2009 D e c i sion s O p inion s of the U nit e d S t at e s C our t of Appe al s for the Thir d C ir c uit 10-20-2009 

# In Re: V ic t or M ondelli P r e c e de nt i al or N on-P r e c e de nt i al : N on-P r e c e de nt i al D ocke t N o . 08-3905

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Thi s de c i sion i s br ou ght t o you for f r e e and ope n a c c e s s b y the O p inion s of the U nit e d S t at e s C our t of Appe al s for the Thir d C ir c uit at V i ll anova U nive r sity S choo l of L a

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w . vi ll anova . e du . Re c omme nde d C it at ion " In Re: V ict or M onde ll i " (2009). 2009 D e cisio n s . P ape r 416. http://d i git alc ommon s .l a

w . vi ll anova . e du/thir dc ir c uit_2009/416NOT P RE CE DE NT I AL UN I TED STATES CO UR T OF A PP EALS F O R T H E T H IR D C IR C U IT

_____________ N o. 08- 3905

_____________ In re : V IC T O R M O N D E L L I, A p p e llan t. A p p e a l f ro m th e O rd e r o f

th e U n ited S tate s D istric t C o u rt fort he D i s t r i ctof N ew J er s ey ( D . C . N o. 08- cv- 01582) D i s t r i ctJ udge: H on. W i l l i am J. M art i ni Subm i t t ed U nderT hi r d C i r cui tL . A . R . 34. 1( a)

on M ay22, 2009 B efore: F U E N T E S , JO R D A N , and N Y G A A R D , C i rcui tJudg es.

( O pi ni on Fi l ed: O ct ober20, 2009 )

OPI NI ON O F THE COURT FU E N T E S, C i r cui tJ udge: D e b to r-A p p e llan t V icto r M o n d e lli a p p e a ls th e d e c isio n o f th e D istric t C o u rt to aff i r m t w o or der s ent er ed byt he B ankrupt cyC our t : one thatenfor ced a m or t gage a nd l eas e s peci fi cal l yagr eed t o byM ondel l i ; and anotherthatdeni ed a s ubs equentm ot i on for2

r econs i der at i on. Fort he r eas ons t hatfol l ow , w e w i l l aff i r m the D i s t r i ctC our t ’ s or der d ism iss in g M o n d e lli ’s a p p e a l f ro m th e B a n k ru p tcy C o u rt.

I. B eca us e w e w r i t e exc l us i vel yforthe part i es , w e onl ydi s cus s the fa ct s and p ro c e e d in g s to th e e x te n t n e c e s s a ry f o r t h e re s o lu tio n o f

th is c a s e . In M a y2 0 0 7 , the B a n k ru p tcy C o u rt a p p ro v e d a p lan w h e re b yM o n d e lli w o u ld sa tisf ya sig n if

ica n t p o rtio n o f

h is o u tsta n d in g d e b ts b ym o rtg a g in g p ro p e rtyh e o w n e d in B e r k e l e y H e i g h t s , N e w J e r s e y. M o n d e l l i o b t a i n e d th e l o a n f r o m J a c k S i l v e r m a n R e a l ty & M or t gage Co. ( “J SR M ”) and us ed the l oan pr ocee ds t o payhi s cr edi t or s . A t ypi cal l y , t he m o rtg a g e a g re e m e n t w ith JS R M w a s a c c o m p a n ied b ya n in e ty -n in e y e a r g ro u n d lea se to anothercompany , B erkel eyR eal t yPar t ner s ( “B R P”) . T he l eas e expr es s l ys t at es thatt he l eas e’ s exi s t ence w as a condi t i on pr ece dentt o J SR M ’ s gr antof the mort gage – J SR M and B R P sha r e s om e over l appi ng ow ner s hi p i nt er es t s , and the mort gage f r om J SR M and the lea se to B R P w e re c lea rlyp a rt o f a p a c k a g e d e a l. T he l eas e t o B R P cont ai ns s ever al pr ovi s i ons r el evantt o t hi s appea l . Fi r s t , the le a s e g iv e s B R P a ri g h t o f f ir s t r e f u s a l if a n d w h e n M o n d e lli d e c id e s to s e ll th e p ro p e rt y . S e c o n d , the lea se c o n tain s a “ su b o rd in a tio n ” p ro v isio n , w h ich re q u ire s M o n d e lli to s u b o r d i n a t e h i s i n t e r e s ti n t h e p r o p e r t yt o a n ys u b s e q u e n tmo r t g a g e e n t e r e d i n t o b yBRP fort he purpos e of “ cons t ruct i on and perm anentfi nanci ng” of the l eas e. T hi r d, pur s uant3

