In re Dimogerodakis, Case No.: 04-23833 (DHS) (Bankr.N.J. 8/13/2009)
| Decision Date | 13 August 2009 |
| Docket Number | Case No.: 04-23833 (DHS) |
| Parties | In Re: KRISTI E. DIMOGERODAKIS, Chapter 13, Debtor. |
| Court | U.S. Bankruptcy Court — District of New Jersey |
Kristi E. Dimogerodakis a/k/a Christine Dimogerodakis, Morristown, New Jersey, Debtor Pro Se.
Dean G. Sutton, Esq., Sparta, New Jersey, Former Counsel for Debtor.
Zucker, Goldberg & Ackerman, Michael S. Ackerman, Esq., Mountainside, New Jersey, Attorneys for Secured Creditor Saxon Mortgage Services, Inc. as Servicer for Deutsche Bank Trust Company Americas f/k/a Bankers Trust Company as Trustee and Custodian by Saxon Mortgage Services, Inc. f/k/a Meritech Mortgage Services Inc. as their Attorney in Fact.
Before the court is a cross-motion by Saxon Mortgage, Inc. ("Saxon") to reinstate/re-open a Chapter 13 bankruptcy proceeding commenced by Kristi E. Dimogerodakis ("Debtor"). The Debtor filed her petition on April 22, 2004 and a Plan was confirmed on October 1, 2004. An Order authorizing sale of the Debtor's real property ("Sale Order") was entered October 31, 2007 and the Trustee's Final Report and Account was filed May 8, 2008.
On April 1, 2008, the Debtor filed a motion to enforce the Sale Order and to hold Saxon in contempt for non-compliance with its terms. In response, Saxon filed a cross-motion seeking to reinstate/re-open the case to compel the Debtor to reimburse Saxon for escrow advances, alleging that the Debtor was unjustly enriched when Saxon advanced post-judgment taxes and insurance.
After a hearing on the motions, the Court entered an Order on July 17, 2008, which resolved the motion for contempt and the portion of Saxon's cross-motion relating to the turnover of unclaimed funds. The portion of Saxon's cross-motion to compel the reimbursement of advances was adjourned by the parties.
For the reasons stated hereafter, the Court denies Saxon's motion to re-open the case to compel the Debtor to reimburse Saxon for escrow advances. The court has jurisdiction over this motion pursuant to 28 U.S.C. § 1334 and the Standing Order of Reference from the United States District Court for the District of New Jersey dated July 23, 1984. This matter is a core proceeding pursuant to 28 U.S.C. § 157(b)(2)(A), (B), and (N). Venue is proper under 28 U.S.C. §§ 1408 and 1409.
On April 22, 2004, the Debtor filed a Chapter 13 Petition. A plan was confirmed on October 1, 2004. Certif. of Dean G. Sutton, Esq. in Support of Mot. Enforcing Order and for Order of Contempt (hereinafter "Sutton Cert.") 1:1-2. The Court entered an Order on October 31, 2007, authorizing the sale of the Debtor's real property to Nicholas Dimogerodakis. Sutton Cert. at Ex. B. Pursuant to the Sale Order, the Chapter 13 Trustee, Marie-Ann Greenberg, sent a pay-off check in the amount of $368,455.85 to Saxon on November 30, 2007. Sutton Cert. 1:4. Saxon had been ordered to issue a Warrant of Satisfaction for its foreclosure judgment, a Discharge of Lis Pendens, a Dismissal of its Foreclosure Action, and a Discharge of its Mortgage upon receipt of the funds. Sutton Cert. 1:5. The check was not cashed and the documents not issued.
On March 6, 2008, Debtor's counsel wrote to Saxon's counsel to advise that the Trustee's check had become stale-dated, Saxon had not complied with the Court Order, and that a Motion for Contempt would be filed unless assurance was given that the issues would be remedied. Sutton Cert. at Ex. C. Saxon's counsel offered no response. The Chapter 13 Trustee then sent an e-mail to Saxon's counsel on March 19, 2008 requesting an immediate update. Sutton Cert. at Ex. D. When Saxon's counsel did not respond to the Trustee, the unclaimed pay-off funds, totaling $368,455.85, were deposited by the Trustee in the Court's registry. Sutton Cert. at Ex. F.
Due to Saxon's failure to respond to counsel or comply with the Order, the Debtor filed a motion to enforce the Court's Sale Order and to hold Saxon in contempt. An Order was entered July 17, 2008 resolving the motion for contempt and directing Saxon to comply with the Sale Order.
