Elebute

Filing 20

MEMORANDUM OPINION AND ORDER. The Court AFFIRMS the bankruptcy court's order denying reconsideration of its order dismissing the adversary proceeding. (Signed by Judge George C Hanks, Jr) Parties notified. (KimberlyPicota, 4)

United States District Court
Southern District of Texas

ENTERED
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF TEXAS
HOUSTON DIVISION
In re KEHINDE ADEYEMI ELEBUTE,
Debtor.
KEHINDE ADEYEMI ELEBUTE,
Appellant.

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March 28, 2024
Nathan Ochsner, Clerk

CIVIL ACTION NO. 4:23-CV-2674
BANKRUPTCY CASE NO. 16-35528

MEMORANDUM OPINION AND ORDER
This appeal involves a reopened bankruptcy case following a multi-year battle over
a property foreclosure. The debtor-appellant, Kehinde Elebute (“Elebute”), sued the
appellees, Village Capital & Investment LLC (“Village Capital”) and Michael Weems
(“Weems”), in state court for wrongful foreclosure of his inherited property. The state court
action followed a completed litigation of the same issue in an adversary proceeding in the
Bankruptcy Court for the Southern District of Texas, resulting in Weems moving to reopen
the bankruptcy case and remove the state court action. The bankruptcy court reopened the
case, prompting a motion for reconsideration by Elebute. The bankruptcy court denied the
motion for reconsideration. Elebute appealed the order. After commencement of this
appeal, the bankruptcy court dismissed the adversary proceeding adjudicating the removed
state court action because of Elebute’s failure to prosecute the case, again prompting a
motion for reconsideration by Elebute. The motion was denied, and Elebute appealed the
order. Elebute’s appeal of the bankruptcy court’s order denying reconsideration of its order

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reopening the bankruptcy case is DISMISSED. The Court AFFIRMS the bankruptcy
court’s order denying reconsideration of its order dismissing the adversary proceeding.
I.

