Frances Scarborough V. , 457 Fed. Appx. 193 ( 2012 )

NOT PRECEDENTIAL
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
___________
No. 11-2293
___________
In re: FRANCES SCARBOROUGH,
Appellant
____________________________________
On Appeal from the United States District Court
for the Eastern District of Pennsylvania
(D.C. Civil Nos. 2-07-cv-04236 & 2-09-cv-01984)
District Judge: Honorable Ronald L. Buckwalter
____________________________________
Submitted Pursuant to Third Circuit LAR 34.1(a)
January 10, 2012
Before: AMBRO, FISHER and NYGAARD, Circuit Judges
(Opinion filed January 10, 2012)
_________
OPINION
_________
PER CURIAM
Frances Scarborough appeals orders from two consolidated District Court cases
that arose from two related matters in bankruptcy court. We will affirm.
I.
We must begin by recounting the pertinent procedural history of this particular
bankruptcy case, which has been winding on in one fashion or another for over a decade.
At its core, this is an action about appellant Scarborough’s attempts to prevent or
otherwise negate foreclosure proceedings against 5116 North Warnock Street in
Philadelphia by utilizing the tools available under both federal bankruptcy law and state
law. As we deal with but a small facet of the matter, we do not intend what follows to be
exhaustive with regard to the plentiful filings and separate bankruptcy proceedings
Scarborough has initiated.
A) Main Case and First Adversary Proceeding
In 2001, Scarborough filed for protection under Chapter 13 (11 U.S.C. §§ 1301–
30) of the United States Bankruptcy Code. See generally E.D. Pa. Bankr. No. 01-35194
(the ―main case‖). Shortly thereafter, she began an adversary bankruptcy proceeding
(―first adversary proceeding‖), whose primary goal was the bifurcation of creditor Chase
Manhattan’s1 mortgage claim into secured and unsecured claims via 11 U.S.C. § 506(a).
Bankruptcy Judge Kevin J. Carey determined that Scarborough was ―barred from
bifurcating the secured claim of Chase Manhattan pursuant to 11 U.S.C. § 1322(b)(2).‖
Scarborough v. Chase Manhattan Mortg. Corp. (In re Scarborough), Adversary No. 02-
858, 2003 Bankr. LEXIS 2096, at *3 (Bankr. E.D. Pa. Oct. 14, 2003). Scarborough
appealed.
While the appeal in the first adversary proceeding was pending, the main case
continued. Despite filing multiple Chapter 13 plans, Scarborough was unable to satisfy
1
The relevant other parties in this action are Chase Manhattan Mortgage Corporation
(―Chase Manhattan‖ and ―Chase‖) and Chapter 13 trustee William C. Miller.
2
the Bankruptcy Court as to her plans’ feasibility. In a memorandum and order of July 21,
2005, Judge Carey denied confirmation of Scarborough’s Amended Chapter 13 plan and
dismissed the bankruptcy case. See Main Case ECF No. 228.2 Scarborough appealed to
the District Court, arguing, inter alia, that feasibility should not be determined before the
bifurcation issue was definitively resolved on appeal. The District Court ―disagree[d]
with [Scarborough’s] premise‖ and ―affirm[ed] the Bankruptcy Court’s decision to deny
confirmation of [her] amended Chapter 13 plan,‖ but it observed that ―[i]f the Third
Circuit overturns the Bankruptcy Court’s denial of [her] request for bifurcation, the
[District] Court will take the appropriate action.‖ Scarborough v. Chase Manhattan
Mortg. Corp. (In re Scarborough), No. 05-4548, 2006 U.S. Dist. LEXIS 21382, at *9–10
(E.D. Pa. Apr. 20, 2006). Scarborough again appealed to this Court.
B) Our 2006 Decisions
In 2006, we resolved both the appeal of Scarborough’s bifurcation issue from the
first adversary proceeding and her first appeal from the main case. We held in her favor
on the statutory question, concluding: ―a mortgage secured by property that includes, in
addition to the debtor’s principal residence, other income-producing rental property is
secured by real property other than the debtor’s principal residence and, thus, that
2
We observe that, shortly after this dismissal, Scarborough moved both for
reconsideration and for the Bankruptcy Court to ―grant a stay of relief from collection
activity from all creditors pending the outcome of my motion to reconsider and vacate or
modify this court’s order denying confirmation of plan and dismissing case.‖ Main Case
ECF Nos. 232–33 (capitalization modified). Both motions were denied, see Main Case
ECF Nos. 241–42.
