Mergenthaler v. Thaler et al

Filing 9

MEMORANDUM AND OPINION - For the foregoing reasons, Appellant's request for a stay pending appeal is DENIED and all four of Appellant's matters are sue sponte consolidated into case 15-CV-02034. All future filing related to the pending appe als shall be filed in case 15- CV-02034. The Clerk of the Court is directed the following matters CLOSED: 15-CV-02031, 15-CV-02032, and 15-CV-02033. The Clerk of the Court is further directed to mail a copy of this Memorandum & Order to the pro se litigant. So Ordered by Judge Joanna Seybert on 4/29/2015. C/M (Valle, Christine)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF NEW YORK
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In re MERGENTHALER

---------------------------------------X
DEAN OSEKAVAGE d/b/a PATHFINDERS
USA as assignee of Judith Wetzstein,

MEMORANDUM & ORDER
15-CV-02031(JS)
15-CV-02032(JS)
15-CV-02033(JS)
15-CV-02034(JS)

Plaintiff-Respondent,
-against–
PETER MERGENTHALER,
Defendant-Appelant.
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APPEARANCES:
For Appellant:
Peter Mergenthaler, pro se
3 Wood Edge Court
Water Mill, NY 11976
For Appellee
Andrew M. Thaler:

For Appellee
United States
Trustee:

For Appellee
Dean Osekavage:

Andrew M. Thaler, Esq.
Thaler Law Firm PLLC
675 Old Country Road
Westbury, NY 11590

Christine Black, Esq.
Office of the U.S. Trustee
560 Federal Plaza
Central Islip, NY 11572
Melissa Beth Levine, Esq.
Gold Benes LLP
1854 Bellmore Avenue
Bellmore, NY 11710

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For Appellee
Mark A.
Cuthbertson:

Mark A. Cuthbertson, Esq.
Law Offices of Mark A. Cuthbertson
434 New York Avenue
Huntington, NY 11743

SEYBERT, District Judge:
Pending

before

the

Court

is

Peter

Mergenthaler’s

(“Appellant”) motion seeking a stay pending appeal of four orders
issued by Bankruptcy Judge Robert E. Grossman.

Appellant filed

four separate bankruptcy appeals before the undersigned along with
the same order to show cause in each case.
on April 21, 2015.

Oral argument was held

For the foregoing reasons, Appellant’s request

for a stay is denied and his cases are sue sponte consolidated.
BACKGROUND
Appellant obtained a divorce from his first wife, Judith
Wetzstein, in Florida on March 23, 1998. (Compl., Case No. 8-1474517, Docket Entry 1, at 3.)

On that date, Appellant signed a

Marital Rights and Property Settlement Agreement (the “Settlement
Agreement”), in which he promised to pay certain sums of money to
Ms. Wetzstein.

(Compl. at 3.)

The Settlement Agreement was

incorporated into a Florida Divorce Judgment.

However, Plaintiff

never made any payments under the Settlement Agreement to Ms.
Wetzstein.

(Order to Show Cause (“OTSC”), Docket Entry 5,1 Ex.

Unless otherwise specified, all references to docket entries
correspond to the docket for case No. 15-CV-02034.
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2

2.)

On July 17, 2006, Ms. Wetzstein assigned the Florida divorce

judgment to Dean Osekavage d/b/a Pathfinders USA, a debt collection
Company. (Compl. at 4.) Five years later, on November 20, 2011,
Ms. Wetzstein sadly committed suicide.

(See Decl. of Roger D.

Olson, Docket Entry 6, ¶ 3.)
In September of 2011, Osekavage commenced an action in
New York State Supreme Court, Suffolk County before Judge Arthur
G. Pitts (the “State Court Case”) against Appellant and his current
wife, Rosemary Mergenthaler, seeking to domesticate the Florida
Divorce Judgment.

(Compl. at 4.)

