United States Court of Appeals
Fifth Circuit
F I L E D
IN THE UNITED STATES COURT OF APPEALS
July 26, 2004
FOR THE FIFTH CIRCUIT
_____________________ Charles R. Fulbruge III
Clerk
No. 03-30687
_____________________
In The Matter Of: MARY T. OSBORNE,
Debtor.
MARY T. OSBORNE,
Appellant,
versus
HOMESIDE LENDING, INC.,
Appellee.
__________________________________________________________________
Appeal from the United States District Court
for the Middle District of Louisiana
USDC No. 02-CV-1178-B
_________________________________________________________________
Before JOLLY, DUHÉ, and STEWART, Circuit Judges.
E. GRADY JOLLY, Circuit Judge:
This case presents a dispute between Mary T. Osborne, a
homeowner, and Homeside Lending (“Homeside”), a mortgage lender,
about payments that Osborne was to make directly to Homeside in
accordance with her Chapter 13 bankruptcy plan. After an alleged
default, Homeside secured a judgment that permitted Homeside to
foreclose on Osborne’s home. We vacate that judgment, and remand
for further proceedings.
I
Mary Osborne filed for bankruptcy on August 30, 1999. In
accordance with her bankruptcy payment plan (the “Plan”), a portion
of her wages was assigned to a bankruptcy trustee (the “Trustee”)
for disbursement to creditors, while Osborne was to continue making
regular mortgage payments to Homeside Lending -- including the
payment due the next day for September 1999. Osborne, thinking
that the September 1999 payment was included in and discharged by
the Plan, did not make that particular payment, but did send checks
for October, November, and December. The Plan was confirmed,
without objection by Homeside, on December 12, 1999.
Yet on February 4, 2000, Homeside filed a Motion for Relief
from the Stay protecting Osborne’s house (“First Motion”), claiming
Osborne was four payments in arrears. On February 28, Osborne’s
then-attorney, Stephen Peters, filed an objection explaining why
Osborne had missed the September payment (one payment not four) and
expressing an intent to amend the Plan to include the post-petition
September arrearage. The hearing on the motion was twice continued
to allow Peters to file a modified bankruptcy plan. On April 19,
in Osborne’s absence pursuant to the court’s permission, Bankruptcy
Judge Louis M. Phillips granted the motion and lifted the stay
because Peters had never filed the modified plan. Upon learning of
this development, Osborne fired Peters.
On August 10, 2000, Osborne filed a pro se motion to rescind
the order lifting the stay, and, after Homeside neither responded
nor appeared, the court heard the motion on September 13. Osborne
showed that her October through December checks had all been cashed
2
before Homeside’s First Motion. She also showed that Homeside
received but sent back her checks for January, February, and March,
the lender claiming that these were partial payments -- apparently
based on its claim that there was one month’s arrearage -- which it
did not want to accept lest they be construed as waiver of its
right to a greater amount. Homeside also had asked Osborne to stop
making payments (checks Homeside was refusing to cash) because her
checks might get lost. Osborne complied with this request, but
showed the court that her checking account could cover all payments
theoretically due to that time (including the returned checks).
On September 13, 2000, the court granted Osborne’s August 10
motion, vacated its previous order, and noted that FED. R. CIV. P.
60(b) also justified relief from judgment (as a result of excusable
neglect from problems with Peters, and perhaps newly discovered
evidence). The court also found that the First Motion recited an
incorrect amount of default (on four payments rather than one), and
so Osborne’s refusal to sign a consent order proposed by Homeside
was justified. In the September 13 order, Judge Phillips required
Osborne to: 1) pay the Trustee, within five days, eight months
worth of payments (January-August 2000); 2) file a modified plan to
include the September 1999 payment plus $650 in attorney fees; 3)
pay the September 2000 payment to the Trustee, to be held as a
component of the post-petition payments for Homeside’s account.
Osborne complied with the order, except that, on advice of the
Trustee, she sent the September 2000 payment directly to Homeside.
