Matusow v. Trans Cty Title Agcy ( 2008 )

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Precedential or Non-Precedential: Precedential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