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Castle Peak 2011-1 Loan Trust v. Pittner

United States District Court, D. Massachusetts

March 29, 2017

CASTLE PEAK 2011-1 LOAN TRUST and SELENE FINANCE LP
v.
DUSAN PITTNER

          MEMORANDUM AND ORDER

          RYA W. ZOBEL, UNITED STATES SENIOR DISTRICT JUDGE

         Appellants, Castle Peak 2011-1 Loan Trust (“Castle Peak”) and Selene Finance LP (“Selene Finance”) (collectively the “Appellants”), appeal an April 12, 2016 final order of the United States Bankruptcy Court for the District of Massachusetts (the “Bankruptcy Order”) that denied Appellants' motion to dismiss appellee's, Dusan Pittner's (“Pittner”), complaint. Appellants argue that the bankruptcy court committed error by failing to dismiss counts II-IV of the complaint, over which, they argue, the court lacked subject matter jurisdiction.

         I. Background[1]

         A. Procedural Background

         On March 25, 2012, Pittner filed a Chapter 11 bankruptcy petition. Approximately a year later, Pittner filed a second amended Chapter 11 plan (the “Plan”), which included a property located in Boca Raton, Florida, that Pittner and his wife, Ludmila Pittnerova (“Pittnerova”), co-owned (“the Property”). They acquired the Property with a mortgage loan from SMC Mortgage Company in 2007. Although both Pittner and his wife signed the mortgage, only his wife signed the promissory note. Both the note and mortgage were assigned to appellant, Castle Peak. As noted in the Plan, Selene Finance was the servicer of the mortgage, which had a principal balance of $354, 000, with 4% interest over a term of twenty-three years. On July 17, 2013, the bankruptcy court granted Pittner's request to confirm the Plan.[2] Several days later, Pittner filed a motion, which was assented to by Selene Finance, to modify the Plan and increase the interest rate to 4.5%.

         On February 22, 2014, Pittner moved the bankruptcy court to enter a final decree because “the Plan of Reorganization has been substantially consummated in accordance with 11 U.S.C. § 1101(2) and the provisions of the plan and the confirmation order[.]” Case No. 12-12438, Docket # 174, at 1. The bankruptcy court granted Pittner's request and closed Pittner's Chapter 11 case on April 7, 2014.

         B. Post-Final Decree

         Beginning in May 2014, nearly a year after the original confirmation of the Plan, and a month after Pittner's bankruptcy case closed, several communications ensued between Selene Finance, Pittnerova, and Pittner's attorney regarding payment obligations on the Property under the Plan. On May 19, 2014, Selene Finance sent to Pittnerova a Notice of Default and Intent to Accelerate that claimed the mortgage was in default, and in order to cure the fault, she had to pay $3, 226.21. Pittnerova did not respond. Instead, in response to this notice, Pittner's attorney sent to Selene Finance a qualified written request (“QWR”) for information pursuant to section 1024.36 of Regulation X and 12 U.S.C. § 2605(e). However, Selene Finance refused to respond to Pittner's attorney because Pittnerova--not Pittner--was on record as the holder of the promissory note for the Property. Pittner's counsel expressed that Selene Finance had participated in the bankruptcy action and demanded a response from Selene Finance to the QWR. Selene Finance, however, continued to ignore Pittner's requests and only communicated with Pittnerova, sending her another Notice of Default and Intent to Accelerate on September 16, 2014, and claimed that she had to pay $5, 953.91 in order to cure the default. On December 29, 2014, Pittner's attorney sent a Chapter 93A demand letter to Selene Finance due to its failure to accept Pittner's mortgage payments and respond to his inquiries.

         C. The Complaint

         On November 18, 2015, Pittner filed a motion to re-open his Chapter 11 bankruptcy case and filed a complaint with the bankruptcy court against Appellants. He alleges contempt of the confirmation order (count I), breach of contract (count II), violation of Chapter 93A (count III), and violation of the Real Estate Settlement Procedures Act (“RESPA”), 12 U.S.C. § 2605(e) (count IV).

         D. Bankruptcy Court Proceedings

         On December 23, 2015, Appellants filed a motion to dismiss the adversary proceeding. The bankruptcy court held a hearing on April 12, 2016, and denied the Appellants' motion in a docket order with no written explanation for its decision. The court further directed Pittner to file an amended complaint within thirty days to clarify “specifically what activities that are alleged constitute the causes of action for each one of the counts.” Docket # 8, at 53.

         Appellants appealed the Bankruptcy Order[3] but contest its jurisdiction only over counts II-IV. This court has jurisdiction to hear ...


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