Smith et al v. Countrywide Home Loans, Inc.

Filing 17

ORDER denying 4 Motion to Dismiss; denying 4 Motion for Sanctions; and denying 10 Motion to Vacate Judgment. The Order of the Bankruptcy Court is AFFIRMED. However, the Smiths are warned that continuation of their abusive litigation tactics may result in the imposition of further sanctions. Signed by Chief Judge Lisa G. Wood on 7/25/2013. (csr)

in the antttb tatt Jitrttt Court
for the boutbern Martet of deorsia
runbitkDibiton
In Re:
MARVIN B SMITH, III; SHARON H.
SMITH,
Debtors.
MARVIN B. SMITH, III; SHARON H.
SMITH,
Debtors/Appellants
VS.

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BAC HOME LOANS SERVICING LP f/k/a *
COUNTRYWIDE HOME LOAN *
SERVICING LP, AS SERVICING AGENT *
FOR THE BENEFIT OF THE BCAP 2006-AA *
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TRUST
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Creditor/Appellee.

Chapter 7 Case
Number 07-20244

CV 212-179

ORDER

Presently before the Court is an appeal from the United
States Bankruptcy Court's Order dismissing Debtors Marvin and
Sharon Smith's Motion to Reconsider with Prejudice and granting
Creditor BAC Home Loans Servicing LP f/k/a Countrywide Loan
Servicing LP's Motion for Sanctions. See R. 46-59. For the
reasons stated below, the Bankruptcy Court Order is AFFIRMED.

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For the same reasons, the Smiths' Motion to Vacate Judgment,
Dkt. No. 10, is DENIED.

Finally, BAC Home Loans' Motion to

Dismiss the Appeal and motion for additional sanctions, Dkt. No.
4, is DENIED.
BACKGROUND

The facts underlying the long and arduous history of this
litigation are more fully set forth in the Bankruptcy Order.
See R. 46-59. In sum, the Smiths have spent approximately four
years attacking a Consent Order entered into by their former
counsel. Undeterred by repeated defeat, the Smiths have filed
numerous documents challenging the Consent Order in the
Bankruptcy Court, this Court, the Eleventh Circuit, and even the
United States Supreme Court.
Through counsel, the Smiths filed this bankruptcy case on
April 2, 2007. Countrywide' filed two proofs of claim,
describing both claims as secured by real property identified as
311 10th Street, Unit # B, St. Simons Island, Georgia. On
November 12, 2008, the Smiths through counsel agreed to a
Consent Order modifying the automatic stay regarding this
property.
Five months after agreeing to the Consent Order, the
Smiths, now proceeding pro se, filed a motion to vacate the

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Pursuant to the Eleventh Circuit's grant of a Motion for
Substitution, BAC Home Loans is presently the creditor at issue.

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Consent Order. The Smiths' challenged Countrywide's status as
the owner of the Smiths' mortgage. The Bankruptcy Court denied
the Smiths' Motion to Vacate the Consent Order, emphasizing that
the Consent Order constituted a contract between the parties and
that, by agreeing to the Consent Order, the Smiths waived any
challenge to Countrywide's proof of claims. See R. 107.
The Smiths appealed the Bankruptcy Court's denial of their
Motion to Vacate to this Court. On July 20, 2010, this Court
affirmed the Bankruptcy Court's Order and denied the Smiths'
request to reconsider Countrywide's claims. See R. 202-03. The
Smiths then sought review from the Eleventh Circuit, which
issued three opinions regarding the Smiths' appeal. R. 248-49,
255-56, 330-331.

The Eleventh Circuit determined that the

Smiths' appeal was "frivolous and entirely without merit." R.
331.
While still pursuing their appeal before the Eleventh
Circuit, the Smiths began pursuing a motion to reconsider in the
Bankruptcy Court. It is the Bankruptcy Court's decision on that
motion to reconsider that is presently before this Court.
After the Eleventh Circuit denied the Smiths' "Petition for
Panel Rehearing," the Smiths submitted an application to Supreme
Court Justice Clarence Thomas for an extension of time to file a
petition for writ of certiorari. The Smiths continued their
filings in the Bankruptcy Court. Eventually the extended time
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to petition the Supreme Court for certiorari ran without the
Smiths ever filing a petition.
After a hearing, the Bankruptcy Court on September 17, 2012
dismissed with prejudice the Smiths' Motion to Reconsider and
imposed sanctions requiring pre-filing authorization on future
filings by the Smiths naming Countrywide Home Loans Inc.,
Countrywide Home Servicing LP or BAC Home Loans Servicing LP.
R. 46-69. The Bankruptcy Court concluded that (1) grounds for
vacating the Consent Order did not exist under Fed. R. Civ. P.
60(d) (3); (2) res judicata barred the Smiths from relitigating
the same claims; and (3) the Smiths' conduct warranted
sanctions. The Bankruptcy Court stated:
[T]he Smiths have undermined the integrity of the
bankruptcy system in at least two ways, first by
methodically and deliberately impeding a secured
creditor's rightful action against its collateral and
second by diverting the finite resources of the Court.
The Smiths' unfounded and unrelenting attacks on the
Consent Order over a three-year period indicate a
calculated plan to harass, hinder, frustrate, and
delay any action by Countrywide, now BAC, against the
collateral securing its claims.
The Bankruptcy Court identified "the Smiths' filing of the
Motion to Reconsider in the bankruptcy court when they knew the
same claim was pending in the Eleventh Circuit" as "the most
egregious churning in this litigation." R. 67. The Bankruptcy
Court warned that "the Smiths g[a]ve no indication th[ier]
behavior will change, absent judicial action." R. 67. The

