Stanworth v. Bank of Am., N.A. (In re Stanworth), Case No. 10–76016–FJS

CourtUnited States Bankruptcy Courts. Fourth Circuit. U.S. Bankruptcy Court — Eastern District of Virginia
Citation543 B.R. 760
Decision Date07 January 2016
Docket NumberAPN 14–07069–FJS,Case No. 10–76016–FJS
Parties In re : Sheryl S. Stanworth, Debtor. Sheryl S. Stanworth, Plaintiff, v. Bank of America, N.A., Bank of New York Mellon, f/k/a The Bank of New York, as Trustee for the Certificate-Holders of CWALT, Inc., Alternative Loan Trust 2007–OH2, Mortgage Pass–Through Certificates, Series 2007-OH2, LandAmerica Financial Group, Inc., Michael P. Cotter, Chapter 13 Trustee, Defendants.

543 B.R. 760

In re : Sheryl S. Stanworth, Debtor.

Sheryl S. Stanworth, Plaintiff,
v.
Bank of America, N.A., Bank of New York Mellon, f/k/a The Bank of New York, as Trustee for the Certificate-Holders of CWALT, Inc., Alternative Loan Trust 2007–OH2, Mortgage Pass–Through Certificates, Series 2007-OH2, LandAmerica Financial Group, Inc., Michael P. Cotter, Chapter 13 Trustee, Defendants.

Case No. 10–76016–FJS
APN 14–07069–FJS

United States Bankruptcy Court, E.D. Virginia, Norfolk Division .

Signed January 7, 2016


543 B.R. 762

Sheryl S. Stanworth, pro se.

Michael P. Cotter, pro se.

543 B.R. 763

Johnie Rush Muncy, Douglas S. Rubin, Samuel I. White, P.C., Richmond, VA, D. Carol Sasser, Samuel I. White, P.C., Virginia Beach, VA, for Defendants.

Land America Financial Group, Inc., pro se.

MEMORANDUM OPINION

FRANK J. SANTORO, United States Bankruptcy Judge

This matter comes before the Court on the Amended Complaint to Determine Validity, Priority or Extent of Lien filed by counsel on behalf of the above-captioned Plaintiff on September 11, 2014 (the "Amended Complaint"). Bank of New York Mellon, f/k/a The Bank of New York, as Trustee for the Certificateholders of CWALT, Inc., Alternative Loan Trust 2007–OH2, Mortgage Pass–Through Certificates Series 2007–OH2 ("Bank of New York Mellon") and Bank of America, N.A. ("Bank of America" and, collectively with Bank of New York Mellon, the "Defendants") filed a joint answer to the Amended Complaint on October 6, 2014 (the "Answer").1 The remaining defendants are nominal parties who have not answered the Amended Complaint or filed any other pleadings in this adversary proceeding.

The Amended Complaint is styled as a complaint to determine extent, validity, and priority of lien pursuant to Federal Rule of Bankruptcy Procedure 7001(2).2 The Plaintiff requests the following relief in connection with her real property located at 3437 S. Crestline Drive, Virginia Beach, Virginia 23464 (the "Property"):

(A) determin[e] the true holder of the Note; (B) modify[ ] the order approving the [loan modification], as necessary, to ensure that the true holder of the [n]ote is included in [the loan modification's] definition of "Lender," and confirming [Bank of America's] authority to enter into the [loan modification] on behalf of the true holder of the [n]ote; and (C) grant [ ] such other and further declaratory and equitable relief as this honorable Court may deem meet.

Amended Complaint at 8–9.3 However, for clarity in the record, the Court reduces the relief requested to two counts.4 First, a request to modify the Court's order approving a loan modification entered on October 8, 2011, in the Plaintiff's main bankruptcy case (the "Loan Modification Order") to reflect the holder of the note secured by the Property in the Loan Modification Order's definition of the lender (hereinafter "Count I").5 See id. ; see also Loan Modification Order, ECF 48.6

543 B.R. 764

Second, a request for judicial determination of the holder of the note (the "Note") and beneficiary of the deed of trust on the Property (the "Deed of Trust") (hereinafter "Count II"). See Amended Complaint at 8. The Plaintiff brings her second claim as a challenge to the validity of Bank of New York Mellon's lien on the Property pursuant to Federal Rule of Bankruptcy Procedure 7001(2). See id. at 2. As described in further detail below, it later became clear to the Court that the relief requested by Count II was a moving target. The crux of Count II is the Plaintiff's allegation that the transfer of the Note and Deed of Trust by Bank of America's predecessor in interest to Bank of New York Mellon, as trustee, was ineffective because it did not comply with the terms of a pooling and servicing agreement (the "PSA").7 The Plaintiff is not a party to the PSA.

