Miller v. Deutsche Bank Nat'l Trust Co. (In re Miller)

• Decision Date: 01 February 2012
• Docket Number: No. 11–1232.,11–1232.
• Citation: 666 F.3d 1255
• Parties: In re Mark Stanley MILLER, also known as A Moment to Remember Photo & Video, also known as Illusion Studioz; Jamileh Miller, Debtors.Mark Stanley Miller; Jamileh Miller, Appellants, v. Deutsche Bank National Trust Company, Appellee.
• Court: U.S. Court of Appeals — Tenth Circuit

666 F.3d 1255

In re Mark Stanley MILLER, also known as A Moment to Remember Photo & Video, also known as Illusion Studioz; Jamileh Miller, Debtors.Mark Stanley Miller; Jamileh Miller, Appellants,

v.Deutsche Bank National Trust Company, Appellee.

No. 11–1232.

United States Court of Appeals, Tenth Circuit.

Feb. 1, 2012.

Submitted on the briefs: ^*

Mark S. Miller and Jamileh Miller, Pro se.

Susan J. Hendrick, Aronowitz & Mecklenburg, LLP, Denver, CO, for the Appellee.

Before KELLY, Circuit Judge, PORFILIO, Senior Circuit Judge, and MATHESON, Circuit Judge.

PORFILIO, Senior Circuit Judge.

After Deutsche Bank National Trust Company (Deutsche Bank) brought a foreclosure action against the home owned by appellants Mark Stanley Miller and Jamileh Miller and obtained an Order Authorizing Sale (OAS) from a Colorado court, the Millers filed a Chapter 13 bankruptcy petition. Upon the filing of their petition, an automatic stay entered, halting the foreclosure proceedings. See 11 U.S.C. § 362(a). Deutsche Bank obtained an order from the bankruptcy court relieving it from the stay to permit the foreclosure to continue. See id. § 362(d). The Tenth Circuit Bankruptcy Appellate Panel (BAP) affirmed the bankruptcy court's order granting Deutsche Bank relief from the automatic stay. The Millers now appeal from the BAP's order affirming relief from stay.

The issue before us is whether Deutsche Bank established that it was a “party in interest” entitled to seek and obtain relief from the stay. See id. Because we conclude that Deutsche Bank did not meet its burden of proof on this issue, we reverse the BAP's order and remand for further proceedings.

BACKGROUND

On April 20, 2006, the Millers executed a promissory note (Note) in the amount of $216,236 in favor of IndyMac Bank, F.S.B. (IndyMac). The Note was secured by a Deed of Trust assigning a security interest in the Millers' Colorado home to the public trustee of Arapahoe County and creating a power of sale in the public trustee. The Deed of Trust identified Mortgage Electronic Registration Systems, Inc. (MERS), acting as a nominee for IndyMac, as its beneficiary. It further provided that “[t]he Note ... (together with this Security Instrument) can be sold one or more times without prior notice to Borrower.” Aplt.App. at 31.

1. State Court Proceedings

The Millers failed to make the required payments on the Note. In February 2010, Deutsche Bank, claiming to be the current holder of the Note, filed a foreclosure action in the Arapahoe County, Colorado District Court and sought an OAS under Colorado Rule of Civil Procedure 120.¹

On May 4, 2010, the Millers filed their “Motion for Hearing on Jurisdiction” in the Rule 120 proceeding. The Millers argued that Deutsche Bank lacked standing to seek an OAS. See Aplee. Supp.App. at 56 (arguing that “standing to bring [a Rule 120] proceeding stems from an interest recorded in the public record which the Petitioner here does not have and has made no effort to present such evidence to the court”).

On May 6, 2010, the state district court entered an order denying the Millers' motion. In this order, the court determined that Deutsche Bank had made a sufficient showing that it was an “interested person” entitled to an OAS. The text of the order reads as follows:

The issue before the Court is whether the party seeking the ord[e]r auth [or]izing sale is an “interested person” as that term is used in C.R.C.P. 120. A copy of the note is attached to the motion requesting an order auth [oriz]ing sale. The note on page 6 below the respo[n]d[e]nts' signatures is endorsed in blank by Lender. No evidence has been presented to suggest that the endorsement is not genuine or that the pet[i]tioner is not in possession of the original note. The pet[i]tioner is entitled to an order auth [oriz]ing sale.

Id. at 51 (emphasis added).

The state court thus reached its conclusions based on its review of a copy of the Note, which had been indorsed in blank. There is no evidence that the state court was presented with the original Note before it authorized the sale. A few days later, the Millers again moved for a hearing on the jurisdictional issue. The state court summarily denied their motion. It later entered an OAS and an additional summary order finding that Deutsche Bank had established jurisdiction in its pleadings and that the Millers had “not specified a legal reason why jurisdiction has not been established.” Id. at 62.

