Savannah Capital, LLC v. Martino
Filing
23
ORDER: The bankruptcy court's Memorandum Opinion and Order Granting Defendant's Motion for Summary Judgment entered in 8:15-ap-418-KRM on July 13, 2016, is AFFIRMED. The Final Judgment entered in 8:15-ap-418-KRM on July 14, 2016, is VACATED and the adversary proceeding is REMANDED with instructions that it be dismissed for lack of jurisdiction. The bankruptcy court's Order Sustaining Objection to Proof of Claim entered in 8:14-bk-13452-KRM on July 29,2016, is AFFIRMED for the reasons stated. The Clerk is directed to transmit a copy of this Order to the bankruptcy court and, thereafter, CLOSE this case. Signed by Judge Virginia M. Hernandez Covington on 4/27/2017. (DRW)
UNITED STATES DISTRICT COURT
MIDDLE DISTRICT OF FLORIDA
TAMPA DIVISION
IN RE:
THOMAS SALVADOR MARTINO,
Debtor.
_____________________________/
SAVANNAH CAPITAL, LLC,
Appellant,
v.
Case No. 8:16-cv-2105-T-33
Bankr. No. 8:14-bk-13452-KRM
Adversary No. 8:15-ap-418-KRM
THOMAS SALVADOR MARTINO,
Appellee.
_____________________________/
ORDER
This appeal arises from a Chapter 7 bankruptcy and a
related adversary proceeding. Appellant Savannah Capital, LLC
filed its brief on January 20, 2017. (Doc. # 14). Appellee
Thomas Salvador Martino filed his responsive brief on March
7, 2017. (Doc. # 20). The bankruptcy trustee joined in the
Appellee’s brief. (Doc. # 21). Savannah filed its reply brief
on March 21, 2017.
I.
Background
Appellee
Thomas
Salvador
Martino,
the
Debtor
and
defendant in the bankruptcy and adversary proceedings below,
was married to Pam Martino, a stepchild of Robinson Callen.
(Doc. # 8-63 at ¶¶ 1, 7-9). Pam Martino and her fifteen
siblings own Savannah, which has been managed by Callen since
2012. (Id. at ¶ 8). Before him, Tanya Glaize, also a child of
Callen, managed Savannah. (Doc. # 8-51 at 3, ¶ 2). Pam Martino
and her siblings go by the moniker of the “Callen Group.”
(Doc. # 8-63 at ¶ 8).
At some unspecified point, the Callen Group agreed with
the Debtor to form a new corporation, DeVille Corp. (Id. at
¶ 9). As part of this venture, it was agreed the Callen Group
would own fifty percent of DeVille via a separate corporate
entity and the Debtor and Pam Martino would own the other
fifty percent. (Id.). The Debtor was to have ongoing control
of DeVille. (Id.).
In October of 2012, the Debtor, in his capacity as
president of DeVille, emailed Callen to request Savannah’s
consent for DeVille to file Chapter 11 bankruptcy. (Doc. # 866 at ¶ 4). The Debtor’s email initiated a series of events
that culminated in August of 2014, when Savannah filed suit
against DeVille in state court for declaratory judgment and
for court-ordered inspection of DeVille’s records. (Doc. # 863 at ¶ 16; Doc. # 8-66). That state-court action led to the
2
entry of a judgment declaring that Savannah owned fifty
percent of DeVille. (Doc. # 14 at 18; Doc. # 20 at 10 n.2).
While the state-court action was pending, on November
14, 2014, the Debtor filed his voluntary petition for Chapter
7 bankruptcy, thereby initiating the underlying bankruptcy
case. (Doc. # 8-6). Among his Schedules, the Debtor listed
Savannah as a creditor, noting the “[c]laim[] [was] for monies
owed and mismanagement.” (Doc. # 8-7 at 17). The amount of
the claim was listed as “[u]nknown” and the claim itself was
marked as contingent, unliquidated, and disputed. (Id.).
