ROBERT N. OPEL, II, Bankruptcy Judge.
Pending before the Court is Creditor/Defendant Blue Chip Federal Credit Union's ("Blue Chip") Motion for Summary Judgment. The motion seeks not to dismiss the adversary entirely, but instead only to determine the priority of Blue Chip's and the other Creditor/Defendant, Metro Bank's ("Metro"), security interests in the Debtors' primary residence. For the reasons set forth below, the Motion for Summary Judgment is denied.
The Court has jurisdiction over this matter pursuant to 28 U.S.C. §§ 157 and 1334. This is a core proceeding under 28 U.S.C. § 157(b)(2)(K).
The Debtors filed their petition for Chapter 13 relief on October 25, 2011. On May 24, 2012, this adversary proceeding commenced by way of the Debtors' Complaint to Determine Extent of Secured Status ("Complaint") pursuant to 11 U.S.C. § 506(a).
Compl. ¶ 3. Assuming all four of these instruments secure the Debtors' residence, the total face value of liens on this property is $468,500.00. However, according to the Complaint, "[t]he market value of Debtors' residence is $190,000.00 according to a market analysis of October 31, 2001." Compl. ¶ 5. In essence, the Debtors allege that the combination of the three Metro mortgages swallow all existing equity of the Tarrytown Property, leaving the Blue Chip Mortgage fully unsecured. Compl. ¶ 6.
Metro filed their Answer on June 18, 2012. While the pleading contained mostly general admissions and denials, Metro specifically denies the Debtors' estimated value of the property. Metro Answer ¶ 5. To that end, Metro provides no specific estimation; instead it states that "the property is worth more than $190,000.00." Id.
Blue Chip filed its Answer on August 10, 2012. It too contains general admissions and denials. The pleading specifically avers that there is equity in the Tarrytown Property to secure the Blue Chip Mortgage. Blue Chip Answer ¶ 7.
For the sake of clarity, it is worth quoting the specific language of Metro Mortgage 2, although the instrument was not provided to this Court until February 11, 2013. Printed on the bottom of page 1 of the mortgage is the following clause:
Metro's Answer to Mot. for Summ. J. Ex. F. After that clause, in bold print and capitalized, is the following language:
Id. Finally, the following definition is provided on page 10:
Id.
On January 15, 2013, nearly five months after filing their Answer, Blue Chip filed its Motion for Summary Judgment ("Motion"). The Motion directly challenges the contention that Metro Mortgage 3 holds priority vis-à-vis the Blue Chip Mortgage. See Mot. for Summ. J. ¶¶ 41-49. Blue Chip concedes that there is a cross-collateralization provision in Metro Mortgage 2, id. at ¶ 37, but argues that the absence of Metro Mortgage 3, by name, from this provision precludes Metro from cross collateralizing Metro Mortgage 3 against the Debtors' personal residence. Id. at ¶¶ 44-46. In simpler terms, Blue Chip claims that only Metro Mortgages 1 and 2 hold priority over its own because the cross-collateralization provision is legally invalid. Id. at ¶¶ 43-46.
Metro filed its Answer to the Motion on February 11, 2013. Factually, the Answer agrees with the contentions of both the Debtor and Metro; to wit: all three of Metro's mortgages at issue were executed prior to Blue Chip's, Metro Mortgage 2 contains a cross-collateralization provision that does not name Metro Mortgage 3 by name; and the business property directly secured by Metro Mortgage 3 was sold by sheriff sale. Metro's Answer to Mot. for Summ. J. ¶¶ 31, 44, 49. However, Metro contends that the cross-collateralization provision in Metro Mortgage 2 evinces the intent of the Debtors to secure the obligations of Metro Mortgage 3 against the Tarrytown Property. Id. at ¶ 44. In support of its Answer, Metro provided the Court with the mortgage and loan documents previously discussed, as well as a Cross-Default and Cross-Collateralization Agreement ("C.C. Agreement") allegedly signed by the parties on July 25, 2008. Id. at ¶ 49. It is uncontested that the C.C. Agreement was never recorded.
Subsequent to Metro's Answer, the parties filed their respective briefs on the issue. Blue Chip filed papers evidencing the existence of the Blue Chip Mortgage and the associated mortgage on March 7, 2013. The Debtors did not file any documents in response to the Motion.
On April 17, 2013, Metro filed its Answer to Blue Chip's Statement of Material Facts. Metro does not break new ground with its statements in this document opting to state that Blue Chip's $190,000.00 value of the Tarrytown Property is "[n]ot in dispute, although Metro has not taken a position on whether it agrees with this value or not." Answer of Metro to Statement of Mat. Facts ¶ 4. The document reprints language from the cross-collateralization provision in Metro Mortgage 2 as support for its argument without providing any new facts to the Court. Id. at ¶¶ 14, 43. This matter is now ripe for decision.
