Rose et al v. US Bank N.A. et al
Filing
32
MEMORANDUM OPINION (c/e/m to United States Bankruptcy Judge Maria Ellena Chavez-Ruark 12/12/23 sat). Signed by Judge Deborah K. Chasanow on 12/12/2023. (sat, Chambers)
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MARYLAND
IN RE: TIM HAROLD ROSE and
TOYIN GBEMISOLA ROSE
TIM HAROLD ROSE AND TOYIN
GBEMISOLA ROSE
Appellants
v.
US BANK N.A., et al.,
Appellees
:
:
:
:
:
Civil Action No. DKC 23-1231
:
:
MEMORANDUM OPINION
Pending before the court is an appeal filed by Appellants Tim
Harold Rose (“Mr. Rose”) and Toyin Gbemisola Rose (“Mrs. Rose”)
from two orders entered by United States Bankruptcy Judge Maria
Ellena Chavez-Ruark: (1) an order dismissing Counts I and II of
the Adversary Complaint and converting the motion to dismiss Count
III to a motion for summary judgment, 1 and (2) an order granting
summary judgment to Appellees PNC Bank, N.A., and U.S. Bank, N.A.,
as Trustee for Citigroup Mortgage Loan Trust, Inc., Mortgage Pass-
Appellees note that Appellants have abandoned the appeal on
counts I and II. (ECF No. 31 at 6). Because Appellants do not
dispute the bankruptcy court’s order dismissing Counts I and II of
Appellants’ complaint in their brief, they have waived argument on
these issues.
See Grayson O Co. v. Agadir Int’l LLC, 856 F.3d
th
307, 316 (4 Cir. 2017) (quoting Brown v. Nucor Corp., 785 F.3d
895, 923 (4th Cir. 2015)) (“A party waives an argument by failing
to present it in its opening brief or by failing to ‘“develop [its]
argument”—even if [its] brief takes a passing shot at the
issue.’”).
1
Through Certificates, Series 2006-AR5 on Count III.
Because the
facts and legal arguments are adequately presented in the briefs
and record, oral argument is unnecessary. See Fed.R.Bankr.P. 8012;
Local Rule 105.6.
For the following reasons, the order of the
bankruptcy court will be affirmed.
I.
Background 2
In or around April 2005, Mr. Rose acquired two adjacent lots:
the first parcel (“Lot 19”), located at 6708 Oak Park Drive,
Bethesda,
MD
20817,
is
improved
by
a
dwelling
in
which
the
Appellants reside; and the second parcel (“Lot 14”), located at
8605 Burning Tree Road, Bethesda, MD 20817, consists of vacant
land with a paved driveway giving the Appellants their sole access
to their dwelling on Lot 19 (collectively, the “Properties”). (ECF
Lot 14 was subject to an easement granting use
No. 14-50, at 4). 3
of the driveway to Appellants as owners of Lots 14 and 19 as well
as the Oleens, the owners of Lot 18, a neighboring parcel.
id. at 15; 14-52).
mailing address.
(See
Appellants use Lot 14’s address as their
(ECF No. 14-50, at 4).
Lot 19 does not contain
a driveway connecting the dwelling to Oak Park Drive.
(Id.).
Lot
The facts are construed in the light most favorable to
Appellants as the non-movants in the bankruptcy court. Matsushita
Elec. Indus. Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 587–
88 (1986).
2
Citations to Mr. Rose’s deposition testimony will be to the
document page number rather than the deposition page number.
3
2
14’s driveway was fully constructed at the time Mr. Rose acquired
the Properties.
(Id. at 5).
Lot 14’s appearance has not changed
since Mr. Rose acquired the Properties, and the driveway has not
been moved.
utilities.
(Id. at 5, 14).
Lot 14 does not have separate
(Id. at 10).
Approximately one year after acquiring the Properties, Mr.
Rose refinanced the loan secured by the Properties.
2006, Mr. Rose executed the following:
“Note”)
in
favor
of
Appellees’
On April 4,
(1) a promissory note (the
predecessor
in
interest
(the
“Predecessor”) in the amount of $1,710,000, (ECF No. 14-17); and
(2) a deed of trust where he granted the Predecessor a lien on
Lots 14 and 19 to secure repayment of the amounts due under the
Note, (ECF No. 14-18).
On February 24, 2006, Mr. Rose executed a deed to transfer
record title of the Properties from himself to Mrs. Rose and
himself as tenants by the entirety (the “Deed”).
at 1-2).
(ECF No. 14-19,
On April 24, 2006, the Deed and deed of trust were
recorded in the land records for Montgomery County.
