First Nat'l Bank of Oneida, N.A. v. Brandt

• Decision Date: 17 October 2018
• Docket Number: Case No: 8:16-cv-51-T-17MAP
• Citation: 597 B.R. 663
• Parties: FIRST NATIONAL BANK OF ONEIDA, N.A., Plaintiff, v. Donald H. BRANDT, Defendant.
• Court: U.S. District Court — Middle District of Florida

597 B.R. 663

FIRST NATIONAL BANK OF ONEIDA, N.A., Plaintiff,

v.Donald H. BRANDT, Defendant.

Case No: 8:16-cv-51-T-17MAP

United States District Court, M.D. Florida, Tampa Division.

Signed October 17, 2018

David Hywel Leonard, Nicholas Alexander Brown, Carlton Fields Jorden Burt, PA, Tampa, FL, for Plaintiff.

John Philip Newton, Pro Hac Vice, Mayer & Newton, Knoxville, TN, Richard J. Cole, III, Cole & Cole Law, P.A., Sarasota, FL, for Defendant.

AMENDED¹ ORDER

ELIZABETH A. KOVACHEVICH, UNITED STATES DISTRICT JUDGE

THIS CAUSE comes before the Court for consideration on remand by the Eleventh Circuit. (Dkt. 69). Petitioner, First National Bank of Onieda, N.A. ("FNBO "), originally brought this action against Defendant, Donald Brandt ("Brandt "), to collect the remaining amounts due on several loans after the real estate securing those loans was sold and the proceeds of those sales did not cover the outstanding balances. Brandt, who had earlier filed a chapter 11 bankruptcy petition, moved to dismiss FNBO's claims on the grounds that FNBO could not state a claim for a deficiency because it had not complied with certain provisions of Brandt's previously confirmed chapter 11 plan. This Court agreed with Brandt and dismissed FNBO's deficiency claims that related to loans made before Brandt filed his chapter 11 petition. FNBO appealed this dismissal and, after the parties had filed their briefs, Brandt moved the bankruptcy court to dismiss his chapter 11 case. The bankruptcy court granted Brandt's motion to dismiss. Given the dismissal of his underlying bankruptcy petition, none of Brandt's debts or liabilities were discharged and the automatic stay was terminated. The Eleventh Circuit, in light of what it considers a potentially significant case development, vacated this Court's dismissal of FNBO's deficiency claims and remanded for this Court to consider, in the first instance, whether the dismissal of Brandt's chapter 11 case without a discharge has any effect of FBNO's ability to pursue its deficiency claims in this case. First National Bank of Oneida, N.A. v. Brandt, 887 F.3d 1255, 1262 (2018).

I. Background

A. Brandt's Bankruptcy Proceedings

In July 2009, Brandt filed a voluntary chapter 11 bankruptcy petition. 887 F.3d at 1256. When he filed the petition, Brandt owned, managed, and rented approximately 50 single-family homes and duplexes in Ohio, Tennessee, Arizona, and Florida. Id.

He was also in the business of selling and developing raw land in Tennessee. Id.

FNBO was one of Brandt's creditors and Brandt owed FNBO more than $ 1.3 million on real-estate loans. Id. FNBO filed eleven proofs of claim in Brandt's bankruptcy case—ten for the real-estate loans and one for a car loan that is not at issue here. Id. In its proofs of claim, FNBO asserted that its real-estate loans were fully secured. Id. Brandt did not object to any of FNBO's proofs of claim. See 11 U.S.C. § 502(a) (providing that a claim is deemed allowed unless a party in interest objects). Brandt filed his chapter 11 plan in February 2010. 887 F.3d at 1256. He grouped all of FNBO's real-estate loans into a single class—Class 19—"to the extent allowed as...secured claim[s] under" 11 U.S.C. § 506. Id. at 1256-57. No other claims were included in that class. Id. at 1257.

The plan further provided that Brandt would issue a promissory note to FNBO secured by $ 150,000 worth of real estate.² Id. In exchange for Brandt assuming this additional obligation, FNBO would deem Brandt current on the loans through August 2010. Id. Brandt would then resume his payments to FNBO in September 2010. Id.

The plan also established Class 45—a single class of all unsecured claims allowed under 11 U.S.C. § 502. 887 F.3d at 1257. In its description of Class 45, the plan stated: "Any secured creditor who has filed a secured claim and claims an entitlement to an unsecured claim must file an amended claim seeking entitlement to an unsecured claim by 30 days after the confirmation hearing (including any continued dates) ." (Bolded emphasis in original). Id.

The bankruptcy court confirmed Brandt's chapter 11 plan on December 31, 2011. Id.; (Dkt. 33-6). Believing itself oversecured at that time as to its claims, FNBO did not amend its proofs of claim within 30 days after the plan's confirmation to claim an entitlement to an unsecured claim. 887 F.3d at 1257.

