Charles E. Woide v. Federal National Mortgage Association

Case: 17-10776 Date Filed: 04/05/2018 Page: 1 of 13
[DO NOT PUBLISH]
IN THE UNITED STATES COURT OF APPEALS
FOR THE ELEVENTH CIRCUIT
________________________
No. 17-10776
Non-Argument Calendar
________________________
D.C. Docket No. 6:16-cv-01484-RBD,
Bkcy No. 6:10-bkc-22841-KSJ
In Re: CHARLES E. WOIDE,
SUSANNAH CLARE WOIDE,
Debtors.
_________________________________________________________________
CHARLES E. WOIDE,
SUSANNAH CLARE WOIDE,
Plaintiffs - Appellants,
versus
FEDERAL NATIONAL MORTGAGE ASSOCIATION,
Defendant - Appellee.
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________________________
No. 17-10777
Non-Argument Calendar
________________________
D.C. Docket No. 6:16-cv-01524-RBD,
Bkcy No. 6:10-bkc-22841-KSJ
In re: CHARLES E. WOIDE,
SUSANNAH CLARE WOIDE,
Debtors.
_______________________________________________________________
CHARLES E. WOIDE,
SUSANNAH CLARE WOIDE,
Plaintiffs - Appellants,
versus
FEDERAL NATIONAL MORTGAGE ASSOCIATION,
Defendant - Appellee.
________________________
Appeals from the United States District Court
for the Middle District of Florida
________________________
(April 5, 2018)
Before MARCUS, JORDAN, and ROSENBAUM, Circuit Judges.
PER CURIAM:
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In this case, the bankruptcy court reopened the bankruptcy case of Charles
and Susannah Woide upon a motion by the Federal National Mortgage Association
seeking surrender of the Woides’ home. The Woides appealed this decision to the
district court, which affirmed the bankruptcy court. The Woides then moved for
reconsideration, which the district court denied. In Case Number 17-10776, the
Woides, proceeding pro se, appeal the denial of their motion for reconsideration.
In Case Number 17-10777, the Woides appeal the initial bankruptcy judge’s failure
to rule on their motion for reconsideration of his order of recusal, challenge the
denial of their motion for stay pending appeal, and contest the bankruptcy court’s
jurisdiction. Because these two appeals arise out of related orders in the same
bankruptcy proceeding and involve identical parties, we consolidate them for
decision. After careful consideration, we affirm in all respects.
I
The Woides first challenge the bankruptcy court's order reopening the
bankruptcy case and ordering them to surrender their home under 11 U.S.C. §
521(a) (the “order reopening the case”). They advance four primary arguments on
appeal: (1) that the Federal National Mortgage Association (“Fannie Mae”) lacked
standing to reopen the case; (2) that the bankruptcy court erred in granting Fannie
Mae’s motion to reopen; (3) that Fannie Mae’s motion should be barred by laches;
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and (4) that Fannie Mae’s motion should be denied because of alleged misconduct
and misrepresentations to the court. We are not persuaded. 1
In bankruptcy cases, we sit as a “second court of review” and “examine[ ]
independently the factual and legal determinations of the bankruptcy court and
employ[ ] the same standard of review as the district court.” In re Optical Techs.,
Inc., 425 F.3d 1294, 1299–1300 (11th Cir. 2005) (citation omitted). Factual
findings of the bankruptcy court are reviewed for clear error, and legal conclusions
by either the bankruptcy court or the district court are reviewed de novo. Id. at
