Court Opinion

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Opinions of the United
2008 Decisions                                                                                                             States Court of Appeals
                                                                                                                              for the Third Circuit

10-16-2008

Matusow v. Trans Cty Title Agcy
Precedential or Non-Precedential: Precedential

Docket No. 07-2148

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                                    PRECEDENTIAL

    UNITED STATES COURT OF APPEALS
         FOR THE THIRD CIRCUIT
              _____________

                  No. 07-2148
                 _____________

           JACQUELINE MATUSOW,

                             Appellant

                        v.

TRANS-COUNTY TITLE AGENCY, LLC, JUN CHAN
  KIM, BERGEN COUNTY SHERIFF, ARTHUR C.
  LINDERMAN, LYLE ROSENBAUM, and ROSE
               ROSENBAUM,

  On Appeal from the United States District Court
             for the District of New Jersey
               (D.C. Civil No. 06-5723)
  District Judge: The Honorable Faith S. Hochberg

  Submitted pursuant to Third Circuit LAR 34.1(a)
                 March 28, 2008
   Before: McKEE, RENDELL and TASHIMA * , Circuit
                     Judges

                  (Filed: October 16, 2008 )

James R. Radmore
Law Office of James R. Radmore, P.C.
Two Penn Center, Suite 312
1500 JFK Boulevard
Philadelphia, PA 19102
Counsel for Appellant

Rajan Patel
747 Chestnut Ridge Road, Suite 200
Chestnut Ridge, NY 10977
Counsel for Appellees Trans-County Title Agency, LLC and
Jun Chan Kim

Thomas Quirico
74 Central Avenue
Hackensack, NJ 07601
Counsel for Appellee Bergen County Sheriff

Arthur C. Linderman
190 Main Street, Suite 304
Hackensack, NJ 07601
Attorney Pro Se

   *
        The Honorable A. Wallace Tashima, Senior United States
Circuit Judge for the Ninth Circuit, sitting by designation.

                               2
Lyle Rosenbaum
200 Winston Tower Dr., Apt. 318
Cliffside Park, NJ 07101
Appellee Pro Se

Rose Rosenbaum
2706 Nassau Bend, Unit C1
Coconut Creek, FL 33066
Appellee Pro Se

                          OPINION

TASHIMA, Circuit Judge.

       In this case we analyze the reach of the “domestic

relations” exception to diversity jurisdiction under 28 U.S.C. §

1332. The Supreme Court has emphasized the narrowness of

this exception, explaining that it “encompasses only cases

involving the issuance of a divorce, alimony, or child custody

decree.” Ankenbrandt v. Richards, 504 U.S. 689, 704 (1992).

Because the instant case does not involve the “issuance of a

                               3
divorce, alimony, or child custody decree,” we hold that the

District Court erred by dismissing the case for lack of subject

matter jurisdiction. We further hold that abstention under either

Burford v. Sun Oil Co., 319 U.S. 315 (1943) or Younger v.

Harris, 401 U.S. 37 (1971) would be inappropriate in this case.

                          I. Background

        Appellant Jacqueline           Matusow    (“Matusow”) and

Appellee Lyle Rosenbaum (“Lyle”) married in January 1975 and

separated in 1996. The Superior Court of New Jersey, Chancery

Division, issued a dual judgment of divorce (“Judgment”) on

June 24, 1999.

        The Judgment included a property separation agreement

(“Agreement”).      The Agreement, in relevant part, directed

Matusow to “sign a deed and provide an appropriate affidavit of

title transferring all of her right, title, and interest in and to . . .

the former marital premises, which is known as Unit 122,

                                   4
located at the Winston Towers Condominium.” The Agreement

directed Lyle to pay Matusow $2500 per month in child support

for the couple’s two children and $40,000 1 by way of equitable

distribution. He also assumed sole responsibility for mortgages

on the Winston Tower condominium (“Winston property”). In

the Judgment, the court ordered Matusow and Lyle to carry out

the terms of the Agreement. Matusow alleges that, in spite of

the court’s order, Lyle failed to pay the proceeds for equitable

distribution, several child support payments, and defaulted on

certain Winston property mortgages. She further avers that she

failed to sign a deed transferring her interest in the Winston

property to Lyle.

