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In re Anderson

United States Court of Appeals, Seventh Circuit

February 26, 2019

In the Matter of: Carol S. Anderson and Mark R. Anderson, Debtors. Appeal of: BMO Harris Bank, N.A.

          Argued September 17, 2018

          Appeal from the United States District Court for the Northern District of Illinois, Eastern Division. No. 16 C 4748 - Jorge L. Alonso, Judge.

          Before EASTERBROOK, KANNE, and BRENNAN, Circuit Judges.

          EASTERBROOK, CIRCUIT JUDGE.

         Mark 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."

         Back in 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 against Anderson.

         The 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).

         The 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 decision.

         Many 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.

         One 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 appeal.

         We do 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 far 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.

         For 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).

         But 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 ...


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