Court Opinion

ID: 620629
Source: CourtListenerOpinion
Date Created: 2012-01-10 21:11:52+00
Date Added: 2024-06-11T17:50:53.193949
License: Public Domain

NOT PRECEDENTIAL

                       UNITED STATES COURT OF APPEALS
                            FOR THE THIRD CIRCUIT
                                 ___________

                                     No. 11-2293
                                     ___________

                         In re: FRANCES SCARBOROUGH,
                                               Appellant

                      ____________________________________

                    On Appeal from the United States District Court
                         for the Eastern District of Pennsylvania
                   (D.C. Civil Nos. 2-07-cv-04236 & 2-09-cv-01984)
                    District Judge: Honorable Ronald L. Buckwalter
                     ____________________________________

                    Submitted Pursuant to Third Circuit LAR 34.1(a)
                                  January 10, 2012

              Before: AMBRO, FISHER and NYGAARD, Circuit Judges

                            (Opinion filed January 10, 2012)
                                       _________

                                       OPINION
                                       _________

PER CURIAM

      Frances Scarborough appeals orders from two consolidated District Court cases

that arose from two related matters in bankruptcy court. We will affirm.

                                           I.

      We must begin by recounting the pertinent procedural history of this particular

bankruptcy case, which has been winding on in one fashion or another for over a decade.
At its core, this is an action about appellant Scarborough’s attempts to prevent or

otherwise negate foreclosure proceedings against 5116 North Warnock Street in

Philadelphia by utilizing the tools available under both federal bankruptcy law and state

law. As we deal with but a small facet of the matter, we do not intend what follows to be

exhaustive with regard to the plentiful filings and separate bankruptcy proceedings

Scarborough has initiated.

A) Main Case and First Adversary Proceeding

       In 2001, Scarborough filed for protection under Chapter 13 (11 U.S.C. §§ 1301–

30) of the United States Bankruptcy Code. See generally E.D. Pa. Bankr. No. 01-35194

(the ―main case‖). Shortly thereafter, she began an adversary bankruptcy proceeding

(―first adversary proceeding‖), whose primary goal was the bifurcation of creditor Chase

Manhattan’s1 mortgage claim into secured and unsecured claims via 11 U.S.C. § 506(a).

Bankruptcy Judge Kevin J. Carey determined that Scarborough was ―barred from

bifurcating the secured claim of Chase Manhattan pursuant to 11 U.S.C. § 1322(b)(2).‖

Scarborough v. Chase Manhattan Mortg. Corp. (In re Scarborough), Adversary No. 02-

858, 2003 Bankr. LEXIS 2096, at *3 (Bankr. E.D. Pa. Oct. 14, 2003). Scarborough

appealed.

       While the appeal in the first adversary proceeding was pending, the main case

continued. Despite filing multiple Chapter 13 plans, Scarborough was unable to satisfy

1
  The relevant other parties in this action are Chase Manhattan Mortgage Corporation
(―Chase Manhattan‖ and ―Chase‖) and Chapter 13 trustee William C. Miller.

                                             2
the Bankruptcy Court as to her plans’ feasibility. In a memorandum and order of July 21,

2005, Judge Carey denied confirmation of Scarborough’s Amended Chapter 13 plan and

dismissed the bankruptcy case. See Main Case ECF No. 228.2 Scarborough appealed to

the District Court, arguing, inter alia, that feasibility should not be determined before the

bifurcation issue was definitively resolved on appeal. The District Court ―disagree[d]

with [Scarborough’s] premise‖ and ―affirm[ed] the Bankruptcy Court’s decision to deny

confirmation of [her] amended Chapter 13 plan,‖ but it observed that ―[i]f the Third

Circuit overturns the Bankruptcy Court’s denial of [her] request for bifurcation, the

[District] Court will take the appropriate action.‖ Scarborough v. Chase Manhattan

Mortg. Corp. (In re Scarborough), No. 05-4548, 2006 U.S. Dist. LEXIS 21382, at *9–10

(E.D. Pa. Apr. 20, 2006). Scarborough again appealed to this Court.

