Velardi v. Countrywide Bank, FSB (In re Velardi)

• Decision Date: 24 February 2016
• Docket Number: Adversary Number: 5–15–ap–00126 RNO,Case Number: 5–15–bk–02449 RNO
• Parties: In re: Teresa Velardi, Debtor(s). Teresa Velardi, Plaintiff(s) v. Countrywide Bank, FSB; Mortgage Electronic Registration Systems, Inc.; Bank of America, N.A.; Rushmore Loan Management Services LLC; Wilmington Savings Fund Society, FSB dba Christiana Trust, as Trustee for Pretium Mortgage Acquisition Trust; Phelan Hallinan Diamond & Jones LLP, Defendant(s).
• Court: United States Bankruptcy Courts. Third Circuit. U.S. Bankruptcy Court — Middle District of Pennsylvania

547 B.R. 147

In re: Teresa Velardi, Debtor(s).

Teresa Velardi, Plaintiff(s)

v.Countrywide Bank, FSB; Mortgage Electronic Registration Systems, Inc.; Bank of America, N.A.; Rushmore Loan Management Services LLC; Wilmington Savings Fund Society, FSB dba Christiana Trust, as Trustee for Pretium Mortgage Acquisition Trust; Phelan Hallinan Diamond & Jones LLP, Defendant(s).

Case Number: 5–15–bk–02449 RNO

Adversary Number: 5–15–ap–00126 RNO

United States Bankruptcy Court, M.D. Pennsylvania.

Signed February 24, 2016

Teresa Velardi, Clarks Summit, PA, pro se.

Samantha J. Chugh, Reed Smith LLP, Lois Marie Vitti, Louis P. Vitti, Vitti & Vitti & Associates PC, Pittsburgh, PA, Robert E. Warring, Reed Smith LLP, Philadelphia, PA, for Defendant(s).

OPINION¹

Robert N. Opel, II

, Bankruptcy Judge

The Debtor, a Pro Se Plaintiff, commenced an Adversary Proceeding seeking to rescind her mortgage loan and obtain criminal relief against the Defendants under the federal Truth in Lending Act. For the reasons stated herein, I will grant the Motion to Dismiss Adversary Proceeding filed by the first group of Defendants. The Motion to Dismiss Adversary Proceeding filed by the second group of Defendants will be denied because that Motion was not served upon the Plaintiff.

I. JURISDICTION

The statutory bases for Bankruptcy Court jurisdiction are set forth in 28 U.S.C. § 1334 (2005)

and 28 U.S.C. § 157 (2005). The District Court has initial, exclusive jurisdiction over all civil proceedings arising under the Bankruptcy Code, or arising in or related to cases under the Bankruptcy Code. Further, 28 U.S.C. § 157(a) provides that bankruptcy cases shall be referred to the bankruptcy judges in the respective district. Bankruptcy judges may make final decisions in cases arising under Title 11. Bankruptcy judges also generally have the authority to make final decisions concerning "core proceedings" which arise in a bankruptcy case. Core proceedings are listed in 28 U.S.C. § 157(b)(2) and include "determinations of the validity, extent, or priority of liens." 28 U.S.C. § 157(b)(2)(K).

A bankruptcy judge has less authority concerning the adjudication of what is referred to as a non-core proceeding. In those matters, the bankruptcy judge submits proposed findings of fact and conclusions of law to the district court for de novo review. 28 U.S.C. § 157(c)(1)

. The statute further provides that, with the consent of all the parties to the proceeding, the district court may refer a non-core, related case to the bankruptcy judge to make a final judgment. 28 U.S.C. § 157(c)(2).

At the time of oral argument on the subject Motions to Dismiss, I questioned the parties as to whether or not they would consent to my entry of a final judgment in this Adversary Proceeding. Teresa Velardi, the Plaintiff ("Debtor"), responded that she would consent to the entry of a final judgment by the Bankruptcy Court, but further argued that consent was not required because the subject Adversary Proceeding—which seeks the rescission of her mortgage—is a core proceeding under 28 U.S.C. § 157(b)(2)(K)

. Counsel for Countrywide Bank, FSB, Mortgage Electronic Registration Systems, Inc., Bank of America, N.A., and Phelan Hallinan Diamond & Jones, LLP (collectively "BOA") indicated that it did not consent to the entry of a final judgment by the Bankruptcy Court. Counsel for Rushmore Loan Management Services LLC and Wilmington Savings Fund Society, FSB d/b/a Christiana Trust, as Trustee for Pretium Mortgage Acquisition Trust (collectively "Rushmore") indicated that it did not consent to the entry of a final judgment by the Bankruptcy Court.

An adversary proceeding which seeks to avoid a mortgage on the debtor's property is a core proceeding pursuant to 28 U.S.C. § 157(b)(2)(K)

. In re Meyer, 379 B.R. 529, 536 n. 1 (Bankr.E.D.Pa.2007) ; In re Cruz, 441 B.R. 23, 26 n. 4 (Bankr.E.D.Pa.2004) ; In re Armstrong, 288 B.R. 404, 409 n. 1 (Bankr.E.D.Pa.2003) ; In re Smith, 300 B.R. 828, 829–30 (Bankr.M.D.Ga.2003) (truth in lending rescission claim a core proceeding).

I recognize that the bankruptcy court may issue final orders and judgments in non-core proceedings only if all parties consent. In re Mullarkey, 536 F.3d 215, 221 n. 6 (3d Cir.2008)

; In re Miller, 467 B.R. 677, 682 (Bankr.D.Mass.2012) ; In re Bartock, 398 B.R. 135, 152 (Bankr.W.D.Pa.2008). However, in this case, I conclude that the subject Adversary Proceeding is a core proceeding under 28 U.S.C. § 157(b)(2)(K). Therefore, I have the authority to enter a final judgment without the consent of all the parties.

