Joseph Lau v. Bank of America NA , 684 F. App'x 235 ( 2017 )

NOT PRECEDENTIAL
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
___________
No. 16-2221
___________
In re: JOSEPH H. LAU AND RAQUEL R. LAU, Debtors
JOSEPH H. LAU AND RAQUEL R. LAU,
Appellants
v.
BANK OF AMERICA, N.A.; MERSCORP HOLDINGS, INC.; FANNIE MAE
____________________________________
On Appeal from the United States District Court
for the District of New Jersey
(D.N.J. No. 3-15-cv-06413)
District Judge: Honorable Peter G. Sheridan
____________________________________
Submitted Pursuant to Third Circuit LAR 34.1(a)
March 21, 2017
Before: RESTREPO, SCIRICA and FISHER, Circuit Judges
(Opinion filed: March 27, 2017)
___________
OPINION*
___________
*
This disposition is not an opinion of the full Court and pursuant to I.O.P. 5.7 does not
constitute binding precedent.
PER CURIAM
Joseph and Raquel Lau appeal from two orders of the United States District Court
for the District of New Jersey, affirming on appeal an order issued by the United States
Bankruptcy Court for the District of New Jersey. Finding no error, we will affirm.
I.
The facts are well-known to the parties, so we will only recount those necessary to
our decision. On July 31, 2006, Joseph Lau executed a note in favor of Countrywide
Bank, N.A. (the “Note”) to purchase a home. Along with the Note, Joseph and Raquel
Lau (the “Laus”) executed a mortgage to secure the amounts due (the “Mortgage”). The
Mortgage named Mortgage Electronic Registration Services, Inc. (“MERS”) as
mortgagee and nominee for Countrywide Bank, N.A. and its successors and assigns.
Countrywide Bank, N.A. indorsed the Note to Countrywide Home Loans, Inc., who
indorsed the Note in blank. On December 3, 2012, MERS assigned the Mortgage to
Bank of America, N.A. (“BOA”), successor by merger to BAC Home Loan Servicing,
L.P. (“BAC”) f/k/a Countrywide Home Loans Servicing, LP. According to public
records adduced in the bankruptcy court adversary proceeding, BOA is the current
holder, assignee, and servicer of the loan documents, while Federal National Mortgage
Association (“Fannie Mae”) is the current owner (or “investor”) of the loan documents.1
1
Despite their allegations of fraud, the Laus have never refuted the existence of these
public records.
2
On October 6, 2009, the Laus filed a Chapter 13 bankruptcy. On December 30,
2009, BAC filed a proof of claim (“POC”) in the Laus’ bankruptcy case. The
Bankruptcy Court confirmed the Laus’ plan (the “Plan”) on June 24, 2010, they made
their payments of $71,926.57, in full, in accordance with the Plan, and they received their
discharges. Shortly after making their final Plan payments, the Laus instituted an
adversary proceeding against (1) BOA and its subsidiaries including BAC Home
Servicing, L.P., Bank of America Home Loans, f/k/a Countrywide Home Loans, d/b/a
under trade name America’s Wholesale Lender, etc.; (2) Merscorp Holdings, Inc.
(“MHI”) and its subsidiary MERS; and (3) FannieMae. The underlying basis of the
adversary proceeding was several categories of documents filed or sent to the Laus
during the bankruptcy.2
The Appellees filed a first Motion to Dismiss the Adversary Proceeding on
November 24, 2014. The Bankruptcy Court granted it in part and denied it in part. The
Order, entered on January 5, 2015, stated that the causes of action for slander of title,
perjury, and automatic stay violations were dismissed with prejudice. The Laus’ slander
of title claims had alleged an incurable chain of broken title, an irreparable bifurcation of
the Laus’ instruments, violation of the recording statutes, violation of the statute of
2
These included the POC; the copy of the Note attached as an exhibit to the POC; the
assignment of mortgage from MERS to BOA; four “Notice(s) of Mortgage Payment
Change” filed in the bankruptcy by BOA; two “Statement(s) in Response to Notice of
Final Cure” filed in the bankruptcy by BOA; a “Notice of Intention to Foreclose” sent to
3
frauds, and also the claim that clear title may not derive from fraud. Additionally, the
January 5, 2015 Order dismissed with prejudice the claims of fraud based upon 18 U.S.C.
