KEVIN J. CAREY, UNITED STATES BANKRUPTCY JUDGE
Molly S. White and Ralph N. White (the "Whites") filed the above-captioned adversary proceeding against the Debtors by filing a complaint to determine dischargeability of debt (the "Complaint"), which contains twelve counts
On December 15, 2010, the New Century Liquidating Trust (the "Trust"), by and through Alan M. Jacobs, the New Century Liquidating Trustee (the "Trustee"), moved to dismiss the Complaint (the "Motion to Dismiss) (Adv. D.I. 10). By Memorandum and Order dated June 7, 2011, I granted the Motion to Dismiss, in part, by dismissing Counts II, VIII and XII of the Complaint for lack of subject matter jurisdiction. The remainder of the Motion to Dismiss was denied. (D.I. 59 and D.I. 60). White v. New Century TRS Holdings, Inc. (In re New Century TRS Holdings, Inc.), 450 B.R. 504 (Bankr.D.Del.2011) (the "Dismissal Decision").
Count II of the Complaint sought rescission of the Mortgage for violations of the Truth in Lending Act, 15 U.S.C. § 1601 et seq. ("TILA"). Count VIII of the Complaint sought declaratory judgment that the Debtors' actions were fraudulent and violated the Bankruptcy Code and Florida's Uniform Fraudulent Transfer Act, thereby permitting the Mortgage to be cancelled. Count XII of the Complaint, entitled "Equitable Tolling," sought "rescission of the loan and the cancellation of the security interest...."
In the Dismissal Decision, I determined that the Rule 12(b)(1) motion presented a factual challenge to jurisdiction. New Century, 450 B.R. at 509. When reviewing a factual challenge to jurisdiction, a court may consider evidence outside the pleadings, including affidavits, depositions and testimony, to resolve any factual issues bearing on jurisdiction. Gould Elec. Inc. v. United States, 220 F.3d 169, 176 (3d Cir.2000) holding modified on other grounds by Simon v. United States, 341 F.3d 193, 204 (3d Cir.2003); Walker v. United States, Civ. No. 11-866, 2013 WL 5890270, *3 (D.Del. Oct. 31, 2013). The court "is not confined to the allegations of the complaint, and the presumption of truthfulness does not attach to the allegations in the complaint." Walker, 2013 WL 5890270, *3 quoting Shahin v. Delaware Dept. Of Fin., Civ. No. 10-188-LPS, 2012 WL 1133730, *3 (D.Del. Mar. 30, 2012).
When deciding the subject matter jurisdiction challenge, I considered: (i) allegations
New Century, 450 B.R. at 510.
The Whites filed a motion for reconsideration of the Dismissal Decision, arguing that, despite the allegations they included in their Complaint, the Court should consider certain evidence that directly contradicts those allegations and the statements in the Walker Declarations and should conclude that the Debtors did not transfer their interest in the Mortgage Loan prior to filing bankruptcy (the "Motion for Reconsideration") (D.I. 61). Intertwined with the Motion for Reconsideration are other motions and pleadings filed by the Whites, including a Motion to Compel Discovery (D.I. 47) and a Request for Judicial Notice (D.I. 111), which also assert that the Debtors did not transfer their interest in the Mortgage Loan pre-petition.
For the reasons set forth below, the Whites' Motion to Compel Discovery and Motion for Reconsideration will be denied and the Request for Judicial Notice will be granted in part and denied in part.
Federal Rule of Bankruptcy Procedure 9023, which incorporates Fed.R.Civ.P. 59, governs motions for reconsideration. Fed.R.Civ.P. 59(e). A motion to alter or amend a judgment under Rule 59(e) must be grounded on (1) an intervening change in controlling law; (2) the availability of new evidence; or (3) the need to
The crux of the Whites' argument for reconsideration of the Dismissal Decision is that the Court overlooked available evidence and should consider new evidence demonstrating that the Debtors did not transfer their interest in the Whites' Mortgage Loan prior to filing bankruptcy. The Whites argue that their Mortgage Loan is an asset of the Debtors' bankruptcy estate, and this Court has jurisdiction to consider the Rescission and Cancellation Claims. To support their argument, the Whites rely (at least in part) on the Motion to Compel Discovery and the Request for Judicial Notice. Therefore, I will consider those motions before the Motion for Reconsideration.
