Suncoast Credit Union v. Santiago et al

Filing 12

ORDER granting 11 The Appellant, Suncoast Credit Union's Motion to Lift Stay and for Summary Reversal to the extent the case will be remanded to the Bankruptcy Court. The stay is hereby LIFTED. The case is REMANDED to the United States B ankruptcy Court for the Middle District of Florida for entry of an order consistent with the United States Supreme Court's holding in Bank of America v. Caulkett, 575 ---U.S.--- (2015). The Clerk of the Court shall send a copy of this Order to the Clerk of the Bankruptcy Court for the Middle District of Florida and close the file. Signed by Judge Sheri Polster Chappell on 7/2/2015. (LMF)

UNITED STATES DISTRICT COURT
MIDDLE DISTRICT OF FLORIDA
FORT MYERS DIVISION
IN RE: ANGEL SANTIAGO and NILDA
SANTIAGO

SUNCOAST CREDIT UNION,
Appellant,
v.

Case No: 2:14-cv-598-FtM-38

ANGEL SANTIAGO
SANTIAGO,

and

NILDA

Appellees.
/
ORDER1
This matter comes before the Court on the Appellant, Suncoast Credit Union's
Motion to Lift Stay and for Summary Reversal (Doc. #11) filed on July 1, 2015. The issue
presented here is whether this Court should summarily reverse the Bankruptcy Court’s
Order stripping off the junior lien from the property in this case.
FACTS
On June 26, 2013, the Debtors, Angel and Nilda Santiago filed a voluntary Chapter
13 petition in the United States Bankruptcy Court for the Middle District of Florida. The
Chapter 13 was converted to a Chapter 7 on March 7, 2014. The Debtors own real

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property located at 3818 Southwest 7th Place, Cape Coral, Florida 33914 (Property). The
Property was subject to two mortgage liens. The first-priority mortgage lien held by Chase
Home Mortgage is in the approximate amount of $117,925.00. The second mortgage lien
(junior lien) issued by the Appellant is in the approximate amount of $4,802.48.
After the conversion to Chapter 7, the Debtors moved to strip the junior lien from
the Property. On August 28, 2014, the Bankruptcy Court held a hearing on the Motion to
Strip Junior Lien. On September 3, 2014, the Bankruptcy Court issued an Order granting
the Motion and stripped the Junior Lien from the Property. As grounds for granting the
Motion, the Bankruptcy Court relied on the Eleventh Circuit’s holding in McNeal v. GMAC
Mortgage, LLC, 735 F. 3d 1263 (11th Cir. 2012), and Folendore v. Small Business
Administration, 862 F. 2d 1537 (11th Cir. 1989).
Suncoast appealed the Bankruptcy Court’s decision to this Court. After the appeal
was before the Court, Suncoast moved to stay the appeal until the United States Supreme
Court ruled on the same issue pending before it in Bank of America v. Caulkett, 575 --U.S.---(2015). The stay was granted pending the Supreme Court’s decision. On June 1,
2015, the Supreme Court issued a ruling in Caulkett, overturning McNeal and Folendore.
STANDARD OF REVIEW
Pursuant to 28 U.S.C. § 158(a). The United States District Court functions as an
appellate court in reviewing decisions of the United States Bankruptcy Court. In re Fish,
2013 WL 1104884, *2 (M.D. Fla. March 18, 2013) (citing In re Colortex Indus., Inc., 19
F.3d 1371, 1374 (11th Cir.1994)). This Court reviews de novo the legal conclusions of the
bankruptcy court. In re Fish, 2013 WL 1104884 at *2 (citing In re JLJ, Inc., 988 F.2d 1112,
1116 (11th Cir.1993)).

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The standard of review employed by this Court in reviewing the bankruptcy court's
findings of fact is the clearly erroneous standard of review described in Federal Rule of
Bankruptcy Procedure 8013: “Findings of fact, whether based on oral or documentary
evidence, shall not be set aside unless clearly erroneous, and due regard shall be given
to the opportunity of the bankruptcy court to judge the credibility of the witnesses.” In re
Fish, 2013 WL 1104884 at *2 (citing In re Thomas, 883 F.2d 991, 994 (11th Cir.1989)). A
finding of fact is clearly erroneous when, “although there is evidence to support it, the
reviewing court on the entire record is left with the definite and firm conviction that a
mistake has been committed.” Crawford v. W. Elec. Co., Inc., 745 F.2d 1373, 1378 (11th
Cir.1984) (citing United States v. United States Gypsum Co., 333 U.S. 364, 68 S. Ct. 525,
92 L. Ed. 746 (1948)).
DISCUSSION
Based upon the Supreme Court’s decision in Caulkett, Suncoast now moves the
Court to lift the stay and reverse the Bankruptcy Court’s decision. The Bankruptcy Court’s
decision was based upon the Eleventh Circuit’s holdings in McNeal and Folendore. In
McNeal and Folendore, the Eleventh Circuit held that a junior lien may be stripped off or
voided when the junior lien is completely underwater because a senior lien exceeds the
value of the property. The Eleventh Circuit stated in such circumstances the junior lien
may be stripped off pursuant to 11 U.S.C. § 506(d).
The Caulkett decision overturned both McNeal and Folendore holding “… that a
debtor in a Chapter 7 bankruptcy proceedings may not void a junior mortgage lien under
§506(d) when the debt owed on a senior mortgage lien exceeds the current value of the
collateral.” Caulkett, 575 --- U.S. ---, at 7 (2015). Since the Bankruptcy Court’s decision

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to strip the junior lien was based on an earlier judgment that has been reversed, the case
will be remanded to the Bankruptcy Court for further proceedings consistent with the
Supreme Court’s ruling in Caulkett.
Accordingly, it is now
ORDERED:
The Appellant, Suncoast Credit Union's Motion to Lift Stay and for Summary
Reversal (Doc. #11) is GRANTED to the extent the case will be remanded to the
Bankruptcy Court.
(1) The stay is hereby LIFTED.
(2) The case is REMANDED to the United States Bankruptcy Court for the Middle
District of Florida for entry of an order consistent with the United States
Supreme Court’s holding in Bank of America v. Caulkett, 575 ---U.S.--- (2015).
(3) The Clerk of the Court shall send a copy of this Order to the Clerk of the
Bankruptcy Court for the Middle District of Florida and close the file.
DONE and ORDERED in Fort Myers, Florida this 2nd day of July, 2015.

Copies: All Parties of Record
The Honorable Caryl E. Delano,
United States Bankruptcy Judge

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