Residential Capital, LLC

UNITED STATES BANKRUPTCY COURT
SOUTHERN DISTRICT OF NEW YORK
In re:
RESIDENTIAL CAPITAL, LLC, et al.,
Debtors.
FOR PUBLICATION
Case No. 12-12020 (MG)
Jointly Administered
MEMORANDUM OPINION AND ORDER GRANTING IN PART
AND DENYING IN PART MOTION FOR RECONSIDERATION
A P P E A R A N C E S:
MORRISON & FOERSTER
Counsel for Residential Capital, LLC, et al.
1290 Avenue of the Americas
New York, NY 10104
By: 	Norman S. Rosenbaum, Esq.
Jordan A. Wishnew, Esq.
KATHERINE S. PARKER-LOWE
Attorney for Rex T. Gilbert, Jr. and Daniela L. Gilbert
35 Miss Elecia Lane, Suite 101
Post Office Box 730
Ocracoke, North Carolina 27960
MARTIN GLENN
UNITED STATES BANKRUPTCY JUDGE
Pending before the Court is the Motion for Reconsideration of the Memorandum and
Order Sustaining in Part and Overruling in Part Debtors’ Objection to Proof of Claim No. 1984
Filed by Katherine Parker-Lowe and Proof of Claim No. 1991 Filed by Rex T. Gilbert, Jr. and
Daniela Gilbert (ECF Doc. #5983), filed by Rex T. Gilbert, Jr. and Daniela Gilbert (collectively,
“the Gilberts”). The Gilberts filed an Amended Motion for Reconsideration (the “Motion,” ECF
Doc. # 6386), clarifying that they seek relief pursuant to Rule 3008 of the Federal Rules of
Bankruptcy Procedure (the “Bankruptcy Rules”) and 11 U.S.C. § 502(j), which relate to
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reconsideration of an order disallowing a claim. The Gilberts ask the Court to reconsider its
opinion and order (the “Original Opinion”) granting in part and denying in part an objection to
the separate claims filed by the Gilberts and their attorney. See In re Residential Capital, LLC,
501 B.R. 531 (Bankr. S.D.N.Y. 2013). In the Original Opinion, the Court deemed a portion of
the parties’ dispute to be a contested matter. The Gilberts raise several issues warranting further
discussion. As explained below, the Court GRANTS the Motion in part and DENIES it in part.
I. 	BACKGROUND
The Court’s prior opinion contains an extensive description of the facts. See Residential
Capital, 501 B.R. at 535–38. This Opinion recounts the facts only to the extent relevant to this
decision.
The Gilberts filed proof of claim no. 1991 against the Debtors in the amount of
$5,948,900 (“Claim No. 1991”); Katherine Parker-Lowe, (“Parker-Lowe” and together with the
Gilberts, the “Claimants”), filed proof of claim no. 1984 in the amount of $83,181.11, seeking
payment of attorney’s fees for her representation of the Gilberts (“Claim No. 1984”).
The Debtors filed the Debtors’ Objection to Proofs of Claim Filed by Rex and Daniela
Gilbert and Katherine Parker-Lowe (the “Claims Objection,” ECF Doc. # 4767). The Claimants
filed a response to the Claims Objection (the “Claimants’ Response,” ECF Doc. # 5004), and the
Debtors filed a reply to the Claimants’ Response (the “Debtors’ Reply,” ECF Doc. # 5129).
The Court issued the Original Opinion on November 12, 2013. On December 2, 2013,
the Claimants filed the Motion, which they amended on January 30, 2014. The ResCap
Borrower Claims Trust, the Debtors’ successor in interest, filed an objection to the Motion (ECF
Doc. # 6269).
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II. 	DISCUSSION
Under Section 502(j), “[a] claim that has been allowed or disallowed may be
reconsidered for cause.” 11 U.S.C. § 502(j). The Bankruptcy Code does not define “cause,” but
when deciding a motion under section 502(j), the court should:
[a]pply the same analysis that it would to a motion under Fed. R. Bankr. P. 9023
(incorporating Fed. R. Civ. P. 59) or Fed. R. Bankr. P. 9024 (incorporating Fed.
