Russo-Chestnut v. Wells Fargo Home Mortg. (In re Russo-Chestnut)
| Decision Date | 28 October 2014 |
| Docket Number | Adversary Case No. 14–80064–JW,Case No. 13–07133–JW |
| Court | United States Bankruptcy Courts. Fourth Circuit. U.S. Bankruptcy Court — District of South Carolina |
| Parties | In re: Cynthia Ann Russo–Chestnut, aka Cynthia Ann Crawford, aka Cynthia Ann Russo, Debtor. Cynthia Ann Russo–Chestnut, aka Cynthia Ann Crawford, aka Cynthia Ann Russo, Plaintiff, v. Wells Fargo Home Mortgage, Wells Fargo Bank, N.A., HSBC Bank USA National Association, Wells Fargo Asset Securities Corporation, Mortgage Pass-Through Certificates, Series 2007–10, Defendants. |
David Hart Breen, David H. Breen, P.A., Myrtle Beach, SC, for Plaintiff/Debtor.
Ashley K. Kelley, Womble Carlyle Sandridge & Rice, LLP, Charleston, SC, for Defendants HSBC Bank USA National Association, Wells Fargo Asset Securities Corporation, Wells Fargo Bank, N.A. and Wells Fargo Home Mortgage.
ORDER GRANTING DEFENDANTS' MOTION TO DISMISS IN PART AND DENYING IN PART
This matter is before the Court on a Motion to Dismiss (“Motion”) filed by the Defendants Wells Fargo Bank, N.A.1 and HSBC Bank, USA, National Association, as Trustee for Wells Fargo Asset Securities Corporation, Mortgage Pass–Through Certificates, Series 2007102 (“Defendants”).
Defendants filed a Motion to Dismiss pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure, which applies to this adversary proceeding under Rule 7012(b) of the Federal Rules of Bankruptcy Procedure. This Court has jurisdiction over this proceeding pursuant to 28 U.S.C. §§ 1334 and 157.
After hearing arguments of the parties and reviewing the pleadings and record in this action, the Court grants the Motion to Dismiss in part and denies it in part. Pursuant to Fed.R.Civ.P. 52, which is made applicable to this proceeding by Fed. R. Bankr.P. 7052, the Court makes the following findings of fact and conclusions of law.3
1. On February 1, 2007, Cynthia Ann Russo–Chestnut, a/k/a Cynthia Ann Crawford, a/k/a Cynthia Ann Russo (“Debtor”), executed a note and mortgage for the principal sum of $531,300.00 in favor of Defendants' predecessor in interest to finance the purchase of property located at 1070 Folly Road, Myrtle Beach, South Carolina (“the Property”). The mortgage was recorded on February 7, 2007, in the Register of Deeds Office for Horry County, and was subsequently assigned to Defendants.
2. On March 9, 2009, Defendants initiated foreclosure proceedings against Debtor in state court, Horry County Case No. 2009–CP–26–2299. On December 13, 2012, Debtor filed an Answer and Counterclaim, asserting the following counterclaims: (1) Negligent Misrepresentation; (2) Violation of South Carolina Unfair Trade Practices Act; (3) Misrepresentation and/or Fraud; (4) Third–Party Breach of Contract; (5) Breach of Contract Accompanied by Violation of the Covenant of Good Faith and Fair Dealing; and (6) Promissory Estoppel (collectively “Foreclosure Counterclaims”). The Foreclosure Counterclaims all appear to arise out of Defendants' conduct in connection with the negotiation and consideration of a modification of Debtor's mortgage in 2010.
3. Defendants filed a Motion for Summary Judgment as to all Foreclosure Counterclaims on May 22, 2013. Subsequently, the Court of Common Pleas granted Defendants' Motion for Summary judgment on all Foreclosure Counterclaims, and entered an Order Granting Summary Judgment on October 8, 2013, dismissing Debtor's Foreclosure Counterclaims with prejudice. Debtor argues that the Order Granting Summary Judgment was based upon facts deemed admitted as a result of Debtor's failure to timely respond to Defendants' Requests for Admissions. While the Court takes judicial notice of the entry of the Order Granting Summary Judgment on October 8, 2013, a copy of this Order was not presented to this Court.
