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

Decision Date27 September 2012
Docket NumberBankruptcy No. 10–16236–JNF.,Adversary No. 11–1137.
Citation480 B.R. 204
PartiesIn re Laura SHEEDY, Debtor. Laura Sheedy, Plaintiff v. Deutsche Bank National Trust Company and JP Morgan Chase Bank, National Association, Defendants.
CourtU.S. Bankruptcy Court — District of Massachusetts

OPINION TEXT STARTS HERE

David G. Baker, Boston, MA, for Plaintiff.

Donn A. Randall, Gregory Bombard, Bulkley, Richardson & Gelinas, Boston, MA, for Defendants.

MEMORANDUM

JOAN N. FEENEY, Bankruptcy Judge.

I. INTRODUCTION

Two matters are before the Court: 1) the Motion for Summary Judgment filed by Deutsche Bank National Trust Company, as Trustee for WAMU Mortgage Pass–Through Certificates Series 2004–AR4 (Deutsche Bank) and JPMorgan Chase Bank, N.A. (Chase), as the loan servicer for Deutsche Bank (jointly, the Defendants); and 2) the Defendants' Motion to Strike Forensic Audit Report. The Plaintiff, Laura Sheedy (“Sheedy,” the “Debtor,” or the Plaintiff) filed Oppositions to both Motions. The Court heard the matters on July 10, 2012 and ordered the parties to file Supplemental Briefs. The issues presented include whether the Debtor's causes of action under the Truth in Lending Act, 15 U.S.C. §§ 1601–1667f (“TILA”) and Mass. Gen. Laws ch. 93A, §§ 1–11 (Chapter 93A) are barred by the applicable statutes of limitation and whether the Debtor has submitted any evidence to withstand the Defendants' summary judgment motion with respect to her count for fraud, deceit and misrepresentation.

II. PROCEDURAL BACKGROUND AND FACTS

The Debtor filed a voluntary Chapter 13 petition on June 8, 2010. On Schedule A–Real Property, she listed real property located at 11 Harrington Road, Lexington, Massachusetts (the “Property”) valued at $1.1 million and subject to a secured claim in the sum of $861,157.30. The Debtor listed her ownership interest as follows: Trustee over Cardinal Trust.” Accordingly, it is unclear whether the Debtor, in fact, has a beneficial ownership interest in the Property and whether she is the sole trustee of the Cardinal Trust. If she holds a beneficial interest in the Trust, that interest is personal property and should have been listed on Schedule B–Personal Property. On Schedule F–Creditors Holding Unsecured Nonpriority Claims, the Debtor listed claims totaling $27,886.66.

The Debtor filed a Chapter 13 Plan on July 20, 2010 in which she stated:

The debtor contends that this mortgage loan is rescindable under the Truth in Lending Act, Chapter 93A of the Massachusetts General Laws, and/or general principles of equity as stated by the Supreme Judicial Court in Commonwealth v. Fremont. Accordingly, for present purposes, the debtors [sic] are treating this loan as unsecured and tendering repayment as an unsecured loan in the total of general unseured [sic] claims, below. Through this plan, the debtors [sic] demand rescission of the loan, and in the absence of an order sustaining the creditor's objection to confirmation of this plan, the mortgage will be deemed rescinded and an order discharging the debtor, when recorded in the Registry of Deeds, shall discharge the mortgage.

On September 30, 2011, Chase filed a Motion for Leave to Amend Proof of Claim. The Debtor filed a Response in which she did not object to the Motion but cautioned that she did not waive any issues raised in this adversary proceeding. The Court granted the Motion on October 25, 2011. The amended claim, which lists Chase as the creditor, sets forth a secured claim in the sum of $842,908.47 1 with an arrearage of $56,735.77. The original claim listed Deutsche Bank as the creditor. Chase attached to the amended proof of claim a document captioned, “Transfer of Claim Other Than for Security” pursuant to which Deutsche Bank transferred the claim to Chase, as well as a copy of a “Fixed/Adjustable Rate Note,” a Mortgage, and an Assignment dated January 26, 2010.

On April 26, 2011, the Debtor filed a Verified Complaint against the Defendants, commencing the present adversary proceeding. In her Complaint, she made the following allegations, which this Court paraphrases, and in some instances quotes, as follows:

Sheedy and/or her husband first acquired the Property in or about 1987. Since then, title has been transferred by Sheedy several times to a real estate trust and/or her husband for purposes of refinancing the purchase money mortgage, or for other legitimate purposes.

In 2003, Sheedy conveyed the property from the Cardinal Trust to herself by deed recorded in the Middlesex South Registry of Deeds for the purpose of refinancing the mortgage then encumbering title to the property. She refinanced with Washington Mutual Bank, FA.

