Janice D. Loyd, U.S. Bankruptcy Judge.
Arising out of litigation history extending back nearly a decade, in this multi-pronged adversary brought by the Debtor against his residence mortgagee, he seeks the judgment of this Court (1) disallowing the mortgagee's proof of claim on the basis that the mortgagee does not have standing to assert the same, (2) disallowing the mortgagee's proof of claim by virtue of the mortgagee's proof of claim having been denied in one of Debtor's previous bankruptcies, (3) the state court foreclosure judgment is unenforceable and the mortgagee has no interest in the Debtor's property, the mortgage or the state mortgage foreclosure judgment, and (4) recovering actual and punitive damages for the mortgagee's alleged violation of the automatic stay. Mortgagee has moved for summary judgment on the basis that (1) its failure to respond to the Debtor's objection to its claim in the prior bankruptcy only barred its right to be paid in accordance with the Chapter 13 plan but had no effect upon its in rem claim on the mortgage, (2) it is the holder of the Note and Mortgage and is entitled to enforce the same, (3) the state court foreclosure judgment in mortgagee's favor precludes the bankruptcy court from reconsidering mortgagee's standing to enforce the judgment under the Rooker-Feldman Doctrine, (4) if there was a technical violation of the stay in attempting to collect amounts awarded by the plan, the mortgagee reversed such charges before any funds were actually collected, and (5) even if the stay was violated, the Debtor is barred by the doctrine of laches from asserting the same.
Before the Court for consideration are (1) Defendant Wells Fargo Bank, NA's, ("Wells Fargo") Motion for Summary Judgment (the "Motion") [Doc.19], (2) Plaintiff's Objection to Defendant's Motion for Summary Judgment (the "Objection") [Doc. 21] and (3) Defendant Wells Fargo Bank, NA's, Reply to Debtor's Response to Wells Fargo's Motion for Summary Judgment (the "Reply") [Doc. 24]. The below constitutes the Court's findings of fact and conclusions of law pursuant to Fed.R.Bankr.P. 7052 and 9014.
This Court has jurisdiction over this matter pursuant to 28 U.S.C. §§ 1334(b) and 157(a)
1. On November 29, 2006, Plaintiff /Debtor Michael A. Soriano ("Soriano") executed a Promissory Note in favor of Wells Fargo in the principal amount of $400,000 with an annual interest rate of 6.125%. [Doc.19-1].
3. On November 12, 2007, Soriano was notified by Wells Fargo that the loan was in default and two monthly payments were past due. [Doc. 19-3]. On January 14, 2008, Soriano was notified that the loan, with a balance due of $407,862.46, had been accelerated and placed with a law firm for collection. [Doc.19-4].
4. On February 1, 2008, Wells Fargo filed an action in the District Court of Cleveland County, Oklahoma, seeking an in personam judgment against Soriano and a judgment foreclosing Soriano's (and other's) interest in the subject property.
5. On August 25, 2008, Soriano filed for relief under Chapter 13 in the United States Bankruptcy Court for the Western District of Oklahoma, Case No. 08-13655.
6. On December 11, 2008, Wells Fargo filed an Amended Proof of Claim alleging an arrearage of $40,612.19, which included disclosed late charges and attorney's fees. [Doc.19-6]. Soriano did not object to the 2008 Proof of Claim. On February 24, 2009, Soriano's Chapter 13 Plan was confirmed under which ongoing monthly payments would be made at $3,100.10 per month and the stated arrearage paid to Wells Fargo was in the amount of $40,407.19. [Doc.19-7]. On February 27, 2009, Soriano's bankruptcy was dismissed.
8. On September 14, 2009, Soriano's Chapter 13 Plan was confirmed under which Wells Fargo was to be paid a monthly ongoing payment of $2,576.31 per month. [Case 09-13384, Doc. 22]. Neither the total amount of the Wells Fargo debt nor the amount of any arrearage was indicated.
9. On September 30, 2009, Wells Fargo filed its secured Proof of Claim 17-1 [Case. 09-13384] in the total amount of $414,774.20, which included an arrearage and other charges in the amount of $64,279.23, making the new ongoing monthly payment (including the arrearage) of $3,116.75. [Doc.19-10].
10. On October 16, 2009, Soriano filed Debtor's Objection to Proof Of Claim No. 17 for $414,774.20 filed by Wells Fargo, N.A. [Doc.19-11]. The basis of Soriano's Objection was that the "claim should be disallowed to the extent it would require a different payment from the judgment payment set forth in the confirmed plan" of $2,576.31 per month for sixty months. [Doc.19-11].