Thereafter,
Savannah
filed
a
proof
of
claim
and
a
complaint objecting to the dischargeability of debt, which
initiated the underlying adversary proceeding. (Doc. ## 863; 8-19 at 43-49). The bankruptcy court deemed the proof of
claim and the complaint to be timely filed, and entered orders
documenting the same. (Doc. ## 8-26; 8-28); see also (Doc. #
8-27). The complaint in the adversary proceeding brought suit
against the Debtor and DeVille. (Doc. # 8-63). Through it,
Savannah asserted three counts: objection to dischargeability
of debt, judicial dissolution of DeVille, and accounting.
(Id.). The Debtor moved to dismiss on the grounds that
Savannah lacked standing (Doc. # 8-70), and DeVille moved to
3
be dismissed on the grounds that the bankruptcy court lacked
subject-matter jurisdiction (Doc. # 8-71).
The bankruptcy court held a hearing on June 11, 2015,
during which it heard arguments on the two motions to dismiss.
(Doc. # 8-76). The bankruptcy court orally granted DeVille’s
motion to dismiss stating, “I will grant in part the motion
to dismiss all claims against De[V]ille Corp. De[V]ille Corp.
is not under my jurisdiction.” (Id. at 22:16-18). As to the
Debtor’s motion to dismiss, the hearing was continued. (Id.
at 35:14-24). The order dismissing DeVille from the adversary
proceeding was entered on June 16, 2015. (Doc. # 8-75).
On
August
18,
2015,
the
bankruptcy
court
held
its
continued hearing on the Debtor’s motion to dismiss. (Doc. #
8-85 at 28:15-44:4). The Debtor again argued Savannah lacked
standing to sue in its own right because its claim was a
derivative of DeVille’s. (Id. at 30:14-22). For its part,
Savannah focused its arguments on whether it had pled enough
to give rise to a plausible claim for relief. (Id. at 35:2021:13). After hearing argument, the bankruptcy court denied
the Debtor’s motion to dismiss, stating: “[i]t seems to me
that in a closely-held corporation . . . one shareholder . .
. who has his hands on the control of the corporation[] could
directly injure the other shareholder by mismanaging the
4
corporation.” (Id. at 40:7-12). The bankruptcy court stated
further:
[t]he question, really, is whether under the
Bankruptcy Code there is a debt that’s owed for an
injury to . . . Savannah . . . . [t]hat is distinct
from the debts owed to [DeVille]. And there’s an
overlay here of a closely-held corporation.
[Counsel for Savannah] has alleged and has
suggested there’s an overlay behind the scenes of
a family nature. I’m not sure if that’s alleged,
but you’ve argued that.
And so for this purpose, I think that’s sufficient
to at least get past a motion to dismiss. Can one
shareholder
of
a
privately-held
fifty-fifty
corporation who has his hands on the management of
a company[] manage that company in such a way as to
directly prejudice his other shareholders? And I
think that’s -- I think that can happen.
(Id. at 40:22-41:14). The order denying the Debtor’s motion
to dismiss was entered on September 4, 2015. (Doc. # 8-77).
The Debtor subsequently filed his answer and again asserted
Savannah lacked standing. (Doc. # 8-78 at ¶ 55).
The adversary proceeding continued and on May 17, 2016,
the Debtor filed a motion for summary judgment as to all
counts of the complaint and the allowance of Savannah’s proof
of claim. (Doc. # 8-82). The thrust of the Debtor’s motion
for
summary
judgment
was
that
Savannah’s
claim
was
a
derivative of DeVille’s; in other words, it was DeVille—
rather than Savannah—that had suffered an injury due to the
Debtor’s
alleged
actions.
(Id.).
5
Savannah
responded
by
arguing summary judgment was premature. (Doc. # 8-84). The
bankruptcy court held a hearing on the motion for summary
judgment on June 9, 2016. (Doc. # 8-87). In making its ruling,
the bankruptcy court explained:
There are only three parties in the room -- the two
shareholders and the entity. And the cases that
you’ve cited support the proposition that (a) you
look to the four corners of the complaint and see
what’s alleged as the claims -- see what claims are
alleged.
Secondly, you analyze them as to whether the losses
are direct to the Plaintiff or they’re indirect to
the
Plaintiff
through
the
losses
to
the
corporation.