(Id. at 4;
ECF No. 1-16 ¶ 10).
Appellants attempted to sell Lots 14 and 19 as a unitary
parcel beginning from 2016 or 2017.
(Id. at 8).
Shortly after
Mr. Rose decided to sell Lots 14 and 19 separately, in 2021, Mr.
Rose retained the law firm Knopf & Brown to prepare a memorandum
advising
on
Lot
14’s
development
3
potential
(the
“Brown
Memorandum”), (ECF No. 14-51). 4
(ECF No. 14-50, at 11).
The Brown
Memorandum stated that Lot 14 could be developed with a singlefamily home, but the driveway and easement would likely have to be
moved with the Oleens’ consent.
On
or
about
February
(ECF No. 14-51, at 2, 4).
23,
2022,
Appellants
received
a
conditional offer to purchase Lot 14 (the “Conditional Offer”),
which
conditioned
easements.
settlement
on
(ECF No. 14-58, at 2).
Appellants’
removal
of
all
On March 21, 2022, Appellants
obtained an appraisal from Ono Appraisals valuing the Properties
at $1.7 million.
(ECF No. 14-20).
On March 26, 2022, Appellants
obtained an additional appraisal valuing the Properties at $2.15
million.
(ECF
No.
14-60).
Properties as a unitary parcel.
Both
appraisals
evaluated
the
(Id.; ECF No. 14-20).
On March 3, 2022, Appellants commenced the instant case by
filing a voluntary petition under Chapter 11 of the bankruptcy
code.
(Bankr. Case No. 22-11083, ECF No. 1).
The filings
described the Properties together as a “[s]ingle-family home”
located at Lot 14’s address with a value of $1.7 million and noted
that separate valuations for Lots 14 and 19 would be forthcoming.
(Bankr. Case No. 22-11083, ECF No. 22, at 3).
The filings also
Although Mr. Rose testified that he decided to sell Lot 14
separately in 2022, he later stated that he decided to sell Lot 14
shortly before Knopf & Brown prepared its memorandum on Lot 14’s
development potential in 2021. (See ECF Nos. 14-50, at 10-11; 1451).
4
4
identified Appellees as having a claim secured by the Properties
in the amount of $1.7 million.
(Id. at 12).
On June 12, 2022,
Appellants filed a complaint asserting three causes of action:
Count I objects to, and seeks disallowance of, the Appellees’
claim; Count II requests a declaratory judgment that the Appellees’
deed of trust does not constitute a valid lien, secured claim, or
encumbrance
against
the
Properties;
and
Count
III
seeks
alternative relief in the form of a declaratory judgment that the
Appellees’ lien on the Properties is stripped down to $1.7 million
as of the petition date.
(ECF No. 14-16).
Appellees filed a
motion to dismiss all three counts on August 12, 2022, (ECF Nos.
14-38; 14-39), and the bankruptcy court held a hearing on that
motion on November 8, 2022, (ECF No. 14-46).
On November 10, 2022,
the bankruptcy court entered an order dismissing Counts I and II
of Appellants’ complaint and converting the motion to dismiss Count
III to a motion for summary judgment.
(ECF No. 14-45).
On April
20, 2023, the parties conducted oral argument before the bankruptcy
court.
(ECF No. 16).
On April 24, 2023, the bankruptcy court
issued an oral ruling granting summary judgment on Count III in
favor of Appellees.
(ECF No. 15).
On April 25, 2023, the
bankruptcy court entered an order consistent with its oral ruling.
(ECF No. 14-67).
On May 9, 2023, Appellants filed a notice of appeal to this
court.
(ECF No. 1).
On September 11, 2023, Appellants filed their
5
brief.
(ECF No. 30).
opposition brief.
On October 12, 2023, Appellees filed their
(ECF No. 31).
Appellants did not file a reply
brief.
II.
Standard of Review
The court has jurisdiction over this appeal because the
bankruptcy court’s order granting summary judgment to Appellees is
a final order.
28 U.S.C. § 158(a)(1); see also Gold v. Guberman
(In re Computer Learning Ctrs., Inc.), 407 F.3d 656, 660 (4th Cir.
2005) (stating that “orders in bankruptcy cases may be immediately
appealed if they finally dispose of discrete disputes within the
larger case”) (quoting In re Saco Local Dev. Corp., 711 F.2d 441,
444 (1st Cir. 1983)).
On appeal from the United States Bankruptcy
Court, this Court acts as an appellate court
and reviews the Bankruptcy Court’s findings of
fact for clear error and conclusions of law de
novo. In re Merry–Go–Round Enterprises, Inc.,
400 F.3d 219, 224 (4th Cir. 2005); In re
Kielisch, 258 F.3d 315, 319 (4th Cir. 2001).