11. On January 26, 2010, the Court entered an agreed Order Resolving The Debtor's Objection to Wells Fargo Bank's Proof of Claim [Doc.19-13].
12. On July 29, 2013, Soriano filed another Objection to Wells Fargo's 2009 Proof of Claim of $414,774.20 on the basis that Wells Fargo lacked standing because the Federal Home Loan Mortgage Corporation ("Freddie Mac") was the actual owner of the loan and that Wells Fargo was not entitled to payment. [Doc.19-14]. Wells Fargo failed to timely respond to Soriano's Objection, and on August 16, 2013, the Court entered its Order denying Wells Fargo's claim. [Case 09-13384, Doc. 79]. The Court further ordered that Wells Fargo "disgorge all funds disbursed to it by the Chapter 13 Trustee and return the
13. On August 26, 2013, Wells Fargo filed its Combined Motion and Brief for Relief from Order seeking the Court to grant relief (vacate) from its order of August 16, 2013, disallowing Wells Fargo's Proof of Claim (the "Objection Order") [Doc.19-16]. On December 31, 2014, the Court entered an Agreed Order Resolving Wells Fargo Bank, NA's Motion for Relief from Order. [Doc.19-16]. The Order granted in part and denied in part Wells Fargo's Motion for Relief. It ordered that Wells Fargo (1)
14. On May 15, 2015, Soriano received a Discharge after completing his Chapter 13 Plan. [Doc.19-17].
15. On November 10, 2015, Soriano filed his third Chapter 13, the present case underlying this adversary. [Case 15-14341, Doc.1]. On May 12, 2016, the case was converted to one under Chapter 11. [Case 15-14341, Doc. 28].
16. On January 25, 2016, Wells Fargo filed its Proof of Claim 2 in the present underlying case in the total amount of $536,486.37, with an arrearage of $193,859.94. [Doc.19-18].
17. On January 8, 2017, Soriano filed a Chapter 11 Plan, which with regard to Wells Fargo, while disputing both the total amount of the claim of $536,486.37 and an arrearage of $193,859.94, provided for monthly payments extending beyond the term of the Plan in the amount of $3,357.70 through the maturity date of the original note, December 1, 2036. [Doc.19-19]. On February 8, 2017, Soriano filed a Corrected Chapter 11 Plan disputing Wells Fargo's claim but proposing to pay Wells Fargo $3,357.70 per month for twenty years, but not proposing to pay the claimed arrearage. [Doc.19-20]. The Corrected Plan indicated Soriano's intent to file an objection to Wells Fargo's Proof of Claim and the filing of an adversary proceeding to determine the extent and validity of Wells Fargo's lien.
18. On March 2, 2017, Wells Fargo filed its Objection to the Chapter 11 Plan on the basis that the Plan failed to provide for the payment of the mortgage arrearage and for adjustments to the regular monthly payment to account for fluctuations in the amount needed to pay taxes and insurance. [Doc.19-21].
19. On April 17, 2017, Soriano commenced the present Adversary Proceeding. [Doc.1]. On April 18, 2017 Soriano filed his Amended Complaint and Objection to Proof of Claim filed by Wells Fargo. [Doc.4].
It is appropriate to grant a motion for summary judgment when the pleadings and other materials in the record, together with supporting affidavits, if any, demonstrate that there is no genuine dispute with respect to any material fact and that the moving party is entitled to judgment as a matter of law. See Fed.R.Civ.P. 56(c), made applicable to this adversary proceeding
When considering a motion for summary judgment, the court views the record in the light most favorable to the party opposing summary judgment. See, Deepwater Investments, Ltd. v. Jackson Hole Ski Corp., 938 F.2d 1105, 1110 (10th Cir. 1991); Harris v. Beneficial Oklahoma, Inc. (In re Harris), 209 B.R. 990, 995 (10th Cir. BAP 1997). Denial of summary judgment requires existence of genuine material issues that "can be resolved only by a finder of fact because they may reasonably be resolved in favor of either party". Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 250, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). No genuine issue of fact exists if a rational fact finder, when viewing the record as a whole, could not find for the party opposing the summary judgment. See, Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 587, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986) ("where the record taken as a whole could not lead a rational trier of fact to find for the non-moving party, there is no genuine issue for trial."). "[T]he non-moving party may not rest on its pleadings but must set forth specific facts showing that there is a genuine issue for trial as to those dispositive matters for which it carries the burden of proof." Vitkus v. Beatrice Co., 11 F.3d 1535, 1539 (10th Cir. 1993).
