
    IN RE: Iryna HRACHOVA, Debtor. Iryna Hrachova, Plaintiff, v. Deutsche Bank Trust Company Americas, as Trustee for Residential Accredit Loans, Inc. Mortgage Asset-Backed Pass-Through Certificates, Series 2006-QS16; and Wells Fargo Bank, N.A., Defendants.
    Case No. 3:17-bk-698-PMG
    Adv. No. 3:17-ap-169-PMG
    United States Bankruptcy Court, M.D. Florida, Jacksonville Division.
    Signed 03/19/2018
    Aldo G. Bartolone, Jr., Bartolone Legal Group, PA, Orlando, FL, Stephen M. Doty, Law Office of Stephen Doty, Jacksonville, FL, for Plaintiff.
    Neísí L. Garcia Ramirez, Brook & Scott, PLLC, Ft. Lauderdale, FL, for Defendants.
   ORDER ON MOTION TO DISMISS ADVERSARY COMPLAINT, OR ALTERNATIVELY, FOR ABSTENTION

PAUL M. GLENN, United States Bankruptcy Judge

THIS CASE came before the Court for hearing to consider the Defendants’ Motion to Dismiss Adversary Complaint, or Alternatively, for Abstention. (Doc. 7).

The Debtor commenced the proceeding by filing a Complaint against Deutsche Bank Trust Company Americas, as Trustee (Deutsche Bank) and Wells Fargo Bank. In the Complaint, the Debtor seeks a determination that the Defendants have no right to enforce a Note and Mortgage on her homestead real property.

Under 28 U.S.C. § 1334(c)(1), the Court has broad discretion to abstain from hearing a proceeding “in the interest of justice, or in the interest of comity with State courts or respect for state law.” 28 U.S.C. § 1334(c)(1).

In this case, the Court will abstain from hearing this adversary proceeding because (1) Deutsche Bank had filed a foreclosure action against the Debtor more than six years before the bankruptcy case was filed, (2) the Debtor raised Deutsche Bank’s standing to enforce the Note and Mortgage as a defense in the foreclosure action, and (3) the mortgage issues presented by the Debtor can be resolved by the state court in the pending foreclosure action.

Background

On September 6, 2006, the Debtor signed a Note payable to Wachovia Mortgage Corporation in the amount of $147,350.00. The Note was secured by a Mortgage on the Debtor’s real property located at 2503 SE 18th Circle, Ocala, Florida (the Property). (Exhibit A to Doc. 7).

According to the Defendants, Mortgage Electronic Registration Systems, Incorporated, as Nominee for Wachovia Mortgage Corporation, assigned the Mortgage to Deutsche Bank on March 30, 2010, (Exhibit A to Doc. 7).

On June 9, 2010, Deutsche Bank filed a Complaint against the Debtor to foreclose the Mortgage in the Circuit Court for Marion County, Florida. (Exhibit E to Doc. 7).

On May 20, 2014, the Debtor filed her Answer, Affirmative Defenses, Counterclaims, and Crossclaims to the foreclosure Complaint. As her Third Affirmative Defense, the Debtor alleged:

30. The Plaintiff was not the real party of interest as it did not own or hold the Note and Mortgage at the time this suit was filed, and therefore, lacked standing to prosecute the instant action.
31. The Plaintiff did not acquire a legal, equitable, beneficial or ownership interest in the subject Note and Mortgage prior to the commencement of the instant action as required, if at all.
32. Moreover, Plaintiff does not even really exist as a real entity.
33. In light of the above, at the time the instant action was filed, the Plaintiff did not have a sufficient stake in the controversy that would be affected by ■the litigation’s outcome.

(Exhibit F to Doc. 7, pp. 7-8)(Emphasis supplied). Additionally, on August 6, 2016, the Debtor filed an Amended Motion in the state court case to Dismiss Deutsche Bank’s Complaint for Lack of Standing to Foreclose. (Exhibit E to Doc. 7).

On March 1, 2017, the Debtor filed a petition under Chapter 13 of the Bankruptcy Code. On her schedule of assets in the bankruptcy case, the Debtor listed the Property as her residence, and claimed the Property as her homestead on her schedule of exemptions.

The foreclosure action remained pending in state court at the time that the Chapter 13 petition was filed. (Exhibit E to Doc. 7).

On October 9, 2017, the Debtor filed a Complaint against the Defendants in her bankruptcy case (1) to Determine Validity and Extent of Lien on Real property and for Quiet Title, (2) for Injunctive Relief, (3) for Declaratory Relief, and (4) for Conspiracy to Commit Fraud. In the Complaint, the Debtor alleges;

29. Upon information and belief, Deutsche Bank is not the owner of the Loan and Note. Upon information and belief, Deutsche Bank did not pay value for the Note and Loan to the party that previously owned it, which party would have had to pay value for the Note and Loan. Therefore, Deutsche Bank is not secured with the Mortgage on the Property,
30. The Loan, Note and Mortgage were not properly transferred to ' Deutsche Bank. Therefore, Deutsche Bank does not have standing or the ability to claim any rights of enforcement because Deutsche Bank is merely an agent for the RALI 2006-QS16 Trust and must strictly adhere to the conveyance requirements so imposed.

(Doc. 1, p. 8)(Emphasis supplied). In the Complaint’s Prayer for Relief, the Debtor seeks a declaratory judgment that the Defendants are not the holders of the Note and Mortgage, and have no right to enforce the Mortgage against her Property. (Doc. 1, p. 13).

Discussion

The Defendants have filed a Motion to Dismiss the Adversary Complaint, or Alternatively, for Abstention. (Doc. 7). In the Motion, the Defendants assert, among other matters, that the Court “should abstain from hearing the instant adversary proceeding pursuant to permissive abstention.” (Doc. 7, pp. 9-12).

