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In re Moisuc

United States District Court, E.D. Pennsylvania

June 19, 2017

IN RE GEORGETTE M. MOISUC

          ORDER

          SLOMSKY, J.

         I. INTRODUCTION

         On February 2, 2015, Debtor Georgette M. Moisuc, proceeding pro se, filed a petition for relief under Chapter 7 of the United States Bankruptcy Code in the United States Bankruptcy Court for the Eastern District of Pennsylvania. On July 9, 2015, Debtor appealed to this Court an Order of the Bankruptcy Court signed by Bankruptcy Judge Jean K. Fitzsimon. The Order granted the Chapter 7 Trustee's Motion to Approve a Compromise under Rule 9019 of the Federal Rules of Bankruptcy Procedure[1] (the “9019 Motion”). (Doc. No. 1.) After considering the briefs of the parties and the record on appeal, the Court will affirm the Bankruptcy Court's Order which approved the compromise under Rule 9019.

         II. BACKGROUND

         A. The Loan

         The Debtor, Georgette M. Moisuc, and her husband, Vladimir Moisuc, owned real property as tenants-by-the-entireties located at 106 Deep Dene Road, Villanova, Radnor Township, Delaware County, Pennsylvania (the “Premises”). (Doc. No. 6 at 7 ¶ 6.) On September 21, 2004, New Century Mortgage Corporation (the “Lender”) extended a loan in the amount of $660, 000 (the “Loan”) to Vladimir Moisuc (“Borrower”). (Id. at 7 ¶ 4.) Borrower executed and delivered a Note (the “Note”) to the Lender for the same amount. (Id.) “In partial consideration of, as partial security for, and as a partial inducement to the Lender to extend the Loan, ” Borrower and his wife, Debtor, executed and delivered a mortgage on the Premises (the “Mortgage”) in favor of the Lender. (Id. at 7 ¶ 6.) The Mortgage was executed on the same date, and for the same amount, as specified in the Note. (Id.) On October 5, 2004, the Mortgage was recorded with the Recorder of Deeds of Delaware County, Pennsylvania. (Id. at 7 ¶ 8.) On June 5, 2012, the Note and Mortgage were assigned to Deutsche Bank National Trust Company (the “Bank”) and were recorded on July 17, 2012. (Id. at 7 ¶ 9.) “The Note and Mortgage have not been further assigned, and the Bank remains their holder.” (Id. at 7 ¶ 10.)

         On May 4, 2008, Borrower, Debtor's husband, passed away. (Id. at 7 ¶ 12.) Upon his passing, “complete title to the Premises became vested in the Debtor by operation of law.” (Id. at 7 ¶ 13.)

         B. The State Court Foreclosure Action and Federal Bankruptcy Proceedings

         Following her husband's death, Debtor made mortgage payments. Thereafter, Debtor defaulted on her payment obligation under the terms of the Mortgage and the Note. On July 9, 2012, Deutsche Bank National Trust Company (the “Bank”), in its capacity as Trustee, initiated an action to foreclose the Mortgage against Debtor.[2] (Doc. No. 25 at 10; Doc. No. 26 at 4.) The action is titled “Deutsche Bank National Trust Company, as Trustee Under Pooling and Servicing Agreement Dated as of January 1, 2005 Morgan Stanley ABS Capital I Inc. Trust 2005-HE1, v. Georgeta [sic] Moisuc” and is pending in the Court of Common Pleas of Delaware County, Pennsylvania under Docket Number 12-005790 (referred to as the “Foreclosure Action”). (Id.)