In Count I of his Amended Complaint, Soriano asserts an objection to Wells Fargo's Proof of Claim on four grounds: (1) Wells Fargo lacks standing because it is not the owner of the Note and Mortgage; (2) it is based on a proof of claim which was objected to and denied in Soriano's prior bankruptcy; (3) it is based upon a promissory note upon which the statute of limitations has expired, and (4) it includes fees not approved in Soriano's other bankruptcies and does not accurately compute interest, principal and legal expenses.
Soriano claims Wells Fargo lacks standing because on February 12, 2007, prior to Wells Fargo filing the state foreclosure action, its interest in Soriano's Promissory Note and Mortgage were assigned /transferred to Freddie Mac. In its Motion for Summary Judgment, Wells Fargo does not dispute this.
A cause of action against the maker of a promissory note is established if the plaintiff proves that: (1) plaintiff is the holder of the note on which the plaintiff sues; (2) defendant signed the note; (3) the note became due and payable; and (4) defendant has not paid the amount due and owing. FDIC v. Lockhaven Estates, LLC, 918 F.Supp.2d 1209, 1233 (D. N.M. 2012) (citing, Federal Savings and Loan Insurance Corp. v. Wilson, 722 F.Supp. 306, 309 (N.D.Tex.1989)); See also, Green Tree Servicing, LLC v. Christodoulakis, 136 F.Supp.3d 415, 427 (E.D.N.Y. 2015); United States v. Petroff-Klein, 557 F.3d 285, 290 (6th Cir. 2009); United States v. Lawrence, 276 F.3d 193, 197 (5th Cir. 2001). "Generally, suits to enforce promissory notes are among the most suitable classes of cases for summary judgment." Federal Savings and Loan Insurance Corp. v. Wilson, 722 F.Supp. 306, 309 (N.D. Tex. 1989); United States v. Wilkinson, 170 F.Supp.2d 1156, 1157 (D. Kan. 2001) ("Ordinarily, suits on promissory notes provide `fit grist for the summary judgment mill.'") (citations omitted).
Importantly, Soriano does not address Wells Fargo's claim that it is the "holder" of the Note; rather, he asserts that Freddie Mac's "ownership" of the Note (or Wells Fargo's lack of ownership) deprives Wells Fargo's of standing. Soriano refers to Freddie Mac as the "owner" of the Note. On the other hand, Wells Fargo makes reference to Freddie Mac as an "investor" that obtained ownership of the Note and Mortgage but left possession of the Note and Mortgage with Wells Fargo who continued to act as the servicer of the Soriano loan and the holder of the Note.
Soriano next asserts that the doctrine of res judicata compels the denial of Wells Fargo's Proof of Claim in this third bankruptcy on the basis that Wells Fargo's Proof of Claim in his second bankruptcy was denied. The factual road to the denial of Wells Fargo's claim in the prior case is sufficiently nuanced and convoluted (see Material Facts ¶'s 10,11,12, and 13 above), and despite its length it is necessary in some detail to restate here.
Soriano filed two Objections to Wells Fargo's Proof of Claim in the second bankruptcy. The first only sought that Wells Fargo's claim be disallowed to the extent that it did not conform to the confirmation order which proposed to pay Wells Fargo $2,576.31 per month. The Objection recognized that there would remain a balance due Wells Fargo after completion of the plan and the debtor's discharge "in which Debtor will continue to pay." That Objection was resolved by an Agreed Order which provided, among other things, that following completion of the Plan, "Wells Fargo's mortgage balance shall continue to be fully enforceable in rem following completion of the Plan and entry of the order of discharge." [Doc.19-13]. The confirmed Chapter 13 Plan provided for payments to Wells Fargo which were made for nearly 4 years. Soriano then filed another objection
Wells Fargo then filed a Motion for Relief from Order under Fed.R.Civ.P. 60(b)(1). [Case. 09-13384, Doc. 82]. The parties reached an Agreed Order Resolving Wells Fargo's Motion for Relief from Order [Doc.19-16] which indicated some ambivalency as to whether Wells Fargo's claim was being denied in full. The Agreed Order provided that Wells Fargo was entitled to keep all funds that had been disbursed to it by the Chapter 13 Trustee and it would not be required to return any funds to the bankruptcy estate. The Agreed Order further provided that Soriano could pursue a loan modification or loss mitigation alternative programs offered by Wells Fargo consistent with any investor guidelines or criteria. These terms appear to be inconsistent with any complete denial of Wells Fargo's claim. The Agreed Order further provided that the "remaining provisions of the Order Sustaining the Objection to Claim # 17 shall remain in full force and effect."
