In Re: Residential Capital, LLC
Filing
16
MEMORANDUM OPINION AND ORDER: The Reeds now appeal from the October 6, 2014, Memorandum Opinion and Order Determining the Amount of Allowed Claim of Frank and Christina Reed (the "Final Order"), arguing that their allowed claim should have been higher. Because the Bankruptcy Court categorically excluded evidence that may support additional allowable damages under New Jersey law, I REVERSE the ruling limiting the scope of damages evidence permitted, AFFIRM the remainder of the Bankrup tcy Court's decisions, and REMAND for further proceedings consistent with this opinion. For the foregoing reasons, the decision of the Bankruptcy Court is affirmed in part, reversed in part, and remanded. The Clerk of Court is instructed to enter judgment accordingly and to close the case. (As further set forth in this Order.) (Signed by Judge Gregory H. Woods on 12/23/2015) (kko)
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
------------------------------------------------------------------X
:
In re RESIDENTIAL CAPITAL, LLC, et al.,
:
Debtors. :
:
:
:
FRANK REED and CHRISTINA REED,
:
Appellants,:
:
:
-v:
:
RESCAP BORROWER CLAIMS TRUST,
:
Appellee. :
------------------------------------------------------------------X
USDC SDNY
DOCUMENT
ELECTRONICALLY FILED
DOC #: _________________
DATE FILED: 12/23/2015
1:15-cv-2375-GHW
MEMORANDUM OPINION
AND ORDER
GREGORY H. WOODS, United States District Judge:
This bankruptcy appeal is the most recent episode in seven years of litigation involving
Frank and Christina Reed and their former mortgage loan servicer, GMAC Mortgage, LLC
(“GMACM”). In 2012, GMACM, along with approximately 50 affiliated entities, filed chapter 11
bankruptcy petitions. The Reeds filed claims in the bankruptcy proceeding based on previous state
court litigation between GMACM and the Reeds, and the Bankruptcy Court ultimately allowed
some, but not all, of their claimed damages. The Reeds now appeal from the October 6, 2014,
Memorandum Opinion and Order Determining the Amount of Allowed Claim of Frank and
Christina Reed (the “Final Order”), arguing that their allowed claim should have been higher.
Because the Bankruptcy Court categorically excluded evidence that may support additional allowable
damages under New Jersey law, I REVERSE the ruling limiting the scope of damages evidence
permitted, AFFIRM the remainder of the Bankruptcy Court’s decisions, and REMAND for further
proceedings consistent with this opinion.
I.
Background1
A.
The Reeds’ Loan and the Pre-Petition Lawsuits
The Reeds are in the business of “buying, improving, and selling homes.” Appellants’ Br. 9;
Bankr. Doc. 7560 (“Sept. 15 Hr’g”) 42:14-16.2 They reside in some of their properties for a period
of time, others are rental properties. Sept. 15 Hr’g 42:19-24. On May 31, 2006, the Reeds took out
a $1,000,000.00 loan (the “Loan”) from Metrocities Mortgage, LLC (“Metrocities”), evidenced by a
note (the “Note”) and secured by a mortgage (the “Mortgage”) on property located at 817 Matlack
Drive, Moorestown, New Jersey (the “Property”). Final Order 6. They made their last monthly
payment on the Loan on January 4, 2008, and defaulted on the Loan in March 2008 after they had
failed to make their payments for thirty days. Id.
The Loan was, at various times, owned by one entity but serviced by another. Metrocities
conveyed ownership of the Loan to GMAC Bank; Residential Funding Corporation (“RFC”) later
acquired the Loan from GMAC Bank; and on February 6, 2013 RFC transferred ownership of the
Loan to 21st Mortgage Corporation.3 Final Order 6. GMACM began servicing the Loan on June
27, 2006; the Mortgage, however, was not assigned to GMACM until May 22, 2008; and GMACM
never owned the Note. Id. at 6, 8. GMACM continued servicing the Loan until February 15, 2013,
when Ocwen Loan Servicing, LLC (“Ocwen”) took over servicing; Ocwen, in turn, transferred
servicing to 21st Mortgage Corporation on October 1, 2013. Id. at 6. On October 6, 2014, when
the Bankruptcy Court issued the Final Order, 21st Mortgage Corporation both owned and serviced
the Loan. Id.
The facts in this section are taken from the record designated by the parties and are limited to those necessary to decide
this appeal.
2
Documents designated as part of the record in this matter are referred to by their docket number in the bankruptcy
proceedings.
3 GMACM and RFC are Debtors in these bankruptcy proceedings, GMAC Bank is a non-debtor entity.
1
2
On May 19, 2008, GMACM, then the servicer of the Loan, initiated a foreclosure action (the
“Foreclosure Action”) in the Superior Court of New Jersey. Id. at 8. On May 28, 2008, GMACM
recorded a lis pendens on the Property.4 Id. The Superior Court dismissed the Foreclosure Action
without prejudice on February 9, 2009 because GMACM could not prove that it had sent the Reeds
a Notice of Intent to Foreclose (“NOI”) as required under the New Jersey Fair Foreclosure Act (the
“FFA”) and the terms of the Mortgage. The Reeds spent $5,823.00 on attorneys’ fees to defend
against the Foreclosure Action. Id. at 14.
Although it was not a basis for the Superior Court’s decision to dismiss the Foreclosure
Action, the Bankruptcy Court noted that GMACM also lacked standing to bring the Foreclosure
Action. In its motion for summary judgment in the Foreclosure Action, GMACM claimed that it
was the holder of the Note and Mortgage. Id. at 8. But GMACM was never the noteholder, and
had not yet been assigned the Mortgage on May 19, 2008, when it filed the lawsuit. Id. at 12.
Furthermore, the May 22, 2008 assignment falsely stated that the Note had been transferred to
GMACM, and GMACM did not demonstrate that it had the authority to bring the Foreclosure
Action on behalf of the noteholder. Id. Thus, the Bankruptcy Court concluded that GMACM’s lack
of standing would have been fatal to its efforts to foreclose on the Property even if it had complied
with the FFA. Id. Neither ResCap nor the Reeds dispute this.
Despite the fact that the Foreclosure Action was dismissed in February 2009, and for
reasons unknown to this Court or the Bankruptcy Court, final judgment was not entered in the
Foreclosure Action until August 9, 2013. Id. at 13. Nor was the lis pendens recorded by GMACM in
connection with the Foreclosure Action discharged after the dismissal of that action. Id. At some
point before the five-year term of GMACM’s lis pendens expired, Ocwen, the loan servicer that
A recording of a lis pendens on real property “is constructive notice of a pending action concerning that real estate, and a
purchaser or mortgagee takes [the property] subject to the outcome of the lawsuit.” Trus Joist Corp. v. Treetop Associates,
Inc., 477 A.2d 817, 822 (N.J. 1984) (citing N.J.S.A. 2A:15-7).
