United States District Court, D. Colorado
In re ALEXANDER N. KIM and LAURA J. FOSTER, Debtors.
JP MORGAN CHASE BANK, N.A., and DOUGLAS E. LARSON, Trustee, Appellees. ALEXANDER N. KIM and LAURA J. FOSTER, Appellants,
A. BRIMMER UNITED STATES DISTRICT JUDGE
matter is before the Court on the Renewed Motion for Stay
Pending Appeal [Docket No. 44] that was filed by debtors
Alexander N. Kim and Laura J. Foster.
case arises out of efforts by JP Morgan Chase Bank, N.A.
(“Chase”) to collect on a $2, 000, 000 note (the
“Note”) secured by debtors' real property in
Carbondale, Colorado. Docket No. 28 at 2. Debtors filed for
Chapter 11 bankruptcy on September 21, 2010. Id.
After converting debtors' case to a Chapter 7 bankruptcy
on May 9, 2013, the Bankruptcy Court granted Chase relief
from the automatic stay to foreclose on debtors'
property. Id. at 3. On September 3, 2015, debtors
filed an objection to Chase's claim on the basis that
Chase was not in possession of the Note. Id.
Following a two-day evidentiary hearing, the Bankruptcy Court
entered a written order finding that (1) the Note was lost,
(2) Chase was in possession of the original Note and entitled
to enforce it pursuant to Section 4-3-309 of the Colorado
Uniform Commercial Code, and (3) the lost instrument bond
posted by Chase adequately protected debtors from having to
pay twice on the Note. Id. at 3-4. This Court
affirmed the Bankruptcy Court's order on March 2, 2018.
Docket No. 28. On May 2, 2018, debtors filed a notice of
appeal to the U.S. Court of Appeals for the Tenth Circuit.
Docket No. 34. On July 30, 2018, debtors filed their motion
for a stay. Docket No. 44. Debtors seek an order preventing
Chase from pursuing any collection actions, including
foreclosure on debtors' real property, pending the
outcome of debtors' appeal. Docket No. 44 at 1.
motion for stay pending appeal is governed by the same
standards applicable to preliminary injunction motions.
See Warner v. Gross, 776 F.3d 721, 728 (10th Cir.
2015). Accordingly, in ruling on debtors' motion for a
stay, the Court will consider four factors: “(1)
whether [debtors have] made a strong showing that [they are]
likely to succeed on the merits; (2) whether [debtors] will
be irreparably injured absent a stay; (3) whether issuance of
the stay will substantially injure the other parties
interested in the proceeding; and (4) where the public
interest lies.” Nken v. Holder, 556 U.S. 418,
426 (2009) (quoting Hilton v. Braunskill, 481 U.S.
770, 776 (1987)).
respect to the first factor, debtors make four arguments that
the Bankruptcy Court's order - and this Court's
subsequent affirmance of that order - was in error. First,
debtors contend that both orders rely on the faulty premise
that the parties agreed that the original note was lost.
Docket No. 44 at 10. Debtors argue that there was no such
agreement because they maintained throughout the litigation
that there was no competent evidence demonstrating that Chase
ever had possession of the note. Second, debtors contend that
both this Court and the Bankruptcy Court relied on
inadmissible hearsay evidence in finding that Chase possessed
the note. Id. Third, debtors argue that the
Bankruptcy Court impermissibly relied on the testimony of
Chase's witness for the truth of the matter asserted
rather than for the limited purpose of showing that certain
documents were contained in Chase's records. Id.
at 11. Finally, debtors assert that there is no competent
evidence demonstrating that Chase actually lost the note.
Docket No. 47 at 6.
Court finds that debtors have failed to demonstrate a
likelihood of success on the merits. All four of the
arguments raised in debtors' motion for a stay were
addressed in this Court's March 2, 2018 order. With
regard to debtors' first and second arguments, this Court
determined that the Bankruptcy Court relied on competent
evidence in finding that Chase took possession of the note in
2009. Docket No. 28 at 9. That evidence included a screenshot
of a business record showing that the note was scanned into
Chase's system on September 17, 2009 and the testimony of
Marilyn Lea, a mortgage banking research officer for Chase,
regarding the authenticity of the screenshot. Id. at
7. Although debtors argued on appeal that Ms. Lea's
testimony did not lay a proper foundation for admitting the
screenshot under the business records hearsay exception, this
Court found that Ms. Lea's lack of personal knowledge of
the note was irrelevant to the screenshot's
admissibility. Docket No. 28 at 8. The Court based its
conclusion on Tenth Circuit precedent establishing that a
proper foundation for the business record exception may be
laid “by anyone who demonstrates sufficient knowledge
of the record keeping system that produced the
document.” Hardison v. Balboa Ins. Co., 4
Fed.Appx. 663, 669-70 (10th Cir. 2001) (unpublished); see
also FDIC v. Staudinger, 797 F.2d 908, 910 (10th Cir.
