Portuesi v. Bank of N.Y. Mellon Tr. Co. (In re Portuesi)
| Decision Date | 27 May 2021 |
| Docket Number | Adv. No. 20-2018,Case No. 19-11275 |
| Court | U.S. Bankruptcy Court — Middle District of North Carolina |
| Parties | In re: Leonardo Portuesi, Debtor. Leonardo Portuesi and Anita Jo Kinlaw Troxler, Trustee, Plaintiffs, v. The Bank of New York Mellon Trust Company, N.A., Defendant. |
This adversary proceeding came before the Court on the Motion to Dismiss Amended Complaint filed by Defendant, The Bank of New York Mellon Trust Company ("Defendant"). ECF No. 16 ("Motion"). The Court denied the Motion and indicated that it would supplement its order with this opinion further setting out the bases for its ruling. ECF No. 31. For the reasons that follow, the Motion was denied.
The Court has jurisdiction over these proceedings under 28 U.S.C. § 1334. Under 28 U.S.C. § 157, the United States District Court for the Middle District of North Carolina has referred this case and these proceedings to this Court by its Local Rule 83.11. These are statutorily core proceedings under 28 U.S.C. § 157(b). The parties have expressly consented to the entry of final orders by this Court for all matters raised in the pleadings in this proceeding. ECF No. 14. Venue is proper under 28 U.S.C. § 1409.
Plaintiff Leonardo Portuesi ("Debtor") commenced this adversary proceeding on August 14, 2020. ECF No. 1. Defendant filed a motion to dismiss arguing, among other things, that Debtor does not have standing to bring an avoidance action under 11 U.S.C. § 544. ECF No. 7. Debtor filed a Motion to Amend Complaint (ECF No. 10, "Motion to Amend") seeking to join the chapter 13 trustee, Anita Jo Troxler ("Trustee"), as a co-plaintiff, and the Court granted Debtor's Motion to Amend. ECF No. 11.
Debtor and Trustee ("Plaintiffs") thereafter filed an amended complaint, ECF No. 12 ("Amended Complaint"), and the Court denied Defendant's first motion to dismiss the originalcomplaint as moot. ECF No. 11. Defendant similarly moved to dismiss the Amended Complaint under Fed. R. Civ. P. Rules 12(b)(1) and (6), made applicable to this proceeding by Bankruptcy Rule 7012, ECF No. 16, and filed a memorandum of law in support of the Motion. ECF No. 17 ("Supporting Memo"). Plaintiffs filed a Response to Defendant's Motion, (ECF No. 20, "Plaintiffs' Response"), and related Memorandum of Law in Response to Defendant's Motion. ECF No. 21 ("Plaintiffs' Memo"). On March 31, 2021, the Court entered an Order denying Defendant's Motion. ECF No. 31.
Debtor's mother Anna Portuesi ("Debtor's Mother") obtained an undivided interest in real property located at 170 Riverwood Drive, Browns Summit, Rockingham County, NC 27214 ("Property"), and recorded her interest on October 6, 2006 with the Rockingham County Register of Deeds. ECF No. 12 at ¶ 9. On December 23, 2008, Debtor and Debtor's Mother obtained a mortgage loan from Ideal Mortgage Bankers, Ltd ("Lender"). Id. at ¶ 12. Debtor's Mother then attempted to convey an interest in the Property to Debtor as tenants in common through a gift deed. Id. at ¶ 10. Although the Property is located in Rockingham County, she recorded the gift deed in the Guilford County Register of Deeds on June 19, 2009. Id.
Debtor and Debtor's Mother granted Lender a Deed of Truston February 4, 2010 (the "Deed of Trust") to secure the mortgage loan. Id. at ¶ 12. Lender similarly recorded the Deed of Trust in the Guilford County Register of Deeds. Id. Almost two years later, on December 19, 2011, Debtor's Mother filed a chapter 7 bankruptcy petition in the Middle District of North Carolina, Case No. 11-11909. Id. at ¶ 14. The Court granted her a discharge on April 2, 2012, thereby discharging her personal liability on the mortgage obligation. Id. Lender transferred the Guilford County Deed of Trust to GMAC Mortgage on September 12, 2012, and GMAC Mortgage recorded notice of the transfer in Guilford County. Id. at ¶ 13.
Debtor filed a chapter 13 bankruptcy case in the Middle District of North Carolina on March 12, 2013, Case No. 13-10315. In his schedules, Debtor listed a joint interest in the Property. Id. at ¶ 15. Ocwen Loan Servicing, LLC ("Ocwen"), the mortgage servicer at the time, filed a secured claim, asserting a lien in the Property. Id. at ¶ 16.1 Debtor objected to Ocwen's secured claim, and the Court found that Ocwen's claim was unsecured because the Deed of Trust was not recorded in Rockingham County. Id. at ¶ 16; see also In re Portuesi, Case No. 13-10315, ECF No. 28 (Bankr. M.D.N.C. August 29, 2013). Ocwen re-recorded the Deed of Trust in Rockingham County on August 12, 2013 withoutseeking or obtaining relief from the automatic stay or the codebtor stay. Id. at ¶ 17. Debtor's chapter 13 discharge was entered on June 29, 2016. Id. at ¶ 16.