3
Soon, confusion was again in the driver’s seat. On April 24,
2001, Homeside filed another Motion for Relief from Stay (“Second
Motion”), alleging three months’ arrearage and asking to lift the
stay without FED. R. BANKR. P. 4001(a)(3)’s ten-day waiting period.
On June 25, Osborne filed an objection, indicating that she had
made all required payments as per the Plan and as required by Judge
Phillips’s order. The court held a hearing on June 27, where
Osborne’s current attorney, Aaron McGee, first appeared but where
Homeside was absent. Osborne presented evidence of payment
(certificates of mailing, cashed checks, carbon duplicates) for
September 2000 through June 2001. The September 2000 payment had
been sent back, as Homeside’s counsel, Stacey Wheat, stated that
this payment had been provided for through the Plan. Osborne also
testified that Homeside had informed her that the April, May, and
June 2001 checks were not cashed but had been sent to Wheat, and
that the delay between receipt and cashing of checks had generated
a computer determination of default.
On June 28, in the face of this unrefuted evidence, the court
dismissed the Second Motion with prejudice concerning the
allegations of missed payments due through June 2001 (“June 28
Order”).
On July 9, 2001, Homeside filed a motion for rehearing of this
Second Motion (or new trial), alleging that it had missed the June
27 hearing because the date had not been calendared by an employee
missing from work. Homeside alleged that representations of
4
Osborne’s account being current were inaccurate, and that payments
were due for February through July 2001. On July 17, Homeside
filed another motion for rehearing (or new trial). Osborne filed
an objection, stating first that Homeside’s motions were untimely,
having been filed more than ten days after the judgment. Osborne
also attached the evidence of payment for April-June 2001, and a
letter explaining why these checks could have been cashed without
waiver of any other rights. Osborne also presented certificates of
mailing for July and August 2001.
Wheat then contacted McGee to negotiate a settlement, and the
parties signed a consent order (the “Consent Order”) that was
approved by the court on August 23, 2001. By the terms of the
Consent Order, Osborne was credited with $1,569 (for checks Wheat
had “found” during negotiations) and was to make four payments of
$120.33 to cure the remaining post-petition arrearage of $481.32
(representing the September 1999 payment). The Consent Order also
contained a “drop dead” clause, which modified the stay and allowed
Homeside to obtain an ex parte order enforcing its security
interest in Osborne’s home upon presentation of an affidavit of
non-payment if any monthly installment (beginning with September
2001) was not paid within 30 days of its due date.1
1
Osborne claims that her Fourteenth Amendment and Bankruptcy
Code § 362(d) rights were violated when she was not given notice
and a hearing before the bankruptcy court lifted the stay
protecting her home, per the “drop dead” clause. Yet there was
nothing unusual about the “drop dead” clause here, and Mendoza
recognized such a mechanism as a valid negotiation tool and
5
Per the Consent Order, Osborne cured the $481.32 arrearage in
four installments that accompanied her regular payments for August-
December 2001. She also sent in regular payments for January-
September 2002 (as well as a $25 late fee for January). For some
reason that is not clear from the record, Homeside never negotiated
the three checks totaling $1,569 -- which had been credited in the
Consent Order -- nor did it request a new $1,569 payment.
The continued confusion is so confounding that we must assume
that minds were completely disengaged. On April 24, 2002, Wheat
filed an Affidavit of Default and Order Lifting Automatic Stay (the
“Affidavit”), swearing that Osborne had failed to make the Consent
Order payments (even though the Consent Order acknowledged the
payments), and that the February 2002 payment was overdue (even
though Osborne had apparently sent each payment to Homeside). On
May 9, Judge Douglas D. Dodd, who had replaced Judge Phillips in
the case, signed an order (“Dodd’s Order”) lifting the stay on the
basis of the Affidavit, which order was served on McGee by first
class mail. On May 23, Homeside returned Osborne’s January 2002
check (and late fee).
specifically authorized its continued use, even without a debtor’s
consent. Matter of Mendoza, 111 F.3d 1264, 1269 (5th Cir. 1997).
