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Date: 01-05-2018

Case Style:

Timothy M. Jodway; Alaina Zanks-Jodway v. Fifth Third Bank

Sixth Circuit Court of Appeals for the Sixth Circuit

Case Number: 17-1688/17-1691

Judge: Thapar

Court: United States Court of Appeals for the Sixth Circuit on appeal from the Eastern District of Michigan (Wayne County)

Plaintiff's Attorney: Alaina M. Zanke-Jodway

Defendant's Attorney: Mark D. Van der Laan

Description: Many people dream of having a lakefront home. Timothy
Jodway and his wife, Alaina, were no different. So they took out a mortgage loan from Fifth
Third Bank and purchased a home on Lake Charlevoix in Boyne City, Michigan. But things did
not go as planned. Money became tight, and Timothy Jodway eventually had to file for
bankruptcy. And as part of his Chapter 13 repayment plan, Jodway agreed to surrender the
Boyne City property and make monthly deficiency payments to Fifth Third.
Case Nos. 17-1688/17-1691
Jodway v. Fifth Third Bank
- 2 -
Then Jodway threw Fifth Third a curveball. Instead of surrendering his Boyne City
home, he began to fight Fifth Third’s foreclosure in state court. He also stopped making
deficiency payments. Since these were material defaults under his Chapter 13 plan, the
bankruptcy court dismissed his case. The district court affirmed that decision. Jodway now
appeals.
I.
Jodway does not dispute that he was over forty-thousand dollars behind on his deficiency
payments at the time of dismissal. Nor does he dispute that his failure to make deficiency
payments was a material default under his plan. See 11 U.S.C. § 1307(c)(6) (providing for
dismissal of a debtor’s Chapter 13 case for “material default by the debtor with respect to a term
of a confirmed plan”). Instead, he raises several other arguments, none of which merits setting
aside the bankruptcy court’s order.
Jodway’s Proposed Plan Modification. Jodway argues that, rather than dismiss his case,
the bankruptcy court should have let him modify his plan to decrease his deficiency payments.
See 11 U.S.C. § 1329 (providing for post-confirmation modification of Chapter 13 plans). The
bankruptcy court was open to his request, but it gave him a choice: If Jodway would agree to
surrender the Boyne City property—as his plan had required all along—the court would consider
his proposed deficiency-payment modification. If not, the court would dismiss his case. Jodway
refused to surrender. So the court made good on its word and dismissed.
It was within the bankruptcy court’s discretion to reject Jodway’s proposed modification.
See In re Brown, 219 B.R. 191, 192 (B.A.P. 6th Cir. 1998) (“Modification under § 1329 is
discretionary.”). As the bankruptcy court recognized, Jodway’s proposed modification was
futile. Since his plan required him to make deficiency payments and surrender the property,
Case Nos. 17-1688/17-1691
Jodway v. Fifth Third Bank
- 3 -
reducing the payments alone would not have brought him into compliance.1 And as the Supreme
Court held long ago, a bankruptcy court “is not bound to clog its docket with visionary or
impracticable schemes for resuscitation.” Tenn. Pub. Co. v. Am. Nat. Bank, 299 U.S. 18, 22
(1936). While modification may indeed be desirable where feasible, the court is under no
obligation to permit exercises in futility. See In re Am. Capital Equip., LLC, 688 F.3d 145, 162
(3d Cir. 2012) (courts are not “required” to permit modification, “especially where modification
would be futile”). Thus, the bankruptcy court did not abuse its discretion in declining to modify
the amount of Jodway’s deficiency payments.
Subject-Matter Jurisdiction. Jodway next argues that the bankruptcy court lacked
jurisdiction under the Rooker-Feldman doctrine. Why? Because, at the time the bankruptcy
court dismissed his case, a Michigan court had stayed Fifth Third’s foreclosure of the Boyne City
property pending the Jodways’ appeal. Jodway maintains that, in light of this state-court stay,
the bankruptcy court lacked jurisdiction to decide whether his failure to surrender the property
was a material default under his plan.
This argument misconstrues the relationship between the state and federal proceedings at
issue in this case. The Rooker-Feldman doctrine prevents lower federal courts from reviewing
and rejecting state-court judgments. See Exxon Mobil Corp. v. Saudi Basic Indus. Corp., 544
U.S. 280, 284 (2005). But the bankruptcy court did nothing of the sort. It simply found that
Jodway had failed to comply with the terms of his confirmed Chapter 13 plan. The bankruptcy
court did not overrule or pass judgment on the state-court stay of foreclosure. So Rooker-
Feldman does not apply.
1 Jodway also seems to argue that he had already surrendered the Boyne City property at the time of dismissal.
Since he did not raise this argument below, he has forfeited the right to do so on appeal. See Bailey v. Floyd Cty.
