The opinion of the court was delivered by: Joy Flowers Conti U.S. District Judge
(Appeal related to Bankruptcy Case Nos. 09-22081 and 09-2385)
Pending before the court is an appeal filed by Lillian P. Iannini ("Iannini" or "debtor") from two orders of the bankruptcy court dated December 3, 2009. The bankruptcy court granted a motion to dismiss filed by Deutsche Bank National Trust Company ("Deutsche Bank" or "creditor") at bankruptcy number 09-2385 (Civil No. 10-101, Docket No. 1, Ex. 12) with respect to an adversary proceeding commenced by Iannini, granted a motion for relief from stay filed by Deutsche Bank at bankruptcy number 09-22081 (Civil No. 10-55, Docket No. 1, Ex. 12), and denied a motion to dismiss filed by Deutsche Bank at bankruptcy number 09-22081 (id.). After considering the submissions of the parties, the December 3, 2009 orders of the bankruptcy court are affirmed because the bankruptcy court correctly held it lacked subject-matter jurisdiction over the adversary proceeding.
On January 30, 2006, Deutsche Bank filed a complaint in mortgage foreclosure against Iannini and her son, James L. Iannini ("James Iannini," and together with Iannini, "Ianninis"), in the Beaver County Court of Common Pleas at Docket No. 2006-10212. (Adversary Compl. ((Bankr. No. 09-2385, Docket No. 1), Ex. B.) The action was based upon the alleged failure of the Ianninis to make monthly mortgage payments in connection with real property located at 1907 Truman Drive, Aliquippa, Pennsylvania 15001. (Creditor's Br. (Docket No. 8) at 2-3.) In answering the complaint, the Ianninis alleged that debtor and creditor entered a prior agreement in which creditor agreed to forebear from filing a foreclosure action. On May 1, 2006, creditor moved for summary judgment. (Debtor's Br. (Docket No. 5) at 2.)
The Ianninis believe that the complaint was defective, because creditor did not own the subject property at the time the complaint was filed. Several months later on August 3, 2006, creditor filed a notice of mortgage assignment. The purpose of the assignment was to attempt to transfer the property interest of Ameriquest Mortgage Company ("Ameriquest") and AMC Mortgage Services ("AMC") to creditor. (Id.)
The Beaver County Court of Common Pleas scheduled a hearing on November 9, 2006, to decide creditor's motion for summary judgment. On November 7, 2006, however, James Iannini filed for bankruptcy in the United States Bankruptcy Court for the Western District of Pennsylvania at bankruptcy number 06-25618. In that bankruptcy case, AMC, and not creditor, filed a proof of claim alleging ownership of the mortgage on the property; the proof of claim did not mention the August 3, 2006 mortgage assignment. James Iannini paid $5,874.78 to AMC for the purpose of fulfilling his delinquent mortgage obligations. Approximately one year after the commencement of the bankruptcy action, the court dismissed the bankruptcy case without prejudice because James Iannini defaulted. (Id.)
After the dismissal of the bankruptcy case, Deutsche Bank turned its attention back to the foreclosure action pending in the Beaver County Court of Common Pleas. On February 28, 2008, the Beaver County Court of Common Pleas granted Deutsche Bank's motion for summary judgment. (Creditor's App. (Docket No. 8) at 70.) A sheriff's sale of the property was scheduled to take place on June 9, 2008, but James Iannini filed a second bankruptcy case before the sale could take place. (Creditor's App. at 93-94.) The second bankruptcy case was dismissed on July 11, 2008, because James Iannini failed to obtain credit counseling prior to the commencement of the bankruptcy action. (Creditor's App. at 100; Creditor's Br. at 3.)
The sheriff's sale was rescheduled for September 15, 2008. (Creditor's App. at 104-05.) On that date, James Iannini filed a third bankruptcy case, and the sale was again postponed. (Creditor's App. at 107, 109-10.) On October 28, 2008, by reason of James Iannini's failure to make regular plan payments, the bankruptcy court dismissed the bankruptcy case with prejudice and barred James Iannini from filing bankruptcy or invoking the provisions of the automatic stay in connection with the property for a period of 180 days. (Creditor's App. at 112-13; Debtor's Br. at 3.)
The sheriff's sale took place on November 17, 2008. (Creditor's App. at 121.) The parties do not dispute that Deutsche Bank purchased the property at the sale for $4,860.36; Iannini did not object to the sale at the time it occurred. (Id.; Creditor's Br. at 3-4; Debtor's Br. at 3-4.) Also not disputed is that an ejectment proceeding was initiated in the Beaver County Court of Common Pleas at Docket No. 10251-2009. (Creditor's Br. at 4.)