3
modification of the mortgage is [statutorily] permitted.‖ Scarborough v. Chase
Manhattan Mortg. Corp. (In re Scarborough), 461 F.3d 406, 408 (3d Cir. 2006) (emphasis
in original). Therefore, Chase’s claim ―can be modified,‖ id. at 414 (emphasis added),
although we did not decide whether it should be. With regard to the separate appeal from
the main case, we determined that we lacked jurisdiction due to the contingent nature of
the District Court’s order. See In re Scarborough, 212 F. App’x 89, 91–92 (3d Cir.
2006). The net result: a remand to Bankruptcy Court for further proceedings on the main
case.
C) Denied Anew
Back in Bankruptcy Court, Chase moved for relief from the reinstated automatic
stay. In the process, Chase emphasized that ―[d]uring the pendency of the . . . appeals
there was no stay in place. The Debtor’s request for a stay pending appeal was denied.‖
See Main Case ECF No. 270 ¶ 9.
During late August and early September of 2007, hearings were held on Chase’s
motion and on the possibility of confirming Scarborough’s latest Chapter 13 plan.3 On
September 5, the Bankruptcy Court issued a thorough opinion from the bench, in which it
―den[ied] confirmation of the plan and dismiss[ed] this bankruptcy case.‖ Tr. 17:10–11,
Main Case ECF No. 293. Even assuming various plan tolling factors and bifurcation
outcomes in Scarborough’s favor, the Court found Scarborough to have failed to
3
By this juncture, the main case had been reassigned to Judge Eric L. Frank.
4
demonstrate persuasively the fair-market value of her property.4
Nor did the debtor persuade me on the present record that she can afford a
$445 payment for three years which is the calculation I’ve come to making
a number of favorable assumptions, especially because the debtor would be
obliged, as a matter of adequate protection, to maintain payments of taxes
every year and – and insurance on the property. So the payment would be
even higher than [$]445. Nothing in the history of the case that goes back
to at least 2001, perhaps 1998 or even further, gives me any confidence the
debtor can perform such a plan. . . . The debtor’s testimony did not
persuade me that her financial condition has improved[;] . . . if anything,
the evidence suggests that her income may well decrease and it certainly
has been irregular. In short, the debtor’s evidence was inadequate to
convince[ ] me to exercise any discretion that I may have to turn this
Chapter 13 bankruptcy case into an eight-and-a-half-year to nine-year
Chapter 13 bankruptcy. . . . So in light of this reasoning and this decision,
I conclude that the appropriate action is for me to deny confirmation and
dismiss the case. . . . For those reasons, I conclude the [relief from
automatic stay] motion is moot.
Tr. 19:20–21:6. While the Court acknowledged some scenarios under which a case
posture could be more favorable to Scarborough, it ruled that ―the shelf life of this case
has expired.‖ Tr. 22:10–11. See also Order, Main Case ECF No. 283.
Scarborough filed a timely notice of appeal. The appeal was docketed in the
United States District Court for the Eastern District of Pennsylvania under case number
07-4236—the first of the two consolidated cases now before this Court. Before we
discuss the District Court proceedings, however, we must lay the foundation for the other
case with which 07-4236 was ultimately joined.
4
The Court did stress that there was ―circumstantial evidence suggesting that the fair
market value [of the property] [wa]s far below the outstanding balance of Chase’s claim,‖
but explained that Scarborough had provided ―inadequate evidence‖ to grant the Court
―equitable discretion‖ to ―extend the plan out beyond five years.‖ Tr. 21:15–20.