1300. See also In re Fin. Federated Title & Tr., Inc., 309 F.3d 1325, 1328–29
(11th Cir. 2002). We liberally construe pro se briefs. See Bingham v. Thomas,
654 F.3d 1171, 1175 (11th Cir. 2011).
A
First, we have no trouble concluding that Fannie Mae had both statutory and
constitutional standing to seek reopening of the bankruptcy case. To have statutory
standing in a bankruptcy case, Fannie Mae must be a “party in interest.” In re
1
In their notice of appeal, the Woides identified the denial of their motion for reconsideration
(D.E. 26 in Case Number 16-cv-01484) as the challenged ruling. Their briefs, however,
challenge the underlying ruling affirming the bankruptcy court’s order, D.E. 24. Because the
Woides have presented no argument challenging the denial of their motion for reconsideration,
their appeal of that ruling has been abandoned. See Timson v. Sampson, 518 F.3d 870, 874 (11th
Cir. 2008). We do have jurisdiction to review the underlying ruling affirming the bankruptcy
court’s order despite the failure to designate that ruling for review. See Nichols v. Ala. St. Bar,
815 F.3d 726, 730–31 (11th Cir. 2016) (reviewing undesignated orders where record made clear
they were orders the party intended to appeal and there was no indication the appellee was
misled or prejudiced).
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Walker, 515 F.3d 1204, 1212 (11th Cir. 2008). A “party in interest” is defined as
“the debtor, the trustee, a creditors’ committee, an equity security holders’
committee, a creditor, an equity security holder, or any indenture trustee.” 11
U.S.C. § 1109(b). See also In re Westwood Community Two Ass’n, Inc., 294 F.3d
1332, 1337 (11th Cir. 2002) (holding that § 1109(b)’s “party in interest” definition
applies in Chapter 7 bankruptcy proceedings). In the bankruptcy proceeding,
Fannie Mae’s servicer filed a proof of claim on its behalf alleging an interest in the
Woides’ home and attaching the mortgage note it holds. This establishes Fannie
Mae as a “creditor” and therefore a “party in interest” with a right to be heard in
the Woides’ bankruptcy case. See 11 U.S.C. § 101(10)(A) (defining “creditor” as
an “entity that has a claim against the debtor”); § 101(5)(A) (defining “claim” as a
“right to payment”). This showing of a right to payment is also sufficient to
establish the constitutional requirement that a party have a personal stake in the
outcome of a case. See O’Halloran v. First Union Nat. Bank of Fla., 350 F.3d
1197, 1202–04 (11th Cir. 2003) (constitutional standing established by a
bankruptcy trustee alleging financial injury caused by the embezzlement of funds).
See also 7 Collier on Bankruptcy ¶ 1109.04[4] (16th ed. 2017) (“In general, the
participation of a party in interest in any proceeding satisfies the requirements of
Article III if the outcome of the proceeding may affect the ultimate disposition of
that party’s stake in the [ ] case”).
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We also disagree with the Woides that Fannie Mae was not a party in
interest when it sought to reopen the bankruptcy case in 2016. Their argument that
their attempted rescission of the mortgage under TILA in 2015 deprived Fannie
Mae of standing fails because we recently held that their attempt was untimely and
ineffective. See Woide v. Fed. Nat’l Mortg. Ass’n, 705 F. App’x 832, 837 (11th
Cir. 2017). Likewise, Fannie Mae’s status as a party in interest was not modified
by a non-final state court order in a proceeding to which it was not a party.
B
Second, we turn to the merits of Fannie Mae’s motion to reopen the case and
compel surrender of the Woides’ home. We review the bankruptcy court’s grant of
a motion to reopen for abuse of discretion. See Slater v. United States Steel Corp.,
871 F.3d 1174, 1186–87 (11th Cir. 2017) (en banc) (explaining that under 11
U.S.C. § 350(b), “the bankruptcy court retains broad discretion to reopen a closed
case on a motion of the debtor or another party in interest . . . .”); In re Haker, 411
F.2d 568, 596 (5th Cir. 1969) (“It is elemental bankruptcy law the granting of a
petition to reopen is a matter addressed to the sound discretion of the [c]ourt, and
the only reason for setting aside that judgment of the trial court is for an abuse of
that discretion.”). A closed bankruptcy case “may be reopened in the court in
which such case was closed to administer assets, to accord relief to the debtor, or
for other cause.” 11 U.S.C. § 350(b).
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In this case, the Woides first filed a Chapter 13 bankruptcy petition in
December of 2010. The Woides filed Chapter 13 schedules which indicated that
they intended to surrender their home in Deland, Florida. In April of 2011, the
Woides’ Chapter 13 case was converted into a Chapter 7 case. Although §
521(a)(2) of the Bankruptcy Code requires a Chapter 7 debtor to file a statement of
intention indicating whether he or she intends to redeem secured property, reaffirm
the debt it secures, or surrender the property, the Woides did not file one after
conversion. The Woides did file amended schedules, but left blank Schedules A
and D, which relate to their personal property and secured creditors.