       Bergen Commercial Bank, the lender on the Winston

property, secured by a mortgage, sought foreclosure on the

   1
       This amount was later lowered to $39,500.

                               5
Winston property. A judgment was entered on April 30, 1999,

but litigation continued for several more years.2 Pursuant to a

writ of execution, Appellee Bergen County Sheriff (the

“Sheriff”) scheduled and advertised a foreclosure sale of the

Winston property for October 10, 2001. The sale, however, was

postponed numerous times over the next three years. Matusow

alleges that the Sheriff failed to publically advertise the date of

any foreclosure sale after the first scheduled date and that,

although Matusow was listed as an owner on the deed, she never

received any notice of sale.        On July 23, 2003, Bergen

Commercial Bank assigned its interest in the foreclosure

judgment to Appellee Rose Rosenbaum (“Rose”), Lyle’s

mother.     Appellee Arthur C. Linderman (“Linderman”)

represented Rose throughout the transaction. On April 30, 2004,

   2
       The delay resulted from litigation over the foreclosure
of and credit due for the sale of a separate property.

                                6
Rose purchased the property at a foreclosure sale. Rose then

sold the property to Appellee Jun Chan Kim (“Kim”) on October

7, 2004. Appellee Trans-County Title Agency, LLC (“Trans-

County”) subsequently issued a title insurance policy to Kim.

       In December 2004, Matusow assigned $38,000 of her

judgment against Lyle to J. Holder, Inc. (“Holder”). Holder

subsequently brought suit against Lyle, Rose, Kim, and

Washington Mutual3 in state court, claiming fraudulent transfer

of the property. Matusow intervened in July 2005, but then

asked the court to dismiss her complaint without prejudice in

2006. On January 23, 2006, the court dismissed her complaint:

without prejudice as to Lyle, Rose, and Kim, and with prejudice

as to Washington Mutual. On March 14, 2006, Holder, Kim,

and Washington Mutual stipulated to a dismissal with prejudice,

   3
      Kim took out a loan with Washington Mutual, secured
by a mortgage, to pay for the Winston property.

                              7
and the court dismissed the action between those parties. The

record does not reveal the result of the action between Holder,

Lyle, and Rose, but Appellees represent that there is no case

pending in state court.

        In 2003, and continuing throughout the fraudulent-

transfer-of-property litigation, a separate proceeding was

underway in state court. Lyle moved the court to reduce his

child support payments, and Matusow moved for enforcement

of the court’s prior orders directing Lyle to pay child support

and equitable distribution. The court issued a final order on

October 16, 2006, directing Lyle to pay sums to Holder, as

Matusow’s partial assignee, and Matusow.

       On November 27, 2006, Matusow filed a six-count

complaint in the District Court for the District of New Jersey on

the basis of diversity jurisdiction. In Counts I and II, Matusow,

a Pennsylvania resident, claims that Trans-County, a New Jersey

                               8
             Corporation not domiciled in Pennsylvania, negligently issued

             a title insurance policy to Kim for the Winston property and that

             Trans-County violated New Jersey Statute, § 17:46B-9, which

             requires a title insurance company to “conduct[] a reasonable

             examination of the title” before issuing a title insurance policy.

             Count III is a quiet title action against Kim, a New Jersey

             resident. In Count IV, Matusow claims that the Sheriff violated

             New Jersey Statute, §§ 2A:17-34 - 17-36 4 during the sale of the

                4
                    The statutes provide:

      All advertisements for the sale of real estate by virtue of executions issued
      out of any court of this state shall state the approximate amount of the
      judgment or order sought to be satisfied by the sale. When practicable, the
      advertisements shall state the street numbers of the real estate to be sold.

N.J. Stat. Ann. § 2A:17-34.

      The sheriff making a sale under execution of the proprietary rights or shares
      mentioned in section 2A:17-18 of this title shall give notice, by
      advertisements, signed by himself, and put up in his office and by an
      advertisement in one of the newspapers published in this state, of the time
      and place of exposing such rights or shares to sale, at least 2 months before

                                             9
             Winston property.     In Count V, Matusow contends that

             Linderman, a New Jersey resident, “fraudulent[ly] and

             improper[ly]” represented Rose in the foreclosure sale. Finally,

             Count VI charges Lyle, a New Jersey resident; Rose, a Florida

             resident; and Linderman with conspiring to defraud Matusow

             and others of Lyle’s creditors.

                    By order dated April 3, 2007, the District Court

             dismissed all of Matusow’s claims for lack of subject matter

             jurisdiction. The District Court held that Matusow’s claims

             were barred by the domestic relations exception to diversity

      the time appointed for selling the same.

N.J. Stat. Ann. § 2A:17-35.

