Porst v. Deutsche Bank Nat'l Trust Co. (In re Porst)

• Decision Date: 04 October 2012
• Docket Number: Adversary No. 11–04137.,Bankruptcy No. 11–42759–MSH.
• Citation: 480 B.R. 97
• Parties: In re Albert J. PORST, Debtor. Albert J. Porst, Plaintiff v. Deutsche Bank National Trust Company et al., Defendants.
• Court: U.S. Bankruptcy Court — District of Massachusetts

480 B.R. 97

In re Albert J. PORST, Debtor.Albert J. Porst, Plaintiff

v.Deutsche Bank National Trust Company et al., Defendants.

Bankruptcy No. 11–42759–MSH.

Adversary No. 11–04137.

United States Bankruptcy Court,

D. Massachusetts,

Central Division.

Oct. 4, 2012.

Sara Discepolo, Framingham, MA, for Albert J. Porst, Jr.

Maura K. McKelvey, Hinshaw & Culbert LLP, Boston, MA, for Deutsche Bank National Trust Company.

Gregory N. Blasé, K & L Gates LLP, Boston, MA, for CitiResidential Lending Inc. and Argent Mortgage Company LLC.

Todd B. Gordon, The Gordon Law Firm, Boston, MA, for Ablitt Schofield., P.C.

MEMORANDUM OF DECISION ON DEFENDANTS' MOTIONS TO DISMISS

MELVIN S. HOFFMAN, Bankruptcy Judge.

Defendants, Deutsche Bank National Trust Company, Ablitt Scofield, P.C., CitiResidential Lending Inc., and Argent Mortgage Company LLC have moved, pursuant to Fed.R.Civ.P. 12(b)(6), made applicable to this adversary proceeding by Fed. R. Bankr.P. 7012, to dismiss each of the remaining counts of a six-count complaint of plaintiff-debtor, Albert J. Porst (“Mr. Porst” or the “debtor”).¹ Mr. Porst opposes the defendants' motions and requests that summary judgment be entered against them on count I of his complaint. ²

Facts

The facts below are drawn from the complaint, documents attached to the complaint and documents of public record referenced in the complaint. The facts are not in dispute.

In February 1992, Frances E. Porst, the debtor's mother, created the Frances E. Porst Trust (the “Trust”), naming herself as trustee and reserving for herself as grantor (i) a life estate in any real property conveyed to the Trust and (ii) the powers to revoke and amend the trust instrument.³ The Trust provided that upon Ms. Porst's death the debtor, if he were alive, would receive a life estate in the family home if it were still owned by the Trust. ⁴ Upon the debtor's death, any principal and income in the Trust would be paid over to certain contingent remainder beneficiaries and the Trust would terminate.⁵ In the event that Ms. Porst decided to amend or revoke the Trust, she could do so “by delivering to the Trustee a written instrument signed and acknowledged by [her].” ⁶ Eight months after the creation of the Trust, Ms. Porst conveyed to the Trust the family home at 115 Boardman Street in Haverhill, Massachusetts.⁷

On August 19, 2003, more than ten years after the creation of the Trust, Ms. Porst executed a document purporting to revoke the Trust. The revocation document bears the signatures of two witnesses but was not acknowledged before a notary public.⁸ The revocation document was recorded on August 19, 2003 in the Essex South District Registry of Deeds.⁹ That same day, Ms. Porst, as trustee of the Trust, conveyed the Haverhill property to the debtor for a dollar.¹⁰ On February 25, 2004, Ms. Porst, as trustee of the Trust, conveyed the Haverhill property to the debtor a second time for “[o]ne dollar ($1.00) and other good and valuable consideration.” ¹¹ With each deed, Ms. Porst certified “that I am the current trustee of said trust and that said trust has not been terminated or amended to date.” ¹²

Ms. Porst died in May 2005 and six years later, on June 29, 2011, Mr. Porst filed his petition under chapter 13 of the Bankruptcy Code (11 U.S.C. § 101, et seq.) commencing the main case in this court.¹³

American Home Mortgage Servicing, Inc., on behalf of Deutsche Bank, filed a secured proof of claim in the chapter 13 case in the amount of $106,164.92 based on a note from the debtor payable to Argent Mortgage Company LLC, secured by a first mortgage on the Haverhill property.¹⁴ According to the documents attached to the proof of claim, Mr. Porst entered into the loan transaction with Argent on April 10, 2006 and on January 15, 2009 CitiResidential Lending Inc. (“Citi”), as attorney-in-fact for Argent, executed an assignment of the mortgage to Deutsche Bank National Trust Company. ¹⁵

Procedural History

Mr. Porst's original complaint contained six counts but was later amended to drop count II (avoidance of the mortgage pursuant to Bankruptcy Code § 544), count III (liability for avoided transfer under § 550(a)(1)) and count IV (liability for avoided transfer under § 550(a)(2)). By the hearing date on the defendants' motions to dismiss, the remaining counts of the complaint had been reduced to three-count I (determination of secured status under § 506(d)), count V (claims under Mass. Gen. Laws ch. 93A and ch. 93, § 49, which the debtor defines as the “Massachusetts Debt Collection Act”) and count VI (negligent infliction of emotional distress). The viability of Mr. Porst's motion for summary judgment on count I will depend on the disposition of the defendants' motions to dismiss. Although Mr. Porst has not objected to Deutsche Bank's proof of claim in the main case, the outcome of this adversary proceeding will also determine the characterization of the bank's proof of claim as secured or unsecured.

