Jester v. Wells Fargo Bank , 656 F. App'x 425 ( 2016 )

FILED
United States Court of Appeals
UNITED STATES COURT OF APPEALS Tenth Circuit
FOR THE TENTH CIRCUIT July 25, 2016
_________________________________
Elisabeth A. Shumaker
Clerk of Court
In re: TIMMY DEWAYNE JESTER,
a/k/a Tim D. Jester; REBECCA JO
JESTER, a/k/a Becky Jo Jester, f/k/a
Rebecca Jo Hillsberry, f/k/a Becky Jo
Hillsberry,
Debtors.
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TIMMY DEWAYNE JESTER;
REBECCA JO JESTER,
Appellants,
No. 15-7079
v. (BAP No. 15-002-EO)
(Bankruptcy Appellate Panel)
WELLS FARGO BANK N.A.,
Appellee.
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ORDER AND JUDGMENT*
_________________________________
Before HARTZ, HOLMES, and McHUGH, Circuit Judges.
_________________________________
*
After examining the briefs and appellate record, this panel has determined
unanimously that oral argument would not materially assist in the determination of
this appeal. See Fed. R. App. P. 34(a)(2); 10th Cir. R. 34.1(G). The case is therefore
ordered submitted without oral argument. This order and judgment is not binding
precedent, except under the doctrines of law of the case, res judicata, and collateral
estoppel. It may be cited, however, for its persuasive value consistent with
Fed. R. App. P. 32.1 and 10th Cir. R. 32.1.
Timmy Jester, proceeding without the assistance of counsel, appeals from the
Bankruptcy Appellate Panel’s affirmance of the bankruptcy court’s denial of their
motion to reopen their bankruptcy case. Exercising jurisdiction under 28 U.S.C.
§§ 158(d)(1) & 1291, we affirm.
On February 23, 2011, Wells Fargo initiated proceedings in state court against
Mr. Jester and his now ex-wife to foreclose on their residence. Two months later, the
Jesters filed a no-asset bankruptcy petition under Chapter 7 of the bankruptcy code.
They listed their real property as exempt and received a discharge on July 27, 2011.
Thereafter, Mr. Jester and Wells Fargo entered into a loan modification agreement,
wherein he acknowledged Wells Fargo’s security interest in the property was still
valid and agreed that should he fail to pay his monthly payment, he “shall surrender
the Property to Lender.” R. at 366. Wells Fargo then dismissed the state foreclosure
action on November 3.
Almost immediately, Mr. Jester failed to make payments under the new loan
agreement. As a result, Wells Fargo filed another foreclosure action in state court on
July 6, 2012. The state court granted summary judgment in favor of Wells Fargo,
over Mr. Jester’s objection, on October 8, 2014. Three weeks later, Mr. Jester moved
to reopen the Jesters’ bankruptcy case so that he could commence an adversary
proceeding in the bankruptcy court against Wells Fargo, his previous counsel, and
Wells Fargo’s counsel. He alleged that, inter alia, his debt to Wells Fargo was
discharged in bankruptcy and Wells Fargo’s attempt to foreclose on the property
post-discharge violated the automatic stay and discharge injunction. He asked the
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bankruptcy court to hold Wells Fargo in contempt and assess punitive damages
against it. The court held a hearing and denied the motion, finding that there was no
violation of the stay or discharge and that it had no authority to review the state
court’s final judgment or otherwise grant the relief requested. Reviewing the
bankruptcy court’s denial for an abuse of discretion, the Bankruptcy Appellate Panel
(BAP) affirmed.
On appeal to this court, Mr. Jester argues that the bankruptcy court abused its
discretion in denying the motion to reopen. Regarding the automatic stay and
discharge injunction, Mr. Jester contends that Wells Fargo violated the stay by not
dismissing the prepetition state-court foreclosure suit upon filing of the bankruptcy
petition and that the entire process of loan modification was violative of the stay and
discharge. The remainder of Mr. Jester’s claims on appeal strike at the other relief
that the bankruptcy court said it was without authority to grant: (1) Wells Fargo
failed to agree to reaffirmation during the bankruptcy proceedings, which rendered
the loan modification invalid; (2) Wells Fargo and its counsel committed various
breaches of the loan modification contract; (3) it was impossible for the Jesters to
default on the loan because the debt was discharged after bankruptcy; (4) Wells
Fargo did not prove it had a valid lien on the property and thus it lacked standing to
foreclose; (5) Wells Fargo violated the Fair Debt Collection Practices Act (FDCPA).
