ROY B. DALTON, Jr., District Judge.
This cause is before the Court on the following:
Upon consideration, the Court finds that the bankruptcy court's Order Granting Motion to Reopen the Bankruptcy Case to Compel Surrender of Real Property (Doc. 5-2) is due to be affirmed and that the appeal is due to be dismissed.
Appellants Charles Edward Woide and Susannah Clare Woide—proceeding pro se—filed a voluntary petition ("
Less than three months after filing the Petition, Appellants requested that the Bankruptcy Action be converted to a proceeding under Chapter 7 of the Code (Doc. 7-8; see also Doc. 8-1.) Following conversion, Appellants filed an amended set of schedules listing their assets ("
Over the next three years, Appellants attempted to maintain possession of the Property by filing lawsuits and asserting claims to invalidate the Mortgage and the underlying note ("
In the instant proceeding, Appellants appeal the Surrender Order.
When a bankruptcy court enters a final order, a party may appeal to the district court under 28 U.S.C. § 158(a)(1). In reviewing decisions of a bankruptcy court, a district court functions as an appellate court. In re Colortex Indus., Inc., 19 F.3d 1371, 1374 (11th Cir. 1994). The Court generally reviews a bankruptcy court's factual findings for clear error and its legal conclusions de novo. In re Globe Mfg. Corp., 567 F.3d 1291, 1296 (11th Cir. 2009). A bankruptcy court's decision whether to reopen a case is reviewed for abuse of discretion. See HDR Architecture P.C. v. Maguire Grp. Holdings, 523 B.R. 879, 886-87 (S.D. Fla. 2014) (collecting federal circuit court decisions); see also, e.g., In re Double J Operating Co., 37 F. App'x 91, 91 (5th Cir. 2002) ("[T]he decision to reopen a bankruptcy case is committed to the sound discretion of the bankruptcy judge and will not be overturned absent abuse of discretion."). An erroneous view of the law constitutes an abuse of discretion. See Cooter & Gell v. Hartmarx Corp., 496 U.S. 384, 405 (1990); see also Klay v. United Healthgroup, Inc., 376 F.3d 1092, 1096 (11th Cir. 2004).
Appellants contend that the bankruptcy court erred by: (1) finding that Fannie Mae had standing to move the bankruptcy court to reopen the Bankruptcy Action ("
Appellants' Standing Argument is that Fannie Mae lacked standing to reopen the Bankruptcy Action, thus rendering the bankruptcy court without jurisdiction to grant the Motion to Reopen and to compel surrender of the Property. (See id. at 12-13.) Appellants are mistaken.
The crux of Appellants' argument is that Fannie Mae has not demonstrated that it is Appellants' creditor. (See id. at 13.) Bankruptcy cases implicate two types of standing— "Article III" and "statutory." See In re Smith, 522 F. App'x 760, 764-66 (11th Cir. 2012). Article III standing arises out of the Constitution's cases-or-controversy requirement and demands that parties invoking federal jurisdiction demonstrate "a personal stake in the outcome of a case." Id. at 764 (citing E.F. Hutton & Co., Inc. v. Hadley, 901 F.2d 979, 984 (11th Cir. 1990)). Because Article III standing is determined at the outset of a case, it is decided based on "allegations" in the invoking party's filings. See id. (citing Hollywood Mobile Estates Ltd. v. Seminole Tribe of Fla., 641 F.3d 1259, 1265 (11th Cir. 2011)).
Statutory standing in a bankruptcy case requires that a party be a "party in interest." In re Walker, 515 F.3d 1204, 1212 (11th Cir. 2008). Although Chapter 7 does not specifically define a "party in interest," the U.S. Court of Appeals for the Eleventh Circuit applies the same definition set forth in Chapter 11, see Westwood Cmty. Two Ass'n, Inc. v. Barbee, 293 F.3d 1332, 1337 (11th Cir. 2002), which defines a party in interest as inclusive of a debtor or creditor, see 11 U.S.C. § 1109(b). A "creditor" includes an "entity that has a claim against the debtor," 11 U.S.C. § 101(10)(A), and a "claim" is a "right to payment," 11 U.S.C. § 101(5)(A).
Here, Fannie Mae's Article III and statutory standing are evidenced by the Proof of Claim on Appellants' Property. (See Doc. 6-1, pp. 10, 16; see also Doc. 22-1, p. 90.) The Proof of Claim, which Appellants did not dispute, evinces an alleged "claim" within the meaning of the Code, rendering Fannie Mae both a "party in interest" and a party with a tangible stake in Appellants' Bankruptcy Action. That is all that is required to show standing. See In re Smith, 522 F. App'x at 765 ("[A] tangible financial interest in getting the [debtors' real property] out from under the jurisdiction of the bankruptcy court so that it could foreclose on the property . . . was sufficient to confer Article III standing.").