On March 26, 2009, Iannini filed the instant bankruptcy proceeding pursuant to chapter 13 of the United States Bankruptcy Code ("Bankruptcy Code"), 11 U.S.C. §§ 101 et seq. (Voluntary Pet. (Bankr. No. 09-22081, Docket No. 1).) On June 16, 2009, Deutsche Bank filed a motion to dismiss, or, in the alternative, for relief of stay. (Mot. to Dismiss (Bankr. No. 09-22081, Docket No. 29).) On July 6, 2009, Iannini filed an adversary complaint against Deutsche Bank, claiming a preference under § 544 and § 548 of the Bankruptcy Code. (Adversary Compl.; Debtor's Br. at 4.) Although using the word "preference" in the complaint, Iannini did not seek relief under 11 U.S.C. § 547; rather, she contended that the sheriff's sale was an unlawful fraudulent transfer of the property. She sought an order staying the ejectment proceeding that was pending in the Beaver County Court of Common Pleas, and a declaration that the sheriff's sale was null and void. (Adversary Compl. ¶¶ 5-7; Adversary Compl. at 6 ("Issue a temporary restraining order pending resolution of the within Adversary staying any further foreclosure activities by the Defendant," and "Declare the January 2, 2009 transfer of 1907 Truman Ave. to the Defendant null and void").) On July 15, 2009, Deutsche Bank filed a motion to dismiss the adversary action. (Mot. to Dismiss Adversary Action (Bankr. No. 09-2385, Docket No. 4); Creditor's Br. at 4.)
On December 2, 2009, the bankruptcy court heard oral argument on this motion. (Id.) Deutsche Bank argued that the court lacked subject-matter jurisdiction over plaintiff's adversary complaint. The bankruptcy court framed the issue as follows:
Now, and the issue is, I think, properly focused in this instance on jurisdiction. And the problem [debtor has] is Rooker-Feldman. And the Third Circuit's most recent pronouncement on Rooker-Feldman severely limits -- to the extent that it wasn't already clearly pretty limited -- what a federal court can do with respect to a state court judgment. If I were to assume the jurisdiction over this action what -- the relief that you're asking, regardless of how it's couched, is that I do something that will set aside this foreclosure sale. That absolutely impinges on the power of the state court that entered the foreclosure judgment and permitted the sale to go forward. I am not an appellate court. Rooker-Feldman clearly bars me from asserting jurisdiction in that respect. (Creditor's App. at 44-45.) In response, debtor argued that the Court of Appeals for the Third Circuit incorrectly applied the Rooker-Feldman doctrine in Knapper v. Bankers Trust Co. (In re Knapper), 407 F.3d 573 (3d Cir. 2005), and Madera v. Ameriquest Mortgage Co. (In re Madera), 586 F.3d 228 (3d Cir. 2009), which involved situations similar to those faced by debtor. Debtor argued that the formulation of Rooker-Feldman used by the court of appeals was rejected by the United States Supreme Court in Exxon Mobil Corp. v. Suadi Basic Industries Corp., 544 U.S. 280 (2005). (Creditor's App. at 45.) The bankruptcy court disagreed with debtor's arguments, and held that it was bound by the Court of Appeals for the Third Circuit's decisions. The bankruptcy court stated "I'm deciding on the Rooker-Feldman issue that there is no jurisdiction." (Id. at 53.)
The bankruptcy court also addressed Iannini's argument that under § 544 and § 548 of the Bankruptcy Code she may void the sheriff's sale as a fraudulent transfer. (Id. at 33-34.) The court noted that § 548 does not permit invalidation of state foreclosures, and that she could not pursue a claim under § 544 because the deed was recorded before the bankruptcy case was commenced. (Id. at 33-34, 52-54.) The bankruptcy court stated that Iannini: has no interest in this property, because the hammer fell at the sheriff's sale. And under applicable state law, that meant that the debtor lost the right to redeem the property. And once the deed was recorded, there could not be a bona fide purchaser for value that the debtor could step into the shoes of for [§] 544[(a)(3)] purposes. (Id. at 53-54.) The bankruptcy court emphasized that:
There is [no case law] that says that a debtor can step into the shoes of a 544(b)(1) or (a)(1) -- whichever you choose to use -- creditor, under these circumstances, where the deed has been recorded two months -- more than two months -- almost three months before the petition was filed, and the sale was even earlier than that. (Id. at 38.)
To the extent Iannini's adversary claims relied upon § 522 of the Bankruptcy Code, the bankruptcy court recognized that a debtor's right to sue to avoid a transfer of property as if in the place of a trustee is contingent on the debtor establishing an exemption on the property. No such exemption applied in Iannini's situation, because she did not possess an ownership interest in the property. "[W]hen the hammer fell on that November date . . . the debtor's equity of redemption was foreclosed as of that date." (Id. at 39.) Iannini "didn't own the property on the date of [this] filing. That's the fact. Unless and until the debtor can avoid the ...