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Velardi v. Countrywide Bank, Fsb

United States District Court, M.D. Pennsylvania

May 3, 2017

COUNTRYWIDE BANK, FSB, et al., Appellees.


          MALACHY E. MANNION United States District Judge

         Pending 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.[1] Based on the foregoing, the orders of the bankruptcy court will be affirmed and Ms. Velardi's appeal will be dismissed.

         I. BACKGROUND

         On 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 40).

         On June 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.[2] (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.

         On 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.

         On March 17, 2017, Ms. Velardi appealed the bankruptcy court's entry of judgment in favor of the Countrywide appellees to this court.[3] 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. (See id.).

         On June 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).

         On June 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 review.


         Ms. 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).

         Construing 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.).

         The 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.).


         This 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.[4] 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)[5] is plenary or de novo. See Black v. Montgomery Cty., 835 F.3d 358, 364 (3d Cir. 2009).

         A. ...

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