Osuji v. Federal National Mortgage Association et al
Filing
12
MEMORANDUM AND OPINIONFor the reasons set forth herein, the order of the Bankruptcy Court dated September 2, 2016 is affirmed. The Clerk of the Court shall enter judgment accordingly and close the case. SO ORDERED. Ordered by Judge Joseph F. Bianco on 7/17/2017. (Hammond, Daniel)
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF NEW YORK
№ 16-CV-5018 (JFB)
SAMUEL OSUJI,
Appellant,
VERSUS
FEDERAL NATIONAL MORTGAGE ASSOCIATION AND JP
MORGAN CHASE BANK, N.A.,
Appellees.
MEMORANDUM AND ORDER
July 17, 2017
JOSEPH F. BIANCO, District Judge:
Samual Osuji (“appellant” or “Mr. Osuji”)
appeals from the Bankruptcy Court’s ruling
in which it permissibly abstained from the
proceeding and held, in the alternative, that
the Rooker-Feldman doctrine barred appellant’s lawsuit. Because the Court concludes
that the Bankruptcy Court clearly did not
abuse its discretion in permissively abstaining
from the proceeding, the ruling below is affirmed.
I.
BACKGROUND
The Court assumes the parties’ familiarity
with the full facts and procedural history of
this action and summarizes the facts and history relevant to the instant appeal based on
the Bankruptcy Record on Appeal (“R.,” ECF
Nos. 3-2 to 3-5). 1
A. The State Court Foreclosure Action
This case originates from a note executed
by Christine Phillips-Osuji (“Mrs. Osuji”) for
$296,000 in favor of appellee JP Morgan
Chase Bank (“Chase”) (R. at 672–74), secured by a mortgage on property located at 95
Angevine Avenue, Hempstead, New York
11550 (the “Property”) (id. at 676–94). Appellant signed neither document. (Id. at 674,
693.) Appellee Federal National Mortgage
Association (“Fannie Mae,” and collectively
1
Though the record spans across four separate docket
entries, the page numbering continues from one entry
to the next. Therefore, rather than delineating between
separate docket entries, the Court simply refers to the
relevant page number in the record.
with Chase, “appellees”) was the original investor in the note and mortgage (collectively,
the “loan”), and Chase was its servicer. (Id.
at 669 ¶ 4.)
lief under Chapter 7 of the Bankruptcy Code
on December 30, 2015 and commenced an
adversary proceeding against appellees on
March 17, 2016, alleging that they have no
ownership interest in the loan. (Id. at 5–107.)
Appellees filed a motion to dismiss on May
26, 2016 (id. at 257–58), and, after the motion was fully briefed, the Bankruptcy Court
issued an Order to Show Cause (“OTSC”)
why it should not abstain from the proceeding
(id. at 1043–44). The parties briefed the issue, and the Bankruptcy Court held a hearing
on the OTSC and appellees’ motion to dismiss on August 15, 2016. (See id. at 1087.)
By order dated September 2, 2016 (the “September 2 Order”), the Bankruptcy Court voluntarily abstained from the proceeding and, in
the alternative, granted appellees’ motion to
dismiss. (Id. at 1084–90.)
On June 17, 2011, Chase commenced a
foreclosure proceeding (the “Foreclosure Action”) against Mrs. Osuji in state court after
she defaulted on the loan. (Id. at 391–435,
1096.) Someone filed an answer and motion
to strike the foreclosure complaint purportedly on behalf of Mrs. Osuji and appellant as
“‘John DOE’ #1 and parties in interest.” 2 (Id.
at 437–98, 500–18.) The state court denied
the motion to strike. (Id. at 524.)
Appellant moved to intervene in the Foreclosure Action on June 4, 2012 (id. at 526–
31), but the court denied the motion by order
dated October 15, 2012 (id. at 533–34). Afterwards, appellant made several additional
motions to intervene in, strike, or stay the
Foreclosure Action, none of which proved
successful. (See, e.g., id. at 574–75, 591–92,
602, 631–645, 653.) Based on Mrs. Osuji’s
consent to an entry of a judgment of foreclosure and sale, the state court granted Chase’s
motion for an order of reference in the Foreclosure Action on October 30, 2015. (Id. at
655.)