On April 19, 2012, Judge Pitts

granted Osekavage’s motion for summary judgment against Appellant
and issued an order finding as follows:
Ordered that the judgment is granted against
the defendant Peter Mergenthaler, in the
amount of $1,517,508.26, which sum represents
the original principle amount of the judgment
plus interest from Florida, together with
interest now calculated from January 13, 2012,
pursuant to a finding that the defendant is in
default of his obligations under a “Final
Judgment of Dissolution of Marriage” entered
on March 23, 1998 by the 15th Judicial Circuit
Court, Palm Beach County, Florida.
(Compl. Ex. 1.)
judgment

was

On May 3, 2012, based upon the above order,

entered

in

Osekavage’s

favor

in

the

amount

of

$1,560,052.74. (Compl. Ex. 1.)
On March 25, 2014, the Suffolk County Supreme Court
appointed Mark A. Cuthbertson, Esq. as receiver of the home in
which Appellant lives with his wife, located at 3 Wood Edge Court,
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Water Mill, NY 11976 (“the Property”).

(Declaration of Melissa

Levine (“Levine Decl.”), Docket Entry 6-2, ¶ 6.)

It is undisputed

that the Property is solely owned by Appellant’s wife, Rosemary
Mergenthaler.

(Levine Decl. ¶ 6.)

Nevertheless, on December 14, 2014, the New York State
Supreme Court issued a judgment against Rosemary Mergenthaler in
the amount of $1,658,528.26 and placed a lien on the Property.
(Levine Decl. ¶ 5.)

The court issued the judgment pursuant to New

York Debtor and Creditor Law section 273 based upon a finding that
Appellant used monies he should have paid to his ex-wife to acquire
and provide upkeep for the Property.

(Levine Decl. ¶ 5.)

On July 17, 2014, Cuthbertson--in his role as receiver
of the Property--commenced an eviction action against Appellant
and his wife.

Cuthbertson then entered into a contract to sell

the Property for $1,850,000 on August 20, 2014.

(Levine Decl.

¶ 9.)
Appellant filed for Chapter 7 bankruptcy on October 10,
2014,

listing

liabilities.

$0

to

$50,000

in

assets

over

$1,000,000

in

(See Bankruptcy Petition, Case No. 14-74517, Docket

Entry 1, at 13.)

In his bankruptcy petition, Appellant claimed

that he did not own any real property.

Dean Osekavage is listed

as Appellant’s largest creditor in his bankruptcy petition, with
a claim of $1,600,000. (Bankruptcy Petition at 19.) Subsequently,
Osekavage and Pathfinders USA commenced an adversarial proceeding
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(the “Adversarial Proceeding”) against Appellant on January 5,
2015 to prevent Appellant from discharging Osekavage’s judgment.
(Levine Decl. ¶ 15.)
In Appellant’s Chapter 7 Bankruptcy Action, the Court
issued an order lifting the automatic stay with respect to the
Property.

(Order, Case No. 8-14-74517, Docket Entry 24.)

During

oral argument, Judge Grossman explained that he was lifting the
automatic stay with respect to the Property because Appellant did
not have title to the Property.

Judge Grossman specifically

explained:
[T]he property at issue here is not property
of your estate. You don’t own it. You don’t
have an economic interest in the property.
All you may have is a possessory right which
allows you to sleep there. You may convince
a state court judge not to evict you. You may
not. That’s the state court. That’s not done
here. There’s nothing for me to do here.
(Levine Decl. Ex. F-1 at 7:15-21.)

Judge Grossman subsequently

denied three motions filed by Appellant seeking reconsideration of
his decision.

(Levine Decl. ¶¶ 17, 22, 27.)

In the Adversarial Proceeding, Judge Grossman granted
Osekavage’s motion for summary judgment on April 3, 2015 and held
that (1) “the obligation underlying Plaintiff’s judgment was a
domestic

support

obligation,”

(2)

that

the

obligation

was

voluntarily assigned to Osekavage by the Appellant’s ex-spouse,

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and (3) Osekavage’s judgment was not dischargeable in bankruptcy.
(Levine Decl. Ex. W.)
Appellant filed appeals of the following orders issued
by

the

Bankruptcy

Court:

(1)

the

Bankruptcy

Court’s

summary

judgment order in the Adversarial Proceeding (Case No. 15-CV2034); (2) the Bankruptcy Court’s order denying Appellant’s motion
to reconsider the court’s decision to lift the automatic stay (Case
No.