4. On November 4, 2013, Debtor filed a Motion for Reconsideration of the Order Granting Summary Judgment. On November 8, 2013, Debtor also filed an Appeal to the South Carolina Court of Appeals. On February 11, 2014, the South Carolina Court of Appeals issued an Order dismissing the appeal based upon Debtor's failure to file the initial brief and designation of matter as required by the South Carolina Appellate Court Rules, thereby making the order final.
5. Debtor filed her Chapter 13 bankruptcy case on November 29, 2013. Debtor scheduled Defendants as a secured creditor with a lien on the Property.
6. On December 13, 2013, Debtor filed her initial Chapter 13 Plan, using the form Chapter 13 plan required in this District.4
The initial plan asserted that Debtor was current on obligations to Defendants and proposed to continue making regular payments.
7. Defendants objected to confirmation of the initial Chapter 13 Plan on January 3, 2014, on the basis that “Debtor provides no information as to how she intends to cure Wells Fargo's pre-petition arrearage” in the amount of $239,400.00.
8. Debtor amended her Chapter 13 Plan on February 11, 2014 and again on February 18, 2014. The February 11, 2014 plan did not provide for treatment of Defendants' claim as to the Property.5 The February 18, 2014 plan provided for the curing of the arrearage owed to Defendants through payments of $4,000.00 or more per month, along with 5.25% interest, and the maintenance of regular non-arrearage payments beginning March, 2014. Both plans used the form Chapter 13 plan required in this District.
9. A confirmation hearing was held on February 20, 2014, during which the Trustee and Defendants expressed concerns about the feasibility of Debtor's proposed Plan. At the hearing, Debtor testified that she had previously pursued mortgage modification with Defendants and had made trial period payments but the modification was not completed. Debtor testified that Defendants told her they were unable to complete the modification because her loan was not eligible as a mortgage-backed security. Debtor indicated her continued interest in pursuing a modification of her mortgage. Upon inquiry from the Court, Defendants' counsel advised that he would check with his client regarding the loan modification and report to Debtor's counsel, but he did not think a loan modification at this point was likely in light of the significant arrearage of over $247,000 owed to Defendants. The confirmation hearing was continued to provide Debtor with an opportunity to demonstrate feasibility.
10. Debtor amended her Chapter 13 Plan again on March 14, 2014 (“Final Amended Plan”). The Final Amended Plan provides for the curing of default on Defendants' loan as follows:
11. Like the earlier plans proposed by Debtor, the Final Amended Plan also uses the form plan language in this District, which includes the following provisions that are relevant to this matter:
12. Prior to the continued confirmation hearing, Defendants filed a notification of Settlement of their Objection to Confirmation on March 14, 2014.
13. The continued confirmation hearing was held on March 18, 2014, and the Trustee recommended confirmation.
14. On March 20, 2014, Defendants filed a secured proof of claim based on Debtor's note and mortgage. The proof of claim reflected a $246,446.10 arrearage balance that Debtor owed as of the petition date and a secured claim of $738,919.53. As of the date of the hearing, Debtor has not filed a separate objection to the proof of claim.
15. The Court confirmed Debtor's Final Amended Plan by Order entered on April 17, 2014.
16. On June 11, 2014, Debtor commenced this adversary proceeding by filing a Complaint against Defendants. The Complaint, which includes causes of action for violation of the South Carolina Unfair Trade Practices Act, negligence, breach of contract, specific performance, and promissory estoppel, seeks monetary damages for the pre-petition and thus pre-confirmation conduct of Defendants in association with its failure to modify Debtor's loan in 2010.
17. On July 25, 2014, Defendants filed the Motion to Dismiss the Adversary Proceeding. In the Motion, Defendants argue that the Complaint should be dismissed because it generally fails to state a plausible claim for relief since it contains only vague and conclusory allegations, the claim for violation of the South...
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