After discharge, the Woides did not reaffirm the debt owed to Fannie Mae or
redeem the property. Instead, they continued to live in the property without
making mortgage payments. In December of 2011, Fannie Mae commenced a
foreclosure action in Florida state court. Since then, the Woides have defended the
foreclosure action and brought other actions in state and federal court in order to
keep the property and invalidate the note and mortgage on their home. In March of
2016, Fannie Mae filed the instant motion to reopen the bankruptcy case to compel
surrender of the property. After a hearing, the bankruptcy court granted the motion
and issued its order reopening the case.
The Woides contend the bankruptcy court erred in reopening the case to
compel surrender because they did not file a statement of intention to surrender
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and, therefore, are not required to surrender their property. Their argument fails
for two reasons.
First, although no statement of intention under § 521(a)(2) was filed after the
case was converted into a Chapter 7 case, the Federal Rules of Bankruptcy
Procedure provide that when a Chapter 13 case has been converted to a Chapter 7
case, “schedules[ ] and statements of financial affairs theretofore filed shall be
deemed to be filed in the Chapter 7 case, unless the court directs otherwise.” Fed.
R. Bankr. P. 1019(1)(A). Because the Woides filed a schedule stating the intent to
surrender their home in the Chapter 13 case and did not modify it in the amended
schedules filed after conversion, the bankruptcy court was within its discretion to
hold that the Woides had a duty to surrender the property.
Second, our case law is clear that § 521(a)(2) provides only three options for
a debtor who has property that serves as collateral for his debts: redeem the
property, reaffirm the debt, or surrender the property. See In re Failla, 838 F.3d
1170, 1178 (11th Cir. 2016) (“Section 521(a)(2) requires the debtor to either
redeem, reaffirm, or surrender collateral to the creditor.”). Doing nothing is not an
option. See In re Taylor, 3 F.3d 1512, 1517 (11th Cir. 1993) (“[T]he plain
language of 11 U.S.C. § 521(2) does not permit a Chapter 7 debtor to retain the
collateral property without either redeeming the property or reaffirming the
debt[.]”). If we were to accept the Woides’ argument, we would reward a debtor
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for failing to choose (and complete) one of these options. Both Failla and Taylor
prohibit this outcome. See Failla, 838 F.3d at 1178; Taylor, 3 F.3d at 1516–17.
“In bankruptcy, as in life, a person does not get to have his cake and eat it too.”
Failla, 838 F.3d at 1178. The bankruptcy court did not abuse its discretion by
reopening the case to afford Fannie Mae relief.
C
Finally, we do not think that Fannie Mae’s motion was barred by laches or
alleged misconduct.
To assert the defense of laches, the Woides were required to establish “(1) a
delay in asserting a right or a claim; (2) that the delay was not excusable; and (3)
that there was undue prejudice to the party against whom the claim is asserted.”
Venus Lines Agency, Inc. v. CVG Intern. Am., Inc., 234 F.3d 1225, 1230 (11th Cir.
2000). On appeal, the Woides argue only that Fannie Mae’s delay bars its claim.
Even if we accepted the argument concerning delay, the Woides have failed to
show that they face any undue prejudice as a result of the delay. During the delay
the Woides have “enjoyed free use of [the] property,” Bank of America, N.A. v.
Rodriguez, 558 B.R. 945, 951 (S.D. Fla. 2016), a benefit to which they were not
entitled. See Taylor, 3 F.3d at 1517. There is no prejudice in requiring them to
comply with § 521(a)(2) and their previous representations to the bankruptcy court
that they would surrender the property.
