Wiggins v. Hudson City Sav. Bank
| Decision Date | 04 August 2015 |
| Docket Number | Adversary Proceeding No. 15-01938 (JKS) |
| Parties | Re: Wiggins v. Hudson City Savings Bank et al. |
| Court | U.S. Bankruptcy Court — District of New Jersey |
NOT FOR PUBLICATION
Andy Winchell, Esq.
45 River Road, Suite 3
Summit, New Jersey 07901
Barbara K. Hager, Esq.
Reed Smith
1717 Arch Street
Suite 3100
Philadelphia, Pennsylvania 19103
Dear Counsel:
This matter is before the Court upon the motion (the "Motion") of Hudson City Savings Bank ("Hudson City") and Wells Fargo Bank, N.A. ("Wells Fargo," together with Hudson City, collectively, the "Defendants") to dismiss the adversary complaint (the "Complaint") filed by Andre G. Wiggins and Sheila S. Bell-Wiggins (the "Debtors" or "Plaintiffs"). The Complaint seeks damages and injunctive relief for the Defendants' alleged violations of the automatic stay and Implementing Regulation X of the Real Estate Settlement Procedures Act ("RESPA"). See12 C.F.R. § 1024 (2014); 12 U.S.C. §§ 2601-17 (2012). For the reasons set forth below, the Court will grant the Defendants' Motion.
On April 30, 2007, the Debtors received a mortgage loan (the "Loan") from Wachovia Mortgage (now known as Wells Fargo Bank, N.A) for the purchase of real property located at 812 Cleveland Avenue, Scotch Plains, New Jersey (the "Property"). (Compl. at ¶ 12, ECF No. 1). In exchange for the Loan, the Debtors executed a note and gave a mortgage on the Property to Wachovia Mortgage as security. The Loan was subsequently transferred (apparently to Hudson City) and Wells Fargo retained its role as servicer of the Loan. (Id. at ¶¶ 14-15).
On July 5, 2012, the Debtors filed a joint chapter 13 petition (the "Petition") and chapter 13 plan of reorganization (the "Plan"). (Chapter 13 Plan and Motions, Main Case, ECF No. 4). Schedule D of the Petition lists the value of the Property as $500,000, subject to Wells Fargo's first mortgage in the amount of $536,324 and a second mortgage held by Bank of America, NA in the amount of $136,000. In Part 4 of the Plan, which addresses the proposed treatment of secured claims, the Debtors list the Property in the section entitled "Surrender."1 The Plan states that 2 (Id. at 4). The Plan further states that the Property is "[s]urrendered in Full Satisfaction of all claims." (Id.). On August 30, 2012, Wells Fargo filed a motion for relief from the automatic stay with respect to the Property. On September 18, 2012, the Court entered an order confirming the Plan. (Main Case, ECF No. 18).An order granting Wells Fargo's motion to vacate the automatic stay was entered four days later. (Main Case, ECF No. 20).
In July 2013, the Debtors filed a modified plan, which was confirmed on September 17, 2013, and the Debtors filed a second amended plan on January 31, 2014, which was confirmed on March 18, 2014. Both of these plans included the same language with respect to the surrender of the Property as the treatment of the secured claim under the Plan. On March 17, 2014, just prior to the hearing on confirmation of the Debtors' second amended plan, Hudson City commenced a foreclosure action (the "Foreclosure Action") against the Property in the Superior Court of New Jersey, Chancery Division, Union County, Docket No. F-009769. While the Foreclosure Action was pending, the Debtors filed a third amended plan, which this Court confirmed on September 30, 2014. Like the Debtors' previously confirmed plans, the third amended plan provided that "the stay is terminated" as to the Property and the Property was "[s]urrendered in Full Satisfaction of all claims." (Main Case, ECF No. 83).
Despite the entry of four confirmed plans (the "Confirmed Plans") providing for the surrender of the Property, in early 2015 the Debtors apparently decided that they wanted to attempt to keep the Property by submitting an application for a loan modification (the "Loan Modification") to Wells Fargo. According to the Plaintiffs, they have "had a complete loan modification application pending" since February 2015, which they assert stays Wells Fargo from "commencing or advancing proceedings against the Debtor's home." (Compl. at ¶¶ 22-23).
