NOT PRECEDENTIAL

UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT

_____________

No. 14

- 3923

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IN RE: NEW CENTURY TRS HOLDING, INC., et al.,
Debtors

ALAN M. JACOBS, IN HIS CAPACITY AS LIQUIDATING TRUSTEE

TO NEW CENTURY LIQUIDAT ION TRUST, Appellant

On Appeal from the United States District Court

for the District of Delaware (District Court No.: 1

- 13

- cv

- 01719) District Judge: Honorable Sue L. Robinson

Argued on July 16, 2015

( F iled: August 10, 2015 )

Before: HARDIMAN, VANASKIE, and RENDELL, Circuit Judges

Ralph N. White (ARGUED) Molly S. White
5948 Doraville Drive Port Orange, FL 32127

Pro Se Appellees2

Michael D. DeBaecke, Esq. Bonnie G. Fatell, Esq. Alan M. Root, Esq.
Blank Rome
1201 Market Street
Suite 800 Wilmington, DE 19801

Mark S. Indelicato, Esq. (ARGUED)
Hahn & Hessen
488 Madison Avenue New York, NY 10022

Counsel for Appellant

Irv Ackelsberg, Esq. (ARGUED) Langer, Grogan & Diver
1717 Arch Street Suite 4130, The Bell Atlantic Tower Philadelphia, PA 19103

Counsel for Amicus

O P I N I O N *

RENDELL

, Circuit Judge :

The parties to this appeal seek a ruling as to whether the District Court properly

concluded that the Bankruptcy Court erred in determining that the notice of the bar date

by publication given to unknown creditors of the Debtors comported with due process.

Appellees, Molly S. White and Ralph N. White (the “Whites” or “Appellees”), and

amicus urge that we should uphold the District Court. At the same time, they argue that

* This disposition is not an opinion of the full Court and pursuant to I.O.P. 5.7 does not constitute binding precedent.3

the notice to Appellees was unconstitutional beca use one of the Debtors and Appellees

were parties to a mortgage loan that Appellees contend was fraudulent and Appellees

were clearly known to the Debtors and thus entitled to actual notice. Appellees’ claims

against the Debtors were set forth in a late

- f iled proof of claim. Appellees contest the

notification aspect of the claim process and have also filed an adversary proceeding in the

Bankruptcy Court (the “Adversary Proceeding”), which is currently pending. 1

In connection with a motion to dismiss in the Adversary Proceeding, the

Bankruptcy Court issued an opinion that did not dismiss the case entirely, in which the

Bankruptcy Judge ruled that Appellees were unknown creditors. 2 Appellees and amicus

1 The Adversary Proceeding, White v. New Century TRS Holdings, Inc. , No. 10

- 55357 (Bankr. D. Del. filed No v. 15, 2010), was brought by the Whites against the Debtors and included claims for monetary damages and for rescission and declaratory relief regarding the Whites’ ongoing mortgage obligation based on fraud and deceptive practices. The Bankruptcy Court g ranted in part and denied in part the Trustee’s motion to dismiss the Whites’ adversary action. The Bankruptcy Court granted the dismissal of the Whites’ nonmonetary claims for rescission and declaratory relief for lack of subject matter jurisdiction. Th e Trustee also argued that the Bar Date Order barred the Whites’ monetary claims. The Bankruptcy Court denied this portion of the motion in a two

- part ruling: First, the Bankruptcy Court ruled that the Whites were properly classified as “unknown creditor s.” Second, the Bankruptcy Court declined to dismiss the monetary claims on the ground that there was insufficient information to determine whether the publication satisfied due process. The Whites have filed two timely motions for
reconsideration of the dismissal decision, addressed to issues other than the “unknown” creditor ruling. The second such motion remains pending.

2 The Bankruptcy Judge was presented with the Whites’ argument that they were known creditors because their identity was ascertaina ble from the Debtors’ books and records. The Bankruptcy Judge disagreed with that argument because the Whites’ names and address in the Debtors’ loan files only suggested that they were known customers, not
known creditors . Because the Whites did not all ege that, at the time of the Bar Date Notice, a review of the Debtors’ records would have revealed any potential claims held by the Whites, the Bankruptcy Court concluded that the Whites were unknown creditors at the time the Bar Date Notice was served. ( App. 132

- 33.)4

challenge that ruling, urging that the Debtors knew t hat the borrowers were potential

claimants in light of the subprime nature of the loans and the fact that at least one class

action was filed alleging bait

- and

- switch tactics vis

- à

- vis interest rates. See Grimes v.

