RAMOS, District Judge:
3939 WPR Funding LLC ("WPR Funding" or "Appellant") appeals from two orders of the United States Bankruptcy Court for the Southern District of New York (1) an order entered on July 29, 2014, denying Appellant's claim for pre-petition default interest on the underlying mortgage and note (the "July 2014 Order"), A-333 to A-346
Campbell is the owner of a commercial, mixed-used property in the Bronx (the "Property"). A-003. On April 13, 2005, she executed a mortgage and note secured by the Property in the amount of $400,000 with Flushing Savings Bank. Id. Campbell allegedly defaulted on the mortgage by failing to make the monthly payments due beginning on October 1, 2012 and every month thereafter." Id. As a result of the default, Flushing Savings Bank commenced a foreclosure action on February 6, 2013, in Supreme Court, Bronx County. Approximately two months later, on April 19, 2013, Flushing Savings assigned its interest in the note and mortgage to Hayden Asset IX, LLC. A-266 to A-286. Hayden Asset, in turn, assigned its rights in the note and mortgage to Appellant on October 9, 2013, thus making Appellant the holder of a first priority lien on the Property. A-199 to A-209. On December 8, 2013, Campbell filed a petition under chapter 13 of the Bankruptcy Code with the United States Bankruptcy Court for the Southern District of New York, effectively staying the foreclosure action in Bronx Supreme Court. A-333.
On February 5, 2014, Appellant filed a Proof of Claim in the bankruptcy proceeding based on the note and mortgage. See Proof of Claim, A-001 to A-117. As relevant to the instant appeal, as part of its Proof of Claim, Appellant sought, in addition to other fees and penalties, pre-petition default interest in the amount of $79,009.70. A-114. That amount was calculated by applying the default interest rate provided in paragraph 7.2 of the mortgage, 24% (or 18.625% in excess of the 5.375% contract rate), to the principal balance of the mortgage at the time of default ($351,888.42), from the date of default to the date of the filing of the bankruptcy petition (October 1, 2012 to December 8, 2013). A-024.
The initial confirmation hearing on Campbell's petition was held on May 1, 2014 before United States Bankruptcy Judge Allan L. Gropper (the "May 2014 Hearing"). See Transcript of Hearing, A-118 to A-131. At that hearing, counsel for Campbell specifically stated that the she was disputing the approximately $79,000 in pre-petition default interest being claimed by Appellant. A-123. The court, in turn, advised the parties that he had "written on default interest, you can take a look[,]" but that he did not know whether his prior opinion(s) would be applicable to the instant case. A-124.
On May 16, 2014, Campbell filed her formal Objection to Appellant's Proof of Claim. A-137 to A-167. In the Objection, Campbell argued that the claim for default interest should be expunged because at 24%, it was usurious, or that it should be disallowed for a host of equitable considerations.
A-141.
On June 10, 2014, Appellant filed its Response to Campbell's Objection. A-168 to A-294. In its Response, Appellant argued generally that the default interest rate provided in the mortgage was valid and enforceable under the bankruptcy statutes and as a matter of New York State contracts law, and was not otherwise usurious. A-173 to A-175. In responding to Campbell's notice argument, Appellant simply stated: "the Debtor waived notice of payment and there is no provision requiring WPR to provide notice of default." A-175. Appellant did not argue that notice had in fact been given, either by letter or in any other fashion, or attempt to introduce evidence of any such notice.
A subsequent hearing was held in Bankruptcy Court the following week, on June 17, 2014. See Transcript of Hearing ("the June 2014 Hearing"), A-295 to A-332. As counsel for Campbell made clear at the hearing, Appellant's claim for default interest was proving to be an impediment to settlement because Campbell ultimately wanted to pay the arrearage and keep the Property, but apparently would not be able to do so if she also had to pay default interest. A-300. Judge Gropper again referred to his "decisions on the issue" and noted that the bankruptcy courts' power is significantly less when it comes to pre-petition default interest than post-petition default interest "For pre[-]petition we ordinarily have to follow state law . . . and in order to avoid paying default interest under state law you have to make a very, very strong showing." A-301. The parties then agreed with the judge that, due to the importance of the default interest issue to the resolution of Campbell's petition, and the fact that there was no dispute as to the facts, Judge Gropper would decide that issue first before turning to other matters raised by Campbell's petition:
A-303.