R. Civ. P. 60), depending on whether the movant . . . sought reconsideration
within [fourteen] days after the entry of the order disallowing the claim, or did so
only later.
In re Terrestar Networks, Inc., No. 10–15446 (SHL), 2013 WL 781613, at *2 (Feb. 28, 2013)
(collecting cases).
Bankruptcy Rule 9023 incorporates Federal Rule of Civil Procedure 59, which regulates
motions for amendment of a judgment. Rule 9023 states: “[a] motion . . . to alter or amend a
judgment shall be filed . . . no later than 14 days after entry of judgment.” FED. R. BANKR. P.
9023 (emphasis added). The Gilberts filed the Motion twenty days after the Court entered the
Opinion, which prevents them from obtaining relief under Bankruptcy Rule 9023. See In re
Terrestar Networks, Inc., 2013 WL 781613, at *2. Therefore, the Court will apply Rule 9024,
which incorporates Federal Rule of Civil Procedure 60.
Rule 60 permits a court to grant relief from a final judgment or order for the following
reasons: (1) “mistake, inadvertence, surprise, excusable neglect”; (2) newly discovered
evidence; (3) fraud, misrepresentation, or misconduct. (4) the judgment is void; (5) the judgment
has been satisfied, released, discharged, or it is “no longer equitable”; or (6) “any other reason
that justifies relief.” FED. R. CIV. P. 60(b). A motion for reconsideration “is generally not
favored and is properly granted only upon a showing of exceptional circumstances.” Marrero
Pichardo v. Ashcroft, 374 F.3d 46, 55 (2d Cir. 2004) (citation omitted); see also United States v.
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Int’l Bhd. of Teamsters, 247 F.3d 370, 391 (2d Cir. 2001) (same). “A motion for reconsideration
should be granted only when the [moving party] identifies ‘an intervening change of controlling
law, the availability of new evidence, or the need to correct a clear error or prevent manifest
injustice.’” Kolel Beth Yechiel Mechil of Tartikov, Inc. v. YLL Irrevocable Trust, 729 F.3d 99,
104 (2d Cir. 2013) (emphasis added) (quoting Virgin Atl. Airways, Ltd. v. Nat’l Mediation Bd.,
956 F.2d 1245, 1255 (2d Cir. 1992)).
The party seeking Rule 60 relief bears the burden of proof. See Int’l Bhd. of Teamsters,
247 F.3d at 391. Whether to grant a motion for relief under Rule 60 is within the discretion of
the court. Stevens v. Miller, 676 F.3d 62, 67 (2d Cir. 2012).
The Gilberts have neither identified any intervening change of controlling law nor
introduced new evidence. Thus, to prevail, the Gilberts must show the need to correct clear error
of law or to prevent manifest injustice. The Court addresses each of the Gilberts’ requests in
turn.
A. 	Truth in Lending Act Claims
The Gilberts concede that their claim for monetary damages pursuant to the Truth in
Lending Act (“TILA”) is time-barred. (Motion ¶ 20.) The Court need not revisit that issue.
Instead, the Motion asks the Court to reconsider its finding that GMAC Mortgage, LLC
(“GMACM”) cannot be liable for a claim for rescission or rescissionary damages. (Motion
¶ 38.) As an initial matter, GMACM is no longer the servicer of the loan, so it cannot be ordered
to rescind the loan. Residential Capital, 501 B.R. at 539. Consequently, the Gilberts challenge
the Court’s finding that rescissionary damages cannot be imposed against GMACM for failing to
comply with the Gilberts’ letter purporting to exercise their right to rescind. (See Motion ¶¶ 11–
19.)