The Defendants consented to the relief requested in Count I as memorialized by an amended order approving the loan modification entered in the main bankruptcy case (the "Amended Loan Modification Order"). See Amended Loan Modification Order, ECF No. 147; see also Transcript of January 6, 2015 Pretrial Conference (hereinafter "Tr. (1/6)") at 8, APN 20. The only claim for relief set forth in the Amended Complaint that remains unresolved is Count II.

Since the filing of this adversary proceeding, the Court has convened a plethora of hearings and pretrial conferences.8 The Court held a pretrial scheduling conference on July 21, 2015, at which the parties represented they did not intend to file any additional pretrial briefs. At the conclusion of this pretrial scheduling conference, the Court advised that it would determine whether the Plaintiff has standing to maintain Count II when the count is based on alleged violations of a contract—the PSA—to which the Plaintiff is not a party.

The Court has jurisdiction over this adversary proceeding pursuant to 28 U.S.C. §§ 157(b) and 1334(b). This is a core matter. 28 U.S.C. § 157(b)(2)(K).9 Having considered the parties' pleadings and applicable case law, the Court issues this Memorandum Opinion. For the reasons discussed below, Count II will be dismissed.

I. The Amended Complaint and Answer

The central theme of the Amended Complaint is the Plaintiff's uncertainty regarding the identity of the holder of the Note secured by the Deed of Trust on the Property.

The Amended Complaint highlights several alleged discrepancies between the Loan Modification Order and Bank of New York Mellon's original and amended proofs of claim that the Plaintiff believes call into question the identity of the holder of the Note and beneficiary of the Deed of Trust, the holder of the Note's intention to abide by the terms of the underlying loan modification agreement, and the validity of the Loan Modification Order. See Amended

543 B.R. 765

Complaint at 4–5, 7–8. To clarify this perceived uncertainty and ensure the holder of the Note will honor the terms of the Loan Modification Order, the Amended Complaint requests the relief set forth in Count I. Id. at 8–9. As noted above, that relief was granted. See Amended Loan Modification Order, ECF No. 147.

The Amended Complaint also describes the Plaintiff's past attempts to participate in the National Mortgage Settlement (the "NMS"), which proved unsuccessful because (1) Bank of America maintained that it does not hold the Note and (2) the Plaintiff was not in default on the relevant date as a result of the loan modification. See Amended Complaint at 5; see also United States v. Bank of Am. Corp ., No. 1:12–cv–00361–RMC, Doc. 11 (D.D.C. April 4, 2012) (setting out the terms of the NMS as to Bank of America, et al. ). Based upon research the Plaintiff undertook following Bank of America's determination that she was ineligible for NMS relief, the Amended Complaint alleges that the transfer of the Plaintiff's Note and Deed of Trust (collectively, the "Mortgage Documents") from Bank of America's predecessor in interest, Countrywide Home Loans, Inc.,10 ("Countrywide") to Bank of New York Mellon, as trustee, was ineffective. Amended Complaint at 5–6. Specifically, the Plaintiff contends that Bank of America holds the Note because Countrywide "failed to complete the documentation required to assign the Note"11 to the trust for which Bank of New York Mellon is trustee. Id. at 6. Additionally, the Amended Complaint alleges that "Countrywide missed certain deadlines for completing the document transfer to [Bank of New York Mellon], and that the Note never made it to [Bank of New York Mellon's trust]." Id. at 7.

Finally, the Plaintiff asserts the Note and Deed of Trust may have become separated

543 B.R. 766

and, if the Note and Deed of Trust "have become separated and are held by different entities," she may own the property "free and clear of liens." Id. at 8.

In the Answer, the Defendants deny the Plaintiff's allegations of deficiencies with respect to Countrywide's transfer of the Note to the trust and the Plaintiff's contentions regarding the effect of these alleged deficiencies on the validity of the transfer. See Answer ¶¶ 18, 26–27. The Defendants respond to the allegations of the Amended Complaint by asserting that Bank of America services the Note and Bank of New York Mellon is the owner of the Note, which is endorsed in blank and payable to the bearer. Id. ¶¶ 28(a), 28(b), 28(c). As a result of the loan modification approved by the Loan Modification Order, the Defendants state that the Plaintiff is not in default under the Note. Id. ¶ 28(d). As to the validity of the Loan Modification Order, the Defendants contend the order is valid and adequate, but would assent to an amended order that clearly identifies both the owner and servicer of the Note. Id. ¶ 29.

II. Subsequent Proceedings and Briefing

At the initial pretrial conference held on January 6, 2015 (the "January Pretrial Conference"), Defendants' counsel represented that Bank of New York Mellon holds the Note and Bank of America services the Note and maintains possession of the original Note only in its capacity as servicer, which Note...

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