Opinion
Case No. 19-13209
11-17-2020
In re: DEMETRIOUS YADIRFA SMITH AMY KATHLEEN SMITH Debtors
Chapter 13
ORDER DENYING DEBTORS' MOTION FOR RECONSIDERATION OF DECISION AND ORDER GRANTING LIMITED RELIEF FROM THE AUTOMATIC STAY TO WILMINGTON SAVINGS FUND SOCIETY, FSB [Docket Number 179]
This matter is before this Court on the Motion for Reconsideration of Decision and Order Granting Limited Relief from Stay to Wilmington Savings Fund Society, FSB, as Trustee for Upland Mortgage Trust A with Respect to First Mortgage on Real Property Located at 4703 Winona, Terr., Cincinnati, Ohio 45227 [Docket Number 179] ("Motion") and the Affidavit of Demetrious Yadirfa Smith ("Mr. Smith") offered in support of the Motion [Docket Number 181] ("Affidavit").
Debtors' counsel withdrew a previously filed motion for reconsideration [Docket Numbers 177 and 178].
To the extent that Mr. Smith's Affidavit includes a "Motion to Obtain New Counsel" that motion will be scheduled for hearing on December 17, 2020 by separate order.
I. FACTUAL AND PROCEDURAL BACKGROUND
Debtors Demetrious Yadirfa and Amy Kathleen Smith (collectively "the Smiths") request that this Court reconsider and reverse its Decision and Order Granting Limited Relief from the Automatic Stay to Wilmington Savings Fund Society, FSB, as Trustee For Upland Mortgage Loan Trust A with Respect to First Mortgage on Real Property Located at 4703 Winona Terrace, Cincinnati, OH 45227 [Docket Number 170] ("Order"). They base their request on several arguments including newly discovered evidence that they feel is relevant to the relief granted in the Order.
In the Order, this Court granted Creditor Wilmington Savings Fund Society, FSB ("Wilmington") limited relief from the automatic stay. That limited relief allows Wilmington to continue its defense of a foreclosure judgment that the creditor obtained and, subsequently, the Smiths appealed, to an Ohio appellate court prior to their bankruptcy petition filing. In making its ruling to grant this limited relief, this Court concluded that Wilmington's prepetition foreclosure judgment established a colorable claim to a lien against the Smiths' residential real property sufficient to allow Wilmington to proceed in the state court appeal. However, this Court clarified that any conclusive determination with respect to whether Wilmington held a valid lien was left to be determined in the pending state court litigation. Furthermore, the relief granted to Wilmington was limited to pursuing the state court appeal to finality. Wilmington must return to this Court with an additional request for relief prior to taking any other action, including any action to foreclose on the Smiths' residence.
In addition to concluding that Wilmington established a colorable claim to a lien against the Smiths' residential real property, this Court further concluded that Wilmington established "cause" for relief from stay pursuant to 11 U.S.C. § 362(d)(1) based on proof of a lack of adequate protection. In their Motion, the Smiths provide no basis for reconsidering this determination beyond an assertion that hearing evidence supported that they hold equity in their residential property based on alleged testimony from the Smiths that properties in the area are rapidly increasing in value. However, the Smiths provided no such testimony at the hearing nor was any other evidence offered by the Smiths to support that the value of their residential property was more than what was owed to Wilmington on the loan. Consequently, the Smiths unsupported assertion regarding equity in the property as a basis for adequate protection of Wilmington's claimed security interest in the property does not provide a basis for reconsideration.
II. LEGAL ANALYSIS
Although the Federal Rules of Civil Procedure ("Rules") do not explicitly recognize "motions for reconsideration," a bankruptcy court has post-judgment reconsideration powers under Federal Rules of Bankruptcy Procedure 9023 and 9024 which extend Rules 59(e) and 60(b) to bankruptcy proceedings. Equity Sec. Holders' Comm. v. Wedgestone Fin. (In re Wedgestone Fin.), 152 B.R. 786, 789 (Bankr. D. Mass. 1993).