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The Gilberts previously argued they did not know who owned their loan, so when they
sent their letter purporting to rescind the loan and GMACM replied, GMACM essentially
rendered itself a “functional holder” of the loan subject to TILA liability. (See Claimants’
Response ¶ 4.) In response, the Debtors asserted that GMACM never held any ownership stake
in the loan and never held itself out to be the owner. (See Debtors’ Reply ¶ 3.) The Court
rejected the “functional holder” theory and held that since GMACM was only the loan servicer,
it could not be liable for TILA violations. See 15 U.S.C. § 1641(f)(1) (precluding a loan servicer
from liability unless the servicer is or was the owner of the loan).
The Gilberts now ask the Court to reconsider its ruling that GMACM cannot be liable for
TILA violations on two grounds: (1) GMACM explicitly agreed to become the assignee of the
loan; and (2) other courts have adopted a “functional holder” theory and imposed TILA liability
on loan servicers. In support of the first theory, the Gilberts now argue that as part of an
agreement with third parties, GMACM explicitly agreed to become the assignee and functional
holder of the loan. (Motion ¶¶ 13–19.) The Gilberts cite the Standard Terms of Pooling and
Servicing Agreement between and among Residential Accredit Loans, Inc., Residential Funding
Company, LLC and Deutsche Bank Trust Company Americas as Trustee:
Section 3.01 Master Servicer to Act as Servicer.
(a) 	The Master Servicer shall service and administer the Mortgage Loans in
accordance with the terms of this Agreement and the respective Mortgage Loans
and shall have full power and authority, acting along or through Subservicers as
provided in Section 3.02, to do any and all things which it may deem necessary or
desirable in connection with such servicing and administration.
(Motion ¶ 13.) This agreement was entered into on March 1, 2006; it is not the type of newly
discovered evidence for which relief may be granted upon a motion for reconsideration. See
Webb v. City of New York, No. 08 Civ. 5145 (CBA), 2011 WL 5824690, at *1 (S.D.N.Y. Nov.
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17, 2011) (“[T]o the extent that a motion for reconsideration relies on new evidence, the movant
must demonstrate that the newly discovered evidence could not have been discovered ‘with
reasonable diligence’ prior to the court’s ruling.”). More importantly, this provision does not
change the Court’s analysis. The plain language of this contractual provision indicates that the
master servicer and subservicers “shall have full power and authority . . . to do any and all things
which [they] may deem necessary or desirable in connection with such servicing and
administration.” (Motion ¶ 13 (emphasis added).) This term does not transform servicers and
subservicers into “owners,” “functional holders,” or “assignees” of the note. Accordingly,
contrary to the Gilberts’ assertion, GMACM did not “explicitly h[o]ld itself out as the assignee
and functional holder of the obligation.” Id.
The Gilberts’ second claim that, through its conduct, GMACM implicitly represented
itself as the functional holder of the obligation is equally unavailing. Citing Smith v. Argent
Mortgage Co., LLC, 447 F. Supp. 2d 1194 (D. Colo. 2006), and In re Meyer, 379 B.R. 529
(Bankr. E.D. Pa. 2007)—two cases the Gilberts failed to cite in their brief in response to the
Claims Objection—the Gilberts argue that TILA does not protect servicers that exercise
decisionmaking authority. (See Claimants’ Response ¶¶ 14–28.) To the contrary, the statutory
language is clear; a loan servicer will not be treated as an assignee liable for TILA violations
“unless the servicer is or was the owner of the obligation.” 15 U.S.C. § 1641(f). Even assuming
the Gilberts are correct that GMACM held itself out as the decision maker regarding rescission
of the Gilberts’ loan, the statute does not impose TILA liability on a loan servicer that was the
decision maker.
The Gilberts’ attempted end-run around section 1641(f) must fail—loan servicers
typically are authorized to act as the agent for the owner of the note, handling all aspects of loan
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servicing, including in most circumstances responding to demands for rescission. This does not
convert a loan servicer into a “functional holder,” a theory offered by the Gilberts for statutory
liability that is not supported by the statute. The limitation imposed by section 1641(f) cannot be
so easily evaded. GMACM was never the owner of the obligation and cannot be liable under
TILA.