Further, § 362 does not preclude the inclusion of “drop dead”
clauses in bankruptcy court orders modifying stays. Id. at 1270
(citing U.S. v. Ron Pair Enter., Inc., 489 U.S. 235, 241 (1989)).
Finally, Osborne agreed to the inclusion of the clause in the
Consent Order. Thus, it is clear that the bankruptcy court did not
abuse its discretion in enforcing the Consent Order’s drop dead
clause.
6
McGee apparently did not receive Dodd’s Order until some time
later (after the 10-day period specified for appeal) because of a
separation from his wife and his lack of a business address. On
August 22, McGee filed a motion to vacate Dodd’s Order, attaching
a memorandum of facts controverting the Affidavit and alleging that
all payments had been made. Homeside filed an opposition on
September 5, urging untimeliness, Osborne’s default of $1,569, and
the pending sheriff’s sale of Osborne’s home.
At a motion hearing on September 17 (the “September 17
Hearing”), Osborne requested relief for excusable neglect and
misrepresentation regarding the default. The court was told of
McGee’s separation and petition for divorce leading to his
effective lack of notice, and Osborne presented evidence of all
previously described payments. (Apparently, the payments sworn to
be in default had all been cashed by the time of the Affidavit.)
Wheat stated that she had returned the three checks totaling $1,569
to Osborne; Osborne denied receiving the checks, and Wheat did not
produce any evidence of mailing.2 The court denied Osborne’s
motion on October 30, citing the unreasonableness of McGee’s three-
month delay and evidence of default.
Osborne appealed the bankruptcy court’s order on November 8.
On June 12, 2003, the district court issued a final judgment (on
the briefs) affirming the bankruptcy court’s decision to deny
2
Recall that the Consent Order acknowledged payment of the
$1,569 at issue.
7
Osborne’s motion to vacate Dodd’s Order. Osborne filed a timely
notice of appeal.
II
We review actions taken by the district court in its appellate
role for abuse of discretion. In Re CPDC Inc., 221 F.3d 693, 698
(5th Cir. 2000). A district court abuses its discretion in
reviewing bankruptcy courts when its decision is based on an
erroneous view of the law. Id. The district court in this case
cited “essentially the reasons set forth by the Bankruptcy Judge.”
Thus, we review the legal conclusions of the bankruptcy court de
novo, Matter of Clark Pipe & Supply, Inc., 893 F.2d 693, 697-98
(5th Cir. 1990), and its findings of fact for clear error. FED. R.
BANKR. P. 8013; Matter of Webb, 954 F.2d 1102, 1003 (5th Cir. 1992).
Osborne argues that the district court’s judgment should be
vacated because the bankruptcy court erred in two ways: (1) it
clearly erred in its findings of fact at the September 17 Hearing;
and (2) it abused its discretion in denying Osborne’s motion to
vacate Dodd’s Order.3 We take up these issues in turn.
3
Osborne also argues that the district court abused its
discretion by failing to rule on the admissibility of certain
documents presented by her counsel, McGee, at the September 17
Hearing. Homeside disputes whether McGee moved to offer the proof
of Osborne’s payments, such as cashed checks and certificates of
mailing, into evidence in the first place. Yet McGee stated a
desire to introduce the documents at issue and handed them to court
personnel, and Osborne proceeded to authenticate and discuss the
documents in her testimony, to which Homeside did not object;
Homeside even cross-examined Osborne about the documents. The
district court neither admitted nor declined to admit the proffered
evidence, and it cannot be faulted for not ruling on a non-existent
8
A
We first examine Osborne’s argument that the bankruptcy court
clearly erred in its findings of fact at the September 17 Hearing,
where the court denied Osborne’s request for relief from the
enforcement of the Consent Order’s “drop dead” clause (granted ex
parte in Dodd’s Order).
