Kathleen Elaine Johnston

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UNITED STATES BANKRUPTCY COURT
NORTHERN DISTRICT OF OHIO
EASTERN DIVISION
IN RE:
KATHLEEN ELAINE JOHNSTON,
Debtor.
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CHAPTER 13
CASE NO. 11-61813
JUDGE RUSS KENDIG
MEMORANDUM OF OPINION (NOT
INTENDED FOR PUBLICATION)
Now before the court is chapter 13 trustee’s (“Trustee”) motion to determine amount due
and payable to bankruptcy estate for transfer of certain real property, filed on July 9, 2012.
The court has jurisdiction over this case pursuant to 28 U.S.C. § 1334 and the general order
of reference entered in this district on April 4, 2012. 	Venue in this district and division is proper
pursuant to 28 U.S.C. § 1409. This proceeding is a core proceeding under 28 U.S.C. §
157(b)(2)(A) and (E).
This opinion is not intended for publication or citation. 	The availability of this opinion, in
electronic or printed form, is not the result of a direct submission by the court.
FACTS AND ANALYSIS
Debtor was previously married to Frank Ferraro (“Ferraro”). 	As part of the dissolution
of their marriage, Debtor and Ferraro entered two agreements to divide their marital property: a
time and date indicated, which may be materially different from its entry on the record.
of this court the document set forth below. This document was signed electronically at the
The court incorporates by reference in this paragraph and adopts as the findings and orders
Dated: 10:05 AM November 26, 2012
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land installment contract dated April 8, 2010 (“land contract”) and a separation agreement dated
April 8, 2010 (“separation agreement”).
The land contract dealt with real property located at 4046 Falcon Circle NW in Massillon,
Ohio (“residence”) and provided that Ferraro would buy the residence from Debtor for the
purchase 	price 	of 	$200,000.00. 	Ferraro 	would 	make 	monthly 	payments 	of 	$1,565.00
commencing on April 1, 2010 and due on the first (1st ) day of each subsequent month for a period
of eighteen (18) months until September 30, 2011 when Ferraro was to fully satisfy/pay the
purchase price to Debtor. 	Ferraro’s monthly payments to Debtor were to be directly deposited
into an account with Key Bank jointly held by Debtor and Ferraro.1 Then the mortgage payments
on the residence were automatically withdrawn from this account monthly.
Debtor was responsible for making the monthly mortgage payments on the residence
during this eighteen (18) month period. 	The land contract provided that if Debtor defaulted on the
mortgage, then Ferraro could cure the default and would receive a credit in payments to Debtor.
The separation agreement incorporated the land contract and also provided that Ferraro would
receive the yacht in the divorce and be responsible for any and all obligations on the yacht. 	Each
party was also to retain their respective leased vehicle, free and clear of any claims of the other.
Debtor filed bankruptcy on May 27, 2011. 	On December 8, 2011, the Court entered an
order confirming Debtor’s second amended chapter 13 plan, which provided that once Ferraro
paid the land contract in full by September 29, 2011,2 the proceeds would be property of the estate.
To date, Ferraro has not completed his obligations under the land contract.
On July 9, 2012, Trustee filed a motion to determine the amount due and payable to the
bankruptcy estate under the land contract (“motion”). 	Trustee calculates that Ferraro must pay
the bankruptcy estate $63,246.43. 	Debtor filed an objection to Trustee’s motion on July 11, 2012
which argues that Ferraro should pay the bankruptcy estate $76,959.15. 	Debtor argues that
Trustee’s calculation improperly credited Ferraro for the monthly payments of $1,565.00 and that
Ferraro must pay the entire balance of the mortgage. 	Debtor also argues that Ferraro failed to pay
vehicle insurance of $773.52 and yacht insurance of $651.24, that she paid these expenses instead,
and that she is entitled to a credit for these expenses. 	Ferraro responded to Trustee’s motion on
July 27, 2012 and argues that the amount he owes under the land contract is $50,000.00.
On September 27, 2012, the Court held an evidentiary hearing on Trustee’s motion.
Debtor testified on her own behalf and Ferraro testified on his own behalf. 	The issue of how
much Ferraro must pay under the land contract and separation agreement is complicated because
both parties defaulted under the separation agreement. 	As noted above, Ferraro deposited his
monthly payments on the land contract into the joint bank account and the monthly mortgage
payments were automatically withdrawn from this account. 	There is no dispute that Ferraro
deposited the monthly payment into the account each month. 	However, on at least two occasions
1 Key Bank is also the mortgagee of the residence.
2 It is unexplained why the confirmed plan states that Ferraro will complete the land contract by September 29, 2011
when the land contract provides that the deadline is September 30, 2011.
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within a few months before Debtor filed bankruptcy, Debtor removed the monies deposited by
Ferraro before the monthly mortgage payments were withdrawn. 	This resulted in the mortgage
going into default by two (2) payments. 	Debtor testified that she withdrew these monies to pay
insurance for a vehicle and Ferraro’s yacht. 	Debtor believed that Ferraro was required to pay
these insurance costs, but failed to do so. 	Since Debtor’s name remained on these items, she paid
the insurance for liability reasons.
After the evidentiary hearing, the Court entered an oral judgment that Ferraro must pay the
bankruptcy estate the balance that would have been due as of September 30, 2011 if all parties had
done what they should have after accounting for credits and debits to both Debtor and Ferraro.