BACKGROUND

From 2014 through 2016, Elebute filed multiple bankruptcy petitions under Chapter
13 of the Bankruptcy Code. (Bankr. S.D. Tex. Case No. 14-34916; Bankr. S.D. Tex. Case
No. 15-31877; Bankr. S.D. Tex. Case No. 15-34859; Bankr. S.D. Tex. Case No. 16-30322;
Bankr. S.D. Tex. Case No. 16-35528). Each of these cases was dismissed for failures to
make plan payments and comply with various requirements of the Bankruptcy Code.
(Bankr. S.D. Tex. Case No. 14-34916, Dkts. 41, 46; Bankr. S.D. Tex. Case No. 15-31877,
Dkts. 17, 26; Bankr. S.D. Tex. Case No. 15-34859, Dkts. 17, 21; Bankr. S.D. Tex. Case
No. 16-30322, Dkts. 25, 41; Bankr. S.D. Tex. Case No. 16-35528, Dkts. 34, 40). The
bankruptcy proceeding subject to this appeal was filed on November 1, 2016. (Bankr. S.D.
Tex. Case No. 16-35528, Dkt. 1). Elebute filed the case to save his inherited property from
foreclosure. (Dkt. 14-10 at pp. 34–42). Because the bankruptcy was Elebute’s third petition
within a one-year timeframe, the automatic stay did not arise under 11 U.S.C. § 364(c)(2).
The property was foreclosed on November 1, 2016. (Dkt. 14-10 at p. 53). This case was
dismissed on April 18, 2017, again for nonpayment and failure to comply with certain
requirements of the Bankruptcy Code. (Bankr. S.D. Tex. Case No. 16-35528, Dkts. 34, 40).
On March 14, 2017, Elebute filed an adversary proceeding under his November 1st
bankruptcy case against his alleged creditor, Village Capital, and the alleged buyer of the
property at foreclosure, Meghani Investment Group, LLC (“Meghani”). (Dkt. 14-1 at pp.
2–3). Elebute claimed a cause of action for wrongful foreclosure. (Dkt. 14-1 at pp. 3–5).
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On January 15, 2018, Village Capital moved for summary judgment. (Dkt. 14-4). The
bankruptcy court granted Village Capital’s motion. (Dkt. 14-5 at p. 1). The bankruptcy
court found no defects in the foreclosure sale of Elebute’s property. (Dkt. 14-5 at pp. 3-4).
Elebute moved to reconsider the order granting summary judgment. (Dkt. 14-6 at p. 1).
The bankruptcy court denied the motion. (Dkt. 14-7 at pp. 1–2). On November 26, 2018,
Elebute filed a notice of appeal, which the district court dismissed. (Dkt. 14-8 at p. 1; Dkt.
14-9 at p. 1). The district court entered final judgment for Village Capital. (Bankr. S.D.
Tex. Case No. 17-03148, Dkt. 59).
Elebute filed a complaint against Village Capital, Michael Weems (Village
Capital’s attorney), and the trustees of the foreclosure sale in state court in October 2020.
(Bankr. S.D. Tex. Case No. 23-03110, Dkt. 1-2 at p. 2; Bankr. S.D. Tex. Case No. 2303110, Dkt. 1-3 at pp. 1–2). Three years later, in June 2023, Elebute filed his Fifth
Amended Complaint. (Dkt. 14-11 at p. 4). The complaint removed a few of the trustees
and added Meghani and additional parties. (Bankr. S.D. Tex. Case No. 23-03110, Dkt. 18 at pp. 1–3). Elebute claimed various causes of action alleging the invalidity of the
foreclosure sale of his property. (Bankr. S.D. Tex. Case No. 23-03110, Dkt. 1-8 at pp. 6–
13).
On June 8, 2023, Weems filed a motion to reopen the November 1st bankruptcy
case. (Dkt. 14-12). Weems argued that Elebute’s claims in the state court proceeding were
already decided by the bankruptcy court in the prior adversary proceeding, and
accordingly, that the bankruptcy court should reopen the case and determine the res
judicata effect of the prior ruling. (Dkt. 14-12 at pp. 5–6). On June 16, 2023, the bankruptcy
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court granted the motion and reopened the bankruptcy case. (Dkt. 3-5). On June 19, 2023,
Elebute’s state court complaint was removed to an adversary proceeding underlying the
reopened bankruptcy case. (Bankr. S.D. Tex. Case No. 23-03110, Dkt. 1). On June 25,
2023, Elebute filed his first amended complaint in the adversary proceeding. (Dkt. 14-10;
Bankr. S.D. Tex. Case No. 23-03110, Dkt. 3).
On June 24, 2023, Elebute filed a motion to reconsider the order reopening the
bankruptcy case. (Dkt. 3-6). The bankruptcy court denied the motion. (Dkt. 3-8). Elebute
appealed the order denying reconsideration on July 20, 2023. (Dkt. 1). Elebute is the
Appellant and Village Capital and Weems are the Appellees. (Dkt. 1-1 at p. 1). On August
24, 2024, Village Capital and Weems filed a joint motion to dismiss this appeal. (Dkt. 2).
Elebute submitted his opening brief on November 27, 2023, and Village Capital and
Weems submitted their response brief on December 14, 2023. (Dkts. 10, 14). The Court
held a status conference on December 1, 2023, where it advised the parties that it would
carry the joint motion to dismiss with its consideration of the appellate briefs. (Dkt. 15).
The bankruptcy court held a status conference in the adversary proceeding on
December 4, 2023. (Dkt. 16-2 at 1). Elebute failed to appear, and the bankruptcy court
dismissed the adversary proceeding for want of prosecution. (Dkt. 16-2 at p. 1). On
December 5, 2023, Elebute filed a motion to reconsider the dismissal. (Bankr. S.D. Tex.
Case No. 23-03110, Dkt. 26). On January 17, 2024, a hearing was held on the motion for
reconsideration, and that same day, the motion was denied. (Dkt. 16-2 at pp. 1–2). Elebute
appealed the order on January 18, 2024. (Dkt. 16).

