Dennis v. U.S. Bank, National Association et al
Filing
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MEMORANDUM OPINION. Signed by Chief Judge Deborah K. Chasanow for Judge Roger W. Titus on 9/9/2011. (kns, Deputy Clerk)(c/m 9/9/11)
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MARYLAND
ALICIA MARIA DENNIS
Appellant
v.
BANK UNITED, et al.,
Appellees
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Case No.: RWT 10cv3147
Bankr. Case No. WL 09-33957 (Chapter 7)
Adversary Proceeding No. 10-00303
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ALICIA MARIA DENNIS
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Appellant
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Case No.: RWT 10cv3151
v.
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Bankr. Case No. WL 09-33957 (Chapter 7)
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Adversary Proceeding No. 10-00304
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U.S. BANK, N.A., et al.,
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Appellees
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ALICIA MARIA DENNIS
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Appellant
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Case No.: RWT 10cv3152
v.
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Bankr. Case No. WL 09-33957 (Chapter 7)
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Adversary Proceeding No. 10-00305
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BANK OF AMERICA, N.A., et al.,
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Appellees
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MEMORANDUM OPINION
Alicia Maria Dennis (“Appellant”), acting pro se, seeks review of the Bankruptcy Court’s
orders dismissing her complaints in related Adversary Proceeding Nos. 10-00303, 10-00304, and
10-00305. Because Appellant lacks standing, and alternatively, the Bankruptcy Court did not
abuse its discretion in abstaining, the Orders of the Bankruptcy Court will be affirmed.
BACKGROUND
On December 8, 2009, Appellant, acting pro se, filed a Chapter 13 petition. On February
2, 2010, Appellant’s case was converted to one under Chapter 7, upon Appellant’s request. In re
Alicia Maria Dennis, Bankr. Case No. WL 09-33957 (Chapter 7).
On March 11, 2010, the Chapter 7 Trustee reported that there was no property available
for distribution from Appellant’s bankruptcy estate. On June 9, 2010, Appellant received her
Chapter 7 discharge. BK-Docket No. 79. On May 7, 2010, prior to receiving her discharge,
Appellant filed the three adversary proceedings from which the present appeals are taken.
Appellant initiated Adversary Proceeding No. 10-00303 against Defendants Bank of
America, N.A., BAC Home Loan Servicing, LP (the “Bank of America Defendants”), and Bank
United, concerning her personal residence located at 2800 Moore’s Plains Boulevard in Upper
Marlboro. See BK-Docket No. 71. In the original Schedule D filed by Appellant in connection
with her personal residence, she acknowledged that the Bank of America Defendants and Bank
United each held a secured claim in the property. These claims were not listed as contingent,
unliquidated, or disputed on Appellant’s original Schedule D.
Appellant initiated Adversary Proceeding No. 10-00304 against Defendants JPMorgan
Chase Bank, N.A.; U.S. Bank, N.A. as Trustee for WAMU Mortgage Pass Through Certificate
for WMALT Series 2007-OA3 concerning her rental property located at 3515 Texas Ave, SE,
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Washington, DC 20020. See BK-Docket No. 70. In the original Schedule D filed by Appellant
concerning her DC rental property, she acknowledged that Appellee JPMorgan Chase Bank,
N.A. held a secured claim in the property. Appellant did not list U.S. Bank, N.A. as a creditor on
her Schedule D. Nowhere in her relevant mandatory sworn disclosures in the Bankruptcy Case
did Appellant disclose the existence of the cause of action that gave rise to the Adversary
Proceeding.
Appellant initiated Adversary Proceeding No. 10-00305 against Defendant Bank of
America, N.A. concerning her rental property at 6935 Forest Terrace, Landover, MD 20785. See
BK-Docket No. 69. In the original Schedule D filed by Appellant concerning her Landover
rental property, she acknowledged that Bank of America, N.A. had two claims secured by the
Property. Bank of America’s claim was not listed as contingent, unliquidated, or disputed on
Appellant’s original Schedule D.
