Although a bank was never given notice that the debtor was challenging the enforceability of its mortgage, the Eleventh Circuit held the mortgage invalid because the bank did not promptly move for reconsideration of the order that voided the mortgage lien without notice.
In other words, the lack of due process is not a claim that persists forever, according to a non-precedential opinion on Dec. 11.
The facts in the per curiam opinion were complicated but boil down to the following: The chapter 13 debtor failed to give notice to the bank of an objection to the validity of the bank’s mortgage. It appeared (incorrectly) that the bank had defaulted, so the bankruptcy court entered an order declaring that the bank only had an unsecured claim for about $500,000.
The bank did not dispute that it received notice of the order voiding the mortgage lien and never filed a motion for reconsideration.
In total, the bank did receive five notices bearing on its claim, the plan or the debtor’s discharge. About 18 months after entry of the order declaring the mortgage to be unenforceable, the bank took its first action in the case by opposing the debtor’s motion to have the mortgage deemed extinguished or satisfied on the public records.
Although the debtor did not give the bank “‘perfect’ service of every document that he was required to send to his creditor,” the appeals court said the bank “was nonetheless provided with notice reasonably calculated under all the circumstances to apprise [the bank] that its status as a secured creditor was being challenged.”
While the debtor’s failure to provide service “violated a procedural rule,” the appeals court said that the bank’s “due process rights were not violated when the bankruptcy court invalidated its mortgage lien” later in the case.
By the time the bank indirectly challenged the order that originally extinguished its lien without notice, the bankruptcy court had already confirmed the debtor’s plan relegating the bank to an unsecured claim. As support for its holding, the appeals court relied on United Student Aid Funds Inc. v. Espinosa, 559 U.S. 260(2010), to say that the bank should have sought reconsideration or appealed when it first received notice of the order holding the mortgage lien invalid.
The opinion was handed down on the same day as Title Max v. Wilber (In re Wilber), 16-17468 (11th Cir. Dec. 11, 2017), which we reported on yesterday. In Title Max, the majority opinion by a different Eleventh Circuit panel held in substance that a final order of confirmation was not binding on a secured creditor because the creditor had filed an unresolved motion to declare what was or was not property of the estate.
Unlike the majority opinion in Title Max, the per curiam panel cited Section 1327(a) for the proposition that a confirmed plan binds creditors, whether or not they have objected to, accepted or rejected the plan. To read ABI’s discussion of Title Max, click here.
Under Eleventh Circuit rules, the non-precedential opinion is not binding authority but “may be cited as persuasive authority.”