Opinion
Case No. 08-13656-A-7 Adv. No. 18-1086-A
12-12-2018
In re: DEBORAH MORROW, Debtor. DEBORAH MORROW, Plaintiff, v. ERA HOME LOANS et al., Defendants.
NOT FOR PUBLICATION
Memorandum
Plaintiff Deborah Morrow ("Morrow") seeks an injunction precluding ERA Home Loans, PHH Mortgage and Ocwen (collectively "mortgage lender") from selling at Sheriff's sale her residence located at 2113 Main Street, Shade Gap, Pennsylvania. She contends an injunction should issue because (1) her successful objection to the mortgage lender's Proof of Claim voided the lender's lien against that property; and (2) the mortgage lender has violated her rights under applicable non-bankruptcy law, e.g., 15 U.S.C. § 1635 et. seq.
I. FACTS
In 2007, Morrow purchased her residence in Shade Gap, Pennsylvania. As a part of that transaction Morrow executed a note and mortgage in favor of ERA Home Loans. Those instruments were purportedly transferred to PHH Mortgage and/or Ocwen.
Soon after closing escrow, she unsuccessfully attempted to exercise her rescission rights, 15 U.S.C. § 1635 et. seq.
In 2008, she filed chapter 7 bankruptcy, listing the Shade Gap property. As a part of that bankruptcy, PHH Mortgage filed a secured Proof of Claim. Morrow objected to it. Finding that PHH Mortgage had not proven that it was the assignee of the note and mortgage, this court sustained Morrow's objection. Tr. Hr'g on Obj. to Claim at 4:21-6:10, October 26, 2010, ECF # 225.
In 2008, Morrow received her discharge and in 2012 the case closed.
In 2010, PHH Mortgage filed an action in state court seeking to judicially foreclose its mortgage. It has since prevailed and now has noticed a Sheriff's sale of the Shade Gap property.
II. PROCEDURE
Morrow filed an adversary proceeding, citing the invalidity of the mortgage lender's lien, 11 U.S.C § 506(d) and violations of applicable non-bankruptcy law. She prays a temporary restraining order, preliminary injunction and permanent injunction precluding the Sheriff's sale of her residence.
III. DISCUSION
Bankruptcy jurisdiction extends to cases and to proceedings "arising under," "arising in" or "related to" cases under title 11. 28 U.S.C. § 1334(a),(b). Proceedings "arising under" title 11 "involve a cause of action created or determined by a statutory provision of title 11." Harris v. Wittman (In re Harris), 590 F.3d 730, 737 (9th Cir. 2009). "A civil proceeding 'arises in' a Title 11 case when it is not created or determined by the bankruptcy code, but where it would have no existence outside of a bankruptcy case." Harris v. Wittman (In re Harris), 590 F.3d 730, 737 (9th Cir. 2009) (citation omitted). The test for determining "related to" jurisdiction is "whether the outcome of the proceeding could conceivably have any effect on the estate being administered in bankruptcy." Fietz v. Great W. Sav. (In re Fietz), 852 F.2d 455, 457 (9th Cir. 1988) (emphasis omitted) (citation omitted) (internal quotation marks omitted). "An action is related to bankruptcy if the outcome could alter the debtor's rights, liabilities, options, or freedom of action (either positively or negatively) and which in any way impacts upon the handling and administration of the bankrupt estate." Id.
Neither the stay, 11 U.S.C. § 362(a), nor the discharge injunction, 11 U.S.C. § 524(a), provide a basis for bankruptcy jurisdiction. The stay that protects the debtor evaporated in 2008, when the debtor received her discharge. 11 U.S.C. § 362(c)(2)(C).
The discharge injunction continues in full force and effect but does not preclude a creditor from pursuing in rem collection actions, such as foreclosure. In re Echevarria, 212 B.R. 185, 187 (1st Cir. BAP 1997); Matter of Paeplow, 972 F.2d 730, 735 (7th Cir. 1992).
Moreover, Morrow's successful claims objection did not void the mortgage lender's lien. 11 U.S.C. § 506(d); Bank of New York Mellon v. Lane (In re Lane), 2018 WL 4560912 * 5-9 (9th Cir. BAP September 19, 2018) (limiting the reach of § 506(d) to where the claims objection successfully attacked the validity of the underlying loan). Here, the court specifically limited its ruling to the creditor's failure to demonstrate that it held the rights to the note and/or mortgage. As a result, neither arising under, nor arising in. jurisdiction exits.
Finally, "related to jurisdiction" does not exist. The case long since closed and the estate's interest in the Shade Gap property relinquished, neither the alleged violations, nor loss of the property to foreclosure can impact the estate. As a consequence, the motion must be denied, and the adversary proceeding dismissed. Fed. R. Civ. P. 12(h)(3), incorporated by Fed. R. Bankr. P. 7012(b).
IV. CONCLUSION
The motion for temporary restraining order and preliminary injunction will be denied and, finding a want of jurisdiction, the adversary proceeding will be dismissed. The court will issue an order from chambers. Dated: December 12, 2018
/s/_________
Fredrick E. Clement
United States Bankruptcy Judge