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Clair v. Beneficial Mortgage Company

July 25, 2000

IN RE: DONALD F. ST. CLAIR AND KAREN M. ST. CLAIR, DEBTORS.
DONALD F. ST. CLAIR AND KAREN M. ST. CLAIR, APPELLANTS,
v.
BENEFICIAL MORTGAGE COMPANY, D/B/A BENEFICIAL NEW JERSEY, INC., AND FIRST UNION MORTGAGE CORPORATION, APPELLEES.



The opinion of the court was delivered by: Cooper, District Judge

FOR PUBLICATION

MEMORANDUM OPINION

This matter comes before the Court on an appeal by Donald and Karen St. Clair ("appellants" or "debtors") from an Order of the bankruptcy court dated October 15, 1999, which, inter alia, granted prospective relief from the automatic stay, and an Order dated December 2, 1999, denying appellants' motion for reconsideration and a stay pending appeal (collectively the "Orders"). The Orders provide that any future bankruptcy filed by the debtors would not impose an automatic stay of efforts by Beneficial Mortgage Company, d/b/a Beneficial New Jersey, Inc. ("Beneficial") to recover possession of real property located at 2625 Fenimore Road, Hainesport, New Jersey (the "Property"), which was owned by the debtors before Beneficial purchased the Property at a foreclosure sale. Appellants seek reversal of the Orders because the bankruptcy court's granting of prospective relief to Beneficial was inconsistent with the bankruptcy court's prior oral ruling denying such relief. The Court will dismiss the debtors' appeal because the debtors' lack of a property interest in, or a good-faith, colorable claim to possession of, the Property renders the appeal moot. *fn1

In addition, the debtors have brought a motion for sanctions against Beneficial, Beneficial's attorney Laura Scurko, Esq. and her firm Ward & Associates, (Mot. for Sanctions filed 5-4-00), and a motion for contempt of court, fraud and/or sanctions against First Union Mortgage Corporation, Central Mortgage Co., their attorneys, Harold N. Kaplan, Esq., Rosemary Diamond, Esq., and Jennifer Scanlon, Esq., and their law firm, Federman and Phelan, P.C., (Mot. for Contempt of Ct.; Fraud and/or Sanctions filed June 23, 2000.) The Court will dismiss the motions without prejudice because the Court lacks subject matter jurisdiction over the issues raised in the motions.

BACKGROUND

The Debtors were the owners of the Property and have lived there for approximately thirty years. (Reply to Def./Appellee's Mot. to Dismiss Appeal filed 4-3-00 ("Appellant's Reply") Ex. D: Aff. in Supp. of Mot. for Emergency Stay Pending Decision ¶ 5; Br. in Opp'n to Appeal ("Appellee's Br. in Opp'n") at 5.) Beneficial held a second mortgage on the Property and obtained a Final Judgment of foreclosure (the "Foreclosure Judgment") against the Property in the Superior Court of New Jersey (the "State Court") on December 9, 1996. (Certif. in Opp'n to Appeal filed 4-24-00 ("Scurko Certif.") Exs. A: Foreclosure Judgment and C: Sheriff's Deed dated 10-5-98 ("Deed").) The debtors moved before the State Court to vacate the Final Judgment, which motion was denied on January 31, 1997. (Id. Ex. B: Order Den. Vacation of Default J.) A sheriff sale of the Property took place on September 24, 1998, and Beneficial was the successful bidder. (Deed.) The Debtors unsuccessfully objected to the sale in the State Court, (Certif. in Opp'n to Debtor's Mot. to Recons. Order Vacating the Stay and in Supp. of Prospective Relief dated 11-12-99 ¶ 3; Scurko Certif. Ex. D: Order Den. Mot. for the Hr'g of an Objection to the Sale filed 11-20-98), and Beneficial received a Sheriff's Deed for the Property on October 5, 1998. (Deed.)

On February 11, 1999, Beneficial obtained a Writ of Possession from the State Court declaring that the debtors have unlawfully deprived Beneficial of possession of the Property and requiring the Burlington County Sheriff to place Beneficial in possession of the Property without delay. (Scurko Certif. Ex. E: Writ of Possession.) On March 15, 1999, Beneficial obtained an Order to Post Writ of Possession because the Burlington County Sheriff was unable to personally serve the Writ of Possession on the debtors. (Id. Ex. F: Order to Post Writ of Possession.) The Writ of Possession was posted and an eviction of the debtors was scheduled by the Burlington County Sheriff for May 17, 1999. (Appellee's Br. in Opp'n at 6.)

