Sandia Area Fed. Credit Union v. Fiorenza (In re Fiorenza)

• Decision Date: 17 January 2019
• Docket Number: Case No. 08-11670-t7,Adv. Pro. No. 09-1012-t
• Parties: In re: CHARLES A. FIORENZA and GENA R. FIORENZA, Debtors. SANDIA AREA FEDERAL CREDIT UNION, Plaintiff, v. CHARLES A. FIORENZA and GENA R. FIORENZA, Defendants.
• Court: U.S. Bankruptcy Court — District of New Mexico

In re: CHARLES A. FIORENZA and GENA R. FIORENZA, Debtors.

SANDIA AREA FEDERAL CREDIT UNION, Plaintiff, v. CHARLES A. FIORENZA and GENA R. FIORENZA, Defendants.

Case No. 08-11670-t7

Adv. Pro. No. 09-1012-t

UNITED STATES BANKRUPTCY COURT DISTRICT OF NEW MEXICO

January 17, 2019

OPINION

Before the Court are Plaintiff's motion to revive a money judgment entered in this proceeding in 2009 and Defendants' motion for prospective relief from the judgment. Having reviewed the parties' briefs and heard arguments of counsel, the Court finds and concludes that the Plaintiff's judgment should be revived and the Defendants' request for relief should be denied.

I. FACTS¹

On January 12, 2007, Defendants applied to Plaintiff for a $75,000 loan. Defendants gave Plaintiff pay advices showing that Mr. Fiorenza earned $195,500 in 2006 as a "Managing Partner"of Pitre Super Center. Mr. Fiorenza also represented that his monthly salary in January 2007 was $8,750.

Based on the Defendants' representations, on or about February 6, 2007, Plaintiff loaned Defendants $75,000, secured by a second mortgage on a house in Corrales, New Mexico (the "Corrales House"). The first mortgage was held by LaSalle Bank, N.A. Residential Funding Company, LLC ("LaSalle").

On February 26, 2008, LaSalle filed an action to foreclose its mortgage on the Corrales House (the "Foreclosure Action"). At that time, Debtors owed LaSalle about $1,100,000. Plaintiff and Defendants were parties to the Foreclosure Action. On April 4, 2008, Plaintiff filed a cross-petition for debt and foreclosure.

On May 27, 2008, Defendants filed this bankruptcy case. In their statement of financial affairs, Defendants disclosed their 2006 income as $34,984, not $195,500. Similarly, Defendants' 2006 federal income tax return reported wages of $34,984.

LaSalle filed a stay relief motion on June 5, 2008. Defendants did not object to the motion, and on July 3, 2008, the Court entered a default order granting LaSalle and "any and all junior lienholders" stay relief (the "Stay Relief Order"). Plaintiff did not file a separate stay relief motion, object to LaSalle's motion, or agree to the Stay Relief Order. The Stay Relief Order provided in part:

any deficiency owed by the Debtor(s) to [LaSalle], its successors, assigns and/or real party in interest, after foreclosure sale shall be set forth in a Proof of Claim filed by [LaSalle], its successors, assigns and/or real party in interest, and shall be subject to the Bankruptcy Code should this bankruptcy continue.

Also, on July 3, 2008, the chapter 7 case trustee filed a report of no distribution. Because of that, no proof of claim bar date was ever set.

After the Stay Relief Order was entered, the Foreclosure Action proceeded to judgment. On July 31, 2008, the state court entered a $76,165.38 in rem judgment in favor of Plaintiff and against Defendants on Plaintiff's cross-petition for foreclosure (the "In Rem Judgment"). LaSalle also obtained a judgment foreclosing its first mortgage.

The Corrales House was sold at a special master's sale. On October 3, 2008, the state court entered an order approving the sale. The sale extinguished the In Rem Judgment. All the sale proceeds were paid to LaSalle; Plaintiff received nothing.

On February 2, 2009, Plaintiff filed this adversary proceeding. In its prayer for relief Plaintiff asked:

For entry of Judgment against Defendants for all damages claimed herein pursuant to 11 USC Section 523, as may be determined by the Court, and that such obligations, including interest, fees and costs of collection, if any, be determined to be nondischargeable and for such other relief as the Court deems just in the premises.

The Court entered a default judgment against Defendants on March 16, 2009. Defendants moved to set the judgment aside, which the Court did on May 27, 2009.

On June 2, 2009, Plaintiff again moved for a default judgment. On July 8, 2009, the Court entered a second default judgment against Defendants (the "Judgment"). The Judgment provides in part:

ORDERED, ADJUDGED AND DECREED that the debt owed by Defendants Charles Fiorenza and Gena R. Fiorenza to Sandia Area Federal Credit union in the amount of $76,165.38 bearing interest at the rate of 8.50% per annum from February 29, 2008 until paid plus costs of $108.25 and attorneys fees of $1000.00 be and the same is excepted from said Defendants' bankruptcy discharge; FURTHER ORDERED that the Plaintiff be and the same hereby is granted default judgment against Defendants in the sum of $76,165.38 bearing interest at the rate of 8.50% per annum from February 29, 2008 until paid plus costs of $108.25 and attorneys fees of $1000.00 plus interest at the legal rate.

