In re Hassan

527 B.R. 97

In re Mohammed Hassan aka Mohammed H Hassan, Debtor.

Case No. 12–43627–CEC

United States Bankruptcy Court, E.D. New York.

Signed March 19, 2015

Karamvir Dahiya, Dahiya Law Offices, LLC, 75 Maiden Lane, Suite 506, New York, N.Y. 10038, Attorneys for Mohammed Hassan

Samuel E. Kramer, 225 Broadway, Suite 3300, New York, N.Y. 10007, Attorney for Richard E. O'Connell, Trustee

DECISION

CARLA E. CRAIG, Chief United States Bankruptcy Judge

This decision resolves the motions of chapter 7 debtor Mohammed Hassan (the “Debtor”) to reconsider an order approving a settlement, between the chapter 7 trustee Richard E. O'Connell (the “Trustee”) and creditor Yair Kerstein (“Kerstein”), that resolved the estate's claims against Kerstein for $45,000, and to compel the Trustee to abandon those claims back to the Debtor. The Debtor raises various arguments, including that the Court overstepped its authority when it made a finding that the estate's claims were barred by the Rooker–Feldman doctrine and res judicata in approving the settlement, and that the settlement violated the takings clause of the Fifth Amendment. Because the Debtor has not identified an intervening change in controlling law, the availability of new evidence, or the need to correct a clear error or prevent manifest injustice, his motion to reconsider is denied. Because the Debtor's motion to compel abandonment was mooted when the Trustee settled the estate's claims against the creditor, his motion to compel abandonment is also denied.

JURISDICTION

This Court has jurisdiction of this proceeding pursuant to 28 U.S.C. § 1334(b), and the Eastern District of New York standing order of reference dated August 28, 1986, as amended by order dated December 5, 2012. This decision constitutes the Court's findings of fact and conclusions of law to the extent required by Federal Rule of Bankruptcy Procedure 7052.

BACKGROUND

Kerstein was the second-lien mortgage holder on property owned by the Debtor located at 114–20 101st Avenue, Richmond Hill, New York (the “Property”). According to the Trustee, the mortgage between Kerstein and the Debtor (the “Mortgage”) was intended to create a lien against two different properties, the Debtor's personal residence (the “Residence”) and a commercial building owned by the Debtor. (9019 Motion 3, ECF No. 34–1.)¹ Mr. Kerstein commenced an action to foreclose the Mortgage and obtained a judgment of foreclosure and sale, with respect to the Property, on July 25, 2011 (the “Foreclosure Judgment”). (Foreclosure Judgment, Case No. 12–48130, ECF No. 11 Ex. C.) In September 2011, prior to the first scheduled sale of the Property, the Debtor filed his first bankruptcy case under chapter 13 (Case No. 11–48063). The first case was dismissed because the Debtor failed to file all of the documents required under § 521.² In February 2012 he filed his second chapter 13 case (Case No. 12–40906), and that case was dismissed for the same reason.

On May 17, 2012, the Debtor filed the chapter 7 case that is the subject of this decision. The Debtor received a discharge on August 27, 2012; Paul I. Krohn, the chapter 7 trustee at the time, issued a report of no distribution on September 20, 2012; and the case was closed on September 21, 2012. The Debtor then filed two more bankruptcy petitions. On November 29, 2012, he filed a chapter 13 case (Case No. 12–48130) that was dismissed on March 5, 2013 because the Debtor failed to file all of the documents required under § 521. Before the fourth case was dismissed, the Court issued an order, pursuant to § 362(d)(4), lifting the automatic stay with respect to the Property and providing that the automatic stay would not come into effect with respect to any filing purporting to affect the Property for a period of two years.

On March 7, 2013, the Debtor filed his fifth bankruptcy petition, a chapter 7 case (Case No. 13–41288). As the automatic stay did not come into effect, the Property was sold pursuant to the Foreclosure Judgment to Lakhyunder Multani at a referee's sale. (Settlement Agreement 2, ECF No. 34–3.) The fifth case was dismissed on June 21, 2013 for failure to file all of the documents required under § 521. The Trustee had initially opposed dismissal, based on his review of the Foreclosure Judgment and the underlying mortgage documents and his conclusion that the Mortgage contained hand written notations and additional typed-in text describing the two encumbered properties which made the Foreclosure Judgment vulnerable to a bona fide dispute that could bring a recovery to the estate. Based in part on the Trustee's discovery of potential assets to administer, the Court reopened the third case on June 20, 2013 so that any potential recovery could be administered on behalf of the creditors whose debts were discharged. On June 20, 2013, and the United States Trustee appointed the Trustee as chapter 7 trustee in this case.