1986) (“[T]here is no requirement that the party
offering a business record produce the author of the
item.”). Debtors do not contend that the Court
misapplied this precedent. Accordingly, they have not shown
that their first and second arguments are likely to prevail
third argument is equally unavailing. Debtors contend that
the bankruptcy court's reliance on certain testimony and
documents for the truth of the matter asserted violated its
own limiting instruction with regard to the purpose for which
that evidence was admitted. Docket No. 44 at 11. However, the
Court rejected the same argument in its March 2, 2018 order,
finding that “[t]he bankruptcy court's limitation
[was] consistent with the purpose for which Chase offered the
screenshot: to establish that Chase had the Note in its
files.” Docket No. 28 at 8-9. Debtors simply repeat
their argument without offering any explanation of why this
Court's prior holding was in error.
the Court has already addressed at length debtors'
contention that Chase failed to prove the loss of the Note by
clear and convincing evidence. See Docket No. 28 at
11. In their motion for a stay, debtors fail to explain how
the evidence cited in the Court's March 2, 2018 order as
supportive of the Bankruptcy Court's decision was
insufficient to satisfy Chase's evidentiary burden. Thus,
debtors have failed to show that any of their arguments are
likely to succeed on appeal.
the second stay factor, debtors contend that they will be
irreparably harmed absent a stay because Chase would be free
to foreclose on their property. Docket No. 44 at 7. Debtors
state that the property serves not only as their home, but
also as the site of their catering business. Id.
Foreclosure would therefore disrupt both their present living
situation and their source of income. Id. at 7-8.
Chase responds that debtors' asserted harm is
“greatly exaggerated, ” as “Chase has yet
to begin the foreclosure process which in Colorado averages
about six months to complete.” Docket No. 46 at 7.
Chase contends that, in that six-month period, debtors would
have the opportunity to “save for and procure alternate
living and business arrangements.” Id. at 7-8.
The Court finds that debtors are likely to suffer irreparable
harm absent a stay. The second stay factor therefore weighs
in favor of debtors.
third stay factor “requires that the possible harm to
[debtors] if the [stay] is not entered be balanced against
the possible harm to [Chase] if the [stay] is entered.”
Pelletier v. United States, No. 11-cv-01377, 2011 WL
2077828, at *4 (D. Colo. May 25, 2011). Chase contends that a
stay would cause it irreparable economic harm because Chase
has not received any payments on debtors' mortgage since
August of 2013. Docket No. 46 at 6. Additionally, Chase has
been paying taxes and insurance on the property because both
expenses are escrowed into the mortgage loan. Id. at
7. Chase contends that it “cannot pursue Debtors for
damages because of the discharge of the personal liability
under the mortgage, ” and thus Chase's losses on
the property are unrecoverable. Id. Debtors respond
that their monthly protection payments and property
maintenance expenditures are sufficient to compensate Chase
for any out-of-pocket costs it has incurred. Docket No. 47 at
2. Importantly, however, debtors do not dispute that they
have made no payments on the mortgage since August 2013.
See Id. (stating that debtors made monthly
protection payments “[d]uring the course of their
bankruptcy case while it was in Chapter 11 (and for several
months after conversion of the case to Chapter 7)”);
see also Docket No. 28 at 3 (noting that the
Bankruptcy Court converted debtors' case to a Chapter 7
bankruptcy on May 9, 2013). Nor do they cite any authority
for the proposition that their routine upkeep of the property
constitutes adequate compensation for Chase's ongoing
payment of the property taxes and insurance. Particularly in
light of the Court's finding that debtors are unlikely to
succeed on the merits of their appeal, debtors have not shown
that the balance of harms clearly tips in their favor.
Court also finds that the public interest weighs in favor of
denying debtors' request for a stay. Debtors' only
argument on this factor is that Chase has “repeatedly
abused the legal process” by commencing foreclosure
proceedings in contravention of the Bankruptcy Court's
orders and that denial of a stay will only encourage further
abuse of the legal process. Docket No. 44 at 12. However,
there are a variety of remedies for a party's failure to
abide by court orders - a stay pending appeal is not one of
them. By comparison, courts have consistently recognized a
strong public interest in the enforcement of contractual
obligations. See, e.g., Medina v. Citifinancial,
Inc., 2010 WL 11432624, at *3 (D.N.M. May 3, 2010)
(noting the “strong public interest in requiring
adherence to contracts”). The Court therefore concludes
that the fourth stay factor weighs in favor of Chase.
determined that three out of four of the relevant factors
weigh against the issuance of a stay in this case, the Court
will deny debtors' request for a stay pending appeal.
See Village of Logan v. U.S. Dep't of Interior,
577 Fed.Appx. 760, 766 (10th Cir. 2014) (unpublished)
(“[A] plaintiff's failure to prove any one of the
four preliminary injunction factors renders its request for
injunctive relief unwarranted.”); Sierra Club, Inc.
v. Bostick, 539 Fed.Appx. 885, 888 (10th Cir. 2013)
(unpublished) (“A party seeking a preliminary
injunction must prove that all four of the equitable
factors weigh in its favor . . . .”). Wherefore, it is
that debtors' Renewed Motion for Stay Pending Appeal