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On February 8, 2024, Village Capital and Weems submitted a notice of disbarment
of Elebute’s counsel, Diogu Kalu Diogu, II. (Dkt. 18). Elebute did not file an amended
appellate brief. On February 19, 2024, Village Capital and Weems submitted a renewed
motion to dismiss for undue delay and frivolity. (Dkt. 19). The Court does not address this
motion. As stated, the Court reviews the parties’ appellate briefs and Village Capital’s and
Weems’s joint motion to dismiss the appeal.
II.

BANKRUPTCY APPEALS

Federal district courts have jurisdiction to hear appeals from the final judgments of
bankruptcy judges. 28 U.S.C. § 158(a). An appeal to a district court from the bankruptcy
court “shall be taken in the same manner as appeals in civil proceedings generally are taken
to the courts of appeals from the district courts[.]” 28 U.S.C. § 158(c)(2). This Court
reviews the bankruptcy court’s legal conclusions de novo but may only disregard a fact
finding made by the bankruptcy court if that fact finding is clearly erroneous. In re Perry,
345 F.3d 303, 309 (5th Cir. 2003). “A factual finding is not clearly erroneous if it is
plausible in the light of the record read as a whole.” In re Ramba, Inc., 416 F.3d 394, 402
(5th Cir. 2005). The Fifth Circuit has emphasized that, under the “clearly erroneous”
standard, this Court “may [not] weigh the evidence anew” and may only set aside the
bankruptcy court’s fact findings if it is “left with the definite and firm conviction that a
mistake has been committed.” In re Perry, 345 F.3d at 309 (quotation marks omitted).
The review of a bankruptcy court’s decision to reopen a proceeding is governed by
the abuse of discretion standard. Citizens Bank & Tr. Co. v. Case (In re Case), 937 F.2d
1014, 1018 (5th Cir. 1991). The review of a dismissal with prejudice for failure to prosecute
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is also governed by the abuse of discretion standard. In re Wood, 199 F. App’x 328, 331
(5th Cir. 2006). “An abuse of discretion occurs where the ‘ruling is based on an erroneous
view of the law or on a clearly erroneous assessment of the evidence.’” Tollett v. City of
Kemah, 285 F.3d 357, 363 (5th Cir. 2002) (quoting Mercury Air Grp., Inc. v. Mansour,
237 F.3d 542, 548 (5th Cir. 2001)).
III.

ANALYSIS
—Village Capital’s and Weems’s joint motion to dismiss is granted.