15-CV-2031);

(3)

the

Bankruptcy

Court’s

order

denying

Appellant’s supplemental motion for reconsideration of the same
order (Case No. 15-CV-2032); and (4) the Bankruptcy Court’s order
denying Appellant’s second supplemental motion to reconsider the
same order (Case No. 15-CV-2033).
Appellant now seeks to stay execution of the Bankruptcy
Court’s decisions until his appeals are resolved.
2.)

(See OTSC at 1-

Plaintiff claims that the Bankruptcy Court should not have

lifted the automatic stay with respect to the Property and should
not have found that Osekavage’s judgment was not dischargeable in
bankruptcy.

Liberally construed, Appellant makes two arguments

that apply to both claims: (1) Appellant argues that because
Osekavage

is

a

professional

debt

collector,

his

judgment

is

illegitimate and (2) Appellant argues that Osekavage should not be
allowed to collect on a judgment against Appellant by levying on
a house that only his wife owns.

(See OTSC ¶ 25.)

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DISCUSSION
I.

Stay Pending Appeal
In deciding whether to grant a stay pending appeal, I

must consider the following four factors:
(1) whether the stay applicant has made a
strong showing that he is likely to succeed on
the merits; (2) whether the applicant will be
irreparably injured absent a stay; (3) whether
issuance of the stay will substantially injure
the
other
parties
interested
in
the
proceeding; and (4) where the public interest
lies.
In re Vytautas Vebeliunas, No. 01-CV-1108, 2002 WL 535503, at *1
(S.D.N.Y. Apr. 10, 2002) (quoting In re Marine Pollution Serv.,
Inc., 89 B.R. 344, 345 (S.D.N.Y. 1988)); Hirshfeld v. Board of
Education, 984 F. 3d 35, 39 (2d Cir. 1993).

The party seeking a

stay pending appeal bears the burden of proving entitlement to the
stay.

United States v. Private Sanitation Industry Ass’n of

Nassau/Suffolk, Inc., 44 F.3d 1082, 1084 (2d Cir. 1995). The Court
will consider each factor in turn.
A.

Irreparable Harm
Appellant

argues

that

he

and

his

wife

will

suffer

irreparable harm because they will be evicted from their home
absent a stay.

(Reply Br., Docket Entry 8, ¶¶ 38-41.)

Osekavage

argues in opposition that Appellant’s rights will not be affected
if

the

Property

Appellant’s wife.

is

sold

because

the

Property

is

owned

(Opp. Br., Docket Entry 6-45, at 15.)

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by

Here,

Appellant will undeniably suffer irreparable harm if he is evicted
from his home, regardless of the fact that he merely has a
possessory interest in the Property.
495

(E.D.N.Y.

1996)

(holding

that

In re Slater, 200 B.R. 491,
a

litigant

would

suffer

irreparable harm if she was evicted from the home she lived in for
twenty years).

Plaintiff represented that he has nowhere else to

go and he recently declared bankruptcy. Therefore, the Court finds
that the irreparable harm factor weighs in favor of Appellant.
B.

Likelihood of Success on the Merits
“[T]he proper standard governing the strength-of-the-

case

component

of

a

motion

for

a

stay

pending

appeal

of

a

bankruptcy court order is ‘substantial possibility’ of success on
the merits--i.e., the same standard utilized on a motion to stay
a district court’s order pending appeal to the Court of Appeals.”
In re Gen. Credit Corp., 283 B.R. 658, 660 (S.D.N.Y. 2002).
Although Appellant finds faults with four of Judge Grossman’s
Orders, only two substantive issues are relevant to his appeals:
(1) whether the Bankruptcy Court correctly lifted the automatic
stay with respect to the Property at issue and (2) whether the
Bankruptcy Court correctly decided that Osekavage’s judgment is
not dischargeable.
i.

Whether the Bankruptcy Court Properly Lifted the
Automatic Stay

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The Bankruptcy Court lifted the automatic stay with
respect to the Property at issue because it was not part of
Appellant’s bankruptcy estate.

