2010 Judge Wizmur - Opinions
Judge Judith H Wizmur -- Opinions signed in 2010
The court determined that if the New Jersey Supreme Court was presented with the applicability of collateral estoppel in a case where there was substantial participation by the party in pretrial activity, including filing responsive pleadings and participating in depositions, followed by a withdrawal of attorney representation prior to trial, and no notice of or appearance at the trial by the defendant, the court would deny preclusive effect because the matter had not been "actually litigated" and the party had been denied a full and fair day in court.
In TCI2 Holdings, there were two competing Chapter 11 plans of reorganization, one proposed jointly by the debtors and a group of second lien noteholders and one proposed by the holder of the first liens. The court determined that both plans were confirmable, after certain modifications. The inclusion of certain non-debtor third party releases in the debtors' plan was denied, and the debtors were required to limit the scope of a proposed indemnification provision. All administrative and professional fees required an application to and review by the bankruptcy court. The proposed new term loan interest rate had to be increased to match the market rate, and final confirmation was conditioned on the approval of DIP financing. Under the first lien lender's plan, the court struck a provision capping administrative expenses subject to the proponent's approval as well as a severance package limited to certain employees, and clarified that a plan provision cancelling an indenture applied only to the debtors' obligations. The court required an exculpation provision to be modified to provide for acts or omissions constituting gross negligence, willful misconduct or fraud, and also extended the bar date for filing administrative claims to 30 days. The court compared the two plans by considering the preferences and treatment of creditors and equity security holders and the type and the feasibility of each plan. Balancing these factors, the court concluded that the significant support for the debtors' plan by the largest creditor constituency, coupled with the more favorable treatment of creditors and other feasibility considerations, compelled the confirmation of the debtors' proposed plan.
The Chapter 7 debtor sought to reclassify a wholly unsecured second mortgage on his principal residence from a secured claim to an unsecured claim pursuant to 11 U.S.C. §§ 506(a) and 506(d). Citing to the United States Supreme Court's decision in Nobelman and the Third Circuit's opinion in McDonald, the debtor argued that in the Third Circuit, "stripping off" a wholly unsecured lien must be distinguished from the "strip down" prohibited in Chapter 7 cases by the Supreme Court case of Dewsnup, and was therefore a permissible reclassification of the mortgagee's claim. The mortgagee claimed that a "strip off" and a "strip down" were essentially indistinguishable and therefore equally prohibited. The court concluded that Dewsnup did not permit the voiding of a lien under § 506(d) in a Chapter 7 case where the claim was wholly unsecured. Under Dewsnup, an allowed claim is secured for purposes of § 506(d) simply because the claim is subject to a lien with recourse to collateral. Valuation is not a factor in the determination. The debtor's motion to "reclassify" the second mortgagee's wholly unsecured claim, or to void the mortgagee's lien, was denied.
The debtor challenged the creditor's opportunity to enforce an obligation alleged to be due, based primarily on the fact that the underlying note executed by the debtor was not properly indorsed to the transferee, and was never placed in the transferee's possession. The debtor did not dispute that he signed the original mortgage documents in question. The court determined that Countrywide's claim must be disallowed, because it was unenforceable under New Jersey law on two grounds. First, under New Jersey's UCC provisions, the fact that the owner of the note, the Bank of New York, never had possession of the note, was fatal to its enforcement. Second, upon the sale of the note and mortgage to the Bank of New York, the fact that the note was not properly indorsed to the new owner also defeated the enforceability of the note. Because the Bank of New York had no right to enforce the note, Countrywide as its agent and servicer also could not enforce the note. The debtor's motion to expunge the proof of claim was granted.