United States District Court, W.D. Pennsylvania
R. Hornak, United States District Judge.
may be the sincerest form of flattery, but not when Plaintiff
Ernest Smalis ("Smalis") relitigates issues settled
by a decade-old consent order over and over again. Smalis
lost a foreclosure action in state trial court involving
commercial real estate at 3224 Boulevard of the Allies in
Pittsburgh, Pennsylvania (the "Property"). Smalis
co-owned the Property with his then-wife, son, and daughter
(collectively the "Smalis family"). The
Pennsylvania appellate courts affirmed the state trial
ex-wife later filed for bankruptcy in the United States
Bankruptcy Court for the Western District of Pennsylvania
("Bankruptcy Court") and listed the Property as an
asset. Smalis responded by filing an adversary proceeding in
2005 (the "Initial Proceeding") challenging the
validity of the foreclosure action against the Property. On
May 19, 2006, Smalis and the defendants in the Initial
Proceeding, which included Pennsylvania Capital Bank
("PCB"), successors Three Rivers Bank
("TRB") and Sky Bank ("Sky"), as well as
the assignee of the Property's mortgage, Labrisa Lofts
("Labrisa"), executed a consent order concluding
the Initial Proceeding. The consent order released the
parties to the Initial Proceeding and their successors from
claims they had or may have had against each other regarding
signing the consent order, Smalis brought an adversary
proceeding in 2015 at the Bankruptcy Court against PCB, TRB,
Sky, and these banks' successor: Huntington Bank
("Huntington"). Smalis moved to vacate the consent
order and again challenged the validity of the foreclosure
action he lost in state court. The Bankruptcy Court denied
Smalis's motion to vacate the consent order and held that
the doctrine of claim preclusion prevented him from
relitigating issues settled by the consent order. Unsatisfied
with his outcome in the Bankruptcy Court, Smalis appealed.
Because the Bankruptcy Court correctly held that the consent
order is valid and precludes further litigation regarding the
foreclosure action against the Property, this Court affirms
the Bankruptcy Court.
JURISDICTION AND STANDARD OF REVIEW
U.S.C. § 158(a)(1) bestows this court with subject
matter jurisdiction over Smalis's bankruptcy appeal.
District courts review "the bankruptcy court's legal
determinations de novo, its factual findings for
clear error[, ] and its exercise of discretion for abuse
thereof." In re United Healthcare Sys., Inc.,
396 F.3d 247, 249 (3d Cir. 2005) (internal quotation marks
omitted). A factual finding by a bankruptcy court is clearly
erroneous when "the reviewing court on the entire
evidence is left with the definite and firm conviction that a
mistake has been committed." In re Cellnet Data
Sys., Inc., 327 F.3d 242, 244 (3d Cir. 2003) (citing
United States v. United States Gypsum Co., 333 U.S.
364, 395 (1948)).
FACTS AND PROCEDURAL HISTORY
factual timeline underpinning this appeal began in early
October 1993. The Smalis family signed a promissory note in
favor of PCB for $335, 000. (ECF No. 9-2 at 9). The
Smalis family secured repayment of the promissory note by
mortgaging the Property to PCB. (Id. at 1- 7). TRB,
PCB's successor, assigned the mortgage to Labrisa in
mid-February 2002. (ECF No, 9-11 at 1-2). Labrisa
filed a foreclosure action concerning the property in May
2002, naming each member of the Smalis family as an
individual defendant. (ECF No. 9-12 at 1, 6). In an
October 2003 bench trial, Judge R. Stanton Wettick Jr.
entered a $70, 000 verdict plus costs against Smalis.
(Id. at 3). Smalis unsuccessfully appealed the
trial-court verdict to the Superior Court of Pennsylvania and
the Supreme Court of Pennsylvania. (Id. at 2-3;
ECF No. 9-18 at 2).
the state courts provided Smalis no relief, he filed the
Initial Proceeding in late November 2005 against Labrisa,
PCB, TRB, and Sky, among others, in the Bankruptcy Court.
(ECF No. 9-1 at 2); Adv. No. 05-3325 Doc. No. 1. He
argued that the defendants obtained their foreclosure
judgment against him by fraud, voiding the judgment.
(Id. at 3). His complaint contained thirteen causes
of action related to the Property:
1. Violation of Article 9 of the Uniform Commercial Code;
2. Violation of rights protected by the 14th Amendment of the
United States Constitution for deprivation of property
without [d]ue [p]rocess of [l]aw; 3. Violation of the
protections afforded by the 14th Amendment of the United
States Constitution guaranteeing to all persons [e]qual
[p]rotection under the [l]aw;
4. Violation of the Truth in Lending Act due to failure to
make accurate disclosures and disposition of monies paid
toward the principal of the mortgage;
5. Violation of the Real Estate Settlement Procedures Act by
illegally routing monies paid to satisfy the mortgage;
6. Violation of the Racketeer Influenced and Corrupt
7. Common law fraud; 8. Fraudulent transactions pursuant
9. Violation of the Fair Debt Collection Practices Act and
Consumer Credit Protection Act due to illegal debt ...