4
3
succeeded GMACM, recorded its own lis pendens, and later 21st Mortgage Corporation recorded a lis
pendens in connection with a new foreclosure action that it had filed against the Reeds. Id. Thus,
there has been a recorded notice of lis pendens on the Property continuously since May 28, 2008.
On May 10, 2010, the Reeds filed a five-count lawsuit (the “Reed Action”) in New Jersey
state court claiming that (1) GMACM acted negligently and/or recklessly when it filed the
Foreclosure Action and recorded the lis pendens without first sending them an NOI; (2) GMACM
breached its contract by failing to send them an NOI before initiating the Foreclosure Action; (3)
RFC, as GMACM’s successor in interest, inherited GMACM’s liability for its actions; (4) GMACM’s
and RFC’s agents and employees were liable for failing to provide the Reeds with an NOI; and (5)
GMACM, RFC, and any other successor in interest should be estopped from instituting another
foreclosure action against the Reeds. Id. at 14. In January 2012, the Reeds amended their complaint
to add claims for economic and non-economic losses resulting from the Foreclosure Action,
punitive damages for malicious acts, and fraud under the New Jersey Consumer Fraud Act (the
“CFA”). Id. at 15. Shortly after amending their complaint, the Reeds moved to stay or dismiss the
Reed Action so that they could participate in a foreclosure review process coordinated by the
Federal Reserve Board. Id. The New Jersey court granted their motion to dismiss the complaint
without prejudice on February 9, 2012. Id.
B.
Bankruptcy Court Proceedings Prior to the Evidentiary Hearing
On May 14, 2012, GMACM, Residential Capital, LLC, and approximately 50 affiliated
entities (together the “Debtors”) filed chapter 11 bankruptcy petitions in the Southern District of
New York. Bankr. Doc. 1. The Second Amended Joint Chapter 11 Plan (the “Plan”), confirmed by
the Bankruptcy Court in December 2013, established the Residential Capital Borrowers Claims
Trust (“ResCap” or the “Trust”) as the successor in interest to the Debtors for purposes of
resolving borrower claims. See Bankr. Doc. 6065 and 6137. The Trust is responsible for processing
and paying claims of persons who are or were mortgagors under a mortgage loan originated,
4
serviced, or purchased by one or more of the Debtors. Plan at 67. The Trust is also responsible for
prosecuting objections to borrower claims. Id.
The Reeds filed proofs of claim against GMACM and RFC based on alleged causes of action
similar to those asserted in the Reed Action.5 See Bankr. Doc. 7246, July 11, 2014 Order 2. ResCap
objected to the Reeds’ claims, and the Bankruptcy Court held a hearing on the objection on July 9,
2014. On July 11, 2014, the Bankruptcy Court issued an order sustaining ResCap’s objections as to
four of the Reeds’ claims, including their claim for malicious use of process. Id. It also sustained an
objection to the breach of contract claim with respect to RFC because RFC did not own the Loan
until after the Foreclosure Action was initiated, but overruled an objection to the breach of contract
claim against GMACM. Id. at 6. Finally, the Bankruptcy Court sustained in part and overruled in
part ResCap’s objection to the CFA claim, and allowed the claim to go forward on the limited
ground that GMACM misrepresented its ownership of the Note during the Foreclosure Action. Id.
at 8. The deadline for the completion of discovery was set for August 22, 2014, and an evidentiary
hearing on the surviving claims was scheduled for September 15 and 16, 2014.
The Reeds filed a motion for partial reconsideration of the July 11, 2014 Order, arguing that
the Bankruptcy Court should reconsider its decision sustaining ResCap’s objection to the Reeds’
claim for malicious use of process. Bankr. Doc. 7317. The Bankruptcy Court denied that motion
on July 30, 2014. Bankr. Doc. 7319.
On July 28, 2014, the Bankruptcy Court held a conference regarding a series of
discovery disputes between the Reeds and ResCap. At that hearing, the Bankruptcy Court
confronted a proposal by the Reeds to call 27 fact witness and three expert witnesses that left it
“aghast.” Bankr. Doc. 7320 (“July 28 Hr’g”) 16:7. The Bankruptcy Court rejected the Reeds’ “very
5 Mr. and Mrs. Reed each filed a claim against Residential Funding Corporation and a claim against GMACM, for a total
of four claims. See Bankr. Doc. 7619, Final Order 4 n.3. The Bankruptcy Court disallowed the claims against RFC, and
because the claims against GMACM were duplicative the Bankruptcy Court allowed the claim filed by Mr. Reed and
disallowed the claim filed by Mrs. Reed. Id. The Reeds do not appeal these rulings.
5
expansive” view of the damages that they were entitled to claim. Instead, as illustrated by the
following comments, the Bankruptcy Court limited the damages that the Reeds could pursue to
economic damages directly related to the Property.
THE COURT: [W]hen I read your papers before there was a decision, you seemed
to be taking the position that you would be entitled to recover damages not limited
to the one property as to which GMACM commenced foreclosure but to other
business ventures, opportunities, things of that nature, none of which in my view can you
recover any damages for. . . . It was in light of the alleged wrongful foreclosure that the
Consumer Fraud Act claim survived. Arguably a punitive damage claim survived.
But all of that focuses solely upon this one property. I can’t conceive of how you could have
twenty-seven fact witnesses who would testify with respect to this one property and
the alleged wrongful foreclosure action that was commenced.
July 28 Hr’g, 12:6-11; 20-25; 13:1 (emphasis added).
Mr. Reed protested the Bankruptcy Court’s decision to limit damages to direct economic
harm with respect to the Property. July 28 Hr’g, 14:8-10 (“Your Honor . . . where is the where is the
limitation and forgive my ignorance but where is it confined to this property? I don't understand
that.”) The court responded to Mr. Reed’s objection, stating
THE COURT: I'm telling you now that I am not going to permit you to put on
evidence relating to other business opportunities, lost or otherwise. What your
claims survive with respect to are wrongful foreclosure with respect to this property,
if it gives rise to a Consumer Fraud Act claim-- it may and it may not. And if it gives
rise to a breach of contract claim, we'll see whether there's a contract. You say there
is. The debtor, at least told me there wasn’t and then you correctly pointed to the
place in their foreclosure complaint where they said there was. But it all relates to this
one specific property. To the extent you are arguing that you suffered economic loss
with respect to this property, as a result of the debtors’ actions, yes, I believe that is a
proper subject for this hearing and your effort to recover damages, but that is
economic damages relating to this specific property, not to other business ventures
known or unknown, imagined or unimagined. This trial relates to this property. . . . I'm
not precluding you from seeking economic losses that focus--if you can demonstrate
that you suffered economic loss relating to this property as a result of wrongful
conduct of the defendant, you can seek to recover it . . . . What I am not going to
permit you to do is to try and bring in--and I read this in some of your earlier papers
before I ruled on the objection, that you were claiming that this put a cloud--this
wasn’t the term you used--it affected your credit, thereby preventing you from
engaging in other business opportunities. That’s not going to be part of
this trial.