Appellants' Laches Argument is that Fannie Mae's delay in seeking to reopen the Bankruptcy Action bars the grant of the Motion to Reopen under the laches doctrine. (Doc. 21, p. 11.) Again, the Court disagrees.
The laches doctrine bars relief when a party "unreasonably delays taking action and the affected party is prejudiced by the delay." Bank of Am., N.A. v. Rodriguez, 558 B.R. 945, 949 (S.D. Fla. 2016); see also Black Warrior Riverkeeper, Inc. v. U.S. Army Corps of Eng'rs, 781 F.3d 1271, 1283 (11th Cir. 2015). "[T]he mere lapse of time does not constitute prejudice, and a court of equity must consider whether a case would prejudice the adversary's position." Rodriguez, 558 B.R. at 949.
Here, Appellants were not unfairly prejudiced as a result of Fannie Mae's delay. Rather, they have benefited. Appellants have enjoyed the free use of their home for more than five years. Moreover, the record does not reveal that Fannie Mae unreasonably delayed in seeking to reopen the Bankruptcy Action; instead, Fannie Mae sought relief from the bankruptcy court only after years of attempting to secure the Property through the Foreclosure Action and defending against Appellants' attempts to invalidate the Mortgage. (See Doc. 21, pp. 5-6; see also Doc. 22, pp. 4-5.) Under these circumstances, the Court finds that the bankruptcy court did not abuse its discretion in failing to apply the doctrine of laches, as Appellants have only benefited from Fannie Mae's delay in seeking to reopen the Bankruptcy Action.
Appellants Surrender Argument is that the bankruptcy court abused its discretion in finding that Appellants intended to surrender the Property based on the Original Schedules filed prior to the Bankruptcy Action's conversion. The Court finds that it did not.
When a Chapter 13 case is converted to a Chapter 7 case, any schedules filed in the Chapter 13 case are deemed filed in the converted Chapter 7 case. See Fed. R. Bankr. P. 1019(1)(A). If such schedules include debts secured by property, section 521(a)(2) of the Code requires that a Chapter 7 debtor file a statement of intention ("
Here, Appellants indicated their intention to surrender the Property on the Original Schedules when they initiated the Bankruptcy Action. (See Doc. 6-1.) Once converted, Appellants did not restate that intention on the Amended Schedules, nor did they file a Statement, as required under § 521(a)(2). Nonetheless, the bankruptcy court concluded that Appellants had a duty to surrender the Property because Appellants: (1) declared their intention to surrender the Property on the Original Schedules, which were deemed filed once the Bankruptcy Action was converted; (2) continued to own the Property after conversion; and (3) neither reaffirmed the debt to Fannie Mae, nor redeemed the Property. (See Doc. 5-2, pp. 2-3; see also Doc. 21-15, p 5.)
The bankruptcy court's conclusion is supported by the Eleventh Circuit's interpretation of § 521(a)(2) as providing a debtor with three exclusive options—surrender the Property, reaffirm the debt, or redeem the Property. Taylor, 3 F.3d at 1516-17; see also In re Steinberg, 447 B.R. 355, 358 (S.D. Fla. 2011). Appellants cannot choose to do nothing and retain the property. See Taylor, 3 F.3d at 1517; see also 11 U.S.C. § 362(h) (permitting a bankruptcy court to terminate the automatic stay where a debtor fails to file a Statement). Rather, in order to retain the Property, Appellants were required to redeem it or reaffirm the debt. See Taylor, 3 F.3d at 1517. Appellants did neither and their testimony before the bankruptcy court confirms as much. (See Doc. 21-15, p. 5 ("We [Appellants] didn't reaffirm the debt").) Thus, Appellants' only remaining option was to surrender the Property—an option that they expressed on the Original Schedules. (See Doc. 6-1.)
Displeased with the result in the bankruptcy court, Appellants now contend that because they did not file a Statement, they had no obligation to surrender the Property. (See Doc. 21, pp. 9-10; see also Doc. 23, pp. 7-8.) But Appellants' dissatisfaction does not amount to an abuse of discretion. Especially here, where Appellants have provided no legal authority for their position suggesting that the bankruptcy court's reliance on the Original Schedules was contrary to law. As such, the Court cannot say that the bankruptcy court abused its discretion.
In light of the foregoing, the Court finds that the Surrender Order (Doc. 5-2) is due to affirmed and that the appeal is due to be dismissed.
Accordingly, it is hereby
1. The Bankruptcy Court's Order (Doc. 5-2) is
2. This appeal is
3. The Clerk is