t o t he l eas e, B R P i s r equi r ed t o paypr oper t yt axes and pur chas e i ns ur ance forthe p ro p e rt y . T he pr es entdi s put e ar os e w hen B R P at t empt ed t o obt ai n a mort gage on the p ro p e rty , inv o k in g th e p ro v isio n o f th e lea se re q u irin g M o n d e lli to su b o rd in a te h is i nt er es t . M ondel l i obj ect ed and r efus ed t o exec ut e the nec es s arypaperw or k. B R P and JSR M t hen fi l ed a m oti on w i t h the B ank rupt cyC ou rtt o en force t he rel evan tl ease pr ovi s i ons cons ent ed t o byM ondel l i . D ur i ng the hea r i ng on t he mot i on, M ondel l i not ed that B R P h ad fa ll en b eh ind o n it s p rop ertytax o b li g ati o n s, thu s en d an g ering M o n d ell i’ s i nt er es ti n t he l and. O verM ondel l i ’ s obj ect i ons , the B ankrupt cyC our tgr ant ed the m ot i on, not i ng t hatM ondel l i had agr eed t o t he s ubor di nat i on and cha r act er i zed M o n d e lli’ s re s is ta n c e a s s o m e th in g a k in to b u y e r’ s re m o rs e . Shor t l yt her eaf

t er , M ondel l i fi l ed a mot i on forr econs i der at i on of the dec i s i on enfor ci ng t he l eas e pr ovi s i ons . I n t hi s m ot i on, M ondel l i s uppl ement ed hi s cl ai m about t he unpai d t axes byar gui ng t hat( 1) B R P’ s r i ghtof fi r s tr efus al cons t i tut ed a c l og on M ondel l i ’ s equi t abl e r i ghtof r edempt i on; ( 2) B R P coul d notr eques ts ubor di nat i on w i t houtevi dence t hatt he mort gage w as fordevel opm entof the pr oper t y ; ( 3) B R P had br eac hed the l eas e bys ubl eas i ng a por t i on of the pr oper t y ; and ( 4) the B ankrupt cyJ udge shou l d h ave recused h i m sel f fo r bi as. T he B ank rupt cyC ou rtrej ect ed all of theseA s noted byt he D i stri ctC ou rt , the B ank rupt cyC ou rtdid not cl earl yadd res s 1 M ondel l i ’ s s econd a r gum ent– t hats ubor di nat i on w as depende nton evi dence of devel opm ent– perhaps beca us e i tdi d notunder s t and M ondel l i t o be ac tual l yar gui ng t hat p o in t. R e g a rd les s, th e D istric t C o u rt d id a d d re ss th e iss u e in its O p in io n , an d w e w ill re v ie w th a t d e te rm in a tio n f o r a b u s e o f

d is c re tio n . 4 ar gum ent s and di s m i s s ed the mot i on forr econs i der at i on. M ondel l i then appe al ed t o the 1 D i s t r i ctC our t , pr es ent i ng t he s ame ar gum ent s he r ai s ed i n hi s ear l i ers ubm i s s i ons . T he D istri ct C o u rtaf

firm ed , ag ree ing w ith the B an k rup tcyC o u rto n the m erit s o f M o n d ell i’ s appea l , butal s o not i ng t hatM ondel l i had def aul t ed on hi s obl i gat i on underthe Feder al R u les o f B a n k ru p tcy P ro c e d u re to p ro v id e th e D istric t C o u rt w ith a c o m p lete a p p e llate re c o rd . II. Pur s uantt o Feder al R ul e of Bankrupt cyPr ocedur e 8006, “[w ] i t hi n 10 day s aft er fi l i ng [a] not i ce of

appea l . . . , [an] appel l ants hal l fi l e w i th t he cl erk and s erve on the appel l ee a des i gnat i on of the i t ems t o be i ncl uded i n t he r ecor d on appea l and a s t at ement o f th e iss u e s to b e p re se n ted .” F e d . R . B a n k . P ro c . 8 0 0 6 . A s n o ted b yth e D istric t C o u rt, M ondel l i fi l ed hi s not i ce of appea l on February4, 2008, butdi d notfi l e hi s des i gnat i on of t he i t ems t o be i ncl uded i n t he r ecor d unt i l A pr i l 2, 2008, w el l pas tthe t en- dayfi l i ng l i mi t . S u c h a v i o l a t i o n ma yc o n s t i tu t e a b a s i s f o rd i s mi s s a l o f

th e a p p e a l . S e e F e d . R. B ank. Pr oc. 8001( a) ( “A n appel l ant ’ s fai l ur e t o t ake a nys t ep otherthan t i m el yfi l i ng a not i ce of appea l does notaff

ectt he val i di t yof the appe al , buti s gr ound onl yfors uch act i on as t he di s t r i ctcour torbankrupt cyappel l at e pane l deems a ppr opr i at e, w hi ch may5

i ncl ude di s m i s s al of the appe al . ) . B efor e di s m i s s i ng M ondel l i ’ s appea l forthi s pr ocedur al v io latio n , h o w e v e r, th e D istric t C o u rt a p p ro p ria telya n a ly z e d M o n d e lli ’s v io latio n in r efe r ence t o t he fa ct or s l ai d outi n Poul i s v. St at e Farm Fi r e and Casua l t yC o. , 747 F. 2d 8 6 3 (3 d C ir . 1 9 8 4 ).

