Court Opinion

ID: 4018760
Source: CourtListenerOpinion
Date Created: 2016-07-25 22:00:58.948351+00
Date Added: 2024-06-11T09:26:38.916329
License: Public Domain

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.

------------------------------

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.
                             _________________________________

                                 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 This order and judgment is not binding
precedent, except under the doctrines of law of the case, res judicata, and collateral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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