Rubino v. Deutsche Bank Nat'l Trust Co. (In re Rubino), Case # 08-11041
| Decision Date | 04 March 2016 |
| Docket Number | Case # 08-11041,Adversary Proceeding # 14-1011 |
| Court | U.S. Bankruptcy Court — District of Vermont |
| Parties | In re: Peter N. Rubino and Patricia L. Rubino, Debtors. Peter N. Rubino and Patricia L. Rubino, Plaintiffs, v. Deutsche Bank National Trust Company, as Indenture Trustee for American Home Mortgage Investment Trust 2007-2, Mortgage-Backed Notes, Series 2007-2, and Ocwen Loan Servicing, LLC, Defendants. |
Formatted for Electronic Distribution
Not for Publication
Rutland, Vermont
Andre Bouffard, Esq.
Downs, Rachlin & Martin
Burlington, Vermont
The Plaintiffs, Mr. and Mrs. Rubino, own a parcel of real property composed of five lots and approximately 110 acres of land, and dispute the mortgage deed now held by the Defendants includes all of that land. They allege the subject mortgage deed conveyed only the 11-acre lot on which their house is located because that is the only portion of property described in the mortgage deed by a specific, metes and bounds description. The Defendants, by contrast, contend the mortgage deed description is sufficient to convey the entire property because it includes a deed reference to the portions of the land not specifically described. Alternatively, the Defendants assert even if there is a flaw in the mortgage deed description, it is not fatal to their position because the Plaintiffs have failed to prove the subject mortgage deed was intended to convey less than the entire 110-acre parcel, and principles of equity and fundamental fairness require a determination in their favor.
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.
When they purchased this property in 2004, Mr. and Mrs. Rubino (the "Plaintiffs") borrowed money from, and gave a mortgage to, CTX Mortgage Company, LLC ("CTX"). That mortgage (the "CTX Mortgage") clearly described the property it was encumbering to include, through a metes and bounds description, all 110 acres of the Plaintiffs' land consisting of five numbered lots. When they refinanced their mortgage debt in 2006, the Plaintiffs borrowed money from, and gave a mortgage to, American Brokers Conduit ("ABC"). Significantly, the property description in the mortgage deed to ABC (the "ABC Mortgage") was a collapsed version of the property description in the CTX Mortgage; it included a reference to all five lots making up the 110-acre parcel, but included a metes and bounds description of only one 11-acre lot on which the Plaintiffs' home is located ("Lot 3").
The Plaintiffs filed for relief under Chapter 13 of the Bankruptcy Code in October 2008, and the Court entered an order confirming their Chapter 13 plan in August 2009. In February 2009, ABC assigned its mortgage to Deutsche Bank National Trust Company ("Deutsche Bank"). Thereafter, the Plaintiffs fell behind in their mortgage payments, Deutche Bank filed a motion for relief from stay, and the Chapter 13 trustee filed a motion to dismiss the case. The Court granted the relief from stay motion, and Deutsche Bank commenced a foreclosure action. The Plaintiffs requested mediation in connection with the foreclosure action, but prior to the scheduled mediation session, Deutsche Bank's servicer offered the Plaintiffs a loan modification. The Plaintiffs accepted the modification proposal, and the Court entered an order approving the loan modification agreement on November 17, 2011. As a result of the loan modification, the Plaintiffs were able to file an amended Chapter 13 plan, bring their mortgage and plan payments current, and move forward in their bankruptcy reorganization process. On July 18, 2013, the Court entered an order approving the Plaintiffs' amended plan (which incorporated the terms of the modified mortgage debt). Neither the Plaintiffs nor Deutsche Bank (nor its servicer) raised any issue with respect to the mortgage property description or scope of the mortgage lien through this point in the case.
