Schmid v. Bank of Am., N.A. (In re Schmid)
| Decision Date | 24 April 2013 |
| Docket Number | Adversary Number: 12-160,Case Number: 10-12142-13 |
| Parties | In re: SUZANNAH META SCHMID, Debtor. SUZANNAH META SCHMID, Plaintiff, v. BANK OF AMERICA, N.A., and ASSOCIATED BANK, N.A., Defendants. |
| Court | U.S. Bankruptcy Court — Western District of Wisconsin |
PROPOSED FINDINGS OF FACT AND CONCLUSIONS OF LAW AND
SECOND AMENDED COMPLAINT, DEFENDANT'S MOTION TO DISMISS,
The Debtor and Plaintiff, Suzannah Meta Schmid ("Debtor"), filed an objection to Claim No. 2 filed by BAC Home Loans Servicing, LP ("BAC"), now known as Bank of America as a successor by merger ("BANA"), contending that BAC "is not the real party in interest" and that it "owns neither the promissory note nor the mortgage."1 The Debtor then filed this adversary proceeding contending that BANA is neither a real party in interest nor the owner of thenote and mortgage supporting Claim No. 2 (the "Adversary Proceeding"). The Debtor filed an Amended Complaint on August 16, 2012.
On October 31, 2012, the Debtor filed a motion seeking leave to file a second amended complaint ("Motion to Amend") to "correct factual allegations which do not effect [sic] the substance of the relief requested in the adversary proceeding." The factual errors she seeks to correct are, according to her, "immaterial and merely errata" that make "no substantive difference." BANA opposes the Motion to Amend.
BANA moved, pursuant to Fed. R. Bankr. P. 7012 and Fed. R. Civ. P. 12(b)(6), to dismiss the Debtor's Complaint and Amended Complaint with prejudice for failure to state a claim upon which relief can be granted ("Motion to Dismiss"). BANA contends, further, that the Complaint and Amended Complaint should be dismissed under the doctrine of claim preclusion. BANA also seeks to have the decision on the Motion to Dismiss address the Claim Objection that remains pending on the docket.
The parties filed briefs addressing both the Motion to Amend and the Motion to Dismiss. The Court has consolidated the Claim Objection and the Adversary for decision.
After considering the arguments presented, the Motion to Amend is denied. The Motion to Dismiss is granted, and the Debtor's objection to BANA's Claim No. 2 is denied. This Memorandum Decision constitutes the Court's findings of fact and conclusions of law.
To the extent the Court lacks authority to enter a final order on some of the claims, this decision will also constitute proposed findings and conclusions for consideration by the district court.
The Debtor signed a note on March 3, 2004, for a loan from M&I of $40,950 ("Note"). Motion to Amend, Exhibit 3, Adv. Pro. ECF No. 15. To secure the Note, she signed a mortgage on her homestead in Almond, Wisconsin in favor of M&I Mortgage Corporation ("M&I") (the "Mortgage"). Motion to Amend, Exhibit 2. It was recorded in the Portage County Register of Deeds on March 8, 2004.
There were a series of endorsements transferring the Note, first in favor of Countrywide Document Custody Services ("CDCS") ("CDCS Allonge"), then to Countrywide Home Loans ("CHL"), and finally an endorsement in blank. Similarly, the Mortgage was the subject of multiple assignments. First, it was assigned to CDCS, and thereafter to BAC. The transfers of the Note and Mortgage may be depicted follows:
The State Court Proceedings
The Debtor did not pay the Note. Her bankruptcy schedules acknowledge an arrearage on the Note as of the Petition Date but dispute that BAC is the proper party creditor and argue there was an "invalid assignment of mortgage" and that it is "unknown when BAC Home Loans Servicing, LP obtained the promissory note." Schedule D, Bankr. Pro. ECF No. 23, p. 8. The Statement of Financial Affairs identifies a mortgage foreclosure action and judgment in favor of BAC that was entered in Portage County Circuit Court on September 24, 2009. Statement of Financial Affairs, Bankr. Pro. ECF No. 24, p. 2.
The Court has a limited record before it of the litigation that produced the judgment on which BANA relies for its claim that the ownership of the Note and Mortgage has already been determined. The Portage County Circuit Court entered its Findings of Fact, Conclusions of Law and Judgment on September 24, 2009 ("State-Court Judgment," "Judgment"). Motion to Dismiss, ECF No. 9-1, Exhibit A. The Judgment confirms, following service of the summons and complaint, that no answer was filed, and that the Judgment was a default judgment.