Ocwen's recording of the Deed of Trust in Rockingham County brought it into Debtor's Mother's chain of title. Id. at ¶ 19. On May 2, 2017, Debtor's Mother effectively transferred her remaining undivided interest to Debtor and recorded the transfer in the Rockingham County Register. Id. at ¶ 11.
After acquiring the Deed of Trust from Ocwen, Defendant commenced a power of sale foreclosure in Rockingham County.2 The Clerk denied the foreclosure because Defendant failed to prove the existence of a valid debt, but the Rockingham County Superior Court allowed the foreclosure on appeal under de novo review. ECF No. 17 at ¶ 23-26. In defense to the foreclosure action, Debtor argued that the recording of the Deed of Trust was void because it was done in violation of the automatic stay. Id. at ¶ 24. Defendant argued that, at the time it recorded the Deed of Trust in Rockingham County, Debtor did not own any interest in the Property because the prior gift deed was void under N.C. Gen. Stat. § 47-26. Id. at ¶ 25. Defendant further argued that perfection was immaterial to the foreclosure because it did not affect the validity of the underlying debt or theeffectiveness of the Deed of Trust inter se. See id. at Exhibit C, 60-61.
The Rockingham County Superior Court filed a written order on September 24, 2019. Id. at Exhibit D, 72-75 ("Foreclosure Order"). The Foreclosure Order found the debt valid and that the "Bank of New York is the holder of the Note." Id. at ¶ 10. Defendant sold the Property at foreclosure on November 23, 2019. ECF No. 17 at ¶ 29. Debtor commenced his current chapter 13 bankruptcy case (Case No. 19-11275) within the ten-day upset bid period under N.C. Gen. Stat. § 45-21.27. ECF No. 17 at ¶ 30.
Debtor's schedules list the Property as his and the Defendant's loan as disputed. Case No. 19-11275, ECF No. 1. On September 20, 2020, Trustee filed a notice that Debtor changed his address to the Property address. See ECF Nos. 67 and 69. The Court confirmed Debtor's chapter 13 plan on September 23, 2020. Among the other provisions of the confirmed plan, Section 9 of the plan provides as follows:
By Order entered July 1, 2020, the Debtor's objection to Claim No. 5 of The Bank of New York Mellon ("BNYM") was sustained to the extent that Claim No. 5 was disallowed solely to the Debtor's personal liability on the Note with the determination of the extent, validity, priority or enforceability of the lien of BNYM on the Debtor's non-residential real property, commonly known as 170 Riverwood Drive, Browns Summit, North Carolina ("property") being reserved for further order of the Court upon the filing of an Adversary Proceeding by the Debtor. The Debtor has filed an Adversary Proceeding challenging the extent, validity, priority or enforceability of the lien of BNYM againstthe Debtor's property. A finding that there is no valid lien against the Debtor's property will result in a liquidation requirement of $25,575.00, which will pay all allowed unsecured claims in full with interest at 7.0%. If the lien of BNYM is held to be a valid lien, automatic stay is lifted to allow BNYM 180 days from the entry of the judgment/order entered in the Adversary Proceeding to liquidate the property and file a documented deficiency claim. Funds for allowed unsecured claims will be reserved pending final determination of lien status in the Adversary Proceeding and the reserve will be removed for funds to be distributed upon entry of the order resolving the Adversary Proceeding.
The Amended Complaint requests an order providing that (1) Defendant's predecessor-in-interest violated the codebtor stay under 11 U.S.C. § 1301 when it recorded the Deed of Trust in Rockingham County without first obtaining relief from this Court; (2) the recording of the Deed of Trust is void; (3) Defendant's unrecorded Deed of Trust is avoidable under 11 U.S.C. § 544; (4) once avoided, the secured claim should be disallowed; and (5) Debtor be allowed reasonable attorney fees. ECF No. 12 at 4-5.
In response, Defendant argues that the Court does not have subject matter jurisdiction, and Plaintiffs fail to state a claim upon which relief may be granted. Specifically, Defendant makes six arguments. First, Defendant alleges the Court does not have subject matter jurisdiction over Debtor's claims under the Rooker-Feldman doctrine because the Amended Complaint is acollateral attack on a state court foreclosure judgment. ECF No. 16 at ¶ 1. Second, Defendant argues that neither Debtor nor the Trustee have standing. Id. at ¶ 2. Debtor does not have independent standing to bring the avoidance claim under § 544. Id. Trustee does not have standing to bring the avoidance claim under § 544 because the avoidance "[does] not provide a benefit to the estate and unsecured creditors." Id. Third, Defendant argues collateral estoppel and res judicata bar the Plaintiffs from disputing the validity of the lien. Id. at ¶¶ 5-6. Fourth, Defendant alleges the act of recording a deed is a ministerial act that does not violate the codebtor stay under 11 U.S.C. § 1301. Id. at ¶ 6. Fifth, Defendant argues ...
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