After additional colloquy concerning attorneys' fees, the Court turned back to the issue of default interest:
A-305.
Prior to concluding the hearing, Judge Gropper and the parties discussed the need to resolve the threshold legal issue of the applicability of default interest three
On July 29, 2014, the bankruptcy court issued its decision on the issue of default interest. See July 2014 Order, A-333 to A-346. In the Order, the Bankruptcy Court first noted that under New York law, pre-petition default interest was available, even at a rate of 24%, if the operative documents provided for such interest. A-337 ("There is no reason to believe the default interest provided in . . . the WPR [Funding] . . . instruments would be void under New York Law.") The bankruptcy court then found that Appellant's note and mortgage adequately provided for default interest, but that the note was "very clear that default interest is only payable on demand." A-337 to A-338. Finally, the court concluded that there was no evidence in the record that notice of acceleration of Appellant's debt had been provided to Campbell. A-338 ("[Appellant] in fact has never placed in the record a notice of default or notice of acceleration.") On the basis of the foregoing, the bankruptcy court determined that because "the record [was] insufficient to establish that [Appellant] or any of its predecessors accelerated the Mortgage," Appellant was not entitled to default interest. A-341.
Appellant timely moved for reconsideration of the July 2014 Order on August 8, 2014, see A-349 to A-381, but only to the extent of requesting that the court consider evidence that the Default Letter had in fact been mailed to Campbell by certified and regular mail on January 25, 2013. A-350. In its motion for reconsideration, Appellant made two concessions that are particularly relevant: (1) that it "believed that the underlying documents allowed the charging of default interest even without notice of default"; and (2) that the Default Letter was not part of the original record. A-354 and A-352, respectively. Appellant argued that denial of its motion for reconsideration would result in manifest injustice.
In its January 2015 Order, the bankruptcy court denied reconsideration. Specifically, the court found that Appellant was actually put on notice that Campbell was contesting pre-petition acceleration by Campbell's submission, in which she cited Judge Gropper's Northwest Airlines Corp. decision dealing with the very issue. A-412 to A-413. Moreover, the court found that Appellant had "every opportunity place all the facts in the record prior to or during the [July 17, 2014] Hearing . . . as the Court made several statements concerning its intention to rule on the existing record, to which the parties did not object." A-412.
The instant appeal followed.
This Court has jurisdiction to hear appeals from decisions of a bankruptcy court pursuant to 28 U.S.C. § 158(a), which provides in relevant part that "[t]he district courts of the United States shall have jurisdiction to hear appeals . . . from final judgments, orders, and decrees; . . . [and,] with leave of the court, from other interlocutory orders and decrees . . . of bankruptcy judges." 28 U.S.C. § 158(a)(1), (3). A district court generally reviews the findings of fact of a bankruptcy court under a "clearly erroneous" standard, see Fed. R. Bankr.P. 8013, but conclusions of law are reviewed de novo. See, e.g., Shugrue v. Air Line Pilots Ass'n, Int'l (In re Ionosphere Clubs, Inc.), 922 F.2d 984, 988-89 (2d Cir.1990); Nova v. Premier Operations, Ltd. (In re Premier Operations), 294 B.R. 213, 217 (S.D.N.Y.2003).
In reviewing a decision of a bankruptcy court, the district court "may affirm on any ground that finds support in the record, and need not limit its review to the bases raised or relied upon in the decision[] below." Freeman v. Journal Register Co., 452 B.R. 367, 369 (S.D.N.Y.2010). But the district court may not consider evidence outside the record. See In re Bear Stearns High-Grade Structured Credit Strategies Master Fund, Ltd., 389 B.R. 325, 339 (S.D.N.Y.2008). Any arguments not raised in the bankruptcy court are considered waived; unless such a waiver results in manifest injustice, the new arguments will not be considered on appeal. See In re Lionel Corp., 29 F.3d 88, 92 (2d Cir.1994); see also, e.g., In re Barquet Grp., Inc., 486 B.R. 68, 73 n. 3 (S.D.N.Y.2012) (citing Midland Cogeneration Venture Ltd. P'ship v. Enron Corp., 419 F.3d 115, 126 (2d Cir.2005)).