An appellate court reviews a “grant of a
motion for summary judgment de novo” and
applies the same standard as the originating
court. Nader v. Blair, 549 F.3d 953, 958 (4th
Cir. 2008). Summary judgment in favor of the
Appellee is appropriate “if the movant shows
that there is no genuine dispute as to any
material fact and the movant is entitled to
judgment as a matter of law.” Fed. R. Civ. P.
56(a); Fed. R. Bankr. P. 7056. A United States
District Court may affirm, modify, or reverse
a Bankruptcy Judge’s order, or remand with
instructions for further proceedings. See Fed.
R. Bankr. P. 8013; see also In re White, 128
F. App’x. 994, 999 (4th Cir. 2005); Suntrust
Bank v. Johnson, 2006 U.S. Dist. LEXIS 87622
6
at *6, 2006 WL 3498411 at *2 (D.Md. Dec. 4,
2006).
Feyijinmi v. Cent. Collection Unit, 638 F.Supp.3d 535, 538–39
(D.Md. 2022).
III. Analysis
In granting summary judgment in favor of Appellees with
respect to Count III, the bankruptcy court held that, pursuant to
11 U.S.C. § 1123(b)(5), Appellees’ lien on the Properties cannot
be modified because Lots 14 and 19 constitute Appellants’ principal
residence.
(ECF No. 15, at 4).
The bankruptcy court concluded
that Lot 14 is incidental property that is part of Appellants’
principal residence on Lot 19 on the basis that “[Appellants] rely
on
[L]ot
14
for
the
use,
enjoyment,
support,
existence,
and
enhancement of their residence on [L]ot 19, and treat [L]ot 14 as
part of their principal residence.” (Id. at 42). Appellants argue
that the bankruptcy court should not have granted summary judgment
because a genuine issue of material fact exists regarding whether
Lot 14 is incidental property in relation to Appellants’ principal
residence. (ECF No. 30, at 8-9). Specifically, Appellants contend
that Lot 14 is not incidental property because the Conditional
Offer and the Brown Memorandum demonstrate that Lot 14 is a
developable lot that could be marketed for sale, (ECF No. 30, at
9).
7
A Chapter 11 bankruptcy plan “may modify the rights of holders
of secured claims, other than a claim secured only by a security
interest
in
residence.”
real
property
that
is
11 U.S.C. § 1123(b)(5).
the
debtor’s
principal
The bankruptcy court held
that a debtor’s principal residence under Section 1123(b)(5) is
determined as of the petition date.
(ECF No. 15, at 19-21) (citing
In re Wong, 598 B.R. 827, 832 (Bankr.D.Md. 2019) (holding that the
temporal focus of the debtor’s principal residence under 11 U.S.C.
§ 1123(b)(5) is on the petition date rather than when the parties
created the relevant security interest); In re Abdelgadir, 455
B.R. 896, 903 (B.A.P. 9th Cir. 2011) (same); In re Crump, 529 B.R.
106, 110 (Bankr.D.S.C. 2015) (same); In re Cohen, 267 B.R. 39, 43
(Bankr.D.N.H. 2001) (same)).
Because Appellants do not dispute
the bankruptcy court’s holding on this issue in their brief, they
have waived argument on this issue.
See Grayson, 856 F.3d at 316
(quoting Nucor, 785 F.3d at 923) (“A party waives an argument by
failing to present it in its opening brief or by failing to
‘“develop [its] argument”—even if [its] brief takes a passing shot
at the issue.’”).
Given that Lot 14’s appearance and driveway
have not changed from the time Mr. Rose acquired the Properties in
2005, (ECF No. 14-50, at 5, 14), the court may look to Appellants’
use, treatment, and purpose of Lot 14 up until the 2022 petition
date to determine whether Lot 14 constitutes incidental property
to Lot 19.
8
The definition of “principal residence” is “a residential
structure
if
used
as
the
principal
residence
of
the
debtor,
including incidental property, without regard to whether that
structure is attached to real property.”
(emphasis added).
11 U.S.C. § 101(13A)
“Incidental property” is defined as follows:
The term “incidental property” means, with
respect to a debtor’s principal residence—
(A)
property
commonly
conveyed
with
a
principal residence in the area where the real
property is located;
(B) all easements, rights, appurtenances,
fixtures, rents, royalties, mineral rights,
oil or gas rights or profits, water rights,
escrow funds, or insurance proceeds; and
(C) all replacements or additions.