July 28 Hr’g, 14:14-25; 15:1-7; 19-25; 16:1-6 (emphasis added).
6
Later during the conference, in response to a request by Mr. Reed for the legal basis of the
limitation on damages that it had imposed, the Bankruptcy Court further expanded on its views, as
follows:
THE COURT: In my view, Mr. Reed, any other damages would be speculative and
not recoverable in this action--in this claim. This relates to alleged wrongful
foreclosure with respect to a specific property. Any other--in my view, any other
business opportunities you may have had, and maybe you did, and I hope you did, is
far too speculative to permit recovery on the claims that survive on the basis they've
survived.
July 28 Hr’g, 26:22-25; 27:1-4.
Critically for my analysis of the issue, the Bankruptcy Court did not engage in a specific
evaluation of the proof that Mr. Reed proposed to offer when it concluded that damages other than
direct damages related to the property would be speculative. Instead, the court’s limitation was
categorical, based, apparently, on a view of the scope of damages permitted by law.
That the Bankruptcy Court viewed its categorical limitation of prospective damages to be
mandated by law was expressly articulated in the order memorializing its ruling the following day.
There, the court wrote that
[T]here is no basis for Reed to call 30 witnesses at the hearing, and he will not be
permitted to do so. Witness testimony will only be permitted regarding the one
specific property owned by the Reeds that was the subject of the New Jersey
foreclosure action and any damages the Reeds suffered directly relating to the alleged
wrongful foreclosure—the Reeds may not recover damages relating to any other
properties or lost business opportunities that the Reeds assert they lost because of
the foreclosure action. The Court concludes as a matter of law that such other damages, if any,
are speculative and not foreseeable, and are not recoverable on the Reeds’ surviving claims.
Bankr. Doc. 7314, July 29 Order 1-2 (emphasis added).
On September 8, 2014, the Bankruptcy Court held a final pretrial conference in advance of
the evidentiary hearing. Prior to the conference ResCap filed motions in limine seeking to exclude
the testimony of the Reeds’ three expert witnesses. Docs. 7459, 7460, and 7461. The experts were
permitted to testify regarding economic damages, and Christy Donati, the Reeds’ expert regarding
7
foreclosure practices, was permitted to testify regarding New Jersey foreclosure custom, practice,
and procedure. Id. at 24.
During this conference, the parties also discussed two letters from TD Bank that Mr. Reed
wanted to offer as evidence. ResCap informed the Bankruptcy Court that it planned to object to the
letters on authenticity grounds, and the Bankruptcy Court told Mr. Reed that he needed to obtain a
declaration or affidavit from TD Bank to authenticate the letters. Id. at 30-33. Neither ResCap nor
the Bankruptcy Court raised other grounds for excluding the letters at the September 8 conference.
C.
The Evidentiary Hearing
At the evidentiary hearing held on September 15 and 16, 2014, Mr. Reed strove to prove that
as a result of the improperly filed Foreclosure Action, and the associated notice of lis pendens, the
Reeds had been unable to sell the Property, unable to refinance the Property, and that the value of
the Property had declined. Mr. Reed called four witnesses: himself, Ms. Donati, Evan Hendricks,
who testified regarding the effect of a notice of lis pendens on selling or refinancing property, and
Drew Murdock, a friend of the Reeds.6 ResCap called Lauren Graham Delehey, Chief Litigation
Counsel of the Trust. Both parties also introduced documentary evidence. Consistent with the
Bankruptcy Court’s pre-hearing rulings, the Reeds’ proof was limited to economic damages directly
linked to the Property.
1.
Attempts to Sell
The Reeds attempted to sell the Property several times—before, during, and after the
Foreclosure Action. In December 2007, prior to defaulting on the Loan, the Reeds entered into an
agreement with Scott and Traci Jacobs to sell the house to the Jacobs for $2.04 million. Final Order
20. That sale never closed. Id. The Jacobs informed the Reeds in January 2008 that they were
unable to obtain financing after an appraisal indicated that the value of the property was less than
Christina Reed was not deposed during discovery leading up to the evidentiary hearing and did not testify at the
evidentiary hearing.
6
8
the purchase price. Doc. 7561 (“Sept. 16 Hr’g”) 84:9-18. The Reeds obtained a second appraisal
that supported the purchase price, but the Jacobs did not accept the revised appraisal. Final Order
20-21.
As discussed above, the Reeds did not make a mortgage payment in February 2008, and
three months later GMACM initiated the Foreclosure Action. After the Foreclosure Action was
filed, the Reeds relisted the Property, and in August 2008 they entered into an agreement to sell the
Property to Mark Weaver for $1.8 million. Id. at 21. When Mr. Weaver was unable to pay the Reeds
for the property outright, the Reeds and Mr. Weaver entered into a lease/purchase agreement and
Mr. Weaver moved into the house. Id. Mr. Weaver, however, never made any of his rental
payments. Id. at 22-23. The Reeds were ultimately forced to bring an eviction action against him—
they served him while he was in jail for writing bad checks—and listed the Property again in
September or October of 2009. Sept. 15 Hr’g 90:1-11; 97:18-24.
In March 2010, Frank and Gina Roccisano offered the Reeds $1.3 million for the Property.
Final Order 23. The Reeds rejected their offer. Id. Mr. Reed testified that he and his wife had
rejected the offer because it was not high enough for the Reeds to pay off the Loan, which had
continued to accumulate interest since their March 2008 default. Id. In June 2010 the Roccisanos
made a second offer for $1.45 million, but they later withdrew their offer. Id. at 24. A July 1, 2010
email from Frank Roccisano to his attorney stated that they needed to “discontinue any
negotiations” because the Roccisanos were moving back to Louisville where Mr. Roccisano would
resume his old job. Doc. 7766-13, ResCap Ex. EE. Mr. Reed testified that he understood that Mr.
Roccisano was choosing between two positions, and that the decision to take the position in
Louisville was influenced in part, by the Roccisanos’ ability to purchase the Property—and that after
the Roccisanos “found out [the Reeds] had filed litigation, it [was] like they didn’t want to bother
anymore.” Sept. 15 Hr’g 173:2-7; 175:14-22.