“Section 541 of the Bankruptcy

Code provides that the commencement of a bankruptcy case ‘creates
an estate . . . comprised of . . . all legal or equitable interests
of the debtor in property as of the commencement of the case.’”
Bloch v. Bloch, No. 09-CV-3963, 2010 WL 3824125, at *3 (E.D.N.Y.
Sept. 23, 2010) (quoting 11 U.S.C. § 541).

“Whether or not a

debtor has an interest in property sufficient to bring it within
the ambit of ‘property of the estate’ is determined by state law
or other applicable nonbankruptcy law.”

In re Taub, 427 B.R. 208,

219 (Bankr. E.D.N.Y. 2010) (internal citation and quotation marks
omitted), aff’d, No., 2011 WL 1322390 (E.D.N.Y. Mar. 31, 2011).
“Under New York law, one spouse’s rights in marital property owned
by the other are inchoate and do not vest until entry of a judgment
of divorce.”
2006).

DiGeronimo v. Weissberg, 354 B.R. 625, 637 (E.D.N.Y.

Thus,

whether

property

becomes

part

of

a

spouse’s

bankruptcy estate depends upon who has title to the property when
the petition is filed.

See Musso v. Ostashko, 468 F.3d 99, 105-

06 (2d Cir. 2006) (Under New York law, “[a] spouse without legal
title has no interest in marital property prior to obtaining a
judgment

creating

such

an

interest.”

quotation marks omitted)).

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(internal

citation

and

Here, it is undisputed that the Property at issue is
owned

by

Appellant’s

current

wife,

not

by

Appellant,

and

Appellant’s wife did not file for bankruptcy along with her
husband.

Therefore, the Bankruptcy Court’s decision to lift the

automatic stay with respect to the Property was straightforward,
and Appellant has not shown that he is likely to succeed on the
merits with respect to his appeals related to Judge Grossman’s
decision to lift the automatic stay.
ii.

Whether the Bankruptcy Court Correctly Decided that
Osekavage’s Judgment was not Dischargeable

Following a hearing, the Bankruptcy Court decided that
Osekavage’s state court judgment against Appellant was a domestic
support

obligation.

“Domestic

support

obligations,

such

as

spousal maintenance and child support . . . are not dischargeable
and thus survive the bankruptcy discharge.”

Bloch v. Bloch, 2010

WL 3824125, at *2; see 11 U.S.C. § 523(a)(5); In re Bezoza, 271
B.R. 46, 51 (S.D.N.Y. 2002).

As is relevant to this appeal, the

term “domestic support obligation” means:
[A] debt that accrues before, on, or after the
date of the order for relief in a case under
this title, including interest that accrues on
that debt as provided under applicable
nonbankruptcy law notwithstanding any other
provision of this title, that is (A) owed to
or recoverable by (i) a spouse, former spouse,
or child of the debtor [that is] . . . . (B) in
the nature of alimony, maintenance, or
support . . . . [and was] not assigned to a
nongovernmental
entity,
unless
that
obligation is assigned voluntarily by the
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spouse, former spouse, child of the debtor, or
such child’s parent, legal guardian, or
responsible relative for the purpose of
collecting the debt.
11 U.S.C.A. § 101.
Appellant

argues

that

because

Osekavage

is

a

professional debt collector, his state court judgment is not
legitimate and is therefore unenforceable.
argument misses the point.

However, Appellant’s

The only issue before the Bankruptcy

Court with respect to Osekavage’s status as a creditor was whether
Osekavage’s judgment was a domestic support obligation.
Rooker-Feldman

doctrine,

whether

the

judgments

Under the

Osekavage

was

granted in state court were properly obtained is not a question
that the Bankruptcy Court--or this Court--has jurisdiction to
decide. “[B]ecause only the United States Supreme Court may review
a final decision of a state court, federal district courts do not
have jurisdiction over claims that have already been decided, or
that are ‘inextricably intertwined’ with issues that have already
been decided, by a state court.”

Bridgewater Operating Corp. v.