C. Appeal
Appellant filed his notice of appeal of the
September 2 Order on September 8, 2016.
(ECF No. 1.) This Court received the Bankruptcy Record on October 14, 2016. (ECF
No. 3.) Appellant filed his brief in support of
the appeal on March 3, 2017 (ECF No. 8),
appellees responded on April 3, 2017 (ECF
No. 9), and appellant filed a reply on April
27, 2017 (ECF No. 11). The Court has fully
considered the parties’ submissions.
On February 2, 2016, Fannie Mae transferred its ownership interest in the loan to
MTGLQ Investors, L.P. (“MTGLQ”), and
service was transferred to Shellpoint Mortgage Servicing. (Id. at 696–98; see also id.
1084–85.)
II. DISCUSSION
Appellant argues that the Bankruptcy
Court abused its discretion in permissively
abstaining from the proceeding and erred as a
matter of law in concluding that the RookerFeldman doctrine barred his action against
Fannie Mae and Chase. As set forth below,
the Court concludes that the Bankruptcy
Court did not abuse its discretion in permissively abstaining from the adversary proceed-
B. Bankruptcy Proceedings
Appellant filed a voluntary petition for re2
Mrs. Osuji later asserted that these documents were
filed without her knowledge or permission. (R. at
520–22, 1096 n.1.) On this basis, the state court granted Chase’s motion to strike the answer (id. at 614–16),
and the Appellate Division affirmed (id. at 628–29).
2
ing and, therefore, affirms the ruling below. 3
ing to the main bankruptcy
case, (7) the substance rather
than form of an asserted
‘core’ proceeding, (8) the
feasability of severing state
law claims from core bankruptcy matters to allow
judgments to be entered in
state court with enforcement
left to the bankruptcy court,
(9) the burden of [the court’s]
docket, (10) the likelihood
that the commencement of
the proceeding in bankruptcy
court involves forum shopping by one of the parties,
(11) the existence of a right
to a jury trial, and (12) the
presence in the proceeding of
nondebtor parties.
A. Applicable Law
Under 28 U.S.C. § 1334(c)(1), the Bankruptcy Court may permissibly abstain from an
adversary proceeding.
See 28 U.S.C.
§ 1334(c)(1) (“[N]othing 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 . . . .”). The Second Circuit has indicated that such abstention “is within the
sound discretion of the bankruptcy court.” In
re Abir, No. 09 CV 2871(SJF), 2010 WL
1169929, at *7 (E.D.N.Y. Mar. 22, 2010)
(citing In re Petrie Retail. Inc., 304 F.3d 223,
232 (2d Cir. 2002) (“Permissive abstention
from core proceedings under 28 U.S.C.
§ 1334(c)(1) is left to the bankruptcy court's
discretion.”)). In deciding whether to permissibly abstain, the Bankruptcy Court may consider
Id. at *7 (quoting In re Luis Electrical Contracting Corp., 165 B.R. 358, 368 (Bankr.
E.D.N.Y. 1992)). The court is not required,
however, to consider each of these factors,
and may permissibly abstain where only
some of them favor abstention. Wallace v.
Guretzky, No. CV-09-0071(SJF), 2009 WL
3171767, at *2 (E.D.N.Y. Sept. 29, 2009) (affirming permissive abstention that was based
on four of the twelve factors). District courts
review a decision to permissibly abstain for
an abuse of discretion. Abir, 2010 WL
1169929, at *8; Wallace, 2009 WL 3171767,
at *2. The Bankruptcy Court abuses its discretion if it abstained “based on an ‘erroneous
view of the law’ or ‘clearly erroneous factual
findings.’” 4 Wallace, 2009 WL 3171767, at
*2 (quoting In re Bay Point Assocs., No. 07CV-1492 (JS), 2008 WL 822122, at *3
(E.D.N.Y. Mar. 19, 2008)).
