FORECLOSURE ARTICLE - BANKRUPTCY LAWYER IN NEW JERSEY (201) 646-3333

 196 A.3d 121 (2018)

456 N.J. Super. 546

DEUTSCHE BANK TRUST COMPANY AMERICAS, AS TRUSTEE FOR RESIDENTIAL ACCREDIT LOANS, INC., Mortgage Asset-Backed Pass-Through Certificates, Series 2005-QSI4, Plaintiff-Respondent,

v.

Debbie A. WEINER and Clifford R. Weiner, Defendants-Appellants.

DOCKET No. A-2110-17T4.

Superior Court of New Jersey, Appellate Division.

Submitted October 23, 2018.Decided November 8, 2018.

On appeal from Superior Court of New Jersey, Chancery Division, Somerset County, Docket No. F-026288-16.

Christopher D. Ferrara LLC, attorneys for appellants (Christopher D. Ferrara, on the brief).

Blank Rome LLP, attorneys for respondent (Michael P. Trainor, on the brief).

Before Judges Fisher, Geiger and Firko.

122*122 The opinion of the court was delivered by

FISHER, P.J.A.D.

For many years, New Jersey lacked a statute of limitations for residential foreclosure actions. Instead, for more than a century, our courts applied the time-bar used in adverse possession actions: twenty years. See Depew v. Colton, 60 N.J. Eq. 454, 464, 46 A. 728 (E. & A. 1900); Security National Partners L.P. v. Mahler, 336 N.J. Super. 101, 106-07, 763 A.2d 804 (App. Div. 2000). In 2009, the Legislature made up for lost time and enacted N.J.S.A. 2A:50-56.1, which codified Security National Partners^[1] by declaring that a residential foreclosure action "shall not be commenced following the earliest of" three points in time:

• Six years from "the date fixed for the making of the last payment or the maturity date set forth in the mortgage or the note," N.J.S.A. 2A:50-56.1(a);

• Thirty-six years from the date the mortgage was recorded or, if not recorded, from the date of execution, N.J.S.A. 2A:50-56.1(b); and

• Twenty years from the date of a default that "has not been cured," N.J.S.A. 2A:50-56.1(c).^[2]

Defendants' contention that N.J.S.A. 2A:50-56.1(a)'s six-year time-frame applies and bars this foreclosure action, which was filed seven years after their uncured default, is without merit.

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The record reveals that defendant Debbie A. Weiner borrowed $657,500 from Weichert Financial Services in 2005 and then executed in Weichert's favor a promissory note that required monthly payments, 123 the last of which was scheduled for June 2035. To secure the note's repayment, both defendants executed a mortgage that was recorded in 2005 and ultimately assigned to plaintiff Deutsche Bank Trust Company Americas.^[3]

There is no dispute that defendants failed to make a scheduled August 2009 payment and all later monthly payments. After four discontinued suits, Deutsche Bank commenced this foreclosure action in September 2016, more than seven years after defendants' uncured default.

The parties eventually cross-moved for summary judgment. The judge granted Deutsche Bank's motion, denied defendants' motion, and later denied defendants' motion for reconsideration. Once final judgment was entered in December 2017, defendants filed this timely appeal, arguing: (1) summary judgment should not have been entered because discovery was incomplete and there were genuine disputes about Deutsche Bank's claim, its standing to sue, and its status as a holder; (2) their answer should not have been stricken; and (3) the complaint was barred by the statute of limitations. We reject these arguments and affirm.^[4]

In arguing the action was time-barred, defendants claim the six-year time frame in subsection (a) was triggered in 2009 when their default triggered the loan's acceleration. We disagree. Subsection (c) specifically provides a time frame to be considered upon an uncured default. To interpret subsection (a) as triggering the same event encompassed by subsection (c) would wreak havoc with the clearly delineated provisions of N.J.S.A. 2A:50-56.1. We refuse to inject such confusion into what the Legislature carefully planned when it adopted this multi-part statute of limitations.

Defendants' interpretation would also require that we ignore subsection (a)'s plain language. That provision declares that the six-year period runs from the date of the last payment or the maturity date "set forth in the mortgage or the note." N.J.S.A. 2A:50-56.1(a). June 1, 2035 was the date "set forth" in the note and mortgage here, and that date is the one and only date that triggers the six-year period in subsection (a). There is no ambiguity; that conclusion is what the plain language of the statute compels. See DiProspero v. Penn, 183 N.J. 477, 492, 874 A.2d 1039 (2005). Any other conclusion would mangle the Legislature's carefully phrased statute. State v. Clarity, 454 N.J. Super. 603, 608, 186 A.3d 919 (App. Div. 2018).