. . . .
And I’m going to grant your motion. . . . I’m going
to grant your motion for summary judgment.
. . . .
it seems to me the only damages that have been
alleged are that assets, the one asset, the
property, was allowed to be foreclosed on and that
property is now gone, and that the corporation lost
the equity in that property. On the merits, it would
be whether there was any equity or not.
And secondly, that the company’s treasury was
diminished, the assets of the company were
diminished by making a personal loan of a million
-- I don’t know, over a million dollars to Mr.
Martino. And those are assets of the corporation.
And
the
damages
you’ve
alleged
are
the
shareholder’s -- your client’s interest is as a
shareholder in the value of the corporation’s
assets, and the damages alleged are the shareholder
losses.
6
. . . .
So four corners of the complaint, the claims are
direct as to Deville, derivative as to Savannah
Capital. And under the case law that I have seen,
that would mean that this particular Plaintiff does
not have standing to make this claim, even though
we’ve all acknowledged that it’s the only party who
could have done it, but after all these months and
all this time, has not. And that’s where we are
today.
(Id.
at
26:18-31:23).
The
written
order
entered
by
the
bankruptcy court conforms to the reasons stated during the
hearing; namely, that “[l]ike the claimant in [White v.
Whittle,
449
B.R.
427,
430
(Bankr.
M.D.
Fla.
2011)],
[Savannah] ha[d] no standing to recover directly any damages
inflicted on [DeVille] due to the Debtor’s conduct.” (Doc. #
8-88 at 7).
Judgment was entered in favor of the Debtor in the
adversary
proceeding.
(Doc.
#
8-91).
Because
of
its
determination that Savannah lacked standing, the bankruptcy
court
sustained
the
Debtor’s
objection
and
disallowed
Savannah’s claim in the bankruptcy proceeding. (Doc. # 8-58).
Savannah appealed. (Doc. ## 8-59; 8-89). The appeal arising
from the adversary proceeding was assigned case number 8:16cv-2105-T-33
and
the
appeal
arising
from
the
bankruptcy
proceeding was assigned case number 8:16-cv-2151-T-17. Case
number 8:16-cv-2151-T-17 was transferred to the undersigned
7
and the appeals were consolidated. (Doc. # 5; Case No. 16cv-2151, Doc. ## 9; 11).
II.
Jurisdiction
Savannah’s
two
appeals
seek
review
of
three
orders
entered by a bankruptcy judge of this District. In particular,
Savannah appeals (1) the Order Sustaining Objection to Proof
of Claim entered in 8:14-bk-13452-KRM on July 29, 2016; (2)
the Memorandum Opinion and Order Granting Defendant’s Motion
for Summary Judgment entered in 8:15-ap-418-KRM on July 13,
2016; and (3) the Final Judgment entered in 8:15-ap-418-KRM
on July 14, 2016. (Doc. # 1; Case No. 16-cv-2151, Doc. # 1).
The Court has jurisdiction pursuant to 28 U.S.C. § 158(a)(1).
III. Standard of Review
This Court “review[s] the bankruptcy court’s factual
findings for clear error and its resolution of any legal
questions de novo.” In re Coady, 588 F.3d 1312, 1315 (11th
Cir. 2009). A bankruptcy court’s entry of summary judgment is
reviewed de novo, In re Optical Techs., Inc., 246 F.3d 1332,
1335 (11th Cir. 2001), as is the question of standing, Pittman
v. Cole, 267 F.3d 1269, 1282 (11th Cir. 2001).
“A bankruptcy court’s decision to allow or disallow a
claim is reviewed under the abuse of discretion standard.” In
re Bull, 528 B.R. 473, 484 (M.D. Fla. 2015) (citing Nat’l
8
Capital Mgmt., LLC v. Herman, No. 6:11-cv-9-Orl-28, 2011 WL
4531736, at *1 (M.D. Fla. Sept. 29, 2011)). “An abuse of
discretion occurs if the judge fails to apply the proper legal
standard
or
to
follow
proper
procedures
in
making
the
determination, or bases an award upon findings of fact that
are clearly erroneous.” In re Red Carpet Corp. of Panama City
Beach, 902 F.2d 883, 890 (11th Cir. 1990). “A finding of fact
is
clearly
erroneous
‘if
the
record
lacks
substantial
evidence to support it,’ . . . such that [a court’s] review
of the entire evidence leaves [it] ‘with the definite and
firm conviction that a mistake has been committed.’” Blohm v.