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Bankruptcy Court did not impose any monetary sanctions, but
required that the Smiths receive authorization for any future
filings. Specifically, the Bankruptcy Court required that,
prior to filing any pleading or motion in the Bankruptcy Court
naming Countrywide Home Loans, Countrywide Loan Servicing LP, or
BAC Home Loans Servicing LP, the Smiths were directed to submit
the pleading to the Clerk of Court, who would then submit the
pleading to the Bankruptcy Court for determination of whether
the pleading asserted "a meritorious claim or simply
reassert[ed)" claims dismissed in the Bankruptcy Court's Order.
R. 68. If the Bankruptcy Court found the pleading to be
appropriate, it would be docketed. R. 68. However, if the
pleading was inappropriate, the pleading would be docketed as
stricken, but would not be publicly viewable. R. 68.
The Smiths sought appellate review of the Bankruptcy
Court's Order. However, instead of appealing to this Court or
the Eleventh Circuit, the Smiths attempted to appeal directly to
the Supreme Court by invoking 28 U.S.C. § 1253, which governs
determinations "by a district court of three judges." R. 70-71.
The Smiths appeal was eventually redirected to the appropriate
forum, this Court. R. 432. Approximately a month after
attempting to appeal directly to the Supreme Court, the Smiths,
with the assistance of new counsel, filed a Petition for Writ of
Mandamus in the Supreme Court. See Dkt. No. 4, Ex. A. On
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January 14, 2013, the Smiths' Petition for Writ of Mandamus was
denied. See In Re Smith, 133 S. Ct. 939 (2013)
BAC Home Loans filed a Motion to Dismiss the present
appeal, relying mainly on procedural defects, and urged this
Court to impose further sanctions on the Smiths. Dkt. No. 4.
Specifically, BAC Home Loans requested that the pre-screening
procedure be extended to filings in any court, state or federal,
within the United States. Dkt. No. 4. Following BAC Home
Loans' motion, the Smiths filed a Motion to Vacate Judgment.
Dkt. No. 10. In that motion, the Smiths largely regurgitated
the same arguments they have urged throughout the history of
this litigation.
LEGAL STANDARD

"In reviewing bankruptcy court judgments, a district court
functions as an appellate court." In Re JLJ, Inc., 988 F.2d
1112, 1113 (11th Cir. 1993). This Court "reviews the bankruptcy
court's legal conclusions de novo, but must accept the
bankruptcy court's factual findings unless they are clearly
erroneous." Id. Mixed questions of law and fact are reviewed
de novo.

In Re Cox, 493 F.3d 1336, 1340 n.9 (11th Cir. 2007).
DISCUSSION

BAC Home Loans seeks dismissal of this appeal due to
several procedural defects. Specifically, BAC Home Loans
requests that this Court dismiss the appeal because the Smiths
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failed to pay the required filing fee and because the Smiths
drafted the questions presented on appeal as if they would be
heard by the Supreme Court. Because the Smiths are pro se
litigants, the Court will not dismiss the appeal based on these
procedural technicalities when it is not clear from the record
whether the Smiths received warning from the Court that their
appeal was subject to dismissal based on these defects. See
Erickson v. Pardus, 551 U.S. 89, 94 (2007); Haines v. Kerner,
404 U.S. 519, 520 (1972); Platsky v. C.I.A., 953 F.2d 26, 28 (2d
Cir. 1991) . The Court will determine the appeal based on the
merits (or lack thereof) of the Smiths' arguments.
Turning now to the merits of the Smiths' appeal, this Court
finds that modifying or vacating the Consent Order is
inappropriate for the reasons set forth in the Bankruptcy Court
Order. Federal Rule of Civil Procedure 60 does not provide any
grounds for vacating the Consent Order. Furthermore, the
Smiths' arguments regarding the Consent Order have already been
litigated and determined and are thus barred by the doctrine of
res judicata.

With regards to sanctions, this Court concludes that
further sanctions are not appropriate at this time. It is not
clear whether BAC Home Loans complied with the twenty-one day
safe harbor provision mandated by Federal Rule of Civil
Procedure 11 in its request for additional sanctions.
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Furthermore, a motion for sanctions "must be made separately
from any other motion." Fed. R. Civ. P. 11(c) (2); see Carofino
c. Forester, 450 F. Supp. 2d 257, 274 (S.D.N.Y. 2006); Mitchell
v. Osecola Farms Co., 408 F. Supp. 2d 1275, 1280 (S.D. Fla.
2005). Here, BAC Home Loans' Motion for Sanctions was combined
with a Motion to Dismiss. See Dkt. No. 4.
The Smiths, however, are specifically warned that failure
to comply with the Bankruptcy Court's mandated screening
procedure could constitute contempt of court. Additionally, the
Smiths are also warned that further filing of motions or
pleadings restating arguments that have on numerous occasions
been found meritless by the Bankruptcy Court, this Court, and
the Eleventh Circuit, could result in the imposition of further
sanctions, financial or otherwise. The Smiths are specifically
admonished that repeated and vexatious filings urging frivolous
arguments will not be tolerated by this Court.
CONCLUSION

For the reasons stated above, the Order of the Bankruptcy
Court is AFFIRD.

The Smiths' Motion to Vacate Judgment, Dkt.

No. 10, is DENIED.

BAC Home Loans' Motion to Dismiss the Appeal

and Motion for Sanctions, Dkt. No. 4, is also DENIED.

However,

the Smiths are warned that continuation of their abusive
litigation tactics may result in the imposition of further
sanctions.
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SO ORDERED,

this 25th day of July, 2013.

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ISA GODBEY WOOD, CHIEF JUDGE
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF GEORGIA

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