B) Our 2006 Decisions

       In 2006, we resolved both the appeal of Scarborough’s bifurcation issue from the

first adversary proceeding and her first appeal from the main case. We held in her favor

on the statutory question, concluding: ―a mortgage secured by property that includes, in

addition to the debtor’s principal residence, other income-producing rental property is

secured by real property other than the debtor’s principal residence and, thus, that

2
  We observe that, shortly after this dismissal, Scarborough moved both for
reconsideration and for the Bankruptcy Court to ―grant a stay of relief from collection
activity from all creditors pending the outcome of my motion to reconsider and vacate or
modify this court’s order denying confirmation of plan and dismissing case.‖ Main Case
ECF Nos. 232–33 (capitalization modified). Both motions were denied, see Main Case
ECF Nos. 241–42.

                                              3
modification of the mortgage is [statutorily] permitted.‖ Scarborough v. Chase

Manhattan Mortg. Corp. (In re Scarborough), 461 F.3d 406, 408 (3d Cir. 2006) (emphasis

in original). Therefore, Chase’s claim ―can be modified,‖ id. at 414 (emphasis added),

although we did not decide whether it should be. With regard to the separate appeal from

the main case, we determined that we lacked jurisdiction due to the contingent nature of

the District Court’s order. See In re Scarborough, 212 F. App’x 89, 91–92 (3d Cir.

2006). The net result: a remand to Bankruptcy Court for further proceedings on the main

case.

C) Denied Anew

         Back in Bankruptcy Court, Chase moved for relief from the reinstated automatic

stay. In the process, Chase emphasized that ―[d]uring the pendency of the . . . appeals

there was no stay in place. The Debtor’s request for a stay pending appeal was denied.‖

See Main Case ECF No. 270 ¶ 9.

         During late August and early September of 2007, hearings were held on Chase’s

motion and on the possibility of confirming Scarborough’s latest Chapter 13 plan.3 On

September 5, the Bankruptcy Court issued a thorough opinion from the bench, in which it

―den[ied] confirmation of the plan and dismiss[ed] this bankruptcy case.‖ Tr. 17:10–11,

Main Case ECF No. 293. Even assuming various plan tolling factors and bifurcation

outcomes in Scarborough’s favor, the Court found Scarborough to have failed to

3
    By this juncture, the main case had been reassigned to Judge Eric L. Frank.

                                              4
demonstrate persuasively the fair-market value of her property.4

       Nor did the debtor persuade me on the present record that she can afford a
       $445 payment for three years which is the calculation I’ve come to making
       a number of favorable assumptions, especially because the debtor would be
       obliged, as a matter of adequate protection, to maintain payments of taxes
       every year and – and insurance on the property. So the payment would be
       even higher than [$]445. Nothing in the history of the case that goes back
       to at least 2001, perhaps 1998 or even further, gives me any confidence the
       debtor can perform such a plan. . . . The debtor’s testimony did not
       persuade me that her financial condition has improved[;] . . . if anything,
       the evidence suggests that her income may well decrease and it certainly
       has been irregular. In short, the debtor’s evidence was inadequate to
       convince[ ] me to exercise any discretion that I may have to turn this
       Chapter 13 bankruptcy case into an eight-and-a-half-year to nine-year
       Chapter 13 bankruptcy. . . . So in light of this reasoning and this decision,
       I conclude that the appropriate action is for me to deny confirmation and
       dismiss the case. . . . For those reasons, I conclude the [relief from
       automatic stay] motion is moot.

Tr. 19:20–21:6. While the Court acknowledged some scenarios under which a case

posture could be more favorable to Scarborough, it ruled that ―the shelf life of this case

has expired.‖ Tr. 22:10–11. See also Order, Main Case ECF No. 283.

       Scarborough filed a timely notice of appeal. The appeal was docketed in the

United States District Court for the Eastern District of Pennsylvania under case number

07-4236—the first of the two consolidated cases now before this Court. Before we

discuss the District Court proceedings, however, we must lay the foundation for the other

case with which 07-4236 was ultimately joined.

4
 The Court did stress that there was ―circumstantial evidence suggesting that the fair
market value [of the property] [wa]s far below the outstanding balance of Chase’s claim,‖
but explained that Scarborough had provided ―inadequate evidence‖ to grant the Court
―equitable discretion‖ to ―extend the plan out beyond five years.‖ Tr. 21:15–20.