A motion to alter or amend a judgment under Rule 59(e) may be granted if "there is a clear error of law, newly discovered evidence, an intervening change in controlling law, or to prevent manifest injustice." Drown v. GreenPoint Mortg. Funding, Inc. (In re Leahy), 376 B.R. 826, 829 (Bankr. S.D. Ohio 2007) (quoting GenCorp, Inc. v. Am. Int'l Underwriters, 178 F.3d 804, 834 (6th Cir. 1998)). The burden of proof rests with the party seeking to amend or alter the judgment. Leahy, 376 B.R. at 830. A Rule 59(e) motion for reconsideration is entrusted to the trial court's informed discretion and is only reversible for abuse of that discretion. Johnson v. University Housing, 2008 WL 11450691 at *1 (S.D. Ohio Oct. 14, 2008) (citing Shivers v Grubbs, 747 F. Supp. 434, 436 (S.D. Ohio 1990); Hamerly v. Fifth Third Mortg. Co. (In re J & M Salupo Dev. Co.), 388 B.R. 795, 800-01 (B.A.P. 6th Cir. 2008).
Relief from a final order may be granted under Rule 60(b) for any of the following reasons:
(1) mistake, inadvertence, surprise, or excusable neglect; (2) newly discovered evidence that, with reasonable diligence, could not have been
discovered in time to move for a new trial under Rule 59(b); (3) fraud (whether previously called intrinsic or extrinsic), misrepresentation, or misconduct by an opposing party; (4) the judgment is void; (5) the judgment has been satisfied, released, or discharged; it is based on an earlier judgment that has been reversed or vacated; or applying it prospectively is no longer equitable; or (6) any other reason that justifies relief.Fed. R. Civ. P. 60(b). "[T]he party seeking relief under Rule 60(b) bears the burden of establishing the grounds for such relief by clear and convincing evidence." Info-Hold, Inc. v. Sound Merch., Inc., 538 F.3d 448, 454 (6th Cir. 2008).
Significantly, neither a motion presented under Rule 59(e) nor under Rule 60(b) is intended to provide the parties an opportunity to relitigate previously decided matters or present the case under new theories. See Jinks v. AlliedSignal, Inc., 250 F.3d 381, 385 (6th Cir. 2001) (noting that "Rule 60(b) does not allow a defeated litigant a second chance to convince the court to rule in his or her favor by presenting new explanations, legal theories, or proof"); J & M Salupo, 388 B.R. at 805. "Rather, such motions are intended to allow for the correction of manifest errors of fact or law, or for the presentation of newly-discovered evidence.'" J & M Salupo, 388 B.R. at 805 (citing In re Nosker, 267 B.R. 555, 564 (Bankr. S.D. Ohio 2001)).
In their Motion, the Smiths request reconsideration and reversal of the Order granting Wilmington limited relief from stay based on various arguments, including what they characterize as newly discovered evidence. With respect to this latter argument, they note that, subsequent to this Court's Order, the Ohio appellate court handling the appeal of Wilmington's foreclosure judgment granted the parties a six-month extension, now requiring the parties to file memoranda on the status of the Smiths' bankruptcy case on or before March 10, 2021 [Docket Number 179, Ex. B]. The Smith assert that this Court should reconsider and reverse its Order to allow the Smiths to remain under the protection of the automatic stay for the entire period of the state court extension until March 10, 2021.
The Smiths appear to misunderstand the limited breadth of this Court's Order and the relief it granted. The Order only authorizes Wilmington to return to state court to defend its foreclosure judgment in the Ohio appellate court litigation. In all other respects, the Smiths do remain protected and Wilmington cannot pursue any other foreclosure-related actions against the Smiths until the state court appeal is final. If anything, the Ohio appellate court's six-month extension provides the Smiths with more time to remain in their home and gather the documents that they assert are necessary to defend their position in the state court litigation. Accordingly, the Smiths' newly discovered evidence does not support reconsideration of the Order.
