In re Laxmi Sarah Sundaram

Case Type:
Case Status:
20-9008 (1st Circuit, Aug 13,2021) Published
Affirming the Bankruptcy Appellate Panel for the First Circuit (BAP), the U.S. Court of Appeals for the First Circuit (Circuit) reaffirmed the general jurisdictional mootness rule--when an issue involves matters pertaining to a debtor's estate's attempted reorganization, an appeal is moot because no live case or controversy persists--and ruled two possible exceptions--the appellate issue was "merely ancillary" to her case, and that the trustee's disbursing of insurance-settlement funds was erroneous is statutory construction question--inapposite due to these funds pre-dismissal distribution.
Procedural context:
In the course of the second chapter 13 case of Laxmi Sarah Sundaram, both the DR and the appellant, originally filed (like the first) in the United States Bankruptcy Court for the District of Massachusetts but later transferred to the United States Bankruptcy Court for the District of Rhode Island (BC), the DR paid over funds obtained from United Property Casualty Insurance Company (United) for damage to her home to John Boyajian (TR), the chapter 13 trustee, and subsequently held in escrow pursuant to an order of the BC. Months later, Briry, LLC (Briry) filed a motion in the bankruptcy case, seeking payment to it of these insurance funds based on a provision in the mortgage documents stipulating that any home-insurance proceeds be paid directly to Briry should the relevant promissory note (Note) be in default. The BC granted this motion, having received no objection from the DR. Subsequently, rather than moving for a stay, the DR moved for reconsideration. Even as this motion was pending, the DR filed a motion to dismiss her chapter 13 case. A little bit more than three weeks later, the BC held a hearing on the DR's motion for reconsideration, the DR's motion to dismiss still pending. As Briry then informed the BC, the TR had already released the funds to it, and it had promptly--and much before the hearing--applied the funds to reduce the balance due on the Note. The BC denied the motion for reconsideration at the end of this hearing and dismissed the DR's bankruptcy case at the day's end. With the case's end, no repayment plan was ever confirmed. The DR appealed to the BAP. The DR specifically challenged the BC's order releasing the insurance funds to Briry and its denial of the DR's motion for reconsideration. The DR, however, let the dismissal order lie unmolested. Upon review of the DR's appellate filings, the BAP order the DR to show cause as to why her appeal had not been rendered moot by this unchallenged order. In response, the DR contended that her type of appeal had not been rendered moot by dismissal because it did not concern the "reorganization of [her] estate." Concluding otherwise, the BAP dismissed the appeal as moot in an unpublished judgment.
On July 5, 2016, Briry made a commercial loan to Global Investments/India Portfolio, Inc. (Global), a corporation wholly owned by the DR. To memorialize this loan, the DR, on behalf of Global, executed the interest-bearing promissory Note, its facial amount then standing at $120,000. Importantly, the DR not only personally guaranteed payment but acceded to the Note being secured by a mortgage on her home in North Providence, Rhode Island (Property), a piece of real property whose title, fittingly enough, was then in Global's name. By its terms, the Note was payable in installments, but contained a balloon-payment provision making the entire balance payable at the noteholder's option upon the earlier of the maturity date of January 7, 2017, or the transfer of the Property. Things went haywire in January 2017, and got only weirder thereafter. On January 6, 2017, only one day before the Note's scheduled maturity, the DR executed a quitclaim deed purporting to transfer title of the Property from Global to herself. Because the DR undertook this transfer without Briry's knowledge or consent, she had defaulted under the Note. A surprisingly (or perhaps not) lengthy amount of time later--on October 25, 2017--Briry notified the DR of this default and demanded, as it was entitled, to the payment of the outstanding balance, plus accrued interest, costs, and attorneys' fees. The DR opted for silence. Less than three months later (on January 18, 2018), a burst water pipe rendered the Property wholly uninhabitable. Again without informing Briry, the DR submitted a claim for the resulting damage to United. Crucially, according to the relevant policy documents, the DR was named as an insured party--and Briry, "qua mortgagee," was named as an additional party in interest. When the DR's insurance claim was settled, United initially issued a draft in the amount of $ 62,323.90 for interior structural damage, payable to the appellant, Briry, and her chosen public adjuster. Not negotiated, this draft grew stale in the possession of the DR's lawyer. On July 12, 2019, United issued a replacement draft, making it payable to the DR, the DR's lawyer, and Briry's lawyer. It was roughly three months later -- September 2019 -- that the bankruptcy system got involved. First, the DR filed a chapter 13 case in Massachusetts on September 3, 2019; her initial petition was dismissed without prejudice. She filed a second on September 9, 2019. Sometime after, her case was transferred to the BC.
O. Rogeriee Thompson; Bruce M. Selya; and William J. Kayatta Jr.

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