C.I.R., 994 F.2d 1542, 1548 (11th Cir. 1993) (citations
omitted).
IV.
Analysis
A.
Standing: A Jurisdictional Issue
“Federal courts are courts of limited jurisdiction. They
possess
only
that
power
authorized
by
Constitution
and
statute.” Kokkonen v. Guardian Life Ins. Co. of Am., 511 U.S.
375, 377 (1994). “Although the Constitution does not fully
explain what is meant by ‘[t]he judicial Power of the United
States,’ . . . it does specify that this power extends only
to ‘Cases’ and ‘Controversies.’” Spokeo, Inc. v. Robins, 136
S. Ct. 1540, 1547 (2016). “Standing . . . is a doctrine rooted
9
in the traditional understanding of a case or controversy. .
. . [It] limits the category of litigants empowered to
maintain a lawsuit in federal court to seek redress for a
legal wrong.” Id.
“Standing ‘is the threshold question in every federal
case, determining the power of the court to entertain the
suit.’” Maverick Media Grp., Inc. v. Hillsborough Cty., Fla.,
528 F.3d 817, 819 (11th Cir. 2008) (citation omitted). “‘In
the absence of standing, a court is not free to opine . . .
about the merits of a plaintiff’s claims,’ . . . and ‘the
court is powerless to continue.’” CAMP Legal Def. Fund, Inc.
v. City of Atlanta, 451 F.3d 1257, 1269 (11th Cir. 2006)
(citations omitted).
“[T]he irreducible constitutional minimum of standing
contains three elements.” Lujan v. Defs. of Wildlife, 504
U.S. 555, 560 (1992). Specifically, “the plaintiff must have
suffered an ‘injury in fact’” that is “(a) concrete and
particularized
.
.
.
and
(b)
‘actual
or
imminent,
not
“conjectural” or “hypothetical.”’” Id. “For an injury to be
‘particularized,’ it ‘must affect the plaintiff in a personal
and individual way.’” Spokeo, 136 S. Ct. 1548 (citations
omitted). “[T]here must [also] be a causal connection between
the injury and the conduct complained of—the injury has to be
10
‘fairly . . . trace[able] to the challenged action of the
defendant.”
Lujan,
504
U.S.
at
560
(third
and
fourth
alterations in original). Finally, “it must be ‘likely’ . .
.
that
the
injury
will
be
‘redressed
by
a
favorable
decision.’” Id. at 561.
“Each
element
plaintiff’s
omitted).
various
case.’”
is
‘an
CAMP,
indispensable
451
F.3d
at
part
1269
of
the
(citation
“[T]he evidence necessary to prove standing at the
stages
of
litigation
[is]
as
follows,”
OMS
Collections, Ltd. v. Tien, 634 Fed. Appx. 750, 755-56 (11th
Cir. 2015):
[a]t
the
pleading
stage,
general
factual
allegations
of
injury
resulting
from
the
defendant’s conduct may suffice, for on a motion to
dismiss we presum[e] that general allegations
embrace those specific facts that are necessary to
support the claim. In response to a summary
judgment motion, however, the plaintiff can no
longer rest on such mere allegations, but must set
forth by affidavit or other evidence specific
facts, which for purposes of the summary judgment
motion will be taken to be true. And at the final
stage, those facts (if controverted) must be
supported adequately by the evidence adduced at
trial.
Lujan, 504 U.S. at 561 (internal quotation marks and citations
omitted).