Appellant argues that, for any number of reasons, the bankruptcy court should never even have reached the issue of whether Appellant was required to give Campbell notice of its intent to accelerate the loan. Each of Appellant's proffered rationales is patently without merit. First, Appellant asserts that the bankruptcy court was wrong to have "reviewed the [l]oan [d]ocuments sua sponte and determined that acceleration was mandatory." Br. at 30. This remarkable assertion is illogical and contrary to the record. As noted above, at the July 17 Hearing, which was held one week after Campbell had filed her Objection, the parties acknowledged that default interest was the most pressing issue preventing resolution of Campbell's petition because of Campbell's stated desire to retain ownership of the property. In reliance on counsel's stated concerns, the bankruptcy court resolved to decide the issue as soon as possible so that the parties could then reconsider the "practicality" of their respective positions. See A-305, A-317; see also, January 2015 Order, A-409 ("The Court determined that because the creditors' entitlement to default interest was a central issue in all of the motions and objections, it would address
Moreover, contrary to its protestations, Appellant was absolutely put on notice that the bankruptcy court would be relying on the entirety of the record before it, including the note and mortgage. As noted above, the issue was discussed at various points during the July 17 Hearing. See also January 2015 Order, A-409 ("The Court specifically stated on the record of the [July 17] Hearing that it would decide the open question on the record before it. The parties did not take exception to the Court's statement to that effect.") If the bankruptcy court was not permitted to review the very loan documents that Appellant insisted established its entitlement to default interest, it is difficult to understand how exactly Appellant believed the court would resolve the issue.
In addition, Appellant makes various references in its brief to the fact that it believed that the bankruptcy court would be applying a "summary judgment standard." See Brief for Appellant ("Br."), Doc. 6, 9 ("WPR understood `primarily questions of law' to be a summary judgment standard[.]"); Br. 15 ("The Court did not consider that a ruling as a matter of law implied a summary judgment standard that would not be determined before the issuance of the July 29 Decision."); Br. 17 ("at the June 17th Hearing, the Bankruptcy Court stated it would rule primarily as a matter of law and it was fair for the parties to understand this to mean the Court would use a summary judgment standard.") A summary judgement motion, by its nature, is addressed to the entirety of admissible evidence in the record. See Fed.R.Civ.P. 56(c) (summary judgment is appropriate where "the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law").
Second, Appellant argues that because there were no objections to its Proof of Claim, it was presumptively valid and default interest should have been allowed. See Br. 18. While it is certainly true that pursuant to Federal Rule of Bankruptcy Procedure 3001(f), "[a] proof of claim executed and filed in accordance with these rules shall constitute prima facie evidence of the validity and amount of the claim, Fed. R. Bankr.Pro. 3001(f), Appellant is wrong to suggest that it "was not objected to on the basis of any evidence whatsoever."
Third, Appellant suggests that Campbell's objection concerning lack of notice was somehow not sufficient; that she should have come forward with evidence that she did not receive the Default Letter. See Br. at 19-20. Even assuming, arguendo, that Campbell should have done more than object to the lack of notice in her formal Objection—as she indisputably did—this argument has been waived because Appellant did not raise it before the bankruptcy court. See In re Lionel Corp., 29 F.3d at 92. Campbell's counsel objected to the claim for default interest both in open court and in her Objection. Thus, the Court finds that Appellant was on notice of the facts concerning the purported insufficiency of Campbell's objection. Yet, Appellant's only response to that precise objection was that the loan documents contained "no provision requiring WPR [Funding] to provide notice of default." A-175. Appellant, having chosen before the bankruptcy court to rely on the theory that the loan documents did not require notice, is not free to change that strategy on appeal.
Fourth, and similarly unavailing, is Appellant's argument that it was not made aware of the specific legal basis for Campbell's objection because she only provided a partial citation to In re Northwest Airlines Corp., No. 05-17930, 2007 WL 3376895 (Bankr.S.D.N.Y.2007), the case on which she relied. This argument borders on the absurd. In the first instance, the bankruptcy judge made specific mention at both the May 1 and July 17 Hearings of the fact that he had written on the very issue of default interest and invited counsel to "take a look" at his decision(s). A-124. Counsel would have done well to heed that advice, if for no other reason than Judge Gropper suggested that his opinion was likely favorable to appellant. See A-301 ("in order to avoid paying pre-petition interest under state law you have to make a very, very strong showing"). Secondly, while the Debtor certainly cited the case incompletely, see A-140 (citing the case thusly: "In re: Northwest Airlines Corporation (Bankr.S.D.N.Y.2007) (case no. 0517930)"), the Objection noted that it was written by Judge Gropper
Finally, the balance of Appellant's arguments concerning the June 29 Order, namely, that the foreclosure complaint provided adequate notice, is deemed waived because Appellant never made that argument to the bankruptcy court.