( 1) t he ext entof the part y ’ s per s onal r es pons i bi l i t y ; ( 2) the pr ej udi ce t o t he adve r s arycaus ed bythe fa i l ur e t o m eet s chedul i ng or der s and r es pond t o di s covery ; ( 3) a hi s t oryof di l at or i nes s ; ( 4) w hetherthe conduc tof the part yorthe at t or neyw as w i l l ful ori n bad fa i t h; ( 5) the ef fec t i venes s of s anct i ons ot hert han di s m i s s al , w hi ch ent ai l s an ana l y s i s of a ltern a tiv e sa n c tio n s; a n d (6 ) th e m e rito rio u sn e ss o f th e c laim ordefe ns e. I d. at868. T he D i s t r i ctC our taddr es s ed ea ch fa ct orand found, i n t he aggr egat e, that d is m is s a l f

o r f a ilu re to m e e t th e re q u ir e m e n ts o f R u le 8 0 0 6 w a s w a rr a n te d . W e have r evi ew ed the D i s t r i ctC our t ’ s appl i cat i on of the Poul i s fac t or s , and w e s ee no abus e of di s cr et i on. See Em er s on v. T hi el C ol l ege, 296 F. 3d 184, 191 ( 3d C i r . 2002) (no ti n g stan d ard o f re v iew ). In term s o f th e m erit s o f M o n d ell i’ s arg u m en ts, w e a ff irm fo r th e tho rou g h an d p ersu asiv e re aso n s n o ted in the D istri ct C o u rt ’s op inion . In p arti cu lar, w e e ch o the D istri ct C o u rt ’s an aly sis of the a ll eg ed clog s to M o n d ell i’ s e q u i t a b l e r i g h to f

r e d e m p t i o n – a c o n t e n t i o n th a tMo n d e l l i p r i o r i t i z e s i n h i s b r i e f i n g . We do nots ee how B R P’ s r i ghtof fi r s tr efus al i n t he eve ntthatM ondel l i choos es t o s el l t he pr oper t yi n anyw aycompar es t o t he s or tof uncondi t i onal r i ghtt o pur chas e hel d bythe m or t gagee i n H um bl e O i l & R efi ni ng C o. v. D oerr , 303 A . 2d 898 ( N . J . Super . C t . C h. D iv . 1 9 7 3 ). Q u ite s im p ly , B R P ’s r ig h t to re p u rc h a se w o u ld n o t af f e c t M o n d e lli ’s a b ili ty6

to red ee m h is m o rt g ag e – itw o u ld o n lyaf fe ct his ef

fo rt s to se ll the p rop ertyto a th ir d par t y . A nd, as not ed byt he D i s t r i ctC our t , even i f the r i ghtof fi r s tr efus al di d cl og the equi t abl e r i ghtof r edempt i on, t he r emedyw oul d be t o r enderthe pr ovi s i on unenfor cea bl e, n o t t o inv ali d ate the en ti re lease . Id. at 56 5 . W e a lso rejec t th e a rgu m en t th at th e m ere p re s e n c e o f

th e s u b o rd in a tio n c la u s e s o m e h o w c lo g s th e e q u ita b le ri g h t o f re d e m p tio n . W hi l e the s ubor di nat i on cl aus e mi ghtaff ectM ondel l i ’ s abi l i t yt o obt ai n otherfi nanci ng at a f a v o ra b le r a te, th e c lau se d o e s n o t in a n yw a yp re v e n t h im f ro m a c tu a llyre d e e m in g h is m o rtg a g e , an d th u s c a n n o t b e c o n sid e re d a c lo g to th a t es se n tial rig h t. In re g ard to the n o n -m erit s fa ctors, w e se e n o clea r error in the D istri ct C o u rt ’s fac tual det erm i nat i on t hatM ondel l i w as notper s onal l yr es pons i bl e forthe pr ocedur al vi ol at i on; t hatB R P w as s om ew hatpr ej udi ced bythe del ay ; thatM ondel l i has a hi s t or yof di l at or i nes s ; and thatal t ernat e s anct i ons , s uch as fi nanci al penal t i es , w oul d be i neff ect i ve g iv e n M o n d e lli ’s b a n k ru p tcy. A c c o rd in g ly , w e a g re e w ith th e D istric t C o u rt’s a n a ly sis a n d b a la n c in g o f

th e P o u lis f

a c to rs , a n d w ill a f

f ir m its d is m is s a l o f

M o n d e lli’ s a p p e a l.