In re Lahijani
| Citation | 648 B.R. 542 |
| Decision Date | 22 December 2022 |
| Docket Number | Case No.: 22-14847-ABA |
| Parties | IN RE: Masoud LAHIJANI, Debtor. |
| Court | U.S. Bankruptcy Court — District of New Jersey |
Jennifer R. Gorchow, Jane L. McDonald, Office of the Chapter 13 Standing Trustee, Cherry Hill, NJ, for Trustee Isabel C. Balboa.
John M. Makowski, The Law Office of John M. Makowski, Marlton, NJ, for Debtor.
Essentially before the court is a dispute as to the allowed amount of an undisputed creditor's prepetition claim and whether that claim is secured. For the reasons set forth below, the court finds that the creditor holds an allowed secured claim which must treated as such and paid together with interest calculated in accordance with N.J. Ct. R. R. 4:42-11(a)(iii) and costs. What is more, the creditor is entitled to post-petition interest on his secured claim pursuant to 11 U.S.C.A. § 506(b) and as such, the debtor must modify his chapter 13 plan to properly account for the secured claim.
This matter before this court is a core proceeding pursuant to 28 U.S.C. § 157(b)(2)(B) and (O), and the court has jurisdiction pursuant to 28 U.S.C. § 1334, 28 U.S.C. § 157(a), and the Standing Order of Reference issued by the United States District Court for the District of New Jersey on July 23, 1984, as amended on September 18, 2012, referring all bankruptcy cases to the bankruptcy court. The following constitutes this court's findings of fact and conclusions of law as required by Federal Rule of Bankruptcy Procedure 7052.
On June 14, 2022, Masoud Lahijani filed this Chapter 13 bankruptcy case. On Schedule E/F of his petition, Lahijani disclosed Tarunkant Mithani's claim as an unsecured priority debt, undisputed, non-contingent, and liquidated, in the amount of $11,000. Doc. No. 10, p. 12. In his chapter 13 plan, Lahijani proposed to pay the claim as a priority with no interest. Doc. No. 13, Part 3.
Mithani filed a proof of claim asserting a secured claim arising out of a perfected docketed judgment lien in the amount of $23,696.13. (Claim No. 1-1) (the "Claim").1 Mithani has filed several amendments to the Claim, as well as other pleadings, asserting different amounts due—with the latest amount claimed due as $25,623. As a result, this court is tasked with not only determining if the Claim is allowed but also with fixing the proper amount of that claim. Thereafter, Mithani filed a Motion to Provide Complete and Accurate Information on Secured Claims and Lien Priority, Doc. No. 22 (the "Motion"), and Lahijani filed opposition thereto. Doc. No. 28. Lahijani also filed an objection to the amount of the Claim, Doc. No. 33 ("Claim Objection"), and Mithani filed a response thereto. Doc. No. 35. Several hearings were conducted, multiple supplemental pleadings were filed, and after a hearing on November 8, 2022, the parties were instructed to file their final pleadings, with a final hearing, if required, to be held on December 6, 2022. On December 6, this court took the matter under advisement. With that, the record is closed, and this matter is now ripe for disposition.
Lahijani resides at 2041 Lucas Lane, Voorhees, NJ 08043 (the "Residence"). Doc. No. 1. He values the Residence at $98,100. Doc. No. 10, p. 3. He only lists one secured creditor with a lien against the Residence—PNC Mortgage—with a claim in the amount of $52,652. Doc. No. 10, p. 11. PNC Mortgage timely filed a proof of claim stating a secured claim of $52,184.46. Claim No. 2-1.
On June 28, 1995, Mithani obtained a judgment by consent in the Superior Court of New Jersey against Lahijani in the amount of $19,152 (the "Judgment"). Doc. No. 22-1, ¶ 1; Doc. No. 28, Ex. A. The Judgment awarded legal interest accruing thereafter. Doc. No. 28, Ex. A. Lahijani was represented by counsel in the state court matter and actually signed the Judgment on his own behalf. Id . The Judgment was recorded as a lien on July 17, 1995 as Judgment No. J 160740-95 ("Judgment Lien"). Doc. No. 22-1, ¶7 & Ex. A., pp. 3-4.
On September 27, 1995, Lahijani filed his first bankruptcy case, docketed at Bankr. Case. No. 95-15635, in this court. In that case, Mithani commenced an adversary proceeding objecting to the dischargeability of the Judgment. Doc. No. 22-1, ¶ 3 & Ex. B. On July 29, 1996, Lahijani, who was represented by counsel, and Mithani, entered into a Consent Order in that adversary proceeding in which they specifically acknowledged the Judgment and agreed that $11,000 of it was nondischargeable as an exception to discharge pursuant to 11 U.S.C. § 523. (the "Consent Order"). Doc. No. 22, Ex. B; Doc. No. 28, Ex. C. Drafted by Lahijani's counsel, the Consent Order, only released Lahijani from the allegations contained in the complaint filed in the adversary proceeding. Id. The Consent Order, however, was silent as to the Judgment Lien. When Lahijani obtained a discharge in the case, the amount due on the Judgment beyond the $11,000 was discharged. See Doc. No. 28, Ex. B; 11 U.S.C. § 524(a).