                                             5
D) Second Adversary Proceeding

         In March of 2008, Scarborough filed another adversary proceeding. See generally

E.D. Pa. Bankr. No. 08-00058 (―second adversary proceeding‖). She sought, first, an

―injunction to stop the sheriff sale of my home on April 1, 2008.‖ Compl. ¶ 3, Second

Adversary Proceeding ECF No. 1. Scarborough also sued for ―damages amounting to

$100,000‖ stemming from ―Chase’s violation of the automatic stay‖—for, in other words,

Chase’s pursuit of foreclosure between the July 21, 2005 dismissal of bankruptcy

proceedings and the April 11, 2007 order5 vacating judgment and remanding the matter

back to bankruptcy court following our 2006 decisions in Scarborough’s appeals. Compl.

¶ 4–5. Scarborough maintained that, pursuant to her eventual success on appeal, ―the 21

month period of time during the pendency of the Plaintiff[’]s appeal is treated as if that

length of time never occurred, for the purposes of this instant bankruptcy case.‖ Compl.

¶ 5. Thus, according to Scarborough, the automatic stay was retroactively restored after

her bankruptcy case was remanded, and Chase had violated the stay by pursuing the

foreclosure in the interim. During the pendency of the second adversary proceeding, the

subject premises were sold at Sheriff’s sale.6

         Following a lengthy hearing, at which Scarborough was represented by counsel,

the Bankruptcy Court dismissed the second adversary proceeding, determining that—

absent a due-process violation or similar major error—there was no reason to hold that an

5
    See Order, E.D. Pa. Civ. No. 2:05-cv-04548 ECF No. 16.
6
 We note that the property was not sold during the period about which Scarborough
complained.

                                             6
automatic stay would or should retroactively apply if a bankruptcy dismissal was later

reversed on appeal. See Tr. 37:14–19, Second Adversary Proceeding ECF No. 27-1. The

court further noted that to hold to the contrary would ―obliterate[] the concept of a stay

pending appeal.‖ Tr. 38:7–8. For those reasons, the complaint was deemed to lack merit.

Tr. 41:12–13.

       Scarborough appealed, and the District Court7 eventually remanded. However, the

Court’s memorandum revealed that it believed to have before it appeals from both ―the

dismissal of the adversary proceeding[] and from the ultimate dismissal of the bankruptcy

itself.‖ In re Scarborough, No. 08-cv-04873, 2009 U.S. Dist. LEXIS 4279, at *3 (E.D.

Pa. Jan. 22, 2009) (emphasis added). It also observed that ―the bankruptcy stay is now in

effect, and precludes any further action to enforce the creditor’s claim, unless approved in

this proceeding.‖ Id. at *4. The District Court instructed the Bankruptcy Court to, inter

alia, hold a hearing on the bifurcation issue and to conduct proceedings ―enabling the

debtor to propose a feasible plan, if possible.‖ Id.

       On remand, the Bankruptcy Court concluded that it could not follow the District

Court’s mandate, as the ―only subject of the appeal [to the District Court] was the [second

adversary proceeding] Dismissal Order.‖ Scarborough v. Chase Home Fin., LLC (In re

Scarborough), Adv. No. 08-00058, 2009 Bankr. LEXIS 2769, at *11 n.14 (Bankr. E.D.

Pa. Apr. 8, 2009). Following the mandate here, the Bankruptcy Court reasoned, was

prevented by the ―manifest injustice‖ exception to the ordinary rule of appellate review;

                                              7
―(1) there is a clear error and (2) this court lacks jurisdiction to carry out the District

Court’s instructions.‖ Id. at *13–14. The Court dismissed the case anew, albeit for the

same reasons expressed prior, but indicated its willingness to follow the mandate should

the District Court ―reaffirm[] its stance and remand[] . . . with the same instructions as

before.‖ Id. at *18–19 & n.18.

         Scarborough again appealed, leading to the second case (09-01984) from which

the action before us arises. On October 19, 2010, the District Court consolidated the two

cases.

E) The District Court Opinion and Aftermath

         The District Court cast the central issue in the consolidated appeal as follows: ―did

the Bankruptcy Court correctly determine that the Chapter 13 Plan was not confirmable

as set forth in its September 5, 2007 bench order[?]‖ Scarborough v. Miller (In re

Scarborough), Nos. 07-4236 & 09-1984, 2011 U.S. Dist. LEXIS 10049, at *2 (E.D. Pa.