While the Trustee's Motion to Dismiss was pending, the parties continued with discovery related to the Whites' Complaint. The Whites filed a Motion to Compel Discovery (D.I. 47), arguing that the Trustee failed to respond properly and asserted unreasonable objections to their discovery requests. The Trustee filed a response opposing the Motion to Compel Discovery (D.I. 56). At a hearing May 23, 2012, Mr. White stated that he was seeking only one document—a power of attorney from the Debtors to Countrywide Home Loans, Incorporated ("Countrywide") (Tr. 5/23/2012, D.I. 94, at 19:17-24).
On June 1, 2012, the Trustee filed a "Certification of Counsel Regarding Plaintiff's Motion to Compel Discovery" (D.I. 96) (the "COC"), stating that the Trustee searched his files and provided the Whites with two powers of attorney between the Debtors and Countrywide (the "Countrywide Powers of Attorney"). The Trustee also noted that it had not provided those documents in response to the Whites' original document request because the original request sought a power of attorney applicable to the Whites' Mortgage Loan, and the Trustee could not determine whether the Countrywide Powers of Attorney were related in any way to the Whites' Mortgage Loan. The Whites filed an objection to the COC (D.I. 100), arguing that the COC did not adequately explain why the
Upon consideration of the foregoing, I conclude that the Whites' Motion to Compel Discovery should be denied. The Trustee has complied fully and reasonably with the Whites' request. I am satisfied with the Trustee's certifications regarding the sufficiency of his search efforts in connection with the original document request and Mr. White's request made at the May 23, 2012 hearing for any Countrywide powers of attorney.
On August 23, 2012, the Whites filed a Request for Judicial Notice Pursuant to Federal Rules of Evidence 201 (the "Request for Judicial Notice") in both this adversary case and the main bankruptcy case. (D.I. 111, Main Case D.I. 11011). The Whites asked this Court to take judicial notice of certain case law and treatises, documents filed with the Clerk of the Court's Office in Volusia County, Florida, publications of the National Bureau of Economic Research, a filing with the Security and Exchange Commission, "findings of fact" in the Dismissal Decision, the Trustee's response to the Whites' Requests for Admissions, documents filed in the main bankruptcy case, and testimony of the Trustee and Debtors' counsel offered at hearings on various motions in the main bankruptcy case. The Trustee filed a response to the Request for Judicial Notice (Main Case D.I. 11021) (the "JN Response"), objecting to many of the Whites' requests.
The Whites' Request for Judicial Notice will be granted, in part, and denied, in part, as follows:
With the foregoing resolved, I now return to the Motion for Reconsideration. After the Motion to Compel was filed, the Whites filed a "Letter to the Court" (the "Letter") (D.I. 99) further explaining their position that the Debtors' interest in the Mortgage Loan was not transferred pre-petition.
In deciding to dismiss the Rescission and Cancellation Claims for lack of subject matter jurisdiction, I relied upon allegations made by the Whites in their Complaint and upon the Walker Declarations filed by the Trustee and determined that the Debtors' interest in the Mortgage Loan was transferred pre-petition. In the Motion for Reconsideration, the Whites argue that: (i) the Walker Declarations are unreliable for lack of personal knowledge or as hearsay; and (ii) new evidence contradicts the Complaint's allegations and the Walker Declarations regarding the timing of the Debtors' transfer of the Mortgage Loan.
In their response to the Trustee's Motion to Dismiss, the Whites argued
The Whites also look to various sources, some provided during discovery, as evidence that the Debtors did not transfer their interest in the Mortgage Loan pre-bankruptcy. The Whites rely on certain findings in the Final Report of Michael J. Missal Bankruptcy Court Examiner, dated February 29, 2008, (main case D.I. 5518), about the number of loans that investors refused to accept from the Debtors because the loan files lacked the necessary documents. (See D.I. 65 at 5).