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In short, the three events described in subsections (a), (b), and (c) of N.J.S.A. 2A:50-56.1, were scheduled to occur in 2041 (six years after the 2035 maturity date), 2041 (thirty-six years after the 2005 recording of the mortgage), and 2029 (twenty years from defendants' uncured 124*124 default), respectively. Since the earliest has yet to occur, this suit, commenced in September 2016, was not time-barred.^[5]

Affirmed.

[1] See Assemb. Fin. Insts. & Ins. Comm. Statement to S. No. 250 — L. 2009, c. 105 (Oct. 6, 2008).

[2] For brevity's sake, we have omitted statutory language from the descriptions of each subsection that has no bearing here.

[3] The mortgage was first assigned to Deutsche Bank Trust Company Americas, as trustee for certain certificate holders, in 2009, and later assigned to Deutsche Bank, as trustee for Residential Accredit Loans, Inc., 2005-QS14, the plaintiff here, in 2013. The assignments were duly executed and recorded.

[4] We find insufficient merit in defendants' first two points to warrant further discussion in a written opinion. R. 2:11-3(e)(1)(E). We add only as to the first that, in moving for summary judgment, Deutsche Bank provided undisputed evidence that it was in possession of the note, which was endorsed to it, and that the mortgage assignments were duly executed and recorded. See Deutsche Bank Trust Co. v. Angeles, 428 N.J. Super. 315, 318, 53 A.3d 673 (App. Div. 2012).

[5] Although not raised, we assume N.J.S.A. 2A:50-56.1 applies to defendants' argument that Deutsche Bank's suit was untimely even though the statute did not become effective until August 6, 2009, approximately the same time as defendants' default. Even if the statute had no application here, the result would be the same, since the pre-statute twenty-year time-bar described in Colton and Security National Partners would allow for the maintenance of this suit.

MORTGAGE ARTICLE - BANKRUPTCY LAWYER IN HACKENSACK NEW JERSEY (201) 646-3333

 273 N.J. Super. 542 (1994)

642 A.2d 1037

GREAT FALLS BANK, PLAINTIFF-RESPONDENT,
v.
JOSEPH PARDO, DEFENDANT-APPELLANT, AND FRANK PAPARATTO, MARIA PAPARATTO AND SAMUEL PETRACCA A/K/A/ SAM PETRACCA & SAMUEL S. PETRACCA, AND MARIA PETRACCA, A/K/A/ MARIA D. PETRACCA, JOHN F. KENNEDY MEDICAL CENTER AND THE STATE OF NEW JERSEY, DEFENDANTS.

Superior Court of New Jersey, Appellate Division.

Argued May 10, 1994.Decided May 26, 1994.

543Before Judges STERN and KEEFE.

Aldan O. Markson, argued the cause for appellant Joseph Pardo (Mr. Markson, on the brief).

Cheryl H. Burstein argued the cause for respondent Great Falls Bank (Williams, Caliri, Miller & Otley, attorneys; Ms. Burstein, of counsel and on the brief).

Argued (telephonically)^[1] May 10, 1994.

PER CURIAM.

In 1987, Frank Paparatto, Ciro Spinella and Samuel Petracca entered a joint venture to build two-family houses on a parcel of land in North Arlington. To finance the venture, they personally executed a promissory note for a $350,000 loan Great Falls Bank ("plaintiff") made to their corporation. When they could not make payments, Paparatto and Petracca induced Pardo ("defendant") to acquire a 14% interest in the venture in exchange for $176,000 and execution on January 6, 1989 of a guaranty of the debt. On June 16, 1989 defendant also executed a mortgage to secure the guaranty in exchange for release by plaintiff of Paparatto's certificate of deposit previously given as security. Defendant contends that the mortgage was prepared by the bank's vice president, Glen Durr, but that he (defendant) had no direct communication with the 544 bank or Durr. The mortgage was witnessed and notarized by Petracca. According to defendant's certification in opposition to plaintiff's motion for summary judgment, "[a]lthough my signature appears on the mortgage, I have no recollection of ever signing the mortgage ... I was not aware that I had signed a mortgage until many months after June 16, 1989." Defendant, a janitor who cannot read or write English, claims he never understood that he executed a mortgage to secure his guaranty and that he was fraudulently induced to do so by his "partners."^[2]

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On January 21, 1990 the four partners executed a renewal promissory note which facially changed defendant's obligation from that of guarantor to principal. When the obligors did not make timely interest payments, plaintiff commenced a suit in August 1990 against Paparatto, Spinella, Petracca and defendant. Incident to a settlement and dismissal of that litigation, the four "partners" executed another extension of the $350,000 loan. Defendant simultaneously executed a Mortgage Modification and Extension Agreement to secure the debt. Both the note and agreement provided that plaintiff could release any party or collateral without affecting the liability of any other debtor or mortgagor. About seven months later, plaintiff released Spinella and discharged his mortgage in exchange for 25% of the amount due under the loan. Because the remaining balance was not paid when due, plaintiff instituted this foreclosure action. Thereafter, plaintiff's motion for summary judgment was granted, and defendant's motion for reconsideration was denied. Great Falls Bank v. Pardo, 263 N.J. Super. 388, 622 A.2d 1353 (Ch.Div. 1993).