9
After negotiations with the Roccisanos fell through, the Reeds at first lowered the listing
price, but later, around Thanksgiving of 2010, the Reeds took the house off of the market and
moved back in. Id. at 173:10-16; 174:1-7.
In May 2011, the Reeds received an offer from Kris and Nina Singh. Id. at 174:1-15, 20-24;
Doc. 7766-14, ResCap Ex. FF. The Reeds rejected the Singhs offer of $1.1 million because, like the
Roccisanos’ first offer, it was not high enough to allow the Reeds to pay off the Loan and convey
clear title to the Singhs. Sept. 15 Hr’g 174:20-175:4.7 The Reeds have not listed the Property since
the Singhs’ offer. Final Order 25.
2.
Attempts to Refinance
In addition to offering evidence that he had attempted to sell the Property, at the hearing
Mr. Reed offered evidence that he had attempted to refinance the Property but had been unable to
obtain financing because of the Foreclosure Action. Specifically, he testified that he thought he had
options for refinancing in place, but that both Commerce Bank and Allied Mortgage ultimately
refused him refinancing due to the Foreclosure Action. Sept. 15 Hr’g 80:19-25 (Commerce Bank);
Sept. 16 Hr’g 99:14-100:11 (Allied Mortgage).
Mr. Reed did not fill out written applications for refinancing from either bank. See Sept. 15
Hr’g 47:8-16, 48:4-9; Sept. 16 Hr’g 98:7-16. The evidence presented at the evidentiary hearing
regarding whether Mr. Reed ever even sought refinancing from Allied Mortgage was, at best,
inconclusive. Mr. Reed introduced a letter dated November 20, 2010, from Thomas J. Tartamosa, a
former Allied Mortgage loan officer, that stated that Mr. Reed qualified for a number of loan
programs in March of 2008, but that those options became “null and void when [Reed’s] property at
Mr. Reed testified that the Singhs “wanted issues with the mortgage company to be resolved” prior to entering an
agreement. Sept. 16 Hr’g 97:6-9. In an email to Louise Carter, the Reeds real estate agent, Nina Singh requested “a full
description of what the legal dealings are with the bank and seller, as this may affect the closing.” Bankr. Doc. 7766-14,
Ex. FF. It is unclear exactly what Ms. Singh was referring to; at the time of the Singhs’ offer, the Foreclosure Action had
been dismissed, although a lis pendens was still on record, and the Reed Action was pending in New Jersey Court.
Regardless, it is undisputed that the Reeds rejected the $1.1 million offer.
7
10
817 Matlack Dr. Moorestown NJ 08057 was placed into foreclosure.” Doc. 7767-20. ResCap,
however, introduced an affidavit from Stuart Shilling, a Vice President at Allied Mortgage,
confirming that Allied Mortgage had searched its records and had found no record of any
application by Mr. Reed. Bankr. Doc. 7766-16.
With respect to Commerce Bank, the parties agree that Mr. Reed sought financing, but
disagree both as to why Mr. Reed wanted a loan from Commerce and why the transaction was never
consummated. At the hearing, Mr. Reed sought to introduce two letters from Commerce Bank’s
successor, TD Bank. The first letter, written in 2012, stated that Mr. Reed had been denied
financing in 2008 because of the foreclosure proceedings. Bankr. Doc. 7153-8. The second, written
in 2014, stated that the 2012 letter was provided pursuant to the Equal Credit Opportunity Act.8
The Bankruptcy Court did not consider either letter in its factual findings because it determined that
the letters were inadmissible hearsay, a decision that Mr. Reed appeals and that is addressed in more
depth below.
ResCap also introduced testimony from Mr. Reed’s 2009 deposition in which he testified
that he had applied to Commerce Bank to refinance the second mortgage on the Property (not the
Mortgage at issue here) and the loan “wasn’t disapproved,” but the “process kind of died” because
Mr. Reed planned to sell the house to the Jacobs. Sept. 16 Hr’g 109:3-15. The Bankruptcy Court
did not find Mr. Reed’s explanation of the discrepancies between his 2009 deposition and his
testimony at the evidentiary hearing credible, and concluded that he had not established that he was
denied refinancing due to the Foreclosure Action. Final Order 26-27.
3.
The Property’s Decline in Value
In addition to claiming that their ability to sell or refinance the Property had been impaired
8 The 2014 TD letter has not been included as part of the record in this case. However, during the September 8, 2014
status conference, counsel for ResCap described the 2014 letter as clarifying that the first letter was provided pursuant to
the Equal Credit Opportunity Act, and the Court relies upon that description here. Bankr. Doc. 7557, Sept. 8, Hr’g
29:17-21.
11
by the improperly filed Foreclosure Action, the Reeds contended that the value of the Property had
declined over time because of the Foreclosure Action. The evidence that Mr. Reed offered in
support of this argument focused on the decreasing amount that prospective purchasers offered the
Reeds, as well as his own testimony about contemporaneous sales in his neighborhood.
As discussed above, the Reeds had reached an agreement to sell the Property to the Jacobs
for $2.04 million dollars prior to the Foreclosure Action. The next offer, from Mr. Weaver in the
fall of 2008, was for $1.8 million. Approximately a year and a half later, in March of 2010, the
Roccisanos offered $1.3 million, and then, in June of 2010, they increased their offer to $1.45
million. A year after the Roccisanos’ offer, in May 2011, the Singhs offered $1.1 million.
Mr. Reed also testified that during the 2008-2011 time period, two other homes in his
neighborhood were sold. A house “similar in size” to the Property sold for over two million dollars
in 2009, and in 2010 a home on the Reeds’ street sold for $1.465 million. Sept. 16 Hr’g 16:21-17:3;
17:15-18:5. Mr. Reed noted that the sale price of the house sold in 2010 was above the Roscianos’
first offer despite the fact that the Reeds’ property was, in his opinion, qualitatively different from—
and more valuable than—that house. Id. 18:5-15.
Mr. Reed testified that he believed that each of the offers after the initial offer from the
Jacobs had been adversely impacted by the Foreclosure Action. At the time Mr. Weaver made his
offer of $1.8 million, Mr. Reed said that he thought that the Property was worth closer to $1.9
million. Id. 22:5-8. He also estimated that, had the Property not been affected by the Foreclosure
Action, it would have been worth $1.75 to $1.8 million in 2010 and 2011. Id. 19:16-23, 22:24-25.
D.