“After satisfying these constitutional requirements, a
party claiming standing also must demonstrate that prudential
11
considerations do not restrain the trial court from hearing
the case.” E.F. Hutton & Co., Inc. v. Hadley, 901 F.2d 979,
984 (11th Cir. 1990). “The Supreme Court has . . . instructed
courts to consider three prudential principles[,] which may
counsel for judicial restraint in considering the plaintiff’s
claims.” Bischoff v. Osceola Cty., Fla., 222 F.3d 874, 883
(11th Cir. 2000). Those considerations are namely:
“1) whether the plaintiff’s complaint falls within
the zone of interests protected by the statute or
constitutional provision at issue; 2) whether the
complaint raises abstract questions amounting to
generalized grievances which are more appropriately
resolved by the legislative branches; and 3)
whether the plaintiff is asserting his or her own
legal rights and interests rather than the legal
rights and interests of third parties.”
Id. (quoting Saladin v. City of Milledgeville, 812 F.2d 687,
690
(11th
Cir.
1987)).
The
party
invoking
the
court’s
jurisdiction bears the burden of establishing standing. CAMP,
451 F.3d at 1269; E.F. Hutton, 901 F.2d at 985.
1.
Savannah
Savannah argues the bankruptcy court erred in holding it
lacked
standing.
Whether
Savannah
had
standing
turns
on
whether the claim it asserted against the Debtor was a direct
or a derivative claim. And while both parties agree Florida
law determines if the claim was direct or derivative, they
cite
different
tests.
(Doc.
12
##
14
at
31;
20
at
18).
Nevertheless,
the
conclusion
remains
the
same:
Savannah
lacked standing.
In 2006, the Eleventh Circuit stated, “Florida . . .
uses the gravamen test to distinguish between direct and
derivative claims.” Hantz v. Belyew, 194 Fed. Appx. 897, 900
(11th Cir. 2006) (citing Citizens Nat’l Bank of St. Petersburg
v. Peters, 175 So. 2d 54 (Fla. 2d DCA 1965)).
Under the gravamen test, “a stockholder may bring
a suit in his own right to redress an injury
sustained directly by him, and which is separate
and distinct from that sustained by other
stockholders.” . . . If, however, the injury is
“primarily
against
the
corporation,
or
the
stockholders generally, then the cause of action is
in the corporation and the individual’s right to
bring it is derived from the corporation.”
Id.
(internal
citations
omitted).
Subsequent
to
Hantz,
Florida’s Third District Court of Appeal rephrased the test.
The Third District Court of Appeal held:
an action may be brought directly only if (1) there
is a direct harm to the shareholder or member such
that the alleged injury does not flow subsequently
from an initial harm to the company and (2) there
is a special injury to the shareholder or member
that is separate and distinct from those sustained
by the other shareholders or members. . . . [T]here
is an exception to this rule under Florida law. A
shareholder or member need not satisfy this twoprong test when there is a separate duty owed by
the defendant(s) to the individual plaintiff under
contractual or statutory mandates.
13
Dinuro Invs., LLC v. Camacho, 141 So. 3d 731, 739-40 (Fla. 3d
DCA 2014) (internal citations omitted); see also Strazzulla
v. Riverside Banking Co., 175 So. 3d 879, 884 (Fla. 4th DCA
2015) (adopting Dinuro test).
The complaint in the adversary proceeding alleged the
Debtor improperly loaned himself $1,028,162 from DeVille’s
bank account and allowed for a diminution of DeVille’s worth
via foreclosure of valuable property. (Doc. # 8-63 at ¶ 12).
Moreover, when Savannah calculated its damages, it divided
the loan amount and the diminution from the foreclosure by
two. (Doc. # 8-19 at 48-49). In other words, Savannah’s own
valuation of its damages recognizes it was damaged only to
the extent it held a fifty percent share of DeVille. Thus,
Savannah’s alleged injury flowed from an initial harm to
DeVille. Savannah therefore lacked standing to bring a direct
claim.
Savannah’s argument that “when the circumstances show
that the reasons for the general rule requiring a derivative
suit do not apply, shareholders may be allowed to proceed
individually” (Doc. # 14 at 40), is unpersuasive. Savannah
does not cite a single Florida case recognizing such an
exception and the Court is unaware of any. In fact, there is
Florida case law contrary to Savannah’s argument. See, e.g.,
14
Hetrick v. Ideal Image Dev. Corp., 372 Fed. Appx. 985, 989
(11th Cir. 2010) (citing Lincoln Oldsmobile, Inc. v. Branch,
574 So. 2d 1111, 1114 (Fla. 2d DCA 1990) (“[A] stockholder
cannot maintain an action in his own name but must bring it
in the name of the corporation. This is true even where the
individual is the sole stockholder of the corporation.”)).