Feb. 2, 2011). It observed that, with regard to the issue of valuation—the central,

disputed factual finding—Scarborough ―never took any steps to meet her burden of proof

in that regard.‖ Id. at *3. The District Court analyzed the findings of the Bankruptcy

Court and found them to be a) not clearly erroneous and b) fully consonant with the law.

Id. at *7–8. It therefore denied the appeals. Following prodding by Chase regarding

apparently unresolved issues from the second adversary proceeding, the District Court

7
 This appeal was not assigned to Judge Buckwalter, who was otherwise handling the
main-case appeal in District Court, perhaps leading to some of the confusion that was to
follow.

                                                8
clarified that it also believed that the Bankruptcy Court ―was correct in determining that

no stay was in effect during the time [Chase] commenced its foreclosure action.‖

Scarborough v. Miller (In re Scarborough), Nos. 07-4236 & 09-1984, 2011 U.S. Dist.

LEXIS 13771, at *3 (E.D. Pa. Feb. 11, 2011) (supplemental memorandum).

Scarborough’s timely Fed. R. Civ. P. 59/60 motion was denied, and she thereafter filed a

timely notice of appeal—bringing us out of the past and into the present.

                                             II.

       Scarborough raises a variety of substantive and procedural claims. Deriving our

jurisdiction from 28 U.S.C. §§ 158(d) and 1291, we will first address those issues that

relate to the denial of the second adversary proceeding before moving to those arising

from the main case.

A) Second Adversary Proceeding

       Scarborough’s challenges here are based on questions of law. Accordingly, our

review is plenary. In re Montgomery Ward, LLC, 634 F.3d 732, 736 n.3 (3d Cir. 2011).

Scarborough first alleges that the Bankruptcy Court erred by failing to comply with the

January 22, 2009 memorandum and order of the District Court, which purported to

remand the case ―for the purpose of (1) holding a hearing to establish the secured amount

of Chase’s claim; (2) enabling the debtor to propose a feasible plan, if possible; and (3)

establishing a reasonable time-frame for the further conduct and ultimate resolution of

this bankruptcy proceeding.‖ In re Scarborough, 2009 U.S. Dist. LEXIS 4279, at *4.

       As Scarborough correctly observes, it is ―axiomatic that on remand for further

                                             9
proceedings after decision by an appellate court, the trial court must proceed in

accordance with the mandate and the law of the case as established on appeal.‖ Bankers

Trust Co. v. Bethlehem Steel Corp., 761 F.2d 943, 949 (3d Cir. 1985); see also Skretvedt

v. E.I. Dupont de Nemours, 372 F.3d 193, 203 (3d Cir. 2004). But it is equally axiomatic

that a court may not act outside the scope of the jurisdiction granted to it. Williamson v.

Berry, 49 U.S. (8 How.) 495, 543 (1850); cf. USPPS, Ltd. v. Avery Dennison Corp., 647

F.3d 274, 284 (5th Cir. 2011) (―The federal courts are courts of limited jurisdiction and

are tasked with the duty to continually, and sua sponte, assess their jurisdiction.‖);

Finberg v. Sullivan, 658 F.2d 93, 96 n.5 (3d Cir. 1980).

       It is clear that the District Judge lacked jurisdiction over the main case at the time

he issued his January 22 memorandum. Moreover, the Bankruptcy Court lacked

jurisdiction to carry out the mandate, as the earlier notice of appeal filed in the main case

had divested the Court of its power to further address the central bankruptcy issues. See

Venen v. Sweet, 758 F.2d 117, 120–21 (3d Cir. 1985); Main Line Fed. Sav. & Loan

Ass’n v. Tri-Kell, Inc., 721 F.2d 904, 906 (3d Cir. 1983). Accordingly, we cannot impute

the power of the law of the case doctrine onto a mandate that was issued erroneously and

without jurisdiction.8

       Turning, then, to Scarborough’s substantive argument, we determine that the

8
 We note, further, that the Bankruptcy Court’s decision to reenter its order can plausibly
be viewed as an attempt to seek clarification from the District Court as to the intended
scope of its mandate; indeed, the Bankruptcy Court expressed willingness to follow the
District Court’s instructions were it to enter the same judgment the second time around.
Of course, the District Court did no such thing.

