Opinion
No. 2D20-3006
04-08-2022
Suzanne CENTRELLA, Appellant, v. The BANK OF NEW YORK MELLON f/k/a The Bank of New York, as Trustee for the Certificateholders of CWMBS, Inc., CHL Mortgage Pass-Through Trust 2007-15 Mortgage Pass-Through Certificates, Series 2007-15, Appellee.
Thomas Erskine Ice of Ice Appellate, Lake Worth; and Amanda L. Lundergan of Lundergan Legal, LLC, Royal Palm Beach, for Appellant. Michael Ruff of Padgett Law Group, Tallahassee, for Appellee.
Thomas Erskine Ice of Ice Appellate, Lake Worth; and Amanda L. Lundergan of Lundergan Legal, LLC, Royal Palm Beach, for Appellant.
Michael Ruff of Padgett Law Group, Tallahassee, for Appellee.
CASANUEVA, Judge.
Suzanne Centrella appeals the trial court's final order which precludes her "from further litigating in the pending [foreclosure] proceeding in any manner due to her previously filed bankruptcy." We conclude that the trial court's order is overbroad and unsupported by the concept of surrender. Accordingly, we reverse in part without comment on the remaining issues Ms. Centrella raises.
We note that in state court foreclosure actions, we must navigate through the requirements of the Federal Bankruptcy Code. Our voyage will have several ports of call, including an examination of the procedural posture of the state court action and the requirements imposed by the jurisprudence of federal bankruptcy law.
I. FACTS
A. History
In 2007, Ms. Centrella executed a promissory note and mortgage with Countrywide Home Loans, Inc. (CHI). The mortgage designated Mortgage Electronic Registration Systems, Inc. (MERS), as the mortgagee, solely as a nominee for CHI. The promissory note and mortgage were allegedly assigned to The Bank of New York Mellon (the Bank) in 2009.
Ms. Centrella filed a petition for chapter 13 bankruptcy in 2011. To effectuate chapter 13 relief, Ms. Centrella proposed a plan to "surrender" secured collateral. See 11 U.S.C. § 1321. Section 3(G) of the bankruptcy plan provided that Ms. Centrella, as the debtor, "will surrender the following collateral no later than thirty (30) days from the filing of the petition unless specified otherwise in the Plan. Upon Plan confirmation, the automatic stay will be deemed lifted for the collateral identified below for surrender." Further, section 3(G) stated that "[n]othing herein is intended ... to abrogate Debtor's state law contract rights." Ms. Centrella listed the real property which is the subject of the instant foreclosure action as secured collateral and listed Bank of America Home Loans as the secured creditor.
The bankruptcy court issued an "Order Confirming Plan" on March 28, 2012. In pertinent part, the bankruptcy court noted that the bankruptcy plan was confirmed and that "[c]laims are allowed and security surrendered to creditors set forth in Exhibit ‘A.’ " Ms. Centrella moved out of the home shortly thereafter. The bankruptcy court discharged Ms. Centrella's debt in 2016.
In 2018, Ms. Centrella became aware of the fact that the secured creditor never obtained title to the property at issue. As a result, Ms. Centrella was still listed as the title owner. To address potential liability for any personal injury on the property, Ms. Centrella spent approximately $60,000.00 making repairs to the home.
B. Procedural Posture
The Bank initiated a foreclosure action against Ms. Centrella in 2019, alleging that she defaulted on her mortgage by failing to make payments. Ms. Centrella raised several affirmative defenses, including that the Bank lacked standing to bring the foreclosure action because it was not the secured creditor listed on her approved bankruptcy plan. The Bank then filed a motion for judicial estoppel in which it argued that because Ms. Centrella agreed to surrender the property in her approved bankruptcy plan, she should be judicially estopped from contesting the instant foreclosure action.
The trial court conducted a hearing on the Bank's motion, where the Bank introduced records detailing Ms. Centrella's bankruptcy proceedings into evidence. The records demonstrated that the real property at issue was identified in Ms. Centrella's bankruptcy schedules. The bankruptcy schedules suggested that Ms. Centrella's secured debt on the real property far exceeded its value—the property was "underwater."