      A sheriff or other officer selling real estate by virtue of an execution may
      make two adjournments of the sale, and no more, to any time, not exceeding
      14 calendar days for each adjournment. However, a court of competent
      jurisdiction may, for cause, order further adjournments.

N.J. Stat. Ann. § 2A:17-36.

                                               10
subject matter jurisdiction and, alternatively, declined to

exercise jurisdiction under the Burford and Younger abstention

doctrines. Matusow’s timely appeal followed.

       We exercise jurisdiction pursuant to 28 U.S.C. § 1291.

“[O]ur review of a dismissal for lack of subject matter

jurisdiction is plenary.” Frett-Smith v. Vanterpool, 511 F.3d
396, 399 (3d Cir. 2008).

           II. The Domestic Relations Exception

       While conceding that the property at the heart of her

claims is the same property discussed in the Agreement,

Matusow argues that her claims cannot fall within the domestic

relations exception because they do not involve the issuance or

modification of a divorce decree. She also contends that the

domestic relations exception cannot apply to her claims against

Trans-County, the Sheriff, Kim, Linderman, and Rose because

they are not parties to the Judgment.

                              11
       Appellees contend that the domestic relations exception

applies because Matusow seeks a modification of a divorce

decree, and because any judgment in her favor would

necessarily alter the rights and obligations of Matusow and Lyle

under the Judgment and Agreement.

       We agree with Matusow. Because Matusow does not

seek modification of the Judgment between her and Lyle, the

fact that the Winston property is both subject to the Agreement

and related to the present suit does not divest the federal courts

of diversity jurisdiction.

       The Supreme Court has long recognized a domestic

relations   exception     to   federal   diversity   jurisdiction.

Ankenbrandt, 504 U.S. at 693-94. The exception has its roots in

Barber v. Barber, 62 U.S. (21 How.) 582 (1859). In Barber the

Court held that the enforcement of an alimony decree was within

the jurisdiction of the federal courts, id. at 592, but also noted

                                12
that federal courts have no jurisdiction over suits for divorce or

the allowance of alimony, id. at 584; see also Marshall v.

Marshall, 547 U.S. 293, 306 (2006) (discussing the Court’s

holding and dicta in Barber). The modern rule, as expressed in

Ankenbrandt, provides “that the domestic relations exception

encompasses only cases involving the issuance of a divorce,

alimony, or child custody decree.” 504 U.S. at 704. The Court

in Marshall recently affirmed that “only ‘divorce, alimony, and

child custody decrees’ remain outside federal jurisdictional

bounds.” 547 U.S. at 308 (quoting Ankenbrandt, 504 U.S. at

704).5

   5
       We addressed the domestic relations exception in
Solomon v. Solomon, 516 F.2d 1018 (3d Cir. 1975), and we
affirmed a dismissal for lack of subject matter jurisdiction
where the plaintiff brought a suit in diversity against her ex-
husband, seeking “money damages for non-support, specific
enforcement of the separation agreement, and appropriate
equitable relief.” Id. at 1021. At that time, we understood the
domestic relations exception to mean “that the federal courts

                               13
       The plaintiff in Ankenbrandt sued her ex-husband and her

ex-husband’s girlfriend in federal court, alleging that the

defendants sexually and physically abused her daughters and

seeking damages. 504 U.S. at 691. The Court concluded that

the plaintiff did not seek the issuance of a child custody decree;

rather, she alleged that the defendants committed torts against

her children. Id. at 704. Thus, the Court held, jurisdiction

pursuant to 28 U.S.C. § 1332 was “proper in this case.” Id.

       Matusow similarly does not seek the issuance of a

divorce decree or alimony.     In five of six claims (Counts I-II

and IV-VI) Matusow seeks damages, and the remaining count

do not have jurisdiction in domestic relations suits except
where necessary to the effectuation of prior state court
judgments involving the same matters.” Id. at 1024. That
formulation of the exception, however, was broader than the
Supreme Court’s in Ankenbrandt and Marshall. Thus, to the
extent that Solomon conflicts with the subsequent rulings of
the Supreme Court, it has been abrogated.