The Whites also rely on state court filings as evidence that the Mortgage Loan was not transferred pre-bankruptcy. First, the Whites point to a complaint was filed in the Circuit Court for Volusia County, Florida (the "State Court") by Deutsche Bank National Trust Company as Trustee for Morgan Stanley ABS Capital I Inc. Trust 2006-NC5, Mortgage Pass-Through Certificates, Series 2006-NC5 ("Deutsche Bank") against the Whites, which asserted two claims: (i) re-establishment of the lost promissory note; and (ii) mortgage foreclosure (the "Mortgage Foreclosure Complaint").
The Whites also assert that the Assignment of Mortgage, assigning the Whites' Mortgage to Deutsche Bank by Countrywide, as "attorney-in-fact" for NCMC, was executed on November 8, 2011, and filed with the Volusia County Clerk of Court's Office on November 23, 2011, thus proving that transfer did not occur until more than four years after the Debtors filed bankruptcy. (See D.I. 78, D.I. 89).
The Whites also argue that the State Court Filings provide evidence of flaws in the chain of assignment of the Note and Mortgage from NCMC to the Deutsche Bank. The Whites claim that the Morgan Stanley ABS Capital I Inc. Trust 2006-NC5, Mortgage Pass-Through Certificates, Series 2006-NC5 (the "Trust") was not a valid trust under New York law that could take delivery of the Mortgage Loan at the time of the Debtors' transfer. (D.I. 108). The Whites further question the authority of Countrywide to act as attorney-in-fact for NCMC. (Id.). Any challenges to the rights and claims of the third parties, or to the validity or effectiveness of the third parties' filings, must be addressed by a court with appropriate jurisdiction over those third parties.
The Trustee points out, however, that the State Court already determined that Deutsche Bank is the proper holder of the Mortgage Loan by granting Summary Final Judgment of Foreclosure in favor of Deutsche Bank on January 11, 2012, and specifically finding that "[t]he original promissory note [was] presented and delivered to the Court." (D.I. 103, Ex. B).
"Congress has specifically required all federal courts to give preclusive effect to state-court judgments whenever the courts of the State from which the judgments emerged would do so." Youssef v. Dept. of Health and Senior Serv., 524 Fed.Appx. 788 (3d Cir.2013) quoting Allen v. McCurry, 449 U.S. 90, 96, 101 S.Ct. 411, 66 L.Ed.2d 308 (1980). Florida courts have recognized that "[c]ollateral estoppel is a complete defense to the relitigation of an issue when there is an identity of parties or their privies, an identity of issues and an actual litigation thereof in the first suit. Southeastern Fidelity Ins. Co. v. Rice, 515 So.2d 240, 242 (Fla.4th Dist.Ct.App. 1987). When deciding whether there was an "identity of parties or their privies," the Rice Court determined that "privity is defined as `mutual or successive relationships to the same right of property, or such an identification of interest of one person with another as to represent the same legal right.'" Id. quoting Black's Law Dictionary 1079 (5th ed. 1979). Here, the Florida State Court has already decided that a valid transfer of the Mortgage Loan occurred. The Debtors and Deutsche Bank meet the "identity of parties" requirement by their successive relationship to the same property, i.e., the Mortgage Loan. Accordingly, the Whites' current claims as to the invalidity of the
The Whites argue that the Mortgage Foreclosure Complaint was filed in violation of the automatic stay and, therefore, the Summary Final Judgment of Foreclosure is void ab initio. The automatic stay bars actions against a debtor, a debtor's property or property of the estate. 11 U.S.C. § 362(a). Deutsche Bank filed the Mortgage Foreclosure Complaint against the Whites to enforce its rights under the Note and Mortgage. There is no basis for finding that the automatic stay arising from the Debtors' bankruptcy filing was applicable to the Mortgage Foreclosure Complaint.
Neither the Debtors nor the Trustee have claimed any interest in the Whites' Mortgage Loan. Quite to the contrary, the Trustee has disavowed—consistently—any property interest in the Whites' Mortgage Loan. The Whites have not provided any "new evidence" to alter my conclusion that the Debtors transferred their interest in the Mortgage Loan prepetition. The Whites' Rescission and Cancellation Claims implicate only the rights of third parties who are not before this Court. As I have written previously with respect to other pro se claimants in this case:
Carr v. New Centtuy TRS Holdings, Inc. (In re New Century TRS Holdings, Inc.), Adv. No. 09-52251, 2011 WL 6097910, *3 (Bankr.D.Del. Dec. 7, 2011) (footnotes omitted).