Further giving contradictory signals as to whether Soriano was seeking to completely deny any claim of Wells Fargo was the fact that when Soriano filed the present case his new Chapter 13 Plan provided for the payment of Wells Fargo's claim of $414,774.20, with a monthly payment of $3,200, at the contract rate of interest, the secured debt extending beyond the length of the Plan and that the "home mortgage loan owed to servicer Wells Fargo Bank will be modified under HAMP or similar loan modification package, to cure the existing arrearage through re-amortization of the loan ...." [Case 15-14341, Doc. 2]. Soriano then filed a Second Amended Plan proposing to pay Wells Fargo $339,774.20 in monthly payments of $3,325.45, with an arrearage of $75,000 to be cured. [Case 15-14341, Doc.15]. Both the amount of the claim and the arrearage was shown as "disputed".
Wells Fargo then filed an Objection to the Second Amended Plan primarily on the basis that the actual arrearage on the mortgage was $193,859.94 while the Plan placed the arrearage at $75,000. [Case 15-14341, Doc. 20]. A hearing on the confirmation of the Chapter 13 Plan was continued several times and finally set on April 26, 2016. The day before the hearing, April 25, 2016, Soriano filed his Motion to Convert the case to one under Chapter 11 so that "he may reorganize, and cure disputed arrearages on his home mortgage." [Case 15-14341, Doc. 24]. Without objection, the case was converted to Chapter 11. [Case 15-14341, Doc. 28]. After Wells Fargo moved to lift the automatic stay and Soriano objected, the parties entered into an Agreed Order Mooting Request for Relief from the Automatic Stay and Abandonment of Property and Granting Adequate Protection Payments by which Soriano agreed to make monthly adequate protection payments to Wells Fargo of $3,357.70 [Case 15-14341, Doc. 68]. Soriano then
What all of Soriano's above machinations demonstrate to the Court is that despite his present position that he owes Wells Fargo nothing because of the denial of its claim, he continued to propose and/or make payments to Wells Fargo in all three of his bankruptcies, including the continued adequate protection payments in the converted Chapter 11, and continued attempts at loan modification. The Agreed Order Resolving Wells Fargo's Motion for Relief from Order modified the Order Denying Wells Fargo's claim in language inconsistent with the total extinguishment of the claim. [Doc.19-16]. It appears to the Court that Soriano was recognizing a continued obligation to make his mortgage payments, but he was financially unable or unwilling to make both the current monthly payment as well as the mushrooming arrearage. The Court agrees with Wells Fargo which states in its Motion for Summary Judgment that the adversary "primarily involves a dispute over the arrearage" which Soriano owes on his mortgage loan.
A debtor asserting res judicata "has the burden of proof on all elements and bears the risk of non-persuasion." In re Brawders, 503 F.3d 856, 867 (9th Cir. 2007). Whether it be a plan or an order, the same should clearly state its intended effect on a given issue. Where it fails to do so it may have no res judicata effect for a variety of reasons: any ambiguity is interpreted against the debtor, any ambiguity may also reflect that the court that originally confirmed the plan did not make a final determination on the matter at issue, and claim preclusion generally does not apply to a "claim" that was not within the partys' expectations of what was being litigated, nor plainly inconsistent with the fair and equitable implementation of a statutory or constitutional scheme. Id. The Court finds too much uncertainty and ambiguity in the orders regarding Soriano's objections to Wells Fargo's proofs of claim to find that as a matter of law that res judicata compels the extinguishment of all of Wells Fargo's rights under its Note and Mortgage.
Even if the Court regards the denial of the Wells Fargo Proof of Claim in the second bankruptcy case as res judicata that doesn't release Soriano of somehow having to deal with his obligations, including the arrearage, under the Note and Mortgage at the risk of losing his house at sheriff's sale. In In re Thompson, 570 B.R. 336 (Bankr. E.D. Okla. 2017), Judge Cornish was presented with the issue as to whether a Chapter 13 mortgagee which had failed to timely file a proof of claim lost its mortgage rights. In language applicable to the present case, the Court stated as follows:
Thompson, at 344. See also, In re Colley, 570 B.R. 346, 351 (Bankr. E.D. Okla. 2017) ("Even though Chase's claim is disallowed for untimeliness, the Court does not believe it can wipe out the entire arrearage claim and declare the mortgage current when Debtor has made no attempt to cure the default. Instead, it appears that what Debtor is attempting to do is gain a huge windfall."); In re Matteson, 535 B.R. 156, 164 (6th Cir. BAP 2015) (the mortgagee failed to file a proof of claim, but "mortgagee's election not to participate in the Chapter 13 plan, however, did not result in the mortgagee's waiver of its right to payment on the debt. To avoid default on the mortgage loans, the Debtors were still required to service the debt, if not through the plan, then by making payments outside the plan.").