Defendant appeals and contends that the court erred by granting summary judgment. He argues that there are material facts in dispute which, if resolved favorably to him, support his claim that (1) plaintiff, as a third party beneficiary of his promises to his 545 "partners," stands in the shoes of the promisees and is therefore subject to the defense of fraud that he asserts against his "partners" in a related action; (2) his mortgage is void because it did not secure a valid, subsisting debt; (3) his original guaranty is unenforceable because plaintiff released a principal obligor on the debt;^[3] (4) his guaranty and mortgage are unenforceable for lack of consideration, and (5) the trial judge improperly denied him a hearing on his request that the foreclosure sale of his mortgage be stayed until plaintiff could litigate his claims against his partners and require the plaintiff to satisfy his obligation against them before resorting to the foreclosure sale of his mortgage.

The judgment is affirmed substantially for the reasons expressed by Judge Boyle in his written opinion, Great Falls Bank v. Pardo, 263 N.J. Super. 388, 622 A.2d 1353 (Ch.Div. 1993), together with the following. It is uncontested before us that defendant was named as a defendant in the action filed in August 1990 based on the January 21, 1990 note executed by Paparatto, Petracca, Spinella and defendant, and that the suit was dismissed incident to execution by the same four individuals on November 14, 1990 of a new $350,000 promissory note, together with guaranties executed by the wives of Paparatto, Petracca and Spinella, and the Mortgage Modification and Extension Agreement signed by defendant (and apparently separate such agreements by Petracca 546*546 and Spinella as well). These items were submitted to the plaintiff by counsel for defendants in the 1990 action.^[4] In fact, counsel witnessed and notarized defendant's signature on the modification agreement, and defendant simultaneously executed an affidavit of title to his mortgaged property. If nothing else, dismissal of the 1990 complaint and renewal of the loan in November of that year provided consideration for the new obligation defendant undertook, and plaintiff could fairly rely on these documents sent to the bank by defendant's counsel.^[5]

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We do not believe that the bank had an independent obligation in these circumstances to scrutinize the relationship between the individuals who each appeared to have an interest in the entity for whose benefit the loan was made, or to question if there was a conflict among obligors (or obligors and guarantors), or in their joint representation. As Judge Boyle stated in his opinion, "any fraud perpetrated by the partners is of no moment unless Great Falls had knowledge thereof or participated therein...." Great Falls v. Pardo, supra, 263 N.J. Super. at 398, 622 A.2d 1353. There was an insufficient showing of such knowledge, which defendant claims to flow from Durr's prior close relationship with one of the "partners" and his personal lawyer. Moreover, as defendant acknowledged in the November 1990 Mortgage Modification and Extension Agreement that the 1989 mortgage "shall continue to secure repayment" of the borrowers' obligation to repay the loan simultaneously renewed and extended, and acknowledged the "obligation" under his original guaranty, defendant cannot now deny the validity of the 1989 mortgage. We therefore reject his contention that there are factual issues related to the execution of the mortgage which would preclude summary judgment in this foreclosure action.

547Before us defendant claims for the first time the Mortgage Modification and Extension Agreement signed by defendant is unenforceable because it was not executed by the plaintiff. Hence, defendant asserts he did not consent to the release of Spinella as a principal obligor, thereby adversely affecting defendant's guaranty. However, independent of whether defendant was then a principal obligor protecting his own investment, the modification agreement was signed by defendant, "the party to be charged." N.J.S.A. 25:1-5. The fact the bank may not have executed the modification does not control.

As we disagree with defendant on the merits, we see no reason to further consider whether a stay should have been granted pending resolution of his cross-claims against the other defendants in a related action. Generally, the bank can proceed directly against a guarantor. Delaware Truck Sales, Inc. v. Wilson, 131 N.J. 20, 32-33, 618 A.2d 303 (1993); Summit Trust v. Willow Business Park, supra, 269 N.J. Super. at 445-46, 635 A.2d 992. In any event, we have been told that the premises have not yet been the subject of a foreclosure sale as plaintiff was, in fact, permitted to proceed only to one foreclosure sale and elected to proceed against Petracca (with whom it subsequently settled) and is awaiting this opinion before taking further action.