The Gilberts’ TILA claim can be asserted against the owner of the note, not against
GMACM. As the Court stated in the Original Opinion, “it appears that Deutsche Bank, as
trustee for RAL, is the current holder of the note.”1 Residential Capital, 501 B.R. at 536. In fact,
the Gilberts named Deutsche Bank as a defendant in their state court action that was then
removed to federal court, alleging that Deutsche Bank Trust Company Americas was the “owner
and holder of the [note].” (See Claims Objection, Ex. 3 at 269 ¶ 2.)
Neither of the cases cited by the Claimants alter the Court’s determination in the Original
Opinion that GMACM cannot be held liable for the alleged TILA violations. In Smith, the court
interpreted a pro se plaintiff’s complaint as sufficient to survive a motion to dismiss. There, the
court concluded that the complaint:
could support a reasonable inference that [the loan servicer] is, at least in part,
responsible for decisions regarding rescission of the transaction. 	Assuming the
allegations in the Complaint to be true, it is conceivable that the plaintiffs could
prove facts entitling them to relief against [the loan servicer] on claim two.
447 F. Supp. 2d at 1199. The court did not cite any authority for this statement and, most
importantly, the court did not discuss TILA section 1641(f). This is a weak reed to support the
1 	While the Court notes that the North Carolina Court of Appeals found that “the record is lacking of
competent evidence sufficient to support that [Deutsche] is the owner and holder of Mr. Gilbert’s note and deed of
trust,” In re Simpson, 711 S.E.2d 165, 175 (N.C. Ct. App. 2011), the Court draws a distinction between what was
known to the Gilberts and what Deutsche was able to sufficiently demonstrate in a court of law, see Gilbert v.
Residential Funding LLC, 678 F.3d 271, 281 (4th Cir. 2012).
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argument about liability extending to a “functional holder.” The Court declines to follow the
Smith case.
Meyer also does not support extending liability to GMACM. There, in order to initiate a
claim of rescission, the plaintiffs made a qualified written request under RESPA, seeking the
identity of the current owner or master servicer of a loan from both the prior holder of the loan
and the current loan servicer. See Meyer, 379 B.R. at 551. In response, the current loan
servicer—a previous owner of the loan—failed to provide the requested information. By the
time the plaintiffs learned the current owner’s identity, the statute of limitations had run on the
rescission claim and no claim could be asserted against the current owner. See id. at 549–52.
Under those circumstances, the bankruptcy court concluded that the facts of the case supported
application of equitable estoppel, barring the loan servicer from denying that it was a holder (i.e.,
creditor) of the loan. See id. at 554. The court did not adopt either a functional holder or
“decision maker” theory of liability. The Gilberts never asserted that equitable estoppel applies
here, and the facts clearly do not support its application.
The Gilberts did not request the identity of the noteholder so they could send a rescission
letter. Instead, the Gilberts sent the rescission letter to the loan servicer, GMACM, addressed to
the “Holder of Loan # _____2713.” (See Claims Objection, Ex. 2-B at 99–100.) GMACM
responded, refusing to rescind the loan. (See id. at 101.) The Gilberts obviously determined who
owned the loan because the Gilberts sued Deutsche Bank as the purported “owner and holder of
the [note]” and timely requested rescission. (See id. Ex. 3 at 269 ¶ 2.)
Both Smith and Meyer were decided well before the Gilberts filed the Claimants’
Response—a motion for reconsideration is not an opportunity for making arguments that could
have been previously advanced. See Associated Press, 395 F. Supp. 2d at 19. In any event, the
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Court is not persuaded that Smith or Meyer should lead the Court to change the result reached in
the Original Opinion.
For these reasons, the Court rejects the “functional holder” or “decision maker” theories
of liability and DENIES this portion of the Motion.