11 U.S.C. § 101(27B).
Courts have considered property to be part of a residenceincluding a principal residence-only if it is actually “linked to
the support, existence, or enhancement of the structure in which
the debtors live.”
Lanier v. Beaman, 394 B.R. 382, 384 (E.D.N.C.
2008);
e.g.,
see
also,
In
re
Beckford,
247
B.R.
27,
30
(Bankr.D.Conn. 2000) (holding that two adjacent lots have been
used together as one residence when one lot contained the driveway
and parking lot serving the other lot’s house); In re Frank, No.
12-06722-8-SWH, 2014 WL 5395857, at *5 (Bankr.E.D.N.C. Oct. 23,
2014) (holding that two adjacent lots constitute a single residence
when “the adjacent lot is seamlessly integrated into the debtor’s
use of his residence and acts as expanded back yard and recreation
9
area in connection with the residence.”); In re Marenaro, 217 B.R.
358, 361 (B.A.P. 1st Cir. 1998) (holding that lots adjacent to the
single-family house that were being used as a yard and parking
area constituted incidental property to the principal residence).
“[A]n abstract potential to use property in a different way,”
however, that “never amount[s] to a gleam in the eye of the owner
at the time that the mortgage is given,” cannot “withhold the
protection of the anti-modification language from a mortgagee.”
Marenaro, 217 B.R. at 361.
Otherwise, “virtually every mortgage
would be subject to modification.”
Id.
Appellants solely rely on Lanier, 394 B.R. 382, and In re
Faulring,
573
distinguishable
B.R.
by
71
the
(Bankr.W.D.N.Y.
bankruptcy
2007)-deemed
court-in
factually
support
of
an
alternative holding that the buildability of a lot is indeed
dispositive to the determination of whether a property constitutes
incidental property to a principal residence.
10).
(ECF No. 30, at 9-
In Lanier, the debtors sought to show that their adjacent
lots, separated by a fence-one containing the debtors’ house and
the other consisting of an undeveloped area used for horseriding
by
non-family
members-constituted
a
single
residence
for
the
purpose of obtaining a federal bankruptcy homestead exemption
under 11 U.S.C. § 522(d)(1).
by
the
definitions
of
Lanier, 394 B.R. at 383.
“principal
residence”
and
Informed
“incidental
property” under 11 U.S.C. § 101(13A) and 11 U.S.C. § 101(27B), the
10
Lanier court held that the horseriding area was not incidental
property commonly conveyed with the debtors’ principal residencenamely, the lot containing the debtors’ house.
Id. at 383-84.
Appellants provide the following excerpt of the Lanier court’s
reasoning:
There is no confusion by any reasonable
viewer, as it is clear that the two properties
are not commingled as part of one residence,
but that one area is the debtors’ home and one
area is the horse area that is owned by the
debtors.
The debtors refer to several cases in
bankruptcy courts outside of this circuit
where two adjacent lots were considered to be
part of the debtor’s residence.
In those
cases, the debtors used the adjacent lots for
their own family needs, and had either built
structures for family purposes, parked their
cars there, had sheds for storing family
property, or in other ways subsumed the
property
so
its
use
was
completely
indistinguishable from the home. These facts
are not present here.
Indeed, as Appellants assert, Lanier “supports the proposition
that one lot is not incidental property simply because it is
adjacent to another lot.”
(ECF No. 30, at 10).
As shown, however,
in the excerpt of Lanier provided by Appellants, the Lanier court
did not hold that the horseriding area is not incidental property
because it is commercially developable.
Rather, the dispositive
fact was that the horseriding area fulfilled a purpose entirely
separate from day-to-day household activities, as manifested in
the lots’ visual separation.
11
Appellants’ reliance on Faulring, a similar case to Lanier,
fares no better.
In Faulring, a debtor sought a determination
that his three contiguous lots constituted a single residence for
the purpose of obtaining a federal bankruptcy homestead exemption
under 11 U.S.C. § 522(d)(1).
Faulring, 573 B.R. at 72-73.
The
first lot contained the debtor’s house, a rental unit, and a pole
barn for vehicle storage.
Id. at 73.
The second lot was acquired
by the prior owner as a buffer during the pole barn’s construction,
and the third lot consisted of an undeveloped wooded area where
the debtor would occasionally hunt and collect firewood.
Id.
The
Faulring court determined that, unlike the pole barn, neither the
wooded area nor the standalone rental unit were incidental property
typically conveyed with residences in the area because “the debtor
does not use the rental unit and undeveloped acreage as his
residence.”
Id. at 74.
Appellants argue that Faulring stands for
the proposition that “‘incidental property’ excluded raw land on
a separate parcel.”
(ECF No. 30, at 9).