Affirmed.

[1] The case was originally submitted on May 3, 1994.

[2] In a certification defendant described Paparatto, who he "trusted ... implicitly," as "my long-standing and intimate friend and next-door neighbor" and "godfather of one of my children, my best man at my wedding, and ... related to me through marriage."

[3] Because of contested issues of fact, the trial judge "assume[d] that Pardo remained at all times only a guarantor and that Paparatto and Petracca fraudulently induced Pardo to execute the guaranty and mortgage." Great Falls Bank v. Pardo, supra, 263 N.J. Super. at 394, n. 3, 622 A.2d 1353. Despite execution of the January and November 1990 documents as principal, we will also proceed on that assumption principally because the Mortgage Modification and Extension Agreement expressly provided that

[t]his Agreement is intended by the parties to be an extension and renewal of the loan obligation of the Borrowers as set forth in the Note dated January 21, 1990 and obligation of Pardo under the Note and Guaranty Agreement dated June 8, 1988. It is not a termination or release of the existing loan obligation of the Borrowers or Pardo as Guarantor.

See Summit Trust Co. v. Willow Business Park, L.P., 269 N.J. Super. 439, 443-44, 635 A.2d 992 (App.Div.), certif. denied, 136 N.J. 30, 641 A.2d 1041 (1994).

[4] The 1990 pleadings were not submitted to us.

[5] There was no assertion that the attorney had a conflict of interest, did not represent defendant, or the like.

FORECLOSURE ARTICLE - BANKRUPTCY ATTORNEY IN HACKENSACK NEW JERSEY (201) 646-3333

 

EDWIN L. SIEGEL, Plaintiff-Appellant,
v.
LEONARD BLASUCCI, Defendant.No. A-0998-12T3.Superior Court of New Jersey, Appellate Division.

Argued September 11, 2013.Decided February 21, 2014.

Arnold G. Shurkin argued the cause for appellant.

Robert L. Grundlock, Jr., argued the cause for respondent Venkat Gourkanti (Rubin, Ehrlich & Buckley, P.C., attorneys; Mr. Grundlock, on the brief).

Before Judges Grall, Nugent and Accurso.

NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION

PER CURIAM.

Plaintiff Edwin L. Siegel appeals from the denial of his application pursuant to Rule 4:59-1(d)(1) for an order permitting the sale of real property for satisfaction of a judgment debt. The property he desired sold no longer belonged to the judgment debtor, Leonard Blasucci, but to Venkat Gourkanti, who acquired it from sellers who purchased the property at sheriff's sale following foreclosure of Blasucci's mortgage. We affirm.

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The essential facts are undisputed. Blasucci and his wife took title to the residential property in 1976. The Blasuccis gave a first mortgage to First Fidelity Bank in 1986 and a second mortgage to Washington Savings Bank in 1987. Washington Savings instituted a foreclosure action against the Blasuccis in May 1990 and obtained final judgment of foreclosure the following October. First Fidelity and Washington Savings subsequently assigned their mortgages to Martin Tave and the Sylvia T. Cohen Revocable Trust (Tave and Cohen). The property was sold at sheriff's sale in June 1994 to Tave and Cohen, who took subject to the First Fidelity mortgage which they held and subsequently discharged. Tave and Cohen conveyed the property to Gourkanti in October 1997.

Siegel did not obtain his default judgment against Blasucci until July 1992, almost two years after the entry of the foreclosure judgment. Siegel claims that his judgment, docketed in July 1992 and revived in November 2011, was a lien against Blasucci's real property that was not extinguished by the

October 1990 foreclosure judgment and subsequent sheriff's sale. He contends that either Washington Savings or Tave and Cohen was required to amend the foreclosure complaint to include him as a subsequent encumbrancer in order to bind him to the foreclosure judgment. We disagree.

We addressed this issue in Morsemere Fed. Sav. & Loan Ass'n v. Nicolaou, 206 N.J. Super. 637 (App. Div. 1986). Morsemere, a foreclosing mortgagee, obtained final judgment of foreclosure against Nicolaou. Id. at 640-41. After entry of the foreclosure judgment, DiPrima obtained a default judgment against Nicolaou. Id. at 641. DiPrima subsequently purchased the property at sheriff's sale. DiPrima then filed a motion to intervene in the foreclosure action and for payment of surplus funds. Ibid.

