REDMOND v. FIFTH THIRD BANK (October 20, 2010)

After he defaulted on his mortgage and became the target of a foreclosure proceeding, James Redmond filed for Chapter 13 bankruptcy protection. The bankruptcy court entered an agreed order which stayed the foreclosure, established a monthly payment plan, and required an April 1, 1998 balloon payment to Fifth Third Bank, the lender. Just prior to April 1, Redmond asked for a payoff latter in order to close on a new loan. He got two letters – each with a different amount. He asked for an explanation but eventually failed to get the loan (he says because of the Bank’s error) and failed to make the balloon payment. The Bank again brought a foreclosure action. The parties litigated that suit (for seven years!) until a few weeks before trial. At that point (June 2005), Redmond asked the bankruptcy court to reopen the bankruptcy proceedings, alleging a violation of the agreed order and plan. It refused. A year later, Redmond filed another motion asking to reopen the proceedings. The bankruptcy court again refused, but the district court on appeal reversed and instructed the bankruptcy court to consider whether the Bank sought any pre-petition debts. On remand, the bankruptcy court again denied the motion on the grounds that it was untimely, that the state court could resolve the issues, and that the arguments lacked merit. Judge Manning (N.D. Ill.) affirmed. Redmond appeals.

In their opinion, Chief Judge Easterbrook and Judges Kanne and Sykes affirmed. The Court first noted that a bankruptcy judge has a great deal of discretion in deciding whether to reopen a case and that the standard of review is an abuse of discretion. The bankruptcy court considered the proper factors: length of time since the case was closed, an available forum to entertain the claim, and whether the claims have merit. The Court addressed each in turn. First, with respect to timeliness, the Court found no abuse of discretion. The record suggested that the timing of the motion (a few weeks before trial) was for the purpose of delay. That, combined with the prejudice to the Bank in incurring years of attorneys’ fees, justified the denial. Second, with respect to the merits of the underlying claims, the Court also found no abuse of discretion. It agreed that Redmond’s claims (that the payoff letter violated the automatic stay, the agreed order, the plan, and the discharge) were all without merit. Finally, the Court agreed that Redmond had an adequate forum (the state court) to litigate his claims.