The result of the disallowance of Wells Fargo's claim in the second bankruptcy, in the absence of an adversary proceeding under Fed.R.Bankr.P. 7001(2) (which wasn't done), still would not change the fact its mortgage lien would pass through bankruptcy unaffected; regardless whether it ignored the bankruptcy case, or filed an unsecured claim and meant to file a secured claim, or filed an untimely claim after the bar date has passed. Dewsnup v. Timm, 502 U.S. 410, 418, 112 S.Ct. 773, 116 L.Ed.2d 903 (1992) (a lien on real property passes through bankruptcy unaffected); Farrey v. Sanderfoot, 500 U.S. 291, 297, 111 S.Ct. 1825, 114 L.Ed.2d 337 (1991) ("Ordinarily, liens and other secured interests survive bankruptcy"); In re Picht, 428 B.R. 885, 891-92 (10th Cir. BAP 2010) ("The United States Supreme Court has repeatedly held that liens pass through Chapter 7 bankruptcy unaffected, and the debt secured by the lien continues to exist and is enforceable against property securing the debt (unless, of course, the lien is avoided)."). Thus, even if the denial of the claim in the second case was res judicata in the present Chapter 11 bankruptcy Wells Fargo's in rem lien rights remain unaffected.
The third ground to which Soriano asserts that Wells Fargo's Proof of Claim should be denied is "because it is based upon a promissory note for which the statute of limitations bars collection." [Doc.4, ¶ 43]. Wells Fargo has moved for summary judgment on the statute of limitations issue on the basis that the state court foreclosure proceeding was filed within the applicable statute of limitations. Wells Fargo is correct. The Oklahoma statute of limitations to collect upon a promissory note is six years from the date of acceleration. 12A O.S. § 3-118(a). The date of acceleration was January 14, 2008. [Doc.19-4].
While Soriano in his Amended Complaint only asserts expiration of the statute of limitations, in his Objection to the Motion for Summary Judgment, he doesn't address the statute of limitations issue; rather, he asserts that the foreclosure judgment was "not renewed" and "the efficacy of the judgment has departed upon dormancy." [Doc. 21, pgs.4 & 10]. "Dormancy" and whether a claim is barred by the statute of limitations are two different issues. Presumably, though not stated in his pleadings, Soriano is relying upon the Oklahoma dormancy statute, 12 O.S. § 735, which provides that unless an execution, notice of statute renewal of judgment or garnishment is issued within five years from the date of the judgment or five years since the last execution or renewal of judgment was filed, the judgment is unenforceable and of no effect. Like his statute of limitations argument, Soriano's dormancy argument would be unavailing insofar as it affects Wells Fargo's in rem rights under its mortgage.
Bankruptcy Code § 108(c) applies to the renewal of state court judgments. The time for renewing a state court judgment does not expire until the later of the applicable state law or thirty days after the termination of the automatic stay. Unlike some states, Oklahoma law provides that the automatic stay does not prevent a judgment creditor from filing a notice of renewal of judgment and extending its judgment lien. 3M Dozer Service, Inc. v. Baker, 2006 OK 28, 136 P.3d 1047. However, even though Wells Fargo could have renewed its judgment lien at any time within five years of rendering without violating the automatic stay, Oklahoma law provides that § 108(c) extends the time in which the judgment creditor could execute on the judgment and the judgment lien for at least thirty days after the automatic stay was lifted. Id. at 1053. The state court judgment was entered on July 9, 2008. Absent the bankruptcy, the five-year period within which to renew the judgment would have expired on July 8, 2013. On that date, Soriano was still in his second Chapter 13 with the automatic stay still in effect. The automatic stay did not terminate until the granting of Soriano's discharge on May 15, 2015. Wells Fargo thereafter had thirty days, or until June 15, 2015, to renew its judgment. It didn't. Its "judgment lien" may have expired, but it was the holder of not solely a judgment lien but for the foreclosure of a consensual mortgage lien which would continue until the property was sold and the sale confirmed.