(1) the effect or lack thereof
on the efficient administration of the [bankruptcy] estate if a Court recommends
abstention, (2) the extent to
which state law issues predominate over bankruptcy issues, (3) the difficulty or unsettled nature of the applicable state law, (4) the presence
of a related proceeding commenced in state court or other
nonbankruptcy court, (5) the
jurisdictional basis, if any,
other than 28 U.S.C. § 1334,
(6) the degree of relatedness
or remoteness of the proceed3
Because the Court affirms on this ground, it does not
address the Bankruptcy Court’s alternative ruling on
appellees’ motion to dismiss.
4
In any event, this Court would reach the same conclusion under a de novo standard of review.
3
found that “state law issues clearly predominate over bankruptcy issues” (R. at 1089),
and this Court agrees. In his complaint, appellant claims an interest in the Property—
and challenges appellees’ interest in it—
based on principles of New York state property law. (See id. at 6 (appellant’s complaint
citing New York law exclusively as the basis
for his challenge to appellees’ interest in the
Property).). Indeed, apart from the jurisdictional allegations, the Complaint is devoid of
any citations to federal law. 5 (See generally
id. at 5–37.) Under these circumstances,
there is no question that the Bankruptcy Court
did not err in finding that this factor favored
abstention. See Little Rest Twelve, Inc. v.
Visan, 458 B.R. 44, 60 (S.D.N.Y. 2011) (upholding abstention where, inter alia, “the cases contain[ed] exclusively state claims with
little, if any, relevance to federal law”).
B. Application
Here, the Bankruptcy Court permissively
abstained after finding that
(2) state law issues clearly
predominate over bankruptcy
issues; (4) there is a related
state court foreclosure proceeding pending; (5) the lack
of any jurisdictional basis
other than 28 U.S.C. § 1334;
(6) the degree of relatedness
or remoteness of the proceeding to the main bankruptcy
case; (9) the burden on the
court’s docket; and (10) the
likelihood that the commencement of the proceeding
in a bankruptcy court involves forum shopping by
one of the parties.
2. Relatedness of State Proceeding
(R. at 1089.) Appellant argues that the Bankruptcy Court abused its discretion in permissively abstaining because “there is no pending, or ongoing, parallel state proceeding that
would trigger abstention principles.” (Appellant’s Br., ECF No. 8, at 17.) He further argues that the factors do not weigh in favor of
permissive abstention. (Appellant’s Reply,
ECF No. 11, 19–25.) As set forth below, the
Court disagrees.
The fourth and sixth factors favor abstention where there is “a related proceeding
commenced in state court” and that proceeding is closely related to the bankruptcy proceeding. 6 Abir, 2010 WL 1169929, at *7. In
In re Fierro, No. 1-14-41439-NHL, 2015 WL
3465753, at *3 (Bankr. E.D.N.Y. May 29,
2015), for example, the court permissively
abstained where “[a] related proceeding [was]
already commenced and ongoing in the State
Court” and had been “for over twelve years.”
See also In re Int’l Tobacco Partners, Ltd.,
462 B.R. 378, 393 (Bankr. E.D.N.Y. 2011).
In discussing similar factors in other circuits,
district courts have found abstention appropriate “where the record reflects a substantial
investment of effort in the state proceeding.”
1. Predominance of State Law Issues
Courts in this Circuit frequently cite the
second factor—the extent to which state law
issues predominate over bankruptcy issues—
as a reason for permissively abstaining. See,
e.g., Abir, 2010 WL 1169929, at *8; Wallace,
2009 WL 3171767, at *2; Bay Point Assocs.,
2008 WL 822122, at *4; In re Exeter Holding, Ltd., No. 11-77954-AST, 2013 WL
1084548, at *5 (Bankr. E.D.N.Y. Mar. 14,
2013); In re Taub, 417 B.R. 186, 194 (Bankr.
E.D.N.Y. 2009). Here, the Bankruptcy Court
5
For this reason, appellant’s conclusory assertion that
“[s]tate law claims have no bearing on this case” is
patently incorrect. (Appellant’s Reply at 21.)
6
Because the fourth and sixth factors overlap, this
Court addresses them together.
4
In re Bay Vista of Virginia, Inc., 394 B.R.
820, 844 (Bankr. E.D. Va. 2008) (collecting
cases).