On December 21, 2012, Mithani filed a motion to revive the Judgment in state court pursuant to N.J.S.A. 2A:14-5. Doc. No. 22-1, ¶ 4.2 On January 11, 2013, the state court entered an Order to Revive Judgment wherein the docketed Judgment was renewed for an additional twenty years. Doc. No. 22-1, ¶ 4 & Ex. C; Doc. No. 28, Ex. G.
Then, on March 4, 2022, the state court issued a writ of execution in connection with the Judgment.3 Doc. No. 22-1, ¶5 & Ex. D. On April 1, 2022, the state court issued an order permitting the sale of the Residence on account of the Judgment and Writ even though the motion authorizing the sale was opposed . Doc. No. 18, Ex. H.4 There is no evidence that the Judgment, the order revising the Judgment, or the order permitting the sale of the Residence were, or can be, appealed.
Before the Residence could be sold, Lahijani filed this bankruptcy case.
Lahijani, through his counsel, has either conceded to these facts or has produced no evidence, valid argument, or case law to refute these facts.
First and foremost, without question, Mithani possesses an allowed claim against Lahijani. Lahijani has acknowledged as much by 1) disclosing Mithani on his bankruptcy schedules as a creditor with an undisputed, non-contingent, liquidated claim, and 2) providing for payment of that claim through his chapter 13 plan. Indeed, even Lahijani's pleadings and concessions during oral argument, as well as the evidence presented, corroborate that Mithani has an allowed claim. The issues that remains are the amount of the claim and whether it is secured.
Lahijani puts forth several theories on why Mithani's claim is not secured. First, he argues that the fact that the lien search performed by the title company in connection with the PNC mortgage loan in 2018 failed to show any liens against the Residence evidences that the Judgment Lien no longer existed or, at a minimum, is subordinate to the lien of PNC Mortgage. These arguments are flawed, and Lahijani's counsel conceded at the November 8 hearing, he has no evidence or case law that would support them.
It is well established that a properly docketed judgment becomes a judgment lien on any real estate owned by the debtor. Borromeo v. DiFlorio , 409 N.J.Super. 124, 976 A.2d 388, 394 (App. Div. 2009) ; N.J. Stat. Ann. § 2A:16-1 (West) (a judgment binds real estate "from the time of the actual entry of such judgment on the minutes or records of the court"). Entry of a judgment is all that is necessary to establish a lien against a judgment debtor's real property—levy and execution on real property are not required. New Brunswick Sav. Bank v. Markouski , 123 N.J. 402, 587 A.2d 1265, 1269 (1991). "The judgment ..., when recorded on the docket of the Clerk of the Superior Court, functions as notice of the debtor-creditor relationship." Id. ; see also N.J. Stat. Ann. § 2A:16-11 (West) ("The entry required by this section shall constitute the record of the judgment, order or decree and a transcript thereof duly certified by the clerk of the court shall be a plenary evidence of such judgment, order or decree."). The basic rule is "first in time, first in right," and the purpose of this rule "is to give constructive notice to subsequent purchasers, encumbrancers and others who may deal with title to real estate upon which a judgment constitutes a lien." Les Realty Corp. v. Hogan , 314 N.J.Super. 203, 714 A.2d 366, 368 (Ch. Div. 1998). That the title search company failed to discover the judgment lien does not change the fact that the lien existed, irrespective of the constructive notice provided by entry of the judgment. See, e.g., United States v. St. John's Gen. Hosp ., 875 F.2d 1064, 1072 (3d Cir. 1989) ().
Here, Mithani, with Lahijani's consent, obtained the Judgment in state court. Thereafter, the Judgment Lien was recorded and became a lien against the Residence in accordance with New Jersey law. Accordingly, Mithani's claim, which arises from the Judgment, is secured, as it is a lien against the Residence.
Clearly, at the time of the PNC Mortgage loan, the Judgment (with a portion of its amount discharged) and the Judgment Lien existed. The fact that the state court issued an order permitting the sale of the Residence subject to the Judgment Lien5 is further proof positive that the perfected Judgment Lien was still in place . That the title company failed to pick up the Judgment Lien does not mean it did not exist, just that the title company may have made a mistake. See N.J.S.A. 17:46B-1 (); Walker Rogge, Inc. v. Chelsea Title & Guar. Co. , 116 N.J. 517, 535, 562 A.2d 208 (1989) (...
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