Travers v. Bank of Am., N.A. (In re Travers)

• Decision Date: 25 March 2014
• Docket Number: Adversary No. 11–01047.,Bankruptcy No. 11–12650.
• Citation: 507 B.R. 62
• Court: U.S. Bankruptcy Court — Western District of Washington
• Parties: In re Inez TRAVERS, Debtor. Inez Travers, Plaintiff v. Bank of America, N.A., Alias, and John Doe, Alias, Defendants.

507 B.R. 62

In re Inez TRAVERS, Debtor.Inez Travers, Plaintiff

v.Bank of America, N.A., Alias, and John Doe, Alias, Defendants.

Bankruptcy No. 11–12650.

Adversary No. 11–01047.

United States Bankruptcy Court, D. Rhode Island.

Signed March 25, 2014.

John B. Ennis, Cranston, RI, for Plaintiff.

Christopher Somma, Goodwin Procter LLP, Boston, MA, Harris K. Weiner, Salter McGowan Sylvia & Leonard, Inc., Providence, RI, for Defendants.

John Doe, pro se.

MEMORANDUM AND ORDER GRANTING MOTION TO DISMISS

(this relates to Doc. # 38)

DIANE FINKLE, Bankruptcy Judge.

Defendant Bank of America, N.A. seeks dismissal of this adversary proceeding brought by Plaintiff–Debtor Inez Travers for statutory damages, rescission of the Defendant's mortgage against her residence, and attorney's fees for alleged violations of the Truth in Lending Act, 15 U.S.C. § 1601et seq. (“TILA”) and Regulation Z, 12 C.F.R. § 226.1.¹ In ruling on the motion, I have considered the Plaintiff's Complaint for Declaratory Judgement [sic] Equitable Relief, Rescission, Recoupment, and Damages (Doc. # 1) ² (the “Complaint”), the Answer of Bank of America, N.A. (Doc. # 18) (the “Answer”), Bank of America, N.A.'s Motion to Dismiss (Doc. # 38) (the “Motion to Dismiss”), the Plaintiff's Objection to Motion to Dismiss (Doc. # 49) (the “Objection”), the Supplemental Memorandum of Law in Support of Bank of America, N.A.'s Motion to Dismiss (Doc. # 66) (the “Defendant's Supplemental Memorandum”), and the Plaintiff's Supplemental Memorandum of Law (Doc. # 96) (the “Plaintiff's Supplemental Memorandum”). Among other grounds, ³ the Defendant moves to dismiss the Complaint for lack of jurisdiction because there is no longer a bankruptcy estate, the Plaintiff's underlying bankruptcy case having been closed quite some time ago. After due consideration, I conclude that this Court no longer has subject matter jurisdiction over this matter. On that basis, this adversary proceeding should be dismissed.

I. STANDARD OF REVIEW

The Defendant moves for dismissal pursuant to Fed.R.Civ.P. 12(b)(1).⁴ Procedurally, this rule permits a party to assert lack of subject matter jurisdiction as a defense by way of a motion to dismiss. “The part[y] asserting jurisdiction, here the [P]laintiff[ ], [has] the burden of demonstrating the existence of federal jurisdiction.” Acosta–Ramirez v. Banco Popular de Puerto Rico, 712 F.3d 14, 20 (1st Cir.2013). The issue of subject matter jurisdiction should be resolved before addressing the merits of the action. See Morales Feliciano v. Rullan, 303 F.3d 1, 6 (1st Cir.2002) (“[T]he preferred—and often the obligatory—practice is that a court, when confronted with a colorable challenge to its subject-matter jurisdiction, should resolve that question before weighing the merits of a pending action.”).

In reviewing the Motion to Dismiss, I must accept as true all allegations contained within the Complaint. See Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007); see also Aversa v. United States, 99 F.3d 1200, 1209–10 (1st Cir.1996) (internal citations omitted) (“In ruling on a motion to dismiss for lack of subject matter jurisdiction under Fed.R.Civ.P. 12(b)(1), the district court must construe the complaint liberally, treating all well-pleaded facts as true and indulging all reasonable inferences in favor of the plaintiff. In addition, the court may consider whatever evidence has been submitted....”). Both the procedural history and factual background of this proceeding are pivotal to the resolution of the jurisdictional challenge raised by the Defendant.

II. PROCEDURAL AND FACTUAL BACKGROUNDA. The Mortgage Transaction

On July 24, 2007, the Defendant entered into a consumer credit transaction with the Plaintiff involving the Plaintiff's residence at 25 Cantara Street, West Warwick, Rhode Island (the “Property”), advancing funds to the Plaintiff in the principal amount of $198,000 and securing such advances with a first mortgage against the Property (the “Mortgage Transaction”). See Objection, Exhibit B at 34. The Plaintiff alleges that at the time of the closing on the Mortgage Transaction she did not receive an accurate Truth–in–Lending Disclosure Statement as required by TILA and its implementing regulation, Regulation Z. More specifically, the Plaintiff asserts that in violation of the statutory and regulatory requirements certain charges were not listed as finance charges on the Disclosure Statement, the calculation of the annual percentage rate was inaccurate, and she did not receive two copies of the statutory “Notice of Right to Cancel.”

