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In Re Kristi E. Dimogerodakis, Debtor(S v. Kristi E. Dimogerodakis

April 11, 2011


On Appeal from: Bankruptcy Case No. 04-23833 (DHS)

The opinion of the court was delivered by: Katharine S. Hayden, U.S.D.J.




Saxon Mortgage Servicing, Inc. ("Saxon" or "appellant") brings this appeal of the Bankruptcy Court‟s order of August 2009 denying its cross-motion to reinstate/re-open a Chapter 13 bankruptcy proceeding. Saxon, the servicing agent for Deutsche Bank Trust Company Americas ("Deutsche Bank"), had argued that the debtor in the bankruptcy proceeding, Kristi Dimogerodakis ("debtor" or "appellee"), was unjustly enriched by Saxon‟s payment of $59,132 in real estate taxes and insurance costs following a foreclosure judgment on Dimogerodakis‟ property in Morristown, New Jersey. Judge Donald H. Steckroth, U.S.B.J. ("Judge Steckroth" or "Bankruptcy Court"), heard oral argument on the cross-motion in June 2009, reserving judgment. In a written opinion issued on August 13, 2009 ("Op."), the Bankruptcy Court denied Saxon‟s motion, finding no cause to reopen. Saxon now appeals, arguing, inter alia, that the Bankruptcy Court committed reversible error of law. For the reasons stated herein, this Court denies Saxon‟s appeal and affirms the decision.

Dimogerodakis did not oppose Saxon‟s appeal.*fn1 The Court has jurisdiction pursuant to 28 U.S.C. § 158.

Background and Procedural History:

Dimogerodakis filed for Chapter 13 bankruptcy in the District of New Jersey on April 22, 2004. (Op. at 4.) In an October 31, 2007 order, the Bankruptcy Court authorized the sale of the real property to Nicholas Dimogerodakis. (Order of the Bankruptcy Ct. Authorizing Sale of Property, October 31, 2007 ("Sale Order") at 2.) The sale order stated that, "upon payment of the sum of $368,455 by the Chapter 13 Trustee, the secured claim of Saxon Mortgage Services, Inc., which is based on the foreclosure judgment that merged with the mortgage of Deutsche Bank. . . shall be satisfied in full." (Id.) The Sale Order further stated that, "when the above referenced funds are received by Saxon, it shall, within 30 days, issue a Warrant of Satisfaction for its foreclosure judgment, a Discharge of its Lis Pendens, a Dismissal of its Foreclosure Action and a Discharge of its Mortgage" and that "the Chapter 13 Plan shall be paid in full." (Id.)

Under the Federal Rules of Bankruptcy Procedure, Saxon had "at least five days" to object to the proposed sale of the property, but it did not. (Op. at 11.) Nor did Saxon appeal the Bankruptcy Court‟s Sale Order. (Id.)

On November 30, 2007, the Chapter 13 trustee issued a final report and sent a payoff check to Saxon for $368,455, along with a letter advising that the check "represents the balance due" to Saxon" (Op. at 4.) The trustee also sent Dimogerodakis a letter on December 4, 2007, stating that, "you have successfully paid off your Chapter 13 Plan." (D.E. 5, App. at 127.) Saxon made no objection to the trustee‟s final report, but did not cash the pay-off check or issue the required documents, including a warrant of satisfaction for its foreclosure judgment. (Op. at 11-12.) The Bankruptcy Court issued a second order directing Saxon to comply with the Sale Order, but Saxon did not. (Id.) Saxon also did not respond to a March 6, 2008 letter from Dimogerodakis‟ counsel informing Saxon that it had not complied with sale Order and that the un-cashed payoff check had become stale-dated. (D.E. 5, App. at 132.) Nor did Saxon respond to a March 19, 2008 email from the Trustee requesting an immediate update. (D.E. 5, App. at 136)

On April 1, 2008, Dimogerodakis filed a motion to enforce the Bankruptcy Court‟s Sale Order and hold Saxon in contempt for failing to comply with its terms. (Op. at 3.) On April 16, 2008, Saxon filed a cross-motion to "reinstate/reopen, if necessary, bankruptcy proceeding for the limited purpose to compel the debtor to reimburse Saxon Mortgage for Escrow Advances." (Saxon‟s Cross-Mot. ("Cross-Mot."))(emphasis added.) Saxon‟s cross-motion sought to compel Dimogerodakis to reimburse it for the $59,132 in escrow advances it made for payment of real estate taxes and hazard insurance while the bankruptcy case was pending.*fn2 (Cross-Mot. at 7.) Saxon argued that, under the Chapter 13 plan, Dimogerodakis was responsible for paying the taxes and insurance costs for the Morristown property, but had failed to do so, and therefore Saxon was entitled to recover the escrow advances it made under a theory of quasi-contract or unjust enrichment. (Id. at 10-11.) Saxon also noted that, if it had not made the payments, then Dimogerodakis would have been required to do so at the closing on the property. (Id.)

At oral argument before Judge Steckroth in June 2009 on its cross-motion, Saxon contended for the first time that it had never consented to the Sale Order. (Op. at 11.) Also for the first time, Saxon offered a theory for recovery of the escrow advances based on a previous order of the Bankruptcy Court order that pre-dated the Sale Order and provided in part that the "parties had to agree on the payoff because the basis of the plan was to pay off the final judgment of foreclosure." (Tr. or Oral Argument, June 10, 2009 ("Tr."), D.E. 5, Attach. 2 at 5:20-22.)

a. Judge Steckroth's Opinion Denying Saxon's Cross-Motion:

Judge Steckroth denied Saxon‟s cross-motion to reopen on several grounds. He noted that under the merger doctrine, which is followed by New Jersey courts, "once a foreclosure judgment is obtained, "the mortgage is merged into the final judgment of foreclosure and the mortgage contract is extinguished.‟" (Op. at 6)(quoting In re Roach, 824 F.2d 1370, 1377 (3d Cir. 1987)). As a consequence, a foreclosure judgment itself "provides the amount needed to satisfy the mortgage." (Op. at 6.) In Dimogerodakis‟ case, ...

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