2.
The Debtor
Savannah argued at the summary judgment hearing that the
Debtor lacked standing to object to its claim. (Doc. # 8-87
at 12:17-13:7). Although the bankruptcy court’s written order
does not address the Debtor’s standing, the bankruptcy court
stated at the hearing:
while it’s a general rule that a debtor that’s out
of money, where there’s no surplus, has no standing
to object to claims, I don’t know whether there’s
going to be a surplus in this case or not. And . .
. the conclusion to disallow the claim flows
directly from the ruling in the adversary
proceeding. And I see no benefit to making the
Trustee, compelling the Trustee to take the papers
from this proceeding and object to your claim. I’m
going to disallow the claim as well.
(Doc. # 8-87 at 27:25-28:8).
On appeal, the Debtor argues that (1) the uncertainty as
to whether there would be a surplus provided him with standing
and
(2)
he
had
standing
by
virtue
of
Savannah’s
dischargeability action. (Doc. # 20 at 26-29). A court sitting
15
in an appellate capacity may affirm “‘on any ground that finds
support
in
the
record,’
including
alternate
grounds
for
summary judgment.” Thompkins v. Lil’ Joe Records, Inc., 476
F.3d
1294,
1303
(11th
Cir.
2007)
(citation
omitted).
Furthermore, the court “need not consider all of the questions
. . . raise[d], if [it] find[s] any ground in the record”
warrants affirmance. In re Monetary Grp., 2 F.3d 1098, 1103
(11th Cir. 2993).
“As a general rule[,] a Chapter 7 debtor is not a ‘party
in interest’ for purposes of [§] 502(a) and therefore lacks
standing to file an objection to a claim.” In re Costello,
184 B.R. 166, 168 (Bankr. M.D. Fla. 1995) (citation omitted);
see also In re Brooks, 548 B.R. 896, 900 (Bankr. S.D. Ga.
2016) (“Chapter 7 debtors usually do not have standing as a
‘party in interest’ to object to the proof of claim . . . .”
(citations omitted)). That “lack of standing to object to a
claim is premised upon the notion that the allowance of the
claim will have no affect [sic] on the debtor’s rights”
because, once the objected to claim is discharged, the debtor
will bear no legal obligation. In re Toms, 229 B.R. 646, 651
(Bankr. E.D. Penn. 1999). But, if the claim were exempted
from the discharge, the debtor would continue to bear a legal
obligation. Id.
16
There
are
exceptions,
however.
Courts
have
found
a
debtor to have standing “where there will be a surplus after
distribution providing the debtor with a pecuniary interest
in the estate,” In re Walker, 356 B.R. 834, 848 (Bankr. S.D.
Fla. 2006) (citation and internal quotation marks omitted),
and “when the debt at issue is one that may not be subject to
discharge,” Brooks, 548 B.R. at 900-01 (citations omitted).
When Savannah instituted the adversary proceeding, the
Debtor, at that point, faced a prospect of a continuing legal
obligation in spite of the discharge. Accordingly, the Debtor
obtained standing to object to Savannah’s claim. Toms, 229
B.R. at 651. However, when the bankruptcy court determined
Savannah
lacked
standing
to
prosecute
the
adversary
proceeding, the Debtor no longer faced the possibility of
having to bear a continuing legal obligation after receiving
a discharge. Thus, the Debtor lost standing to object to
Savannah’s claim. Id. at 651-56 (holding that debtors lacked
standing
to
object
to
allowance
of
a
claim
that
was
dischargeable).
