United States District Court, M.D. Pennsylvania
MALACHY E. MANNION United States District Judge
before the court is pro se appellant Teresa Velardi's
bankruptcy appeal. (Doc. 1). Ms. Velardi seeks the reversal
of two judgment orders of the Bankruptcy Court in the Middle
District of Pennsylvania granting a motion to dismiss filed
by appellees Countrywide Bank, FSB
(“Countrywide”), Mortgage Electronic
Registrations Systems, Inc. ("MERS”), Bank of
America, N.A. (“BANA”), and Phelan Hallinan
Diamond & Jones, LLP (“Phelan”),
(collectively, the “Countrywide appellees”), and
a second motion to dismiss filed by appellees Rushmore Loan
Management Services, LLC (“Rushmore”) and
Wilmington Savings Fund Society, FSB
(“Wilmington”), (collectively, the
“Rushmore appellees”). (See Doc. 3 at
116-117, 147). The above motions sought dismissal of Ms.
Velardi's adversary complaint in her underlying Chapter 7
bankruptcy case. Based on the foregoing, the orders of the
bankruptcy court will be affirmed and Ms. Velardi's
appeal will be dismissed.
January 8, 2008, Ms. Velardi executed a mortgage and
promissory note with Countrywide, with MERS acting as
nominee, in the principle amount of $176, 750.00 for property
located at 612 Sunset Street, Clarks Summit, Pennsylvania.
(See Doc. 3 at 38, 46). On September 28, 2011, MERS
assigned the mortgage to BANA, successor by merger to BAC
Home Loans Servicing, LP, f/k/a Countrywide Home Loans
Servicing, LP. (See id. at 35-37). In 2012, BANA
filed a foreclosure complaint against Ms. Velardi in the
Court of Common Pleas of Lackawanna County. (See id.
at 10; Doc. 4 at 16). On May 8, 2014, the county court
entered summary judgment in favor of BANA. (Doc. 4 at 40). On
May 15, 2015, Ms. Velardi mailed a “Notice of
Rescission/Cancellation” letter to all of the appellees
proclaiming the letter to be an exercise of her right to
rescind the loan pursuant to the Truth in Lending Act (TILA),
15 U.S.C. §1601 et seq., as amended. (Doc. 3 at 69-71).
On May 20, 2015, the county court's entry of judgment in
the foreclosure action was affirmed on appeal. (Doc. 4 at
8, 2015, Ms. Velardi filed a voluntary petition under Chapter
7 of the United States Bankruptcy Code without legal counsel,
therein staying the foreclosure action. On August 13, 2015,
Ms. Velardi initiated an adversary action by complaint
against the appellees, proceeding pro se. (See
Doc. 3 at 9-33). In her adversary complaint, Ms. Velardi
alleged that the appellees violated the TILA by failing to
disclose who the “true lender” was at the closing
of the property. (Id. at 17, ¶2). She sought
enforcement of the May 15, 2015 rescission letter because the
appellees did not respond to it. She described her complaint
as a suit to “enforce” the rescission and not to
“make the rescission effective by operation of
law.” (Id. at 11, ¶2). While seeking to
“enforce rescission” of the loan transaction, she
also argued that the loan transaction was never consummated.
Lastly, she attempted to bring a criminal action against
appellees Phelan and Rushmore. She sought various forms of
relief in her complaint including, but not limited to, an
extension of the stay, an injunction enjoining the
continuation of the state foreclosure action, a return of the
promissory note marked cancelled, a return and satisfaction
of the mortgage, the return of previous payments, actual
damages, and statutory damages.
September 14, 2015, the Countrywide appellees filed a motion
to dismiss the adversary complaint. On September 29, 2015,
the Rushmore appellees also filed a motion to dismiss. The
bankruptcy court held a hearing on the motions on January 28,
2016. (See Doc. 10). On February 24, 2016, the
bankruptcy court issued an opinion and entered judgment in
favor of the Countrywide appellees, dismissing Ms.
Velardi's adversary complaint against the Countrywide
appellees with prejudice. (Doc. 3 at 99-114, 116). The
Rushmore appellees' motion to dismiss was denied without
prejudice because they failed to properly serve the motion.
(Id. at 105). The bankruptcy court also granted
leave to the Rushmore appellees to file a renewed dispositive
motion or an answer to Ms. Velardi's complaint within
thirty (30) days of the decision and order. (Id. at
116-117). On March 22, 2016, the Rushmore appellees filed a
second motion to dismiss.