Although “very difficult to decipher,” the complaints filed in the three adversary
proceedings are virtually identical, differing only in the property and Defendants/Appellees
involved. Each of Appellant’s complaints appears to make the same allegations concerning the
different mortgage loans Appellant obtained in connection with the three properties. In short,
Appellant claims that the various Defendants/Appellees violated numerous federal statutes when
they made mortgage loans to her.
On July 14, 2010, the Bankruptcy Court held a hearing to consider the complaints and
related filings in the three adversary proceedings.
At the conclusion of the hearing, the
Bankruptcy Court dismissed each adversary proceeding on the basis that Appellant lacked
standing because any purported cause of action that she was attempting to assert belonged to the
bankruptcy estate and could only be brought by the Chapter 7 Trustee. Case No. RWT 10-cv-
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3147, ECF No. 1-30; Case No. RWT 10-cv-3151, ECF No. 1-30; Case No. RWT 10-cv-3152,
ECF No. 1-30. Alternatively, the Bankruptcy Court determined that it was in the interests of
comity and justice to abstain from deciding Adversary Proceeding Nos. 10-00303 and 10-00304
because Appellant received her discharge and her purported claims are unrelated to her
bankruptcy case. Case No. RWT 10-cv-3147, ECF No. 1-30; Case No. RWT 10-cv-3151, ECF
No. 1-30. The Bankruptcy Court also denied Appellant’s Motions for Default Judgment filed in
Adversary Proceeding Nos. 10-00304 and 10-00305. Appellant challenges each of these rulings.
STANDARD OF REVIEW
When reviewing a bankruptcy court’s final order, the district court acts as an appellate
court. Accordingly, legal conclusions are reviewed de novo, and findings of fact may be set
aside only if clearly erroneous. See In re Banks, 299 F.3d 296, 300 (4th Cir. 2002). The
Bankruptcy Court’s dismissal based on standing is reviewed de novo. See e.g., Deutchman v.
Internal Revenue Service (In re Deutchman), 192 F.3d 457, 459 (4th Cir. 1999). The Bankruptcy
Court’s decisions to abstain from asserting jurisdiction under 28 U.S.C. § 1334 or to grant a
motion seeking a default judgment are discretionary, and are therefore reviewed under an abuse
of discretion standard. See In re: Eastport Assoc., 935 F.2d 1071, 1075 (9th Cir. 1991) (A
decision relating to abstention “under § 1334(c)(1) is reviewed for an abuse of discretion.”); In
re: Hamlett, 322 F.3d 342, 345 (4th Cir. 2003) (reviewing Bankruptcy Court’s order vacating
default judgment for abuse of discretion).
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DISCUSSION
On appeal, Appellant claims that the Bankruptcy erred in (1) determining that she lacked
standing to pursue the adversary proceedings, (2) in the alternative, abstaining from deciding
Adversary Proceeding Nos. 10-00303 and 10-00304, and (3) denying her motions for default
judgment in Adversary Proceeding Nos. 10-00304 and 10-00305. Below, each issue is discussed
in turn.
A. STANDING
“If a cause of action is part of the estate of the bankrupt then the trustee alone has
standing to bring that claim.” Miller v. Pacific Shore Funding, 287 B.R. 47, 50 (D. Md. 2002),
aff’d 92 Fed. Appx. 933 (4th Cir. 2004) (quoting Nat’l Am. Ins. Co. v. Ruppert Landscaping Co.,
187 F.3d 439, 441 (4th Cir. 1999)).
[A]ny unliquidated lawsuits initiated by a debtor prepetition (or that could have
been initiated by the debtor prepetition) become part of the bankruptcy estate
subject to the sole direction and control of the trustee, unless exempted or
abandoned or otherwise revested in the debtor.
Bailey v. Household Finance Corp. III (In re: Bailey), 306 B.R. 391, 392-93 (Bankr. D.D.C.
2004); 11 U.S.C. § 541(a)(1) (bankruptcy estate includes “all legal or equitable interests of the
debtor in property as of the commencement of the case”). “Because ‘[t]he bankruptcy trustee is
the legal representative of the bankruptcy estate,’ the debtor may not pursue a cause of action
which is the property of the bankruptcy estate unless the trustee abandons the claim or
participates in the cause of action.” Steger G. General Elec. Col, 318 F.3d 1066, 1080 (11th Cir.