We held that a lien claimant such as DiPrima cannot be made a party to a foreclosure suit after entry of final judgment. Morsemere, supra, 206 N.J. Super. at 641-42. We reasoned that N.J.S.A. 2A:50-30, which operates to bind the holders of unrecorded interests existing at the filing of the foreclosure to the judgment and allows those holding such interests to intervene as of right upon recording, did not apply "because DiPrima's lien did not exist `at the time of the filing of the complaint' or even at the time the foreclosure judgment was entered." Ibid. Instead, we held that N.J.S.A. 2A:50-37 was controlling, and thus a creditor who obtains a money judgment subsequent to entry of the foreclosure judgment "may participate in any surplus after prior claiming lienholders (at the time of the foreclosure judgment) have been paid or satisfied." Morsemere, supra, 206 N.J. Super. at 642-43.

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Siegel, who obtained his judgment after Washington Savings obtained its foreclosure judgment against Blasucci, is in the same position as was DiPrima in Morsemere. The lien of his judgment only allowed him to participate in any surplus remaining after sheriff sale. The holding is in accord with the general rule "that surplus funds take on the character of the land, at least with respect to junior encumbrancers whose liens existed at the time of the foreclosure." Ibid.

Because Siegel's remedy was limited to participation in any surplus funds arising from the sheriff's sale, the trial court correctly denied his motion for sale of Gourkanti's property to satisfy Siegel's 1992 judgment against Blasucci. Siegel's remaining arguments relating to the priority of his judgment and the conduct of the sheriff's sale conducted in 1994 are without sufficient merit to warrant discussion in a written opinion. R. 2:11-3(e)(1)(E).

Affirmed.

CHAPTER 7 ARTICLE - BANKRUPTCY ATTORNEY IN NEW JERSEY 07601 - (201) 646-3333

114 A.3d 742 (2015)221 N.J. 501

Robert D. GASKILL and Kathleen Gaskill, h/w, Plaintiffs-Appellants,
v.
CITI MORTGAGE, INC., f/k/a Citicorp Mortgage, Inc., Defendant-Respondent.A-51 September Term 2013, 071804Supreme Court of New Jersey.

Argued April 13, 2015.Decided May 28, 2015.

Joseph M. Pinto argued the cause for appellants (Polino and Pinto, attorneys).

Mary Lynn McCaffrey argued the cause for respondent (Isabel L. Becker, attorney).

PER CURIAM.

This appeal arises from plaintiffs' complaint to cancel and discharge a creditor's judgment lien held by defendant Citi Mortgage, Inc. (Citi), following the conclusion of bankruptcy proceedings conducted pursuant to Chapter 7 of the United States Bankruptcy Code (Chapter 7), 11 U.S.C.A. §§ 701-784. In 1997, the Superior Court entered a default judgment in favor of Citi against plaintiffs, and by virtue of its docketing of that judgment, Citi obtained a lien on all of plaintiffs' real property in New Jersey. Four years later, plaintiffs instituted a Chapter 7 bankruptcy proceeding in the United States Bankruptcy Court. Because plaintiffs listed the law firm that had represented Citi, rather than Citi itself, in their Chapter 7 petition, the bankruptcy court did not provide notice of the proceeding to Citi. After the bankruptcy trustee abandoned two of plaintiffs' New Jersey properties, the bankruptcy court discharged plaintiffs' debt and closed their Chapter 7 case. Citi did not attempt to levy on plaintiffs' property at any time prior to the bankruptcy filing and did not seek to enforce its lien in the wake of plaintiffs' bankruptcy discharge.

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More than three years after the bankruptcy discharge, plaintiffs filed this action under N.J.S.A. 2A:16-49.1. That statute permits a debtor, whose debts have been discharged in bankruptcy, to apply to the state court that has entered a judgment against the debtor, or has docketed the judgment, for an order directing the judgment 743 to be canceled and discharged. N.J.S.A. 2A:16-49.1. The statute requires the debtor to wait at least a year following his or her bankruptcy discharge before seeking the cancellation and discharge of the judgment lien. Ibid. Pursuant to N.J.S.A. 2A:16-49.1, plaintiffs sought an order cancelling Citi's judgment lien on the two properties.

The trial court granted Citi's motion for summary judgment and dismissed plaintiffs' claim. The court acknowledged that a judgment creditor, such as Citi, who has not levied on the debtor's property prior to the debtor's filing of a bankruptcy petition, may enforce its valid lien following the bankruptcy discharge, but must do so within the year following the discharge. The court explained that if Citi did not enforce its lien within that period, its lien could be canceled pursuant to N.J.S.A. 2A:16-49.1. The trial court found, however, that Citi had not received notice of plaintiffs' Chapter 7 bankruptcy proceeding. It accordingly ruled that due process principles would be violated if Citi's judgment lien was canceled prior to the expiration of a year following the date upon which Citi belatedly learned of the bankruptcy proceedings and plaintiffs' attempt to cancel its lien. Consequently, the trial court equitably tolled the one-year period prescribed by the statute.