Appellant’s remaining argument on this
factor is also unavailing. Even assuming appellant is correct that permissive abstention
requires the state proceeding to be “pending”
or “ongoing” under 28 U.S.C. § 1334(c)(1),
see In re Lazar, 237 F.3d 967, 981 (9th Cir.
2001), the Foreclosure Action here is still
pending at this time because, though an order
of reference has issued, there has been no
foreclosure sale or additional action since appellant filed the complaint in this proceeding.
Consequently, the Bankruptcy Court did not
abuse its discretion in concluding that the
fourth and sixth factors favored abstention.
Here, it is beyond dispute that a closely
related proceeding exists in state court. The
state court in the Foreclosure Action adjudicated the various interests in the Property that
appellant challenges here, and appellant himself was a very active participant in that proceeding. His lack of success on his various
motions does not imply that the proceeding is
unrelated. On the contrary, in denying his
motions to intervene, to strike, and to stay the
case, the state courts have addressed the very
claims he raises now. (See, e.g., R. at 533
(state court denying appellant’s motion to intervene because appellant “is neither in the
title nor named on the mortgage note” and
“an interest in property, as claimed herein,
that arose through marriage, standing alone,
does not justify intervention”).)
3. Jurisdictional Basis for Action
The fifth factor, the basis for the Bankruptcy Court’s jurisdiction, also plainly supports the decision below, as the only basis for
jurisdiction identified in the complaint is 28
U.S.C. § 1334(b). (See R. at 6–7.) See, e.g.,
Wallace, 2009 WL 3171767, at *3; Taub, 417
B.R. at 194. 8
Appellant argues that the two cases are
not related because he was never formally a
party to the Foreclosure Action. (See, e.g.,
Appellant’s Reply at 19–20, 21.) It was not
for lack of trying that appellant was not a party in that action, however. Instead, as the
Bankruptcy Court correctly noted, appellant
“is not a party to the current Foreclosure Action . . . because the state court determined he
did not have a right to intervene.” (Id. at
1089.) His failure to successfully intervene
in that action, therefore, does not render the
Foreclosure Action unrelated to the present
proceeding, given that the substance of the
two cases are identical. 7
involved a completely different statute—the Declaratory Judgment Act—and made no mention of 28 U.S.C.
§ 1334. Furthermore, even assuming Wilton applied,
lack of success in state court alone is insufficient to
show that a claim cannot “satisfactorily be adjudicated” in state court, yet that is the only reason appellant
offers for why the state court could not adjudicate his
claim. Wilton, 515 U.S. at 283.
8
Though appellant belatedly identifies various other
federal statutes as providing jurisdiction for the first
time in his reply papers, it is not clear how those statutes apply, and appellant does not even attempt to explain why they provide jurisdiction. (See Appellant’s
Reply at 22.) As such, this Court declines to consider
these arguments. See Karibian v. Columbia Univ., 14
F.3d 773, 777 (2d Cir. 1994) (“We have no obligation
to review issues that are raised, but not independently
and sufficiently developed, in an appellant’s main
brief.”); Johnson v. Panetta, 953 F. Supp. 2d 244, 250
(D.D.C. 2013) (“[P]erfunctory and undeveloped arguments, and arguments that are unsupported by pertinent authority, are deemed waived.”); Sunseri v. Proctor, 461 F. Supp. 2d 551, 573 (E.D. Mich. 2006) (“The
Court need not consider arguments raised in a perfunc-
7
Moreover, appellant’s citations to Wilton v. Seven
Falls Co., 515 U.S. 277, 281 (1995) are inapposite.
Although he is correct that the Supreme Court in that
case encouraged lower courts to “examine the scope of
the pending state court proceeding and the nature of
defenses open there” and to consider “whether the
claims of all parties in interest can satisfactorily be
adjudicated” in the state proceeding, id. at 283, Wilton
5
4. Burden on Court’s Docket
shopping by [appellant].” (R. at 1090.)
