In re McKeon
| Decision Date | 17 February 1988 |
| Docket Number | 87-04212,87-03565,87-06038,87-04223,87-03154,Bankruptcy No. 87-02873,87-05554,87-04633,87-05196,87-04487,87-04339,87-04713,87-03308,87-02901,87-04631,87-04145,87-05989,87-06427 and 87-06051.,87-05240,87-05516,87-04111,87-04010 |
| Citation | 86 BR 350 |
| Parties | In re Barry McKEON and Deborah McKeon. In re John D. WHITCRAFT. In re Joseph T. HOLMES. In re Cheryl GREEN. In re Annie McCRAY. In re Asuncion CAMACHO. In re Barbara E. MILTON. In re James A. STEWART. In re Larry MARSHALL and Linda Carolyn Marshall. In re James LILES, Jr. In re Charles MARTIN and Barbara Martin. In re James W. POTTS and Lucille Potts. In re David FIELD. In re John GRECO. In re Charlene MARTIN. In re William C. ROSS. In re Clarence Michael STOKES and Jannas Ann Stokes. In re Betty D'ALLESANDRO. In re Russell POLK. In re Charles LEE and Gloria Lee. In re Edgardo COSME. In re Arlene PAYNE. In re Hector RODRIQUEZ. |
| Court | U.S. Bankruptcy Court — District of New Jersey |
David P. Daniels, Camden, N.J., for debtors in Nos. 87-02873, 87-03154, 87-04010, 87-04111, 87-04223, 87-04339, 87-04713, 87-05196, 87-05516, 87-05554, 87-05989, 87-06427 and 87-06051.
Edward Casel by Elizabeth G. Casel, Willingboro, N.J., for Fireman's Fund Mortg. Corp. and Com. Mortg. Corp.
Wood & Broege by Peter J. Broege, Manasquan, N.J., for Robert M. Wood, Standing Trustee.
Jenkins & Jenkins by Jeffrey E. Jenkins, Haddon Heights, N.J., for debtors in Nos. 87-02901, 87-03565 and 87-04487.
Mesirov, Gelman, Jaffee, Cramer & Jamieson by Marc G. Mellman, Philadelphia, Pa., for ITT Financial Services.
Martin J. Siegel, Pennsville, N.J., for debtor in No. 87-03308.
Alvin D. Miller, P.A. by Merri R. Lane, Cherry Hill, N.J., for Security Financial & Mortg. Corp. and for Cobb Partners Financial Inc., formerly known as Arvida Mortg. Co. and Fleet Real Estate Funding Corp.
Zucker, Goldberg, Becker & Ackerman by Michael S. Ackerman, Maplewood, N.J., for New Jersey Housing and Mortg. Finance Agency and Com. Mortg. Corp.
John W. Morris, Haddonfield, N.J., for debtors in Nos. 87-04145, 87-04631 and 87-04633.
William M.E. Powers, Jr. by William M.E. Powers, III, Medford, N.J., for First Federal Sav. & Loan Ass'n of Rochester and for Citicorp Mortg. Inc. and Inland Mortg. Corp.
Jacoby & Meyers by Steven J. Popkin, Haddonfield, N.J., for debtors in No. 87-04212.
Farr, Wolf & Lyons by Kathleen M. Calemmo, Bellmawr, N.J., for Midlantic Nat. Bank South, General Motors Acceptance Corp.
Kasen, Kasen & Braverman by Robert N. Braverman, Cherry Hill, N.J., for Manufacturers Hanover.
Schulman & Greenberg by Robert S. Greenberg, Vineland, N.J., for debtor in No. 87-05240.
Beck, D'Elia & Rosenberg by Gary J. Zangerle, Cherry Hill, N.J., for Kislak Mortg. Co.
Greenberg, Shmerelson, Weinroth & Etish by James Greenberg, Camden, N.J., for Trico Mortg. Co.
Ernest R. Costanzo, Bellmawr, N.J., for debtor in No. 87-06038.
Before the court are 23 plans submitted for confirmation and 3 motions to vacate the stay instituted in the respective proceedings. The 23 cases have been consolidated for the purposes of addressing the identical issue raised in each case, namely, the extent to which a Chapter 13 debtor may propose to deal with the claim of a mortgagee in a Chapter 13 plan where the mortgagee holds a final judgment of foreclosure issued by the state court of New Jersey. In these cases the affected mortgagees' claims are secured only by a security interest in the debtor's principal residence. For the purpose of completeness of record, this court will briefly state the salient facts in each of the cases presently before the court.
