2012 Judge Wizmur - Opinions
Judge Judith H Wizmur -- Opinions signed in 2012
Debtor's counsel was sanctioned pursuant to Rule 9011 for filing the debtor's petition, schedules and subsequent pleadings in a manner that was improper and vexatious. Alternatively, sanctions against debtor's counsel were justified pursuant to 11 U.S.C. section 105, the court's inherent powers and 28 U.S.C. section 1927.
In re Vanhook / Case No. 10-43881 February 21, 2012
The debtor’s state court divorce attorney moved for reconsideration of the court’s previous order directing him to turn over funds that he was holding in an attorney escrow account, on behalf of the debtor, to the parents of the debtor’s estranged wife. The court determined at the outset that reconsideration was appropriate because the original motion for turnover had not been served on the movant. In response to the court’s inquiry, the Chapter 7 trustee indicated his intention to abandon the bankruptcy estate’s interest in the funds in question. Because there was no “formal” abandonment by the trustee and the property in question had never been scheduled, the court utilized section 105(a) to deem the funds abandoned and no longer property of the debtor’s estate. The court then determined to exercise its authority to permissively abstain from any further consideration of the proper disposition to be afforded to the escrowed funds. The court’s order directing turnover was vacated and the parties were free to pursue their remedies in state court.
In re Aubree Phillips case, 09-28759 April 12, 2012
The debtor filed a motion to reinstate her bankruptcy in order to administer a previously undisclosed asset, a state court employment discrimination claim. The state court defendant sought to oppose the motion to reinstate the bankruptcy case. The court held that the state court defendant was not a party in interest and did not have standing to object to the motion to reinstate the case. The court determined that the state court defendant did not have a legally protected interest that the debtor sought to affect through the bankruptcy and would not be subject to an injury in fact upon the reopening of the case. The court examined the merits of the debtor’s motion to reinstate and acknowledged that the failure to disclose the claim in bad faith in the bankruptcy petition might result in judicial estoppel of the state court action, but nonetheless declined to deny reopening the bankruptcy. Other remedies were available to prevent the debtor from benefitting from a claim not disclosed in bad faith, and any bad faith of the debtor should not preclude creditors from a potential recovery.
In re Daniel and Maureen Maloney case 11-40584 April 16, 2012
The debtors moved to voluntarily dismiss their Chapter 7 case and the trustee opposes dismissal as an attempt by the debtors to avoid the liquidation of a significant asset of the estate. The court determined that the debtors acted in good faith in filing their petition, notwithstanding the errors made by debtors’ counsel in failing to properly characterize the nature of the asset held by the debtors and failing to identify certain preferential payments. The court also determined that the creditors would be prejudiced by a dismissal because there was no reasonable prospect of a repayment to creditors if the case was dismissed. Balancing the likely effect of dismissal or non-dismissal on both the debtors and the creditors, the court granted the debtors’ motion to dismiss subject to satisfaction of the trustee’s administrative expenses. The court concluded that the consequences of non-dismissal would be catastrophic for the debtors. A dismissal would also deprive the creditors of approximately a 15.5% recovery. The court also considered that this was the debtors’ first bankruptcy filing; there were no prepetition collection efforts by the creditors, and the creditors will be returned to the same collection opportunities they had before the petition was filed. Dismissal of the case would not occasion any reordering of priorities.
In re James and Jacqueline Tarby case 11-32886 April 20, 2012
The debtors sought to modify the classification of a tax claim held by the New Jersey Division of Taxation from a priority claim to a general unsecured claim. The debtors asserted that the income tax obligation at issue was due over three years prior to the filing of their current bankruptcy case, making the tax debt ineligible for priority status under 11 U.S.C. § 507(a)(8)(A)(i). The Division claimed that the automatic stay that was in place during the debtors’ previous bankruptcy filing stayed their opportunity to collect, thus extending the look back period pursuant to the hanging paragraph in § 507(a)(8). The court concluded that property of the estate retains its status as such, even through confirmation of the debtor’s Chapter 13 plan, until dismissal, closure or conversion of the case, as provided in § 1306(a), denying the debtors’ motion.
In re Ricchi v. American Home Mortgage, Case No. 09-45062, Adv. No. 11-1144, May 17, 2012
The debtors' home was subject to four mortgages. The debtors refinanced the first two mortgages and the third mortgagee agreed to be subordinated to the refinancing lender. The title insurance commitment letter, however, failed to disclose the existence of the fourth mortgage on the property. The fourth mortgagee commenced foreclosure proceedings and the homeowners filed for Chapter 13 protection. In this adversary complaint, the debtors challenged the extent, validity and priority of the competing mortgages, and sought a default judgment against the title insurer. The fourth mortgagee claimed that its debt was nondischargeable. The court applied the doctrine of equitable subrogation to subrogate the refinancing lender’s mortgage to the positions held by the senior mortgagees before their loans were satisfied from the proceeds of the loan. As to the title insurer, because the proceeding did not arise in or under the bankruptcy case, and was not related to the bankruptcy, the court determined that it lacked subject matter jurisdiction over the matter. The causes of action against the title insurer were dismissed without prejudice and the court found no basis to bar the discharge of certain claims asserted against the debtors.
In the Matter of Tracy L. Purington, Debtor, Case No. 11-11617; Filomena Boccella v. Tracy L. Purington, Adv. No. 11-1757. The filed date is 5/29/12
The plaintiff brought an action against the debtor alleging that the debtor had committed fraud and theft by deception with respect to a contract to perform renovations on the plaintiff’s home. The original adversary cover sheet captioned the matter as an objection to the debtor’s overall discharge under 11 U.S.C. § 727, even though the plaintiff’s allegations and objections to the debtor’s ability to discharge her claim were more in line with a quest for nondischargeability of the debt alleged to be due to the plaintiff under section 523. On the eve of trial, the plaintiff sought to amend her complaint to include several newly asserted causes of action. The court permitted the amendment that conformed the complaint to the plaintiff’s actual allegations with respect to section 523, but denied all other amendments as unduly prejudicial. As a threshold matter, the court determined that a prepetition unconfirmed arbitration award against the debtor was not entitled to preclusive effect. On the specific elements under section 523, the court concluded that poor workmanship did not qualify as a misrepresentation, but that the debtor had otherwise materially misrepresented herself and her company to the plaintiff. The court also concluded that the debtor knew that her representations to the plaintiff about her qualifications and her established capacity to do the work were false; however, because the element of intent to deceive the plaintiff by the debtor had not been established, the relief sought by the plaintiff was denied.
The Chapter 7 trustee moved to disgorge payments previously made in the ordinary course to a property management company, which had been hired by the trustee to manage apartment complexes owned by the debtor, in order to achieve a pro rata distribution to administrative creditors. The court decided that § 549(a)(2)(B) proscribed disgorgement of payments made in the ordinary course pursuant to § 363(c)(1). In addition, the court determined that the property management company did not need to be retained pursuant to § 327 and that the equities of the case would not allow the trustee, who had made the payments in the ordinary course, to now assert that these were not ordinary course payments. The trustee’s motion was denied.
The debtors’ motion to expunge the proof of claim filed by a post-petition assignee of credit card debt, eCAST Settlement Corporation, was denied. The debtors did not dispute the validity of the underlying debt, but instead challenged the assignee’s standing to file a proof of claim in place of the original creditor, contending that the documentation provided regarding the assignment was insufficient under the Bankruptcy Code and the applicable Rules of Bankruptcy Procedure, and that the assignment did not comply with state law noticing requirements. The court determined that the proof of claim, as amended, was enforceable under New Jersey law and that there was sufficient evidentiary support for the assignment.