The cases cited by the Debtor do not convince the Court
to the contrary. In In re Mandel, the objection to the claim
was
decided
before
the
bankruptcy
court
resolved
the
adversary proceeding that sought to exempt the claim from
17
discharge. 641 Fed. Appx. 400, 402 (5th Cir. 2016). Likewise,
there is no indication in Brooks that the adversary proceeding
had concluded at the time the bankruptcy court adjudicated
the objection to the claim. 548 B.R. at 899-901. In contrast,
here, the Debtor’s objection to Savannah’s claim was disposed
of after the adversary proceeding seeking to exempt the claim
from discharge was resolved. (Doc. # 8-87 at 28:3-5). And
with respect to In re O’Donnell, the discussion of the
debtor’s standing to object is dicta. 326 B.R. 901 (Table),
No. 04-8054, 04-8056, 2005 WL 1279268, at *5 (Bankr. App.
Panel of the 6th Cir. May 19, 2005) (“the filing of an
objection by the Debtors is not necessary to the Panel’s
decision . . . . However, while not strictly necessary to the
Panel’s decision, the Panel will review the question of
whether the Debtors had standing.”).
The bankruptcy court therefore erred when it allowed the
Debtor to object to Savannah’s proof of claim. In the end
though, the error was harmless. Fed. R. Bankr. P. 9005 (making
Federal Rule of Civil Procedure 61 applicable to bankruptcy
actions). “Under the harmless error rule[,] this Court may
disregard errors which do not affect substantial rights.” In
re Carapella, 115 B.R. 365, 368 (M.D. Fla. 1990).
A court may question standing sua sponte. Indeed,
18
[b]efore rendering a decision . . . every federal
court operates under an independent obligation to
ensure it is presented with the kind of concrete
controversy upon which its constitutional grant of
authority is based; and this obligation on the
court to examine its own jurisdiction continues at
each stage of the proceedings, even if no party
raises the jurisdictional issue and both parties
are prepared to concede it.
Cuban Am. Bar Ass’n, Inc. v. Christopher, 43 F.3d 1412, 142223 (11th Cir. 1995) (quoting Hallandale Prof’l Fire Fighters
Local 2238 v. City of Hallandale, 922 F.2d 756, 759 (11th
Cir.
1991)).
Savannah’s
The
bankruptcy
standing
to
court
bring
a
was
claim
free
in
to
the
question
bankruptcy
proceeding. And because it was DeVille that directly suffered
the alleged injury, the claim was DeVille’s to bring. As such,
the bankruptcy court’s disallowance of Savannah’s claim was
proper.
B.
No Abuse of Discretion
Savannah further argues the bankruptcy court abused its
discretion in two ways. The first putative abuse occurred
when the bankruptcy court denied the Debtor’s motion to
dismiss, which sought dismissal on the grounds that Savannah
lacked standing, but then subsequently granted the Debtor’s
motion for summary judgment on the grounds that Savannah
lacked standing. The second claimed error occurred when the
bankruptcy court did not grant Savannah leave to amend its
19
complaint. Neither argument convinces the Court that an abuse
of discretion occurred.
The bankruptcy court was free to revisit the question of
standing,
notwithstanding
its
decision
on
the
motion
to
dismiss. See E.F. Hutton, 901 F.2d at 983 (noting that where
district court denies motion to dismiss, allows discovery,
and reconsiders standing at summary judgment, appellate court
evaluates standing from all the materials in the record). To
be sure, standing may be challenged at any time and must be
proved by the degree required for the stage at which it is
challenged. CAMP Legal Def. Fund, 451 F.3d at 1269; Cuban Am.
Bar Ass’n, 43 F.3d at 1422-23 (citation omitted).
And
with
respect
to
Savannah’s
argument
that
the
bankruptcy court should have granted it leave to amend after
finding Savannah lacked standing to bring a direct claim,
this
Court
cannot
say
the
bankruptcy
court
abused
its
discretion. “Discretion necessarily entails flexibility and
autonomy; the [lower] court does not abuse its discretion
simply because the appellate court would have handled the
issue differently.” Fils v. City of Aventura, 647 F.3d 1272,
1283 (11th Cir. 2011) (citation omitted).
Savannah
standing
was
knew
from
contested.
the
motion
(Doc.