Oklahoma law provides that a decree of foreclosure determines only that there is a valid mortgage lien which the mortgagee is entitled to enforce to a sale. Until there has been a sale of the foreclosed property, the mortgagor retains the right of redemption until the mortgage has been dissolved by sale of the property. As stated in Bank of the Panhandle v. Hill, 965 P.2d 413, 416 (Okla. Civ. App. 1998):
See also, In re Sun 'N Fun Waterpark, LLC, 408 B.R. 361, 371 (10th Cir. BAP 2009) ("Because the bank's collateral had not yet been sold at sheriff's sale, there has been no merger."). Furthermore, the entry of a deficiency judgment has been held to constitute a new judgment for purposes of the dormancy statute. Panhandle, 965 P.2d at 416; Baker v. Martin, 1975 OK 112, 538 P.2d 1048. In the present case, Soriano's property has yet to be sold, and there is yet the possibility of a deficiency judgment if Wells Fargo should choose to seek the same. Thus, there can be no successful argument that the mortgage lien cannot be enforced due to dormancy. The "bottom line" is that Soriano has to pay the mortgage or lose his home.
Wells Fargo asserts that Soriano's challenge to its standing is precluded by the application of the Rooker-Feldman doctrine. The Rooker-Feldman doctrine precludes a losing party in state court who complains of injury caused by the state-court judgment from bringing a case seeking review and rejection of that judgment in federal court. See, e.g. Exxon Mobil Corp. v. Saudi Basic Industries Corp., 544 U.S. 280, 291-92, 125 S.Ct. 1517, 161 L.Ed.2d 454 (2005); In re Miller, 666 F.3d 1255 (10th Cir. 2012). The Rooker-Feldman doctrine has been applied to bar collateral attacks on judgments entered in State foreclosure proceedings. Kline v. Deutsche Bank National Trust Co. (In re Kline), 472 B.R. 98, 105 (10th Cir. BAP 2012). In short, federal courts lack subject-matter jurisdiction to review final state court judgments. Bear v. Patton, 451 F.3d 639, 641 (10th Cir. 2006). The Rooker-Feldman doctrine is not limited to the preclusion of claims actually litigated and decided on the merits by the state court, it also precludes claims which are inextricably intertwined with the State Court judgment. Tal v. Hogan, 453 F.3d 1244, 1256 (10th Cir. 2006).
In the foreclosure context, the Tenth Circuit has held that proceedings are final for purposes of Rooker-Feldman when granting the requested relief would completely undo the foreclosure and eviction proceedings. Dillard v. The Bank of New York, 476 Fed.Appx. 690, 692, n. 3 (10th Cir. 2012). There is no doubt in the present case that Soriano has made a direct attack upon the judgment, asserting that "the Judgment is not enforceable under state law", and that Wells Fargo "does not have a viable interest in the Judgment." [Doc. 4 ¶ 47]. See e.g., In re Washington, 469 B.R. 587 (Bankr. W.D. Pa. 2012) (Rooker-Feldman doctrine prevents the debtor from challenging the standing of mortgagee to file a proof of claim when the state court had already entered a foreclosure judgment in favor of that mortgagee); In re Stewart, 473 B.R. 612, 630-31 (Bankr. W.D. Pa. 2012) (it would be impossible for bankruptcy court to hold that mortgagee did not have a claim secured by the debtor's property without reviewing or rejecting a state foreclosure judgment); Sheikhani v. Wells Fargo Bank, 577 Fed. Appx. 610 (7th Cir. 2014) (Rooker-Feldman doctrine prevented appellant from pursuing an argument that foreclosing entity was not the true owner of the loan because the district court lacked jurisdiction to consider such argument); In re Agard, 444 B.R. 231, 243-44 (Bankr. E.D. N.Y. 2011) (Rooker-Feldman doctrine prevented standing challenge when net effect of upholding such challenge would be to
The state court judgment against Soriano was taken by default. Soriano contends that "no preclusive effect will obtain from such a default judgment". Soriano conflates the requirements of the Rooker-Feldman doctrine with the requirements of issue preclusion (collateral estoppel). See Exxon Mobil, 544 U.S. at 293, 125 S.Ct. 1517 (Rooker-Feldman is distinct from principles of preclusion, and a court is not barred from exercising jurisdiction under Rooker-Feldman even if a plaintiff attempts to litigate in federal court a matter previously litigated in state court). Rooker-Feldman can be applicable to a judgment that was entered by default. See e.g., Fischer v. Bank of America, NA (In re Fischer), 483 B.R. 877, 883 (Bankr. E.D. Wis. 2012); Stewart v. J.P. Morgan Chase Bank, NA (In re Stewart), 473 B.R. 612, 630 (Bankr. W.D. Pa. 2012) ("The jurisdictional limitations imposed by Rooker-Feldman apply... also to default judgments."); Randall v. Bank One National Association (In re Randall), 358 B.R. 145, 159 (Bankr. E.D. Pa. 2006) ("[A] default judgment in mortgage foreclosure, prior to any sale, was sufficient to trigger application of Rooker-Feldman.")).
