOCIETY, FSB, doing business as Christiana Trust, not in its individual Capacity, but solely as trustee for BCAT 2015-13BTT, and SELENE FINANCE, LP Defendant(s)
• Court: U.S. Bankruptcy Court — Middle District of Pennsylvania

IN RE: ALLEN J. MEYER Debtor(s)ALLEN J. MEYER Plaintiff(s) v. WELLS FARGO BANK, N.A., WILMINGTON SAVINGS FUND SOCIETY, FSB,doing business as Christiana Trust, not in its individual Capacity, but solelyas trustee for BCAT 2015-13BTT, and SELENE FINANCE, LP Defendant(s)

Case Number: 1-12-bk-04042-RNO

Adversary Number: 1-17-ap-00138-RNO

UNITED STATES BANKRUPTCY COURT FOR THE MIDDLE DISTRICT OF PENNSYLVANIA

April 4, 2018

Chapter: 13

Document No.: 14 & 15

Nature of Proceeding: Motion to Dismiss Adversary Proceeding

OPINION¹

Allen J. Meyer ("Debtor") filed a two-count Complaint seeking sanctions for alleged noncompliance with Federal Rule of Bankruptcy Procedure 3002.1 and violations of the discharge injunction. In separation motions, all of the Defendants moved to dismiss the Complaint. I will grant Wells Fargo Bank, N.A.'s ("Wells Fargo") Motion to Dismiss as to Counts I and II. The Motion to Dismiss filed by Wilmington Savings Fund Society, FSB, Doing Business as Christiana Trust ("Wilmington") and Selene Finance, LP ("Selene") will be denied as to Counts I and II.

I. Jurisdiction

This Court has jurisdiction over this matter pursuant to 28 U.S.C. §§ 157 and 1334. This is a core proceeding under 28 U.S.C. § 157(b)(2)(B).

II. Facts and Procedural History

The Debtor filed a voluntary Chapter 13 petition on July 10, 2012, and received a Chapter 13 discharge on April 19, 2017. Upon motion of the Debtor, the case was reopened on July 25, 2017, to commence this adversary proceeding against Wells Fargo, Wilmington, and Selene. The Debtor filed a Complaint on August 5, 2017, alleging in Count I that Defendants failed to file and serve notices of fees, expenses, and charges in violation of Rule 3002.1(c) and seeking sanctions under Rule 3002.1(i). The Debtor further alleges in Count II that Defendants violated the discharge injunction pursuant to 11 U.S.C. § 524(a)² and § 105 by seeking to collect fees, expenses, and charges post-discharge for which required notices were not filed.

The alleged noncompliance with Rule 3002.1 relates to a secured claim against real property. On November 15, 2012, Wells Fargo filed Proof of Claim No. 7-1, stating that it held a secured claim for $135,714.43, with arrearages of $42,080.82 against real property located at 959 Sunny Hill Lane, Harrisburg, PA 17111 ("real property"). On September 8, 2015, the claim was transferred from Wells Fargo to Wilmington. The Transfer of Claim lists Selene as the mortgage loan servicer for Wilmington.

On September 21, 2017, Wilmington and Selene moved to dismiss the Complaint ("Wilmington's Motion to Dismiss") with prejudice for lack of subject matter jurisdiction and for failure to state claims upon which relief can be granted. Mot. of Def. Wilmington SavingsFund Society, FSB, Doing Business as Christiana Trust, Not in its Individual Capacity, but Solely as Trustee for BCAT 2015-13BTT, and Def. Selene Finance, LP, to Dismiss Pl.'s Adversary Compl. ("Wilmington's Motion to Dismiss") ¶ 22, ECF No. 14. They further argue that relief is barred under the doctrines of res judicata, estoppel, and waiver, and request an award of counsel fees. Wilmington's Motion to Dismiss 5, ECF No. 14.

On September 21, 2017, Wells Fargo also moved to dismiss the Complaint ("Wells Fargo's Motion to Dismiss"), with prejudice, for failure to state claims upon which relief can be granted. The Debtor withdrew Count II of the Complaint as to Wells Fargo in open court during a hearing held on November 16, 2017, acknowledging in its Brief opposing Wells Fargo's Motion to Dismiss that "Plaintiff concedes that Defendant, Wells Fargo, has engaged in no conduct post-discharge in violation of the discharge injunction." Br. of Pl. Opposing Mot. of Def. Wells Fargo Bank, N.A. to Dismiss Pl.'s Compl. Pursuant to Fed. R. Civ. P. 12(b)(6) and Fed. R. Bank. P. 7012 ("Plaintiff's Brief Opposing Wells Fargo") 9, ECF No. 20; Tr. of Mot. of Selene Finance Wilmington Savings Fund Society to Dismiss Adversary Proceeding ("Transcript") 4, Nov. 16, 2017, ECF No. 26. I will therefore only consider in this opinion Wells Fargo's Motion to Dismiss regarding Count I of the Complaint.

Briefs have been filed in support of, and in opposition to, the Motions to Dismiss. A hearing was held on November 16, 2017, at which time the parties presented oral argument. The Motions to Dismiss are now ripe for decision.

III. Discussion

A. Subject Matter Jurisdiction under F.R.B.P. 7012(b)(1)

Wilmington and Selene argue that this Court lacks subject matter jurisdiction on two bases: that the outcome of this proceeding would have no effect on the estate and that under the Rooker-Feldman doctrine, this Court is barred from reviewing a state-court judgment.