         On February 2, 2015, one day before trial was scheduled to commence in state court, Debtor filed a petition for relief under Chapter 7 of the Bankruptcy Code.[3] In the Brief of the Chapter 7 Trustee, Gary F. Seitz, Esquire, filed in this Court, he recounts the history of the case as follows:

When the [state court] Foreclosure Action was called for trial, the Debtor claimed that her signature on the subject mortgage was a forgery, though no such contention appeared in her filed answer to the foreclosure complaint. Trial in the Foreclosure Action was adjourned to allow the Bank to conduct discovery on the Debtor's forgery claim. The Bank sought and received permission to file an amended Complaint setting forth additional claims against the Debtor to be pursued only if the state court determined that her signature on the mortgage was a forgery.
The Debtor filed an Answer to the Amended Complaint, setting forth her claim of forgery, together with various affirmative defenses to the Foreclosure Action, and counterclaim against the Bank. Well after she filed her Answer to the Amended Complaint, the Debtor served the Bank with an expert report asserting that her husband's signature on the subject note and mortgage had also been forged. This was the first time that such an assertion had been made, and contradicted allegations made in the answer.
Trial in the Foreclosure Action was scheduled to resume on February 3, 2015, but was stayed by the Debtor's bankruptcy filing.[4] On March 9, 2015, the Bank moved for relief from the Automatic Stay (the “Stay Relief Motion”). The Debtor filed an Objection to the Stay Relief Motion.
Upon the Chapter 7 filing, the Debtor's forgery claims (and all of the other defenses set forth in her Answer to the Bank's Amended Complaint in Mortgage Foreclosure, and in the Objection to the Stay Relief Motion) became property of the Chapter 7 estate, by operation of 11 U.S.C. § 541.[5] The Trustee investigated the Debtor's forgery (and other) claims, and, among other things, reviewed the filed pleadings and the transcript of the Debtor's deposition from the Foreclosure Action.
As a result of his investigation, the Trustee concluded, in an exercise of his business judgment that it would not be in the best interests of the Estate to assert the Debtor's proffered defenses to the Foreclosure Action, nor to the Bank's Stay Relief Motion.

         The Trustee's conclusion was based upon, among other things, the following:

a. There were no funds available to pay counsel to litigate the forgery claim, except as a percentage of any recovery;
b. Success on the forgery claim would inevitably result in an appeal, with the additional expense attendant thereto, and again, with no funds available to pay counsel;
c. It would likely take more than a year for the disposition of the likely appeal to become final, during which this case would have to beheld [sic] open, delaying its final administration and closing;
d. The lateness of the Debtor's assertion of the forgery claim cast serious doubts upon its validity;
e. The Debtor admitted, in state court deposition testimony, that both she and her husband were present at closing on the subject loan, which cast further doubt upon the validity of the Debtor's forgery claims;
f. The Debtor admitted, in state court deposition testimony, that the net proceeds of the subject loan were deposited into a checking account titled jointly in the names of the Debtor and her husband, which strongly suggests that the Debtor and her husband authorized, ratified or acquiesced in any possible forgeries of their signatures (which forgeries are denied by the Bank);
g. Assertion of the Debtor's claims would have required the close cooperation of the Debtor. Since prevailing on those claims would likely result in the sale of the Debtor's residence against her wishes, it seemed unlikely that the Debtor would cooperate with the Trustee to the degree necessary to successfully assert those claims;
h. The Debtor had offered contradictory evidence in the Foreclosure Action. In her Answer to the Amended Complaint filed therein, she admitted that her husband had signed the subject note and mortgage, but an expert report served on the Bank several weeks later contained the assertion that her husband's signatures were also forged; and
i. The Debtor's Schedule “E” indicates that the Debtor has no “priority unsecured” debt, and the Debtor's Schedule “F” indicates that the Debtor has only $14, 848.21 in general unsecured debt.
The Bank offered the Trustee $20, 000.00, in full and final settlement of all of the Debtor's defenses to, and claims in opposition to, (a) the Foreclosure Action (including (i) the Debtor's assertion that her signature on the subject mortgage is a forgery, or is otherwise ineffective; (ii) the Debtor's assertion that her husband's signature on the subject mortgage is a forgery or is otherwise ineffective; and (iii) the Debtor's assertion that her husband's signature on the subject note is a forgery or is otherwise ineffective); and (b) the Stay Relief Motion, to be paid within 15 days after a court order approving the settlement becomes final.
The Bank and the Trustee memorialized the foregoing agreement, on the terms and conditions set forth in a stipulation (the “Stipulation”), which provided, inter alia, the following:
A. Within 15 days after Court approval of the Stipulation, the Bank shall tender the sum of $20, 000.00 (the “Settlement Payment”) to the Trustee.
B. The Trustee agrees to accept the Settlement Payment in full and final settlement of (a) the Debtor's claim that her signature was forged on the Mortgage; (b) all other claims and defenses to the Foreclosure Action; and (c) all claims and defenses set forth in the Debtor's Objection to the Stay Relief Motion (collectively, the “Settled Claims”).
C. Effective upon receipt and collection of the Settlement Payment, the Trustee, on behalf of the Chapter 7 Estate and as successor by operation of law to the interests of the Debtor in the Settled Claims, unconditionally releases, remises and forever discharges Deutsche Bank National Trust Company, in its capacity as Trustee under the Pooling and Servicing Agreement Dated as of January 1, 2005 for the Morgan Stanley ABS Capital I Inc. Trust 2005-HE1, its servicers, subservicers, and its and their respective agents, employees, representatives, predecessors, shareholders, directors, officers, partners, attorneys, successors and/or assigns, and any and all other persons or entities, whether or not identified (collectively, the “Releasees”) of and from any and all manner of actions and causes of action, suits, debts, dues, accounts, bonds, covenants, contracts, agreements, judgments, claims and demands whatsoever in law or equity, which constitute, arise from or are related to the Settled Claims, and which the Debtor possessed against the Releasees as of the commencement of this case (whether known or unknown, asserted or unasserted, scheduled or unscheduled, liquidated or unliquidated, contingent, absolute, litigated or unlitigated).
D. It is the intention of the parties that the Releasees be granted relief to the same extent and with the same force and effect as if the Debtor had executed the release herself, absent the instant Chapter 7 filing.
E. The Trustee hereby consents to a grant of relief from the Automatic Stay, in favor of the Bank, effective upon the filing of a Notice of Receipt and Collection, to the extent necessary to permit the Bank (a) to exercise its rights as a secured creditor of the Debtor pursuant to the Mortgage and applicable state law, by, among other things, resuming the prosecution of its state court Mortgage Foreclosure action against the Debtor, and - if the Bank prevails therein - causing a Sheriff's Sale of the Premises subject thereto; and (b) if the Bank is the successful bidder at the Sheriff's Sale, to commence a state court proceeding to remove or otherwise eject the Debtor from the Premises.
F. The Trustee further consents to a waiver of the 14-day stay of Bankruptcy Rule 4001(a)(3), making the grant of stay relief effective immediately upon filing of the Notice of Receipt and Collection described below.
G. Because the Settlement Payment should be sufficient to pay all unsecured claims in full, and to cover all administrative expenses of the estate, the Trustee, effective upon filing of a Notice of Receipt and Collection, abandons all of the estate's right, title and interest in and to the Premises as provided by 11 U.S.C. §554 and Bankruptcy Rule 6007(a).
H. The Trustee shall file a Notice of Receipt and Collection with respect to the Settlement Payment, within 3 business days after receipt and collection thereof.
On May 18, 2015, the Trustee filed the 9019 Motion to approve the Stipulation.[6]On June 19, 2015, the Debtor filed an objection to the 9019 Motion. A hearing on the 9019 Motion was held on June 24, 2015, wherein no testimony was taken but the Trustee proffered that in the exercise of his business judgment, the Stipulation was the best resolution of the issues attendant thereto. The Debtor offered no testimony or evidence to rebut the Trustee's proffer but, rather, just argued to the Court the merits of the underlying Foreclosure Action.
On June 24, 2015, the Court entered an Order approving the 9019 Motion. Thereafter, the Debtor filed the instant appeal ...

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