2003) (quoting In re Alvarez, 224 F.3d 1273, 1279-80 (11th Cir. 2000)). “Property of the estate
includes all of the debtors’ interests in any cause of action that has accrued pre-petition.” Miller,
287 B.R. at 49-50. “Under Maryland law, a cause of action accrues when: (1) the legally
operative facts permitting the filing of a claim come into existence; and (2) the claimants have
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notice of the nature and cause of their injury.” Id. at 50.
In this case, Appellant seeks relief based on Defendants/Appellees’ purported violations
of various federal statutes in connection with her mortgage loans. See, e.g., Compl. at 3-5, 1114, A.P. No. 10-00303. Although Appellant’s claims are far from a model of clarity, she
confirmed at the July 14, 2010 hearing that her claims stem from prepetition loans secured by the
properties. See Case No. RWT 10-cv-3147, ECF No. 1-30, at 5; Case No. RWT 10-cv-3151,
ECF No. 1-30, at 4-5; Case No. RWT 10-cv-3152, ECF No. 1-30, at 4. Thus, any such claims
became property of her bankruptcy estate when Appellant filed her bankruptcy petition.
Accordingly, under the holding of Miller, Appellant lacks standing to pursue these appeals.
Appellant argues in her briefs that she filed the Adversary Complaints “to determine the
dischargeability of the underlying mortgage debt.” E.g., Appellant’s Br. at 20, Case No. RWT
10-cv-3147.
However, even a cursory review of Appellant’s complaints in the adversary
proceedings reveals that she does not seek such relief. Indeed, there would be no reason for
Appellant to seek such relief because she has already received a full discharge of all her debts.
BK-Docket No. 79.
Rather, as discussed above, Appellant seeks to challenge the validity of
Defendant/Appellees’ liens on the properties and to obtain substantial compensatory and punitive
damages against them. Because any such causes of action accrued pre-petition, and the Chapter
7 Trustee has neither abandoned nor joined in her claims,1 Appellant lacks standing to pursue
both the underlying adversary proceedings and the present appeals. See In re. Bailey 305 B.R. at
392.
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The Debtor failed to list any cause of action against the Defendant/Appellees as an asset on her
bankruptcy schedules. As a result, the Trustee never had notice of the existence of the alleged causes of action in
order to pursue or abandon the claims.
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B. PERMISSIVE ABSTENTION
Alternatively, the Bankruptcy Court found that the facts and circumstances of Adversary
Proceeding Nos. 10-00303 and 10-00304 permitted it to abstain from considering the merits of
the matter pursuant to 28 U.S.C. § 1334(c)(1).2 Section 1334(c)(1) provides, in relevant part:
“… nothing in this section prevents a district court in the interest of justice, or in the interest of
comity with State courts or respect for State law, from abstaining from hearing a particular
proceeding arising under Title 11 or arising in or related to a case under Title 11.”
Courts consider numerous potentially relevant factors in deciding whether to abstain under §
1334(c)(1), including:
(1) efficiency in the administration of the debtor’s estate;
(2) the extent to which state issues predominate over bankruptcy issues;
(3) whether the issues involve difficult or unsettled questions of state law that
would be better addressed by a state court;
(4) the presence of a related proceeding commenced in state court;
(5) the existence of a jurisdictional basis other than Section 1334;
(6) the degree of relatedness or remoteness of the proceeding to the main
bankruptcy case;
(7) the substance rather than form of an asserted “core” proceeding;
(8) the feasibility of severing state law claims from core bankruptcy matters to
allow judgments to be entered in state court;
(9) the burden of the federal court’s docket;
(10) the likelihood that the commencement of the proceeding in federal court
involves forum shopping by one of the parties;
(11) the existence of a right to a jury trial; and
(12) whether non-debtor parties are involved in the proceeding.