New Century Mortg. Corp. , 340 F.3d 1007 (9th Cir. 2003). 3 Appellees have made known

their intention to appeal the ruling that they were unknown creditors once the Adversary

Proceeding is finally adjudicated. 4 That may not happen, however, until we rule as to the

propriety of notice by publicat ion, because the Bankruptcy Judge indicated in his opinion

that he will defer decision as to the dismissal of the Adversary Proceeding until the notice

issue is resolved. 5

3 The Bankruptcy Court appointed an Examiner to investigate matters related to New Century. The Examiner’s report refers explicitly to these tactics: “A senior New Century officer noted in 2004 that borrowers would experience ‘sticker shoc k’ after the teaser rates expired.” Final Report of Michael J. Missal, Bankruptcy Court Examiner, at 3, In re: New Century TRS Holdings, Inc. , No. 07

- 10416 (Bankr. D. Del. Mar. 26, 2008), ECF
No. 5518.

4 In addition, at oral argument, the Whites pointed to the Debtors’ motion requesting the establishment of the Bar Date as only requesting publication notice “to provide notice of
the Bar Dates to entities whose names and addresses are unknown to the Debtors.” (App. 52 ¶ 19 (emphasis added).) The Whites c onstrue this request as the Debtors conceding that actual notice was required to entities whose names and addresses were known to the Debtors. The Whites urge that their mortgage contracts provided the Debtors with this information, and therefore actual n otice was required.

5 The Bankruptcy Judge’s opinion stated, in relevant part:

Although the Debtors arguably complied with the stated minimum requirements of the Bar Date Order, without a more fully developed factual record, I am unable to determine whet her the publication notice was reasonably calculated to provide notice to consumer mortgagors like the Whites. At this stage in the proceeding, the Trustee has not met his burden of proving that publication in one national edition newspaper and one local5

Clearly, if the Whites were unknown creditors and the notice was sufficient to

mee t due process, the Whites will be barred from pursuing their claim and the Adversary

Proceeding will be dismissed by the Bankruptcy Judge; if insufficient, the Adversary

Proceeding, based on fraud, will proceed. In light of the vocal arguments of the Whit es

urging that they were known creditors entitled to actual notice, their standing to appeal to

the District Court to challenge the notice to unknown creditors

— and, as luck would have

it, they were the only parties to appeal

— is subject to question. And if they were known

creditors, and we issued an opinion regarding the notice, it would be advisory. Review of

the Bankruptcy Court’s ruling regarding the Whites’ status is stymied because the

Bankruptcy Judge is awaiting the very ruling we question whether w e can make based on

the standing issue. Thus, this appeal presents unique practical, procedural, as well as

legal issues.

A court has the duty to determine the standing of the parties before it. “[F]ederal

appellate courts have a bedrock obligation to e xamine both their own subject matter

jurisdiction and that of the district courts[, and] . . . standing is ‘perhaps the most

important’ of jurisdictional doctrines.” Blunt v. Lower Merion Sch. Dist. , 767 F.3d 247,

280 (3d Cir. 2014) (quoting Pub. Interest Research Grp. of N.J., Inc. v. Magnesium

Elektron, Inc. , 123 F.3d 111, 117 (3d Cir. 1997)). We believe that the District Court here

newspaper is sufficient to meet due process requirements as applied to the
Whites as unknown creditors.

(App. 135 (footnote omitted).) The Bankruptcy Judge thereafter approved the publication notice pursuant to the Trustee’s motion, but that ruling is st ill not final, as it is the ruling presented on appeal to us.6

should have addressed the issue of the Whites’ standing to appeal the Bankruptcy Court’s

ruling on the notice to unknown c reditors, i.e., decided whether the Whites were known

or unknown, because only by doing so can it determine whether the Whites were parties

aggrieved by the publication notice. 6 If the District Court determines that the Whites

were indeed unknown creditor s, it can reenter its merits ruling. If it determines that they

were known creditors, it should dismiss the appeal. Thus, we will vacate the District

Court’s ruling on the merits and remand this matter to the District Court for further

proceedings consis tent with this opinion.

6 The Third Circuit has held that only a “person aggrieved” by an order of the Bankruptcy Court has standing to appeal that order. See Gen. Motors Acceptance Corp. v. Dykes , 10 F.3d 184, 188 (3 d Cir. 1993). The “person aggrieved” rule states that only those whose pecuniary interests are directly and adversely affected by a Bankruptcy Court order that “diminishes their property, increases their burdens, or impairs their rights” may appeal.
Trav elers Ins. Co. v. H.K. Porter Co. , 45 F.3d 737, 741

- 42 (3d Cir. 1995) (quoting Dykes

, 10 F.3d at 187). “[W]hether someone is a ‘person aggrieved’ is normally a question of fact to be determined by the district court.” Id. at 742 (citing Dykes , 10 F.3d at 188).