In June 2014, the Trustee filed a motion under Rule 9019 to approve a settlement with Kerstein (the “Settlement Agreement”) that waived the estate's objections to the sale of the Property and the Foreclosure Judgment, and any other claim that the Trustee might have with respect to the validity of the Mortgage (the “Kerstein Claims”) in return for $45,000 (the “9019 Motion”). (9019 Motion, ECF No. 34–1.) The Debtor objected to the 9019 Motion and filed a motion to convert his case to Chapter 13 (the “Conversion Motion”). The Debtor argued, in substance, that he should be able to challenge the Foreclosure Judgment in state court, and that the Trustee did not have authority to settle the Kerstein Claims.

On October 15, 2014, over the Debtor's objection, the Court issued an order granting the 9019 Motion and denying the Conversion Motion (the “Order”). The Court found, among other things, that the Debtor was ineligible to be a debtor under chapter 13 because he failed to establish that he is an individual with regular income pursuant to §§ 109(g) and 101(30). (Order 4, ECF No. 70.) The Court also found that the Trustee established that the Settlement Agreement was in the best interests of creditors, based in part on the conclusion that “any alleged claim against Kerstein relating to the Mortgage that might be pursued by the Trustee or abandoned to the debtor is barred by the doctrines of Rooker–Feldman and res judicata following the entry of a final Judgment of Foreclosure and Sale” in the state court foreclosure proceeding. (Order 4–5, ECF No. 70.)

On October 27, 2014, the Debtor filed a motion to reconsider the Court's order denying the Conversion Motion and granting the 9019 Motion (the “Motion to Reconsider”), and on November 3, 2014, the Debtor filed a motion to compel the Trustee to abandon the Kerstein Claims back to the Debtor (the “Abandonment Motion”). Both motions were fully briefed, and the Court reserved decision after holding a hearing on January 20, 2015.

LEGAL STANDARD

Rule 59, made applicable to this adversary proceeding pursuant to Bankruptcy Rule 9023, permits a party to make a motion “to alter or amend a judgment.” Fed. R. Civ. P. 59(e). Rule 59(e) does not provide specific grounds for amending or reconsidering a judgment. See Fed. R. Civ. P. 59(e). The Second Circuit has held that “[t]he major grounds justifying reconsideration are an intervening change of controlling law, the availability of new evidence, or the need to correct a clear error or prevent manifest injustice.” Virgin Atl. Airways, Ltd. v. Nat'l Mediation Bd., 956 F.2d 1245, 1255 (2d Cir.1992) (internal quotations and citation omitted). Under the “clear error” standard, relief is “appropriate only when a court overlooks ‘controlling decisions or factual matters that were put before it on the underlying motion’ and which, if examined, might reasonably have led to a different result.” Corines v. Am. Physicians Ins. Trust, 769 F.Supp.2d 584, 593–94 (S.D.N.Y.2011) (quoting Eisemann v. Greene, 204 F.3d 393, 395 n. 2 (2d Cir.2000) ). “[R]econsideration will generally be denied unless the moving party can point to controlling decisions or data that the court overlooked—matters, in other words, that might reasonably be expected to alter the conclusion reached by the court.”Shrader v. CSX Transp., Inc., 70 F.3d 255, 257 (2d Cir.1995). “A motion for reconsideration is neither an occasion for repeating old arguments previously rejected nor an occasion for making new arguments that could have been previously advanced.” Associated Press v. U.S. Dep't of Def., 395 F.Supp.2d 17, 19 (S.D.N.Y.2005).

“A motion for reconsideration is ‘an extraordinary remedy to be employed sparingly in the interests of finality and conservation of scarce judicial resources.’ ” Corines, 769 F.Supp.2d at 593–94 (quoting In re Initial Public Offering Sec. Litig., 399 F.Supp.2d 298, 300 (S.D.N.Y.2005), aff'd sub nom. Tenney v. Credit Suisse First Boston Corp., Nos. 05 Civ. 3430, 05 Civ. 4759, and 05 Civ. 4760, 2006 WL 1423785, at *1 (2d Cir.2006) ). See also Schonberger v. Serchuk, 742 F.Supp. 108, 119 (S.D.N.Y.1990) (motions made pursuant to Rule 59(e) must adhere to stringent standards to prevent “wasteful repetition of arguments already briefed, considered and decided”). “The determination of whether a motion for reconsideration should be granted is within the sound discretion of the court.” In re Richmond, 516 B.R. 229, 234 (Bankr.E.D.N.Y.2014).

Under § 554(a), “the trustee may abandon any property of the estate that is burdensome to the estate or that is of inconsequential value and benefit to the estate,” and under § 554(b), “On request of a party in interest and after notice and a hearing, the court may order the trustee to abandon any property of the estate that is burdensome to the estate or that is of inconsequential value and benefit to the estate.” 11 U.S.C. § 554 ; see also Fed. R. Bankr.P. 6007. “Under either subsection, abandonment is proper only when the party seeking abandonment can establish that the property at issue is burdensome or of...