Ultimately, the trial court ruled that the Bank established its entitlement to judicial estoppel and struck Ms. Centrella's affirmative defenses and demand for a jury trial. The trial court also noted that the order should be treated as a final order as to Ms. Centrella's ability to contest the foreclosure action.
II. DISCUSSION
When Congress enacted the Bankruptcy Code it served to provide "diverse courses overburdened debtors may pursue to gain discharge of their financial obligations, and thereby a ‘fresh start.’ " Harris v. Viegelahn , 575 U.S. 510, 513, 135 S.Ct. 1829, 191 L.Ed.2d 783 (2015). Here, Ms. Centrella selected a chapter 13 course for her fresh start. Her approved bankruptcy plan required the surrender of the real property at issue in the pending foreclosure action. Thus, at this juncture two questions are posed. First, how is surrender defined, and second, to whom is surrender made. We next answer each inquiry.
We first note that Congress failed to define the term surrender within the Bankruptcy Code. Therefore, we must turn to federal bankruptcy law jurisprudence. The Eleventh Circuit noted that "[t]he bankruptcy code does not define the word ‘surrender,’ so we give it its ‘contextually appropriate ordinary meaning.’ " In re Failla , 838 F.3d 1170, 1176 (11th Cir. 2016) (quoting Antonin Scalia & Bryan A. Garner, Reading Law 70 (2012)). The Eleventh Circuit concluded that the term "surrender" means "giving up of a right or claim." Id. at 1177. Consistent with this conclusion the Eleventh Circuit determined that "debtors who surrender their property can no longer contest a foreclosure action." Id. Retention of property is inherently inconsistent with the concept of surrender. Id.
"[W]hen a debtor says they intend to surrender property they must surrender it to both the trustee and to the creditor and that ‘surrender’ necessarily prohibits a debtor from contesting a foreclosure action post-bankruptcy." In re McHale , 593 B.R. 670, 676 (Bankr. M.D. Fla. 2018) (citing Failla , 838 F.3d at 1175-77 ). By fighting the foreclosure action, the debtor is doing the "exact opposite of what [the debtor] promised" when the debtor agreed to surrender the property. In re McHale , 593 B.R. at 677.
In this case, whether the property in foreclosure can be surrendered to the trustee is not at issue. Ms. Centrella's bankruptcy case closed years ago. Thus, in this instance we follow the majority view, which states that "the most sensible connotation of ‘surrender’ ... is that the debtor agreed to make the collateral available to the secured creditor[ ]." In re Elowitz , 550 B.R. 603, 607 (Bankr. S.D. Fla. 2016) (quoting In re Pratt, 462 F.3d 14, 18 (1st Cir. 2006) ).
Relying on Failla , this court has adopted the rule that when a debtor surrenders real property in a bankruptcy proceeding, the surrender prohibits opposition in the state court foreclosure action. BMG Realty Grp., LLC v. U.S. Bank Nat'l Ass'n , 291 So. 3d 165, 167 (Fla. 2d DCA 2020) (citing Lewis v. Innova Inv. Grp., LLC , 279 So. 3d 876, 877 (Fla. 2d DCA 2019) ). However, to recover real property a creditor is still required to take the legal action of a foreclosure. Id. ; see also Failla , 838 F.3d at 1177.
Thus, we are now called upon to establish whether there is a limit to opposing a foreclosure action in our state courts after a bankruptcy surrender.
A. Judicial Estoppel
Included amongst the relief awarded to the Bank by the trial court was its request to impose the doctrine of judicial estoppel.
Judicial estoppel applies when the following elements are met: (1) the party against whom estoppel is sought must have asserted a clearly inconsistent or conflicting position in a prior judicial proceeding; (2) the position assumed in the former proceeding must have been successfully maintained; (3) both proceedings must involve the same parties and same questions; (4) the party claiming estoppel must have relied on or been misled by the former position; and (5) the party seeking estoppel must have changed his or her position to his or her detriment based on the representation.