5
D) Second Adversary Proceeding
In March of 2008, Scarborough filed another adversary proceeding. See generally
E.D. Pa. Bankr. No. 08-00058 (―second adversary proceeding‖). She sought, first, an
―injunction to stop the sheriff sale of my home on April 1, 2008.‖ Compl. ¶ 3, Second
Adversary Proceeding ECF No. 1. Scarborough also sued for ―damages amounting to
$100,000‖ stemming from ―Chase’s violation of the automatic stay‖—for, in other words,
Chase’s pursuit of foreclosure between the July 21, 2005 dismissal of bankruptcy
proceedings and the April 11, 2007 order5 vacating judgment and remanding the matter
back to bankruptcy court following our 2006 decisions in Scarborough’s appeals. Compl.
¶ 4–5. Scarborough maintained that, pursuant to her eventual success on appeal, ―the 21
month period of time during the pendency of the Plaintiff[’]s appeal is treated as if that
length of time never occurred, for the purposes of this instant bankruptcy case.‖ Compl.
¶ 5. Thus, according to Scarborough, the automatic stay was retroactively restored after
her bankruptcy case was remanded, and Chase had violated the stay by pursuing the
foreclosure in the interim. During the pendency of the second adversary proceeding, the
subject premises were sold at Sheriff’s sale.6
Following a lengthy hearing, at which Scarborough was represented by counsel,
the Bankruptcy Court dismissed the second adversary proceeding, determining that—
absent a due-process violation or similar major error—there was no reason to hold that an
5
See Order, E.D. Pa. Civ. No. 2:05-cv-04548 ECF No. 16.
6
We note that the property was not sold during the period about which Scarborough
complained.
6
automatic stay would or should retroactively apply if a bankruptcy dismissal was later
reversed on appeal. See Tr. 37:14–19, Second Adversary Proceeding ECF No. 27-1. The
court further noted that to hold to the contrary would ―obliterate[] the concept of a stay
pending appeal.‖ Tr. 38:7–8. For those reasons, the complaint was deemed to lack merit.
Tr. 41:12–13.
Scarborough appealed, and the District Court7 eventually remanded. However, the
Court’s memorandum revealed that it believed to have before it appeals from both ―the
dismissal of the adversary proceeding[] and from the ultimate dismissal of the bankruptcy
itself.‖ In re Scarborough, No. 08-cv-04873, 2009 U.S. Dist. LEXIS 4279, at *3 (E.D.
Pa. Jan. 22, 2009) (emphasis added). It also observed that ―the bankruptcy stay is now in
effect, and precludes any further action to enforce the creditor’s claim, unless approved in
this proceeding.‖ Id. at *4. The District Court instructed the Bankruptcy Court to, inter
alia, hold a hearing on the bifurcation issue and to conduct proceedings ―enabling the
debtor to propose a feasible plan, if possible.‖ Id.On remand, the Bankruptcy Court concluded that it could not follow the District
Court’s mandate, as the ―only subject of the appeal [to the District Court] was the [second
adversary proceeding] Dismissal Order.‖ Scarborough v. Chase Home Fin., LLC (In re
Scarborough), Adv. No. 08-00058, 2009 Bankr. LEXIS 2769, at *11 n.14 (Bankr. E.D.
Pa. Apr. 8, 2009). Following the mandate here, the Bankruptcy Court reasoned, was
prevented by the ―manifest injustice‖ exception to the ordinary rule of appellate review;
7
―(1) there is a clear error and (2) this court lacks jurisdiction to carry out the District
Court’s instructions.‖ Id. at *13–14. The Court dismissed the case anew, albeit for the
same reasons expressed prior, but indicated its willingness to follow the mandate should
the District Court ―reaffirm[] its stance and remand[] . . . with the same instructions as
before.‖ Id. at *18–19 & n.18.
Scarborough again appealed, leading to the second case (09-01984) from which
the action before us arises. On October 19, 2010, the District Court consolidated the two
cases.
E) The District Court Opinion and Aftermath
The District Court cast the central issue in the consolidated appeal as follows: ―did
the Bankruptcy Court correctly determine that the Chapter 13 Plan was not confirmable
as set forth in its September 5, 2007 bench order[?]‖ Scarborough v. Miller (In re
Scarborough), Nos. 07-4236 & 09-1984, 2011 U.S. Dist. LEXIS 10049, at *2 (E.D. Pa.
Feb. 2, 2011). It observed that, with regard to the issue of valuation—the central,
disputed factual finding—Scarborough ―never took any steps to meet her burden of proof
in that regard.‖ Id. at *3. The District Court analyzed the findings of the Bankruptcy
Court and found them to be a) not clearly erroneous and b) fully consonant with the law.
