Aum Shree of Tampa, LLC v. HSBC Bank USA (In Re Aum Shree of Tampa, LLC)
449 B.R. 584
Bankr. M.D. Fla.2011Background
- In 2005, the Debtor bought a Pasco County hotel with two BLX loans secured by 1601 and 1632 Mortgages and Notes.
- The 1601 Mortgage was recorded before the 1632 Mortgage due to inadvertence; a Subordination Agreement later reversed priority in favor of the 1632 Mortgage.
- Assignment of Note and Mortgage modifications in 2005–2006 (621 Assignment and 638 Assignment) targeted the 1601 Note/Mortgage but references incorrectly pointed to the 1632 Mortgage.
- Continued, contemporaneous assignments transferred 1601 interests to FBDC and then to SBA; the 621 and 638 documents contained scrivener errors.
- A 1601 Satisfaction was recorded in 2006 that the court later deemed a wild satisfaction; foreclosure proceedings and bankruptcy were initiated, with HSBC ultimately taking the claims.
- HSBC filed a proof of claim and later a counterclaim/third-party complaint seeking reformation and ownership of the notes/mortgages; the Debtor filed an Amended Complaint outlining eight counts.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Reformation of the 621 and 638 assignments and related documents | HSBC seeks reformation for mutual mistake to reflect the 1601 Mortgage assignment. | Debtor opposes reforming records given disputed execution/attachments. | HSBC is entitled to reformation; documents reformed to reflect 1601 Mortgage/book-page references. |
| Judicial estoppel bars against HSBC enforcing the 1632 Note and Mortgage | HSBC should be barred due to Ciena's prior position in Foreclosure. | Debtor argues estoppel applies because of inconsistent positions. | Judicial estoppel does not bar HSBC; no clear inconsistency or advantage to Debtor. |
| Debtor may avoid HSBC's liens under Chapter 5 (Counts III–V) | Debtor argues avoidance of liens as preferential/fraudulent/post-petition transfers. | HSBC contends transfers of perfected mortgages are not property of the estate for avoidance. | Debtor cannot avoid perfected mortgages; summary judgment for HSBC on Counts III–V. |
| Debtor lacks standing under Fla. Stat. § 701.02 (Count II) | Debtor asserts recording violations affect HSBC's liens. | HSBC argues § 701.02 applies to competing creditors, not to mortgagor. | Debtor lacks standing; Count II dismissed in HSBC's favor. |
| HSBC's entitlement to enforce the subject mortgages (Count VII) | HSBC must be holder in due course to enforce both notes and mortgages. | Debtor contends HSBC must prove status as holder; otherwise cannot enforce. | HSBC may enforce as a person entitled to enforce; no required holder-in-due-course status. |
Key Cases Cited
- Kapila v. Atlantic Mortgage and Investment Corp., 184 F.3d 1335 (11th Cir. 1999) (standing to avoid mortgage transfers under 541; trustee powers limit reach)
- Taylor v. Deutsche Bank Nat. Trust Co., 44 So.3d 618 (Fla. 5th DCA 2010) (foreclosing on mortgage may be by holder or nonholder in possession with rights of a holder)
- Burnes v. Pemco Aeroplex, Inc., 291 F.3d 1282 (11th Cir. 2002) (factors for judicial estoppel: inconsistency, tribunal reliance, and unfair advantage)
- Goodall v. Whispering Woods Center, LLC, 990 So.2d 695 (Fla. 4th DCA 2008) (mutual mistake requires clear and convincing evidence)
- Celotex Corp. v. Catrett, 477 U.S. 317 (1986) (summary judgment standard: no genuine issue of material fact)