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Deutsche Bank National Trust Co. v. Goldfeder

Superior Court of Delaware, New Castle

December 9, 2014

DEUTSCHE BANK NATIONAL TRUST COMPANY, as Trustee for Morgan Stanley ABS CAPITAL 1, INC.TRUST 2005-HE2, Plaintiff,
v.
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.

OPINION

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[1] 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.[2] 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.[3] 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.[4] 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."[5] 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 here is that she has not paid on the mortgage for quite some time.

Defendant's alternate claim in Count II of her counterclaim is that plaintiff did not perfect its security interest and therefore is not a real party in interest in this litigation. In a foreclosure action, it is the plaintiff's burden to establish, by a preponderance of the evidence, that it is the proper party to bring the action.[6]While Defendant labels this a "counterclaim, " it is actually an element of a foreclosure action that Plaintiff bears the burden of establishing.

Defendant has affirmatively admitted she signed the mortgage upon which plaintiff sues herein. This included an undertaking to make payments which, we understand, are deep in arrears The claim that Plaintiff is not the proper party to bring the suit coming as it does in this context is singularly out of place.

In Count III of her counterclaim, defendant claims "slander of title, " a term that, in context, means that defendant alleges that the plaintiff bank, knowing it did not have a right to do so, nonetheless filed to foreclose on defendant's mortgage and, in doing so, it disparaged defendant's title to the property.[7]

The bank complains that this counterclaim, if it has any currency at all, does not belong in this lawsuit but rather should be brought in a subsequent lawsuit after the underlying dispute is resolved. We agree with the bank. If the bank is guilty of slandering defendant's title, defendant is entitled to the difference between the value of the property as it exists today and its value had the bank not slandered the title.[8] Here, defendant claims entitlement to attorney's fees and punitive damages, apparently foregoing any claim to diminution of value (the traditional measure of damages in such cases) or even a claim for compensatory damages.

These claimed damages are not unimportant, as they demonstrate the defect in defendant's pleading. Although the cases in Delaware regarding "slander of title" are rare, it is the case virtually everywhere that in order to recover damages for an injurious falsehood regarding title to land, the claimant must be able to show "special damages" in the form of pecuniary loss and not general damages.[9] In this case, the pecuniary loss suffered by the defendant would necessarily be the loss in value of her property because the bank foreclosed on her mortgage. But it has been the bank – not the defendant – that has been complaining that defendant has kept the property in such disrepair that the value of its collateral has dissipated to an extreme degree. Defendant has not alleged any damage at all except for attorney fees and a generalized claim for "punitive damages." These are not "special damages" within the meaning of a slander of title action.

The Court hastens to add that we make no ultimate decision here that there are no circumstances under which the bank could be held liable for slander of title. It is, however, our conclusion that such an action has no place in a foreclosure action ab initio, which is primarily in rem and intended to remain somewhat limited and focused in scope. In the event defendant were to succeed in her defense of the foreclosure action and, in the course of the litigation, become aware of facts that would justify a claim of intentional wrongdoing by the bank, she would conceivably have a cause of action against the bank. But for now, we think the appropriate course is to dismiss this action unless and until such time as plaintiff can make a claim of slander based upon a record developed after the foreclosure action has concluded.

Count IV alleges "destruction of personal property." Defendant alleges that Plaintiff "destroyed Defendant's personal property that was stored at the property, including, but not limited to furniture, antiques, personal property and did excessive damages to the property."

"Permissive counterclaims may not be brought as part of a Scire Facias action, but they may be brought as part of a combined in rem and in personam action."[10] This case is an in rem scire facias sur mortgage action brought by Deutsche Bank. A permissive counterclaim is a claim against an opposing party not arising out of the same transaction that is the subject matter of the opposing party's claim.[11]

The transaction that is the subject matter of Deutsche Bank's action is the consummation of a mortgage, and the performance of rights and obligations under that mortgage. Even if Defendant's claim for destruction of property is true, it is a tort claim for damages unrelated to the formation or performance of the mortgage contract. Therefore, defendant's counterclaim for destruction of personal property is also dismissed.

Based on the foregoing, Plaintiff's Motion to Dismiss Counterclaims II-IV is hereby GRANTED.

IT IS SO ORDERED.


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