Osborne argues that the bankruptcy court’s finding of default
in the amount of $1,569 contradicts the June 28 Order, which
dismissed with prejudice allegations of default on payments due
through June 2001 -- and which preceded the Consent Order. The
June 28 Order acknowledged that Osborne had met her Plan
obligations by sending Homeside the checks. Any default was thus
caused by Homeside’s refusal to negotiate the checks it had in its
possession. Osborne also emphasizes that the Consent Order
explicitly acknowledged (again) that “[t]he Debtor has made a
payment of $1,569.”
Homeside’s arguments to the contrary are unconvincing; the
Consent Order -- including its acknowledgment that Osborne made the
payment on which the court found her in default -- is binding on
both parties. It seems disingenuous to claim that Osborne did not
pay what she owed when it is Homeside that has a history of not
motion to admit. Yet the evidence was offered, authenticated, and
cross-examined, and Homeside has clearly waived any objection to
its implicit admission into the record. See, e.g., U.S. v.
Fuentes, 432 F.2d 405, 409 (5th Cir. 1970). As such, we consider
the evidence to be part of the record.
9
cashing and returning valid checks. Homeside simply cannot refuse
to negotiate Osborne’s checks, then blame her for knowing they were
not negotiated, and call it a default.4
As Osborne sent checks in the correct amount due and presented
evidence that she had sufficient funds in her bank account to cover
these payments -- and as the binding Consent Order states that she
made the required payment -- the bankruptcy court clearly erred in
its finding of default.5 Yet this holding does not decide the
appeal because Homeside argues that the finding of default was not
timely challenged by Osborne.
B
We thus take up the question of whether the bankruptcy court
abused its discretion in denying Osborne’s FED. R. CIV. P. (60)(b)
motion to vacate Dodd’s Order.6 Motions under Rule 60(b) must be
4
At oral argument, Homeside explained that it did not cash
Osborne’s checks because of its policy of accepting only certified
checks from debtors with a delinquency; yet there is no indication
that this fact was ever conveyed to Osborne. This excuse, however,
is beside the point; Homeside’s agreement to the Consent Order
indicates that it already accepted the payment in question.
5
Osborne also argues that the bankruptcy court clearly erred
in finding that Homeside had returned checks totaling $1,569, and
that Homeside would rather have Osborne’s money than sell her home
at a sheriff’s sale. The record shows, however, that the court did
not make these findings, so these points of error are meritless.
6
The relevant portion of Rule 60(b), made applicable to
bankruptcy cases by Rule 9024 of the Bankruptcy Rules, reads as
follows:
On motion and upon such terms as are just, the
court may relieve a party or a party’s legal
representative from a final judgment, order,
10
made “within a reasonable time,” unless good cause can be shown for
the delay. Pryor v. U.S. Postal Svc., 769 F.2d 281, 287-88 (5th
Cir. 1985). Moreover, “Rule 60(b) relief will be afforded only in
‘unique circumstances.’” Id. at 287 (citing Wilson v. Atwood
Group, 725 F.2d 255, 257-58 (5th Cir. 1984) (en banc)). This “good
cause,” and these “circumstances,” must necessarily be evaluated on
a case-by-case basis. See, e.g., Ashford v. Steuart, 657 F.2d
1053, 1055 (9th Cir. 1981) (“What constitutes a ‘reasonable time’
depends upon the facts of each case, taking into consideration the
interest in finality, the reason for the delay, the practical
ability of the litigant to learn earlier of the grounds relied
upon, and prejudice to other parties.”).
Osborne argues that two main factors should have left no
choice to the bankruptcy court but to grant her motion to vacate:
1) a legal conclusion of default unsupported by evidence (which we
have already held to be the case, supra); and 2) the loss of her
home being at stake. Further, she contends that the delay in
filing the motion was caused by “excusable neglect” under Rule
or proceeding for the following reasons: (1)
mistake, 1) mistake, inadvertence, surprise,
or excusable neglect; . . . (3) fraud (whether
heretofore denominated intrinsic or
extrinsic), misrepresentation, or other
misconduct of the adverse party; . . . (6) any
other reason justifying relief from the
operation of the judgment. The motion shall
be made within a reasonable time, and for
reasons (1) [and] (3) not more than one year
after the judgment, order, or proceeding was
entered or taken.
