Martin B. Smith, III v. HSBC Bank USA

Opinion

Case: 18-10736 Date Filed: 05/20/2019 Page: 1 of 11

[DO NOT PUBLISH]

IN THE UNITED STATES COURT OF APPEALS

FOR THE ELEVENTH CIRCUIT ________________________

No. 18-10736 Non-Argument Calendar ________________________

D.C. Docket No. 2:15-cv-00070-LGW-RSB

MARVIN B. SMITH, III, SHARON H. SMITH,

Plaintiffs - Appellants,

versus

HSBC BANK USA, NATIONAL ASSOCIATION, WELLS FARGO BANK, NATIONAL ASSOCIATION, S. ANDREW SHUPING, JR., SHUPING, MORSE AND ROSS, LLP, RUBIN LUBLIN, LLC, et al.,

Defendants - Appellees,

S. ANDREW SHUPING, JR.,

Defendant. Case: 18-10736 Date Filed: 05/20/2019 Page: 2 of 11

________________________

No. 18-12349 Non-Argument Calendar ________________________

D.C. Docket Nos. 2:17-cv-00156-LGW, 07-bkc-20244-MJK

In Re: MARVIN B. SMITH, III, SHARON H. SMITH,

Debtors.

MARVIN B. SMITH, III, SHARON H. SMITH,

Plaintiffs – Appellants,

versus

HSBC BANK USA, HSBC BANK USA, N.A.,HSBC BANK USA, National Association as Trustee for the Holders of BCAP LLC Trust 2006-AA2,

Defendants - Appellees.

________________________

Appeals from the United States District Court for the Southern District of Georgia ________________________

(May 20, 2019)

Before MARTIN, JORDAN, and EDMONDSON, Circuit Judges. 2 Case: 18-10736 Date Filed: 05/20/2019 Page: 3 of 11

PER CURIAM:

In this consolidated appeal, Plaintiffs Marvin and Sharon Smith (proceeding

pro se)1 appeal three district court orders issued in Plaintiffs’ bankruptcy

proceedings and in Plaintiffs’ related civil litigation challenging the foreclosure on

their home. No reversible error has been shown; we affirm.

I. Background

Briefly stated, this appeal stems from the foreclosure proceedings on

Plaintiffs’ home in St. Simons Island, Georgia. This appeal has a complicated and

lengthy procedural history. We summarize the facts and proceedings only as

necessary to provide context for our decision.

A. Smith I

1 We construe liberally pro se pleadings. See Tannenbaum v. United States, 148 F.3d 1262, 1263 (11th Cir. 1998). 3 Case: 18-10736 Date Filed: 05/20/2019 Page: 4 of 11

In 2007, Plaintiffs filed for bankruptcy after defaulting on their mortgage

loan (“Smith I”). The Smith I litigation remained pending for several years and

resulted in a number of rulings from the bankruptcy court, from the district court,

and from this Court. For background, see In re Smith, No. 07-20244, 68 Collier

Bankr. Cas. 2d (MB) 763 (Bankr. S.D. Ga. Sept. 17, 2012). On 1 June 2016, the

bankruptcy court entered an order discharging Plaintiffs’ debt under Chapter 7.

In July 2017, Plaintiffs moved the bankruptcy court to stay a writ of

possession granted to HSBC Bank USA, N.A. (“HSBC”), which Plaintiffs said

violated the bankruptcy court’s automatic stay. On 5 December 2017, the

bankruptcy court denied Plaintiffs’ motion as barred by res judicata. The

bankruptcy court relied on the district court’s 9 August 2017 order denying a

materially similar motion to stay filed by Plaintiffs in Smith II. The district court

affirmed the denial on appeal; Plaintiffs now appeal that decision (docketed as

Appeal No. 18-12349).

B. Smith II

Meanwhile, in 2015, Plaintiffs filed a separate civil action challenging the

foreclosure proceedings on their home (“Smith II”). Briefly stated, Plaintiffs

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challenged the validity of the assignment of the security deed on their property.