II. FACTS AND PROCEDURAL HISTORY

The Debtor filed a Voluntary Petition under Chapter 7 of the Bankruptcy Code on June 8, 2015. The Debtor is a self-represented party who is appearing without the assistance of legal counsel. Included in the completed bankruptcy schedules is Schedule A—Real Property. The Debtor scheduled as an asset a residential property in Clarks Summit, Pennsylvania with a stated value of $180,000.00 ("Real Estate"). The Debtor obtained a Chapter 7 bankruptcy discharge on October 16, 2015. On January 21, 2016, the Chapter 7 Trustee filed a Report of No Distribution. The Debtor's Chapter 7 case remains open at this writing.

This Adversary Proceeding was commenced by a Complaint filed by the Debtor on August 13, 2015. The Complaint contains more than eighty numbered paragraphs and was accompanied by a number of exhibits labeled A through F. The Complaint alleges that on May 15, 2015, the Debtor mailed a notice of rescission to BOA and to Rushmore. Complaint, August 13, 2015, ECF No. 1, p. 3, ¶ 7. In sum, the Complaint alleges that on January 8, 2008, the Debtor refinanced a mortgage on the Real Estate and received a loan in the face amount of $176,750.00. The first portion of Exhibit B is a copy of a Promissory Note dated January 8, 2008, in the face amount of $176,750.00 and bearing the signature of the Debtor. The latter portion of Exhibit B to the Complaint is a copy of a Mortgage dated January 8, 2008, in the face amount of $176,750.00 encumbering the Real Estate ("Mortgage"). The Mortgage also bears the Debtor's signature.

The gravamen of the Complaint is that pursuant to the Federal Truth in Lending Act, 15 U.S.C. § 1601, et seq.

("TILA"), the Debtor effectively rescinded the Mortgage on the Real Estate. In part, the Complaint alleges that the mortgage loan was never consummated. Complaint, August 13, 2015, ECF No. 1, p. 20, ¶¶ 61–64. Additionally, the Complaint further alleges criminal liability against BOA and Rushmore for alleged willful and knowing violations of TILA. Finally, the Complaint seeks statutory damages, repayment of sums paid by the Debtor on account of the Mortgage, and the award of costs and reasonable attorney's fees.

Pursuant to Federal Rule of Evidence 201

, I take judicial notice of the docket in this Adversary Proceeding and the docket in the underlying Voluntary Chapter 7 Proceeding commenced by the Debtor.

On September 14, 2015, BOA filed its Motion to Dismiss Adversary Proceeding which was accompanied by a supporting Memorandum. BOA certified that it served its Motion to Dismiss and supporting Memorandum on the other parties to the action. On September 29, 2015, Rushmore filed its Motion to Dismiss Adversary Proceeding, accompanied by a supporting Memorandum of Law. The docket in the Adversary Proceeding does not reflect service of Rushmore's Motion to Dismiss or its Memorandum of Law on the other parties to the Adversary Proceeding. Both Motions maintain that this action is untimely under TILA. Further, BOA's Motion maintains that the Debtor's action is barred by the doctrine of res judicata and by the Rooker–Feldman doctrine. BOA also maintains that there is no private right of action for criminal liability under TILA.

Briefs have been submitted in support of and in opposition to the Motions to Dismiss and oral argument was held on January 28, 2016, making the Motions to Dismiss ripe for decision.

III. DISCUSSION

A. Review of a Pro Se Pleading

A pro se party represents herself in a court proceeding without the assistance of a lawyer. Black's Law Dictionary, p. 1416 (10th ed.2014).

The pleadings of pro se litigants are construed somewhat liberally. Such pleadings "however inartfully pleaded, ... are held to less stringent standards than formal pleadings drafted by lawyers." Haines v. Kerner, 404 U.S. 519, 520–21, 92 S.Ct. 594, 596, 30 L.Ed.2d 652 (1972)

; United States v. Otero, 502 F.3d 331, 334 (3d Cir.2007). However, "a court need not credit a complaint's bald assertions or legal conclusions." Burrell v. Ross, 2013 WL 3097320, *3 (M.D.Pa., June 18, 2013), (citing Morse v. Lower Merion Sch. Dist., 132 F.3d 902, 906 (3d Cir.1997) ). Further, the relaxed review of pleading formalities does not excuse a lack of legal knowledge or legal resources. U.S. v. Sosa, 364 F.3d 507, 512 (4th Cir.2004) (a pro se litigant's misconception about the operation of the statute of limitations does not warrant equitable tolling of the limitation period).

Based upon the above, I will review the formalities of the Debtor's Complaint with a relaxed standard consistent with the above authority.

B. Debtor's Waiver of Defenses Argument

At oral argument, the Debtor argued that BOA and Rushmore waived their defenses to the Complaint because their Motions to Dismiss were filed after the reply date stated in the Summons. It is true that failure to raise an affirmative defense in a responsive pleading generally results in a waiver of that defense. However, even that general rule is subject to exceptions. Charpentier v. Godsil, 937 F.2d 859, 863–64 (3d Cir.1991)

; Drippe v. Gototweski, 434 Fed.Appx. 79, 81 (3d Cir.2011). In this Adversary Proceeding, no scheduling order has been issued setting a deadline for filing dispositive motions. Further, the Debtor did not seek a judgment by default against either BOA or Rushmore. The adversary Summons set a response date of September 13, 2015. The Motion to Dismiss by BOA was filed on ...