Village Capital and Weems filed a joint motion to dismiss this appeal on August 15,
2023. (Dkt. 2). Elebute filed an amended notice of appeal on January 18, 2024. (Dkt. 16).
Elebute argues that his filing of the amended notice of appeal renders the joint motion to
dismiss moot, as the original notice of appeal no longer has any legal effect. (Dkt. 17 at pp.
1–2).
The Court disagrees. The motion to dismiss involves an issue regarding the Court’s
jurisdiction to hear this appeal. Even if the motion no longer remained operative, federal
courts have a duty to raise the issue of their subject matter jurisdiction sua sponte. H&D
Tire & Auto.-Hardware, Inc. v. Pitney Bowes Inc., 227 F.3d 326, 328 (5th Cir. 2000). The
Court has a duty to address the issues raised in the motion to dismiss.
Village Capital and Weems move to dismiss on grounds that the bankruptcy court’s
order granting Weems’s motion to reopen the bankruptcy case was not a final, appealable
order. (Dkt. 3 at pp. 5–7). Pursuant to 28 U.S.C. § 158(a)(3), a district court has jurisdiction
to hear appeals of a bankruptcy court’s nonfinal, interlocutory orders only with leave of
the court. “Orders in bankruptcy cases qualify as ‘final’ when they definitively dispose of
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discrete disputes within the overarching bankruptcy case.” Ritzen Grp., Inc. v. Jackson
Masonry, LLC, 140 S. Ct. 582, 586 (2020); see also Kountaki v. Johnson, No. CIV.A. H07-3530, 2007 WL 4570161, at *1 (S.D. Tex. Dec. 26, 2007) (alterations in original)
(internal quotation marks omitted) (“[F]or a bankruptcy court order to be final . . . it must
completely resolve all of the issues pertaining to a discrete claim . . . .” (quoting Shimer v.
Fugazy (In re Fugazy Express, Inc.), 982 F.2d 769, 776 (2d Cir. 1992))).
An order reopening a bankruptcy case is final when it resolves the merits of the
dispute. Kountaki, 2007 WL 4570161, at *1. “An order denying a motion to reopen is a
final order because it ‘leaves nothing for the [bankruptcy] court to do but execute the
judgment,’” Id. (alteration in original) (quoting In re Booth, 242 B.R. 912, 914 (B.A.P. 6th
Cir.1999)). On the other hand, “a bankruptcy court’s order granting a motion to reopen is
final if it is ‘conclusive on the merits.’” Id. (quoting In re Bonner, 330 B.R. 880, 2005 WL
2136204, at *1 (B.A.P. 6th Cir. 2005)) (finding an order granting a trustee’s motion to
reopen nonfinal because it merely reopened the case without ruling on the merits of the
trustee’s claim or the debtor’s affirmative defenses).
The bankruptcy court’s order reopening the bankruptcy case is a nonfinal,
interlocutory order. The order was used as an administrative device to reopen the case
without resolving any of the issues prompting the motion to reopen—specifically, the
removal of Elebute’s state court action and the adjudication of Elebute’s claims and Village
Capital’s and Weems’s res judicata defense. (Dkt. 3-5 at p. 1). Since Elebute did not seek
leave from the Court, the Court does not have jurisdiction to decide whether the order to
reopen was valid under the Bankruptcy Code.
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Village Capital’s and Weems’s motion to dismiss is granted with respect to the
bankruptcy court’s denial of reconsideration of its order reopening the bankruptcy case.
—The bankruptcy court had jurisdiction to reopen the bankruptcy case.
Elebute’s appeal of the bankruptcy court’s order denying reconsideration raises an
issue regarding the bankruptcy court’s subject matter jurisdiction to reopen the bankruptcy
case. (Dkt. 10 at pp. 3, 6–7). The Court finds that the bankruptcy court had jurisdiction.
Elebute claims that, because his state court action was removed to the bankruptcy
court after the dismissal of his bankruptcy case, the bankruptcy court lacked “related to”
jurisdiction over the adversary proceeding. (Dkt. 10 at pp. 6–7). Elebute’s argument
misconstrues the timeline of the case. (Dkt. 3-5 at p. 1; Bankr. S.D. Tex. Case No. 2303110, Dkt. 1). Although the state court action was commenced after the initial dismissal,
it was removed after the case was reopened. This is not a basis for the Court to find that
the bankruptcy court lacked subject matter jurisdiction. See In re Bissonnet Invs. LLC, 320
F.3d 520, 525 (5th Cir. 2003) (“The existence of subject matter jurisdiction is determined