In support, Appellants
provide an excerpt of the Faulring court’s application of Lanier’s
holding, which states in part, “the sporadic use of undeveloped
land will not transform it into property incidental to the debtor’s
residence.”
Faulring, 573 B.R. at 74. 5
Appellants, however,
The remainder of Appellants’ selected excerpts of Faulring
misrepresent the language in the opinion. Compare (ECF No. 30, at
9), with Faulring, 573 B.R. at 73-74.
5
12
misread Faulring and overlook the fact that Faulring’s holding is
not predicated on the wooded area’s undeveloped state.
the
Faulring
commercial
property
court’s
determination
development-also
demonstrates
that
does
the
that
not
wooded
the
Rather,
rental
qualify
as
area’s
unit-a
incidental
non-residential
purpose, not its lack of development, is dispositive.
Accordingly, under Lanier and Faulring, the bankruptcy court
did not err in “focus[ing] on [Appellants’] use, treatment, and
purpose
of
[L]ot
14
[to]
determin[e]
whether
it
should
considered part of [Appellants’] principal residence.”
15,
at
34-35).
As
the
bankruptcy
court
stated,
be
(ECF No.
Lot
14
is
dissimilar to the horseriding area in Lanier because the Brown
Memorandum
shows
that
“[t]o
the
average
person
viewing
the
property, [L]ots 14 and 19 appear to be one single unitary parcel
of land[]” such that the two properties are commingled as a single
residence.
11).
(ECF No. 15, at 29-30) (citing ECF No. 14-51, at 10-
Moreover,
unlike
the
sporadically
used
wooded
area
in
Faulring, Lot 14 “is treated, for all intents and purposes, as
part of [L]ot 19” given that it is “the sole form of access to .
. . [L]ot 19 [and its residential structure].”
28).
(ECF No. 15, at
The fact that Lot 14 lacks separate utilities and serves as
Appellants’
mailing
address
further
evidences
that
Lot
14
functions as an extension of Appellants’ residence on Lot 19. (ECF
No. 14-50, at 4, 10).
Appellants have not indicated that Lot 14
13
has been used for a non-residential purpose.
As such, Appellants
have not shown that the Lot 14’s commercial development potential
amounts even to “a gleam in the eye[.]”
Marenaro, 217 B.R. at
361.
Appellants
argue
that
“[a]
commercially
developable
lot
cannot be considered property commonly conveyed with a principal
residence in the area where Lot 19 is located” because “[i]t is
neither common nor frequent that a residential homeowner purchases
two lots from a developer, one of which can be developed for the
homeowners’ separate sale.”
(ECF No. 30, at 10).
The frequency
that a homeowner purchases two lots, one of which can be developed
for separate sale, is irrelevant to determining whether Lot 14
constitutes property commonly conveyed with a principal residence
in the area where Lot 19 is located.
Here, Appellants do not
dispute that Lot 14 contains nothing but the sole pathway to their
house on Lot 19.
Hence, the bankruptcy court correctly stated
that Lot 14 would be commonly conveyed with Lot 19 because “the
debtors had no other means of driving onto their property unless
they drove over their grassy lawn.”
(ECF No. 15, at 33).
The
Brown Memorandum and the Conditional Offer also suggest that Lots
14 and 19 would be commonly conveyed together given that they are
inextricably
linked
by
the
driveway.
The
Brown
Memorandum
recognizes that “[t]he feasibility of [Lot 14’s] development plan
is contingent upon . . . moving the driveway” currently benefitting
14
Lot 19, because its location “interfere[s] with [the] development
of Lot 14.”
(ECF No. 14-51, at 4-5).
The Conditional Offer
conditions settlement on Appellants’ removal of all easements,
including the driveway easement linking Lot 14 to Lot 19.
No. 14-58, at 2).
More importantly, Lots 14 and 19 were in fact
conveyed together when they were purchased by Appellants.
No. 14-50, at 5).
(ECF
(ECF
Appellants have appraised and attempted to sell
Lots 14 and 19 as a unitary parcel, in addition to describing Lots
14 and 19 together in their filings as a “[s]ingle-family home”
located at Lot 14’s address.
(ECF Nos. 14-20; 14-60; 14-50, at 8;
Bankr. Case No. 22-11083, ECF No. 22, at 3). Appellants’ treatment
of the Properties plainly indicate that Lot 14 constitutes property
commonly conveyed with a principal residence in the area where Lot
19 is located.
IV.
Conclusion
The order of the bankruptcy court granting summary judgment
will be affirmed.
A separate order will follow.
/s/
DEBORAH K. CHASANOW
United States District Judge
15
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