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Fourth Circuit Affirms Judgment of South Carolina District Court in Denying Debtors’ Motion for Reconsideration Arising from Bankruptcy Proceeding

Branch Banking and Trust Company v. Cathy Lanier
United States Court of Appeals for the Fourth Circuit Case No. 14-1459
(4th Cir. Oct. 29, 2014)

by Jhanelle A. Graham, Associate
Semmes, Bowen & Semmes (www.semmes.com)

Available at: http://www.ca4.uscourts.gov/Opinions/Unpublished/141459.U.pdf

In Branch Banking and Trust Company v. Cathy Lanier, Randy and Cathy Lanier (collectively, “the Laniers”) appealed the district court’s judgment in favor of Branch Banking & Trust Company (“BB&T Co.”) and its order denying their Fed. R. Civ. P. 59(e) motion for reconsideration. In a per curiam opinion, the United States Court of Appeals for the Fourth Circuit affirmed the South Carolina district court’s ruling.

BB&T were holders of certain commercial notes and mortgages executed by the Laniers. BB&T obtained judgments and decrees of foreclosure in the Court of Common Pleas for Lexington County, South Carolina, in the fall of 2011, and Randy Lanier filed for relief under the United States Bankruptcy Code. By order dated November 7, 2011, United States Bankruptcy Judge David R. Duncan granted a motion to dismiss Randy Lanier’s bankruptcy case on the grounds that the amount of the Laniers’ secured and unsecured debt exceeded the limitations provided by 11 U.S.C. § 109(e), so that Randy Lanier was not eligible for relief under Chapter 13 of the Bankruptcy Code. Foreclosure sales of the property were scheduled for November 8, 2011.

On November 8, 2011, the Laniers jointly filed a second bankruptcy case. On January 3, 2012, Chief Bankruptcy Judge John E. Waites issued an order dismissing the case with prejudice, upon concluding that the Laniers had filed the second bankruptcy case in bad faith and to impede BB&T’s foreclosure sales. Judge Waites further noted that certain documents submitted by Appellants at a hearing on November 19, 2012, had no legal effect, and that their assertion of payment had been rejected by Judge Duncan and in state court. As a consequence, BB&T obtained supplemental judgments and decrees of foreclosure. Foreclosure sales were scheduled for March 5, 2012. The Laniers filed a notice of appeal in bankruptcy court on January 17, 2012, along with a motion to stay the pending foreclosure sales. Both motions were denied. The notice of appeal from the bankruptcy court was docketed in the United States District Court for the District of South Carolina on February 14, 2012. Also, on February 14, 2012, the Laniers filed in district court a motion to stay the foreclosure sale.

In accordance with 28 U.S.C. § 636(b) and Local Rule 73.02, D.S.C., the matter was referred to United States Magistrate Judge Shiva V. Hodges for pretrial handling. The Magistrate Judge filed an order on February 16, 2002, directing the Laniers to file their brief within fourteen (14) days, and further directing BB&T to file its brief within fourteen (14) days thereafter. On February 28, 2012, the Laniers filed a second motion to stay, and the district court issued an order denying the stay on that date, noting that the Laniers did not meet their burden of establishing entitlement to such injunctive relief. The Laniers filed their brief one (1) day later, on February 29, 2012, shortly after which they filed a motion to reconsider. Their motion was denied by order on March 2, 2012, and the court was informed that the foreclosure sales were held and the properties were sold as scheduled on March 5, 2012.

On January 30, 2013, Magistrate Judge Hodges issued a Report and Recommendation, in which she observed that the Laniers’ bankruptcy schedules revealed a total secured debt of $2,884,025.00. She further noted that the secured debt at issue was established by several unappealed orders and judgments. The South Carolina district court observed that a bankruptcy court’s findings of fact are reviewed under the clearly erroneous standard of review. Zack v. United States, 224 B.R. 601, 603 (Bankr. E.D. Mich. 1998). A bankruptcy court’s conclusions of law are reviewed de novo. Id. On appeal, the South Carolina district court may affirm, modify, or reverse a bankruptcy judge’s judgment, order, or decree, or remand with instructions for further proceedings. FED. R. BANKR. P. 8013.

Magistrate Judge Hodges analyzed the Laniers’ contentions of error, and determined that they provided no basis for reversing Judge Waites’ January 3, 2012 Order dismissing the Laniers’ bankruptcy case with prejudice. The Laniers filed objections to the Report and Recommendation on February 19, 2013, but the South Carolina district court adopted the Report and Recommendation of the Magistrate Judge, affirmed Judge Waites’s January 3, 2012, Order, and dismissed the Laniers’ Chapter 13 bankruptcy case with prejudice. The Laniers appealed timely to the United States Court of Appeals for the Fourth Circuit.

On appeal, the Fourth Circuit addressed the Laniers’ challenge to the district court’s jurisdiction over BB&T’s action. According to the appellate court, the South Carolina district court correctly found complete diversity among the parties and, therefore, had jurisdiction under 28 U.S.C. § 1332(a) (2012). See United States ex rel. Vuyyuru v. Jadhav, 555 F.3d 337, 348 (4th Cir. 2009) (stating standard of review); Hoschar v. Appalachian Power Co., 739 F.3d 163, 170-71 (4th Cir. 2014) (discussing diversity jurisdiction with regard to corporations). Next, the Fourth Circuit addressed the Laniers’ suggestion that the district court judge displayed bias towards them—upon a review of the record, the appellate court found no evidence to support the Laniers’ claim. See Belue v. Leventhal, 640 F.3d 567, 573 (4th Cir. 2011) (providing standard for determining judicial bias). Finally, after a careful review of the record, the Fourth Circuit held that the South Carolina district court properly rejected the Laniers’ various attempts to show that the promissory note and the mortgages obligating them to BB&T were invalid or unenforceable, as well as the Laniers’ attempts to challenge the amount of damages awarded by the district court. Accordingly, the Fourth Circuit affirmed the judgment of the South Carolina district court denying the Laniers’ motion for reconsideration.


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