Appellant moved for reconsideration of the July 2014 Order pursuant to Federal Rule of Bankruptcy Procedure 9023 and Local Bankruptcy Rule 9023-1. The only remedy sought by Appellant was the opportunity to supplement the record with the Default Letter in order to prove that notice of acceleration had in fact been given. The bankruptcy court denied the motion, and was well within its rights to do so.
The standard applicable to motions for reargument is identical to that applicable to motions to alter or amend a judgment under Federal Rule of Civil Procedure 59(e). In re Bressler, No. 06-11897(AJG), 2007 WL 98493, at *1 (Bankr. S.D.N.Y. Jan. 12, 2007) (citing In re Houbigant, Inc., 190 B.R. 185, 187 (Bankr.S.D.N.Y.1996)). "The movant must show that the court overlooked controlling decisions or factual matters that might materially have influenced its earlier decision." In re Asia Global Crossing, Ltd., 332 B.R. 520, 524 (Bankr.S.D.N.Y.2005); see also Adams v. United States, 686 F.Supp. 417, 418 (S.D.N.Y.1988) ("The only proper ground on which a party may move to reargue an unambiguous order is that the court overlooked matters or controlling decisions which, had they been considered, might reasonably have altered the result reached by the court." (internal quotation
A motion for reconsideration "is generally not favored and is properly granted only upon a showing of exceptional circumstances." Marrero Pichardo v. Ashcroft, 374 F.3d 46, 55 (2d Cir.2004) (citation omitted). "A motion for reconsideration should be granted only when the [moving party] identifies `an intervening change of controlling law, the availability of new evidence, or the need to correct a clear error or prevent manifest injustice.'" Kolel Beth Yechiel Mechil of Tartikov, Inc. v. YLL Irrevocable Trust, 729 F.3d 99, 104 (2d Cir.2013) (quoting Virgin Atl. Airways, Ltd. v. Nat'l Mediation Bd., 956 F.2d 1245, 1255 (2d Cir.1992)).
A court's denial a motion for reconsideration is reviewed for abuse of discretion. Ayazi v. United Fed'n of Teachers Local 2, 487 Fed.Appx. 680, 681 (2d Cir.2012). "A court abuses its discretion when (1) its decision rests on an error of law or a clearly erroneous factual finding; or (2) cannot be found within a range of permissible decisions." Padilla v. Maersk Line, Ltd., 721 F.3d 77, 83 (2d Cir.2013), quoting Johnson ex rel. United States v. Univ. of Rochester Med. Ctr., 642 F.3d 121, 125 (2d Cir.2011). Here, Appellant is only moving on the basis that reconsideration is necessary to prevent manifest injustice. However, as the bankruptcy court aptly noted, Appellant is simply attempting to "plug the gap" in its argument below. See A-412 (quoting In re: Indu Craft Inc., No. 97-44958, 2011 WL 2619501, at *2 (Bankr.S.D.N.Y.2011)). Appellant was on notice of issue surrounding pre-petition acceleration and had "every opportunity to place all of the facts in the record prior to or during the [July 17] Hearing, or to request such an opportunity at the Hearing." A-412. In addition, Appellant conceded in its motion for reconsideration that it did not believe notice was required and thus it presented no evidence of notice prior to the issuance of the July 2014 Order. A-354. No manifest injustice can result from Appellant's chosen strategy of relying on its theory that notice of acceleration was not required. Accordingly, the bankruptcy court's decision was within the range of permissible decisions and must be affirmed.
For the reasons set forth above, the Bankruptcy Court's July 29, 2014 and January 9, 2015 Orders are AFFIRMED. The Clerk of the Court is respectfully directed to docket this decision and close the case.
It is SO ORDERED.