Based on an independent review of the record, the Court concludes that this finding was
not erroneous. On the contrary, as discussed
above, appellant received several unfavorable
rulings on his various motions to intervene,
stay the action, and strike the complaint in the
Foreclosure Action. (See, e.g., id. at 533–34,
574–75, 591–92, 631–645, 653.) To file suit
in Bankruptcy Court only after these rulings
leaves this Court with “an unmistakable impression of forum-shopping.” Visan, 458 B.R.
at 60. Accordingly, the Court concludes that
it was not an abuse of discretion for the Bankruptcy Court to find that this factor favored
abstention.
The Bankruptcy Court also cited the burden on its docket as a reason for abstaining,
and appellant has presented no reason to
doubt this factor. 9 As such, the Bankruptcy
Court did not err in citing it in favor of abstention.
5. Forum Shopping
The tenth factor favors abstention where
an action “produce[s] an unmistakable impression of forum-shopping.” Visan, 458
B.R. at 60. In Visan, for example, the court
found that such forum shopping existed
where the defendants removed a state court
action to the Bankruptcy Court “to avoid the
state court forum . . . shortly before the state
court judge was about to issue a decision” on
an important motion. Id. Similarly, in Taub,
the court found that this factor favored abstention because the debtor had “previously
commenced actions in [state court]” and
“acknowledged that these actions were withdrawn in favor of bringing them” in the
Bankruptcy Court. Taub, 417 B.R. at 197.
6. Factors Not Cited By Bankruptcy Court
For the first time in his reply brief, appellant raises specific arguments as to each of
the twelve factors, including several not relied upon by the Bankruptcy Court in the
September 2 Order. Most of these arguments,
however, turn on his assertion that there is no
ongoing related case between the parties in
state court. (See, e.g., Appellant’s Reply at
20, 21, 23–24.) As discussed above, however, the Court finds this contention unpersuasive.
Here, the Bankruptcy Court cited this factor in favor of abstention, noting that “bringing this litigation here after receiving adverse
decisions in the state court smacks of forum
The only argument he raises not dependent on this contention is that adjudicating his
interest in the Property in Bankruptcy Court
could result in the influx of an asset into the
bankruptcy estate, which, in turn, would contribute to the efficient administration of the
estate under the first factor. (Id. at 19.) Even
accepting this argument as true, however, the
Bankruptcy Court still found that several other factors strongly favored abstention. It was
not an abuse of discretion, under these circumstances, to permissively abstain. See
Wallace, 2009 WL 3171767, at *2 (abuse of
discretion exists where decision was “based
on an erroneous view of the law or clearly
erroneous factual findings”).
tory manner, unaccompanied by some effort at developed argumentation.”); see also Bowles v. N.Y. City
Transit Auth., No. 03 CIV.3073(BSJ), 2004 WL
548021, at *3 (S.D.N.Y. Mar. 18, 2004) (“The Court
need not consider arguments raised for the first time in
reply memoranda.” (collecting cases)).
9
Instead, appellant simply argues that the burden
would fall on the state court instead, but the possibility
that abstention will place a burden on a state court does
not militate against such abstention. In addition, given
the order of reference dated October 30, 2015 and Mrs.
Osuji’s consent to the foreclosure sale, it appears the
Foreclosure Action is nearing completion, so any burden the Bankruptcy Court’s abstention would place on
the state court is minimal.
6
III. CONCLUSION
In short, the Court concludes that the
Bankruptcy Court did not abuse its discretion
in permissively abstaining from the instant
proceeding. Therefore, its September 2 Order
is affirmed. The Clerk of the Court shall enter judgment accordingly and close the case.
SO ORDERED.
JOSEPH F. BIANCO
United States District Judge
Dated: July 17, 2017
Central Islip, New York
***
Appellant is represented by Oleg Vinnitsky,
Island North Tower Professional Co-op, 575
Main Street, Suit #N-711, Roosevelt Island,
NY 10044. Appellees are represented by
Brian W. Keatts, Parker Ibrahim & Berg
LLC, 270 Davidson Avenue, 5th Floor, Somerset, NJ 08873, and Ronal C. Owens, TD
Bank, N.A., 3000 Atrium Way, Suit 400,
Mount Laurel, NJ 08054.
7
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