On May 14, 1999, the debtors filed a Chapter 13 bankruptcy petition with the United States Bankruptcy Court for the District of New Jersey. (Bankruptcy docket sheet ("Docket").) On May 21, 1999, Beneficial moved for relief from the automatic stay. (Id.) Beneficial's motion was denied by the bankruptcy court on July 28, 1999. (Id.) On August 13, 1999, Beneficial moved for reconsideration of the July 28, 1999 decision. (Id.) Beneficial's motion was granted at a hearing on October 13, 1999, and the automatic stay was vacated as to Beneficial. (Id.; Order Vacating the Automatic Stay as to Real Property and Grant. Prospective Relief filed 10-15-99 ("10-15-99 Order"); Tr. of 10-13-99 Hr'g ("10-13-99 Tr.").) At the hearing, the bankruptcy judge orally denied Beneficial's request for prospective relief, (10-13-99 Tr.), but the signed Order that was later entered by the bankruptcy court included prospective relief, (10-15-99 Order). The Order provides that any future bankruptcy filed by the debtors would not impose an automatic stay of efforts by Beneficial to recover possession of the Property.

The debtors had moved for reconsideration of the bankruptcy judge's decision on 10-25-99, prior to receiving a copy of the signed Order. (Docket, Tr. of 12-1-99 Hr'g ("12-1-99 Tr.").) Beneficial and the debtors first learned that Beneficial had been granted prospective relief from the automatic stay during the hearing on the debtors' motion for reconsideration on December 1, 1999, when the attorney for Beneficial requested a copy of the prior Order. (Appellee's Br. in Opp'n at 6.) The bankruptcy court responded that the Order had gone out and that prospective relief had been granted. (12-1-99 Tr. at 15-16.) When the debtors reminded the judge that she had orally denied such relief, the judge stated, "If you want to get that changed, you've got to do something." (12-1-99 Tr. at 16.) The debtors' motion for reconsideration was denied. (Tr. of 10-13-99 Hr'g ("10-13-99 Tr."); Order Den. Mot. or Application for the Entry of an Order for Stay Pending Appeal and for Recons. filed 12-2-99 ("12-2-99 Order").)

Following argument on the debtors' motion for reconsideration, the bankruptcy court dismissed the debtors' case because the debtors no longer had an interest in the Property. (Id. at 13-14.) On December 7, 1999, Beneficial obtained an Order from the State Court ordering the Burlington County Sheriff to post an alias writ of possession at the Property. (Appellants' Reply Ex. E: Order to Post Alias Writ of Possession.) On December 13, 1999, the debtors filed the within appeal. (Notice of Appeal filed 12-13-99.) On February 24, 2000, the debtors moved before the State Court for an emergency stay pending this Court's resolution of the debtors' appeal. (Id. Ex. D: Notice Concerning Mot. to Vacate J. and Sale per NJRCP 4:50-1(b)(c) and (f) and Emergency Stay Pending Decision as per NJRCP 4:52-6.) On February 25, 2000, the State Court granted the debtors' motion. (Scurko Certif. Ex. G: Order for Emergency Stay.) The debtors are still in physical possession of the Property.

DISCUSSION

Beneficial opposes the debtors' appeal, arguing that the appeal is moot because the debtors no longer have an interest in the Property. The Bankruptcy Code stays any act to obtain possession of property of, or from, the estate. See 11 U.S.C. § 362(a)(3). If Beneficial's acts to take possession of the Property would not be acts to take possession of property of, or from, the debtors' estate upon the debtors' refiling for bankruptcy, then the debtors' appeal would be moot because the automatic stay would not stay Beneficial's actions with respect to the Property.

It is well settled that "federal courts are without power to decide questions that cannot affect the rights of litigants in the case before them." North Carolina v. Rice, 404 U.S. 244, 246 (1971) (citing Oil Workers Unions v. Missouri, 361 U.S. 363, 367 (1960)). The federal judiciary's inability to "review moot cases derives from the requirement of Article III of the Constitution under which the exercise of judicial power depends upon the existence of a case or controversy." DeFunis v. Odegaard, 416 U.S. 312, 316 (1974) (quotation and citations omitted); see also Powell v. McCormack, 395 U.S. 486, 496 n.7 (1969) (citations omitted) ("The rule that this Court lacks jurisdiction to consider the merits of a moot case is a branch of the constitutional command that the judicial power extends only to cases or controversies.").

Thus, to be cognizable in federal court, an action must be definite and concrete, and must touch the legal relationship between adverse parties. The case must be a "real and substantial controversy admitting of specific relief through a decree of a conclusive character, as distinguished from an opinion advising what the law would be upon a hypothetical state of facts." Rice, 404 U.S. at 246 (quoting Aetna Life Ins. Co. v. Haworth, 300 U.S. 227, 240-41 (1937)). Therefore, a case is moot if the questions ...


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