Id. at *7–8. It therefore denied the appeals. Following prodding by Chase regarding
apparently unresolved issues from the second adversary proceeding, the District Court
7
This appeal was not assigned to Judge Buckwalter, who was otherwise handling the
main-case appeal in District Court, perhaps leading to some of the confusion that was to
follow.
8
clarified that it also believed that the Bankruptcy Court ―was correct in determining that
no stay was in effect during the time [Chase] commenced its foreclosure action.‖
Scarborough v. Miller (In re Scarborough), Nos. 07-4236 & 09-1984, 2011 U.S. Dist.
LEXIS 13771, at *3 (E.D. Pa. Feb. 11, 2011) (supplemental memorandum).
Scarborough’s timely Fed. R. Civ. P. 59/60 motion was denied, and she thereafter filed a
timely notice of appeal—bringing us out of the past and into the present.
II.
Scarborough raises a variety of substantive and procedural claims. Deriving our
jurisdiction from 28 U.S.C. §§ 158(d) and 1291, we will first address those issues that
relate to the denial of the second adversary proceeding before moving to those arising
from the main case.
A) Second Adversary Proceeding
Scarborough’s challenges here are based on questions of law. Accordingly, our
review is plenary. In re Montgomery Ward, LLC, 634 F.3d 732, 736 n.3 (3d Cir. 2011).
Scarborough first alleges that the Bankruptcy Court erred by failing to comply with the
January 22, 2009 memorandum and order of the District Court, which purported to
remand the case ―for the purpose of (1) holding a hearing to establish the secured amount
of Chase’s claim; (2) enabling the debtor to propose a feasible plan, if possible; and (3)
establishing a reasonable time-frame for the further conduct and ultimate resolution of
this bankruptcy proceeding.‖ In re Scarborough, 2009 U.S. Dist. LEXIS 4279, at *4.
As Scarborough correctly observes, it is ―axiomatic that on remand for further
9
proceedings after decision by an appellate court, the trial court must proceed in
accordance with the mandate and the law of the case as established on appeal.‖ Bankers
Trust Co. v. Bethlehem Steel Corp., 761 F.2d 943, 949 (3d Cir. 1985); see also Skretvedt
v. E.I. Dupont de Nemours, 372 F.3d 193, 203 (3d Cir. 2004). But it is equally axiomatic
that a court may not act outside the scope of the jurisdiction granted to it. Williamson v.
Berry, 49 U.S. (8 How.) 495, 543 (1850); cf. USPPS, Ltd. v. Avery Dennison Corp., 647
F.3d 274, 284 (5th Cir. 2011) (―The federal courts are courts of limited jurisdiction and
are tasked with the duty to continually, and sua sponte, assess their jurisdiction.‖);
Finberg v. Sullivan, 658 F.2d 93, 96 n.5 (3d Cir. 1980).
It is clear that the District Judge lacked jurisdiction over the main case at the time
he issued his January 22 memorandum. Moreover, the Bankruptcy Court lacked
jurisdiction to carry out the mandate, as the earlier notice of appeal filed in the main case
had divested the Court of its power to further address the central bankruptcy issues. See
Venen v. Sweet, 758 F.2d 117, 120–21 (3d Cir. 1985); Main Line Fed. Sav. & Loan
Ass’n v. Tri-Kell, Inc., 721 F.2d 904, 906 (3d Cir. 1983). Accordingly, we cannot impute
the power of the law of the case doctrine onto a mandate that was issued erroneously and
without jurisdiction.8
Turning, then, to Scarborough’s substantive argument, we determine that the
8
We note, further, that the Bankruptcy Court’s decision to reenter its order can plausibly
be viewed as an attempt to seek clarification from the District Court as to the intended
scope of its mandate; indeed, the Bankruptcy Court expressed willingness to follow the
District Court’s instructions were it to enter the same judgment the second time around.
Of course, the District Court did no such thing.