“A case may be reopened in the court in which such case was closed to
administer assets, to accord relief to the debtor, or for other cause.” 11 U.S.C.
§ 350(b). The bankruptcy court has “broad discretion in deciding whether to reopen
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the case.” Watson v. Parker (In re Parker), 264 B.R. 685, 691 (10th Cir. BAP 2001).
We review the denial of a motion to reopen for an abuse of discretion. See Woods v.
Kenan (In re Woods), 173 F.3d 770, 778 (10th Cir. 1999). We independently review
the bankruptcy court’s decision and give no deference to the BAP’s rulings (though
they may be persuasive). See In re Schupbach Invs., LLC, 808 F.3d 1215, 1219
(10th Cir. 2015).
We affirm. The bankruptcy court did not abuse its discretion in denying the
motion to reopen the bankruptcy proceedings because there was no violation of the
automatic stay or the discharge injunction. As to whether Wells Fargo violated the
automatic stay by not dismissing the state-court case after Mr. Jester filed the
bankruptcy petition, the Jesters do not allege that Wells Fargo continued its
prosecution of the case during the pendency of bankruptcy proceedings, which is the
only activity the automatic stay prohibits. See Eskanos & Adler, P.C. v. Leetien,
309 F.3d 1210, 1214 (9th Cir. 2002) (allowing a stay of non-bankruptcy proceedings
to avoid violating the automatic stay). Further, because the loan modification
agreement was executed post-discharge and did not attempt to make the Jesters
personally liable for the discharged debt, it was not violative of the stay or discharge
injunction. See Chandler Bank of Lyons v. Ray, 804 F.2d 577, 579 (10th Cir. 1986)
(per curiam) (discharge injunction “does not preclude in rem actions by secured
creditors.”); Kline v. Deutsche Bank Nat’l Trust Co. (In re Kline), 472 B.R. 98,
103–04 (10th Cir. BAP 2012) (actions taken after discharge do not constitute stay
violations).
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Nor did the bankruptcy court err in holding it could not provide Mr. Jester the
other relief he sought. Mr. Jester demonstrates a fundamental misunderstanding of
both what happened at the conclusion of the bankruptcy proceeding and what claims
can be redressed by the bankruptcy court. He fails to appreciate the difference
between the discharge of their personal obligation on the loan secured by the
property and Wells Fargo’s continued interest in the property via the security
instrument. The former was discharged, the latter was not. See Johnson v. Home
State Bank, 501 U.S. 78, 84 (1991) (“[A] bankruptcy discharge extinguishes only one
mode of enforcing a claim — namely, an action against the debtor in personam —
while leaving intact another — namely, an action against the debtor in rem.”).
Consequently, the parties’ failure to reach a reaffirmation agreement in the
bankruptcy proceedings had no effect on Wells Fargo’s ability to foreclose on the
property, with or without loan modification. Regardless, any claims of breach of the
loan modification contract or lack of standing to foreclose are not redressable by the
bankruptcy court, which lacks jurisdiction to review the state-court foreclosure
judgment. See Exxon Mobil Corp. v. Saudi Basic Indus. Corp., 544 U.S. 280, 284–86
(2005) (barring federal court review of prior state-court judgments and claims
inextricably intertwined with those judgements). Finally, Mr. Jester did not even
raise his FDCPA claim before the bankruptcy court, thus waiving that argument.
Turner v. Pub. Serv. Co. of Colo., 563 F.3d 1136, 143 (10th Cir. 2009) (“Absent
extraordinary circumstances, we will not consider arguments raised for the first time
on appeal.”).
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Thus, there is no basis for us to find that the bankruptcy court erred in denying
the motion to reopen. Because the bankruptcy court acted within its discretion, we
affirm.
Entered for the Court
Jerome A. Holmes
Circuit Judge
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