B. 	Attempted Wrongful Foreclosure Claim
The Opinion concluded that the Gilberts may not pursue a claim against the Debtors for
“attempted wrongful foreclosure.” See Residential Capital, 501 B.R. at 540. While North
Carolina recognizes a civil cause of action for wrongful foreclosure, there has been no
foreclosure in this case. See id. at 542. Moreover, no North Carolina court has ever recognized
“attempted wrongful foreclosure” as a cause of action.
The Gilberts fail to satisfy the standards for reconsideration in asking the Court to revisit
this issue. They assert that they “respectfully reject the idea that simply because a cause of
action has not previously been brought there can never ever be such a cause of action.” (Motion
¶ 39.) But the Gilberts have neither introduced any new evidence related to the Court’s previous
ruling on this matter nor established that the Court’s Opinion was based upon a “clear error of
law.” The Gilberts simply disagree with the Court, which is an insufficient basis for
reconsideration. See Shrader v. CSX Transp. Inc., 70 F.3d 255, 257 (2d Cir. 1995).
As it relates to the Gilberts’ “attempted wrongful disclosure” claim, the Motion is
DENIED.
C. 	North Carolina Unfair and Deceptive Trade Practices Act Claim
The Gilberts next argue that under North Carolina law a “violation of a statutory
provision designed to protect the consuming public may constitute an unfair and deceptive
practice as a matter of law.” (Motion ¶ 50.) They claim that GMACM could have violated the
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North Carolina Unfair and Deceptive Trade Practices Act (“UDTPA”) by violating TILA. See
N.C. Gen. Stat. 75–1.1, et seq. As both the Fourth Circuit and this Court have already held,
though, GMACM cannot be liable for the original creditor’s conduct. See Gilbert, 678 F.3d at
280; Residential Capital, 501 B.R. at 544.
The elements of a claim for unfair and deceptive trade practices in violation of UDTPA
are: (1) an unfair or deceptive act or practice, or an unfair method of competition; (2) in or
affecting commerce; (3) which proximately caused actual injury to the plaintiff or to his
business. See Dolan v. Dickson Props., Inc., 735 S.E.2d 632, 632 (N.C. Ct. App. 2012) (citing
N.C. Gen. Stat. § 75–1.1). According to N.C. Gen. Stat. § 75–1.1 and 75–16, recovery is limited
to those situations where plaintiffs can show that they detrimentally relied upon a statement or
misrepresentation, and they suffered actual injury as a proximate result of the deceptive
statement or misrepresentation. The Gilberts ask the Court to reconsider several elements of its
UDTPA analysis.
First, the Motion argues that by conflating the Gilberts’ usury claim with a disclosure
violation under TILA, the Court erred as a matter of law. (See Motion ¶ 51.) The Court did not
conflate the two arguments. As the Gilberts concede, the Court found that the collection of
interest in excess of the rate provided for by agreement could constitute a UDTPA violation.
Even so, the Court reviewed the evidence and found no indication that GMACM collected
interest at a higher rate than what was indicated in the Gilberts’ loan documents and TILA
disclosure. Residential Capital, 501 B.R. at 546. The Court further concluded that “the Gilberts
failed to substantiate the $37,076.92 claimed in damages for this portion of the claim.” Id. The
Gilberts do not present any new evidence or controlling law to rebut this finding. Instead, they
concede that they “do not have sufficient information at this stage . . . to do more than state that
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the Fourth Circuit found they had stated a claim.” (Motion ¶ 54.) The Gilberts therefore fail to
meet their burden in requesting reconsideration because they present no new evidence or
controlling law and instead only reiterate facts that the Court considered upon its first ruling. See
Int’l Bhd. of Teamsters, 247 F.3d at 391.
As it relates to the purported collection of usurious interest rates constituting a violation
of the UDTPA, the Motion is DENIED.