2. Proceedings in Bankruptcy Court

The Millers filed their Chapter 13 bankruptcy petition on June 22, 2010. On October 7, 2010, Deutsche Bank filed its motion for relief from stay. In its motion, Deutsche Bank recited that it was the current owner of the Note and Deed of Trust. A copy of the Note, indorsed in blank, was attached to the motion.²

The Millers responded in two ways. First, they filed an adversary proceeding in which they accused Deutsche Bank of filing a fraudulent foreclosure and fraudulently seeking relief from stay. (The adversary proceeding is not a subject of this appeal.) Second, they lodged an objection to the motion for relief from stay. In their objection, the Millers asserted that Deutsche Bank was not the proper party in interest and lacked standing to bring the motion. Specifically, they complained that Deutsche Bank had not produced the original Note or proved that it was in possession of the Note.

On November 3, 2010, the bankruptcy court held a hearing on the motion for relief from stay. During the hearing, counsel for Deutsche Bank proffered a copy of the Note indorsed in blank by IndyMac, along with a copy of the Deed of Trust. The bankruptcy judge asked counsel “where is the original of the note right now?” Aplt.App., Vol. II at 95. Counsel responded, “The original of the note has been requested, and it should be on the way to our firm here shortly. I can present that at any evidentiary hearing.” Id.

Apparently, no further evidentiary hearing was held on the issue of Deutsche Bank's possession of the Note. Instead, the bankruptcy court made findings from the bench at the close of the hearing on the motion for relief from stay. The court observed that it had a copy of the Note and that “I have representation of counsel that the original is on its way.” Id. at 107. After noting the state court's findings that Deutsche Bank had standing to proceed under Colorado Rule of Civil Procedure 120, the bankruptcy court found that “sufficient grounds exist for the lifting of the automatic stay” and that relief from stay was appropriate. Id. at 110.

3. The BAP Appeal

The Millers appealed the bankruptcy court's order granting relief from stay to the BAP. The BAP began its decision by noting that “[t]he details surrounding the assignment to Deutsche Bank are not part of the record on appeal.” Aplee. Supp.App. at 6 n. 8. In particular, the record submitted to the BAP did not even contain a copy of the Note, much less the original.³

In its decision, the BAP spent little time discussing the adequacy of proof that Deutsche Bank was in possession of the original Note, and the legal consequences thereof. Instead, the BAP relied on the Rooker–Feldman doctrine. See Rooker v. Fid. Trust Co., 263 U.S. 413, 44 S.Ct. 149, 68 L.Ed. 362 (1923); D.C. Court of Appeals v. Feldman, 460 U.S. 462, 103 S.Ct. 1303, 75 L.Ed.2d 206 (1983). Though noting that the bankruptcy court had not expressly mentioned this doctrine, it concluded that the court had relied on the state court's decision on the standing issue. The BAP further concluded that in light of this doctrine, which generally prohibits federal courts from entertaining suits by parties who have lost in state court and who seek review of state court decisions in federal court, “the bankruptcy court properly declined to revisit the state court's decision that Deutsche Bank was an ‘interested person’ entitled to a Rule 120 order of sale.” Aplee. Supp.App. at 16. Armed with the state-court decision finding Deutsche Bank had standing to proceed with the foreclosure, the BAP reached a further conclusion that Deutsche Bank had standing to seek relief from stay.

ANALYSIS

1. Standard of Review

“Although this appeal is from a decision by the BAP, we review only the Bankruptcy Court's decision.” C.O.P. Coal Dev. Co. v. C.W. Mining Co. (In re C.W. Mining Co.), 641 F.3d 1235, 1240 (10th Cir.2011) (internal quotation marks omitted). “We review matters of law de novo, and we review factual findings made by the bankruptcy court for clear error.” Id. (citation omitted). “[W]e treat the BAP as a subordinate appellate tribunal whose rulings are not entitled to any deference (although they certainly may be persuasive).” Parks v. Dittmar (In re Dittmar), 618 F.3d 1199, 1204 (10th Cir.2010).

The bankruptcy court's decision whether to grant relief from stay is reviewed for an abuse of discretion. Chizzali v. Gindi (In re Gindi), 642 F.3d 865, 872 (10th Cir.2011), overruled on other grounds by TW Telecom Holdings, Inc. v. Carolina Internet Ltd., 661 F.3d 495, 497 (10th Cir.2011). We review the application of the Rooker–Feldman doctrine de novo. See Mann v. Boatright, 477 F.3d 1140, 1145 (10th Cir.2007) (holding that the dismissal of a complaint pursuant to the Rooker–Feldman doctrine is reviewed de novo).

2. Relief from Stay Standard

The Bankruptcy Code provides that “[o]n request of a party in interest and after notice and a hearing, the court shall grant relief from the stay” if the party in interest has made the appropriate showing to obtain such relief. 11 U.S.C. § 362(d).⁴ The Bankruptcy Code does not define the term “party in interest” for purposes of this subsection. Courts have concluded, however, that in order to invoke the court's power to award relief under § 362(d), a party must be either a creditor or a debtor of the bankruptcy estate. See, e.g., Roslyn Savings Bank v. Comcoach Corp. (In re Comcoach Corp.), 698 F.2d 571, 573 (2d Cir.1983). The question, then, is whether Deutsche Bank has...