                               14
(Count III) is an action to quiet title. The claims for which

Matusow seeks damages sound in tort, and, as such, they clearly

fall outside of the domestic relations exception.       Matusow

claims that Trans-County was negligent in conducting a title

search and writing a title insurance policy (Count I). She further

contends that Trans-County violated New Jersey Statute, §

17:46B-9 by issuing a title insurance policy without conducting

a reasonable examination of the title (Count II), and that the

Sheriff violated several New Jersey Statutes 6 in the foreclosure

sale of the Winston property (Count IV). These are statutory

tort claims, and, as such, they do not fall within the domestic

relations exception. Count V is a fraudulent representation

claim against Linderman, and Count VI is a conspiracy to

   6
       See supra note 3.

                               15
commit fraud claim against Linderman, Lyle, and Rose.7

Because Matusow seeks damages in these five tort claims and

not the issuance of a divorce or alimony decree, federal diversity

jurisdiction is “proper in this case.” Ankenbrandt, 504 U.S. at

704.

       Matusow also brings a quiet title action against Kim

(Count III). While this claim sounds in property and not tort, it

also does not involve the issuance of a divorce or alimony

decree. Matusow asks the district court to invalidate the title

between Rose and Kim and establish her title to the property.

Such a result would not affect the Judgment and Agreement

between Matusow and Lyle.           It would establish only that

Matusow currently has an interest in the property. A state court,

   7
         Civil fraud is also a tort. Black’s Law Dictionary 685
(8th ed. 2004) (“Fraud is usu. a tort, but in some cases (esp.
when the conduct is willful) it may be a crime.”).

                               16
in an enforcement proceeding, could still find that Matusow is

in violation of the Judgment and Agreement due to her failure

to transfer her title and interest to Lyle and order her

compliance. Thus, federal diversity jurisdiction over Matusow’s

quiet title claim is proper, as well.

       Appellees contend that Matusow seeks a “modification”

of the divorce decree, which, they argue, is also foreclosed by

Ankenbrandt. Id. at 701-02 (“The Barber Court [] did not

intend to strip the federal courts of authority to hear cases

arising from the domestic relations of persons unless they seek

the granting or modification of a divorce or alimony decree.”).

We agree that the modification of a divorce decree is analogous

to the issuance of a divorce decree.      Matusow does not,

however, seek a modification of the Judgment and Agreement

to which she and Lyle are bound.

       Matusow concedes that the Judgment and Agreement

                                17
require her to transfer her title and interest in the Winston

property to Lyle. In none of her claims, however, does she ask

the court to alter the Judgment and Agreement nor does she

contest their validity.   Matusow alleges (1) that she never

transferred her interest in the Winston property to Lyle, and (2)

that, as an owner of the property, she was injured by the

allegedly fraudulent and illegal transfer of the property.8 She

seeks damages from Trans-County, the Sheriff, Linderman,

Lyle, and Rose, and, she brings an action to quiet title. Even if

Matusow prevailed on all of her claims in federal court, the

Judgment and Agreement would remain intact and enforceable

in state court.    Therefore, Matusow does not seek the

modification of a divorce decree, and the narrow domestic

   8
       We express no opinion as to the merits of Matusow’s
claims or the validity of her factual allegations, including her
allegation that she never signed a deed transferring her
interest in the Winston property to Lyle.

                               18
relations exception does not divest the federal court of

jurisdiction over her claims.

       Moreover, Matusow’s claims do not implicate the policy

concerns that support the application of the domestic relations

exception.    The Court in Ankenbrandt explained that the

issuance of divorce, alimony, and child custody decrees often

require a court to retain jurisdiction past a case’s completion and

appoint social workers to ensure compliance. 504 U.S. at 703-

04. State courts are better suited for this work because of the

relationship they have with the relevant state agencies. Id. at

704.     Additionally, the Court recognized the “special

proficiency” of the state court to handle divorce, alimony, and

child custody decrees. Id. None of these policy considerations

are implicated by Matusow’s claims. No court oversight would

be necessary; no state agency would be helpful in enforcing the

court’s decision; and state courts have no “special proficiency”

                                19
in handling Matusow’s tort claims and action to quiet title. See

DiRuggiero v. Rodgers, 743 F.2d 1009, 1020 (3d Cir. 1984)

(holding that the domestic relations exception did not bar the

plaintiff’s tort claim because continuing supervision by a state

agency was unnecessary and federal district courts are familiar

with applying state tort law).

       Finally, five of the six counts are against persons other

than Lyle and thus against individuals and entities that are not

parties to the Judgment and Agreement. The domestic relations

exception generally does not apply to third parties. Stone v.