By February 2013, which was a tittle over a year later, Brandt had defaulted on his obligations to FNBO: both on the pre-petition real-estate loans and on the post-petition promissory note. Id. FNBO moved the bankruptcy court to lift the automatic stay so it could foreclose on the real estate securing its loans to Brandt. Id. The bankruptcy court granted the requested relief. Id.

FNBO subsequently sold the real estate securing its loans. Id. After applying the proceeds to the outstanding balances on Brandt's loans, Brandt stilt owed FNBO more than $ 1.2 million. 887 F.3d at 1257. According to FNBO, more than $ 180,000 of that $ 1.2 million deficiency was related to the post-petition promissory note, while the rest related to the pre-petition real-estate loans. Id.

At a hearing on November 3, 2015, FNBO moved the bankruptcy court to lift the automatic stay to allow it to pursue in personam relief against Brandt. Id.

Brandt did not oppose the motion. Id. The bankruptcy court granted the motion and lifted the automatic stay specifically to allow FNBO to pursue its rights and claims (if any) against Brandt." Id.; (Dkt. 17-3). FNBO then brought this case seeking to collect from Brandt the remaining amounts due on both the pre-petition real-estate loans and the post-petition promissory note. 887 F.3d at 1257 ; (Dkt. 1).

B. Procedural History of this Case

FNBO filed its original complaint in January 2016. (Dkt. 1). Brandt moved to dismiss that complaint arguing, among other things, that FNBO could not seek an unsecured deficiency judgment related to its pre-petition real estate loans because FNBO "did not take the steps delineated in Class 45 [of the chapter 11 plan] to assert an unsecured deficiency claim." (Dkt. 9). Specifically, FNBO did not file an amended claim seeking entitlement to an unsecured claim within 30 days after the confirmation hearing. Brandt further argued that allowing FNBO to obtain a deficiency judgment would "disrupt [the plan's] distribution scheme" and cause Brandt to default on his payments to other creditor classes. Id.

In an order entered on May 13, 2016, this Court concluded that FNBO's original complaint stated a plausible claim for deficiency only with respect to the post-petition promissory note. (Dkt. 21). The Court ruled that any deficiency claims related to the pre-petition real-estate loans "necessarily would have been classified in Class 45." Id. at 7. Because FNBO had not alleged "compl[iance] with the Plan's requirements pertaining to Class 45 deficiency claims," this Court dismissed FNBO's deficiency claims related to the pre-petition real-estate loans and instructed FNBO that if it wished to file an amended complaint, it "must attach copies of the Plan, Confirmation Order, and Proofs of Claim, and allege compliance with the provisions relating to Class 45 deficiency claims." Id.

FNBO then filed an amended complain that, like the original complaint, sought the remaining amounts due on both the pre-petition real-estate loans and the post-petition promissory note. (Dkt. 22). FNBO attached copies of the plan, the confirmation order, and the relevant proofs of claim. Id. It did not, however, allege compliance with the provisions relating to Class 45 deficiency claims. Instead, FNBO argued that it was not required to comply with those provisions because, by all accounts, it was oversecured during the relevant time period and because Brandt's chapter 11 plan brought Brandt current on his obligations to FNBO through August 2010. Id. Thus, FNBO claims it "was not required to file a contingent unsecured claim in a speculative unknown amount to preserve its right to receive the full payment promised by the Plan, in the event that Brandt should perhaps default at some later date on his Plan obligations."Id. ¶ 43.

This Court again dismissed FNBO's deficiency claims related to the pre-petition real-estate loans, reiterating that dismissal was warranted because FNBO failed to allege compliance with provisions of Brandt's chapter 11 plan relating to Class 45 deficiency claims, as the Court had directed it must do to state a viable claim. (Dkt. 33). This Court granted FNBO leave to file a second amended complaint to pursue only its claim under the post-petition promissory note. Id.

FNBO filed a second amended complaint in compliance with this Court's Order. (Dkt. 33). Brandt failed to answer the second amended complaint and the clerk entered a default against him. (Dkt. 41). After this Court denied Brandt's motion to set aside that entry of default, Brandt and FNBO stipulated to the entry of a judgment against Brandt for $ 180,000 related to the post-petition promissory note. (Dkt. 60). Judgment was entered on March 28, 2017. (Dkt. 62). FNBO then brought this appeal.

However, on December 14, 2017, after both parties had fully briefed the appeal, Brandt moved the bankruptcy court to dismiss his bankruptcy case. 887 F.3d at 1259 ; (BK Dkt. 860). The bankruptcy court granted the motion and dismissed the case. 887 F.3d at 1259 ; (BK Dkt. 866). According to the dismissal, the automatic stay was terminated and "[n]one of [Brandt's] debts, liabilities, or obligations [were] discharged." Id. FNBO requested the Eleventh Circuit take Judicial Notice of the dismissal of Brandt's bankruptcy case. The Eleventh Circuit granted that motion, vacating this Court's decision on the basis of changed circumstances and remanding for this Court to consider whether the dismissal of Brandt's chapter 11 case without a discharge—after issuance of the Order on appeal here—is a potentially significant event that affects the ultimate...