On the other hand, issue preclusion requires four separate elements: (1) the issue previously decided is identical with the one presented in question, (2) the prior action has been finally adjudicated on the merits, (3) the party against whom the doctrine is invoked was a party or in privity with a party to the prior adjudication, and (4) the party against whom the doctrine is raised had a full and fair opportunity to litigate the issue in the prior action. Stan Lee Media, Inc. v. The Walt Disney Co., 774 F.3d 1292, 1297 (10th Cir. 2014); Moss v. Kopp, 559 F.3d 1155, 1161 (10th Cir. 2009). The element that the issue be "adjudicated on the merits" requires that the issue to have been "actually litigated". Arizona v. California, 530 U.S. 392, 414, 120 S.Ct. 2304, 147 L.Ed.2d 374 (2000); In re Corey, 583 F.3d 1249, 1251 (10th Cir. 2009). Accordingly, the default judgment does not permit the application of issue preclusion.
Count III of Soriano's Amended Complaint asserts that Wells Fargo "violated the automatic stay on multiple occasions by assessing late fees and adding in foreclosure costs not approved by the bankruptcy court." [Doc. 4 ¶ 51]. More specifically, as best the Court can discern, Soriano complains that Wells Fargo failed to give him credit for escrow payments totaling about $12,000 for the period of March to August 2009 (between Soriano's first and second bankruptcy), foreclosure costs of $1,537.55 following the dismissal of Soriano's first bankruptcy in 2009, and foreclosure costs of $1,112.28 following the second bankruptcy which was dismissed after completion of his Plan in 2015. [Doc 21, pgs. 9-10].
Soriano asserts that he learned that late fees, costs and attorney's fees in Wells Fargo's proof of claim filed in his first bankruptcy were pre-petition charges, "only upon much later receiving a RESPA response that Soriano realized such charges were post-petition." [Soriano Affidavit, Doc. 21-1 ¶ 7]. He doesn't say when "much later" was. Likewise, he claims the Proof of Claim in his Second Bankruptcy in 2009 was inaccurate because the total debt included post-petition amounts in violation of the automatic stay. [Soriano Affidavit, Doc. 21-1 ¶ 7]. When did he learn of this? He certainly never claimed that it constituted a stay violation until nearly a decade later. The Court finds, at least on the record thus far presented, that an issue of fact exists as to if and when Wells Fargo communicated to Soriano charges which he claims violated the automatic stay.
In its Motion and its Reply, Wells Fargo points out that while Soriano has not clearly specified all charges he claims were improper, it is highly probable that there is a satisfactory explanation as to why they were not improper (e.g. escrow payments explained in Reply, Doc. 24, pg. 2-3) or they were reversed before any resulting damage to Soriano. The problem for the Court, however, is the lack of admissible evidence refuting Soriano's claims of improper charges. It may well be that Wells Fargo's explanations in its Reply do, in fact, refute Soriano's claims, but that refutation is not supported by affidavit. Wells Fargo's Motion for Summary Judgment is supported by a brief with numerous attached exhibits as well as reference to numerous documents attached as exhibits to Soriano's Objection to the Motion. Many of those exhibits are self-authenticating or matters of which the Court may take judicial notice under the Federal Rules of Evidence (e.g. filed court documents or matters of public record). However, references to the business records of Wells Fargo are not identified or authenticated. "In order for documents not yet part of the court record to be considered by a court in support of or in opposition to a summary judgment motion they must meet a two-prong test: (1) the document must be attached to and authenticated by an affidavit which conforms to Rule 56(e); and (2) the affiant must be a competent
The Court has concluded that at this juncture summary judgment should not be granted on the stay violation claims. Wells Fargo also asserts that even if such violations occurred they are barred by the equitable doctrine of laches. In neither his first (filed in August 2008), second (filed in June 2009) nor the present bankruptcy (filed in November 2015) did Soriano either within his objections to Wells Fargo's proofs of claim or independently assert a violation of the automatic stay. It was not until the filing of this adversary in April 2017, that a stay violation was asserted. Wells Fargo argues that any improper charges were long since reversed before the present adversary was filed. Under these circumstances does the passage of time bar Soriano's claims of a stay violation?
