2008 Judge Kaplan - Opinions

Judge Michael B. Kaplan -- Opinions signed in 2008

Denaro 1/24/2008

PROCEDURAL POSTURE: Debtor moved to expunge a general unsecured proof of claim for $124,137 filed in his Chapter 13 by claimant bank, which claim sought to recover a debt on a state court judgment against debtor on debtor's guaranty. Specifically, debtor sought a ruling that he was entitled to a fair market value (FMV) credit of $750,000, which credit would satisfy the state court judgment. His entitlement thereto under N.J. Stat. Ann. § 2A:50-3 was one issue.

OVERVIEW: Prior to the filing of the Chapter 13, the creditor had won a judgment against him in state court and had filed ancillary proceedings to enforce its claims, including a foreclosure sale at which the creditor bought the property for a credit bid of $401,000. When a later appraisal obtained by debtor valued the property at $750,000, debtor sought a ruling that he was entitled to credit in that amount. The court rejected claims that it could not consider the issue by reason of Rooker-Feldman or by res judicata or collateral estoppel because debtor's entitlement to a credit did not mature until the creditor bought the property and thus could not have been litigated in state court. Nor was the court estopped from considering the issue by any other doctrine. Though the court then concluded that an FMV credit was applicable under equitable principles even though it was not available under § 2A:50-3, it rejected a claim that the appraised value was the proper measure thereof and found that the price for which the property had sold at foreclosure established its "reasonably equivalent value." Thus, that was the value that was properly credited to debtor in connection with his Chapter 13.

OUTCOME: The court held that debtor was equitably entitled to a fair market credit equal to the sale price obtained by reason of the foreclosure of the property. However, the court denied debtor's motion to expunge the creditor's claim in its entirety.


Lancaster 6/4/2008

PROCEDURAL POSTURE: Plaintiff Chapter 7 trustee filed an adversary proceeding against defendants, a mortgage broker and an LLC that serviced mortgages, asserting an ownership interest under 11 U.S.C.S. § 544 in certain mortgage loans transferred by a Chapter 7 debtor. The mortgage broker filed a motion for summary judgment, and the trustee filed a cross-motion for summary judgment.

OVERVIEW: Before it declared bankruptcy, the debtor was in the business of originating and selling loans, and it sold loans secured by mortgages to a mortgage broker. The broker paid for each loan it purchased, but it did not record the mortgages because it resold the loans to investors. On the date the debtor declared bankruptcy, the broker possessed several loans it received from the debtor, and the trustee who was appointed to represent the debtor's bankruptcy estate filed an adversary proceeding against the broker, pursuant to 11 U.S.C.S. § 544, claiming that the loans belonged to the estate. The court found that the loans were not property of the bankruptcy estate that could be recovered under § 544. The broker owned the loans and any interest retained by the debtor was limited to its obligation to complete transfer to the broker. The trustee's argument that 11 U.S.C.S. § 547 allowed her to avoid assignments of mortgages executed or recorded during the 90-day period that preceded the date the debtor declared bankruptcy was also misplaced, and there was no evidence that the mortgage broker failed to pay fair value for the loans.

OUTCOME: The court granted the mortgage broker's motion for summary judgment, and denied the trustee's cross-motion for summary judgment.


Rodriguez 7/9/2008

PROCEDURAL POSTURE: Chapter 13 debtors filed a motion asserting that post-petition collection by a mortgagee of a pre-petition escrow shortage constituted a violation of the automatic stay provisions set forth in 11 U.S.C.S. § 362(a).

OVERVIEW: The mortgagee's proof of claim included only a portion of an escrow shortage amount, consisting of sums actually advanced and disbursed pre-petition by the mortgagee to meet the debtors' real estate tax and insurance obligations, which exceeded the sums deposited by the debtors in their account through their monthly escrow deposits. Upon the filing of the petition, the mortgagee increased the debtors' post-petition payments, treating the escrow account as if there had been neither an escrow account deficit nor surplus on the petition date. The debtors argued that the mortgagee's increased escrow demands represented an unlawful effort to recover the pre-petition escrow shortage over a 12-month period, as opposed to the 60-month length of the Chapter 13 plan. The court held that the mortgagee's actions were in compliance with its loan documentation and the Real Estate Settlement Procedures Act, 12 U.S.C.S. § 2601 et seq. However, the court held that the mortgagee acted arbitrarily in the method of calculating the debtors' escrow shortage and, therefore, ordered the mortgagee to issue a corrected escrow ledger in projecting the summary balance of the debtors' escrow account.

OUTCOME: The court granted the debtors' motion in part and denied in part. The court found no violations of the automatic stay, but directed the mortgagee to recalculate the debtors' shortage component of the post-petition escrow deposit in conformance with its decision.


Popular Club 10/27/2008

This Court concludes that § 502(d) does not preclude Plaintiff from bringing a preference action against Morris. Plaintiff was not required by the Bankruptcy Code [*594] to object to Morris' claim as a preferential transfer during the claim-allowance process. Furthermore, failing to raise that objection does not preclude Plaintiff from raising it at this time. Section 502(d) is a shield--"if the trustee fails to raise the § 502(d) shield, he does not thereby drop the sword sheathed in § 547." In re Cambridge Indus. Holdings, Inc., 2006 U.S. Dist. LEXIS 7939, 2006 WL 516764 at *2.