Fintak v. Fintak , 120 So. 3d 177, 186 (Fla. 2d DCA 2013) (citing Blumberg v. USAA Cas. Ins. Co. , 790 So. 2d 1061, 1066 (Fla. 2001) ). "Judicial estoppel is an equitable doctrine that is used to prevent litigants from taking totally inconsistent positions in separate judicial ... proceedings." Blumberg , 790 So. 2d at 1066 (quoting Smith v. Avatar Props., Inc., 714 So. 2d 1103, 1107 (Fla. 5th DCA 1998) ). "Judicial estoppel is imposed because ‘intentional self-contradiction is being used as a means of obtaining an unfair advantage in a forum provided for suitors seeking justice.’ " Anfriany v. Deutsche Bank Nat'l Tr. Co. for Registered Holders of Argent Sec., Inc., Asset-Backed Pass-Through Certificates, Series 2005-W4 , 232 So. 3d 425, 427 (Fla. 4th DCA 2017) (quoting Scarano v. Cent. R. Co. of N.J. , 203 F.2d 510, 513 (3d Cir. 1953) ).
With this analytical lens in hand, we view the prejudice component of judicial estoppel against the language of the trial court's order. Generally, prejudice in this context focuses upon a party obtaining an unfair advantage. Accordingly, prejudice is unlikely "where both parties are equally in possession of all the facts pertaining to the matter relied on as an estoppel ...." Blumberg , 790 So. 2d at 1066 (quoting Chase & Co. v. Little , 116 Fla. 667, 156 So. 609, 610 (1934) ).
We find the overly broad language of the trial court's order to be inconsistent with the doctrine of judicial estoppel. To illustrate the order's overbreadth, we observe that a foreclosure action customarily establishes a current amount due to the lender as liquidated damages. That amount is the sum permitted to be bid at the sale by the foreclosing entity. For the debtor, it is commonly referred to as the redemption amount. See § 45.0315, Fla. Stat. (2019) ; see also Morris v. Osteen , 948 So. 2d 821, 825 (Fla. 5th DCA 2007) ("[T]he phrase ‘right of redemption’ ... refers to the right of a mortgagor, before being foreclosed from that right, to satisfy the mortgage indebtedness and thus clear the property from the encumbrance of the mortgage."). The redemption amount is not subsumed within surrender. Surrender refers only to the entitlement to the property. The facts necessary to establish the redemption amount are equally available by law to both parties. There is no unfair advantage and therefore no prejudice. Here, the trial court's order granting judicial estoppel included Ms. Centrella's ability to contest the redemption amount.
When a secured creditor elects not to immediately foreclose, additional responsibilities or burdens may be placed upon the debtor, such as code enforcement liens which "may be recorded in the public records and thereafter shall constitute a lien against the land on which the violation exists and upon any other real or personal property owned by the violator ." § 162.09(3), Fla. Stat. (2021) (emphasis added). We pause to note that the record establishes that years have passed between the bankruptcy court order approving Ms. Centrella's bankruptcy plan, the bankruptcy court order granting discharge, and the Bank's institution of the instant foreclosure action. Whether the passage of years has yielded new facts that may rise to the level of a cause of action permitted to be advanced by Ms. Centrella is unclear from the record. What is clear, however, is that the order prohibits her from litigating in the instant matter "in any manner." A reasonable reading of this prohibition results in a conclusion that bars Ms. Centrella from filing either a compulsory or a permissive counterclaim.
III. CONCLUSION
We conclude that the focus in this situation must be on the nexus between surrender and the nature of the cause of action asserted. What is being surrendered in the bankruptcy proceeding is the debtor's legal interest in the subject real property. It is that interest which is due to the secured creditor. Therefore, the extent of a preclusion order is limited by the legal interest asserted and claimed by the debtor and, more specifically, the legal entitlement to challenge the debtor's interest in the real property. Because the debtor's interest has been surrendered, the debtor is no longer entitled to challenge the entitlement to foreclose the debtor's former legal interest. However, a surrender of an interest is not a release of all rights. Because a debtor may be permitted to challenge the amounts due, which in turn may impact a claimed right of redemption, we conclude that the trial court's order is overbroad and unsupported by the concept of surrender.
Additionally, a surrender of the property cannot serve to bar the advancement of claims acquired after the bankruptcy action concluded. To allow such would effectively encompass claims that are either required to be brought in the pending state court action or causes of action permitted to be brought or both.
Affirmed in part; reversed in part; remanded for further proceedings.
KELLY and STARGEL, JJ., Concur.