The district court dismissed, with prejudice, Plaintiffs’ complaint for failure to

comply with a court order. We remanded on appeal. See Smith v. HSBC Bank

USA, N.A., 679 F. App’x 876 (11th Cir. 2017) (unpublished).

In August 2017, Plaintiffs -- having received no ruling from the bankruptcy

court on their July 2017 motion to stay in Smith I -- sought from the district court

in Smith II a stay of HSBC’s writ of possession. The district court denied the

motion on 9 August 2017.

On 1 September 2017, the district court dismissed Plaintiffs’ amended

complaint in Smith II. In pertinent part, the district court concluded that Plaintiffs’

“fraud on the court” claim was barred by res judicata.2 Plaintiffs appeal both the

district court’s dismissal of their amended complaint and the district court’s 9

August 2017 denial of Plaintiffs’ motion to stay (docketed as Appeal No. 18-

10736).

II. Appeal No. 18-10736

2 On appeal, Plaintiffs raise no challenge to the district court’s dismissal of their claims for violations of the federal Racketeer Influenced and Corrupt Organizations Act, the Federal Debt Collection Protection Act, or Plaintiffs’ constitutional due process rights. Nor do Plaintiffs challenge the district court’s decision to decline to exercise supplemental jurisdiction over Plaintiffs’ state law claims. Accordingly, none of those claims are before us on appeal. 5 Case: 18-10736 Date Filed: 05/20/2019 Page: 6 of 11

A. Dismissal of Plaintiffs’ “Fraud on the Court” claim in Smith II

The district court concluded that Plaintiffs’ “fraud on the court” claim was

barred by res judicata based on an order issued by the bankruptcy court in

September 2012. The district court rejected Plaintiffs’ argument that res judicata

was inapplicable because the two cases involved different parties: the district court

determined that privity existed between HSBC and Countrywide Home Loans, Inc.

(“Countrywide”).

We review de novo a district court’s dismissal of a claim as barred by res

judicata. Kizzire v. Baptist Health Sys., Inc., 441 F.3d 1306, 1308 (11th Cir.

2006).

Plaintiffs have failed to demonstrate that the district court erred in

dismissing their “fraud on the court” claim. Plaintiffs argue that “[r]es judicata

cannot be applied to this case due to new evidence and because this Court has

already ruled that HSBC Bank USA, N.A. and Countrywide Home Loans, Inc. are

not the same parties.” (citing to our earlier decision in Smith v. HSBC Bank USA,

N.A., 679 F. App’x 876 (11th Cir. 2017)).

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Plaintiffs’ arguments are without merit. First, our earlier ruling -- made in a

different context -- that HSBC and Countrywide are not the same party is not

determinative of whether res judicata bars Plaintiffs’ fraud claim. Under res

judicata, a claim is barred by earlier litigation if, among other things, both cases

involve identical parties or those in privity with them. Ragsdale v. Rubbermaid,

Inc., 193 F.3d 1235, 1238 (11th Cir. 1999). Here, the district court concluded

expressly that sufficient privity existed between HSBC and Countrywide for

purposes of res judicata. Construed liberally, Plaintiffs’ appellate brief raises no

challenge to the district court’s privity determination on appeal.

About Plaintiffs’ “new evidence” argument, Plaintiffs provide no

explanation for why the purported “new evidence” (a document filed in 2007 with

the United States Securities and Exchange Commission) could not have been

raised earlier in the bankruptcy court. See id. (“Res judicata bars the filing of

claims which were raised or could have been raised in an earlier proceeding.”

(emphasis added)). We also reject -- as conclusory and unsupported by binding

precedent -- Plaintiffs’ assertion that the doctrine of res judicata may not be applied

to bar claims alleging fraud.

Moreover, the district court abused no discretion in dismissing Plaintiffs’

complaint without leave to amend. Plaintiffs had already amended their complaint

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once before. In addition, Plaintiffs’ motion for leave to amend failed to “set forth

the substance of the proposed amendment” or to otherwise explain how a more

carefully drafted complaint could state a claim for relief. See Long v. Satz, 181

F.3d 1275, 1279 (11th Cir. 1999).