In a published opinion, the Appellate Division affirmed the determination of the trial court. Gaskill v. Citi Mortg., Inc., 428 N.J.Super. 234, 237, 52 A.3d 192 (App. Div.2012). The panel concluded that the Citi judgment lien was subject to discharge or release in plaintiffs' bankruptcy proceedings and was consequently subject to cancellation pursuant to N.J.S.A. 2A:16-49.1. Id. at 242-43, 52 A.3d 192. The panel agreed with the trial court that Citi had not received the required actual notice of the bankruptcy petition or the bankruptcy discharge obtained by plaintiffs. Id. at 245-46, 52 A.3d 192. It held that N.J.S.A. 2A:16-49.1 was drafted on the assumption that any creditor subject to its terms had received notice of the bankruptcy proceeding. Ibid. The panel ruled that the trial court's remedy of equitable tolling of the one-year waiting period prescribed by N.J.S.A. 2A:16-49.1 was proper. Id. at 245, 52 A.3d 192. We granted certification. 217 N.J. 52, 84 A.3d 601 (2014).

We affirm, substantially for the reasons stated by the Appellate Division. We add only brief comments with respect to the decision of the United States Court of Appeals for the Third Circuit in Judd v. Wolfe, 78 F.3d 110 (3d Cir.1996), upon which plaintiffs substantially rely in their argument before this Court. For the reasons that follow, we consider Judd to address a procedural question of federal bankruptcy law that is distinct from the issue raised by this appeal and accordingly find that it does not support plaintiffs' argument.

In Judd, the Third Circuit did not consider the issue raised by this case: the effect of a debtor's failure to provide notice to a creditor of a Chapter 7 bankruptcy petition on the debtor's right to cancel a judgment lien under state statutory law. Instead, the court considered the procedural requirements imposed by federal bankruptcy law, following the closing of the bankruptcy case, on a debtor who has failed to list a claim on the schedule of creditors submitted in a Chapter 7 no-asset case in which no bar date has been set. Id. at 111. The Third Circuit held that such a debtor is not required to file a motion to reopen the bankruptcy case, pursuant to 11 U.S.C.A. § 350(b), in order to discharge the debt that had been omitted from the schedule, unless one or more 744 of the statutory exceptions to discharge applied. Ibid.^[1]

In support of its holding, the Third Circuit pointed to the text of 11 U.S.C.A. § 727(b), which provides that "[e]xcept as provided in section 523 of this title, a discharge . . . discharges the debtor from all debts that arose before the date of the order for relief under this chapter." 11 U.S.C.A. § 727(b); Judd, supra, 78 F.3d at 113-14. The court explained that 11 U.S.C.A. § 523 provides that the only situation in which a debt is not discharged is if it was "`[n]either listed nor scheduled ... in time to permit ... timely filing of a proof of claim.'" Judd, supra, 78 F.3d at 114 (quoting 11 U.S.C.A. § 523(a)(3)(A)). The Third Circuit further noted that "[b]ecause [the case before it] is a `no-asset' Chapter 7 case, the time for filing a claim has not, and never will, expire unless some exempt assets are discovered; thus, section 523(a)(3)(A) cannot be applied" to prevent the discharge of an unlisted debt in a no-asset case. Ibid. The court held that such an unscheduled debt is discharged even if that discharge may disadvantage or prejudice the unlisted creditor. See id. at 113 n. 6, 115, 116 n. 13. "In a case where there are no assets to distribute," the creditor's "right to file a proof of claim is a hollow one," because "[a]n omitted creditor who would not have received anything even if he had been originally scheduled, [is] not ... harmed by omission from the bankrupt's schedules and the lack of notice to file a proof of claim." Id. at 115. Accordingly, the Third Circuit reasoned, the failure to give notice to the creditor in the bankruptcy proceeding could not affect that creditor's position, because there were no assets in any event. Ibid.

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The Third Circuit acknowledged, however, that in a bankruptcy case that involves assets, the debt of an unnoticed creditor is not discharged unless that creditor received notice in time to file a proof of claim. See id. at 114-15. Moreover, any intentional tort debt is not discharged unless the creditor received notice in time to file a complaint pursuant to 11 U.S.C.A. § 523(c). See id. at 114 n. 9.

