Court: United States Bankruptcy Court, S.D. New York; April 8, 2013; Us Bankruptcy; United States Bankruptcy Court
The Court granted motions to dismiss an adversary proceeding filed by Plaintiffs against Defendants Susan Turner and Mortgage Electronic Registration Systems, Inc. (MERS), along with Debtor Defendants GMAC Mortgage, LLC and Executive Trustee Services, LLC. The motions were based on Federal Rule of Civil Procedure 12(b)(6) and Bankruptcy Rule 7012(b)(6). The case involved a mortgage loan originated by Amerigroup Mortgage Corporation, which was assigned to GMACM after the Plaintiffs defaulted, leading to a foreclosure sale on August 7, 2012.
On the same day as the foreclosure, Mr. Kimber filed a chapter 13 bankruptcy petition, which was dismissed shortly after for failure to comply with filing requirements. Subsequently, the Plaintiffs filed a joint chapter 13 petition and initiated an adversary proceeding against multiple defendants, including GMACM and MERS, alleging violations of the automatic stay, avoidance of a defective deed of trust, declaratory relief, and turnover.
The Texas Bankruptcy Court had previously dismissed all claims against Turner and MERS with prejudice in a February 21, 2013 order. The Court's decision to dismiss the current adversary complaint was made following a hearing on March 21, 2013, resulting in a judgment that dismissed the complaint with prejudice.
All claims against GMACM and ETS, the Debtor Defendants, were dismissed with prejudice, except for Count I, which alleges a violation of the automatic stay. The Plaintiffs were required to file an amended complaint by March 6, 2013, but failed to do so, leading to the Texas Bankruptcy Court dismissing Count I with prejudice on March 19, 2013. Following this, the Debtors filed for chapter 11 bankruptcy on May 14, 2012, and their cases are being jointly administered. The Plaintiffs initiated an Adversary Proceeding on November 26, 2012, asserting claims similar to those in the Texas AP, particularly that the Defendants violated the automatic stay by selling property in foreclosure. Additional claims include allegations of a defective Deed of Trust due to a fraudulent signature and a request for declaratory relief that the Deed of Trust and asserted lien are void, along with a turnover of the property’s market value to the bankruptcy estate. The Complaint does not comply with Local Bankruptcy Rule 7008-1 regarding consent to final judgments by the bankruptcy judge, although moving parties have consented to judgment on non-core claims. The Defendants filed motions to dismiss the Complaint on March 6, 2013, citing insufficient service and failure to state a claim, but the Plaintiffs did not respond or appear at the hearing. Count I is deemed a core matter allowing the bankruptcy court to enter a final judgment, while other claims appear non-core, though consent for final judgments can be given.
Defendants have consented to the Court entering final orders or judgment, while Plaintiffs, who have not participated in the proceedings since filing the Complaint, have also requested judgment in their favor on all claims. Although the Plaintiffs failed to comply with Local Bankruptcy Rule 7008-1, this request indicates their consent to the Court's jurisdiction. The legal standard referenced includes Bankruptcy Rule 7012, which incorporates Federal Rule 12(b)(6), allowing dismissal for failure to state a claim. A complaint must present a clear and concise statement of the claim per Rule 8(a)(2). Following the Supreme Court's ruling in Ashcroft v. Iqbal, courts assess motions to dismiss using a two-pronged approach: accepting factual allegations as true while disregarding legal conclusions, and determining if the allegations present a plausible claim for relief. The plausibility threshold is context-specific and requires reasonable inference of liability against the defendant. Pro se complaints receive liberal construction but must still provide sufficient factual detail for understanding the claim and legal basis for recovery. The document further discusses the doctrine of res judicata, highlighting that a final judgment precludes relitigation of claims that were or could have been raised, as established in relevant case law.
The Court finds that the Texas Orders bar the Plaintiffs from pursuing claims in the current adversary proceeding based on res judicata. The criteria for res judicata are satisfied: (1) the Texas Orders constitute a final judgment on the merits; (2) the parties involved are identical; (3) both the Texas Bankruptcy Court and this Court possess competent jurisdiction; and (4) the claims in both cases are the same. The Plaintiffs had the opportunity to appeal the Texas Orders but did not do so, rendering them final. The fact that the Texas Orders were dismissals under Rule 12(b)(6) further reinforces their status as judgments on the merits, which do not require the claims to have been actively litigated. Having previously attempted to pursue these claims against the same Defendants in Texas, the Plaintiffs are estopped from relitigating them here. Consequently, the Court grants the Debtors’ and Non-Debtors’ motions, dismissing the Complaint with prejudice, and orders the preparation of a judgment to reflect this dismissal. The Court acknowledges issues regarding service of the Complaint and Summons but determines that these do not affect the dismissal based on res judicata. The Court does not address collateral estoppel since sufficient grounds for dismissal exist under res judicata alone. The Court also notes the identical paragraph numbering error in both complaints. The appeal deadlines for the Texas Orders are specified, with the first order being appealable until March 7, 2013, and the second until April 2, 2013.
