Litton Loan Servicing, L.P. v. Dennis Schubert
- Summarized by Benjamin Fischer , U.S. Bankruptcy Court, District of New Jersey
- 8 months 1 week ago
- Case Type:
- Consumer
- Case Status:
- Affirmed
- Citation:
- 21-3969, 21-3983 (6th Circuit, Mar 28,2023) Not Published
- Tag(s):
-
- Ruling:
- The Sixth Circuit affirmed an order of the bankruptcy court, holding that several mortgage lenders had standing to appeal but failed to meet the person-aggrieved test because they lacked a direct financial stake in the appeal’s outcome—although the court all but said that it would have abandoned the person-aggrieved test were it asked. The court further held that the bankruptcy court had jurisdiction to determine which claims belong to the estate, and that the lenders satisfied the party-in interest test due to their practical stake in maintaining the settlement of claims the bankruptcy.
- Procedural context:
- Two debtors—Dennis and Sue Schubert—exited bankruptcy in 2006. They filed a lawsuit in Ohio state court for breach of contract against Litton Loan Servicing, L.P., JPMorgan Chase Bank, N.A., and Ocwen Financial Corporation (collectively, “the lenders”). The state court proceeding was stayed while the Schuberts reopened their bankruptcy case in the United States Bankruptcy Court for the Northern District of Ohio. Their motion to reopen was granted, and the lenders filed an adversary proceeding in that case seeking an order declaring that the claim belonged to the estate, as well as an injunction barring the Schuberts from pursuing their Ohio suit. The Schuberts moved to dismiss. The bankruptcy court denied their motion, abstained from issuing an injunction and instead ordered the trustee to abandon the Schuberts’ claim. The parties cross-appealed, and the district court affirmed. The parties cross-appealed again, and the Sixth Circuit affirmed both the bankruptcy court’s abandonment order and the denial of their motion to dismiss.
- Facts:
- Two debtors—Dennis and Sue Schubert—were in bankruptcy. While they were in bankruptcy, Litton Loan Servicing, L.P., JPMorgan Chase Bank, N.A., and Ocwen Financial Corporation (collectively, “the lenders”) allegedly breached the Schuberts’ mortgage agreement by collecting more late fees from them than allowed. However, the Schuberts only learned of this breach nearly a decade later. Upon this realization, the Schuberts filed a breach of contract claim in Ohio court, but the lenders argued that the claim belonged to the bankruptcy estate because . The state court proceeding was stayed while the Schuberts reopened the case in bankruptcy court. The lenders filed an adversary proceeding in that case seeking an order declaring that the claim belonged to the estate because it arose during the bankruptcy case, as well as an injunction barring the Schuberts from pursuing their Ohio suit. The Schuberts moved to dismiss. The bankruptcy court denied their motion, abstained from issuing an injunction and instead ordered the trustee to abandon the Schuberts’ claim.
- Judge(s):
- Amul Thapar; Karen Nelson Moore; and Joan Larsen
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