Wall, 135 F.3d 1438, 1441 (11th Cir. 1998); see also

Ankenbrandt, 504 U.S. at 704 n.7 (finding that the domestic

relations exception did not apply to the plaintiff’s tort claims

against a third party). This is so because suits against third

parties do not generally involve the issuance or modification of

a divorce, alimony, or child custody decree. Matusow’s case is

                                 20
no exception. None of the Appellees, with the exception of

Lyle, were parties to the Judgment and Agreement, and the

claims against them (Counts I-V) are also external to the

Judgment and Agreement.

       The domestic relations exception is a narrow exception;

it does not divest the federal court of jurisdiction to hear

Matusow’s claims against third parties.

                       III. Abstention

       Alternatively, the District Court also noted that it would

have abstained pursuant to Burford and Younger.9 We employ

a two-step process when reviewing a district court’s decision to

abstain from exercising its jurisdiction. “[O]ur review of the

underlying legal questions is plenary, but we review the decision

to abstain for abuse of discretion.”      Chiropractic Am. v.

   9
       Burford v. Sun Oil Co., 319 U.S. 315 (1943); Younger
v. Harris, 401 U.S. 37 (1971).

                               21
Lavecchia, 180 F.3d 99, 103 (3d Cir. 1999) (explaining the

standard with regard to Burford abstention); see also Marran v.

Marran, 376 F.3d 143, 154 (3d Cir. 2004) (“We exercise

plenary review over the question of whether the elements

required for [Younger] abstention exist. If all of the elements

are present, we review the District Court’s decision to abstain

for abuse of discretion.”) (internal citation omitted).

       “The purpose of Burford is to ‘avoid federal intrusion

into matters of local concern and which are within the special

competence of local courts.’” Hi Tech Trans, LLC v. New

Jersey, 382 F.3d 295, 303-04 (3d Cir. 2004) (quoting

Chiropractic Am., 180 F.3d at 104). We employ a “‘two-step

analysis’” when determining the propriety of abstention under

Burford. Id. at 304 (quoting Riley v. Simmons, 45 F.3d 764, 771

(3d Cir. 1995)). First, we ask “‘whether timely and adequate

state law review is available.’” Id. (quoting Riley, 45 F.3d at

                               22
771). If such review is available, we “‘determine if the case . .

. involves difficult questions of state law impacting on the

state’s public policy or whether the district court’s exercise of

jurisdiction would have a disruptive effect on the state’s efforts

to establish a coherent public policy on a matter of important

state concern.’” Id. (quoting Riley, 45 F.3d at 771).

       Burford does not permit abstention in this case because

Matusow’s claims do not involve any difficult questions of state

law or implicate any complex state policies.            Nor will

Matusow’s claims have any impact on the public policy

concerns of the State of New Jersey. Cf. Chiropractic Am., 180
F.3d at 105-06 (affirming dismissal under Burford abstention

principles where plaintiffs challenged the constitutionality of

New Jersey’s automobile insurance regulations). Thus Burford

abstention is clearly inappropriate in Matusow’s case.

       Younger abstention is appropriate only if “‘(1) there are

                               23
ongoing state proceedings that are judicial in nature; (2) the state

proceedings implicate important state interests; and (3) the state

proceedings afford an adequate opportunity to raise federal

claims.’” Marran, 376 F.3d at 154 (quoting Schall v. Joyce, 885
F.2d 101, 106 (3d Cir. 1989)). In the present case, there are no

on-going state proceedings. The state fraudulent transfer of

property case concluded in early 2006, before Matusow filed the

present suit in November 2006.           The state enforcement

proceeding between Lyle and Matusow concluded on October

16, 2006. Younger abstention cannot be invoked in the absence

of any on-going state proceedings. See Ankenbrandt, 504 U.S.

at 705; Marran, 376 F.3d at 155 (“When there are no pending

state proceedings, Younger abstention is inappropriate.”)

(citation omitted).

       Because neither the Burford nor Younger abstention

doctrines is properly invoked as to Matusow’s claims, the

                                24
District Court must exercise its jurisdiction over Matusow’s

diversity suit.

                       IV. Conclusion

       “[T]he federal courts have a ‘virtually unflagging

obligation . . . to exercise the jurisdiction given them.’”

Ankenbrandt, 540 U.S. at 705 (quoting Colo. River Water

Conservation Dist. v. United States, 424 U.S. 800, 817 (1976)).

Matusow’s claims do not fall within the narrow domestic

relations exception to diversity jurisdiction; neither does any

abstention doctrine permit the District Court to decline to

exercise its jurisdiction. Accordingly, we must reverse the

decision of the District Court and remand for further

proceedings consistent with this opinion.

                              25