July 2023
“Absent any good explanation, a party shall not be allowed to gain an advantage by litigating on one theory, and then seek an inconsistent advantage by pursuing an incompatible theory.” Ribadeneira v. New Balance Athletics, Inc,
65 F. 4th 1, 27 (1st Cir. 2023)
You cannot have it both ways
When a Chapter 7 bankruptcy debtor receives a discharge of their debts, they are no longer personally liable for the payment obligations under the Mortgage Loan. Nevertheless, if the debtor plans to stay in the property, then the payments have to be made. On August 10, 2016, Deutsche Bank National Trust Company (“DBNT”) started a judicial foreclosure action to foreclose the Pitassi Mortgage in the Connecticut Superior Court. At first the Pitassis did not initially appear to defend the judicial foreclosure action and, as a result, Default Judgment entered in favor of DBNT. On January 17, 2018, the Pitassis, through Counsel, filed a motion to Vacate and Open Judgment of Default and a Motion to Dismiss for Lack of Subject Matter Jurisdiction, to which DBNT objected. The Connecticut Superior Court subsequently denied the Pitassis’ motion on June 8, 2018. The Pitassis filed multiple appeals that were dismissed by the Connecticut Courts.
The Pitassis originally filed a Chapter 7 Bankruptcy Petition in 2011 and obtained their Chapter 7 discharges. The Pitassis’ initial Chapter 7 Bankruptcy Petition stated that they did not have any potential unliquidated claims other than those at issue in the matter of Kassi v. Chase Bank, which did not involve DBNT’s mortgage loan. On August 10, 2022, Kassiani Pitassi filed a second bankruptcy petition under Chapter 13 of the United States Bankruptcy Code, this time in Maine, however, her proposed plan did not provide for the payment of either of the mortgages on her very valuable, mortgaged premises in Connecticut, which were long in default. Rather, Pitassi raised challenges to DBNT’s standing to enforce the mortgage loan in the non-standard provisions of her proposed plan. Because Pitassi obtained a discharge of her personal liability for the debt owed under DBNT’s mortgage loan based on the representation that she did not have any unliquidated claims related to the same, and Pitassi’s challenges to DBNT’s standing were previously rejected by the Connecticut Courts, the Bankruptcy Court refused to confirm Pitassi’s Chapter 13 plan as a matter of law based on Judicial Estoppel and the Rocker-Feldman Doctrine. See Ribadeneira v. New Balance Athletics, Inc, 65 4th 1, 27 (2023); Rooker v. Fidelity Trust Co., 263 U.S. 413 (1923); District of Columbia Court of Appeals v. Feldman, 460 U.S. 462 (1983).
The Pitassis should be estopped as a matter of law from attempting to collaterally attack the Connecticut Superior Court Judgment in the Bankruptcy Court proceedings because they received the benefit of their Bankruptcy discharge, yet they still sought to challenge the Mortgage lien at issue in this matter as their initial attempts to do so failed in the Connecticut Courts. A debtor cannot have the best of both worlds. Courts should not condone the practice by a debtor of obtaining a Chapter 7 discharge of their personal liability and then remaining in the property or, in this case, collecting rents derived from an investment property, while they continue to challenge the lender’s ability to foreclose the mortgage lien thereon.
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