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In re JXB 84 LLC

United States District Court, S.D. Florida

September 25, 2019

In re JXB 84 LLC, Debtor.



         THIS CAUSE comes before the Court on Appellant JXB 84 LLC's Notice of Appeal from the Bankruptcy Court [ECF No. 1]. The Court has reviewed the parties' briefs and the record and is otherwise fully advised. For the reasons discussed below, the Order of the United States Bankruptcy Court for the Southern District of Florida (the “Bankruptcy Court”) Granting Motion for Summary Judgment and the corresponding Summary Final Judgment is affirmed. [ECF No. 7-3, at 763-77].


         The case arises out of a foreclosure in New York state court and the underlying facts are not in dispute. In 2005, a debtor executed a promissory note and corresponding mortgage (the “Mortgage”) on a property located in Brooklyn (the “Property”). The Mortgage was later assigned to Deutsche Bank National Trust Company (“Appellee”). At a later point, the same debtor took out a second mortgage on the Property (the “Second Mortgage”), which was assigned to JXB 84 LLC's (“Appellant”) predecessor-in-interest, Mortgage Electronic Registration Systems, Inc. (“MERS”). After the debtor defaulted on the Mortgage, Appellee subsequently brought a foreclosure action against the debtor and numerous other defendants, including MERS, in the Kings County Supreme Court (the “State Court”). Appellee filed a Summons, Complaint, and a Notice of Pendency with the State Court. The Complaint was timely served on all defendants. No. response was ever filed.

         Over a year after filing the Complaint, Appellee moved for a default judgment and an order of reference against all defendants, including MERS. The State Court granted that motion and “ORDERED, that a default judgment in favor of the [Appellee] be granted as to the claim described in the [Appellee's Foreclosure] Complaint [].” [ECF No. 7-3, at 508-09, ¶ 10]. It is undisputed that Appellee complied with all procedural post-default obligations.

         Appellant-who by that point had succeeded MERS on the Second Mortgage-then appeared in the State Court and moved to dismiss the Complaint and vacate the default. Appellant's sole argument before the State Court was that Appellee's motion for default was not timely. The State Court denied Appellant's motions and granted Appellee's motion for judgment of foreclosure and sale. Appellee again complied with its service obligations on all defendants. Appellant did not reassert its motions or otherwise challenge the State Court foreclosure order; nor did Appellant appeal the foreclosure judgment. Accordingly, as of July 13, 2017, the State Court judgment was final. On September 28, 2017, the scheduled date for the sale of the Property, Appellant notified Appellee that Appellant had filed for bankruptcy and the sale was canceled.

         Because it was Appellant's primary asset, title to the Property was immediately disputed in the bankruptcy proceeding. Appellant sold the Property (to itself) at a sale on October 12, 2017. Appellant then brought an adversary proceeding in the Bankruptcy Court against Appellee on January 17, 2018. In the Adversary Complaint, Appellant asserted three Counts: (1) a declaratory count to determine the extent, validity, and priority of lien (in other words, whether Appellee's original foreclosure judgment was valid); (2) for avoidance of Appellant's security interest because Appellee's Mortgage did not properly attach to Appellant's claim on the title, and; (3) to quiet title against Appellee. Each action would have the effect of overturning the State Court judgment of foreclosure by prioritizing Appellant's lien. On August 31, 2018, the Bankruptcy Court granted summary judgment in favor of Appellee and against Appellant. [ECF No. 7-3, at 763-74]. This appeal followed.


         The district court has jurisdiction to hear appeals from final judgments and orders of bankruptcy courts pursuant to 28 U.S.C. § 158(a). “In reviewing bankruptcy court judgments, a district court functions as an appellate court.” Rush v. JLJ Inc. (In re JLJ Inc.), 988 F.2d 1112, 1116 (11th Cir. 1993). The district court reviews the bankruptcy court's findings of fact for clear error and its conclusions of law de novo, and it cannot make independent factual findings. See Torrens v. Hood (In re Hood), 727 F.3d 1360, 1363 (11th Cir. 2013); Englander v. Mills (In re Englander), 95 F.3d 1028, 1030 (11th Cir. 1996). In a bankruptcy appeal, “both the district court and [the Eleventh Circuit] review a bankruptcy court's entry of summary judgment de novo.” In re Optical Techs., Inc., 246 F.3d 1332, 1335 (11th Cir. 2001) (collecting cases).


         On appeal, Appellant argues that the Bankruptcy Court erred when it found (1) no genuine issues of material fact, (2) that Rooker-Feldman bars entry of judgment in Appellant's favor, and (3) that res judicata and collateral estoppel preclude the instant suit. None hold water.[1]

         I. No. Genuine Issue of Material Fact

         The Court first addresses whether any genuine issues of material fact exist here. The same standards for summary judgment apply before this Court as they do before the Bankruptcy Court. See Fed. R. Bankr. P. 7056. That is to say, summary judgment, pursuant to Federal Rule of Civil Procedure 56(a), “is appropriate only if ‘the movant shows that there is no genuine issue as to any material fact and the movant is entitled to judgment as a matter of law.'” Tolan v. Cotton, 134 S.Ct. 1861, 1866 (2014) (per curiam) (quoting Fed.R.Civ.P. 56(a)). “By its very terms, this standard provides that the mere existence of some alleged factual dispute between the parties will not defeat an otherwise properly supported motion for summary judgment; the requirement is that there be no genuine issue of material fact.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247-48 (1986). An issue is “genuine” when a reasonable trier of fact, viewing all of the record evidence, could rationally find in favor of the nonmoving party in light of his burden of proof. Harrison v. Culliver, 746 F.3d 1288, 1298 (11th Cir. 2014). And a fact is “material” if, “under the applicable substantive law, it might affect the outcome of the case.” Hickson Corp. v. N. Crossarm Co., 357 F.3d 1256, 1259-60 (11th Cir. 2004). The Court must construe the evidence in the light most favorable to the nonmoving party and draw all reasonable inferences in that party's favor. SEC v. Monterosso, 756 F.3d 1326, 1333 (11th Cir. 2014). However, to prevail on a motion for summary judgment, “the nonmoving party must offer more than a mere scintilla of evidence for its position; indeed, the nonmoving party must make a showing sufficient to permit the jury to reasonably find on its behalf.” Urquilla-Diaz v. Kaplan Univ., 780 F.3d 1039, 1050 (11th Cir. 2015).

         Appellant has failed to show that any genuine issues of material fact exist here. First, Appellant argues that its declarations establish a question of whether the Notice of Pendency lapsed between property purchases, such that Appellant's interest in the title was protected at the time of foreclosure. Although at first blush persuasive, the proper time to have raised this was before the State Court. Appellant does not dispute that it was on notice of the foreclosure action and thus could have raised this argument there. See infra, at 6-10. But Appellant did not. Accordingly, the potential lapse of the Notice of Pendency does not present a bar to summary judgment. So too fail the issues relating to ...

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