Permissive abstention is governed by 28 U.S.C. § 1334(c)(1), which provides:

28 USC § 1334. Bankruptcy cases and proceedings
(c)(1) Except with respect to a case under chapter 15 of title 11, nothing in this section prevents a district court in the interest of justice, or in the interest of comity with State courts or respect for State law, from abstaining from hearing a particular proceeding arising under title 11 or arising in or related to a case under title 11.

28 U.S.C. § 1334(c)(1). The section “grants a bankruptcy court broad discretion to permissively abstain from exercising jurisdiction.” In re Annicott Excellence, LLC, 264 B.R. 756, 758 (Bankr. M.D. Fla. 2001).

Permissive abstention under § 1334(c)(1) involves a “multifactor balancing test” in which the Court considers a number of different factors, and the importance of the factors varies with the circumstances of each case. In re Junk, 512 B.R. 584, 617 (Bankr. S.D. Ohio 2014). The factors include the extent to which state law issues predominate over bankruptcy issues, and the presence of a related proceeding commenced in state court or other non-bankruptcy court. In re Blackman, 2017 WL 6033418, at 3 (Bankr. N.D. Ga.)(citing In re Flyboy Aviation Props., LLC, 2013 WL 2317628, at 2 (Bankr. N.D. Ga.)).

In evaluating whether to permissively abstain from hearing the Debtor’s Complaint in this case, the Court has considered the decisions in In re Blackman, 2017 WL 6033418 (Bankr. N.D. Ga.), In re Hanson, 525 B.R. 791 (Bankr. M.D. Fla. 2015), and In re Brown, 2013 WL 85131 (Bankr. M.D. Fla.).

In each of these three cases, a foreclosure action had been filed against the debtor before the bankruptcy, and the foreclosure action had remained pending when the bankruptcy petition was filed. The debtor later filed a complaint in the bankruptcy case, and sought a declaration from the Bankruptcy Court that the foreclosure plaintiff was not the holder of the mortgage and did not have the right to enforce the mortgage against the debtor’s property.

In Brown, for example, the debtor contended that the foreclosure plaintiff had “not provided proper evidence that it holds the note and mortgage,” and therefore did “not have standing to enforce the note and mortgage.” In re Brown, 2013 WL 85131, at 1. And in Hanson, the debtor asserted that he had never received notice that the foreclosure plaintiff had been assigned the right to bill and collect the mortgage debt, and that the debtor did not owe the foreclosure plaintiff any money. In re Hanson, 525 B.R. at 794.

The Courts in Blackman, Hanson, and Brown abstained from hearing the debtors’ complaints pursuant to the permissive abstention provision of § 1334(c)(1). Specifically, in all three cases the Courts abstained because the debtors’ claims were grounded in state law, did not present any bankruptcy issues, related to the foreclosure action that was filed pre-bankruptcy, and could have been raised in the state court foreclosure action.

In other words, the debtors’ claims constituted “state law issues [that] can be resolved in a foreclosure action that was pending at the time that the bankruptcy was filed.” In re Hanson, 525 B.R. at 796. “The standing of the lender to foreclose a mortgage primarily is a state law matter, and justice is better served if the proceeding remained in the state court forum.” In re Brown, 2013 WL 85131, at 2.

In this case, Deutsche Bank alleges that “the Debtor ceased making payments on April 1, 2009 and Debtor thus defaulted on the terms of the Note and Mortgage on May 1, 2009.” (Doe. 1, ¶ 8). Consequently, Deutsche Bank filed a foreclosure action against the Debtor in state court on June 9,2010. (Exhibit E to Doc. 7).

The Debtor filed an Answer and Affirmative Defenses to the state court foreclosure complaint, and asserted that the foreclosure plaintiff was not the holder of the mortgage and therefore lacked standing to enforce the debt. (Exhibit F to Doc. 7). The Debtor also filed a motion in state court to dismiss the foreclosure complaint “for lack of standing to foreclose.” (Exhibit E to Doc. 7).

The foreclosure action was litigated in state court for more than six years before the Debtor filed the current bankruptcy case in 2017. (Exhibit E to Doc. 7).

In the Complaint filed in her bankruptcy case, the Debtor alleges that the foreclosure plaintiff is not the owner of the mortgage and does not have standing to enforce the debt. (Doc. 1, ¶¶ 29-30). The claims asserted by the Debtor in her Complaint in this Court, namely the foreclosure plaintiffs alleged lack of standing, are essentially the same as the claims that she raised in the foreclosure action.

The Debtor’s Complaint presents mortgage issues that should be resolved by the state court in the pending foreclosure action. (Kurinsky v. SunTrust Mortgage, Adv. Pro. 3:12-ap-215-PMG, Doc. 27)(The Court abstained from hearing a debtor’s complaint, where the claims in the bankruptcy complaint “were the subject of a mortgage foreclosure action that had been pending in State Court for almost two years at the time that the bankruptcy case was filed.”).

Accordingly, the Court will exercise its discretion to abstain from this proceeding pursuant to the permissive abstention provision of § 1334(c)(1).

Accordingly:

IT IS ORDERED that:

1. The Motion to Dismiss Adversary Complaint, or Alternatively, for Abstention filed by the Defendants is granted as set forth in this Order.

2. The Court abstains from hearing the Debtor’s Complaint pursuant to 28 U.S.C. § 1334(c).

3. The automatic stay of § 362 of the Bankruptcy Code is modified to the extent necessary to permit the parties to resolve 'the foreclosure issues pending in the case styled Deutsche Bank Trust Company Americas, as Trustee v. Iryna Hrachova, et al., Case No. 2010-CA-002696 in the Circuit Court for Marion County, Florida.  