The Bankruptcy Code does not contain a statute of limitations within which actions for damages for violation of the automatic stay under 11 U.S.C. § 362(k) must be filed. In re Stanwyck, 450 B.R. 181, 193 (Bankr. C.D. Cal. 2011); In re Terrace Housing Associates, Ltd., 577 B.R. 459, 462 (Bankr. E.D. Pa. 2017). The equitable doctrine of laches, however, may be applicable to determine if Soriano's § 362(k) demand is time-barred, and Wells Fargo asserts the doctrine here. Adams v. Hartconn Associates, Inc. (In re Adams), 212 B.R. 703, 711-12 (Bankr. D. Mass. 1997) (debtor is time-barred from pursuing a claim for damages for violation of the automatic stay because the debtor waited nineteen months to file a motion to reopen); Nelson v. Post Falls Mazda (In re Nelson), 159 B.R. 924, 925 (Bankr. D. Idaho 1993) (laches is an appropriate defense to an action seeking damages for violation of the automatic stay, particularly when the action is commenced after the bankruptcy case has been dismissed).
"In order to prove the affirmative defense of laches, the defendant must demonstrate that there has been an unreasonable delay in asserting a claim and that the defendant was materially prejudiced by that delay." Hutchinson v. Pfeil, 105 F.3d 562, 564 (10th Cir. 1997); D. Kirk, LLC v. Cimarex Energy Co., 604 Fed. Appx. 718, 727 (10th Cir. 2015). It is not necessary that the party asserting laches must show "irreparable harm" but, rather, "that the defendant was prejudiced by the delay." Id. at 727. As the party invoking
Consistent with the standards for determining whether Wells Fargo is entitled to summary judgment, the Court must view all facts and reasonable inferences on the issue of laches in the light most favorable to Soriano. Hutchinson, 105 F.3d at 564. The only "facts" that Wells Fargo argues to show prejudice to it by the delay in Soriano asserting a stay violation is that his "claims of violations of the automatic stay come nearly a decade too late and are advanced solely to frustrate Wells Fargo's attempt to enforce its valid lien, which survive both prior Bankruptcy proceedings." [Doc. 19, pg. 14]. In his Response to the Motion for Summary Judgment, Soriano does not even address Wells Fargo's assertion of laches. Notwithstanding Soriano's apparent failure to challenge the laches issue, the Court must independently determine whether it can say that laches bars the stay violation claims as a matter of law. It cannot.
There is no doubt that Soriano did not make a stay violation claim for, in some instances, seven or eight years after Wells Fargo's alleged misconduct, and certainly did not make the claim in his first two bankruptcies. While at first blush that delay seems "unreasonable" or "inexcusable", there is nothing in the record indicating when Soriano first learned of such violations (when Wells Fargo first communicated to him charges due from him which would turn out to be reversed by Wells Fargo). See, Hornady Mfg. Co. v. Double-Tap Ammunition, Inc., 835 F.Supp.2d 1150, 1153 (D. Utah 2011)(When determining whether plaintiff's claim is unreasonably delayed, the Court looks to the time when plaintiff gained "such knowledge as he might have obtained upon inquiry, provided the facts already known by him were such as to put upon a man of ordinary intelligence the duty of inquiry."). Perhaps more importantly, the record does not indicate how Soriano's failure to assert the violation of stay claims unduly prejudiced Wells Fargo. There is little doubt, that Soriano's filing of multiple bankruptcies and objections to claims delayed and frustrated Wells Fargo's efforts to foreclose its mortgage; however, for summary judgment purposes the Court does not see how Soriano's first seeking a violation of the automatic stay by this adversary in 2017 has delayed the foreclosure proceedings. Those state court proceedings have been delayed by Soriano's filing of three bankruptcies beginning on August 25, 2008, without any assertion of a stay violation until nearly 9 years later, in April 2017. While it does appear to the Court that Soriano, as argued by Wells Fargo, may be attempting to use the stay violation as a "trump card" or another "arrow in his quiver" for further delay and to stave off foreclosure, laches precluding assertion of a stay violation has not been established. At least at this stage of the litigation, and based on the record before it, the Court finds there exists a triable issue of fact as to "unreasonable delay" and "substantial prejudice" required for the establishment of Wells Fargo's affirmative defense of laches.
Wells Fargo has also moved for summary judgment on Soriano's assertions
Based upon the findings of fact and conclusions of law stated above,