Next, the Smiths assert that their residential property must be protected until Wilmington demonstrates that it holds a valid lien against the property. As property of the bankruptcy estate, the Smiths' residential property does remain protected (see 11 U.S.C. § 362(a)(3)) and, pursuant to this Court's Order, Wilmington may not take additional foreclosure action against their residential property until Wilmington's lien rights are determined through the state court litigation.
In both the Motion and Affidavit, the Smiths argue that this Court should reconsider its Order because Wilmington lacks valid lien rights against the Smiths' residential property. In the Order, this Court emphasized to the Smiths that it did not rule on the validity of Wilmington's lien and, instead, only concluded that Wilmington had a colorable claim to a lien based on its foreclosure judgment on appeal in the state court. If the Smiths hold evidence supporting that the foreclosure judgment should be reversed on appeal, that evidence must be presented in the state court litigation.
Third, the Smiths argue that the quick deadline set for them to file an adversary complaint against Wilmington, which this Court set at 30-days following the date that the Smiths file their Fifth Amended Plan, is prejudicial to them [See Docket Number 171 for the deadline]. However, the Smiths' argument is misleading in that the Smiths first articulated their desire to file an adversary complaint against Wilmington in December of 2019. They have had ample time to file the complaint. The Smiths' Motion suggests their apparent belief that they must wait to file an adversary complaint against Wilmington until after the state court litigation is finished. The Smiths have articulated no basis in rule or law requiring them to wait on their state court appeal in order to file an adversary complaint.
The outcome of the state court appeal may well be relevant to the adversary proceeding depending on the relief requested in the adversary complaint. If that is the case, it may be appropriate to hold the adversary proceeding in abeyance pending the resolution of the state court appeal. Any such considerations, however, are premature since the adversary complaint has yet to be filed.
Fourth, the Smiths argue that a Notice of Mortgage Payment Change [Docket Number 172] filed by Wilmington is a form of harassment and violates the automatic stay because it increases their mortgage payment. However, a mortgage holder's filing of a notice of mortgage payment change is provided for in Federal Rule of Bankruptcy Procedure 3002.1. This rule requires Wilmington to file such a notice whenever a change in the interest rate or escrow account causes a change in the mortgage payment amount. See Fed. R. Bankr. P. 3002.1(b)(1). The filing of such a notice by Wilmington does not violate the automatic stay nor does it provide this Court with a basis for reconsidering its Order.
If a party in interest disagrees with the payment change, the rule provides a mechanism to object. See Fed. R. Bankr. P. 3002.1(b)(2).
Finally, in both the Motion and supporting Affidavit, the Smiths raise various substantive arguments previously ruled upon in the Order, including their erroneous belief that Wilmington's lien against their residential property was discharged in Mr. Smith's prior bankruptcy case. Those arguments have already been addressed and do not provide a basis for reconsideration of this Court's Order.
III. CONCLUSION
The Order granting Wilmington limited relief from the automatic stay does nothing more than allow the parties to proceed with the Smiths' appeal of Wilmington's foreclosure judgment in an Ohio appellate court. The Order does not authorize Wilmington to take other against the Smiths or their residential property until that state court litigation has completed and Wilmington returns to this Court to request additional relief.
This assumes that the bankruptcy case remains pending. If the bankruptcy case is dismissed, the automatic stay and its protections would terminate. --------
Because the Smiths present no valid basis for reconsideration of this Court's Order, the Smiths' Motion [Docket Number 179] is denied.
SO ORDERED.
This document has been electronically entered in the records of the United States Bankruptcy Court for the Southern District of Ohio.
IT IS SO ORDERED.
/s/_________
Beth A. Buchanan
United States Bankruptcy Judge Dated: November 17, 2020 Distribution List:
Default List Plus
Adam Hall, Esq.
Edward Cahill, Esq.