United States District Court, E.D. Pennsylvania
In the Matter of James Albert D'ANGELO, Sr., and Carolyn Marie D'Angelo.
[Copyrighted Material Omitted]
[Copyrighted Material Omitted]
David A. Scholl, Newtown Square, PA, for Plaintiffs.
Anne Marie Aaronson, Philadelphia, PA, for Defendant.
DuBOIS, District Judge.
This is a bankruptcy appeal. Debtors James Albert D'Angelo, Senior, and Carolyn Marie D'Angelo (collectively, " debtors" ) appeal from a decision of the United States Bankruptcy Court for the Eastern District of Pennsylvania granting in part J.P. Morgan Chase Bank, N.A.'s ("JPM" ) Motion to Dismiss, permissively abstaining from certain of debtors' claims, and denying the Motion of Debtors for a Preliminary Injunction. For the following reasons, the Court affirms the rulings of the Bankruptcy Court.
The facts of the case have been previously set forth in the opinions of the Bankruptcy Court. See In re D'Angelo, Bankr.No. 11-14926-MDC, Adv. No. 11-00744-MDC, 2012 WL 27541 (Bankr.E.D.Pa. Jan. 5, 2012) (granting motion for fees and costs); In re D'Angelo, 475 B.R. 424 (Bankr.E.D.Pa.2012) (dismissing amended complaint in part, abstaining in part, and denying motion for preliminary injunction). Further, this Court has previously recounted such facts in detail in its Memorandum dated August 7, 2012, and repeats those facts only as necessary to resolve the issues presently before the Court.
A. Proceedings Leading to Appeal
This bankruptcy proceeding arises from a dispute regarding property previously owned by debtors in Doylestown, Pennsylvania, on which JPM sought to foreclose in state court. Debtors James D'Angelo, Senior (" Mr. D'Angelo" ) and Carolyn D'Angelo (" Mrs. D'Angelo" ) previously owned real estate located at 102 Pickwick Drive in Doylestown, Pennsylvania (" Doylestown property" ). In re D'Angelo, 2012 WL 27541, at *1. A mortgage on the Doylestown property, dated August 11, 2005, secured a note of $1,462,500. Id. Through a series of assignments, JPM became the mortgage holder and, on July 3, 2006, filed a foreclosure action in the Court of Common Pleas of Bucks County (" Court of Common Pleas" or the " state court" ),
J.P. Morgan Chase Bank National Association v. D'Angelo et al., Civil Action No.2006-6047 (" Foreclosure action" ). Id.
Debtors opposed the foreclosure proceedings, asserting that the mortgage and note were invalid because they were forged. Id. Specifically, according to debtors, James D'Angelo, Junior— Mr. D'Angelo's son, hereinafter " D'Angelo Junior" — obtained a mortgage for $1.5 million with the help of an unscrupulous mortgage lending agent who was later indicted for mortgage fraud. D'Angelo Junior allegedly forged Mr. D'Angelo's name and arranged for a friend to forge Mrs. D'Angelo's name. D'Angelo Junior, according to debtors, then " traded" the $1.5 million mortgage for a second mortgage of $1.88 million. JPM sought to foreclose on the second mortgage. Debtors sought a declaratory judgment in the Court of Common Pleas, asking that court to hold that the mortgage was " invalid, void, or otherwise unenforceable" due to D'Angelo Junior's forgery. Id. The declaratory judgment case, D'Angelo et al. v. JP Morgan Chase Bank, N.A., et al., Civ. Action No.2007-00041-26-1, was consolidated with the foreclosure action in Civil Action Number 2006-6047 in the Court of Common Pleas.