Barry McKeon and Deborah McKeon ("debtors") filed a voluntary petition under Chapter 13 of the Bankruptcy Reform Act of 1978, as amended by the Bankruptcy Amendments and Federal Judgeship Act of 1984 ("Bankruptcy Code") on May 11, 1987. On March 3, 1986 a final judgment of foreclosure was entered by the Superior Court of New Jersey, Chancery Division, Gloucester County in favor of Colonial Savings & Loan Association of Roselle Park, New Jersey in the amount of $50,137.14, plus interest, taxed costs and counsel fees. On May 11, 1987 the debtors filed a Chapter 13 plan which proposed to make payments to the Chapter 13 Standing Trustee of $270.00 monthly for 48 months to cure mortgage arrears to Fireman's Fund Mortgage Corporation ("Fireman's Fund") on account of the aforesaid first mortgage on the debtors' residence located at 250A N. Brewster Road, Newfield, New Jersey in the amount of $8,000.00 and to pay unsecured creditors 10% on their claims. On July 21, 1987 Fireman's Fund, as successor in interest to Colonial Savings & Loan Association of Roselle Park, New Jersey, filed "Objections to Confirmation and a Request for Dismissal of the case or Relief from the Automatic Stay" on the grounds that: (1) on the basis of the plan as proposed it would take more than 60 months to pay the amount due Fireman's Fund; (2) 11 U.S.C. § 1322(c) provides that a plan may not provide for payments over a period longer than three years unless the court, for "cause" approves a period no longer than five years; (3) the plan does not provide for the correction of the default within a reasonable time as required by 11 U.S.C. § 1322(b)(5); (4) the amount due to the mortgage holder is $20,224.24; (5) the creditor did not receive a copy of the debtors' valuation of property and so requests interest on its claim.
On September 25, 1987, the scheduled confirmation hearing on the debtors' plan, the court denied confirmation of the plan and granted the debtors leave to file an amended plan. On October 2, 1987 the debtors filed a modified Chapter 13 plan which provides for the payment of $1,000.00 monthly to the Chapter 13 Standing Trustee for 45 months, and $19,000.00 on the 60th month. The plan provides for payment to Fireman's Fund of a "cram-down" value of the foreclosure judgment which it holds. The plan sets the "cram-down" value of the judgment at $47,200.00, based upon a valuation of real estate proposed by the debtors of $70,000.00,1 plus interest at 7.5% per annum over the term of the plan, for a total payment of $56,760.00.2 The debtors propose no payment to First National Bank of Newfield on its second mortgage, on the basis that the Bank would receive no dividend in liquidation and accordingly is unsecured. The plan provides no payment to unsecured creditors.
On October 22, 1987 Fireman's Fund filed a motion for relief from the automatic stay of 11 U.S.C. § 362 on the grounds that a final judgment of foreclosure was entered prior to the filing, asserting (1) once judgment has been filed in a state court foreclosure action, a subsequent filing will not affect property under foreclosure and it cannot be included in the plan; (2) the mortgage must be paid within the 60-day redemption period granted by 11 U.S.C. § 108(b); (3) the court cannot confirm a plan over three years, except "for cause", and may not approve a plan that is longer than five years; (4) the plan does not provide for the correction of the default on the first mortgage, including the mortgage holders' expenses, with a reasonable time, as required by 11 U.S.C. § 1322(b)(5); (5) the amount due to the first mortgage holder is $58,949.11; (6) the plan cannot be confirmed because of a lack of good faith3 and a lack of feasibility.4 Fireman's Fund in its brief in opposition to the plan raises the following claims: (1) the Bankruptcy Courts are courts of limited jurisdiction and cannot pre-empt the state law right of redemption; (2) the objecting creditor is the holder of a claim secured only by a security interest in real property that is the debtor's principal residence and its rights cannot be modified by the court's approval of a plan to satisfy the objecting creditors' foreclosure judgment over the term of a plan; (3) 11 U.S.C. § 1322(b) and § 1325(a) do not permit the debtor to cram-down the objecting mortgagee's foreclosure judgment.
John D. Whitcraft ("debtor") filed a voluntary Chapter 13 petition on May 12, 1987. On August 2, 1987 ITT Financial Services ("ITT") filed a notice of motion to dismiss the Chapter 13 petition or in the alternative for an order vacating the automatic stay with respect to property located at 605 Kings Highway South, Cherry Hill, New Jersey to allow the creditor to proceed with foreclosure and sale of the property. That motion was heard by the court on October 14, 1987 and denied but a hearing was scheduled on confirmation of the debtor's Chapter 13 plan.
On March 28, 1984, the debtor, John D. Witcraft, and his wife, Ann T. Whitcraft, executed a mortgage on their residence to ITT in the principal sum of $25,251.83. ITT was the second mortgagee on the property and the mortgage was made pursuant to the Secondary Mortgage Loan Act of New Jersey, N.J.S.A. 17:11A-34 et seq. In October 1984 the debtor defaulted on the loan at which time ITT filed a mortgage foreclosure action in the Chancery Division of the Superior Court of New Jersey, Camden County. Default judgment was entered against the debtor in that action on February 17, 1985, and sheriffs sale was initially scheduled on May 10, 1985. However, the loan was brought current by the debtor and ITT agreed to reinstate the loan on or about June 27, 1985, at which time the foreclosure action was dismissed. Subsequent to reinstatement of the loan, the debtor again defaulted in payments. As a result, on March 2, 1987 ITT filed a mortgage foreclosure action. A judgment of foreclosure was entered by the Superior Court of New Jersey by default on April 27, 1987. Pursuant to that judgment a writ of execution of same date was forwarded to the Sheriff of Camden County which commanded the sheriff to sell the foreclosed premises to satisfy the claim of ITT of $26,735.48, together with costs which were taxed in the amount of $757.87. A sheriffs sale was scheduled for June 26,...
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