at the time of removal.”). However, Elebute’s argument does raise the question of whether
the bankruptcy court had subject matter jurisdiction in its initial action of reopening the
bankruptcy case.
28 U.S.C. § 157(a) authorizes district courts to refer to bankruptcy courts “any or
all cases under title 11 and any or all proceedings arising under title 11 or arising in or
related to a case under title 11.” Bankruptcy cases in this district have been automatically
referred to the bankruptcy court under General Order 2012-6. 28 U.S.C. § 1334 lists four
types of matters over which the district court has subject matter jurisdiction in a bankruptcy
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proceeding: cases under title 11, proceedings arising under title 11, proceedings arising
under a case under title 11, and proceedings related to a case under title 11. Wood v. Wood
(In re Wood), 825 F.2d 90, 92 (5th Cir. 1987) (quoting § 1334). A bankruptcy court has
jurisdiction to interpret and enforce its own prior orders. Travelers Indem. Co. v. Bailey,
557 U.S. 137, 151 (2009); see also In re Lothian Oil, Inc., 531 F. App’x 428 (5th Cir. 2013)
(holding that the bankruptcy court retained jurisdiction to enjoin post-confirmation state
court actions); In re Offshore Fin. Corp., 319 B.R. 845, 847–48 (Bankr. N.D. Tex. 2005)
(“The court . . . has the discretion to administratively reopen the closed adversary
proceeding, to the extent necessary to enforce the judgment.”).
The bankruptcy court reopened Elebute’s case upon review of Weems’s emergency
motion to reopen. (Dkt. 3-5 at p. 1). That motion sought to reopen the case in order to
remove Elebute’s state court action to the bankruptcy court and file a motion to dismiss the
action. (Dkt. 14-12 at pp. 5–6). This was premised on the claim that the court’s judgment
in Elebute’s prior adversary proceeding barred Elebute’s state court claims through res
judicata. (Dkt. 14-12 at pp. 5–6). Elebute’s state court action was brought to reclaim title
to his inherited property on the basis of a wrongful foreclosure. (Bankr. S.D. Tex. Case No.
23-03110, Dkt. 1-8 at pp. 6–13). Elebute’s prior adversary proceeding alleged wrongful
foreclosure of the same property at issue in the state court action. (Dkt. 14-1 at pp. 1–2, 3–
5). That prior adversary proceeding resulted in an order granting summary judgment in
Village Capital’s and Meghani’s favor. (Dkt. 14-5 at p. 1). On granting summary judgment,
the bankruptcy court found that there were no defects in the foreclosure sale of Elebute’s
property. (Dkt. 14-5 at pp. 3–4). Elebute appealed the decision, resulting in a dismissal of
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the appeal and the district court’s entry of final judgment in Village Capital’s favor. (Dkt.
14-8 at p. 1; Dkt. 14-9 at p. 1; Bankr. S.D. Tex. Case No. 17-03148, Dkt. 59). The
bankruptcy court’s decision to reopen the case and determine whether to enforce its order
in the prior adversary proceeding plainly fell within its jurisdiction.
Elebute also claims that, because his bankruptcy was dismissed on April 18, 2017,
all prior orders entered in the case, including the orders in the prior adversary proceeding,
were void. (Dkt. 8 at pp. 2–4). If this were true, then the bankruptcy court may not have
had jurisdiction to reopen the case, as there would be no orders to enforce. However,
Elebute’s argument fails.
Elebute relies on 11 U.S.C. § 349(b). Section 349 provides, “Unless the court, for
cause, orders otherwise, a dismissal of a case other than under section 742 of this title . . .
(2) vacates any order, judgment, or transfer ordered, under section 522(i)(1), 542, 550, or
553 of this title . . . .” The prior adversary proceeding did not involve any of the listed
subsections. It was a state-law based action to recover property. (Dkt. 14-1 at pp. 3–4; Dkt.
14-5 at pp. 3–4). The adversary proceeding also continued adjudication after dismissal. A
bankruptcy court has discretion to retain jurisdiction of related proceedings after
termination of the underlying bankruptcy case. Querner v. Querner (In re Querner), 7 F.3d
1199, 1202 (5th Cir. 1993). The bankruptcy court was permitted to retain jurisdiction to
litigate Elebute’s claims after dismissing the underlying bankruptcy. The orders entered in
the adversary proceeding were affirmed on appeal. The orders remain valid and binding.
The bankruptcy court had jurisdiction to reopen Elebute’s bankruptcy proceeding.