                                             10
Bankruptcy Court did not err in deciding that the automatic stay did not apply

retroactively to the ―gap period‖ between its 2005 dismissal of the main case and the

District Court’s 2007 order vacating that dismissal.9 An automatic stay is dispelled when

the underlying case is dismissed. See 11 U.S.C. § 362(c)(2)(B); In re Taylor, 81 F.3d 20,

23 (3d Cir. 1996). Cases suggesting the possibility of the ―retroactivity‖ of the stay are

inapposite and distinguishable, as Scarborough has not shown that she was denied due

process or otherwise suffered a constitutional injury. See, e.g., Turtle Rock Meadows

Homeowners Ass’n v. Slyman (In re Slyman), 234 F.3d 1081, 1087 (9th Cir. 2000)

(order of dismissal was void, and automatic stay was ―continuously in effect from the

date the petition was filed‖—rendering foreclosure sale ―without effect‖—as ―dismissal

of a case because a debtor failed to attend a meeting of which he had not been notified‖

was in violation of due process) (citations, quotations omitted). As there was no

automatic stay in effect, then Chase cannot be held liable for proceeding with foreclosure

procedures during the gap period.10

       Therefore, we will affirm the judgment of the District Court with regard to the

matters arising in the second adversary proceeding. We turn now to the appeal of the

9
 We agree with Chase that the 2005–2007 period is the correct one. Neither of our 2006
decisions had the effect of vacating the order dismissing the main case. The first settled a
question of law raised in the first ancillary proceeding, while the second simply
determined that we lacked jurisdiction over a contingent order.
10
  Scarborough argues, in the alternative, that Chase should have seen the writing on the
wall once we rendered our 2006 decisions. But she fails to point to any provision of law
that would impart independent civil liability for foreclosing in the wake of a probability
that a stay would, at some point in the future, be reinstated—and, moreover, once the stay
was reimposed, Chase quickly moved to quash it.

                                             11
main case.

B) Main Case

         Scarborough also raises a number of procedural and substantive arguments with

regard to her main case, not all of which are relevant or meaningfully reviewable.11

Exercising plenary review over the District Court’s appellate review of the Bankruptcy

Court, we review factual findings for clear error and legal conclusions de novo. JELD-

WEN, Inc. v. Van Brunt (In re Grossman’s Inc.), 607 F.3d 114, 119 (3d Cir. 2010) (en

banc).

         Throughout her submissions, Scarborough argues that the Bankruptcy Court

ignored the mandates of this Court and the District Court in resolving the main case. She

contends that the Bankruptcy Court should have relied upon 2002 valuations in

determining her plan’s confirmability, and should also have explicitly resolved

bifurcation (in the form of the adversary proceeding) before taking any other action.

         While we cannot speak to the intent behind the District Court mandates, we can

decisively conclude that Scarborough reads our 2006 decision in her favor too broadly.

In that opinion, we determined whether ―a mortgage on a multi-unit dwelling in which

the debtor resides qualifies for the anti-modification protection afforded by 11 U.S.C.

§ 1322(b)(2),‖ holding that modification was permitted. Scarborough v. Chase

11
  Also, she asserts, for the first time on appeal, several factual contentions (such as
incorrect mathematical calculations by the Bankruptcy Court) that do not appear to have
been raised below; hence, they are waived. See Knop v. McMahan, 872 F.2d 1132, 1143
n.20 (3d Cir. 1989).

                                             12
Manhattan Mortg. Corp. (In re Scarborough), 461 F.3d at 408. Section 1322(b) states

that a Chapter 13 plan may ―modify the rights of holders of secured claims‖—not that it

must do so. Compare with 11 U.S.C. § 1322(a) (establishing what the Chapter 13 plan

―shall‖ contain). In announcing the possibility of modification as to the claim brought by

Scarborough, we did not instruct the District Court or the Bankruptcy Court to resolve

matters in any particular order or in satisfaction of any procedural formality, and

Scarborough cites no case law that would bind the District or Bankruptcy Courts to the

order of action she prescribes.12

       Furthermore, we read the relevant Bankruptcy Court’s decision as assuming the

success of the hearings she requests. For example, its outcome was based on the

presumption that Scarborough could bifurcate the claim and that the $13,000 property

value she proposed—a property value that, it seems, was never supported in Bankruptcy

Court with admissible evidence—could be the value of the secured debt (although the

Judge also emphasized that Scarborough ―ha[d] not given [him] enough confidence [at]

present that she will establish that the fair-market value is $13,000‖).

