DEUTSCHE BANK NATIONAL TRUST COMPANY, as Trustee for Morgan Stanley ABS CAPITAL 1, INC.TRUST 2005-HE2, Plaintiff,
NANCY GOLDFEDER c/o EMIL MIKHAIL, Guardian Ad Litem, Defendant.
Date Submitted: October 24, 2014
Upon Consideration of Plaintiff's Motion to Dismiss Counterclaims II-IV. GRANTED.
Lisa R. Hatfield, Esquire, Morris Schneider Wittstadt, LLC, Newark, Delaware. Attorney for Plaintiff.
Leo John Ramunno, Esquire, Law Office of Leo John Ramunno, Wilmington, Delaware. Attorney for Defendant.
Charles E. Butler, Judge
This well travelled piece of litigation is now six years old. Further description of its history will be deferred in favor of a recitation of its salient facts and a ruling on plaintiff's pending motion to dismiss several of defendant's recently filed counterclaims.
Defendant Nancy Goldfeder took out a mortgage to secure refinancing of a previous mortgage on property located on North Union Street in the city of Wilmington. The mortgage fell into default as a result of nonpayment and the mortgage came to be owned by plaintiff Deutsche Bank which foreclosed. Before the foreclosure could be fully consummated with a writ of possession, the Court became aware of the fact that Ms. Goldfeder is – and has been for some time – incompetent to handle her own affairs and indeed, a guardian ad litem has now been appointed to handle this litigation. The Court entered orders staying the writ of possession and ordering Ms. Goldfeder to file an answer and defend the foreclosure on the merits. Ms. Goldfeder has filed an Answer to which she has appended a counterclaim which, predictably enough, the bank has sought to dismiss.
Goldfeder's counterclaims are several and generally aver that she was incompetent to enter into the debt in question.
In Count I, Goldfeder claims "contractual recission" because she lacked competency to sign the note and mortgage. Oddly enough, she requests the Court to rescind "the loan in its entirety and award compensatory and punitive damages, as well as attorney fee and cost." But a rescission is intended to return the parties to the status quo ante and such a remedy would, in effect, dispossess the defendant of the property and require her to repay all monies given her by plaintiff or its predecessor – a remedy that looks remarkably like the one sought by plaintiff. It is not a tort and "compensatory and punitive damages" are not available; indeed, rescission is itself a remedy, not a cause of action. Perhaps that is why plaintiff has not moved to dismiss Count I.
The plaintiff does seek dismissal of Counts II-IV. In Count II, defendant claims a "lack of standing – wrongful foreclosure." The thought expressed here is that the bank "failed to perfect a security interest in the note and mortgage" and therefore cannot show a "valid interest as a real party in interest." Moreover, according to the counterclaim, plaintiff did not seek relief from an automatic stay in bankruptcy to file the action and therefore the bank should pay the debtor "compensatory and punitive damages" and attorney fees and costs.
It fairly appears from the pleadings that the mortgage in question was not originated between Ms. Goldfeder and plaintiff Deutsche Bank. Rather, the original lender is alleged to have been Home Funds Direct, an outfit that allegedly dealt in "sub-prime" mortgages and, like many others, disappeared into bankruptcy in or about 2009. This complaint was filed on or about October 2008. Since this is the only bankruptcy referenced in defendant's counterclaim, we may safely assume that defendant believes Deutsche Bank filed this complaint notwithstanding the ongoing bankruptcy of its predecessor, Home Funds Direct.
This all may well be true, and indeed, we are constrained to accept it as true for present purposes, yet still ask: "and what of that?" Does the mortgage debtor inherit some rights to defend an action on the debt by arguing that the party to whom the debt was originally owed went into bankruptcy and therefore the automatic stay provisions of the bankruptcy code apply? Do mortgage debts go on holiday when the original creditor goes into bankruptcy? We suspect not.
The automatic stay in bankruptcy protects only the debtor and the estate of the debtor. The automatic stay may not be invoked by third parties "such as sureties, guarantors, co-obligors, or others with a similar legal or factual nexus to the . . . debtor." Accordingly, the automatic stay may not be invoked by parties who have absolutely no legal or factual nexus to a debtor in bankruptcy. It follows that Ms. Golfeder, who has not indicated that she has ever filed bankruptcy, may not invoke the protections of the automatic stay when a creditor, who is also not in bankruptcy, seeks to foreclose on her mortgage. The automatic stay in bankruptcy simply has nothing to do with this case.
What all of this tells us is that the bankruptcy of the original creditor is of no moment to the defendant as she acquired no rights to defend against her nonpayment of the debt because of it and, we understand, the principal problem ...