20
#
to
dismiss
8-70).
that
its
Furthermore,
Savannah’s current argument that it had no reason to seek
leave to amend after the bankruptcy court denied the Debtor’s
motion to dismiss is belied by its argument below. During the
August 18, 2015, hearing, Savannah argued it had pled enough
to survive a motion to dismiss, not that it had proven
standing. (Doc. # 8-85 at 36:13-14, 37:24-38:13). Moreover,
although the bankruptcy court denied the motion to dismiss,
the question of standing was free to be revisited later in
the proceeding. (Id. at 40:18-19). The Debtor’s answer also
reasserted the challenge to Savannah’s standing. (Doc. # 878 at ¶ 55). Taken as a whole, the record demonstrates that
Savannah knew its standing was contested and it could have
sought leave to bring a derivative claim. But it chose not to
seek leave to amend. Given this procedural history, the Court
cannot say an abuse of discretion occurred.
C.
The Judgment
An appellate court “must consider questions concerning
[its] appellate jurisdiction on [its] own motion even if
neither party has raised the issue.” Holloman v. Mail-Well
Corp., 443 F.3d 832, 844 (11th Cir. 2006). “[T]he issue of
standing may be raised at any time, including after the entry
of judgment.” Alvarez v. Royal Atlantic Developers, Inc., 854
F. Supp. 2d 1219, 1225 (S.D. Fla. 2011) (citing AT&T Mobility,
21
LLC v. NASCAR, Inc., 494 F.3d 1356, 1359–60 (11th Cir. 2007);
Fla. Ass’n of Med. Equip. Dealers v. Apfel, 194 F.3d 1227,
1230 (11th Cir. 1999); Pelphrey v. Cobb County, 495 F. Supp.
2d 1311, 1314 (N.D. Ga. 2007)).
Bankruptcy
courts,
like
all
federal
courts,
are
constrained in their exercise of jurisdiction by, inter alia,
standing considerations. See In re All Am. Trailer Mfrs.,
Inc., 631 Fed. Appx. 699, 700-01 (11th Cir. 2015) (concluding
that appellant lacked standing after sua sponte raising the
issue, vacating order of district court affirming bankruptcy
order, and remanding with instructions for district court to
dismiss for lack of subject matter jurisdiction); In re J.H.
Inv. Servs., Inc., 413 Fed. Appx. 142, 149-50 (11th Cir. 2011)
(after noting “standing is a jurisdictional requirement” and
a party’s “failure to raise the standing issue [did] not
impede [its] ability to consider the issue for the first time
on appeal,” court sua sponte addressed standing). When the
bankruptcy court concluded Savannah lacked standing, “the
court [became] powerless to continue.” CAMP, 451 F.3d at 1269
(citations and internal quotation marks omitted). Indeed,
“[u]nless [Savannah] ha[d] . . . standing to bring its claims,
the . . . court had no . . . authority to enter a judgment in
the case.” Maverick Media Grp., 528 F.3d at 819-20; see also
22
Cuban Am. Bar Ass’n, 43 F.3d at 1422-23. The judgment of the
bankruptcy court is therefore vacated and the case is remanded
with
instructions
to
dismiss
the
case.
See
Id.
at
823
(vacating district court’s judgment when plaintiff lacked
standing
and
remanding
with
instructions
to
dismiss
the
case).
Accordingly, it is
ORDERED, ADJUDGED, and DECREED:
(1)
The bankruptcy court’s Memorandum Opinion and Order
Granting Defendant’s Motion for Summary Judgment entered
in 8:15-ap-418-KRM on July 13, 2016, is AFFIRMED.
(2)
The Final Judgment entered in 8:15-ap-418-KRM on July
14, 2016, is VACATED and the adversary proceeding is
REMANDED with instructions that it be dismissed for lack
of jurisdiction.
(3)
The bankruptcy court’s Order Sustaining Objection to
Proof of Claim entered in 8:14-bk-13452-KRM on July 29,
2016, is AFFIRMED for the reasons stated above.
(4)
The Clerk is directed to transmit a copy of this Order
to the bankruptcy court and, thereafter, CLOSE this
case.
23
DONE and ORDERED in Chambers in Tampa, Florida, this
27th day of April, 2017.
24
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