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Greenwood v. Ocwen Loan Servicing LLC

United States District Court, D. Nevada

April 17, 2018

JERRY GREENWOOD et al., Plaintiffs,
v.
OCWEN LOAN SERVICING LLC et al., Defendant.

          ORDER

          ROBERT C. JONES, UNITED STATES DISTRICT JUDGE

         This is an action to quiet title. Now pending before the Court is a defensive motion for summary judgment. (Mot. Summ. J., ECF No. 32.) For the reasons given herein, the Court grants the motion.

         I. FACTS AND PROCEDURAL HISTORY

         On or about June 20, 2006, Plaintiffs Jerry and Gina Greenwood borrowed $691, 000 from IndyMac Bank, FSB, to pay off a prior existing mortgage and home equity loan on their residence at 1123 Jo Lane in Gardnerville, Nevada (“the Property”). (Compl. ¶¶ 10-11, ECF No. 1-2.) The Greenwoods signed an Adjustable Rate Note containing their promise to repay the loan on specified terms. The Note was secured by a deed of trust (“DOT”) identifying IndyMac as the Lender, First American Title Insurance Co. as the Trustee, and Mortgage Electronic Registration Systems, Inc. (“MERS”) as the Beneficiary. (Clark County DOT, ECF No. 1-2 at 25.) Although the Property is located in Douglas County, Nevada, the DOT was originally recorded in Clark County on June 28, 2006-a mistake which was not corrected until September 18, 2009. (See Douglas County DOT, ECF No. 1-2 at 55.)

         In January 2008, the Greenwoods stopped making payments on the Note. (Gina Greenwood Dep. 31:17-32:11, ECF No. 32-2.) On July 11, 2008, IndyMac was closed by the Office of Thrift Supervision (“OTS”). OTS chartered a new institution, IndyMac Federal Bank, FSB (“IndyMac Federal”) and appointed the Federal Deposit Insurance Corporation (“FDIC”) as conservator. On March 19, 2009, Defendant OneWest Bank, FSB (“OneWest”) acquired substantially all of the assets and mortgage servicing rights of IndyMac Federal from the FDIC, and thus became the servicer of the Greenwoods' loan.

         On September 23, 2009, the Greenwoods filed for Chapter 7 bankruptcy. See In re Greenwood, No. 09-bk-53338-GWZ (Bankr. D. Nev. Sept. 23, 2009). In Schedule A of their schedule of assets and liabilities, relating to real property, the Greenwoods listed ownership of the Property. In Schedule D, relating to creditors holding secured claims, the Greenwoods listed the DOT, but included a notation that it was “never recorded by lender in Douglas County.” (Chapter 7 Voluntary Petition 12, ECF No. 33-5.) Of course, at the time of filing the bankruptcy petition, this was no longer true; the DOT had been re-recorded in Douglas County five days prior. Thereafter, on January 19, 2010, an assignment of deed of trust was recorded in Douglas County as Document No. 757313, evidencing the transfer of the Note and DOT from IndyMac Federal to OneWest.

         On April 18, 2011, the Greenwoods filed an adversary proceeding against OneWest in the bankruptcy court, seeking to invalidate the Note and DOT on the basis that the DOT was initially recorded in the wrong county. See Greenwood v. OneWest Bank, FSB, No. 11-ap-05038-GWZ (Bankr. D. Nev. Apr. 18, 2011). On August 25, 2011, Angelique L. M. Clark, trustee of the Greenwoods' Chapter 7 estate, was permitted to intervene in the adversary proceeding as the real party-in-interest, in order to protect the interests of the unsecured creditors of the estate and prevent the Greenwoods from obtaining a windfall. The following day, Trustee Clark filed her first amended complaint, asserting that the September 2009 re-recordation of the DOT in Douglas County constituted a “transfer” under 11 U.S.C. § 101(54)(A) (i.e., “the creation of a lien”) which, having been made within ninety days before the Chapter 7 petition was filed, could be avoided under 11 U.S.C. § 547(b).