The Bankruptcy Court’s Final Order and the Instant Appeal
In its Final Order, the Bankruptcy Court held that GMACM had breached its contract with
the Reeds by failing to send an NOI before bringing the Foreclosure Action, and that GMACM had
violated the CFA when it misrepresented in the Foreclosure Action that it owned the Note, and that
as a result it had standing to foreclose. Final Order 37, 50. The court concluded that the Reeds had
12
not prevailed on their negligence claim or their claim for punitive damages based upon actual malice.
Id. at 35, 44.
Based on the CFA violation, the Bankruptcy Court allowed the Reeds’ claim for
$17,469.000—triple the amount of the attorneys’ fees that the Reeds incurred to defend against the
Foreclosure Action. Id. at 50. The Bankruptcy Court determined that the Reeds had not proven
that they were entitled to any damages under the breach of contract claim, because they had not
demonstrated either that they were unable to sell or refinance the Property due to the Foreclosure
Action, or that the Foreclosure Action had caused the Property to decline in value. Id. at 37-41.
The Bankruptcy Court also concluded that the Reeds were unable to recover attorneys’ fees based
on their breach of contract claim, although, as noted above, it awarded attorneys’ fees under the
CFA claim. Id. at 42.
On appeal, the Reeds argue that the Bankruptcy Court erred in a series of decisions that
shaped the evidentiary hearing: (1) in sustaining ResCap’s objection to their claim for malicious use
of process, and (2) in limiting the scope of damages evidence the Reeds were permitted to introduce
at the evidentiary hearing. They also argue that the Bankruptcy Court erred during the evidentiary
hearing by (3) excluding the two letters from TD bank. Finally, the Reeds assert that the Bankruptcy
Court erred in its Final Order by (4) holding that the notice of lis pendens was absolutely privileged
under New Jersey law, (5) incorrectly weighing the damages evidence presented by Mr. Reed with
respect to the valuation of the Property, and (6) finding that the Reeds’ only ascertainable loss was
the amount of fees incurred in defending against the Foreclosure Action.9
9 The Reeds’ opening brief listed nine issues, but three were not included in the argument section of their brief and so
are waived. Federal Rule of Bankruptcy Procedure 8014(a) requires an Appellant’s brief to contain both a statement of
issues and argument. Rule 8014(a) is derived from Federal Rule of Appellate Procedure 28, and accordingly “simply
stating an issue does not constitute compliance” with the rule, rather “an appellant or cross-appellant must state the issue
and advance an argument” in order for the claim to be considered. Frank v. United States, 78 F.3d 815, 833 (2d Cir. 1996)
vacated on other grounds, 521 U.S. 1114 (1997).
13
II.
Standard of Review
A district court reviews a bankruptcy court’s finding of facts for clear error, its conclusions
of law de novo, and its evidentiary rulings for an abuse of discretion. In re Bayshore Wine Prods. Corp.,
209 F.3d 100, 103 (2d Cir. 2000)) (findings of fact and conclusions of law); Manley v. AmBase Corp.,
337 F.3d 237, 247 (2d Cir. 2003) (evidentiary rulings). A finding of fact is clearly erroneous when
the reviewing court is “left with the definite and firm conviction that a mistake has been made.” In
re Ames Dep’t Stores, Inc., 582 F.3d 422, 426 (2d Cir. 2009) (citing United States v. U.S. Gypsum Co., 333
U.S. 364, 395 (1948)).
III.
Discussion
A.
Malicious Use of Process
The Reeds claim that the Bankruptcy Court erred in sustaining the objection to their
malicious use of process claim. In order to prove a claim for malicious use of process under New
Jersey law, a plaintiff must show that the original lawsuit (1) was brought without probable cause; (2)
was motivated by malice; (3) terminated favorably to plaintiff; and (4) caused the plaintiff to suffer a
special grievance. Baglini v. Lauletta, 768 A.2d 825, 834 (N.J. Super. Ct. App. Div. 2001).
Appellant’s argument focuses on the Bankruptcy Court’s statement that GMACM had “the
absolute right to commence a foreclosure” during the July 9, 2014 objection hearing. Bankr. Doc.
7259 84:13-14. They argue that GMACM did not have the “absolute right” to commence the
proceeding because it lacked standing, and also because it was obligated to comply with certain
contractual and statutory obligations. As a result, the Reeds claim that the Bankruptcy Court’s
statement was error that requires remand.
As ResCap points out, however, when the Bankruptcy Court’s statement is read in context it
is clear that the court meant that GMACM had a good-faith basis for instituting foreclosure
proceedings, not that it had an inviolate right to do so. The Bankruptcy Court’s complete statement
was:
14
Commencing a foreclosure action against somebody who hadn’t paid their mortgage
is not a malicious use of process. They couldn’t – the foreclosure action was
dismissed without prejudice because they didn’t satisfy the technical requirement of
the foreclosure act, not that they didn’t have the absolute right to commence a
foreclosure against you.
Bankr. Doc. 7259, Transcript of July 9, 2014 Objection Hearing, 84:9-14. The Reeds are correct that
GMACM failed to take certain required steps before filing the Foreclosure Action. The Bankruptcy
Court acknowledged that fact in its Final Order when it held that the Reeds had proven their breach
of contract claim. Bankr. Doc. 7619 at 37. Failure to meet those “technical requirements,”
however, does not mandate the conclusion that the foreclosure proceedings were motivated by
anything besides the uncontested fact that the Reeds had defaulted on their mortgage. The record
does not support the contention that the foreclosure action was motivated by malice. The
Bankruptcy Court’s order sustaining ResCap’s objection to the Reeds’ malicious use of process claim
is affirmed.
B.
Limitation on the Scope of Damages Evidence
The remainder of the Reeds’ arguments on appeal concern legal rulings and factual findings
related to their damages. I will first address the Reeds’ primary contention on appeal—that the
Bankruptcy Court erred when, during the July 28 telephone conference and in its July 29 order, it
limited the scope of damages that the Reeds were entitled to recover to direct economic losses
related to the Property, and, therefore, constrained the evidence that the Reeds were permitted to
introduce at trial.10
1. The Allowed Damages
In its Final Order, the Bankruptcy Court held that the Reeds had established that GMACM
was liable under both their CFA claim and their breach of contract claim. The CFA requires a
Because, as set forth further below, I agree with the Reeds’ argument that the Bankruptcy Court’s categorical exclusion
of certain damages evidence as a matter of law was in error, I do not reach their due process argument.
10
15
private plaintiff to establish “(1) an unlawful practice, (2) an ‘ascertainable loss,’ and (3) ‘a causal
relationship between the unlawful conduct and the ascertainable loss . . . .” Gonzalez v. Wilshire Credit
Corp., 25 A.3d 1103, 1115 (N.J. 2011) (quoting Lee v. Carter-Reed Co., 4 A.3d 561, 576 (N.J. 2010)).
