In Re: Jones

Background

Shelly Jones and Warren Gregory Jones, appearing without lawyers, appealed a United States Bankruptcy Court for the Southern District of New York order dismissing their adversary proceeding against PennyMac Loan Services, LLC. The adversary proceeding arose in the context of a foreclosure action involving a note and mortgage on property in Poughkeepsie, New York.

The district court’s Clerk set February 9, 2024, as the deadline for the Joneses to file their appeal brief under Federal Rule of Bankruptcy Procedure 8018(a)(1). They did not file a brief by that deadline and had not filed one by the time of the opinion. They later requested an unspecified extension of time. PennyMac moved to dismiss the appeal because of the missed deadline.

Ruling on the Missed Deadline

The court explained that missing the briefing deadline did not automatically require dismissal. It considered prejudice, the length of the delay, the reason for the delay, and whether the Joneses acted in good faith.

The court found that the prejudice factor favored PennyMac because PennyMac had paid more than $36,000 in escrow advances relating to the property. The length of the delay also favored dismissal, although less strongly. The court found that the record did not conclusively establish bad faith, so that factor favored the Joneses.

The court found the Joneses’ reasons for the delay insufficient. The bankruptcy rule clearly provided a 30-day deadline, and the docket specifically listed the February 9 deadline. The court rejected the Joneses’ claimed confusion about a New York state appellate rule and their explanation that they were waiting for a docket number. The court also noted that they still had not filed a brief more than a year after filing their notice of appeal. The court concluded that they had not shown legally excusable neglect.

The court nevertheless considered the Joneses’ appeal arguments rather than dismissing solely for lateness. It treated their opposition to PennyMac’s motion as presenting their arguments on appeal.

Standing

The Joneses argued that PennyMac was not the holder of the note, lacked the right to pursue foreclosure, had not established a claim to the property, and violated the Fair Debt Collection Practices Act by misrepresenting the debt and attempting to collect a debt it did not own.

The bankruptcy court had concluded that the Joneses lacked standing, meaning they were not legally entitled to pursue the claims, because they had not disclosed those claims in their bankruptcy schedules. The district court agreed. The Joneses answered “no” to schedule questions asking whether they had claims against third parties or other contingent and unliquidated claims. Because the claims were not disclosed, the court held that they remained property of the bankruptcy estate and could be asserted only by the bankruptcy trustee. The district court concluded that the bankruptcy court did not abuse its discretion in dismissing the claims on that basis.

State-Court Judgment Bar

The district court also agreed with the bankruptcy court that the Joneses’ claims were barred by the Rooker-Feldman doctrine. This doctrine generally prevents a federal district court from functioning as an appeals court for a state-court judgment.

The court found that the Joneses had lost motions in the state foreclosure action before starting the bankruptcy adversary proceeding. It further found that their federal claims challenged PennyMac’s right to enforce the note and pursue foreclosure, and that resolving those claims would require reviewing and potentially overturning the state-court rulings. The court therefore concluded that the requirements for applying the doctrine were met and that the bankruptcy court did not abuse its discretion in relying on it.

Disposition

The court stated that, even if the Joneses’ delay were excused, the bankruptcy court’s judgment would be affirmed in all respects based on lack of standing and the Rooker-Feldman doctrine. The court specifically noted that it did not need to examine the merits of the Joneses’ underlying claims. The court granted PennyMac’s motion to dismiss the appeal and directed the Clerk of Court to terminate the motion and close the case.