§§ 152, 157, 371, 513, 514, 1343 and 31 U.S.C. § 3729, because those sections do not
provide for a private right of action, and, further, dismissed all claims against MHI.
Critically, the Laus never appealed the January 5, 2015 Order to the District Court. In the
process of arguing the first motion to dismiss, the Laus admitted to borrowing the money
at issue, promising to pay it back, and falling behind on monthly mortgage payments.
However, the Bankruptcy Court gave the Laus an opportunity to amend their complaint
to more precisely plead their causes of action for fraud.
Thereafter, the Laus filed an Amended Complaint containing twenty-five causes
of action. Ten are styled as “Fraud on the Plaintiffs, Fraud on the Federal Bankruptcy
Court/Trustee” for various filings throughout the course of the bankruptcy and written
and oral arguments related to the first motion to dismiss. Two causes of action are
“Fraud on the Plaintiffs” for the pre-foreclosure letter and the Notice of Intent to
Foreclose.3 The gravamen of the Amended Complaint was that the defendants had
fraudulently misrepresented their status in bankruptcy and conspired to hide a
securitization of the Laus’ instruments by multiple parties in interest who had engaged in
the Laus by BOA; and a pre-foreclosure letter sent to the Laus by BOA (collectively, the
“Documents”).
3
One cause of action is for an alleged Truth in Lending Act violation. Finally, the
remaining twelve causes of action are for alleged violations of the Fair Debt Collection
Practices Act. The Laus have expressly abandoned these thirteen claims on appeal.
4
slander of title, and that none of the Appellees is a real party in interest to the Laus’
instruments. The Laus sought, among other things, to be given their home free and clear
of any instrument and be awarded punitive damages.
The Appellees filed a second motion to dismiss, which was granted in full by the
Bankruptcy Court on August 10, 2015. The Bankruptcy Court found that the Laus had
failed to meet the requirements of Federal Rules of Civil Procedure 8(a), 9(b), and
12(b)(6). The Laus appealed to the District Court, which held argument before affirming
the Bankruptcy Court in full on February 19, 2016. The Laus filed a motion for
rehearing, which the District Court denied on April 5, 2016. This appeal followed.
II.
The Bankruptcy Court had jurisdiction under 28 U.S.C. §§ 157 and 1334. The
District Court had jurisdiction over the appeal of the Bankruptcy Court’s decision under
28 U.S.C. § 158(a). We have jurisdiction under 28 U.S.C. § 1291. Our standard of
review is clear: “We review the bankruptcy court’s findings of fact under a clearly
erroneous standard, and its conclusions of law under a plenary standard. Because the
district court sits as an appellate court in bankruptcy cases, our review of its decision is
plenary.” Cinicola v. Scharffenberger, 248 F.3d 110, 115 n.1 (3d Cir. 2001) (citations
omitted). In order to survive a motion to dismiss under Federal Rule of Civil Procedure
12(b)(6), “a complaint must contain sufficient factual matter, accepted as true, to ‘state a
5
claim to relief that is plausible on its face.’” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009)
(quoting Bell Atl. Corp. v. Twombly, 550 U.S. 554, 570 (2007)).
III.
On appeal, the Laus challenge the District Court’s affirmance of the Bankruptcy
Court’s dismissal of their fraud causes of action. The elements of intentional fraud in
New Jersey are, “1) a material misrepresentation of presently existing or past fact; 2)
knowledge or belief by the defendant of its falsity; 3) an intention that the other person
rely on it; 4) reasonable reliance thereon by the other person; and 5) resulting damages.”
