In the Matter of: Carol S. Anderson and Mark R. Anderson, Debtors. Appeal of: BMO Harris Bank, N.A.
September 17, 2018
from the United States District Court for the Northern
District of Illinois, Eastern Division. No. 16 C 4748 - Jorge
L. Alonso, Judge.
EASTERBROOK, KANNE, and BRENNAN, Circuit Judges.
EASTERBROOK, CIRCUIT JUDGE.
Anderson and Walter Kaiser jointly borrowed about $700, 000
from BMO Harris Bank; the loan was secured by a mortgage.
They did not pay, and the Bank filed a foreclosure action in
state court. That action was put on hold when Anderson and
his wife (who need not be mentioned again) commenced a
bankruptcy proceeding. After the Bank asked Bankruptcy Judge
Cox to lift the automatic stay under 11 U.S.C. §362 she
entered an order granting "full and complete relief from
the Automatic Stay of Section 362 to permit BMO HARRIS BANK
to proceed with the pending State Court foreclosure
litigation with respect to the property commonly known as 151
W. Wing St., Unit 905, Arlington Heights, Illinois 60005 as
more particularly described in the Motion for Relief."
state court the Bank asked the judge to put the property up
for auction. That was done, and the sale was confirmed. After
the sale the Bank asked for a deficiency judgment against
Kaiser but not against Anderson. (Earlier the Bank had
requested a deficiency judgment against both borrowers, but
it did not repeat this after the sale.) The state judge
awarded the Bank about $650, 000 in personam against
Kaiser, but with respect to Anderson the judgment was in
rem only (that is, without recourse against Anderson).
The Bank did not appeal the omission of a deficiency judgment
state litigation ended in April 2015, but the federal
litigation continues. The Bank made a claim against Anderson
for the same $650, 000 shortfall that the state judge had
awarded against Kaiser. (Anderson and Kaiser are jointly and
severally liable on the loan.) Anderson asked Judge Cox to
hold that the state court's judgment extinguished the
Bank's claim through the doctrine of claim preclusion:
the Bank could have received a deficiency judgment against
Anderson but did not, and Illinois does not allow single
claims to be split into multiple suits or litigated in
multiple forums. Judge Cox denied this motion, and Anderson
took an interlocutory appeal under 28 U.S.C. §158(a)(3).
The district court reversed, holding that the absence of a
deficiency judgment against Anderson in the state case blocks
any further proceedings against him related to this loan.
2017 U.S. Dist. LEXIS 142599 (N.D. 111. Sept. 5, 2017).
Bank immediately appealed to us. Unlike the district court,
which can accept interlocutory appeals under §158(a)(3),
our jurisdiction is limited to final decisions. 28 U.S.C.
§158(d)(1). (There are exceptions for appeals direct
from bankruptcy courts to the courts of appeals, see
§158(d)(2), but none applies.) We directed the parties
to file supplemental memoranda discussing appellate
jurisdiction, particularly because the Bank's claim arose
as a contested matter in the main proceeding rather than as
an adversary action, the usual source of appellate business
when the main proceeding continues in the bankruptcy court.
The memoranda have been received, and we can proceed to
opinions in this circuit conclude that a district court's
decision is "final" under §158(d)(1) when it
conclusively resolves the sort of dispute that would be a
standalone case outside of bankruptcy. See, e.g.,
Schaumburg Bank & Trust Co. v. Alsterda, 815
F.3d 306, 312-13 (7th Cir. 2016); In re Wade, 991
F.2d 402, 406 (7th Cir. 1993). Bullard v. Blue Hills
Bank, 135 S.Ct. 1686, 1692 (2015), implies approval of
these decisions. A claim to foreclose a mortgage and collect
a deficiency judgment on the note is a common stand-alone
dispute outside of bankruptcy, so it is covered by this
principle. And we do not see any reason why it should matter
whether a dispute that could have been a stand-alone suit
outside bankruptcy has been resolved in an adversary
proceeding or a contested matter. This circuit has several
times accepted appeals from final decisions in contested
matters. See, e.g., In re UAL Corp., 408 F.3d 847,
850 (7th Cir. 2005). Although these might be disparaged as
drive-by jurisdictional rulings, see Steel Co. v.
Citizens for Better Environment, 523 U.S. 83, 91 (1998),
we lack a good reason to depart from them given the absence
of any such distinction in the statutory text.
potential jurisdictional problem remains, however. Some of
our decisions say that an appeal under §158(d)(1) is
possible "only if the bankruptcy court's original
order and the district court's order reviewing the
bankruptcy court's original order are both final."
In re Rimsat, Ltd., 212 F.3d 1039, 1044 (7th Cir.
2000). See also, e.g., In re Salem, 465 F.3d 767,
771 (7th Cir. 2006); Zedan v. Habash, 529 F.3d 398,
402 (7th Cir. 2008); Schaumburg Bank, 815 F.3d at
312. Although the district court's order is final, the
bankruptcy court's order was not: Judge Cox denied a
motion to dismiss the claim but left open questions such as
whether the Bank is entitled to a deficiency judgment and, if
so, how much. If we take literally the language in
Rimsat and other opinions, we must dismiss this
not think, however, that Rimsat and similar cases
foreclose appeals of all disputes in which the district
court's jurisdiction rests on §158(a)(3). All of the
decisions cited in the preceding paragraph-and there are
more, cited in turn in those opinions-arise from appeals
taken under 28 U.S.C. §158(d)(1), which provides:
"The courts of appeals shall have jurisdiction of
appeals from all final decisions, judgments, orders, and
decrees entered under subsections (a) and (b) of this
section." Subsection (a), the only one relevant here,
deals with proceedings in the district court, not the
bankruptcy court. The statute thus asks whether the
district court's decision is final, not whether the
bankruptcy court's was. We could not adhere to the
position that an interlocutory bankruptcy-court decision,
followed by a final district-court decision, is not
appealable, without contradicting the statute.
as we can see, none of the opinions in which this language
appears stems from the sequence we have: an interlocutory
decision by the bankruptcy judge, followed by a final
decision in the district court. (Final because, after the
district court's decision, there is no more work for the
bankruptcy judge to do.) In Rimsat, Salem, and
Zedan both decisions were final (so appeal was not
problematic); in Schaumburg Bank both decisions were
interlocutory, so the absence of appellate jurisdiction also
was straightforward. The "both decisions must be
final" language matters only when one court has rendered
a final decision and the other has not.
example, suppose that the order of decision in this case had
been reversed: Judge Cox found the Bank's claim
precluded, and the district court disagreed, directing the
bankruptcy court to determine how much (if anything) Anderson
owed to the Bank. In that sequence an appeal to this court
would not have been authorized-not because one decision was
final and the other not, but because the district
court's decision, in particular, would not have been
final. See, e.g., In re Rockford Products Corp., 741
F.3d 730, 733 (7th Cir. 2013); In re Gordon, 743
F.3d 720, 723 (10th Cir. 2014).
when an interlocutory decision by a bankruptcy judge is
reversed by a ruling that leaves no more work for either the
bankruptcy court or the district court, the decision is
canonically final, making an ...