In re Elowitz
550 B.R. 603
Bankr. S.D. Florida2016Background
- Debtors executed a note (2005) secured by a mortgage on real property in Boca Raton; they filed Chapter 7 in 2011 and listed the mortgage creditor as Aurora Loan Services on Schedule D and stated on Form B8 that the property would be "surrendered."
- The bankruptcy was closed and Debtors received a discharge after the court granted relief from the automatic stay to Aurora to pursue foreclosure in state court.
- Aurora (later Nationstar as successor, then Deutsche Bank as owner) pursued a state-court foreclosure; Nationstar (servicer) later filed to reopen the bankruptcy to compel surrender.
- The parties filed a Joint Stipulation of Facts including the unqualified stipulation that "Deutsche Bank is the person to whom surrender should be compelled."
- The Note was a negotiable instrument that was ultimately indorsed in blank and is in Nationstar’s possession on behalf of Deutsche Bank; the court considered (1) what "surrender" means under 11 U.S.C. § 521(a)(2) and (2) which lienholder must receive surrender.
Issues
| Issue | Plaintiff's Argument (Nationstar) | Defendant's Argument (Elowitz) | Held |
|---|---|---|---|
| Meaning of “surrender” under § 521(a)(2) | "Surrender" requires the debtor to make property available to the lienholder and not oppose foreclosure. | Debtors say surrender only requires turning property over to the trustee; trustee’s abandonment returns property to debtor. | Court adopts majority view: surrender means surrender to the lienholder; debtors may not contest foreclosure and here failed to comply. |
| To whom must property be surrendered | Deutsche Bank, as holder/entitled-to-enforce the Note; parties stipulated Deutsche Bank is the proper party. | Debtors argued Trustee abandonment meant surrender must be to Debtors/the estate trustee. | Court: Deutsche Bank is the proper party—both because of the parties’ unqualified stipulation and because Deutsche Bank is the holder entitled to enforce the Note under UCC Article 3. |
Key Cases Cited
- Failla v. Citibank, N.A., 542 B.R. 606 (S.D. Fla. 2015) (bankruptcy court decision affirmed: debtor who states intention to surrender may not oppose creditor foreclosure; abandonment by trustee does not restore debtor’s right to contest foreclosure)
- In re Taylor, 3 F.3d 1512 (11th Cir. 1993) (dicta that surrender contemplates delivery of collateral to lienholder for disposition under state law)
- In re Pratt, 462 F.3d 14 (1st Cir. 2006) (stating sensible meaning of surrender is ceding possessory rights to the secured creditor)
- In re White, 487 F.3d 199 (4th Cir. 2007) (agreeing that surrender implies making collateral available to secured creditor)
- In re Metzler, 530 B.R. 894 (Bankr. M.D. Fla. 2015) (criticizing "ride-through" and holding debtors cannot retain possession while obstructing foreclosure)
- In re Guerra, 544 B.R. 707 (Bankr. M.D. Fla. 2016) (discussing judicial estoppel and that bankruptcy court should address near-term inconsistent post-discharge opposition to foreclosure)