Federal Rule of Bankruptcy Procedure 7056 incorporates, and makes applicable to bankruptcy adversary proceedings, Rule 56 of the Federal Rules of Civil Procedure ("F.R.C.P."). Pursuant to F.R.C.P. 56(a), it is the movant's burden to prove that no genuine dispute exists as to any material fact and that the movant is entitled to judgment as a matter of law. Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). "As to materiality, ... [o]nly disputes over facts that might affect the outcome of the suit under the governing law will properly preclude the entry of summary judgment." Anderson v. Liberty Lobby Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986).
Once the moving party satisfies its burden, the nonmoving party "must do more than simply show that there is some metaphysical doubt as to the material facts." In re LandSource Communities Dev. LLC, 485 B.R. 310, 314 (Bankr.D.Del.2013) (citing Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 586, 106 S.Ct. 1348,
Because of the scant factual record in this matter, and the substantial weight the parties place on the C.C. Agreement and the value of the Tarrytown Property as stated in the Debtors' schedules, I feel it is appropriate to discuss the applicable evidentiary standard in summary adjudication.
Both the movant and the nonmovant must support the arguments in their pleadings by "citing to particular parts of materials in the record, including ... documents,... stipulations ..., or other materials...." Fed.R.Civ.P. 56(c)(1)(A). However, the Court's review goes beyond what the advocates represent; instead, I "must review the record taken as a whole." Reeves v. Sanderson Plumbing Products, Inc., 530 U.S. 133, 150, 120 S.Ct. 2097, 147 L.Ed.2d 105 (2000) (citing Anderson, 477 U.S. at 250-51, 106 S.Ct. 2505).
When evaluating evidence, the Court must consider the evidentiary standard that applies at trial. Impax Labs., Inc. v. Aventis Pharm., Inc., No. Civ.A. 02-581 JFF, 2004 WL 253482, at *2 (D.Del. Feb. 5, 2004) (citing Eli Lilly & Co. v. Barr Labs., Inc., 251 F.3d 955, 962 (Fed.Cir. 2001)). However, in courts where the jury is the primary fact-finder, "the court ... may not make credibility determinations or weigh the evidence." Reeves, 530 U.S. at 150, 120 S.Ct. 2097 (emphasis added). Indeed, "credibility determinations, the weighing of the evidence, and the drawing of legitimate inferences from the facts are jury functions, not those of the judge." Id. (citing Anderson, 477 U.S. at 255, 106 S.Ct. 2505).
In contrast, in bankruptcy court, the judge decides "[a]ll matters of fact and law in whatever domains of the law to which the parties' dispute may lead." Northern Pipeline Const. Co. v. Marathon Pipe Line Co., 458 U.S. 50, 91, 102 S.Ct. 2858, 73 L.Ed.2d 598 (1982) (Rehnquist, J., concurring) (plurality opinion). It follows that in the bankruptcy court, as a court of equity, the judge shall partake in the requisite weighing of evidence and credibility determinations in all stages of the litigation. See Official Committee of Unsecured Creditors of Cybergenics Corp. ex rel. v. Chinery, 330 F.3d 548, 567-68 (3d Cir.2003) (discussing binding Supreme Court precedent holding that bankruptcy courts are equitable tribunals). This process promotes judicial efficiency and furthers the policies behind the Bankruptcy Code. Hence, to rule on this Motion, I must absorb all of the evidence provided on the docket and dispense with my fact-finding duties accordingly. In general, the parties have proffered minimal information on which I could decide this matter on a motion for summary judgment. There are no affidavits from any of the parties involved, and no references to discovery materials, such as interrogatories or deposition transcripts. Instead, the parties ask me to merely read the unverified Complaint, Answer, the present motions, and the supporting briefs. Deciding this case as a matter of law is an impossible endeavor at this stage of the proceedings.
When looking at the prayer for relief by Blue Chip in the motion, this document seems more in line with that of a cross-claim
Turning next to the key documents related to this litigation, I begin with the C.C. Agreement. Even after reviewing it in the light most favorable to the Debtors, I afford it very little weight, if any, at this stage of the proceedings. The document was not recorded with Metro Mortgage 2 nor any of the other mortgages executed by the Debtors and Metro. Furthermore, there is no proof, other than in Metro's pleadings, that this document existed at the time of Metro Mortgage 2, nor would other parties be made aware of it through state-recordation procedures. There are no affidavits, no depositions, nothing in the record that authenticates the document. Therefore, at least at this stage, this document will not factor into the enforceability of the cross-collateralization provision in Metro Mortgage 2.