March 17, 2017, Ms. Velardi appealed the bankruptcy
court's entry of judgment in favor of the Countrywide
appellees to this court. Following an initial decision and
reconsideration, the court determined that the bankruptcy
court's February 24, 2016 order was not a final order for
purposes of appeal, particularly because the order did not
terminate all claims with respect to all parties. The court,
therefore, dismissed her appeal without prejudice.
2, 2016, the bankruptcy court granted the Rushmore
appellees' second motion to dismiss in open court and
entered judgment in their favor. (See Doc. 3 at 147;
Doc. 11). This concluded the entire adversary proceeding. The
bankruptcy court did not issue another formal opinion.
Instead, the bankruptcy court incorporated by reference its
prior decision with respect to the Countrywide appellees,
relying on those findings and conclusions in open court.
(See Doc. 11). Judgment was then entered in favor of
the Rushmore appellees. (Doc. 3 at 147).
10, 2016, Ms. Velardi filed the current appeal. (Doc. 1). On
July 15, 2016, she filed her opening brief. (Doc. 7). On
August 3, 2016, the Rushmore appellees filed an opposition
brief. (Doc. 12). On August 18, 2016, the Countrywide
appellees filed an opposition brief. (Doc. 13). Mr. Velardi
filed a reply to the appellees' briefs on September 2,
2016. (Doc. 14). Ms. Velardi's appeal is now ripe for
THE BANKRUPTCY COURT'S DECISION
Velardi's appeal only challenges the dismissal of the
various TILA claims in her adversary complaint. In the
underlying adversary proceeding, the appellees sought
dismissal of Ms. Velardi's TILA claims on various
grounds, including: (1) the timeliness of Ms. Velardi's
May 15, 2015 notice of rescission under the TILA; (2) the
doctrines of res judicata and claim-splitting; and (3) the
Rooker-Feldman doctrine. (See Doc. 4 at 14-15; Doc.
6 at 10-14). Exercising judicial restraint, the bankruptcy
court did not address the appellees' arguments regarding
the doctrine of res judicata and the Rooker-Feldman doctrine.
(Doc. 3 at 113-14). Nor did the bankruptcy court address the
arguments regarding claim-splitting. Instead, the bankruptcy
court's decision rested solely on the timeliness of Ms.
Velardi's notice of rescission. (See id. at
109-111; Doc. 11 at 10-11).
Ms. Velardi's pro se complaint liberally, the bankruptcy
court determined that Ms. Velardi's TILA claims and the
right to rescission were barred by the TILA's three-year
statute of repose, 15 U.S.C. §1635(f). (Doc. 3 at 103,
109-111). The bankruptcy court determined that the
limitations period began on January 8, 2008 because the loan
transaction was consummated on that date, making Ms.
Velardi's May 15, 2015 notice of rescission untimely.
(Id. at 109-110). The bankruptcy court also
determined that any amendment to the adversary complaint
would have been futile. (Id. at 111; Doc. 11 at 12).
Prior to reaching this determination, the bankruptcy court
concluded that it could reach the limitations arguments on a
motion to dismiss based on the “Third Circuit
Rule.” (Id. at 108). This rule, as explained
by the bankruptcy court, allows limitations defenses to be
raised in a motion to dismiss where the complaint and/or
attached exhibits indicate that the claim has not been
brought within the requisite time period. (Id.).
bankruptcy court also addressed Ms. Velardi's argument
that the appellees waived their defenses to the adversary
complaint because their motions were late. (Id. at
104). The Countrywide appellees' motion was one day late
and the Rushmore appellees' motion was over two weeks
late. (See id.). The bankruptcy court concluded that
no defenses were waived due to the untimely filings, partly
because no explicit deadlines for dispositive motion had been
set by the court. (Id.).
court has appellate jurisdiction over the bankruptcy
court's February 24, 2015 order and entry of judgment in
favor of the Countrywide appellees and June 2, 2016 entry of
judgment in favor of the Rushmore appellees. 28 U.S.C.
§158(a)(1) (The district court has “jurisdiction
to hear appeals from final judgments, orders, and
decrees” of a bankruptcy court). When a district courts
sits as an appellate court over a final order of a bankruptcy
court, it reviews the bankruptcy court's legal
determinations de novo, its findings of fact for clear error,
and its exercise of discretion for abuse of discretion. In re
Trans World Airlines, Inc., 145 F.3d 124, 131 (3d Cir. 1998).
The court's review of the granting of a motion to dismiss
under Federal Rule of Civil Procedure 12(b)(6) is plenary or de
novo. See Black v. Montgomery Cty., 835 F.3d 358,
364 (3d Cir. 2009).