Second, the Gilberts argue that the Court erred by finding that GMACM’s refusal to
honor rescission does not rise to the level of an unfair and/or deceptive act or practice under
North Carolina law. Rather than addressing the Court’s conclusion that “GMACM’s conduct in
denying the Gilberts’ demand for rescission does not rise to the level of unfair or deceptive
practices as defined by UDTPA,” see Residential Capital, 501 B.R. at 547, the Gilberts launch a
strongly worded attack on GMACM. The Gilberts state that GMACM’s refusal to rescind the
loan:
absolutely evinces unfairness to the point of immorality, oppressiveness, and
offends established public policy. 	It is unfair, immoral[,] and oppressive for
GMAMC[sic][,] a major mortgage servicing company[,] to willfully violate an
Act designed to promote the informed use of credit by the consuming public. It is
unfair, immoral[,] and oppressive for GMACM, a major mortgage servicing
company, to wrongfully place the burden upon the borrower to initial legal action
to protect his right to rescind.
(Motion ¶ 61.) This argument presents no new facts or controlling law and only states the
Gilberts’ opinion about GMACM’s conduct. It does not suffice to warrant reconsideration of the
Court’s earlier ruling, and that portion of the Motion is DENIED.
Third, the Gilberts assert that “GMACM’s conduct in attempting to proceed with a
foreclosure of Gilberts’ home without an order authorizing the sale constitutes an unfair and/or
deceptive act or practice under the UDTPA.” Motion ¶ 67. This is the first time the Gilberts
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have raised this issue with the Court. See Residential Capital, 501 B.R. at 5442 ; see also
Claimants’ Response, Ex. A. A motion for reconsideration is not a vehicle to present the case
under new theories. See Analytical Surveys, 684 F.3d at 52.
The Gilberts’ request for reconsideration on the grounds that GMACM’s attempted
foreclosure violated the UDTPA is therefore DENIED.
Fourth, the Gilberts argue that the Court should revive their UDTPA claim against the
GMACM for creating a new indorsement to the allonge to their note (the “Allonge,” Motion Ex.
2). The Gilberts did not articulate this claim in their original proof of claim or original lawsuits
against the GMACM, nor did the Gilberts brief this argument before the Court’s Original
Opinion. Instead, the Gilberts attached to the Claimants’ Response a purported amended proof
of claim and they filed that amended claim with the Debtors’ claims agent on September 13,
2013. The amended proof of claim includes a “Summary of Damages,” which alleges damages
for “[c]reation of a new indorsement to the Note outside the chain of title together with threats to
reinstitute foreclosure using said false indorsement.”
A motion for reconsideration is not the proper instrument to advance arguments for the
first time. Since the Gilberts did not previously raise this issue and the Court did not consider
this argument in its Original Opinion, this portion of the Motion is DENIED.
Fifth, the Gilberts argue that GMACM’s “attempted wrongful foreclosure” violated the
UDTPA. But the Gilberts previously presented GMACM’s “attempted wrongful foreclosure” as
a separate cause of action, not as a violation of the UDTPA. (See Claimants’ Response, Ex. A.)
2 	In their complaint, the Gilberts identify several causes of action under the UDTPA: “(a) disclosing,
charging and collecting usurious rates of interest; (b) failing to make material disclosures pursuant to the
requirements of the federal Truth in Lending Act; (c) failing to take affirmative steps to cancel the plaintiffs’ Deed
of Trust upon their notice of rescission; (d) falsely representing to be the owner and holder of plaintiffs’ note and
deed of trust [.]” Residential Capital, 501 B.R. at 544 (quoting ECF Doc. # 4767, Ex. B ¶ 82 (the “Complaint”)).
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Therefore, the Court need not entertain this claim upon a motion for reconsideration. See
Associated Press, 395 F. Supp. 2d at 19 (a motion consideration is not an opportunity for making
arguments that could have been previously advanced).
This portion of the Motion is therefore DENIED.
D. 	Debt collection violations
In the Complaint, the Gilberts alleged that GMACM “falsely represented the character,
extent, or amount of debt to a consumer pursuant to N.C. Gen Stat. § 75-54(4) . . . .” In partially
defining fraudulent representations, section 75-54(4) reads:
Falsely representing the character, extent, or amount of a debt against a consumer
or its status in any legal proceeding; falsely representing that the collector is in
any way connected with any agency of the federal, State or local government; or
falsely representing the creditor’s rights or intentions.