Additionally, the alleged value of the Tarrytown Property stated in Debtors' Schedule A is nothing more than the Debtors' personal statement; it is not a definitive "fact" in this litigation as all the parties contend. Courts outside of this Circuit have held that a debtor's schedules are solely "evidentiary admissions made by the debtor." In re VanCleef, 479 B.R. 809, 823 (Bankr.N.D.Ind.2012) (citing Plourde, 418 B.R. 495, 505 (1st Cir. BAP 2009)); see also In re Bohrer, 266 B.R. 200, 201 (Bankr.N.D.Cal.2001) ("Statements in bankruptcy schedules are executed under penalty of perjury and when offered against a debtor are eligible for treatment as judicial admissions."); In re Jorczak, 314 B.R. 474, 482-83 (Bankr. D.Conn.2004) ("[S]cheduling constitutes an admission which ... is binding upon the debtors."). As such, the statements themselves hold little weight; they require further evidentiary support to become dispositive fact.
Moreover, the Debtors, as challengers of the secured claim's value, bear the initial burden in a § 506 action. See In re Heritage Highgate, Inc., 679 F.3d 132, 139-40 (3d Cir.2012) (providing the burden-shifting standard, from debtor to creditor, that exists in a § 506 adversary proceeding). To satisfy this burden, they must "establish with sufficient evidence that the proof of claim overvalues [the] secured claim." Id. To this end, I find the single statement of the Tarrytown Property's alleged value as $190,000.00 as not a dispositive fact and is therefore insufficient to meet the D'Angelo's initial burden.
Thus, for purposes of this Motion, material issues of fact exist as to the legitimacy of the C.C. Agreement and the true value of the Tarrytown Property. As a result, testimony is needed on the validity and purpose of the C.C. Agreement, and appraisal testimony is needed for an appropriate value to be placed on the Tarrytown Property.
It is well settled in the law of this Commonwealth that the intent of contracting parties must first be ascertained from the writing itself. Martin v. Monumental Ins. Co., 240 F.3d 223, 232-33 (3d Cir.2001). If the language is clear and unambiguous the "intent as reflected in the expressed language chosen by the parties must be given effect." Morris v. Wells Fargo Bank, N.A., No. 2:11cv474, 2012 WL 3929805, at *6 (W.D.Pa. Sept. 7, 2012); Martin, 240 F.3d at 232-33. Determining
A contract is ambiguous under Pennsylvania law "if, and only if, it is reasonably or fairly susceptible of different constructions and is capable of being understood in more senses than one and is obscure in meaning through indefiniteness of expression or has a double meaning." Glenn Distributors, 297 F.3d 294, 300 (3d Cir.2002) (citing Duquesne Light Co. v. Westinghouse Elec. Corp., 66 F.3d 604, 614 (3d Cir.1995) (quoting Samuel Rappaport Family Partnership v. Meridian Bank, 441 Pa.Super. 194, 657 A.2d 17, 21-22 (1995))). Furthermore, under Pennsylvania law, "mortgages are generally governed by the same rules of construction [applicable] to other written instruments." In re Dolata, 306 B.R. 97, 122 (Bankr. W.D.Pa.2004); In re Riddlesburg Mining Co., Inc., 122 F.Supp. 560, 561 (W.D.Pa. 1954). Thus, Pennsylvania contract principles direct my analysis on the mortgage language at issue.
On its face, I hold Metro Mortgage 2 to be ambiguous to all potential bona fide purchasers, and thus testimony is needed on the intent of the parties as they were drafting its language. First, there is no mention of Metro Mortgage 3 anywhere within the mortgage, and specifically not in the Cross-Collateralization provision. Although the language purports to secure "all obligations, debts and liabilities" by the parties, such a generalization, without more, may not provide the necessary notice to subsequent lenders.
Second, the cross-collateralization provision in Metro Mortgage 2 does not mention the Debtors' former businesses or the real property interests owned by those businesses. Metro claims that this provision secures Metro Mortgage 2, Metro Mortgage 3, and a third, allegedly satisfied, $127,500 mortgage on the Debtors' previously-owned business property. There is no record here as to the Debtors' intention when they signed Metro Mortgage 2 as guarantors. Thus, at this point in the litigation, I find that the cross-collateralization language itself lacks the requisite clarity for me to find that it unambiguously reflects the parties' intentions. Here, I do not reach the question of whether the "relatedness rule" applies to cross-collateralization provisions because the parties have not briefed the issue and because I opt to reserve such an issue for trial. Also, my finding of ambiguity in the language of the mortgage is not a final finding nor does it create law of the case; however, with such a small record, it is the only finding I can make at the summary motion stage.
Therefore, for all of the above reasons, the Motion for Summary Judgment is denied.
