Court Opinion

ID: 4669097
Source: CourtListenerOpinion
Date Created: 2021-03-18 15:00:37.626999+00
Date Added: 2024-06-11T07:56:48.239140
License: Public Domain

USCA11 Case: 20-11641   Date Filed: 03/18/2021   Page: 1 of 8

                                                    [DO NOT PUBLISH]

             IN THE UNITED STATES COURT OF APPEALS

                     FOR THE ELEVENTH CIRCUIT
                       ________________________

                              No. 20-11641
                          Non-Argument Calendar
                        ________________________

                   D.C. Docket No. 2:19-cv-00073-LGW
                     Bkcy. No. 2:19-bkc-20244-AJK

In re: MARVIN B. SMITH, III,
       SHARON H. SMITH,

                                                                  Debtors.

__________________________________________________________________

MARVIN B. SMITH, III,
SHARON H. SMITH,

                                                    Plaintiffs-Appellants,

HSBC BANK USA,
HSBC BANK USA, N.A.,
HSBC BANK USA, NATIONAL ASSOCIATION,
as Trustee for the Holders of BCAP LLC Trust
2006-AA2,
PATRICK J. BURKE,
Pres./CEO of HSBC Bank USA, N.A.,
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GEREMY GREGORY,
Agent for Balch & Bingham LLP, et al.,

                                                         Defendants-Appellees.

                             ________________________

                     Appeal from the United States District Court
                        for the Southern District of Georgia
                           ________________________

                                    (March 18, 2021)

Before JILL PRYOR, LUCK, and EDMONDSON, Circuit Judges.

PER CURIAM:

       Marvin and Sharon Smith, proceeding pro se, 1 appeal the district court’s

order affirming the bankruptcy court’s order denying the Smiths’ motion to enforce

a bankruptcy discharge injunction and to hold in contempt certain parties involved

in the foreclosure proceedings on the Smiths’ home. The Smiths sought a

contempt order against (1) HSBC Bank USA, HSBC Bank USA, N.A., and HSBC

Bank USA, National Association as Trustee for the Holders of BCAP LLC Trust

2006-AA2 (collectively “HSBC”); (2) an HSBC corporate officer; and (3) several

1
 We construe liberally pro se pleadings. See Tannenbaum v. United States, 148 F.3d 1262,
1263 (11th Cir. 1998).
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lawyers, law firms, a realtor, and a realty company. No reversible error has been

shown; we affirm.

I.     Background

       Briefly stated, the Smiths seek to challenge the foreclosure and

dispossessory proceedings on their home in St. Simons Island, Georgia (the

“Property”). Given the complicated and lengthy procedural history underlying this

appeal, we will summarize the facts and proceedings only as necessary to provide

context for our decision.2

       In 2007, the Smiths filed for bankruptcy seeking to discharge over $ 2

million in mortgage debt on the Property. On their bankruptcy petition, the Smiths

listed Countrywide Home Loans (“Countrywide”) as holding two secured claims

against the Property.

       In 2008, Countrywide -- as servicing agent for HSBC -- moved for relief

from the automatic stay under 11 U.S.C. § 362(a). The bankruptcy court denied

the motion but entered a Consent Order modifying the automatic stay to allow the

bankruptcy trustee to market the Property for sale. If the Property remained unsold

2
 A more thorough description of the underlying factual and procedural history is set forth in the
district court’s decision. See Smith v. HSBC Bank, N.A., 616 B.R. 438 (S.D. Ga. 2020).
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as of 4 May 2009, the automatic stay would terminate without further hearing or

order and foreclosure proceedings could commence.

      In July 2009, the bankruptcy court denied the Smiths’ motion to vacate the

Consent Order and stated that foreclosure on the Property could proceed. The

district court affirmed; we dismissed the Smiths’ appeal as frivolous.

      In April 2012, the bankruptcy trustee abandoned the bankruptcy estate’s

interest in the Property. In January 2013, the bankruptcy trustee objected to a

proof of claim filed earlier by Countrywide (“Claim No. 10”) on grounds that the

mortgage loan on the Property was “secured by property either abandoned or not

administered by the Trustee and, therefore, [Countrywide] should look to its

collateral for satisfaction of the debt.” The bankruptcy court sustained the

objection and disallowed Claim No. 10.

      HSBC foreclosed on the Property in May 2015. On 1 June 2016, the

bankruptcy court entered an order discharging the Smiths’ debt under Chapter 7.