On February 26, 2015, the Debtors received a letter (the "Denial Letter") indicating that they were not eligible for any loss mitigation programs because Wells Fargo did not "have thecontractual authority to modify [the Debtors'] loan because of limitations in our servicing agreement" and because "[a]ny available mortgage assistance programs would conflict with the terms of your current bankruptcy plan or increase your payment." (Id., Ex. A). About a week later, the Debtors received notice that a sheriff's sale of the Property had been scheduled. (Id. at ¶ 26). On April 21, 2015, the Debtors sent Wells Fargo a notice of error (the "Notice of Error") pursuant to 12 C.F.R. § 1024.35(b) asserting that Wells Fargo "failed to provide accurate information to a borrower for loss mitigation options and foreclosure, as required by the early intervention provisions of Sec. 1024.39." (Id., Ex. C). The Defendants then adjourned the sheriff's sale.
On May 18, 2015, the Debtors filed the Complaint seeking damages and injunctive relief against the Defendants for alleged violations of the automatic stay and RESPA. Count One of the Complaint asserts that Hudson City knowingly violated the automatic stay by failing to obtain stay relief from this Court before initiating the Foreclosure Action and seeks actual and punitive damages pursuant to section 362(k) of the Bankruptcy Code. Count Two seeks entry of injunctive relief preventing the Defendants from continuing any foreclosure proceedings against the Property and related declaratory relief. Finally, Count Three asserts that the Defendants violated RESPA and Implementing Regulation X by continuing to pursue the foreclosure and sheriff's sale while the Loan Modification was pending and by failing to adequately respond to the Plaintiffs' Notice of Error. The Defendants filed the Motion to dismiss the complaint in its entirety on June 17, 2015. (Mot. to Dismiss Pls.' Adversary Compl., ECF No. 4).
Federal Rule of Civil Procedure 12(b)(6), made applicable to this adversary proceeding by Federal Rule of Bankruptcy Procedure 7012, provides that a motion to dismiss may be granted if the complaint fails "to state a claim upon which relief can be granted." Fed. R. Civ. P. 12(b)(6); Fed. R. Bankr. P. 7012. A complaint is sufficiently pled as long as it provides the opposing party with notice of claims against it and includes "a short and plain statement of the claim showing that the pleader is entitled to relief." Fed. R. Civ. P. 8(a)(2). In considering a 12(b)(6) motion to dismiss, courts must "accept all factual allegations as true, construe the complaint in the light most favorable to the plaintiff, and determine whether, under any reasonable reading of the complaint, the plaintiff may be entitled to relief." Phillips v. County of Allegheny, 515 F.3d 224, 233 (3d Cir. 2008) (internal citations and quotations omitted). However, factual allegations "must be enough to raise the right to relief above the speculative level" and "should 'plausibly suggest[ ]' that the pleader is entitled to relief." Wilkerson v. New Media Tech. Charter Sch. Inc., 522 F.3d 315, 322 (3d Cir. 2008) (citing Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 557 (2007)). A claim is implausible in the context of a Rule 12(b)(6) motion to dismiss if its allegations "are too conclusory or the complaint fails to include essential facts about the elements of a claim." In re Neale, 440 B.R. 510, 518 (Bankr. W.D. Wis. 2010).
The Plaintiffs assert that Hudson City violated the automatic stay by commencing the Foreclosure Action without first obtaining an order from the Court specifically granting it stay relief with respect to the Property. Section 362(a) of the Bankruptcy Code stays:
11 U.S.C. § 362(a)(1) and (6). It is well established that the automatic stay prevents the commencement or continuation of foreclosure proceedings against property of the bankruptcy estate. See In re Littke, 105 B.R. 905, 910 (Bankr. N.D. Ind. 1989). Willful violations of the automatic stay may render a defendant liable for actual or punitive damages and fees and costs pursuant to section 362(k). See 11 U.S.C. § 362(k) (). "To succeed on a 'willful' stay-violation claim, the debtor must prove: (1) a violation of the stay occurred; (2) the creditor had knowledge of the bankruptcy case when acting; and, (3) theviolation caused actual damages." Linsenbach v. Wells Fargo Bank (In re Linsenbach), 482 B.R. 522, 526 (Bankr. M.D. Pa. 2012).
The Plaintiffs assert that Hudson City is liable for intentionally violating the automatic stay because the only entity that obtained stay relief with respect to the Property was Wells Fargo. The Plaintiffs claim that the provisions of the Confirmed Plans and this Court's order granting Wells Fargo relief from the stay do not extend to any other party, including any successors or...
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