10
Bankruptcy Court did not err in deciding that the automatic stay did not apply
retroactively to the ―gap period‖ between its 2005 dismissal of the main case and the
District Court’s 2007 order vacating that dismissal.9 An automatic stay is dispelled when
the underlying case is dismissed. See 11 U.S.C. § 362(c)(2)(B); In re Taylor, 81 F.3d 20,
23 (3d Cir. 1996). Cases suggesting the possibility of the ―retroactivity‖ of the stay are
inapposite and distinguishable, as Scarborough has not shown that she was denied due
process or otherwise suffered a constitutional injury. See, e.g., Turtle Rock Meadows
Homeowners Ass’n v. Slyman (In re Slyman), 234 F.3d 1081, 1087 (9th Cir. 2000)
(order of dismissal was void, and automatic stay was ―continuously in effect from the
date the petition was filed‖—rendering foreclosure sale ―without effect‖—as ―dismissal
of a case because a debtor failed to attend a meeting of which he had not been notified‖
was in violation of due process) (citations, quotations omitted). As there was no
automatic stay in effect, then Chase cannot be held liable for proceeding with foreclosure
procedures during the gap period.10
Therefore, we will affirm the judgment of the District Court with regard to the
matters arising in the second adversary proceeding. We turn now to the appeal of the
9
We agree with Chase that the 2005–2007 period is the correct one. Neither of our 2006
decisions had the effect of vacating the order dismissing the main case. The first settled a
question of law raised in the first ancillary proceeding, while the second simply
determined that we lacked jurisdiction over a contingent order.
10
Scarborough argues, in the alternative, that Chase should have seen the writing on the
wall once we rendered our 2006 decisions. But she fails to point to any provision of law
that would impart independent civil liability for foreclosing in the wake of a probability
that a stay would, at some point in the future, be reinstated—and, moreover, once the stay
was reimposed, Chase quickly moved to quash it.
11
main case.
B) Main Case
Scarborough also raises a number of procedural and substantive arguments with
regard to her main case, not all of which are relevant or meaningfully reviewable.11
Exercising plenary review over the District Court’s appellate review of the Bankruptcy
Court, we review factual findings for clear error and legal conclusions de novo. JELD-
WEN, Inc. v. Van Brunt (In re Grossman’s Inc.), 607 F.3d 114, 119 (3d Cir. 2010) (en
banc).
Throughout her submissions, Scarborough argues that the Bankruptcy Court
ignored the mandates of this Court and the District Court in resolving the main case. She
contends that the Bankruptcy Court should have relied upon 2002 valuations in
determining her plan’s confirmability, and should also have explicitly resolved
bifurcation (in the form of the adversary proceeding) before taking any other action.
While we cannot speak to the intent behind the District Court mandates, we can
decisively conclude that Scarborough reads our 2006 decision in her favor too broadly.
In that opinion, we determined whether ―a mortgage on a multi-unit dwelling in which
the debtor resides qualifies for the anti-modification protection afforded by 11 U.S.C.
§ 1322(b)(2),‖ holding that modification was permitted. Scarborough v. Chase
11
Also, she asserts, for the first time on appeal, several factual contentions (such as
incorrect mathematical calculations by the Bankruptcy Court) that do not appear to have
been raised below; hence, they are waived. See Knop v. McMahan, 872 F.2d 1132, 1143
n.20 (3d Cir. 1989).
12
Manhattan Mortg. Corp. (In re Scarborough), 461 F.3d at 408. Section 1322(b) states
that a Chapter 13 plan may ―modify the rights of holders of secured claims‖—not that it
must do so. Compare with 11 U.S.C. § 1322(a) (establishing what the Chapter 13 plan
―shall‖ contain). In announcing the possibility of modification as to the claim brought by
Scarborough, we did not instruct the District Court or the Bankruptcy Court to resolve
matters in any particular order or in satisfaction of any procedural formality, and
Scarborough cites no case law that would bind the District or Bankruptcy Courts to the
order of action she prescribes.12
Furthermore, we read the relevant Bankruptcy Court’s decision as assuming the
success of the hearings she requests. For example, its outcome was based on the
presumption that Scarborough could bifurcate the claim and that the $13,000 property
value she proposed—a property value that, it seems, was never supported in Bankruptcy
Court with admissible evidence—could be the value of the secured debt (although the
Judge also emphasized that Scarborough ―ha[d] not given [him] enough confidence [at]
present that she will establish that the fair-market value is $13,000‖).
