White-Lett v. NewRez, Inc.

• Docket Number: CIVIL ACTION FILE NO. 4:22-cv-00082-WMR
• Decision Date: 20 April 2024
• Citation: White-Lett v. NewRez, Inc., 661 B.R. 63 (N.D. Ga. 2024)
• Parties: Shirley WHITE-LETT, Debtor/Appellant, v. NEWREZ, INC., The Bank of New York Mellon, Shellpoint Mortgage Servicing, The Bank of New York Mellon Corp., and RRA CP Opportunity Trust 1, Appellees.
• Court: U.S. District Court — Northern District of Georgia

661 B.R. 63

Shirley WHITE-LETT, Debtor/Appellant, v. NEWREZ, INC., The Bank of New York Mellon, Shellpoint Mortgage Servicing, The Bank of New York Mellon Corp., and RRA CP Opportunity Trust 1, Appellees.

CIVIL ACTION FILE NO. 4:22-cv-00082-WMR

United States District Court, N.D. Georgia, Rome Division

Signed April 20, 2024

Heather L. Fesnak, Pro Hac Vice, Akerman LLP, Tampa, FL, for Appellee NewRez, Inc.

Alan Michael Hurst, Idaho Office of the Attorney General, Boise, ID, Jeremy Patrick Burnette, Akerman LLP, Atlanta, GA, for Appellee The Bank of New York Mellon.

Chandler Thompson, Akerman LLP, Salt Lake City, UT, for Appellee Shellpoint Mortgage Servicing.

William Oxford Tate, McCalla Raymer Liebert Pierce LLC, Roswell, GA, for Appellee RRA CP Opportunity Trust 1.

ORDER¹

WILLIAM M. RAY, II UNITED STATES DISTRICT JUDGE.

In 2005, Appellant Shirley White-Lett executed an adjustable rate note in the amount of $636,000 to refinance the mortgage on her home. She also executed a note for a $79,500 line of credit. Both loans were secured by deeds on Appellant's home. Appellant later filed for Chapter 7 bankruptcy in 2010, and shortly after the bankruptcy case closed in 2012, Appellant stopped making mortgage payments on her home. She has now lived there for over 11 years without making a mortgage payment. How has she managed to avoid foreclosure for more than a decade? By suing any entity that she imagines may have been involved with her mortgage in any way, at any time. This Order resolves just one of Appellant's many disputes.

I. Background

The Court's Order addresses Appellant Shirley White-Lett's ("Appellant") pending appeals from the Bankruptcy Court's orders in adversary proceeding number 20-06278-bem (the "Adversary Proceeding"). Appellant has two appeals pending in this Court from the Adversary Proceeding, which are represented in this Court by case numbers 4:22-cv-00082-WMR ("First Appeal") and 1:23-cv-02327-WMR ("Second Appeal"). This Order resolves all claims in Appellant's two appeals from the Adversary Proceeding.

The Adversary Proceeding relates to Appellant's chapter 7 bankruptcy case, filed in Bankruptcy Court as case number 10-61451-bem (the "Bankruptcy Case"). For the sake of clarity, the Court will discuss the relevant background of the Bankruptcy Case and the Adversary Proceeding. However, as further discussed in the Analysis section, infra, this Court's appellate jurisdiction is limited to review of only those orders from the Adversary Proceeding that Appellant properly appealed to this Court.

For ease of reference, the Court has taken judicial notice of the entire records in both the Bankruptcy Case and the Adversary Proceeding, as it may with the records of inferior courts. See U.S. v. Rey, 811 F.2d 1453, 1457 n.5 (11th Cir. 1987). ("A court may take judicial notice of its own records and the records of inferior courts."). Accordingly, the Court cites directly to documents in the Bankruptcy Case and the Adversary Proceeding rather than the records provided to this Court for purposes of appeal.²

A. The Origins of Appellant's Appeals

In 2005, Appellant signed an adjustable rate note in exchange for a $636,000 loan from Aegis Wholesale Corporation ("AWC"). [AP Doc. 9 at 179]. She also signed another note in exchange for a $79,500 loan from AWC. [Id. at 36]. These notes were secured by two security deeds that encumbered Appellant's real property, located at 456 North Saint Mary's Lane in Marietta, Georgia (the "Residential Property"). [Id. at 68] (the "Senior Security Deed"); [Id. at 195] (the "Junior Security Deed"). Mortgage Electronic Registration Systems, Inc. ("MERS"), acting as a nominee for AWC's successors and assigns, was the named beneficiary on both security deeds. [Id.].

In 2010, Appellant initiated the Bankruptcy Case by filing a voluntary petition for Chapter 7 bankruptcy. [BC Doc. 1]. Appellant was granted a discharge in 2011, and the Bankruptcy Case was closed in 2012. [BC Doc. 23; BC Doc. 26].

In 2013, after the Bankruptcy Case closed, MERS assigned the Senior Security Deed to The Bank of New York Mellon ("BoNYM"). [AP Doc. 9 at 89]. Later, in 2017, MERS assigned the Junior Security Deed to RRA CP Opportunity Trust 1 ("RRA"). [Id. at 206].