The Judgment found and determined that all of the material allegations in the complaint were proven and true, and that the Debtor owed $41,712.14 to BAC under the terms of the Note and Mortgage. The Judgment directed that the Debtor's property be sold at a sheriff's sale any time after six months from the entry of the Judgment, and that the proceeds of sale, after the fees and expenses of the sale, be applied to the amounts owed to BAC. The Debtor did not appeal the Judgment.
On March 23, 2010, the Debtor filed her Chapter 13 petition. On May 24, 2010, Associated Bank, N.A. ("ABNA") filed a Proof of Claim for $30,066,75. On June 9, 2010, BAC filed a Proof of Claim for $41,349.26.
On November 12, 2010, the Debtor objected to the BAC claim asserting, among other grounds, that BAC was "not the real party in interest" and that BAC is not the owner or holder of the Note and Mortgage. A second objection tothe claim was filed by the Debtor on April 27, 2012. In it she reasserted issues related to the ownership of the Note and Mortgage, and challenged whether the transfers of these documents were effective to confer standing on BAC or BANA to enforce or collect on the Judgment, Note, and Mortgage.
On June 9, 2011, the Debtor filed an objection to the ABNA claim "pending a determination on" the objection to the BAC claim. On August 9, 2011, she filed a motion to continue the hearing on her objection to BAC's claim until September 21, 2011. Bankr. Pro. ECF No. 94. Included in that motion was a representation that BAC's merger with BANA would cause additional discovery requests. On August 15, 2012, the Debtor filed an Adversary Complaint against ABNA and BANA alleging, among other claims, that the Note and Mortgage were not owned by BAC. The next day, she filed an Amended Complaint against the same defendants to correct typographical errors. The Amended Complaint contains only minor variations on the arguments raised in the Debtor's objection to BANA's proof of claim.
BANA filed its Motion to Dismiss on September 14, 2012. On October 30, 2012, the parties filed a Joint Pre-Trial Statement. On October 31, 2012, the Debtor filed her Motion to Amend asserting a need to amend in order "to correct mistakes and inadvertent errors in the earlier filed Amended Complaint."
After a hearing on February 14, 2013, the Court took both the Motion to Dismiss and the Motion to Amend under advisement. The Court confirmed thatthe Claim Objection would be consolidated with a decision on the Motion to Dismiss.
The Debtor's Amended Complaint (and the proposed Second Amended Complaint) seeks a determination of the validity and enforceability of the claims of BANA. The Debtor seeks a determination that the assignments of the Note and Mortgage are void and unenforceable as a result of fraud; that no amounts are owed to BANA; that BANA is not the real owner or holder of the Note and Mortgage; that the assignments, allonges and endorsements are a forgery or unenforceable because the assignments were to nonexistent entities, or in blank; and that the claims of ABNA be disallowed as unsecured if the claim of BANA is allowed. Further, the Debtor asks the Court to determine that the proof of claim is false or fraudulent. She argues that BANA does not have standing, or is not a real party in interest, to maintain a claim. Debtor also requests an award of costs and attorneys' fees and "reserves her rights to bring claims at law for damages . . . ."
Finally, at various points the Debtor makes the very general claim that her note was "paid by the United States Treasury under 12 U.S.C. § 5212 . . . ." Amended Complaint at ¶ 35. She alleges that the debt was paid "in full pursuant to 12 U.S.C. § 5212 . . . ." Id. at ¶ 38. Elsewhere, however, the Debtor states that she "did not allege that she does not is not [sic] required to pay [BANA] on its false secured claim in this case because funds were paid to it orits predecessor in interest under [TARP]." Brief in Opposition to Motion to Dismiss, ECF No. 28, p. 14. Instead, she explains, she "merely alleged that the debt [BANA] is attempting to collect has already been paid in full for the purpose of demonstrating [BANA's] incentive to commit the forgeries in order to defraud the courts." Id. She continues that her "point was not to claim that the loan was not owed by the [Debtor], but rather that [BANA] does not own the loan." Id. Moreover, Debtor's counsel asserts that "[s]ince December 30, 2012, [Attorney Nora] has come to believe that many of the loans which are represented by forged documents or have breaks in the chain of ownership of the loan claim [sic] may be owned by . . . Fannie Mae or Freddie Mac." Id. at 15. She concludes that, "[e]ither way, the United States Treasury is the real party in interest to which payments would be owed." Id.
The federal district courts have "original and exclusive jurisdiction" of all cases under title 11 ("Bankruptcy Code" or "Code") and "original but not exclusive jurisdiction" of all civil proceedings that arise under the Bankruptcy Code, or that arise in or are related to cases under the Code. 28 U.S.C. §§ 1134(a)-(b) (2012). The district courts may, however, refer such cases to the bankruptcy judges for their district. 28 U.S.C. § 157(a) (2012). In the Western District of Wisconsin, the district court has made such a...
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