B. Denial of Plaintiffs’ Motion to Stay in Smith II

Plaintiffs moved the district court to stay the writ of possession granted to

HSBC on 20 October 2016; Plaintiffs say that the writ violated the bankruptcy

court’s automatic stay. On 9 August 2017, the district court denied the motion on

the merits, concluding that HSBC had been granted relief from the automatic stay.

The filing of a bankruptcy petition operates as an automatic stay against

several actions by creditors, including actions “to obtain possession of property of

the estate . . . or to exercise control over property of the estate.” 11 U.S.C. §

362(a)(3). The stay expires by operation of law upon the bankruptcy court’s grant

of a Chapter 7 discharge for the debtor. 11 U.S.C. § 362(c)(2)(C).

Here, Plaintiffs’ automatic stay expired on 1 June 2016: the day the

bankruptcy court granted Plaintiffs a Chapter 7 discharge. Accordingly, the 20

October 2016 writ of possession constituted no violation of the already-expired

8 Case: 18-10736 Date Filed: 05/20/2019 Page: 9 of 11

automatic stay. The district court committed no error in denying Plaintiffs’ motion

to stay the writ of possession.

III. Appeal No. 18-12349

Plaintiffs next appeal the district court’s affirmance of the bankruptcy

court’s denial of Plaintiffs’ motion to stay HSBC’s writ of possession in Smith I.

The bankruptcy court concluded that the motion was barred by res judicata based

on the district court’s 9 August 2017 denial of a stay in Smith II.

We review de novo the bankruptcy court’s legal conclusions and review the

bankruptcy court’s factual findings for clear error. Finova Capital Corp. v. Larson

Pharmacy, Inc., 425 F.3d 1294, 1299-1300 (11th Cir. 2005).

On appeal, Plaintiffs argue that res judicata is inapplicable because the

district court’s 9 August 2017 order was no “final judgment.” Cf. Ragsdale, 193

F.3d at 1238 (res judicata applies only if four conditions are met, including that a

prior final judgment on the merits exists). Plaintiffs rely on our earlier ruling that

the 9 August 2017 order was an interlocutory order over which we lacked

jurisdiction to review on appeal. See Smith v. HSBC Bank USA, N.A., No. 17-

13622, 2018 U.S. App. LEXIS 20449, at *1-2 (11th Cir. July 23, 2018).

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Although the 9 August 2017 order was no “final judgment” when first

issued, it became a final appealable order once the district court entered final

judgment dismissing Plaintiffs’ amended complaint in September 2017.

Accordingly, the bankruptcy court concluded correctly -- in December 2017 -- that

the 9 August 2017 order was a “final judgment” for purposes of res judicata. See

Lobo v. Celebrity Cruises, Inc., 704 F.3d 882, 892-93 (11th Cir. 2013) (applying

res judicata effect to an interlocutory order that was later rendered “final” upon the

district court’s entry of final judgment).

IV. Constitutional Due Process

On appeal, Plaintiffs assert violations of their Fifth Amendment due process

rights. Plaintiffs say that they have been denied unconstitutionally an opportunity

to show that HSBC was no real party in interest; Plaintiffs contend the courts have

dismissed Plaintiffs’ argument as frivolous. Plaintiffs argue that the bankruptcy

court violated due process by waiting four months to rule on Plaintiffs’

“emergency” motion for a stay. Plaintiffs also say that the district court’s refusal

to consider “new evidence of fraud” constituted a due process violation.

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Plaintiffs’ conclusory arguments are without merit. The record makes clear

that Plaintiffs have been given ample notice and opportunities to be heard -- in the

bankruptcy court, the district court, and in this Court -- throughout the course of

this litigation. That Plaintiffs are dissatisfied with the outcome of the proceedings

establishes no constitutional violation.

AFFIRMED.