11
60(b)(1), namely McGee’s not being aware of Dodd’s Order due to
some unfortunate personal circumstances. In addition, Homeside’s
pattern of returning checks and then claiming in the Affidavit that
payment was never received could constitute “misrepresentation”
under Rule 60(b)(3). Finally, Osborne suggests that her repeated
good faith attempts to meet her obligations, justify relief from
the bankruptcy court’s too-harsh judgment under Rule 60(b)(6).
Homeside replies that McGee’s excuses are insufficient to
constitute “excusable neglect” such that the motion was filed
within a “reasonable time” after the judgment per Rule 60(b).
Marcaida v. Roscoe, 569 F.2d 828, 830 (5th Cir. 1979) (counsel’s
preoccupation with other matters -- including father’s death, own
ill health, and the holidays -- does not dispense with the
necessity to comply with court rules) (citing U.S. v. Bowen, 310
F.2d 45, 47 (5th Cir. 1962)).
A decade ago, the Supreme Court addressed whether an
attorney’s inadvertent failure to file within the established
deadline can be “excusable neglect” within the meaning of FED. R.
BANKR. P. 9006(b)(1)7, and defined “excusable neglect” as follows:
Because Congress has provided no other
guideposts for determining what sorts of
neglect will be considered “excusable,” we
conclude that the determination is at bottom
an equitable one, taking account of all the
relevant circumstances surrounding the party’s
7
This rule sets forth the calculation of time in bankruptcy
proceedings, and the holding is illustrative of the (scant)
precedent in this area.
12
omission. These include . . . the dangers of
prejudice to the [non-moving party], the
length of the delay and its potential impact
on judicial proceedings, the reason for the
delay, including whether it was within the
reasonable control of the movant, and whether
the movant acted in good faith.
Pioneer Inv. Serv. Co. v. Brunswick Assocs. Ltd. P’ship, 507 U.S.
380, 385 (1993) (emphasis added).
One basic fact strongly supports Homeside: McGee did not
notify the court of his address change, and he admitted that he
received Dodd’s Order in the second or third week of May 2002.
Under this reading, even if McGee did not see the Order within the
ten-day appeal period, lack of notice cannot be an excuse for not
filing a motion until August. It would normally be within the
court’s clear discretion to find a three-month delay unreasonable.
Yet all other equities weigh in Osborne’s favor: Osborne
cured the initial (and inadvertent) post-petition arrearage of one
mortgage payment, sent all other payments as they became due, and
otherwise complied with all aspects of the Plan and the Consent
Order -- and she presented evidence to prove all this. Homeside,
meanwhile, asked for a declaration of default and enforcement of
the drop dead clause on faulty evidence contrary to the Consent
Order. Although we are not prepared to say Homeside acted in bad
faith, it acted recklessly and exercised faulty judgment in asking
for a default when the operative Consent Order acknowledged receipt
of the very payment at issue. Any careful lawyer would have known
13
that there was no basis for default with respect to the $1,569 at
issue until and unless the Consent Order -- which acknowledged
payment -- was set aside, and it never was.
Moreover, the consequence of a ruling adverse to Osborne is
the loss of her home, while the opposite ruling implies a
resolution to which both parties should be amenable: the curing of
the arrearage and continuation of payments under the Plan and the
Consent Order. Under the circumstances present here, we consider
this case to be highly exceptional, and conclude that the
bankruptcy court abused its discretion in denying a 60(b)(6) motion
for “any other reason justifying relief from the operation of the
judgment.”
III
For the foregoing reasons, the judgment of the district court
is VACATED, and the case is REMANDED to the district court with
instructions to remand to the bankruptcy court for further
proceedings consistent with this opinion.
VACATED and REMANDED.
14