Any advantages or disadvantages of the residence and mortgage are Ferraro’s after September 30,
2011 and, thus, any payments made by Ferraro since September 30, 2011 are ignored in the
calculation. 	Further, Debtor has no right to have the mortgage paid off by Ferraro because she
defaulted under the land contract. 	That said, the Court’s ruling is contingent on Debtor getting
her discharge. 	The Court stated it will enter an opinion as to its calculation of the monies due to
the bankruptcy estate by Ferraro. 	The following constitutes the Court’s calculation and analysis
of the amount due from Ferraro to the bankruptcy estate.
The Court begins its calculation with the balance of the mortgage as of June 22, 2011 of
$133,654.62 in accordance with the mortgagee’s proof of claim, no. 5-1, filed on June 29, 2011.
Utilizing an amortization chart for a 15-year mortgage of $189,000.00 at 5.66% interest borrowed
on October 7, 2004, the Court determined the monthly principal payments made to the mortgage
for the months of July, August, and September 2011, respectively $974.70, $979.30, and $983.91.
The Court deducted these principal payments from the June 22, 2011 mortgage balance of
$133,654.62 to reach a principal balance of $130,716.71 as of September 30, 2011.
Since Debtor is not entitled to have Ferraro pay off the mortgage, the Court next subtracts
the principal mortgage balance of $130,864.91 as of September 30, 2011 from the purchase price
of $200,000.00 under the land contract. 	The resulting amount is $69,283.29. 	Ferraro shall
remain obligated on the outstanding principal balance of the mortgage.
In terms of credits and debits made to this calculation, the Court credits Ferraro for the two
payments of $1,565.00 that Debtor withdrew from the joint account before the mortgage payments
were withdrawn. 	Debtor was required to pay the mortgage on the residence and breached the land
contract by failing to make two (2) of the mortgage payments. 	As a result, the amount of
$69,283.29 is reduced by $3,130.00 to $66,153.29.
With respect to the insurance payments that Debtor paid on the vehicle ($773.52) and yacht
($651.24), under the separation agreement, Ferraro was responsible for the insurance on both his
personal vehicle and the yacht. 	Ferraro breached the separation agreement by failing to pay the
insurance on these items. 	However, Debtor failed to provide Ferraro with the plates for his
vehicle. 	Since he was not able to legally drive the vehicle, he will not be held responsible for
payment of the insurance on the vehicle. 	Accordingly, Debtor is entitled to a credit for $651.24
that she paid in insurance for the yacht only. 	As a result, the amount of $66,153.29 is increased by
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$651.24 to $66,804.53.
Finally, Ferraro is entitled to a credit for the fees and interest that accrued on the mortgage
between March 1, 2011, when the missed payments began, and September 30, 2011. 	No proof
was provided to the Court regarding the fees and interest that accrued on the mortgage as a result of
Debtor’s breach of the land contract. 	Ferraro shall have fourteen (14) days from the entry of this
memorandum of opinion to file proof with the Court regarding any fees and interest that accrued
between March 1, 2011 and September 30, 2011. 	Debtor shall have seven (7) days from the date
of Ferraro’s filing to object to his proof. 	Once Ferraro files such proof with the Court and Debtor
has an opportunity to object, the Court will review it and enter an order regarding the allowance or
disallowance of a credit to Ferraro for the fees and interest. 	If Ferraro fails to provide such proof
to the Court within fourteen (14), then he shall not be entitled to any credit for the fees and interest
as a result of Debtor’s breach.
Ferraro is not entitled to any damages for fees and interest that accrued after September 30,
2011 or for any damages related to his inability to refinance the mortgage as a result of Debtor’s
breach. 	Ferraro breached the separation agreement by failing to pay the insurance. 	There is joint
fault and these are equitable assessments. 	In addition, Ferraro presented no proof that he was
unable to refinance the mortgage solely because of Debtor’s breach or that he would have been
able to refinance the mortgage absent Debtor’s breach. 	Ferraro testified that Key Bank would not
speak to him about the account. 	In the accompanying order, the Court will grant Key Bank relief
from the automatic stay and co-debtor stay in order to deal with Ferraro with regard to any matter
relating to this obligation.
In conclusion, Ferraro shall pay the sum of $66,804.53 to the bankruptcy estate subject to a
possible a credit to Ferraro due to Debtor’s breach. 	Ferraro shall pay this sum to Trustee by the
deadline that will be set forth in this Court’s future order after the deadline for Ferraro to provide
proof of the fees and interest has elapsed. 	If Ferraro fails to pay this sum in full to Trustee by that
deadline, Ferraro shall pay interest at the rate of 9.39% on the unpaid sum until the sum is fully
paid to Trustee.3
An appropriate order will be entered simultaneously with this memorandum of opinion.
# 	# 	#
Service List:
Gerald B Golub
1340 Market Ave North
Suite 1
Canton, OH 44714
3 Ferraro is not responsible for interest prior to this date because Debtor also breached the separation agreement.
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Kathleen Elaine Johnston
7696 Kemary Ave SW
Navarre, OH 44662
Toby L Rosen, Trustee
400 W Tuscarawas St
Charter One Bank Bldg
4th Floor
Canton, OH 44702
Alfred D. McCallin
116 Cleveland Ave NW
500 Courtyard Centre
Canton, OH 44702
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