The Bankruptcy Court found that GMACM’s misrepresentation during the Foreclosure Action—
submitting the assignment that falsely stated that GMACM was assigned both the Note and the
Mortgage—was an unlawful act that violated the CFA. Final Order 48. The Bankruptcy Court also
determined that GMACM had breached the Mortgage when it failed to comply with the FFA’s
notice requirements, which were incorporated into the contract. The Bankruptcy Court’s
determination that GMACM was liable with respect to both causes of action is not at issue in this
appeal.
After determining that GMACM was liable under the CFA and that it breached the
Mortgage, the Bankruptcy Court considered the damages, if any, to which the Reeds were entitled.
It held that GMACM’s misrepresentation caused the Reeds’ to incur attorneys’ fees to defend
against the Foreclosure Action, and accordingly allowed the Reeds’ claim for treble the amount they
spent on attorneys’ fees. Id. at 50. The Bankruptcy Court found, however, that the Reeds had not
proven that they were entitled to recover any damages based on their breach of contract claim.
Final Order at 42. Specifically, the Bankruptcy Court found the Reeds had not established (1) that
they were denied refinancing based on the Foreclosure Action, (2) that they were unable to sell the
Property as a result of the Foreclosure Action and lis pendens, (3) that the decline in the value of the
Property was caused by the Foreclosure Action, or (4) that they were entitled to attorneys’ fees
(although, as discussed above, it allowed damages based on attorneys’ fees under the CFA). Id. at
37-42.
Consistent with its previous ruling, the Bankruptcy Court only considered damages evidence
that concerned the Property specifically when determining the allowable damages. The issue,
16
therefore, is whether the Bankruptcy Court’s limitation on the presentation and development of
damages evidence was appropriate.
2. The Excluded Evidence
The Reeds argue that the categorical exclusion of damages outside of the value and
alienability of the Property and cost of defending the Foreclosure Action prevented them from
recovering the full amount of damages they are entitled to under New Jersey law. For example, the
Reeds claim that a long-term tenant of their rental properties chose not to renew its lease due to the
Foreclosure Action. Appellants’ Br. 19; see Bankr. Doc. 7153-13. The Court agrees that the
categorical exclusion of all evidence of loss not specifically tied to the Property was not supported
by New Jersey law. 11
Under the CFA, the Reeds are entitled to recover “ascertainable losses” directly related to
GMACM’s CFA violation. The New Jersey Supreme Court has explained that an “ascertainable
loss” within the meaning of the CFA must be “an actual loss” that is “quantifiable or measureable”
and not “hypothetical or illusory.” Thiedemann v. Mercedes-Benz USA, LLC, 872 A.2d 783, 792-93
(N.J. 2005). Where, as here, a case involves breach of contract or misrepresentation, “either out-ofpocket loss or a demonstration of loss in value will suffice to meet the ascertainable loss hurdle and
will set the stage for establishing the measure of damages.” Id. at 792 (citing Furst v. Einstein Moomjy,
Inc., 860 A.2d 435, 441-42 (N.J. 2004)).
In New Jersey, “a party who breaches a contract is liable for all of the natural and probable
consequences of the breach of that contract.” Pickett v. Lloyd’s, 621 A.2d 445, 454 (N.J. 1993) (citing
Donovan v. Bachstadt, 453 A.2d 160 (N.J. 1982)). Such damages, however, must be reasonably
ResCap responded to the Reeds argument, in part, by arguing that the Bankruptcy Court’s decision to limit the
testimony of the Reeds’ expert witnesses was a proper exercise of its authority under Rule 16, and, as an evidentiary
ruling should be reviewed for abuse of discretion. But the Reeds’ argument is that the Bankruptcy Court erred in
reaching its legal conclusion that damages not directly related to the Property were too speculative to be recoverable
without evaluating the evidence at the hearing—the limitation on the scope of expert testimony is just one of multiple
evidentiary rulings that resulted from that legal determination, which the Court reviews de novo.
11
17
foreseeable. Id. “Loss of profits, where based on sound fact and not on mere opinion evidence
without factual support, is recognized as a proper measure of damages if ‘capable of being estimated
with a reasonable degree of certainty.’” Stanley Co. of Am. v. Hercules Powder Co., 108 A.2d 616, 626
(N.J. 1954) (citing Rempfer v. Deerfield Packing Corp., 72 A.2d 204, 208 (N.J. 1950)).
The Bankruptcy Court did not clearly adhere to these principles of New Jersey law when it
categorically limited the damages that the Reeds could recover to direct economic losses related to
the Property. The court excluded “damages relating to any other properties or lost business
opportunities . . . ,” because “as a matter of law” “such damages are speculative and not
foreseeable . . . .” July 29 Order 1-2. Critically, however, the record does not reflect that the court
evaluated any of the Reeds’ evidence, or even received a proffer regarding its content, before
imposing its restriction on the scope of the Reeds’ damages. As a result, I do not have a basis to
construe the Bankruptcy Court’s ruling as reflecting its considered judgment of the proffered
evidence. Instead, I am confronted with the more basic question of whether damages that are not
directly related to the relevant property and non-economic damages must be excluded, as the
Bankruptcy Court held, “as a matter of law.” The answer to that bare question is that they are not.
As outlined above, New Jersey law requires that the Reeds’ damages be “ascertainable” or
“foreseeable.” But the law does not support the exclusion of indirect damages, such as lost profits,
so long as they meet those requirements. The court’s conclusory culling of a category of damages
prior to the evidentiary hearing created the possibility that an ascertainable or foreseeable loss
directly caused by the Foreclosure Action was overlooked.12 I have sympathy for the Bankruptcy
Court’s desire to establish limitations on the evidence presented—particularly given the volume of
submissions in this case—and I take no position regarding whether the evidence that the Reeds seek
to introduce will meet the standard required for the Reeds to recover. However, I believe that New
12
This possibility is why, contrary to ResCap’s arguments, the error is not harmless.
18
Jersey law requires some evaluation of the proffered evidence to determine whether it meets that
standard.
The Bankruptcy Court’s decision limiting the scope of damages evidence is therefore
reversed, and the case is remanded for further proceedings to determine whether the Reeds suffered
any cognizable damages caused by the Foreclosure Action, but not directly related to the Property.
C.
Exclusion of the TD Letters
The Reeds contend that the Bankruptcy Court improperly sustained ResCap’s objection to
two letters from TD Bank that Mr. Reed sought to introduce at the evidentiary hearing. They argue
that during the September 8, 2014 telephone conference, the Bankruptcy Court said that the letters
would be admitted if Mr. Reed could provide affidavits authenticating them, and that it was
improper to then exclude the authenticated letters on hearsay grounds given that the Bankruptcy
Court had not previously suggested that hearsay could be an independent basis to exclude the letters.