Federal Rule of Civil Procedure 12(b)(1), made applicable to adversary proceedings by Federal Rule of Bankruptcy Procedure 7012(b), requires dismissal if a bankruptcy court lacks subject-matter jurisdiction. The burden is on the plaintiff to prove that jurisdiction exists. Mortensen v. First Fed. Sav. and Loan Ass'n, 549 F.2d 884, 891 (3d Cir. 1977). A court may dismiss an action for lack of subject matter jurisdiction at any time. Fed. R. Bankr. P. 7012(h)(3).

Subject matter jurisdiction can be attacked by a facial or factual challenge. Gould Electronics Inc. v. U.S., 220 F.3d 169, 176 (3d Cir. 2000). A facial attack challenges the sufficiency of the pleadings, and the court must accept the allegations in a complaint as true. Com. Cause of Pennsylvania v. Pennsylvania, 558 F.3d 249, 257 (3d Cir. 2009) (citing Taliaferro v. Darby Twp. Zoning Bd., 458 F.3d 181, 188 (3d Cir.2006)). When considering a facial attack, a court must consider only the allegations of the complaint and attached or referenced documents, in a light most favorable to the plaintiff. Gould Electronics Inc. 220 F.3d at 176; see also In re Kaiser Group Intern. Inc., 399 F.3d 558, 561 (3d Cir. 2005). In contrast, when a factual challenge is brought, a defendant is arguing that "the allegations on which jurisdiction depends are not true as a matter of fact." Cunningham v. Lenape Regl. High Dist. Bd. of Educ., 492 F. Supp. 2d 439, 447 (D.N.J. 2007). In reviewing a factual attack, the court may consider evidence outside the pleadings. Gould Electronics Inc. 220 F.3d at 176. I viewWilmington and Selene's Motion to Dismiss as a facial attack and will therefore view facts pled in the Complaint in the light most favorable to the Debtor, the non-moving party.

i. Core Matters

Wilmington and Selene argue that there is no bankruptcy estate because a discharge was entered in the case before it was reopened, and the outcome of this proceeding would therefore not affect a non-existent estate. Mem. Of Law in Supp. of Mot. of Def. Wilmington Savings Fund Society, FSB, Doing Business as Christiana Trust, Not in its Individual Capacity, but Solely as Trustee for BCAT 2015-13BTT, and Def. Selene Finance, LP, to Dismiss Pl.'s Adversary Compl. ("Wilmington's Memorandum") 3, ECF No. 14-1. Wilmington and Selene further argue that the subject property has since been sold and the mortgage has been paid off, therefore the outcome of this proceeding would allegedly have no effect on the estate. Wilmington's Memorandum 3, ECF No. 14-1.

Count I of the Complaint is a request for sanctions under Rule 3002.1 and Count II requests a determination that Defendants willfully violated the discharge injunction pursuant to 11 U.S.C. § 524(a) and § 105. Rule 3002.1 is a bankruptcy rule applicable in chapter 13 cases. In re Carr, 468 B.R. 806, 808 (Bankr. E.D.Va. 2012) ("The Purpose of Rule 3002.1 was the provide a prompt, efficient, and cost-effective means to determine whether there is a question as to the status of a debtor's home loan at the conclusion of the chapter 13 case."). Pursuant to 28 U.S.C. § 1334(b), for jurisdiction to exist a proceeding must be related to, or arise in, a bankruptcy case or arise under title 11. In re Davenport, 544 B.R. 245, 252 (Bankr. D.C. 2015) (citing Pacor, Inc. v. Higgins, 743 F.2d 984, 994 (3d Cir. 1984)).

In In re Guild and Gallery Plus, Inc., the Third Circuit discussed core versus non-core proceedings:

28 U.S.C. § 157(b)(1) provides that "Bankruptcy judges may hear and determine all cases under title 11 and all core proceedings arising under title 11, or arising in a case under title 11...." Section 157(b)(2) sets forth a nonexhaustive listing of core proceedings.

. . .

Our circuit precedents have "held that a proceeding is core under section 157 if it invokes a substantive right provided by title 11 or if it is a proceeding that, by its nature, could arise only in the context of a bankruptcy case." In re Marcus Hook Dev. Park Inc., 943 F.2d 261, 267 (3d Cir.1991) (citations and internal quotation marks omitted). In support of its ruling that this case was a core proceeding, the bankruptcy court relied, inter alia, on the decision of the Court of Appeals for the Fifth Circuit in In re Wood, 825 F.2d 90 (5th Cir.1987), which observed that

the phrases "arising under" and "arising in" are helpful indicators of the meaning of core proceedings. If the proceeding involves a right created by the federal bankruptcy law, it is a core proceeding; for example, an action by the trustee to avoid a preference. If the proceeding is one that would arise only in bankruptcy, it is also a core proceeding; for example, the filing of a proof of claim or an objection to the discharge of a particular debt. If the proceeding does not invoke a substantive right created by the federal bankruptcy law and is one that could exist outside of bankruptcy it is not a core proceeding; it may be related to the bankruptcy because of its potential effect, but under section 157(c)(1) it is an "otherwise related" or non-core proceeding.

Id. at 97.

72 F.3d 1171, 1176-79 (3d Cir. 1996). A claim for sanctions under Rule 3002.1 is a core proceeding because it is matter that would only arise in a bankruptcy case. In re Exide Technologies, 544 F.3d 196, 206...