In re Elowitz

550 B.R. 603

In re: David Howard Elowitz and Leslie Susan Elowitz, Debtor(s).

CASE NO.: 11–12803–BKC–PGH

11–12803

United States Bankruptcy Court, S.D. Florida, West Palm Beach Division.

Signed May 17, 2016

Adam I. Skolnik, Law Office of Adam I. Skolnik, P.A., Deerfield Beach, FL, Stuart A. Young, Esq., West Palm Beach, FL, for Debtor.

ORDER GRANTING NATIONSTAR'S MOTION FOR SUMMARY JUDGMENT TO COMPEL SURRENDER OF PROPERTY (ECF NO. 40)

Paul G. Hyman, Jr., Chief United States Bankruptcy Judge

THIS MATTER came before the Court upon the Motion for Summary Judgment (ECF No. 40) filed by Nationstar Mortgage LLC (“Nationstar”) against David Howard Elowitz and Leslie Susan Elowitz (the “Debtors”). Nationstar's Motion for Summary Judgment seeks summary judgment compelling the Debtors to surrender their real property located at 19723 Brickel Point Drive, Boca Raton, Florida 33498 (the “Property”) to Deutsche Bank Trust Company Americas, as Trustee for the Residential Accredit Loans, Inc. Pass Through Certificates 2005–Q01 (“Deutsche Bank”). For the reasons discussed below, the Court grants the Motion for Summary Judgment.

UNDISPUTED FACTS AND PROCEDURAL BACKGROUND

Unless otherwise noted, the following facts are undisputed by virtue of the Joint Stipulation of Facts (the “Joint Stipulation”) (ECF No. 46) filed by the Debtors and Nationstar. On July 22, 2005, the Debtors executed a promissory note (the “Note”) in favor of U.S. Mortgage of Florida in the principal amount of $523,200.00. The Note was secured by a mortgage on the Property, which was executed by the Debtors on July 22, 2005 (the “Mortgage”).

On February 1, 2011, the Debtors filed a voluntary petition for chapter 7 bankruptcy relief. The Debtors listed the Mortgage on Schedule D (Secured Claims) of their petition and identified their creditor as Aurora Loan Services LLC (“Aurora”). The Debtors did not indicate on Schedule D that Aurora's claim with respect to the Mortgage was contingent, unliquidated, or disputed. The Debtors also did not list any claim with respect to the Note or the Mortgage on Schedule B, which asks debtors to list “contingent and unliquidated claims of every nature, including tax refunds, counterclaims of the debtor, and rights to setoff claims.” The Debtors did, however, indicate on Form B8, Chapter 7 Individual Debtor's Statement of Intention (the “Statement of Intention”), that the Property would be “surrendered.” Finally, the Debtors each signed and filed with the petition the Declaration under Penalty of Perjury to Accompany Petitions, Schedules, and Statements Filed Electronically, in which they declared under penalty of perjury that they “reviewed and signed the original(s) of the [petitions and schedules] and [that] the information contained in the [petitions and schedules] is true and correct to the best of [their] knowledge and belief.”

Aurora sought relief from the automatic stay on February 21, 2011, in order to foreclose on the Property in state court. See Mot. for Relief from Stay (ECF No. 13). The Debtors did not object to the Motion for Relief from Stay, and on March 9, 2011, the Court entered an order granting Aurora relief from the automatic stay. See Order (ECF No. 22). Ultimately, on May 2, 2011, the Debtors received their discharge. See Order Discharging Debtors (ECF No. 26).

In July 2011, Aurora, acting as the servicing agent for the owner of the Note and Mortgage, instituted a foreclosure action (the “Foreclosure Action”) against the Debtors in the Circuit Court of the Fifteenth Judicial Circuit in and for Palm Beach County, Florida (the “Florida State Court”). See Aurora Loan Services LLC v. David Elowitz et al., Case No. 502011CA010307XXXXMB. Nationstar, as successor to Aurora, was substituted in the Foreclosure Action as the party-plaintiff on June 7, 2013. Thereafter, Deutsche Bank was substituted in the Foreclosure Action as party-plaintiff on December 10, 2014.

Aurora was possession of the Note, which was specially indorsed to it, on the date it instituted the Foreclosure Action. Aurora assigned the Note and Mortgage to Nationstar in June 2014, and Nationstar simultaneously assigned the Note and Mortgage to Deutsche Bank. Aurora, having assigned the Note while retaining possession of it, subsequently indorsed the Note in blank in December 2015. Nationstar, on behalf of Deutsche Bank, is currently in possession of the Note, which is indorsed in blank. Nationstar remains the servicing agent for Deutsche Bank, the owner of the Note and Mortgage.

On October 8, 2015, Nationstar filed a Motion to Reopen (ECF No. 31) the Debtors' bankruptcy case in order to obtain an order compelling the Debtors to surrender the Property. After a hearing on the matter, the Court entered an Order (ECF No. 38) on December 23, 2015, granting the Motion to Reopen and reserving ruling as to whom surrender should be compelled. Thereafter, Nationstar filed the Motion for Summary Judgment¹ now before the Court.

