The Court set aside the clerk’s entry of default, denied Plaintiff’s motion for default judgment, and, on its own motion, dismissed Plaintiff’s claims against the defaulting defendants. Even though defendants failed to answer or otherwise respond to the complaint, dismissal of Plaintiff’s claims against these defendants was appropriate where it was patently obvious that Plaintiff could not prevail on claims for fraudulent misrepresentation, intentional infliction of emotional distress, or declaratory judgment.

Defendants filed motions to dismiss Debtor’s claims for fraudulent misrepresentation, intentional infliction of emotional distress, violations of the Fair Debt Collection Practices Act, and request for declaratory judgment all arising from the chain of transfer of a note and mortgage on Debtor’s principal residence. Defendant/creditor obtained a final foreclosure judgment against the Debtor in state court prior to the filing of Debtor’s bankruptcy case. The Court determined that:  

1) standard for evaluating the motion - the Court could rely on underlying state court judgment and findings of fact and conclusions of law without turning the motions to dismiss into summary judgment motions where the Debtor’s complaint referenced the state court documents and there was no genuine dispute as to authenticity of those documents;

2) fraudulent misrepresentation – the applicable statute of limitations barred Debtor’s claims for fraudulent misrepresentation, and, as to the parties to the state court foreclosure action, the preclusive effect of the foreclosure judgment barred Debtor’s fraudulent misrepresentation claims;

3) Fair Debt Collection Practices Act (“FDCPA”) – creditor/defendant that was seeking to collect its own debt is not subject to the FDCPA, but the other defendant who may only be a mortgage servicer remains subject to the FDCPA; because the Court could not discern from the complaint whether Debtor’s claims for violation of the FDCPA challenge the validity of the foreclosure judgment or the underlying debt itself, the Rooker-Feldman doctrine did not bar Debtor’s FDCPA claims; for the same reason, if Debtor’s claim for violation of the FDCPA challenges collection methods rather than the judgment or debt, such claim does not constitute a compulsory counterclaim that was forfeited because it was not raised in the underlying state court foreclosure action;

4) intentional infliction of emotional distress (“IIED”) - the Court can determine in the first instance whether the alleged behavior meets the standard of extreme and outrageous conduct necessary to support a claim for IIED and Debtor’s factual allegations failed as a matter of law to meet that standard;  alternatively, Debtor’s claim for IIED was barred by the applicable statute of limitations;

5) declaratory judgment - because bankruptcy courts are not courts of the United States under applicable Tenth Circuit law, the Court lacked subject matter jurisdiction over Debtor’s request for declaratory judgment under the Federal Declaratory  Judgment Act; alternatively, no justiciable controversy existed over which the Court could issue a declaratory judgment because the prior state court foreclosure judgment has preclusive effect; alternatively, even if the Court had jurisdiction over the request for declaratory judgment, the Court would exercise its discretion to decline to adjudicate the request.

The Court dismissed all claims against all defendants, except for the claim for violation of the FDCPA asserted against defendant whose only interest in the subject loan may be as a servicer with no ownership interest.

The Court set aside the clerk’s entry of default and denied Plaintiff’s motion for default as to various defendants who failed to timely file an answer to the complaint. Defendants demonstrated good cause to set aside the entry of default: 1) the failure to timely file an answer  was not willful, and defendants started participating in the adversary proceeding once they became aware of the proceeding, 2) questions concerning the adequacy of service existed; 3) defendants raised possible meritorious defenses; and 3) Plaintiff would not suffer prejudice from setting aside the clerk’s entry of default.

The Court held that even though creditor had standing to object to the amended chapter 13 plan and despite the timeliness of the objection, 1) creditor’s failure to timely object to debtor’s original plan constituted acceptance of that plan, satisfying the requirements of § 1325(a)(5)(A) such that the plan need not satisfy the alternative requirements of § 1325(a)(5)(B); and 2) under § 1323(c), a creditor who accepted the original plan and whose rights are not changed under the amended plan is deemed to have accepted the amended plan notwithstanding the creditor’s objection to the amended plan. The Court also found sua sponte that the plan’s proposed treatment of creditor’s claim was in good faith.