On April 11, 2011, the Court of Common Pleas granted partial summary judgment to JPM and imposed an equitable lien of $1,339,387.30 against the Doylestown property (" equitable lien" ). The Court of Common Pleas ordered debtors to " confirm" the equitable lien within ten days " by executing an amended and restated note and mortgage effective [August 11, 2005] on the same terms and conditions as the August 11, 2005 Note and Mortgage assigned to" JPM. Docket Entries, J.P. Morgan Chase Bank Nat'l Ass'n v. D'Angelo et al., Civ. No.2006-6047 (Bucks Cnty. Ct. Com. Pl.) (hereinafter " CCP Docket Entries" ). Debtors failed to do so, and, on June 22, 2011, JPM filed a motion in the Court of Common Pleas seeking to hold debtors in contempt for their noncompliance. (CCP Docket Entries.)
That same day, Debtors filed a Chapter 13 bankruptcy petition in the United States Bankruptcy Court for the Eastern District of Pennsylvania. In re D'Angelo, 2012 WL 27541, at *1. That proceeding was later converted to Chapter 11, with the debtors asserting the rights of a Bankruptcy Trustee as " debtors-in-possession."  Id. at *1 n. 1. The filing of the bankruptcy petition automatically stayed enforcement of the equitable lien. See 11 U.S.C. § 362(a). According to the Bankruptcy Court, debtors' counsel " has freely admitted that the [d]ebtors filed for bankruptcy in order to avoid the adjudication of their claims against J.P. Morgan by the Bucks County Court." In re D'Angelo, 475 B.R. at 441.
JPM responded by filing a Motion for Relief from Stay in the Bankruptcy Court on July 7, 2011, seeking permission to enforce the equitable lien.
In re D'Angelo, 2012 WL 27541, at *1. The Bankruptcy Court held an evidentiary hearing on the Motion for Relief from Stay on August 4, 2011, and, at the conclusion of the hearing, granted JPM relief from the automatic stay to seek enforcement of the equitable lien in the Court of Common Pleas.
After the Bankruptcy Court lifted the automatic stay, the Court of Common Pleas held a hearing on October 31, 2011, at which debtors were ordered to execute an amended mortgage and note to comply with that court's April 11, 2011, order. In re D'Angelo, 475 B.R. at 435. At a hearing on January 12, 2012, the Court of Common Pleas " determined that the [d]ebtors had not complied with its Lien Order and found the [d]ebtors to be in willful contempt of that order." Id. That court " awarded J.P. Morgan $4,000.00 in fees and costs plus a $100 penalty for each day after January 12, 2012, that the [d]ebtors failed to comply with the Lien Order." Id. A sheriff's sale of the Doylestown property was scheduled for June 8, 2012. Id. 
On April 9, 2012, debtors filed an Amended Complaint in Bankruptcy Court, in which they sought to invalidate JPM's interests in the Doylestown property and to avoid the equitable lien, pursuant to 11 U.S.C. § 544(a) and (b). Id. at 430. This filing, along with others, began the instant Adversary Case Number 12-301. On April 15, 2012, debtors filed a Motion for Preliminary Injunction, asking the Bankruptcy Court to enjoin the sheriff's sale scheduled for June 8, 2012. Id. at 429.
The Bankruptcy Court held an evidentiary hearing to address the Motion for Preliminary Injunction on May 8, 2012, and took the matter under advisement. Id. Before the Bankruptcy Court could rule, on May 31, 2012, the Court of Common Pleas granted debtors a stay of the sheriff's sale until September 14, 2012. Id. at 428. The Bankruptcy Court held a hearing on June 5, 2012, to address JPM's Motion to Dismiss Adversary Case Number 12-301. At the conclusion of the hearing, the Bankruptcy Court ruled from the bench, granting in part JPM's Motion to Dismiss and denying Debtors' Motion for a Preliminary Injunction. Id. at 429. On
July 19, 2012, the Bankruptcy Court issued a Memorandum amplifying the reasons for its oral rulings. See id. Noting that it was " concerned that [the] adversary proceeding constitute[d] continued and unrepentant gamesmanship by the [d]ebtors," the Bankruptcy Court held, inter alia, that it would invoke the permissive abstention doctrine and decline to rule on debtors' claims regarding the validity of the mortgage. Id. at 441. It also held, inter alia, that it could not invalidate the equitable lien under the Rooker-Feldman doctrine because the state court had decided ...