After consideration of the evidence and arguments presented by the Whites, I conclude that they have not demonstrated a valid basis to reconsider dismissal of the
For the reasons set forth above, the Motion to Compel Discovery will be denied, the Request for Judicial Notice will be granted, in part, and denied, in part, and the Motion for Reconsideration will be denied. An appropriate order follows.
Although the Note and Mortgage appear to be signed by the Whites, the Complaint states that "Nothing in this Complaint should be construed that Plaintiffs [the Whites] concedes to or otherwise acknowledges [sic] that the signatures on any documents referenced or attached hereto to be authentic and those belonging to the Plaintiffs. The Plaintiffs specifically deny such signatures and reserves [sic] the right to review." Complaint, ¶ 14.
I have already issued a decision with respect to the Trustee's Constructive Notice Motion (Main Case D.I.s 11233, 11234), therefore any request for judicial notice or objection thereto applicable to the Constructive Notice Motion in the main bankruptcy case are moot. In re New Century TRS Holdings, Inc., No. 07-10416, 2013 WL 4671734 (Bankr.D.Del. August 30, 2013).
The Whites filed a certification of no objection to the Request for Judicial Notice in the adversary proceeding (the "CNO") (D.I. 114), because the Trustee's response to the Request for Judicial Notice was filed in the main case, but not this adversary proceeding. The Trustee filed an objection to the CNO (D.I. 115), which was followed by the Whites' filing of an objection to the Trustee's response (D.I. 117). Because the Request for Judicial Notice filed in the adversary is identical to the Request for Judicial Notice filed in the main case, and the Trustee filed a timely response to the Request for Judicial Notice in the main case, I will not consider the Whites' CNO. I will consider the Request for Judicial Notice (and the JN Response) as related to the Motion for Reconsideration, since it was filed in this adversary proceeding.
Courts have held that "personal knowledge can come from [a] review of the contents of files and records." Sia v. BAC Home Loans Servicing (In re Sia), 2013 WL 4547312, *5 (Bankr.D.N.J. Aug. 27, 2013) quoting Washington Cent. Railroad Co., Inc. v. Nat'l Mediation Board, 830 F.Supp. 1343, 1353 (E.D.Wash.1993). A custodian of records "or another qualified witness" may testify about business records to fall within an exception to the rule against hearsay. Fed.R.Evid. 803(6)(D), "A qualified witness is someone `with knowledge of the procedure governing the creation and maintenance of the type of record sought to be admitted.'" Sia, 2013 WL 4547312 at *6 quoting U.S. v. Dominguez, 835 F.2d 694, 698 (7th Cir.1987). "A qualified witness `need not have personally participated in the creation of the document nor know who actually recorded the information.'" Id. Further, "a witness is qualified to lay the foundation for business records if she is familiar with the record-keeping procedures of the organization." Id. citing Dyno Const. Co. v. McWane, Inc., 198 F.3d 567, 576 (6th Cir.1999).
When a court evaluates the merits of a jurisdictional challenge, a court may consider evidence outside the pleadings, including affidavits, depositions and testimony, to resolve any factual issues bearing on jurisdiction. Gould Elec., 220 F.3d at 176; Walker, 2013 WL 5890270 at *3. The plaintiff has the burden of proving that jurisdiction exists. Mortensen v. First Fed. Sav. & Loan Assoc., 549 F.2d 884, 891 (3d Cir.1977). The Whites have failed to meet this burden for the Rescission and Cancellation Claims. Further, the Whites have demonstrated neither that the Walker Declarations are invalid nor that my reliance on them was misplaced. Ms. Walker's experience with the Debtors and knowledge of their record-keeping procedures makes her at least a qualified witness (if not a custodian of records) whose statements in support of the Trustee's Motion to Dismiss were reliable. Moreover, her statements are consistent with the Trustee's evidence throughout this bankruptcy case about the Debtors' books and records and the transfers of mortgage loans.