Gennari v. Weichert Co. Realtors, 691 A.2d 350, 367 (N.J. 1997). The Bankruptcy Court
concluded that the fraud counts of the Amended Complaint must fail because they do not
demonstrate any material representations made by the Appellees. This is so, according to
the Bankruptcy Court, because the entire Amended Complaint is based on the
Documents, and the record demonstrates that those Documents are all legitimate. We
agree.
Causes of action one, three, five, six, seven, eight, and nine relate to three
categories of the Documents: the POC, the “Notices of Mortgage Payment Change,” and
the “Statements in Response to Notice of Final Cure.” Federal Rule of Bankruptcy
Procedure 3001(b) allows a creditor or creditor’s agent to file a proof of claim and related
documents. As such, these categories of Documents were properly submitted by BOA in
its capacity as servicer of the loan. See, e.g., Greer v. O’Dell, 305 F.3d 1297, 1302 (11th
6
Cir. 2002) (“A servicer is a party in interest in proceedings involving loans which it
services. The Bankruptcy Code and Rule 17 of the Federal Rules of Procedure each have
liberal standing provisions, designed to allow a party to appear as long as it has a direct
stake in the litigation under the particular circumstances.”); In re Conde-Dedonato, 391
B.R. 247, 250 (Bankr. E.D.N.Y. 2008) (“A servicer of a mortgage is clearly a creditor
and has standing to file a proof of claim against a debtor pursuant to its duties as a
servicer.”); Bankers Tr. (Del.) v. 236 Beltway Inv., 865 F. Supp. 1186, 1191 (E.D. Va.
1994) (holding that both the lender and servicer had standing to sue on mortgagor’s
default even though the servicer was not the holder of the mortgage); In re Tainan, 48
B.R. 250, 252 (Bankr. E.D. Pa. 1985) (determining that mortgage servicer was a party in
interest for purposes of a relief from stay proceeding).
Causes of action ten and eleven concern the Notice of Intent to Foreclose and the
pre-foreclosure letter sent by BOA to the Laus. The Bankruptcy Court correctly
concluded that, pursuant to the New Jersey Fair Foreclosure Act, the assignment of the
mortgage from MERS to BOA on December 3, 2012 allowed BOA to take steps toward
foreclosure.4 See N.J.S.A. 2A:50-55 (“‘Residential mortgage lender’ or ‘lender’ means
any person, corporation, or other entity which makes or holds a residential mortgage, and
any person, corporation or other entity to which such residential mortgage is assigned.”).
4
The initial designation of MERS as nominee did not create a fatal separation of the note
and mortgage (as the Laus have repeatedly argued). See Bank of New York v.
Raftogianis, 13 A.3d 435, 451 (N.J. Super. Ct. Ch. Div. 2010).
7
Thus, neither the assignment nor the subsequent foreclosure-related Documents
constituted misrepresentations.
Cause of action two alleges that the copy of the Note attached to BOA’s POC did
not contain two indorsements, and is therefore fraudulent. The Bankruptcy Court held
that “BOA, through the wealth of documents provided in this case, has established its
standing both in the bankruptcy, and in the foreclosure. The Note, even without the two
indorsements, did not damage [the Laus], as an allowed party appeared and participated
in the bankruptcy case.” Adv. Proc. Docket No. 38 at 11. Again, we agree. BOA
participated in all aspects of the bankruptcy case with the full knowledge of the Laus.
The Laus simply were not damaged by the copy of the Note attached to the POC; without
damages, there was no fraud.
Cause of action twelve alleges that Appellees made fraudulent misrepresentations
through counsel by way of written and oral arguments at the first motion to dismiss.