Positions of the Parties

Mr. Porst asserts that his mother's revocation of the Trust was ineffective because the revocation instrument was not acknowledged as required by the Trust and furthermore that the transfers of the Haverhill property to him by his mother as trustee did not comply with certain requirements of the Trust and were thus invalid. Therefore, Mr. Porst argues, he has only a life estate in the Haverhill property. Alternatively, he maintains that if the revocation of the Trust was effective, the Trust no longer owned the Haverhill property when his mother, in her capacity as trustee, attempted to convey it to him so again he has only a life estate in the Haverhill property. Either way, Mr. Porst claims, the mortgage on the Haverhill property he purported to grant to Argent in 2006 is a nullity since at that time he had no legal right to grant a mortgage.

Mr. Porst also challenges the validity of the assignment of the note on the grounds it was not endorsed. He also challenges the assignment of the mortgage to Deutsche Bank executed by Citi as Argent's authorized agent and further alleges that since approximately 2008 Deutsche Bank, by and through its agent, the law firm of Ablitt Scofield, P.C., has improperly demanded payment in full of the note balance under threat of foreclosure and attempted to foreclose the mortgage on the Haverhill property,¹⁶ including causing Ablitt to publish information concerning Mr. Porst's debt under the note as well as noticing the scheduled foreclosure sale. Mr. Porst alleges that these actions caused him extreme emotional distress and led to his hospitalization for cardiac symptoms.¹⁷ He alleges that these actions, coupled with the allegedly invalid assignment of the note and mortgage on the Haverhill property to Deutsche Bank, render Deutsche Bank, Ablitt and Citi liable to him under Mass. Gen. Laws chapters 93A and 93, § 49 and for the negligent infliction of emotional distress. Mr. Porst does not appear to be seeking damages from Argent who appears to be implicated in count I of the complaint only.

Deutsche Bank, asserting that Mr. Porst did, in fact, own the Haverhill property when he entered into the loan transaction with Argent, seeks dismissal of the complaint. It maintains that Ms. Porst's revocation of the Trust was ineffective and thus the Trust still owned the Haverhill property when Ms. Porst, acting as trustee, conveyed it to the debtor and that the conveyance was proper and valid.¹⁸ As for the validity of the assignment to it of the mortgage, Deutsche Bank cites numerous cases from both the district and bankruptcy courts in Massachusetts supporting its contention that the debtor lacks standing to attack the assignment. Because the debtor owned the Haverhill property when he granted the mortgage to Argent and because he may not attack the validity of the assignment of the mortgage, the bank maintains that the debtor has no valid cause of action for damages under Mass. Gen. Laws chapters 93A and 93, § 49 or for negligent infliction of emotional distress as these causes of action rest upon actions the bank was legally entitled to undertake. Additionally, Deutsche Bank notes that the debtor failed to send it a demand letter which is a prerequisite to bringing an action under Mass. Gen. Laws ch. 93A.

Building upon Deutsche Bank's analysis, Ablitt seeks dismissal asserting that the complaint lumps all the defendants together without articulating which causes of action the debtor asserts lie against each defendant. Ablitt notes that it cannot be liable for carrying out its duties as the attorney for the bank which was legally entitled to foreclosure on the Haverhill property. Finally, relying on Stern v. Marshall, ––– U.S. ––––, 131 S.Ct. 2594, 180 L.Ed.2d 475 (2011), Ablitt challenges this court's subject matter jurisdiction to hear and determine the claims asserted in the complaint and also argues that this adversary proceeding is outside even the court's “related-to” jurisdiction under 28 U.S.C. § 1334(b) and § 157(a).

Argent seeks dismissal of the complaint arguing that it is not the current mortgagee, did not file a proof or claim and did not commence any foreclosure proceedings against the debtor. Citi joins Argent's argument and further notes that it was never a mortgagee with respect to the Haverhill property. Citing In re Samuels, 415 B.R. 8, 21 (Bankr.D.Mass.2009) and In re Almeida, 417 B.R. 140 (Bankr.D.Mass.2009), Citi also maintains that there is precedent in this district holding that Citi was empowered to execute mortgage assignments on behalf of Argent.

Discussion

Jurisdiction and Authority

Ablitt challenges this court's jurisdiction. As I have noted elsewhere, the Supreme Court's ruling in Stern v. Marshall is to be narrowly construed. Acevedo v. Wells Fargo, N.A. (In re Acevedo), 476 B.R. 360 (Bankr.D.Mass. Aug. 7, 2012) (citing DiVittorio v. HSBC Bank, USA, N.A. (In re DiVittorio), 670 F.3d 273, 282 n. 4 (1st Cir.2012)). Here a determination of the nature...