Notwithstanding these favorable assumptions, the Bankruptcy Court found two
12
Scarborough also seizes upon our use of ―$13,000‖ and ―$26,500‖ as being somehow
determinative of a range of values for her property. See Br. of Appellant 25 (―[T]he 2006
Decision does state that the range of valuation testimony presented at the trial of the 2002
Proceeding was between $13,000 and $26,500. . . . Putting these statements of the USCA
in the 2006 Decision together, it seems clear that the mandate . . . is that the [bankruptcy
court] should first determine where in the range between $13,000 and $26,500 the value
of the Premises falls.‖) (citing Scarborough v. Chase Manhattan Mortg. Corp. (In re
Scarborough), 461 F.3d at 409). Our summary of the information presented below
cannot be read as binding the fact-finder on remand. Cf. Kool, Mann, Coffee & Co. v.
Coffey, 300 F.3d 340, 354 (3d Cir. 2002) (distinguishing dicta from mandate).
13
main impediments to confirming the plan: 1) the limitations imposed by the five-year
term of 11 U.S.C. § 1322(d) (2002),13 considered in tandem with 2) the Court’s doubts as
to whether Scarborough would ―be able to make all payments under the plan and . . .
comply with the plan,‖ 11 U.S.C. § 1325(a)(6) (2002). We find Scarborough’s legal
arguments regarding the starting and tolling of the five-year term to be unconvincing; we
agree with the wealth of authorities cited by the Trustee and relied upon by the District
and Bankruptcy Courts that the five-year period cannot have been tolled throughout the
duration of the bankruptcy action, to commence only upon plan confirmation. Nor do we
detect any clear error in the Bankruptcy Court’s fact-finding, especially with regard to
Scarborough’s ultimate ability to pay her obligations under the plan. See In re Exide
Techs., 607 F.3d 957, 962 (3d Cir. 2010) (review of mixed questions of law and fact
involves ―affording a clearly erroneous standard to integral facts, but exercising plenary
review of the lower court’s interpretation and application of those facts to legal precepts‖
(quoting In re CellNet Data Sys., Inc., 327 F.3d 242, 244 (3d Cir. 2003))). We also
cannot fault the Bankruptcy Court for failing to hold a bifurcation hearing when its
outcome could not have affected the resolution of Scarborough’s Chapter 13 filing. In
sum, the Bankruptcy Court’s decision is both legally and factually sound, and the District
Court did not err in upholding it.
III.
Therefore, for the reasons expressed at length above, we will affirm the orders of
13
Since this case began in 2001, the older statutory provision applies.
14
the District Court.14
14
Scarborough does not attack the District Court’s resolution of her Fed. R. Civ. P. 59/60
motion. Accordingly, the matter is waived. Eurofins Pharma US Holdings v.
BioAlliance Pharma SA, 623 F.3d 147, 161 n.15 (3d Cir. 2010).
The parties have filed several additional motions relating to briefing requirements and
amendments to the record. We dispose of them as follows. Scarborough’s motions to
file a reply brief out of time, to submit an over-length brief, to file a supplemental
appendix, and to amend the statement of issues on appeal—motions opposed by the
appellees—are denied. We granted a lengthy extension of time to file a reply brief, but
Scarborough missed the new deadline without notifying this Court. The reply brief she
eventually submitted did not comply with Fed. R. App. P. 32(a)(7)(A)—indeed, the reply
brief was longer than the two principal briefs combined. It also contained numerous
arguments and averments that were never raised below and appear to be novel to this
appeal, and we would therefore be unable to consider much of it—e.g., claims pertaining
to alleged violations of bankruptcy rules. ―As a general matter, the courts of appeals will
not consider arguments raised on appeal for the first time in a reply brief.‖ Hoxworth v.
Blinder, Robinson & Co., 903 F.2d 186, 204 n.29 (3d Cir. 1990). As we understand
Chase’s submissions to pertain to its preclusion arguments, and as we have decided in its
favor on alternative grounds, Chase’s motions to amend the supplemental appendix and
to amend the statement of facts are denied as unnecessary.
15