Namely, the Laus alleged that BOA “reasserted” its false status as creditor by way of its
counsel’s remarks. Because BOA had the authority to file the contested Documents,
statements made by Appellees in their briefs and at argument supporting the use of those
Documents could not have constituted misrepresentations. This claim was properly
dismissed.5
5
Cause of action four is specifically against MHI, in direct violation of the Bankruptcy
Court’s January 5, 2015 Order dismissing MHI with prejudice. The Laus did not appeal
from that Order to the District Court and, thus, that Order is not within the purview of the
8
We have considered the remaining arguments presented in Appellants’ briefs and
find them to be largely duplicative of the massive Amended Complaint. Generally
speaking, on appeal the Laus recycle the arguments presented below concerning the
standing of the Appellees to take certain actions concerning their loan, the alleged
defectiveness of certain loan documents, and alleged fraud regarding the ownership of the
Laus’ loan. These contentions are unpersuasive. There is no evidence of material
misrepresentations upon the Laus or the Court. On the record before us, the Amended
Complaint contains the type of “unadorned, the-defendant-unlawfully-harmed-me
accusation[s]” that do not suffice to survive a Rule 12(b)(6) motion to dismiss.6 Iqbal,
556 U.S. at 678. The District Court properly affirmed the Bankruptcy Court on this
basis.
The District Court also properly denied the Laus’ motion for rehearing under
Bankruptcy Rule 8022. This motion functions, essentially, like a traditional motion for
reconsideration. The test is whether “(1) the court has patently misunderstood a party, (2)
the court has made a decision outside the adversarial issues presented . . . by the parties;
appeal to this Court. See, e.g., Cont’l Cas. Co. v. Dominick D’Andrea, Inc., 150 F.3d
245, 251 (3d Cir. 1998) (“As a general rule, we do not consider on appeal issues that
were not raised before the district court in the absence of exceptional circumstances.”); In
re McClendon, 765 F.3d 501, 506 (5th Cir. 2014) (argument about actions of Bankruptcy
Court waived because debtor did not argue that particular error of law before the District
Court). Accordingly, we need not address the dismissal of cause of action four.
6
The lower courts also concluded that the Amended Complaint failed under Federal
Rules of Civil Procedure 9(b) and 8(a). We need not reach this discussion because it
clearly fails under Rule 12(b)(6).
9
(3) the court has made an error not of reasoning but of apprehension; or (4) there has
been a controlling or significant change in the law or facts since the submission of the
issue to the Court.” Thomas v. U.S. Bank Nat’l Ass’n, 474 B.R. 450, 456-57 (D.N.J.
2012). A motion for rehearing does not permit parties to recycle cases and arguments
which the District Court already rejected in rendering its original decision.
We have reviewed the transcript of the hearing before the District Court. The
Laus merely revisited old arguments. The Laus’ motion was premised upon three
assumptions: (1) their fraud claims were still viable; (2) Fannie Mae’s status was in
question; and (3) there were certain issues with the Laus’ title. As discussed above, the
Laus’ fraud-based claims and allegations concerning Fannie Mae are negated by the
record and the law. As for the title-based claims, these claims were dismissed in the
Bankruptcy Court’s unappealed-from January 5, 2015 Order based on statute of
limitations grounds. We note that the Laus had filed a state court quiet title action but
dismissed it in favor of their federal court action. On appeal of the Bankruptcy Court’s
ruling, the District Court again examined the Laus title-related claims and concluded that
another New Jersey Superior Court action would be the proper means for the Laus to
pursue any remaining title questions. We find no fault with this conclusion.
In short, the Laus did not identify any intervening change in law, present any new
evidence, or point out any compelling errors of fact or law. We believe that the District
Court understood the Laus and the extraordinary relief that they sought, as well as the
10
Bankruptcy Court’s well thought-out reasons for dismissing their Amended Complaint.
Given this, the motion for rehearing was without merit.
IV.
For the foregoing reasons, we will affirm the District Court’s Orders entered
February 19, 2016, and April 5, 2016, affirming the Bankruptcy Court’s Order of August
10, 2015. Appellants’ motion for oral argument is denied.
11