(italics added).

On July 21, 2009, and again on August 24, 2010, Defendants moved to set aside the Judgment. The Court denied the motions. On September 14, 2010, Defendants filed a motion to dismiss the adversary proceeding. The Court denied the motion.

While Defendants were attempting to set aside the Judgment, Plaintiff sought to garnish Mr. Fiorenza's wages from America's Mattress. On April 27, 2011, a garnishment judgment was entered. Defendants immediately filed a motion for relief from the garnishment judgment due to poverty. The Court denied the motion on May 18, 2011.²

On July 24, 2015, Plaintiff filed a second application for writ of garnishment, again seeking to garnish Mr. Fiorenza's wages from America's Mattress. On August 12, 2015, America's Mattress purported to answer the application, stating it did not employ Mr. Fiorenza. The answer was signed by Mr. Fiorenza.

Plaintiff challenged the answer. On or about November 19, 2015, Plaintiff, America's Mattress, and Mr. Fiorenza signed, and the Court entered, a Stipulated Judgment on Writ of Garnishment, Claim of Exemption and Order to Pay (the "Stipulated Garnishment Judgment"), which provides in part:

1. The Plaintiff/Judgment Creditor, Sandia Area Federal Credit Union, has a judgment dated March 16, 2009, against the Defendant/Judgment Debtor, Charles A. Fiorenza.

2. The total amount of the judgment including the principal, interest, costs, and attorney fees awarded by the judgment was $77,273.63.

3. Payments having been received by the Plaintiff/Judgment Creditor after entry of the Judgment, pursuant to prior Writs of Garnishment and/or directly from the Defendant/Judgment Debtor, were first applied to attorney's fees and costs awarded herein and to the interest accrued thereon; and then to damages awarded herein and to the interest accrued thereon. There remains due and owing the Plaintiff damages in the principal amount of $76,165.38, as of July 20, 2015, with interest continuing to accrue at the judgment rate.

4. Interest has accrued through the date of the Application at the rate of 8.50% per annum on damages ($76,165.38) in the amount of $47,630.78.

5. The unpaid balance of the judgment including accrued interest through the date of the application totals $123,796.16, with interest continuing to accrue until the judgment is paid in full.

Under the Stipulated Garnishment Judgment, the parties agreed that $200 a month would be garnished from Mr. Fiorenza's wages and paid to Plaintiff.

On June 29, 2018, Plaintiff filed a motion to revive the judgment (the "Revival Motion"). Defendants objected and on August 30, 2018, filed a motion for relief from the prospective application of the Judgment (the "Motion for Relief"). The Court held a final hearing on both motions on October 24, 2018.

II. DISCUSSION

A. The Revival Motion.

1. Reviving Federal Court Money Judgments. The Bankruptcy Code³ incorporates Federal Rule of Civil Procedure⁴ 69 via Federal Rule of Bankruptcy Procedure⁵ 7096. Rule 69(a) provides:

(a) In General.

(1) Money Judgment; Applicable Procedure. A money judgment is enforced by a writ of execution, unless the court directs otherwise. The procedure on execution--and in proceedings supplementary to and in aid of judgment or execution--must accord with the procedure of the state where the court is located, but a federal statute governs to the extent it applies.

(2) Obtaining Discovery. In aid of the judgment or execution, the judgment creditor or a successor in interest whose interest appears of record may obtain discovery from any person--including the judgment debtor--as provided in these rules or by the procedure of the state where the court is located.

One court has opined:

The draftsmen of the rule, rather than design a format for supplementary proceedings—with stages, deadlines, and other forms, powers, and limitations specially adapted to the needs of such proceedings—decided (perhaps in the hope that such proceedings would rarely be necessary) to borrow the format employed in the courts of the forum state.

Resolution Trust Corp. v. Ruggiero, 994 F.2d 1221, 1226 (7^th Cir. 1993).

Rule 69 is broad enough to encompass the state court rules on reviving judgments. In Securities Investor Protection Corp. v. Institutional Securities of Colorado, 37 Fed. App'x 423 (10th Cir. 2002), for example, the Tenth Circuit stated:

Authority to revive a federal court judgment is provided by Fed.R.Civ.P. 69(a)(2) and 81(b). Rule 81(b) states that relief formerly obtained through a writ of scire facias may be obtained by appropriate action or motion under the practice prescribed in the Rules of Civil Procedure. The relief formerly obtained through scire facias included the revival of judgments. Rule 69(a) provides for "proceedings on and in aid of execution ... in accordance with the practice and procedure of the state in which the district court is held." The revival of the December 13, 1978 judgment is therefore governed by Colorado state practice and procedure concerning the revival of judgments.

37 Fed. App'x at 425 (citations omitted).⁶ Thus, in actions to revive judgments entered by this Court, New Mexico's judgment revival rules apply.

2. State Law. Two New Mexico statutes govern revival of money judgments.⁷ First, N.M.S.A § 37-1-2 provides:

Actions

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