On November 6, 2014, approximately fifteen months after the Court approved the amended plan, the Plaintiffs initiated this adversary proceeding by filing a complaint entitled "Complaint to Determine Extent of Lien and/or Reform Mortgage Deed Description" (doc. # 1, the "Complaint"). In theComplaint, the Plaintiffs allege the property description in the ABC Mortgage includes only Lot 3, and not the full 110-acre parcel, and seek (1) a determination the ABC Mortgage, which is currently held by the Defendants as assignee, is secured solely by Lot 3, and/or (2) a reformation of the last paragraph of the collateral description in the ABC Mortgage to refer to a 1994 deed rather than a 1997 deed. If they prevail, Deutsche Bank's collateral would be reduced from five lots to one, and from 110 acres to 11 acres.
On December 5, 2014, the Defendants filed an answer (doc. # 6, the "Answer"), asserting the documents underlying the subject loan transaction speak for themselves and raising the affirmative defenses of laches, waiver, and the statute of limitations.
The Court entered a stipulated scheduling order on January 14, 2015 (doc. # 10), and an amended scheduling order on August 4, 2015 (doc. # 18); the latter, inter alia, required the parties to file any dispositive motions by September 15, 2015. On August 7, 2015, the Defendants filed a motion to amend their Answer (doc. # 20) along with an amended answer (doc. # 20, Ex. 1, the "Amended Answer"). In their Amended Answer, the Defendants added an affirmative defense asserting three claims: (1) since the Defendant Deutsche Bank is a bona fide purchaser for value of the subject mortgage, and purchased that mortgage without knowledge of the Plaintiffs' claim of an error in the property description, it is not subject to Plaintiffs' claims; (2) since the Plaintiffs failed to raise any issue with respect to the collateral description until well after they filed for Chapter 13 relief, and many years after Deutsche Bank acquired the mortgage, the Plaintiffs are precluded from any relief at this time under the theory of laches; and (3) since the Plaintiffs' claim for reformation arises in equity, it is subject to the equitable rights of Defendant Deutsche Bank. On September 15, 2015, the Court entered an order granting the Defendants' motion to amend their Answer (doc. # 26).
On September 15, 2015, the Plaintiffs and Defendants filed cross motions for summary judgment (docs. ## 27, 28, the "Plaintiffs' MSJ" and the "Defendants' MSJ," respectively). Each of the motions was accompanied by a statement of undisputed material facts (doc. ## 27-3, 28-1, the "Plaintiffs' SUMF" and the "Defendants' SUMF," respectively) and a memorandum of law. Both parties filed a response to the other's motion for summary judgment (docs. ## 30, 31). The Defendants additionally filed a response to the Plaintiffs' SUMF (doc. # 32, the "Response to Plaintiffs' SUMF"), and subsequently filed a reply to the Plaintiffs' response (doc. # 36). The matter is fully submitted.
If there are no materials facts in dispute, the instant cross motions present four interlocking legal issues. First, is the property description in the ABC Mortgage clear and, if so, what land does it include? Second, have the Plaintiffs met their burden of proof for a reformation of the Defendants' mortgage deed?Third, if the property description has two inconsistent components, with one being specific and the other being general, does the specific description control over the general description, and does that limit the property conveyed to just Lot 3? Fourth, if the Court determines the proper interpretation of the subject mortgage's description to include only Lot 3, are the Defendants entitled to relief under an equitable remedy such as subrogation, laches, or the rights of a holder in due course without notice, to expand the scope of lands encumbered by their mortgage?
Pursuant to this Court's Local Rules, if a party fails to file a response or objection to its opponent's statement of undisputed facts, the facts set forth in that statement are deemed admitted. Vt. LBR 7056-1(a)(3). In this proceeding, the Plaintiffs filed no response to the Defendants' SUMF. Consequently, the Court finds the Defendants' rendition of material facts to be undisputed. The Defendants filed a response to the Plaintiffs' SUMF, and the Court has considered that response in making its determination as to what facts are both material and undisputed with respect to the relief sought in the cross motions for summary judgment. After due consideration of the record in this case, the Court finds the following facts to be undisputed.
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