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The argument that Fannie Mae committed fraud or misrepresentation in
order to obtain the order reopening the case is also without merit. The Woides
assert that Fannie Mae’s contentions in its motion to reopen the case were
“complete with full servings of fraud, concealment, and misrepresentation of
material facts.” These accusations boil down to the Woides’ disagreement with the
arguments presented in Fannie Mae’s motion, but nothing in the record supports
the claim that Fannie Mae committed fraud or concealed anything from the
bankruptcy court or the district court. Cf. S.E.C. v. ESM Grp. Inc., 835 F.2d 270,
274 (11th Cir. 1988) (finding allegations of fraud on the court insufficient because,
among other things, “[a]n attorney is expected to present his client’s case in the
light most favorable to the client”).
II
We now turn to the issues raised by the Woides in their related appeal, Case
Number 17-10777.
After the bankruptcy court issued its order reopening the case, the Woides
moved for reconsideration. The bankruptcy court judge denied the motion, but just
days later recused himself sua sponte and vacated the order denying the motion for
reconsideration (the “recusal order”). The case was then reassigned to a different
bankruptcy judge. The Woides filed a notice of appeal of the order reopening the
case before the district court and, on the same day, also filed a motion to stay
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proceedings pending their appeal and moved for reconsideration of the recusal
order. The reassigned bankruptcy judge denied each of the Woides’ motions. The
district court affirmed these rulings on appeal.
Before us, the Woides contend that the bankruptcy court (1) lacked
jurisdiction to consider either motion because of the pending appeal of the order
reopening the case, (2) lacked authority to rule on the motion for reconsideration of
the recusal order, and (3) erred in denying the motion to stay. We discuss, and
reject, each argument in turn.
First, the bankruptcy court had jurisdiction to consider the motion for
reconsideration of the recusal order and the motion to stay. Although the Woides
appealed the order reopening the case, their motion for reconsideration of that
order was pending at the time and, accordingly, the notice of appeal became
effective only after the reassigned bankruptcy judge issued her ruling. See Fed. R.
Bankr. P. 8002(b)(2). The Woides contend that the motion for reconsideration was
not pending because the recused bankruptcy judge ruled on the motion and only
“vacate[d] his prior orders but not the written orders.” This argument ignores that
the recused bankruptcy judge issued two orders, one vacating his orders “entered
orally at the July 27, 2016 Hearing,” Bkr. D.E. 63, and another which specifically
notes that the “Order on Motion To Reconsideration … should … be vacated” and
cites the docket entry for that order. See Bkr. D.E. 62. Therefore, the order on the
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motion for reconsideration of the order reopening the case was vacated and the
appeal was not effective until that motion was resolved. See Fed. R. Bankr. P.
8002(b)(2). The reassigned bankruptcy judge correctly determined that she had
jurisdiction.
Second, the Woides are incorrect that the recused bankruptcy judge should
have ruled on their motion to reconsider the recusal order. Generally, once a judge
is recused, he or she may not issue any further substantive decisions in the case.
See In re BellSouth Corp., 334 F.3d 941, 949 (11th Cir. 2003). The motion for
reconsideration of the recusal order is a substantive matter and, therefore, the
recused bankruptcy judge did not err by not ruling on it. See id. (distinguishing
between “housekeeping” orders and substantive decisions). The reassigned
bankruptcy judge properly determined that she had authority to consider the
motion.
Finally, the bankruptcy court did not err in denying a stay pending appeal of
the order reopening the case. A stay pending appeal is an “extraordinary remedy”
and the party seeking it must show: “(1) a substantial likelihood that they will
prevail on the merits of the appeal; (2) a substantial risk of irreparable injury to
the[m] unless the [stay] is granted; (3) no substantial harm to other interested
persons; and (4) no harm to the public interest.” Touchston v. McDermott, 234
F.3d 1130, 1132 (11th Cir. 2000). See also In re Revel AC, Inc., 802 F.3d 558, 568
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(3d Cir. 2015) (applying this four-part test in the context of a bankruptcy appeal
under Fed. R. Bankr. P. 8007(a)(1)(A)). For the reasons we explained in Part I of
this opinion, the Woides were unlikely to prevail on the merits of their appeal.
Unable to establish the first element, the Woides were not entitled to a stay
pending appeal.
III
For the foregoing reasons, we affirm the orders of the district court in all
respects.
AFFIRMED.
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