The circumstances of this case stand in contrast to the no-asset setting of Judd, in which action taken by the creditor in the bankruptcy proceedings would have been futile even if it had received timely notice of the bankruptcy petition and the subsequent discharge. As noted by the trial court and the Appellate Division, had Citi received notice of the bankruptcy petition and discharge in this case, it would have been in a position to enforce its lien during the year following the bankruptcy discharge, as permitted by N.J.S.A. 2A:16-49.1. Gaskill, supra, 428 N.J.Super. at 243-44, 52 A.3d 192. The notice that was omitted in this case would not have been meaningless, as it was in the no-asset, no-bar date setting of Judd. Instead, timely notice would have enabled the creditor to take action within the time limitation of N.J.S.A. 2A:16-49.1 to protect its interest in the real property at issue.

Accordingly, the Third Circuit's holding in Judd does not address the due process argument that was raised by the debtor in this case: whether notice to a creditor of a 745 Chapter 7 bankruptcy proceeding and discharge constitutes a prerequisite to the cancellation and discharge of a judgment under N.J.S.A. 2A:16-49.1. We concur with the Appellate Division's conclusion that such notice is required before a debtor may invoke the protection of N.J.S.A. 2A:16-49.1, and that equitable tolling was an appropriate remedy in the circumstances of this case.

The judgment of the Appellate Division is affirmed.

For affirmance—Chief Justice RABNER and Justices LaVECCHIA, PATTERSON, FERNANDEZ-VINA and Judge FUENTES (temporarily assigned)—5.

Not participating—Justice ALBIN and SOLOMON—2.

Opposed—None.

[1] Subsections (a)(2), (a)(4), and (a)(6) of 11 U.S.C.A. § 523 exempt from discharge "debts incurred by false pretenses, false representation or actual fraud ... (523(a)(2)); debts incurred by fraud or defalcation while acting as a fiduciary ... (523(a)(4)); and debts for willful and malicious injury ... (523(a)(6))." Id. at 114 (internal quotation marks omitted). The Third Circuit explained that "[i]f the debt at issue is not a debt described under section 523(a)(2), (4) or (6), the debt has been discharged by virtue of section 727(b), whether or not it was listed. If, however, the debt is a debt that falls under sections 523(a)(2), (4) or (6), the debt is not discharged by virtue of section 523(a)(3)(B)." Id. at 115.

BANKRUPTCY ARTICLE - ATTORNEY IN HACKENSACK NEW JERSEY (201) 646-3333

 

MONEY ISLAND MARINA, LLC, Plaintiff-Appellant,
v.
ROGER MAURO and LOIS MAURO, their heirs, devisees, and personal representatives, and his, her, their, or any of their successors in right, title, and interest, Defendants-Respondents.

No. A-2950-14T3.

Superior Court of New Jersey, Appellate Division.

Submitted April 19, 2016.Decided April 25, 2016.

Terance J. Bennett, attorney for appellant.

The D'Elia Law Firm LLC, attorneys for respondents (Teresa M. Lentini, on the brief).

Before Judges Fisher and Espinosa.

NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION

PER CURIAM.

In this appeal, plaintiff Money Island Marina, LLC (MIM) argues that the findings made by the trial judge in dismissing its claims at the conclusion of a bench trial were either based on erroneous legal rulings or were contrary to the weight of the evidence. Finding no error, we affirm.

The issues posed in this civil action are limited and discrete. MIM, a limited liability company ostensibly controlled by Tony Novak (Novak),^[1] seeks a declaration, by way of this quiet title action, that defendant Lois Mauro's mortgage on the property should be invalidated or have no further impact on its ownership rights. MIM argues, however, that the case should be considered in light of other circumstances, some of which have been resolved in other proceedings. That is, MIM contends that defendant Roger Mauro (Mauro) assaulted Novak by vehicle in 2006 and that this circumstance, and the resulting personal injury action he commenced, should have been more fully considered in the disposition of this quiet title action. We described the vehicular assault allegations in earlier opinions in a criminal matter commenced against Mauro.^[2] In or about 2008, Novak brought a personal injury action against Mauro.^[3]

Of greater relevance to the matter at hand is the fact that in 1995, Mauro purchased a marina in Downe Township and then, on December 12, 2008, sold the marina to Joseph Acosta for $425,000, receiving more than $100,000 in cash and a purchase money mortgage to secure repayment of a note payable to Mauro from Acosta of the principal amount of $313,000.

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Acosta filed a Chapter 7 bankruptcy proceeding on February 28, 2011, and, on April 2, 2012, Mauro assigned the Acosta mortgage to his mother, defendant Lois Mauro (Lois). Lois, as assignee of the mortgage, filed a proof of claim in the Acosta bankruptcy matter on October 16, 2012.