Within three years of the Mortgage Transaction, the Plaintiff sent a notice of rescission on June 19, 2010 (the “Notice of Rescission”) to BAC Home Loans, Servicing, LP (“BAC”), the entity servicing the loan on behalf of the Defendant. BAC received the Notice of Rescission on June 22, 2010, and the Plaintiff alleges that on June 30, 2010, the Defendant refused to accede to her request to rescind the Mortgage Transaction and discharge the mortgage. ⁵

B. The Bankruptcy Case

On June 30, 2011, the Plaintiff filed a petition under Chapter 13 of the Bankruptcy Code.⁶ On the same day she also filed the Complaint against the Defendant. Less than one month later the Plaintiff's case converted to Chapter 7, and the Plaintiff subsequently filed her bankruptcy schedules. On “Schedule A—Real Property,” the Plaintiff listed an interest in the Property in fee simple with a value of $165,500, and a secured claim against the Property in the amount of $183,050.⁷ On “Schedule B—Personal Property,” the Plaintiff listed the TILA claims against the Defendant in an “unknown” amount. On “Schedule C—Property Claimed as Exempt,” the Plaintiff elected the state statutory exemptions, claimed a homestead exemption in the amount of “$0,” and claimed an exemption in the TILA claims in an “unknown” amount. No objections to these claimed exemptions were filed. On September 1, 2011, the Chapter 7 Trustee filed a “Report of No Distribution” (the “No–Asset Report”), and on November 2, 2011, the Plaintiff received her discharge. The bankruptcy case was closed but this adversary proceeding remained open pending its resolution.

C. The Adversary Proceeding

The Complaint contains three specific counts for relief: Count I to enforce the Plaintiff's right to rescind the Mortgage Transaction under 15 U.S.C. § 1635(a) and to recover actual damages under 15 U.S.C. § 1640(a); Count II to recover an amount equal to twice the finance charge and the actual damages incurred, as well as attorney's fees and costs, pursuant to 15 U.S.C. § 1640(a); and Count III to disallow any proof of claim the Defendant might file.⁸

The Defendant filed the Motion to Dismiss on March 1, 2013,⁹ and the Plaintiff lodged her Objection on April 8, 2013. Following a hearing on June 19, 2013, I ordered the parties to file supplemental memoranda on the issue of retaining jurisdiction in the event jurisdiction existed on the date the action was commenced but subsequent events altered that jurisdiction. The Defendant's Supplemental Memorandum was filed on August 27, 2013, and the Plaintiff's Supplemental Memorandum on November 18, 2013.

I did not act on the Motion to Dismiss in light of the Plaintiff's statements in her Supplemental Memorandum that she was currently participating in a trial loan modification with the Defendant towards a possible overall settlement of the action. During a conference with the parties on December 2, 2013, the Plaintiff explained that she would release her claims against the Defendant and voluntarily dismiss the adversary proceeding if offered a permanent loan modification in line with the trial plan at the conclusion of the trial plan period. On December 13, 2013, I approved the parties' stipulation essentially staying the proceeding until conclusion of the trial plan in January 2014 (Doc. # 107). Things apparently went awry, and on February 4, 2014, the Defendant filed a status report advising that the Plaintiff had rejected the permanent loan modification offered and requesting a ruling on its pending Motion to Dismiss (Doc. # 109). That same day, the Plaintiff filed her own status report explaining her reasons for rejecting the Defendant's offer (Doc. # 112). The Court then took the matter under advisement.

III. DISCUSSIONA. The Court's Jurisdiction

In its Answer the Defendant admitted that this Court has jurisdiction over this adversary proceeding, and in her Objection the Plaintiff implies that the Defendant has therefore waived its jurisdictional challenge. This waiver argument fails because “parties cannot confer subject matter jurisdiction on a federal court by waiver or consent.” Quinn v. City of Boston, 325 F.3d 18, 26 (1st Cir.2003); see also Sheridan v. Michels (In re Sheridan), 362 F.3d 96, 100 (1st Cir.2004) (citing to Quinn ). Moreover, “[a] litigant generally may raise a court's lack of subject-matter jurisdiction at any time in the same civil action, even initially at the highest appellate instance.” Kontrick v. Ryan, 540 U.S. 443, 455, 124 S.Ct. 906, 157 L.Ed.2d 867 (2004) (citing Mansfield, C. & L.M.R. Co. v. Swan, 111 U.S. 379, 382, 4 S.Ct. 510, 28 L.Ed. 462 (1884)).

“The jurisdiction of the bankruptcy courts, like that of other federal courts, is grounded in, and limited by, statute.” Celotex Corp. v. Edwards, 514 U.S. 300, 307, 115 S.Ct. 1493, 131 L.Ed.2d 403 (1995). In one of the Supreme Court's more recent landmark opinions in the bankruptcy arena,Stern v. Marshall, the Court summarized the three distinct types of matters falling within the bankruptcy courts' jurisdiction:

[T]he district courts of the United States have “original and exclusive jurisdiction of all cases under title 11.” 28 U.S.C. § 1334(a). Congress has divided bankruptcy proceedings into three categories: those that “aris[e] under title 11”; those that “aris[e] in” a Title 11 case; and those that are “related to a case unde...