The Smiths were evicted from the Property in August 2017.

      In August 2018, the Smiths filed the motion at issue in this appeal: a motion

titled “Emergency Motion to Enforce Discharge Injunction and Motion for

Issuance of an Order to Respondents to Show Cause why they should not be Held

in Contempt” (“Contempt Motion”). The Smiths contended that -- by enforcing

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the lien and foreclosing on the Property -- HSBC and the lawyers, law firms, and

realtors involved in the foreclosure proceedings violated the bankruptcy court’s

discharge injunction under 11 U.S.C. § 524 and the bankruptcy court’s order

disallowing Claim No. 10.

       The bankruptcy court denied the Contempt Motion. The bankruptcy court

concluded that the Chapter 7 discharge had no effect on the lien on the Property

and, thus, the foreclosure proceedings “had nothing to do with the Smiths or their

discharge.” The bankruptcy court also found no violation of the order disallowing

Claim No. 10. The district court affirmed.

II.    Discussion3

       We review de novo legal conclusions of both the bankruptcy court and the

district court. See Finova Cap. Corp. v. Larson Pharmacy, Inc. (In re Optical

Techs., Inc.), 425 F.3d 1294, 1299-1300 (11th Cir. 2005). We review for clear

error the bankruptcy court’s factual findings. See id. at 1300.

3
  In their appellate brief, the Smiths reiterate arguments they have raised in other related civil
actions about HSBC’s alleged violations of the automatic stay. Because these arguments were
not raised below in connection with the Smiths’ Contempt Motion, the arguments are not
properly before us in this appeal.
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      A. Discharge Injunction

      A Chapter 7 discharge “operates as an injunction against the commencement

or continuation of an action, the employment of process, or an act, to collect,

recover or offset any such debt as a personal liability of the debtor.” 11 U.S.C.

§ 524(a)(2). The Supreme Court has said that -- while a Chapter 7 discharge

extinguishes the personal liability of the debtor -- it does not extinguish a creditor’s

right to foreclose on a valid mortgage on the debtor’s property. See Johnson v.

Home State Bank, 501 U.S. 78, 83 (1991). Instead, “a creditor’s right to foreclose

on the mortgage survives or passes through the bankruptcy.” Id.

      Under the Bankruptcy Code, the Smiths’ Chapter 7 discharge had no impact

on the validity or enforceability of HSBC’s lien against the Property. HSBC thus

retained the right to foreclose. The bankruptcy court concluded correctly that the

complained-of acts taken by HSBC and others to foreclose, evict, or to sell the

Property constituted no violation of the Smiths’ Chapter 7 discharge injunction.

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      B. Disallowance of Claim No. 10

      The bankruptcy court also concluded correctly that the validity of HSBC’s

lien against the Property was unaffected by the disallowance of Claim No. 10. The

record demonstrates that the bankruptcy trustee sought to disallow Claim No. 10

because the trustee had earlier abandoned the Property and the Property was thus

no longer part of the bankruptcy estate. Never did the bankruptcy trustee challenge

the validity or enforceability of the lien on the Property. To the contrary, the

bankruptcy trustee said expressly that HSBC “should look to its collateral for

satisfaction of the debt.” By sustaining the trustee’s objection and disallowing

Claim No. 10, the bankruptcy court disallowed only HSBC’s claim to an interest in

the bankruptcy estate. The bankruptcy court made no merits determination about

the validity or enforceability of HSBC’s lien on the Property.

      We reject the Smiths’ contention that the disallowance of a claim under the

circumstances presented in this case operates to void automatically an otherwise

valid lien under 11 U.S.C. § 506(d). We cannot conclude that the bankruptcy court

erred in finding no violation of the disallowance order.

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      C. Constitutional Due Process

      On appeal, the Smiths contend they were denied their due process rights

when the bankruptcy court ruled on their Contempt Motion without an evidentiary

hearing. This argument is without merit. Generally speaking, due process rights

are attributed to the party against whom contempt sanctions are sought. See

Mercer v. Mitchell, 908 F.2d 763, 766-67 (11th Cir. 1990). We have found no

binding precedent requiring these same due process protections for the party

seeking the issuance of a contempt order.

      The Smiths also contend that adverse rulings by the bankruptcy court and

the district court denied the Smiths their due process right to object to the real party

in interest. We reject these conclusory arguments. That Plaintiffs are dissatisfied

with the outcome of the proceedings establishes no constitutional violation.

      AFFIRMED.

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