CitiMortgage, Inc. v. Jerome Davis

Case Type:
Case Status:
21-1084, 21-1101, 21-1446 (7th Circuit, Dec 10,2021) Published
Affirming the U.S. District and Bankruptcy Courts for the Northern District of Illinois (DC and BC), the U.S. Court of Appeals for the Seventh Circuit (Circuit) found: (1) it lacked jurisdiction to review the BC's remand of the foreclosure proceedings began by CitiMortgage Inc. (Citi) against the property of a married duo (DRs); (2) the spousal party to each underlying suit had waived any argument as to the BC's attorney fee and costs award, having not appealed this to the DC; and (3) the DC properly dismissed his non-bankruptcy suit against Citi based on BC's un-appealed substantive ruling.
Procedural context:
The DRs, Jerome M. Davis (Jerome) and Lynne Ternoir-Davis (Lynne), defaulted on their mortgage loan to Citi and filed for bankruptcy in 2011. (As the Circuit explained, "Jerome ... is a party in all the underlying suits," but Lynne ... is a party only in the foreclosure proceeding"; "[b]oth individuals executed the mortgage at issue." The Circuit thus used "Davis" to refer to the DRs collectively. This summary uses DRs to refer to both, even though Jerome appears to have been the only one named on all pleadings.) At least Jerome, if not Jerome and Lynn, eventually received a discharge in 2018. By then, the BC had informed the DRs that any future discharge would not extend to the debt the DRs owed to Citi in 2016 when it reopened the DRs' mistakenly closed case. In the course of the adversary proceeding later initiated by the DRs so as to nullify Citi's debt and security interest, it did so twice more when it denied Citi's motion for summary judgment in 2018 and granted Citi's motion to dismiss in 2019. Rather than appealing this final decision, the DRs attempted to collaterally attack it in two ways: (1) Jerome attempted to remove Citi's pending foreclosure action to the BC; and (2) he filed an entirely separate suit against Citi in the DC. The DRs lost in each of those proceedings. The DRs, still in the sole form of Jerome, timely appealed these decisions to the Circuit, but only after (1) the DRs had inexplicably neglected to appeal the BC's final order calculating the award amount to the DC (and after it had affirmed the remand), and (2) the deadline to appeal the BC's dismissal of their adversary proceeding had passed. Partly due to the age and complexity of the parties' dispute -- the adversary proceeding alone "spanned nearly five years, 250 docket entries, and scores of hearings" -- though the DRs technically appealed only two opinions/rulings, the DRs thus effectively challenged three determinations: (1) to remand, issued by the BC, appealed by the DRs, and affirmed by the DC; (2) to award attorney fees and costs for improper removal, issued by the BC, but not appealed to the DC by the DRs; and (3) to dismiss the DRs' non-bankruptcy lawsuit against Citi, issued by the DC, on the basis of the BC's conclusion that the DRs' discharge did not affect their mortgage debt or impede Citi's foreclosure efforts, of which the district court took judicial notice. As to (1), in perhaps their most interesting argument, the DRs invoked a rarely cited decision to justify the Circuit's exercise of jurisdiction: City of Waco v. United States Fidelity & Guaranty Co., 293 U.S. 140, 55 S. Ct. 6, 79 L. Ed. 244 (1934).
For years, Citi and the DRs had been battling over the former's attempt to foreclose on the mortgage the couple had taken out on their residence in 2005. At one point, the DRs found themselves unable to make payments to Citi, the loan holder as successor in interest to the original mortgagee, ABN Amro Mortgage Group, Inc., and therefore turned to chapter 13 in 2011. Thereafter, Citi filed a proof of claim for $478,238.90, secured by the DRs' residence, and the DRs' chapter 13 bankruptcy plan was approved in 2012. Among other matters, this plan incorporated an agreement between the parties that conditioned the automatic stay on the DRs making monthly mortgage payments to Citi, along with scheduled payments to cure a post-petition arrearage of $23,402.24 and a pre-petition arrearage of $78,640.90. If the DRs ever defaulted on the payments to Citi, it further provided, the automatic stay would automatically lift, and Citi could foreclose. This appeal traced its origins to the DRs' 2014 default. In response to this failure, Citi withdrew its proof of claim and notified the BC that the stay had terminated. The DRs then challenged Citi's debt and security interest by filing an adversary proceeding that spanned five years; while that proceeding was pending, the DRs completed the chapter 13 plan, ultimately receiving a bankruptcy discharge in 2018. One year later, the BC granted Citi's motion to dismiss on the basis that the parties were involved in "a two-party dispute under state law which does not implicate bankruptcy rights." After the BC dismissed the adversary proceeding, the DRs let the 14-day window to appeal elapse without action. In the wake of this dismissal, Citi filed a foreclosure complaint against the DRs in Illinois state court. The DRs removed the action, but when the BC asked the DRs to respond to Citi's remand motion, the DRs did nothing. Accordingly, the BC remanded and, despite finding itself to lack jurisdiction to reach the merits, awarded fees and costs based on the DRs' unreasonable action. The DRs appealed the BC's remand order to the DC, but the DRs failed to appeal the BC's final order calculating the award amount. The DC affirmed the remand order. In the midst of the aforementioned proceeding, the DRs sued Citi in the DC, alleging violations of the Fair Debt Collection Practices Act, the Illinois Consumer Fraud and Deceptive Practices Act, and the 2018 bankruptcy discharge injunction. All three of the DRs' claims centered on his contention that the 2018 discharge really did wipe away his mortgage, the DC noted. Yet, it continued, the BC had already held the opposite when dismissing Davis's adversary proceeding, among other occasions. Taking judicial notice of this record, the DC granted Citi's motion to dismiss with prejudice.
Diane S. Sykes; Joel Flaum; and Michael B. Brennan

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