Saxon attached to its cross-motion a list of advances that shows the payments it made for real estate taxes and hazard insurance after the foreclosure judgment was entered and the petition filed. Certif. of Michael S. Ackerman, Esq. In Support of Notice of Mot. to Vacate Automatic Stay (hereinafter "Ackerman Cert.") 3. Saxon claims the advances were in the amount of $59,132.69. Ackerman Cert. 1:2. No motion to amend the judgment or seek reimbursement was ever made by Saxon until it filed the instant cross-motion seeking to compel reimbursement for the escrow advances and to have unclaimed funds turned over. Ackerman Cert. at 1:4. At oral argument, counsel for Saxon responded to questions regarding its client's noncompliance with the previous Orders by claiming that it did not agree to the terms of the Sale Order and that it should not have been entered, although no appeal was ever taken from the Order. See Oral Argument, June 10, 2009 at 11:47-48. Saxon also claims that the Debtor has been unjustly enriched by Saxon's post-judgment and post-petition payment of taxes and insurance. Creditor's Br. 7.
Pursuant to Bankruptcy Code Section 350(b) "[a] case may be reopened in the court in which such case was closed to administer assets, to accord relief to the debtor, or for other cause." See also FED. R. BANKR. P. 5010. "The right to reopen the case depends upon the circumstances of the individual case and the decision whether to reopen is committed to the court's discretion." In re Mattera, 203 B.R. 565, 568 (Bankr. D.N.J. 1997) (citing In re Winebrenner, 170 B.R. 878, 881 (Bankr. E.D. Va. 1994) (quoting In re Carter, 156 B.R. 768, 770 (Bankr. E.D. Va. 1993))).
Under the doctrine of merger, New Jersey courts hold that once a foreclosure judgment is obtained, "the mortgage is merged into the final judgment of foreclosure and the mortgage contract is extinguished." In re Roach, 824 F.2d 1370, 1377 (3d Cir. N.J. 1987) (citing Colonial Building-Loan Ass'n v. Mongiello Bros., 120 N.J. Eq. 270, 184 A. 635, 637-38 (N.J. Ch. 1936)). As a result, "when a debtor files a Chapter 13 petition in New Jersey and proposes a plan . . . after the entry of a foreclosure judgment, no contractual relationship remains and the mortgagee's rights are those that arise from its judgment." In re Roach, 824 F.2d at 1377. The judgment itself thus provides the amount needed to satisfy the mortgage. See id. (citing Eisen v. Kostakos, 116 N.J. Super. 358, 282 A.2d 421, 424 (App. Div. 1971)).1
The Third Circuit found an exception exists to the doctrine of merger "if the mortgage clearly evidences [their] intent to preserve the effectiveness of that provision post-judgment." Youngman v. Fleet Bank, N.A. (In re A&P Diversified Techs. Realty, Inc.), 467 F.3d 337, 342 (3d Cir. N.J. 2006) (quoting In re Stendardo, 991 F.2d 1089, 1095 (3d Cir. Pa. 1993)) (emphasis added). According to the Third Circuit precedent announced in Stendardo, language in a mortgage that obligates the Debtor to pay taxes and premiums does not satisfy the requirements of an exception after foreclosure judgment has entered. 991 F.2d at 1095. The exception requires clear language indicating that the obligation to pay taxes and insurance will continue following the merger of the mortgage into the foreclosure judgment. Id.
In Stendardo, the Federal National Mortgage Association ("FNMA") was given permission by the Bankruptcy Court to include post-judgment advances in its proof of claim. Id. at 1089. FMNA had received a default judgment against the debtors in 1986. Id. at 1092. The debtors filed a second Chapter 13 bankruptcy in 1989 and one year later, FMNA filed its proof of claim, including post-judgment advances for taxes and insurance premiums to protect its security interest in the property. Id. at 1092-93. The bankruptcy court held that FMNA was entitled to include the post-judgment expenses in its proof of claim. Id. at 1093. The District Court reversed this finding on appeal, "reasoning that the debtors' obligations under the mortgage were merged into the judgment obtained in the foreclosure action." Id. at 1091. Therefore, "[i]n order for mortgage terms to survive merger into a foreclosure judgment, [the District Court] decided that the language of the mortgage must clearly indicate that a term or clause in an agreement will remain operative after a judgment is obtained." Id. at 1093.
Affirming the District Court, the Third Circuit held that the mortgage was not ambiguous. No language appeared in the Mortgage that indicated the "parties' intent to preserve the Debtors' obligation to pay the relevant taxes and premiums beyond the date of the Judgment." Id. at 1095. The Third Circuit went on to find that:
Although the Mortgage clearly obliges the Debtors to pay the taxes and insurance premiums at issue, it lacks any language indicating that this obligation is to survive foreclosure. The parties could have easily included such a provision in the Mortgage had this been their intent. As written, the Mortgage is unambiguous. It does not require the Debtors to pay real estate taxes and insurance premiums following the merger of the Mortgage into the judgment.
Id. at 1095-96. In the case at bar, the pertinent language of the mortgage does not clearly evidence that the Debtor will be held accountable for advances made following a foreclosure judgment. On
the contrary, the advances for taxes and insurance became "additional debt of the [Debtor] secured by this Security Instrument." See Cert. in...
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