Carmen Denise Diamond v. Bank of America
698 F. App'x 571
| 11th Cir. | 2017Background
- Diamond purchased Georgia real property and executed a promissory note and security deed to Bank of America’s predecessor; the closing attorney failed to record the security deed before Diamond filed Chapter 7 in 2009.
- Diamond filed Chapter 7 before the deed was recorded; the trustee reported no assets for distribution, did not challenge the unrecorded deed, and the case was closed after discharge in 2010–2011.
- The property remained with Diamond; she later defaulted and the original closing attorney recorded a corrective affidavit and the security deed in Fulton County in August 2012.
- Bank of America sued in Georgia state court; the state courts held the security deed valid and enforceable and that the mortgage survived Diamond’s bankruptcy discharge.
- In 2015 Diamond moved pro se in bankruptcy to reopen the case to avoid the allegedly unperfected lien; the bankruptcy court denied relief as untimely to revoke the trustee’s technical abandonment, and the district court affirmed.
- On appeal, the Eleventh Circuit affirmed, concluding reopening would not afford the requested relief because under Georgia and bankruptcy law the mortgage was valid between the parties and the trustee’s avoidance power belonged to the trustee, not the debtor.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the bankruptcy should be reopened to avoid an unperfected security deed | Diamond: deed was unrecorded at filing and thus avoidable; reopening should allow avoidance | Bank: deed valid between parties under state law; trustee did not avoid it and trustee-abandonment and timing bars relief | Court: Denied — reopening would not grant relief because unrecorded deed was nonetheless valid between parties and discharge does not extinguish mortgage rights |
| Whether discharge prevents foreclosure or collection on the mortgage | Diamond: discharge of debt means bank cannot now collect or foreclose | Bank: discharge eliminates personal liability but mortgage lien survives and foreclosure is permitted | Court: Held mortgage survived discharge; foreclosure rights remain; Diamond's personal liability was discharged but lien enforcement is valid |
Key Cases Cited
- In re Int'l Admin. Servs., Inc., 408 F.3d 689 (11th Cir. 2005) (standard of appellate review of bankruptcy decisions)
- Langham, Langston & Burnett v. Blanchard, 246 F.2d 529 (5th Cir. 1957) (abuse-of-discretion review of denial to reopen)
- In re Rasbury, 24 F.3d 159 (11th Cir. 1994) (abuse-of-discretion standard and range-of-choice concept)
- Wright v. City of St. Petersburg, Fla., 833 F.3d 1291 (11th Cir. 2016) (court may affirm on any record-supported reason)
- In re Codrington, 691 F.3d 1336 (11th Cir. 2012) (trustee’s strong-arm powers under § 544(a)(3))
- Old W. Annuity & Life Ins. Co. v. Apollo Grp., 605 F.3d 856 (11th Cir. 2010) (estate divested of interest after trustee abandonment)
- Johnson v. Home State Bank, 501 U.S. 78 (1991) (bankruptcy discharge does not extinguish a valid mortgage lien)
- Baxter v. Bayview Loan Servicing, LLC, 688 S.E.2d 363 (Ga. Ct. App. 2009) (under Georgia law a mortgage is valid between parties even if unrecorded)