Feldstein, 346 F.3d 27, 29 (2d Cir. 2003); see Walker v. New York,
345 F. Supp. 2d 283, 289 (E.D.N.Y. 2004) (holding that the Rooker–
Feldman doctrine barred the plaintiff’s claims because “the relief
sought by Plaintiff [was] essentially retrospective: relief from
a past judgment ordered against him by the state courts”),

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aff’d, 150 F. App’x 28 (2d Cir. 2005).

Here, Osekavage obtained

a judgment against both Appellant and his wife in state court.
This Court will not re-litigate whether those judgment were validly
granted in state court.

Moreover, Appellant does not raise any

specific challenge to the Bankruptcy Court’s decision classifying
Osekavage’s judgment as domestic support obligation.

Therefore,

it is unlikely Appellant will succeed on the merits with respect
to his appeal of the Bankruptcy Court’s summary judgment decision.
iii. Injury to Other Parties
The third element of the analysis looks to the harm that
could befall the party opposing the stay.

Here, Osekavage’s

company will suffer some harm if a stay is granted because it will
be subject to further delay.

Specifically, there is a cash

purchaser waiting to take possession of the Property and Osekavage
will have to pay additional insurance premiums to keep the property
in receivership.
C.

(Opp. Br. at 15.)

The Public Interest
The final factor looks to the public interest. 28 U.S.C.

§ 471 Contemplates the just, speedy, and inexpensive resolutions
of civil disputes.

This matter has been litigated for the better

part of a decade in at least three separate courts.

Moreover,

judgments have been rendered against both Appellant and his wife.
Thus, the public interest will not be served by delaying this
dispute any further.
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D.

Considering the Factors Together
Considering all of the above factors, Appellant has not

demonstrated that a stay is warranted pending appeal.

Critically,

Appellant has not shown that he is likely to succeed on the merits.
Although eviction is a grave remedy, if Appellant is evicted from
his home it will be because he litigated and lost in state court.
This Court will not intervene in state court proceedings when
Appellant is not likely to prevail on his appeals.2
II.

Consolidation
Under Federal Rule of Civil Procedure 42(a), a court may

consolidate multiple cases that “involve a common question of law
or

fact.”

FED. R. CIV. P.

42(a).

Courts

are

empowered

to

consolidate related cases sue sponte provided that the “savings of
expense

and

gains

of

sacrifice of justice.”

efficiency

can

be

accomplished

without

Devlin v. Transp. Commc’ns. Int’l Union,

175 F.3d 121, 130 (2d Cir. 1999) (emphasis in original) (quoting
Consorti v. Armstrong World Indus., Inc., 72 F.3d 1003, 1007 (2d
Cir. 1995));
Cir. 1990)

Johnson v. Celotex Corp., 899 F.2d 1281, 1284–85 (2d
Here, although each of Appellant’s cases stem from

separate orders issued by the Bankruptcy Court, all of the orders

Osekavage also argues that two of Appellant’s cases should be
dismissed because he did not timely file notices of appeal within
fourteen days after each order was entered, as required by
Bankruptcy Rule 8002(a)(1). However, the Court need not address
the issue of timeliness to resolve Appellant’s motions for a stay.
2

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(1) relate to the same facts, (2) involve the same parties, and
(3) were issued by the same Judge.

Indeed, it would be more

confusing to allow Appellant’s cases to proceed separately than to
consolidate them.

Therefore, consolidation is appropriate here.
CONCLUSION

For the foregoing reasons, Appellant’s request for a
stay pending appeal is DENIED and all four of Appellant’s matters
are sue sponte consolidated into case 15-CV-02034.

All future

filing related to the pending appeals shall be filed in case 15CV-02034. The Clerk of the Court is directed the following matters
CLOSED: 15-CV-02031, 15-CV-02032, and 15-CV-02033.

The Clerk of

the Court is further directed to mail a copy of this Memorandum &
Order to the pro se litigant.

SO ORDERED.
/s/ Joanna Seybert_______
Joanna Seybert, U.S.D.J.
Dated:

April 29, 2015
Central Islip, New York

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