Smith v. Atlantic Southern Bank (In re Smith)

Citation:
Smith v. Atlantic Southern Bank (In re Smith), Case No. 12-12973 (11th Cir. June 28, 2013) (unpublished) (per curiam)
Tag(s):
Ruling:
AFFIRMING the District Court, the 11th Circuit held that creditor had both statutory and constitutional standing to seek (i) relief from the automatic stay to institute foreclosure proceedings and (ii) dismissal of adversary proceeding. Held that res judicata prevented the debtors from re-litigating issues regarding creditor's interest in real property raised in the dismissed adversary proceeding.
Procedural context:
Appeal of the District Court's order affirming the Bankruptcy Court: (i) dismissing with prejudice debtors' adversary proceeding seeking damages for violation of the automatic stay and (ii) denying debtors' motion to reconsider the allowance of creditor's claim.
Facts:
In 2007, the Smiths filed a voluntary bankruptcy petition under Chapter 11 of the Bankruptcy Code. Atlantic Southern Bank filed two proofs of claim, claiming an obligation secured by the Debtors' real property. Atlantic initially sought relief from the stay; the bankruptcy court denied the relief, but provided that stay relief would be automatically granted if the debtors failed to make certain adequate protection payments ordered by the Court. The debtors failed to make the adequate protection payments and, following conversion of the case from chapter 11 to chapter 7 that same month, stay relief was granted. Atlantic then instituted foreclosure proceedings. The debtors sought to vacate the stay relief order arguing that Atlantic had no standing because it did not have an interest in the real property subject to the foreclosure, in that the note and mortgage were not properly assigned to Atlantic. The debtors sought damages for violation of the stay. The bankruptcy court determined that the relief requested by the debtors had to be adjudicated in an adversary proceeding. A summons was issued three times in the adversary and the debtors failed to serve Atlantic even though the bankruptcy court ordered them to complete service. Atlantic filed a motion to dismiss the adversary asserting that it was prejudiced by the failure of the debtors to serve the summons. The bankrptcy court dismissed the adversary. Thereafter, the debtors filed a motion to reconsider the allowance of the claims of Atlantic, arguing again that Atlantic had no interest in the real property. Atlantic filed a motion to dismiss based on res judicata. The bankruptcy court agreed and dismissed the motion. The debtors appealed both decisions to the district court. The district court agreed with the dismissal of the adversary in light of the debtors' actions and affirmed the dismissal of the motion to reconsider finding the motion was barred by res judicata.
Judge(s):
Carnes, Barkett, and Fay

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