Article courtesy of Ariel Emmanuel (King & Spalding)
In re Aegis Asset Management, LLC, 182 F.4th 1364 (2026)
A claimant cannot enforce notes absent a showing that it owns or holds such notes at the time it filed proofs of claim.
Aegis Asset Management, LLC (the “Debtor”) filed for Chapter 11 bankruptcy in 2019. The case was subsequently converted into a Chapter 7 bankruptcy. The Debtor owned numerous parcels of real property. The Bankruptcy Court approved a motion on March 29, 2021 for the sale of such parcels to INXS VII, LLC (the “INXS”) and ordered that all liens, claims, and interest would attach to the sale proceeds. The Bankruptcy Court ordered that any claims against such sale proceeds be filed within 30 days of its order (i.e. by April 28, 2021).
On April 28, 2021, Cloud 9 Properties, LLC (“Cloud 9”) filed three proofs of claim against three of such parcels. Cloud 9 claimed that it had a mortgage loan on each of such three parcels. But the mortgagee listed on the mortgage and note for the first claim (“Claim 100”) was Margaret Mitchell and the mortgagee listed on the mortgage and note for the other two claims (“Claim 101” and “Claim 102”) was Bob Mitchell Associates. Margaret Mitchell was the sole owner of Bob Mitchell Associates and Cloud 9. Joseph Quinn Mitchell, president of Cloud 9, was Margaret’s son, personal representative, and trustee. INXS filed a motion objecting to the claims because, among other things, Cloud 9 did not provide evidence, within the 30 day deadline, that it owned the mortgage loans. INXS provided evidence showing that the note related to Claim 100 transferred from Margaret Mitchell to Margaret’s estate upon her death on March 11, 2022, and that the notes related to Claims 101 and 102 transferred to Cloud 9 on March 14, 2023. On August 9, 2023, Cloud 9 assigned its claims in the suit to Bay United Holdings, LLC (the “Claimant”), and the Claimant filed a response objecting to INXS’s motion. The Bankruptcy Court granted INXS’s motion, and the District Court for the Middle District of Florida affirmed the Bankruptcy Court’s ruling. The Claimant appealed to the Eleventh Circuit Court of Appeals.
On appeal, the Eleventh Circuit first looked at Florida law to consider whether Cloud 9 would have been able to enforce the mortgage loans by foreclosing on the mortgages. In Florida, a party must be the owner or holder of a note to foreclose on the property attached to it. Therefore, a party must also be the owner or holder of a note to file a claim based on it in bankruptcy, and a party has no claim before it owns the note. The Eleventh Circuit found that Cloud 9’s proofs of claim showed no evidence that the debts were owed to Cloud 9 on the date it filed its claims. So INXS’s objections on that ground were proper. On those grounds the Eleventh Circuit confirmed that the Bankruptcy Court was right in disallowing Cloud 9’s claims in their entirety and affirmed the District Court’s decision. The Eleventh Circuit concluded that in bankruptcy, the validity of a claim turns on whether the claim was brought by a party entitled to enforce it. Where a creditor does not show it has the right to enforce its claim, the claim is properly disallowed.