         On April 3, 2012, the bankruptcy court approved a settlement agreement in the adversary proceeding, between Trustee Clark and OneWest. The agreement provided that in exchange for a payment of $95, 000 by OneWest, Trustee Clark would dismiss the adversary proceeding with prejudice “so that all right, title and interest in, to, arising from and associated with the IndyMac DOT, and the lien created thereby, and the Property will remain with and be preserved for the benefit of [OneWest] . . . .” (Order Approving Settlement 3-4, ECF No. 33-3.) Trustee Clark also waived, on her own behalf and on behalf of the Greenwoods' Chapter 7 estate, any and all further claims, “known or unknown, against [OneWest] . . . arising out of or related to the IndyMac DOT, the lien created thereby, the Property and/or the above-captioned adversary proceeding and Chapter 7 case.” (Id. at 4.) The Greenwoods had objected to the settlement agreement on the basis of a claimed homestead exemption, which they asserted was prior to the DOT. The bankruptcy court addressed the objection on its merits and overruled it on multiple grounds. (See Id. at 4-5.) On April 25, 2012, pursuant to the settlement agreement, the Greenwoods' adversary proceeding was dismissed with prejudice.

         The Greenwoods then appealed several of the bankruptcy court's orders to the Bankruptcy Appellate Panel (“BAP”), including the order approving the settlement agreement and the order dismissing the adversary proceeding with prejudice. On August 6, 2012, the BAP ordered the appeals dismissed for lack of standing, reasoning that the Greenwoods' claimed homestead exemption was not valid “in light of the voluntary transfer of the Property, ” as there was “no evidence that the transfer was involuntary.” The Greenwoods appealed the BAP's dismissal to the Ninth Circuit.

         On September 6, 2012, with their appeal pending at the Ninth Circuit, the Greenwoods filed a notice of filing of lis pendens. On October 15, 2012, OneWest moved for an order striking and cancelling the lis pendens and for sanctions against the Greenwoods' attorney for bad faith. OneWest noted in its motion that Jerry Greenwood had filed the lis pendens in Douglas County jointly on behalf of himself and Gina Greenwood, though he had quitclaimed his interest in the Property to Gina the previous month. Of course, OneWest also stressed the fact that the bankruptcy court had just approved a settlement agreement in the adversary proceeding stipulating, among other things, that OneWest held a valid security interest in the Property. On May 21, 2013, the bankruptcy court ordered the motion taken off calendar, ordered the Greenwoods to remove the notice of filing of lis pendens, and warned that no discharge would be granted in the underlying Chapter 7 case until the Greenwoods complied. In substance, the bankruptcy court appears to have granted the motion in part and denied it in part, ordering the lis pendens removed, but declining to impose sanctions.

         The Greenwoods then appealed the order requiring them to remove the lis pendens, which appeal was referred to this Court. On July 30, 2013, the Court dismissed the appeal for lack of standing: “As Chapter 7 Debtors, Appellants have no standing to litigate any purported interests in the property of the bankruptcy estate except through the Trustee. The Trustee is joined as an Appellee in the present matter, plainly indicating that she has refused to pursue Appellants' claims.” In re Greenwood, No. 3:13-cv-00293, 2013 WL 11319429, at *1 (D. Nev. July 30, 2013). Again, the Greenwoods appealed the dismissal to the Ninth Circuit. Thereafter, on November 1, 2013, the bankruptcy court issued its final decree, discharging Trustee Clark and closing the Greenwoods' Chapter 7 case.

         Finally, on February 13, 2015, the Ninth Circuit ruled against the Greenwoods on both of their appeals. See In re Greenwood, 593 Fed.Appx. 680, 681 (9th Cir. 2015); Greenwood v. Onewest Bank, FSB, 593 Fed.Appx. 681 (9th Cir. 2015). In addressing the Greenwoods' challenge to the settlement agreement and order dismissing the adversary proceeding with prejudice, the Court of Appeals stated:

In order to show that their homestead exemption might be preserved under § 522(g)(1) as against the lienholder, the Greenwoods were required to demonstrate that their grant of a security interest in excess of the property's value was not voluntary. 11 U.S.C. § 522(g)(1); see also Rodriguez v. Dorine's Bail Bonds, Inc. (In re Rodriguez), 361 B.R. 887, 892 (Bankr. D. Ariz. 2007). There is no evidence in the record indicating that the transfer of the deed of trust encumbering the home was involuntary, and the Greenwoods offer none. As a result, the transfer is ineligible for exemption under ...

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