       Notwithstanding these favorable assumptions, the Bankruptcy Court found two

12
   Scarborough also seizes upon our use of ―$13,000‖ and ―$26,500‖ as being somehow
determinative of a range of values for her property. See Br. of Appellant 25 (―[T]he 2006
Decision does state that the range of valuation testimony presented at the trial of the 2002
Proceeding was between $13,000 and $26,500. . . . Putting these statements of the USCA
in the 2006 Decision together, it seems clear that the mandate . . . is that the [bankruptcy
court] should first determine where in the range between $13,000 and $26,500 the value
of the Premises falls.‖) (citing Scarborough v. Chase Manhattan Mortg. Corp. (In re
Scarborough), 461 F.3d at 409). Our summary of the information presented below
cannot be read as binding the fact-finder on remand. Cf. Kool, Mann, Coffee & Co. v.
Coffey, 300 F.3d 340, 354 (3d Cir. 2002) (distinguishing dicta from mandate).

                                             13
main impediments to confirming the plan: 1) the limitations imposed by the five-year

term of 11 U.S.C. § 1322(d) (2002),13 considered in tandem with 2) the Court’s doubts as

to whether Scarborough would ―be able to make all payments under the plan and . . .

comply with the plan,‖ 11 U.S.C. § 1325(a)(6) (2002). We find Scarborough’s legal

arguments regarding the starting and tolling of the five-year term to be unconvincing; we

agree with the wealth of authorities cited by the Trustee and relied upon by the District

and Bankruptcy Courts that the five-year period cannot have been tolled throughout the

duration of the bankruptcy action, to commence only upon plan confirmation. Nor do we

detect any clear error in the Bankruptcy Court’s fact-finding, especially with regard to

Scarborough’s ultimate ability to pay her obligations under the plan. See In re Exide

Techs., 607 F.3d 957, 962 (3d Cir. 2010) (review of mixed questions of law and fact

involves ―affording a clearly erroneous standard to integral facts, but exercising plenary

review of the lower court’s interpretation and application of those facts to legal precepts‖

(quoting In re CellNet Data Sys., Inc., 327 F.3d 242, 244 (3d Cir. 2003))). We also

cannot fault the Bankruptcy Court for failing to hold a bifurcation hearing when its

outcome could not have affected the resolution of Scarborough’s Chapter 13 filing. In

sum, the Bankruptcy Court’s decision is both legally and factually sound, and the District

Court did not err in upholding it.

                                               III.

         Therefore, for the reasons expressed at length above, we will affirm the orders of

13
     Since this case began in 2001, the older statutory provision applies.

                                               14
the District Court.14

14
  Scarborough does not attack the District Court’s resolution of her Fed. R. Civ. P. 59/60
motion. Accordingly, the matter is waived. Eurofins Pharma US Holdings v.
BioAlliance Pharma SA, 623 F.3d 147, 161 n.15 (3d Cir. 2010).

The parties have filed several additional motions relating to briefing requirements and
amendments to the record. We dispose of them as follows. Scarborough’s motions to
file a reply brief out of time, to submit an over-length brief, to file a supplemental
appendix, and to amend the statement of issues on appeal—motions opposed by the
appellees—are denied. We granted a lengthy extension of time to file a reply brief, but
Scarborough missed the new deadline without notifying this Court. The reply brief she
eventually submitted did not comply with Fed. R. App. P. 32(a)(7)(A)—indeed, the reply
brief was longer than the two principal briefs combined. It also contained numerous
arguments and averments that were never raised below and appear to be novel to this
appeal, and we would therefore be unable to consider much of it—e.g., claims pertaining
to alleged violations of bankruptcy rules. ―As a general matter, the courts of appeals will
not consider arguments raised on appeal for the first time in a reply brief.‖ Hoxworth v.
Blinder, Robinson & Co., 903 F.2d 186, 204 n.29 (3d Cir. 1990). As we understand
Chase’s submissions to pertain to its preclusion arguments, and as we have decided in its
favor on alternative grounds, Chase’s motions to amend the supplemental appendix and
to amend the statement of facts are denied as unnecessary.

                                            15