Osuji v. Fed. Nat'l Mortg. Ass'n

• Decision Date: 17 July 2017
• Docket Number: No. 16–CV–5018 (JFB),16–CV–5018 (JFB)
• Citation: 571 B.R. 518
• Parties: Samuel OSUJI, Appellant, v. FEDERAL NATIONAL MORTGAGE ASSOCIATION and JP Morgan Chase Bank, N.A., Appellees.
• Court: U.S. District Court — Eastern District of New York

571 B.R. 518

Samuel OSUJI, Appellant,

v.FEDERAL NATIONAL MORTGAGE ASSOCIATION and JP Morgan Chase Bank, N.A., Appellees.

No. 16–CV–5018 (JFB)

United States District Court, E.D. New York.

Signed July 17, 2017

Appellant is represented by Oleg Vinnitsky, Island North Tower Professional Co-op, 575 Main Street, Suit # N–711, Roosevelt Island, NY 10044.

Appellees are represented by Brian W. Keatts, Parker Ibrahim & Berg LLC, 270 Davidson Avenue, 5^th Floor, Somerset, NJ 08873, and Ronal C. Owens, TD Bank, N.A., 3000 Atrium Way, Suit 400, Mount Laurel, NJ 08054.

MEMORANDUM AND ORDER

Joseph F. Bianco, District Judge:

Samual Osuji ("appellant" or "Mr. Osuji") appeals from the Bankruptcy Court's ruling in which it permissibly abstained from the proceeding and held, in the alternative, that the Rooker–Feldman doctrine barred appellant's lawsuit. Because the Court concludes that the Bankruptcy Court clearly did not abuse its discretion in permissively abstaining from the proceeding, the ruling below is affirmed.

I. BACKGROUND

The Court assumes the parties' familiarity with the full facts and procedural history of this action and summarizes the facts and history relevant to the instant appeal based on the Bankruptcy Record on Appeal ("R.," ECF Nos. 3–2 to 3–5).¹

A. The State Court Foreclosure Action

This case originates from a note executed by Christine Phillips–Osuji ("Mrs. Osuji") for $296,000 in favor of appellee JP Morgan Chase Bank ("Chase") (R. at 672–74), secured by a mortgage on property located at 95 Angevine Avenue, Hempstead, New York 11550 (the "Property") (id. at 676–94). Appellant signed neither document. (Id. at 674, 693.) Appellee Federal National Mortgage Association ("Fannie Mae," and collectively with Chase, "appellees") was the original investor in the note and mortgage (collectively, the "loan"), and Chase was its servicer. (Id. at 669 ¶ 4.)

On June 17, 2011, Chase commenced a foreclosure proceeding (the "Foreclosure Action") against Mrs. Osuji in state court after she defaulted on the loan. (Id. at 391–435, 1096.) Someone filed an answer and motion to strike the foreclosure complaint purportedly on behalf of Mrs. Osuji and appellant as " ‘John DOE’ # 1 and parties in interest."² (Id. at 437–98, 500–18.) The state court denied the motion to strike. (Id. at 524.)

Appellant moved to intervene in the Foreclosure Action on June 4, 2012 (id. at 526–31), but the court denied the motion by order dated October 15, 2012 (id. at 533–34). Afterwards, appellant made several additional motions to intervene in, strike, or stay the Foreclosure Action, none of which proved successful. (See, e.g. , id. at 574–75, 591–92, 602, 631–645, 653.) Based on Mrs. Osuji's consent to an entry of a judgment of foreclosure and sale, the state court granted Chase's motion for an order of reference in the Foreclosure Action on October 30, 2015. (Id. at 655.)

On February 2, 2016, Fannie Mae transferred its ownership interest in the loan to MTGLQ Investors, L.P. ("MTGLQ"), and service was transferred to Shellpoint Mortgage Servicing. (Id. at 696–98; see also id. 1084–85.)

B. Bankruptcy Proceedings

Appellant filed a voluntary petition for relief under Chapter 7 of the Bankruptcy Code on December 30, 2015 and commenced an adversary proceeding against appellees on March 17, 2016, alleging that they have no ownership interest in the loan. (Id. at 5–107.) Appellees filed a motion to dismiss on May 26, 2016 (id. at 257–58), and, after the motion was fully briefed, the Bankruptcy Court issued an Order to Show Cause ("OTSC") why it should not abstain from the proceeding (id. at 1043–44). The parties briefed the issue, and the Bankruptcy Court held a hearing on the OTSC and appellees' motion to dismiss on August 15, 2016. (See id. at 1087.) By order dated September 2, 2016 (the "September 2 Order"), the Bankruptcy Court voluntarily abstained from the proceeding and, in the alternative, granted appellees' motion to dismiss. (Id. at 1084–90.)

C. Appeal

Appellant filed his notice of appeal of the September 2 Order on September 8, 2016. (ECF No. 1.) This Court received the Bankruptcy Record on October 14, 2016. (ECF No. 3.) Appellant filed his brief in support of the appeal on March 3, 2017 (ECF No. 8), appellees responded on April 3, 2017 (ECF No. 9), and appellant filed a reply on April 27, 2017 (ECF No. 11). The Court has fully considered the parties' submissions.