Approximately one year later, Sheedy was induced to refinance the mortgage again. This mortgage was recorded on April 21, 2004 and was also given to Washington Mutual Bank.

* * *

Although Sheedy and her husband considered themselves relatively sophisticated in real estate matters (but not finance), they began to suspect that they had been misled about the terms of the mortgage. “In order to ascertain whether the loan transaction appeared to conform to legal requirements, they retained a mortgage fraud investigation firm, MFI–Miami, to analyze the documents.”

Upon information and belief, MFl–Miami is a Boynton Beach, Florida, firm founded by Steve Dilbert (“Dilbert”), that is regularly engaged in the business of providing forensic audit reports of mortgage transactions, but is not engaged in the practice of law.

Dilbert provided Sheedy with a comprehensive analysis of the 2004 transaction with Washington Mutual Bank.

In the analysis, Dilbert states that he requested from Washington Mutual Bank, but did not receive, numerous documents relating to the transaction.

In his conclusion, Dilbert states, in part, that [t]here are serious problems with the way this loan was originated. The majority of which were committed by the lender. It contains elements of illegalbait and switch and deception [sic] practices.”

“Sheedy adopts Dilbert's conclusions as her own. For example, on page 3 of his analysis, Dilbert states that the Truth in Lending statement, a copy of which is attached at page 113 of the analysis, is contradictory to the terms of the loan. It states that the payment about beginning on [sic] 61st payment (i.e., at the first interest rate change would be $4,331.44). In fact, the payment $4,055.05.”

The TIL [Truth in Lending Act] statement also states that the initial payment would be $2,446.88, when in fact the Note provides that the initial payment was $4,109.56. Although the TIL statement is based on $2,446.87, it does not disclose that that amount represents interest only.

Realizing that she was in imminent danger of default, Sheedy contacted Chase in 2009, which was servicing the loan, about a modification or some other arrangement to avoid default and foreclosure, but was told that because she was making the payments, Chase would not assist her. Further attempts to resolve the problem proved equally fruitless.

In 2010, Deutsche Bank, claiming to be the owner of the loan, commenced foreclosure activities.

In order to avoid foreclosure and have an opportunity to resolve the issues, Sheedy commenced a chapter 13 bankruptcy case on June 8, 2010.

She filed a chapter 13 plan on or about July 21, 2010. In the plan, Sheedy alleged that the mortgage was rescindable pursuant to the Truth in Lending Act, Chapter 93A of the Massachusetts General Laws, and general principles of equity under Massachusetts law.

The plan also provides for tender of the principal amount by way of an unsecured claim.

Deutsche Bank objected to confirmation and generally denied Sheedy's allegations.

Based upon the foregoing allegations, the Debtor formulated five counts as follows: Count I–Rescission pursuant to TILA; Count II–Chapter 93A; Count III–Fraud, Deceit and Misrepresentation; Count IV–Objection to Claim; and Count V–Standing of Deutsche Bank. Notably, the Complaint is devoid of any specific references to particular sections of TILA or Chapter 93A.

The Debtor adopted Dilbert's Forensic Audit Report to support the allegations set forth in her Complaint. The so-called Forensic Audit Report contains several terse conclusions interspersed with voluminous references to, and verbatim reproductions of, various consumer protection laws and regulations. For example, Dilbert stated that he believed the following:

Lender's actions in negotiation and execution of the loan documents contained all the elements necessary to render the mortgage contract void for fraud and misrepresentation. Lender through affirmative statements and material misrepresentations regarding the essential terms of the proposed terms of the proposed mortgage [sic] (the true price of the loan, the attempted waiver of consumer protections) reasonably induced Client's signature.

Dilbert listed documents he requested but did not receive from Chase, including the initial loan application and final loan application; the executed notice of right to cancel; final closing statements; and [a]ny and all income documents provided by borrower to corroborate their income [sic];” a copy of the loan payment history, and copies of executed pooling and servicingagreements. The Forensic Audit Report, which was based on “information provided by Applicant(s) in accordance with the Terms and Conditions of the Mortgage Fraud Investigation Agreement,” contained no information about Dilbert's educational background or credentials. Moreover, Dilbert did not sign the Report under penalty of perjury.

The Debtor's Complaint concerns a 2004 loan transaction. On April 16, 2004, the Debtor, as sole owner of the Property, executed a promissory note (the “Note”) in favor of Washington Mutual Bank, FA, as lender, in the original principal amount of $810,000 (the “Refinance Transaction”). On April 21, 2004, to secure repayment of the Note, the Debtor executed a mortgage on the Property (the “Mortgage”), which was duly recorded in the...

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