N.C. Gen. Stat. § 75-54(4).
In the Original Opinion, the Court found that “the purported false representation must
occur ‘in a legal proceeding.’” Residential Capital, 501 B.R. at 548 (citing Key v. Dirty S.
Custom Sound & Wheels, No. 09 Civ. 32, 2009 U.S. Dist. LEXIS 46907, at *4 (E.D.N.C. June 3,
2009)). The Court sustained the objection to the Gilberts’ claim under the North Carolina Debt
Collection Act (“NCDCA”). But, the Original Opinion overlooked the statute’s language
regarding the debt’s “status in any legal proceeding . . . .” N.C. Gen. Stat. § 75-54(4).
In support of their request for reconsideration, the Gilberts reference affidavits used by
the Debtor in the state foreclosure proceedings that conflict with the deposition testimony of
Jeffrey Stephan in another case. (See Motion ¶ 83.) The Gilberts argue that the affidavits used
in this case falsely represented the identity of the holder of the note at the time of the foreclosure
suit. (See id. ¶ 84.) GMACM has maintained throughout this litigation that Deutsche Bank was
the owner of the Gilberts’ note at the time the foreclosure proceeding was commenced. But the
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state appellate court, in reversing the trial court foreclosure judgment against the Gilberts,
concluded that Deutsche Bank failed to definitively prove that it had standing to foreclose on the
Gilbert’s property. See In re Simpson, 711 S.E.2d 165, 175 (N.C. Ct. App. 2011). The court was
troubled by the fact that a court in Maine concluded that Stephan had submitted a false affidavit
on behalf of GMACM in the case in Maine. Id. at 494 n.2. Of course, the issue here is not
whether a false affidavit was used in another case in another state; the Gilberts need to
demonstrate that a false affidavit was used in this case.
In the Original Opinion, the Court overruled the objection to a portion of the UDPTA
claim because of the allegation that “GMACM provided false affidavits in the foreclosure suit.”
Residential Capital, 501 B.R. at 547. The Court further stated:
If the Debtors’ were able to show that the assertions in the Stephan[]’[s] affidavit
were true, it may constitute a defense against a suit based on the allegedly
fraudulent affidavit. 	But the proposition that Deutsche Bank is the rightful
noteholder has not been proven conclusively in the preceding litigation and the
Debtors have not offered evidence supporting the assertion. 	The identity of the
noteholder is unclear, and so the Gilberts may be correct in their assertion that the
Stephan affidavit was fraudulent.
Id. at 548. As a result, the UDPTA claim survived the Claims Objection. The same logic applies
to the NCDPA claim.
To the extent that the Gilberts argue that the fraudulent affidavit used in a legal
proceeding raises an issue of the “status of the debt,” the NCDPA claim should survive. To be
sure, the Court has not determined whether the affidavits advanced in the foreclosure proceeding
were fraudulent. The identity of the noteholder at the time of the foreclosure is an unresolved
question of fact. The Court GRANTS this portion of the Motion and reinstates this portion of
the claim under the N.C. Gen. Stat. § 75-54(4) to the extent that the Gilberts assert that the
affidavits filed in the state foreclosure proceedings contained fraudulent misrepresentations. It
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should be noted, however, that section 75–54(4) applies to “debt collectors.” In further
proceedings in connection with this matter, both parties should address whether GMACM is a
“debt collector” under the statute.
III. 	CONCLUSION
Based on the foregoing, the Motion is DENIED in part and GRANTED in part. The
Court will enter a separate order scheduling a conference to establish procedures for resolving
the remaining issues concerning the Gilberts’ claim.
IT IS SO ORDERED.
Dated: April 14, 2014
New York, New York
_____/s/Martin Glenn_______
MARTIN GLENN
United States Bankruptcy Judge
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