II. DISCUSSION

Appellant argues that the Bankruptcy Court abused its discretion in permissively abstaining from the proceeding and erred as a matter of law in concluding that the Rooker–Feldman doctrine barred his action against Fannie Mae and Chase. As set forth below, the Court concludes that the Bankruptcy Court did not abuse its discretion in permissively abstaining from the adversary proceeding and, therefore, affirms the ruling below.³

A. Applicable Law

Under 28 U.S.C. § 1334(c)(1), the Bankruptcy Court may permissibly abstain from an adversary proceeding. See 28 U.S.C. § 1334(c)(1) ("[N]othing in this section prevents a district court in the interest of justice, or in the interest of comity with State courts or respect for State law, from abstaining from hearing a particular proceeding arising under title 11 ...."). The Second Circuit has indicated that such abstention "is within the sound discretion of the bankruptcy court." In re Abir , No. 09 CV 2871(SJF), 2010 WL 1169929, at *7 (E.D.N.Y. Mar. 22, 2010) (citing In re Petrie Retail. Inc. , 304 F.3d 223, 232 (2d Cir. 2002) ("Permissive abstention from core proceedings under 28 U.S.C. § 1334(c)(1) is left to the bankruptcy court's discretion.")). In deciding whether to permissibly abstain, the Bankruptcy Court may consider

(1) the effect or lack thereof on the efficient administration of the [bankruptcy] estate if a Court recommends abstention, (2) the extent to which state law issues predominate over bankruptcy issues, (3) the difficulty or unsettled nature of the applicable state law, (4) the presence of a related proceeding commenced in state court or other nonbankruptcy court, (5) the jurisdictional basis, if any, other than 28 U.S.C. § 1334, (6) the degree of relatedness or remoteness of the proceeding to the main bankruptcy case, (7) the substance rather than form of an asserted ‘core’ proceeding, (8) the feasibility of severing state law claims from core bankruptcy matters to allow judgments to be entered in state court with enforcement left to the bankruptcy court, (9) the burden of [the court's] docket, (10) the likelihood that the commencement of the proceeding in bankruptcy court involves forum shopping by one of the parties, (11) the existence of a right to a jury trial, and (12) the presence in the proceeding of nondebtor parties.

Id. at *7 (quoting In re Luis Electrical Contracting Corp. , 165 B.R. 358, 368 (Bankr. E.D.N.Y. 1992) ). The court is not required, however, to consider each of these factors, and may permissibly abstain where only some of them favor abstention. Wallace v. Guretzky , No. CV-09-0071(SJF), 2009 WL 3171767, at *2 (E.D.N.Y. Sept. 29, 2009) (affirming permissive abstention that was based on four of the twelve factors). District courts review a decision to permissibly abstain for an abuse of discretion. Abir , 2010 WL 1169929, at *8 ; Wallace , 2009 WL 3171767, at *2. The Bankruptcy Court abuses its discretion if it abstained "based on an ‘erroneous view of the law’ or ‘clearly erroneous factual findings.’ "⁴ Wallace , 2009 WL 3171767, at *2 (quoting In re Bay Point Assocs. , No. 07-CV-1492 (JS), 2008 WL 822122, at *3 (E.D.N.Y. Mar. 19, 2008) ).

B. Application

Here, the Bankruptcy Court permissively abstained after finding that

(2) state law issues clearly predominate over bankruptcy issues; (4) there is a related state court foreclosure proceeding pending; (5) the lack of any jurisdictional basis other than 28 U.S.C. § 1334 ; (6) the degree of relatedness or remoteness of the proceeding to the main bankruptcy case; (9) the burden on the court's docket; and (10) the likelihood that the commencement of the proceeding in a bankruptcy court involves forum shopping by one of the parties.

(R. at 1089.) Appellant argues that the Bankruptcy Court abused its discretion in permissively abstaining because "there is no pending, or ongoing, parallel state proceeding that would trigger abstention principles." (Appellant's Br., ECF No. 8, at 17.) He further argues that the factors do not weigh in favor of permissive abstention. (Appellant's Reply, ECF No. 11, 19–25.) As set forth below, the Court disagrees.

1. Predominance of State Law Issues

Courts in this Circuit frequently cite the second factor—the extent to which state law issues predominate over bankruptcy issues—as a reason for permissively abstaining. See, e.g. , Abir , 2010 WL 1169929, at *8 ; Wallace , 2009 WL 3171767, at *2 ; Bay Point Assocs. , 2008 WL 822122, at *4 ; In re Exeter Holding, Ltd. , No. 11-77954-AST, 2013 WL 1084548, at *5 (Bankr. E.D.N.Y. Mar. 14, 2013) ; In re Taub , 417 B.R. 186, 194 (Bankr. E.D.N.Y. 2009). Here, the Bankruptcy Court found that "state law issues clearly predominate over bankruptcy issues" (R. at 1089), and this Court agrees. In his complaint, appellant claims an interest in the Property—and challenges appellees' interest in it—based on principles of New York state property law. (See id. at 6 (appellant's complaint citing New York law exclusively as the basis for his challenge to appellees' interest in the Property).). Indeed, apart from the jurisdictional allegations, the Complaint is devoid of any citations to federal law.⁵ (See generally id. at 5–37.) Under these circumstances, there is no question that the Bankruptcy Court did not err in finding that this factor favored abstention. See Little Rest Twelve, Inc. v. Visan , 458 B.R. 44, 60 (S.D.N.Y. 2011) (upholding abstention where, inter alia , "the cases contain[ed] exclusively state claims with little, if any, relevance to federal law").

2. Relatedness of State Proceeding

The...