Appellants’ Br. 27.
“[P]ro se status ‘does not exempt a party from compliance with relevant rules of procedural
and substantive law.’” Triestman v. Federal Bureau of Prisons, 470 F.3d 471, 477 (2d Cir. 2006) (quoting
Traguth v. Zuck, 710 F.3d 90, 95 (2d Cir. 1983)). The hearsay exception for records of a regularly
conducted activity requires that the record at issue be “made at or near the time” of the act or event
recorded. Federal Rule of Evidence 803(6). The letters at issue were written in 2012 and 2014, and
concern the alleged denial of refinancing to Mr. Reed in 2008. Given the significant delay between
the event records and the preparation of the documents, the Bankruptcy Court clearly did not abuse
its discretion in excluding the letters.
Further, it is apparent from the record that the Bankruptcy Court went out of its way to
devise a solution that would comply with the Rules of Evidence and be fair to the Reeds. After the
letters were excluded on September 15, Mr. Reed told the Bankruptcy Court that Mr. Curley, the
author of the letters, would be able to come to court to testify the next day. Sept. 15 Hr’g 163:3-5.
19
Despite the fact that Mr. Curley was not listed on the witness list, the Bankruptcy Court agreed to
permit Mr. Curley to testify on the second day of the hearing “[i]n fairness to Mr. Reed, a nonlawyer,” who “could not have anticipated the Court’s ruling in refusing to admit into evidence the
letters.” Id. 196:1-15.13 Mr. Reed failed to produce Mr. Curley the next day, despite the Bankruptcy
Court’s expressed willingness to allow the testimony. The court’s exclusion of the TD letters is
affirmed.14
D.
The Notice of Lis Pendens
The Reeds next argue that the Bankruptcy Court erred in ruling that GMACM’s filing of a
notice of lis pendens enjoyed absolute privilege under New Jersey law. The Reeds appeal can be
construed to raise two distinct, but related, issues: (1) whether the initial filing of the lis pendens was
privileged under New Jersey law, and (2) if the original filing was privileged, whether the privilege
ceased when the Foreclosure Action was dismissed and GMACM failed to withdraw the notice of lis
pendens.
“The public policy rationale for the litigation privilege has not changed in half a
millennium.” Loigman v. Twp. Comm. of Twp. of Middletown, 889 A.2d 426, 434 (N.J. 2006). “Certain
statements, such as those made in judicial, legislative, or administrative proceedings, are absolutely
privileged because the need for unfettered expression is crucial to the public weal.” Dairy Stores, Inc.
v. Sentinel Pub. Co., Inc., 516 A.2d 220, 226 (N.J. 1986) (citing Rainier’s Diaries v. Raritan Valley Farms,
Inc., 117 A.2d 889 (N.J. 1955). Under New Jersey law, the filing of a notice of lis pendens is part of a
13 The Court further notes that the Bankruptcy Court was generally solicitous of Mr. Reed’s status as a pro se litigant. In
addition to agreeing to permit Mr. Curley to testify, the Bankruptcy Court pointed out when Mr. Reed might wish to
offer exhibits into evidence, see, e.g., Sept. 15 Hr’g 52-53, and assisted in rephrasing Mr. Reed’s questions for Mr.
Hendricks. Id. 143-144.
14 The Reeds assert, in their reply brief before this Court, that the Bankruptcy Court would not allow them the
opportunity to bring Mr. Curley in at another time. This argument is unavailing. The Bankruptcy Court noted that Mr.
Reed could “seek to obtain some relief” if he believed he “timely served [Mr. Curley] with reasonable notice of a
subpoena to appear” but that he would need to do so outside of the evidentiary hearing. Sept. 16 Hr’g, 43:20-44:5.
There is no evidence in the record before this Court that Mr. Reed ever requested such relief or raised the issue after the
September 16, 2014 hearing.
20
judicial proceeding, and, as such, is an absolutely privileged act which cannot give rise to liability for
slander of title. Wendy’s of South Jersey, Inc., v. Blanchart Mgmt. Corp. of New Jersey, 406 A.2d 1337, 1340
(N.J. Super. 1979). The Reeds argue that privilege cannot attach when the lawsuit of which the lis
pendens gives notice was “wrongfully filed,” and that, in any event, it applies only to claims for slander
of title. Appellants’ Br. 25. Neither proposition is supported by New Jersey law.
First, the Wendy’s court confronted the concern that “the cloak of an absolute privilege will
result in the filing of notice of Lis pendens with impunity and utter disregard for the severe harm
which can result,” and upheld the privilege. Wendy’s, 406 A.2d at 1340. Instead of abrogating the
privilege, the Wendy’s court noted “that the law does offer some protection to a property owner from
the baseless filing of a notice of Lis pendens through the application of such procedural devices as a
motion to dismiss, or a motion for summary judgment, to the action itself.” Id. (internal citations
and citations omitted). Similarly, in considering the constitutionality of the New Jersey lis pendens
statute the Third Circuit has observed that property owners were “not totally without protection
against frivolous or unmeritorious claims” because of the limited circumstances in which a notice of
lis pendens can be filed, and because “remedies of malicious prosecution and abuse of process are
likely to be available in New Jersey to provide some protection against improper utilization of lis
pendens.” Chrysler Corp. v. Fedders Corp., 670 F.2d 1316, 1329.15 The courts have thus considered the
risk that a notice of lis pendens could be filed in a meritless lawsuit and concluded that even
considering the risk that notices of lis pendens may be filed “with impunity,” the privilege applies.
Second, contrary to the Reeds’ assertion, the litigation privilege applies to claims beyond
slander of title. The Wendy’s court recognized that slander of title is just one species of the general
The Reeds claim that filing a notice of lis pendens is, in and of itself, a ‘taking of property’ and cite the district court’s
decision in Chrysler Corp. v. Fedders Corp., 519 F.Supp. 1252 (D.N.J. 1981). On appeal, however, the Third Circuit
declined to determine whether the notice of lis pendens does or does not entail a taking, and instead decided “merely that
the degree of deprivation caused by a filing of a notice of lis pendens warrants reaching the due process issue.” 670 F.2d
at 1324-25. The Third Circuit went on to hold that the New Jersey statute afforded sufficient due process to property
owners against whom a notice of lis pendens was filed and so was constitutional. Id. at 1331.
15
21
tort of injurious falsehood, and that “the same privileges which apply to the torts of personal
defamation apply to the tort of injurious falsehood.” Wendy’s, 406 A.2d at 1338 (citations omitted).