Bd. of Educ., 106 F.3d 135, 143 (6th Cir. 1997).
Case Nos. 17-1688/17-1691
Jodway v. Fifth Third Bank
- 4 -
Due Process. Jodway next argues that the bankruptcy court violated his due-process
rights. Jodway claims that it was improper for the bankruptcy court to consider his failure to
surrender the house, since Fifth Third did not raise the issue in its motion to dismiss. The
problem with this argument is that Jodway never raised it before—either in the bankruptcy or
district court. Jodway previously advanced other due-process arguments, but he never raised this
one. So he has forfeited the right to do so on appeal. See Bailey, 106 F.3d at 143.
The Validity of the Jodways’ Mortgage. Lastly, Jodway claims his mortgage agreement
with Fifth Third was invalid. The Jodways have raised (or had an opportunity to raise) this
argument on three prior occasions. See R. 4, Pg. ID 519–20, 537 (district court order dismissing
Jodways’ first suit against Fifth Third for lack of prosecution); id. at Pg. ID 1249–50 (bankruptcy
court order dismissing Jodways’ adversary proceeding against Fifth Third); id. at Pg. ID 608–09
(bankruptcy court order denying Jodways’ motion to reopen adversary proceeding). And when
they tried to raise it again here, both the bankruptcy court and the district court held that res
judicata bars their attempt to re-litigate the issue.
We agree. The elements of res judicata are easily satisfied here. See Bragg v. Flint Bd.
of Educ., 570 F.3d 775, 777 (6th Cir. 2009) (holding that dismissal for lack of prosecution
constitutes a “decision on the merits” for purposes of res judicata). Perhaps recognizing as
much, Jodway claims that the wrongful-concealment exception to res judicata should apply. But
that exception operates only where the aggrieved party can show that his adversary engaged in
“[a]ffirmative concealment.” Browning v. Levy, 283 F.3d 761, 770 (6th Cir. 2002) (alteration in
original) (internal quotation marks and citation omitted). And the document the Jodways
contend was affirmatively concealed—Loan Application No. 3—was signed by Timothy
Jodway. Thus, the contents of Loan Application No. 3 were known to Jodway from the
Case Nos. 17-1688/17-1691
Jodway v. Fifth Third Bank
- 5 -
beginning. This precludes him from arguing that wrongful concealment prevented him from
bringing his mortgage-invalidity claim. See id. at 770 (wrongful-concealment exception did not
apply when purportedly concealed fact “would have been known” to the aggrieved party through
his “first-hand experience”).
II.
In addition to Timothy Jodway’s appeal from the dismissal of his case, both Jodways
appeal from the denial of their pre-dismissal motion to revoke his confirmed Chapter 13 plan.
The bankruptcy court denied that motion as untimely, and the district court affirmed.
The Bankruptcy Code allows revocation of a confirmation order in limited circumstances.
After the entry of an order, the court may revoke the order only if it was “procured by fraud.”
11 U.S.C. § 1330(a). And the court may do so for only 180 days after entering the order—even
if “the fraud is not discovered until the period has passed.” In re Valenti, 310 B.R. 138, 145
(B.A.P. 9th Cir. 2004) (quotation marks and citation omitted); see 3 Bankruptcy Desk Guide
§ 31:76, Westlaw (database updated Aug. 2017) (“A complaint to revoke confirmation cannot be
brought after expiration of the 180-day time limit, even if confirmation was obtained by fraud
and the fraud was concealed until then.” (footnotes omitted)).
Here, the Jodways’ motion for revocation was more than seven months late. The
Jodways stress that they did not learn of Fifth Third’s alleged fraud until after the 180-day period
expired, but that cannot excuse their tardiness. 11 U.S.C. § 1330(a); see Valenti, 310 B.R. at 145.
The Jodways’ challenge to the court’s denial of revocation thus fails.
III.
In its brief, Fifth Third requests sanctions because it claims that Jodway’s appeal is
frivolous. To request sanctions, however, a party must file a separate motion. See Fed. R. App.
Case Nos. 17-1688/17-1691
Jodway v. Fifth Third Bank
- 6 -
P. 38 & advisory committee’s note to 1994 amendment (“A statement inserted in a party’s brief
that the party moves for sanctions is not sufficient notice.”). And though Rule 38 allows the
court to award sanctions on its own accord after notice and an opportunity to respond, see
McDonough v. Royal Caribbean Cruises, Ltd., 48 F.3d 256, 258 (7th Cir. 1995), we decline to
do so given the cursory nature of Fifth Third’s request.
***

Outcome: We AFFIRM the judgments of the district court affirming the bankruptcy court’s
dismissal of Timothy Jodway’s bankruptcy proceedings and denial of the Jodways’ motion for
revocation.

Plaintiff's Experts:

Defendant's Experts:

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