At a hearing in bankruptcy court on November 13, 2012, Novak bid $12,000 to purchase the marina. When the bankruptcy judge asked Novak if he understood the marina is "subject to the mortgage that's on the property," Novak responded, "Yes." An order entered by the bankruptcy court on November 26, 2012, confirmed the sale of the marina to Novak "or his assignee" for $12,000 "subject to all liens, mortgages and encumbrances on the real estate." The next day, the bankruptcy trustee executed a quitclaim deed in MIM's favor; the deed acknowledged that the grantor had made "no promises as to ownership or title, but simply transfers whatever interest the [g]rantor [i.e., the trustee] has to the [g]rantee [i.e., MIM]." This recitation is in accord with what it means to convey a property interest by quitclaim deed. See N.J.S.A. 46:5-3. The quitclaim deed was recorded on December 12, 2012. On May 16, 2013, the bankruptcy court granted the trustee's motion to expunge Lois's proof of claim in light of the fact that the mortgage remained attached to the property transferred to MIM.

On February 14, 2013, MIM, as the assignee of the marina purchased by Novak through the bankruptcy court, filed this quiet title action. A few months later, Novak's personal injury action against Mauro settled; Novak received $5000, and Mauro obtained a general, unconditional release of Novak's claims. Lois commenced an action seeking to foreclose her mortgage on the marina.

MIM's quiet title action and Lois's foreclosure action were both the subject of a single bench trial conducted over the course of two days. The trial judge rightfully expressed in her written opinion that "[t]here is something very odd about this litigation and the manner in which the parties have pursued or defended against claims." For example, MIM claimed that Novak's settlement of the personal injury action somehow provided MIM with ownership of the marina free of the mortgage; however, as the judge observed, the release that memorialized the settlement contains no such condition or agreement, and the judge found no other evidence to support MIM's contention.^[4] And, while Novak may have thought, as the judge stated, that he had "outwitt[ed] the Mauros by outbidding them at the bankruptcy hearing" for the marina, the bankruptcy record clearly demonstrates that the interest in the marina which Novak purchased was taken subject to Lois's mortgage. The judge's findings also demonstrate that Roger's assignment of the mortgage to Lois was supported by adequate consideration; she noted that Mauro's financial circumstances had long been troubled by Acosta's failure to make the monthly payments required by the note and mortgage, as well as his many other legal matters, including those involving Novak, resulting in Lois providing Mauro with $200,000 for his support, for which she was compensated by assignment of the mortgage. The judge's findings, based upon what is both clearly demonstrated by the various documents and transcripts emanating from the bankruptcy proceeding and the personal injury settlement, as well as by the judge's careful assessment of the credibility of the many witnesses, are entitled to our deference. Rova Farms Resort Co. v. Inv'rs Ins. Co. of Am., 65 N.J. 474, 483-84 (1974); Stephenson v. Spiegle, 429 N.J. Super. 378, 382 (App. Div. 2013).

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Accordingly, with these few comments, we affirm the dismissal of the quiet title action substantially for the reasons set forth by Judge Anne McDonnell in her well-reasoned written decision.^[5]

Affirmed.

[1] To add to some of the confusion about the underlying circumstances, the actual owner of MIM has not been adequately disclosed. At his deposition, Novak asserted he is MIM's "authorized representative," but he denied knowledge about the identity of the owners, saying: "[w]e are trying to figure it out. We do have a dispute and I do not know." Upon further questioning, he identified one of the disputed owners as his stepson and disclosed without clarity that other members "have since abandoned" ownership or otherwise "disavow[ed] and resign[ed]."

[2] On February 21, 2013, we reversed the trial court's dismissal of the criminal prosecution, finding no violation of Mauro's speedy trial rights. State v. Mauro, No. A-4950-11 (App. Div. Feb. 21, 2013). The Supreme Court later remanded for our reconsideration in light of State v. Cahill, 213 N.J. 253 (2013), but we again came to the same conclusion. State v. Mauro, No. A-4950-11 (App. Div. June 10, 2014).

[3] The date the personal injury complaint was filed is not disclosed in the record on appeal. The filing date, however, is not particularly relevant; we assume the complaint was filed in 2008 because of its docket number.

[4] Indeed, Mauro was no longer the owner of the mortgage; it had been assigned to Lois well before Novak and Mauro settled the personal injury action. The mortgage was not something available to Mauro to negotiate with.

[5] By way of the same written decision, the judge determined that the answer and counterclaim filed by Novak and MIM in Lois's foreclosure action were non-contesting. Consequently, the judge referred the matter to the Office of Foreclosure for entry of final judgment, subject to any dispute about the amount of the judgment or MIM's right to a fair market credit or other equitable relief. MIM does not present an argument here regarding the judge's disposition of the foreclosure issues; indeed, MIM correctly recognizes that, until entry of final judgment in the foreclosure action, it has no right to file a notice of appeal in that regard.