CONCLUSIONS OF LAW

I. Jurisdiction

The Court has jurisdiction over this matter pursuant to 28 U.S.C. § 1334(b) and 28 U.S.C. § 157(b). This is a core proceeding under 28 U.S.C. § 157(b)(2)(A), (O).

II. What does it mean to “surrender” real property?

Nationstar contends in its Motion for Summary Judgment that it is undisputed that Deutsche Bank is the “holder” of the Note and Mortgage secured by the Property and that because the Debtors chose to “surrender” the Property on their Statement of Intention, the Court should compel the Debtors to surrender the Property to Deutsche Bank. The Debtors contend, on the other hand, that when a debtor states an intention to surrender property, the Bankruptcy Code merely obliges the debtor to surrender the property to the trustee—an obligation the Debtors already fulfilled. Accordingly, the Court must first determine what it means to “surrender” real property pursuant to Section 521(a)(2)(A) of the Bankruptcy Code.

Section 521(a)(2)(A) of the Bankruptcy Code requires a chapter 7 consumer debtor who owns encumbered property to formally declare on his statement of intention whether he intends to: (1) redeem the property, (2) reaffirm the debt secured by the property, or (3) surrender the property. 11 U.S.C. § 521(a)(2)(A). Section 521(a)(2)(B) goes on to provide that the debtor must perform his stated intention with respect to the encumbered property “within 30 days after the first date set for the meeting of creditors ... or within such additional time as the court ... fixes[.]” 11 U.S.C. § 521(a)(2)(B). These statutory directives unambiguously require the debtor to make his intention known as to encumbered property and to perform this intention. However, when the debtor chooses to “surrender” real property, it is decidedly unclear what actions the debtor must take—or refrain from taking—in order to perform his stated intention.

As noted above, the Debtors contend that under § 521(a)(2) they were merely required to surrender the Property to the Chapter 7 Trustee Deborah Menotte (the “Trustee”) and that they did exactly that, thus adequately performing their stated intention. Because the Trustee chose to abandon the Property, it is the Debtors' position that the Property simply reverted back to the Debtors. The Court, however, previously rejected this exact argument and held instead that in order to “surrender” real property within the meaning of § 521(a)(2), the debtor must surrender the property to the lienholder and thus may not defend or contest the lienholder's efforts to foreclose on the property in a state court proceeding. In re Failla, 529 B.R. 786, 792–93 (Bankr.S.D.Fla.2014), aff'd sub nom. Failla v. Citibank, N.A., 542 B.R. 606 (S.D.Fla.2015).² After considering the matter once again and examining the relevant opinions issued after In re Failla, the Court reaffirms its holding in In re Failla for the reasons discussed below.

The term “surrender” is not defined in 11 U.S.C. § 521(a)(2) or elsewhere in the Bankruptcy Code. See In re Failla, 529 B.R. at 789 (internal citations omitted). When the words in the statute are not defined terms, courts should look to their ordinary, dictionary-defined meanings. See Consol. Bank, N.A., Hialeah, Fla. v. U.S. Dep't of Treasury, Office of Comptroller of Currency, 118 F.3d 1461, 1463 (11th Cir.1997) (quotations and citations omitted) (stating that “[c]ourts must assume that Congress intended the ordinary meaning of the words it used, and absent a clearly expressed legislative intent to the contrary, that language is generally dispositive”). Black's Law Dictionary defines “surrender” as “[t]he act of yielding to another's power or control” or “[t]he giving up of a right or claim.” In re Failla, 529 B.R. at 789 (quoting Black's Law Dictionary 1581 (9th ed.2009)).

Although courts occasionally take conflicting positions as to what it means to “surrender” property, “[m]ost courts appear to assume that the surrender option entails a surrender to the lienholder, not to the trustee [.]” In re Kasper, 309 B.R. 82, 85–86 (Bankr.D.D.C.2004) (emphasis added); see also, Hull v. Wells Fargo Bank, N.A., No. 6:15–CV–01990–AA, 2016 WL 1271675, at *3 (D.Or. Mar. 28, 2016) ) (internal quotations and citations omitted) (noting that “[c]ourts interpret ‘surrender’ under the Bankruptcy Code to mean voluntarily relinquish[ing] all rights in the property, including the right to possession, to the secured creditor.”). Indeed, the Eleventh Circuit Court of Appeals stated in dicta that “[s]urrender provides that a debtor surrender the collateral to the lienholder who then disposes of it pursuant to the requirements of state law.” In re Taylor, 3 F.3d 1512, 1514 (11th Cir.1993). The First and Fourth Circuit Courts of Appeal agree that “the most sensible connotation of ‘surrender’ ... is that the debtor agreed to make the collateral available to the secured creditor-viz., to cede his possessory rights in the collateral.” In re Pratt, 462 F.3d 14, 18 (1st Cir.2006) ; see also, In re White, 487...