As it relates to MERS's assignment of the Senior Security Deed to BoNYM, Appellant first contested that assignment in Cobb County Superior Court in 2013 (the "Cobb County Action"). In the Cobb County Action, Appellant asserted claims for breach of contract, wrongful foreclosure, negligence, fraud, civil conspiracy, violation of the Georgia Residential Mortgage Act, violation of the Georgia Fair Business Practices Act, quiet title, slander of title, and declaratory judgment. [AP Doc. 157-2 at 2]. Appellant specifically alleged: (1) that MERS was acting solely as a nominee for AWC and thus had no authority to assign the Senior Security Deed on its own; (2) that AWC's 2007 bankruptcy and dissolution terminated MERS's power thereafter to act on behalf of AWC; (3) that AWC never transferred Appellant's adjustable rate note to BoNYM; (4) that BoNYM's copy of the adjustable rate note filed in the Bankruptcy Case in 2010 was not validly indorsed; and (5) that BoNYM's copy of the adjustable rate note filed in the Bankruptcy Case in 2010 was forged. [AP Doc. 72 at 27-36; AP Doc. 157-2 at 15 n.8].

The Cobb County Superior Court dismissed all of Appellant's claims, holding that Appellant's attempts to challenge the validity of the subject debt were barred by the doctrine of res judicata because Appellant obtained a bankruptcy discharge of the debt. [AP Doc. 9 at 190]. The court also found that BoNYM held the Senior Security Deed and, because she was a borrower, Appellant lacked standing to challenge MERS's assignment of the Senior Security Deed. [Id. at 190-91]. Finally, the court held that the party that holds a security deed—here, BoNYM—may foreclose regardless of whether that party also holds the promissory note. [Id. at 190]. The court's dismissal order was affirmed by the Georgia Court of Appeals on November 10, 2015. [AP Doc. 102-2 at 2].

In March of 2020, the Bankruptcy Case was reopened upon Appellant's request so that she could file a separate adversary proceeding. See [BC Doc. 36]. After the case was reopened, a trustee was reappointed to determine whether any assets were available for administration, a claims bar date was set, and RRA and BoNYM filed proofs of claim related to the Junior and Senior Security Deeds. See [BC Doc. 41; BC Doc. 61; AP Doc. 67 at 4; AP Doc. 9 at 3]. Plaintiff then initiated the Adversary Proceeding, primarily "as a defense and objection to the Proof of Claim filed by BoNYM." [AP Doc. 9 at 37].

B. Background of the Adversary Proceeding (20-06278-bem)

In December 2020, Appellant commenced the Adversary Proceeding by filing a complaint against Bank of New York Mellon, Corp. ("BoNYMC"), Bank of America, N.A. ("BoA"), Federal National Mortgage Association a/k/a Fannie Mae ("Fannie Mae"), Federal Home Loan Mortgage Corp. a/k/a Freddie Mac ("Freddie Mac"), MERS, and RRA. [AP Doc. 1]. Appellant later amended her complaint to add as defendants BoNYM and Merscorp Holdings, Inc. ("MERSCorp"). [AP Doc. 9].

While Appellant's complaint in the Adversary Proceeding contained many allegations, her complaint focused primarily on BoNYM's proof of claim related to the Senior Security Deed. See [AP Doc. 9]. With regard to BoNYM specifically, Appellant sought (1) damages for alleged discharge injunction violations by one of BoNYM's former servicers; (2) to disallow BoNYM's proof of claim; (3) avoidance of BoNYM's purported lien on Appellant's Residential Property; (4) a declaration that BoNYM could not enforce the Senior Security Deed because it "failed to establish a complete chain of title and that the note at issue herein is unsecured;" and (5) an injunction prohibiting BoNYM from foreclosing on the Senior Security Deed. [Id. at 35].

In addition to her claims against BoNYM, Appellant brought declaratory judgment claims against Fannie Mae, Freddie Mac, and BoA, seeking declarations that each of those parties could not enforce the Senior Security Deed. [Id. at 35]. Appellant also brought a declaratory judgment claim against MERS, seeking a declaration that MERS had no rights or interests in the Senior Security Deed and did not validly assign any rights in the Senior Security Deed to any other parties. [Id. at 35-36]. Finally, Appellant brought a declaratory judgment claim against RRA, alleging that RRA had no valid and enforceable interest in the Junior Security Deed because it received an invalid and void assignment from MERS. [Id. at 36-37].

In short order, the defendants began filing motions to dismiss Appellant's claims against them in the Adversary Proceeding. The following defendants, whose dismissals were not immediately appealed to this Court, were dismissed as follows:

• RRA was dismissed after the Bankruptcy Judge recommended that RRA's motion to dismiss be granted, finding that MERS's assignment of the Junior Security Deed to RRA was valid and that Appellant lacked standing to challenge that assignment. [AP Doc. 67 at 9-19]. This Court adopted the Bankruptcy Judge's recommendation in case number 1:21-cv-02471-WMR, thereby dismissing RRA from the Adversary Proceeding. See [Doc. 2], White-Lett v. The Bank of New York Mellon, Corp. et al, No. 1:21-cv-02471-WMR (N.D. Ga. filed June 17, 2021).

• Fannie Mae was dismissed from the Adversary Proceeding after its motion to dismiss was granted. See [AP Doc. 14; AP Doc. 79]. Specifically, the Bankruptcy Court held that Appellant lacked standing to seek declaratory relief against Fannie Mae under both the Constitution and the Bankruptcy Code. [AP Doc. 79 at 14].

• MERS and MERSCorp were dismissed from the Adversary Proceeding after their motion to dismiss was granted. See [AP Doc. 42; AP Doc. 121]. Specifically, the Bankruptcy Court held that Appellant had not presented justiciable

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