Based on this same privilege, courts have also dismissed claims for malicious interference with one’s
business, intentional interference with contractual relations, and intentional interference with
economic advantage. Rainier’s Dairies, 117 A.2d at 895 (malicious interference with business); Lone v.
Brown, 489 A.2d 1192, 1196 (N.J. Super. Ct. 1985) (intentional interference with contractual relations
and economic advantage). This is a logical conclusion, because “[i]f the policy, which in defamation
actions affords an absolute privilege or immunity to statements made in judicial and quasi-judicial
proceedings is really to mean anything then we must not permit its circumvention by affording an
almost equally unrestricted action under a different label.” Rainier’s Dairies, 117 A.2d at 895; see also,
Loigman, 889 A.2d at 436 (“In New Jersey, the litigation privilege protects attorneys not only from
defamation actions, but also from a host of other tort-related claims.”).
Like the New Jersey courts, this Court cannot permit an end-run around the litigation
privilege because the Reeds have not labelled their claim “slander of title.” They are, in substance,
claiming that they were injured by a statement made in a judicial proceedings—the notice of lis
pendens—that limited their ability to alienate their property. I hold that the lis pendens filed by
GMACM was privileged and, therefore, affirm the decision of the Bankruptcy Court—to do
otherwise would contradict the public policy underlying the privilege as explained by the Rainier’s
Dairies court.
Having determined that GMACM’s original recording of the lis pendens was privileged, I must
briefly consider whether the privilege ceased after the Foreclosure Action was dismissed and
GMACM failed to discharge the lis pendens. It did not. At the evidentiary hearing, the Reeds
provided evidence, through the testimony of an attorney experienced in foreclosure cases, that a
notice of lis pendens is typically withdrawn by the plaintiff-mortgagee when a foreclosure action is
dismissed. Sept. 15 Hr’g 116:22-117:6, 119:3-21. But even crediting the testimony that that is the
22
typical practice, the Reeds have not provided—and the Court’s research has not identified—any
legal authority supporting the proposition that the plaintiff who recorded a notice of lis pendens has
an affirmative obligation to have it discharged when the plaintiff’s case is dismissed. Furthermore,
as the Bankruptcy Court noted, there is no suggestion that the Reeds sought to remove the lis
pendens, despite the fact that there were multiple avenues available for them to do so. Final Order
40. The original notice of lis pendens filed in the Foreclosure Action was privileged, and it did not
lose that status simply because the parties failed to discharge it in a timely fashion.
Because the notice of lis pendens was privileged, the only possible means by which the Reeds
might recover damages based on the notice of lis pendens is by bringing a successful claim for
malicious prosecution or abuse of process. See Chrysler, 670 F.3d at 1330, Wendy’s, 406 A.2d at 1340.
As discussed above, however, these claims fail here given the lack of evidence that GMACM acted
with malice in instituting the Foreclosure Action and recording the notice of lis pendens.
E.
Findings of Fact Regarding the Value of the Property
The Reeds contend that the Bankruptcy Court incorrectly weighed the evidence Mr. Reed
presented with respect to the decline in value of the Property over time. In short, Mr. Reed argues
that his was the only evidence of the Property’s value presented at the evidentiary hearing, and,
therefore, that the Bankruptcy Court’s factual findings with respect to the value of the Property
went against the weight of the evidence. Mr. Reed is incorrect.
As an initial matter, a claim is not automatically allowed in the amount the claimant alleges
simply because the Bankruptcy Court determines that the claimant has a valid claim for some amount.
Rather, the Bankruptcy Court has an independent obligation to “determine the amount” of each
claim “as of the date of the filing of the petition . . . .” 11 USC § 502(b).
Moreover, while it is true, as the parties stated in their briefs, that a correctly filed proof of
claim is prima facie evidence of the validity and amount of the claim, the burden shifts to the objector
to produce evidence sufficient to negate prima facie validity, and that if the objector does so the
23
burden of proof returns to the claimant to establish the validity of the claim, In re Allegheny Intern.,
Inc., 954 F.2d 167, 173-74 (3d Cir. 1992), this simplified recitation misses two significant points.
First, in order to shift the burden to the objector in the first place the filed claim must allege facts
sufficient to support the claim,16 and second, the burden of persuasion is always on the claimant. Id.
With this framework in mind, it is easy to understand how the Reeds failed to meet their
ultimate burden of persuasion—even in a situation in which the only evidence as to the value of the
Property was offered by the Reeds, the onus remained on them to convince their fact-finder, the
Bankruptcy Court, to view those facts in the way that favored their claim. In the context of the
Reeds’ claim that they were entitled to damages to compensate them for the decrease in the value of
the Property over time, they had to convince the Bankruptcy Court not only that the Property
declined in value, but that it declined in value because of the Foreclosure Action.
The Bankruptcy Court considered Mr. Reed’s evidence regarding the value of the Property,
and found that the value diminished over time. Final Order 41. This Court’s review of the record
confirms that the Bankruptcy Court did not err in concluding that the Reeds failed to show that the
decrease in value was a result of the Foreclosure Action. Therefore, the decision of the Bankruptcy
Court on this point is affirmed.
F.
Whether the Reeds Are Entitled to Greater Damages
Finally, the Reeds makes a general assertion that the Bankruptcy Court erred in not awarding
them greater damages. For the same reasons discussed in Section III.E, supra, the Court affirms the
Bankruptcy Court’s rulings with the respect to the category of damages that it considered, namely,
those directly related to the Property. As discussed in Section III.B, supra, the Court remands this
case to the Bankruptcy Court to determine whether the Reeds sustained any cognizable damages as a
It is impossible for the Court to evaluate whether the Reeds’ original claims met the standard for sufficiency in
establishing the amount of their claim because neither party designated the Reeds’ original claims as part of the record
on appeal. See Designation of Bankruptcy R. on Appeal, ECF No. 2, and Counter Designation of Bankruptcy R. on
Appeal, ECF No. 3.
16
24
direct result of the Foreclosure Action beyond the damages relating to the Property on which the
Bankruptcy Court has already heard and evaluated the evidence.
IV.
Conclusion
For the foregoing reasons, the decision of the Bankruptcy Court is affirmed in part, reversed
in part, and remanded. The Clerk of Court is instructed to enter judgment accordingly and to close
the case.
SO ORDERED.
Dated: December 23, 2015
New York, New York
_____________________________________
GREGORY H. WOODS
United States District Judge
25
Disclaimer: Justia Dockets & Filings provides public litigation records from the federal appellate and district courts. These filings and docket sheets should not be considered findings of fact or liability, nor do they necessarily reflect the view of Justia.
Why Is My Information Online?