MacLeod v. Dalkon Shield Claimants Trust, 967 F.Supp. 856, 858 (D.Md. 1997) (citing In re
Eastport Assos., 935 F.2d 1071, 1075,-76 (9th Cir. 1991)). As applied here, the Eastport factors
weigh in favor of abstention, and the Bankruptcy Court did not abuse its discretion by so
holding.
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The Bankruptcy Court did not include abstention as an alternate ground in its September 30, 2010
Memorandum Opinion in Adversary Proceeding No. 10-00305.
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First, Appellant has received her discharge and the bankruptcy estate has been fully
administered by the Trustee. Thus, but for her adversary proceedings, Appellant’s Chapter 7
case is essentially closed. Second, the claims contained in Appellant’s Complaint are not even
related to bankruptcy law. Rather, to the extent Appellant has any legitimate claims against
Defendants/Appellees, the issues relate to looming foreclosures and are therefore best addressed
in state court foreclosure proceedings. Accordingly, even if Appellant had standing to pursue
Adversary Proceedings 10-00303 and 10-00304, the Bankruptcy Court did not abuse its
discretion in determining that it was not the proper forum for such litigation.
C. DEFAULT JUDGMENT
Appellant also appeals the Bankruptcy Court’s denial of her motions for default judgment
against U.S. Bank, N.A. in Adversary Proceeding No. 10-00304 and against Bank of America,
N.A., in Adversary Proceeding No. 10-00305.
The Bankruptcy Court has “wide discretion in
deciding whether or not to enter a default judgment under Fed. R. Civ. P. 55, and the Rule itself
authorizes the bankruptcy court to conduct such hearings ‘as it deems necessary and proper.” In
re Beltran, 182 B.R. 820, 823 (9th Cir. 1995). The Fourth Circuit has repeatedly expressed a
“strong preference that, as a general matter, defaults be avoided and that claims and defenses be
disposed of on their merits.” Colleton Preparatory Academy, Inc. v. Hoover Universal, Inc., 616
F.3d 413, 417 (4th Cir. 2010). The following factors should be used to evaluate motions relating
to defaults: “whether the [defaulting] party had a meritorious defense, whether the defaulting
party acts with reasonable promptness, the personal responsibility of the defaulting party, the
prejudice to the [non-defaulting] party, whether there is a history of dilatory action, and the
availability of sanctions less dramatic.” Id.
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Here, Appellant’s Adversary Proceeding complaints were at best “very difficult to
decipher” and seemingly lacking in merit. Moreover, Appellant lacked standing to pursue these
claims for the reasons stated above.
Thus, the defaulting parties clearly had meritorious
defenses.
In addition, despite believing it had not been properly served with Adversary Proceeding
10-00304, U.S. Bank, N.A. filed its responsive pleading before the Appellant filed her motion for
default judgment and incorporated by reference only those issues previously raised by its coDefendant to that proceeding. Thus, even assuming U.S. Bank, N.A. was properly served, it
appears to have acted with reasonable promptness and without prejudice accruing to Appellant.
Similarly, Bank of America, N.A. argues that it was not properly served with Adversary
Proceeding 10-00305 and only first learned of the proceeding at the July 14 hearing on
Adversary Proceeding 10-00303.
Bank of America, N.A. points out that it filed a timely
response to Adversary Proceeding 10-00303, which is virtually identical to 10-00305. Thus,
even assuming Bank of America, N.A. was properly served adversary proceeding 10-00305,
Appellant was on notice of the defenses found to be meritorious herein and the Court cannot
discern any prejudice to Appellant resulting from its alleged default. Further, Appellant has been
unable to present evidence of a history of dilatory action by either the U.S. Bank, N.A. or Bank
of America, N.A. Accordingly, the Bankruptcy Court did not abuse its discretion by denying
Appellant’s motions for default judgment in Adversary Proceeding Nos. 10-00304 and 1000305.
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CONCLUSION
For the foregoing reasons, the Bankruptcy Court's orders dismissing the complaints in
Adversary Proceeding Nos. 10-00303, 10-00304, and 10-00305 will be affirmed.
order follows.
l#1,Y2lj
Date
UtO~~
Deborah K. Chasanow for Roger W. Titus
United States District Judge
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A separate
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