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—The bankruptcy court’s dismissal of the adversary proceeding is valid.
Elebute appeals the bankruptcy court’s order denying his motion to reconsider the
dismissal of the adversary proceeding. (Dkt. 16 at p. 1). “Under Federal Rule of Civil
Procedure 41(b), a district court may dismiss a claim for failure of prosecution.” In re
Valentine, 733 F. App’x 184, 186 (5th Cir. 2018). Rule 41(b) applies in bankruptcy
adversary proceedings through Federal Rule of Bankruptcy Procedure 7041. Where the
court does not specify whether a dismissal is with or without prejudice, the Fifth Circuit
treats dismissals for failure to prosecute as dismissals with prejudice. In re Valentine, 733
F. App’x at 187; In re Wood, 199 F. App’x at 331. Dismissals with prejudice are affirmed
only when “(1) there is a clear record of delay or contumacious conduct by the plaintiff,
and (2) the district court has expressly determined that lesser sanctions would not prompt
diligent prosecution, or the record shows that the district court employed lesser sanctions
that proved to be futile.” In re Valentine, 733 F. App’x at 187 (quoting In re Wood, 199 F.
App’x at 332). “Typically, this involves ‘at least one of three aggravating factors . . . .
includ[ing] (1) delay resulting from intentional conduct, (2) delay caused by the plaintiff
personally, and (3) delay causing prejudice to the defendant.’” In re Valentine, 733 F.
App’x at 187 (alterations in original) (quoting Boudwin v. Graystone Ins. Co., 756 F.2d
399, 401 (5th Cir. 1985)).
The Court finds that the bankruptcy court acted within its discretion in dismissing
Elebute’s adversary proceeding. The bankruptcy court held a status conference in the
adversary proceeding on December 4, 2023, to determine how to proceed with adjudicating
the case. (Dkt. 16-2 at p. 1; Bankr. S.D. Tex. Case No. 23-03110, Dkt. 21). There was no
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appearance by or for Elebute at the hearing. (Dkt. 14-13 at p. 1). The record indicates that
counsel for Elebute was served with proper notice of the hearing. (Bankr. S.D. Tex. Case
No. 23-03110, Dkt. 20). On this basis, the bankruptcy court found that Elebute failed to
prosecute the adversary proceeding, warranting dismissal. (Dkt. 14-13 at p. 1). Elebute
filed a motion to reconsider the dismissal. (Bankr. S.D. Tex. Case No. 23-03110, Dkt. 26).
A hearing was held on January 17, 2024. (Bankr. S.D. Tex. Case No. 23-03110, Dkt. 35).
In denying the motion, the bankruptcy court found that Elebute’s counsel failed to provide
any explanation for his failure to appear. (Dkt. 16-2 at p. 2). Instead, Elebute’s counsel
argued that the court lacked jurisdiction to hold the hearing, an argument repeatedly
asserted by counsel and validly rejected by the bankruptcy court. (Dkt. 16-2 at p. 2). The
bankruptcy court also noted a phone call following the December 4th status conference by
Elebute’s counsel with chambers staff suggesting abusive communications. (Dkt. 16-2 at
pp. 1–2). The record demonstrates intentional delay by Elebute and that lesser sanctions
would be futile.
The bankruptcy court did not abuse its discretion in dismissing Elebute’s adversary
proceeding for failure to prosecute.

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IV.

CONCLUSION

Elebute’s appeal of the bankruptcy court’s order denying reconsideration of its order
reopening the bankruptcy case is DISMISSED. The Court AFFIRMS the bankruptcy
court’s order denying reconsideration of its order dismissing the adversary proceeding.
SIGNED at Houston, Texas on March 28, 2024.
_______________________________
GEORGE C. HANKS, JR.
UNITED STATES DISTRICT JUDGE

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