2006 Judge Lyons - Opinions

Judge Raymond T. Lyons -- Opinions signed in 2006

Michael W. Browne 12-06-06 Case 05-28758

Debtor sought sanctions against state (New Jersey Motor Vehicle Commission) for violation of discharge injunction. Events giving rise to MVC’s claim occurred prepetition, so claims were discharged and NJ-MVC’s collection efforts were found to have violated the discharge injunction under 11 U.S.C. § 524(a)(2). A claim for surcharge arises on the date of the motor vehicle offense. However, because the MVC was found to have acted in good faith, sanctions were inappropriate.

358 B.R. 139 (Bankr. D.N.J. 2006)


Buccolo v. Buccolo 1-11-06 Case 05-30789 05-2819

The Debtor sought to sell her residence in accordance with her 100% payment Chapter 13 plan. The Plaintiff-Debtor initiated this adversary proceeding in order to compel her estranged husband to either cooperate with the sale or vacate the former marital home. The husband sought relief from the automatic stay so that he could proceed in state court for equitable distribution of the marital property. Under N.J.S.A. §2A: 34-23, the right to equitable distribution does not exist until the entry of the judgment of divorce. Therefore at the moment of the bankruptcy filing, the trustee’s judgment lien creditor status is superior to the husband’s interests, and the home is property of the estate. 11 U.S.C. § 541. Granted as to plaintiff, denied as to defendant.

2006 Bankr. LEXIS 4078 (Bankr. D.N.J. Jan. 11, 2006)
2006 WL 4452990 (Bankr. D.N.J. Jan. 11, 2006)


First American Title Ins. Co v. Lawrence & Janet Coven 8-17-06 Case 04-24703 04-2512

Objection to discharge under 11 U.S.C. §§ 727(a)(2) & (a)(5). Claim that debtor Janet Coven intended to defraud bank. The marital relationship does not automatically give rise to an agency relationship. Accordingly, the husband’s fraud was not attributed to the wife. Plaintiff bank was not a creditor via subrogation, contribution or indemnification, and thus lacked standing to challenge the discharge. Objection to discharge denied.

2006 Bankr. LEXIS 1956 (Bankr. D.N.J. Aug. 17, 2006)
2006 WL 2385423 (Bankr. D.N.J. Aug. 17, 2006)


Dobin v. Hill 5-09-06 Case 04-30325 05-1183

The Chapter 7 Trustee brought this fraudulent transfer action under 11 U.S.C. § 548(a)(1)(a) against Debtor’s former spouse. Just prior to the Debtor’s bankruptcy filing, Debtor and her former spouse entered into a divorce settlement. The Court determined that the divorce settlement was inequitable towards the Debtor, finding actual intent to shield assets and thereby defraud creditors. Debtor failed to establish a § 548(c) good faith defense. Trustee was entitled under § 550 to recover value of the property to thwe extent the equitable distribution was not of “reasonably equivalent value” resulting from “arms-length” bargaining where debtor/spouse created a fraudulent transfer by waiving the right to marital property.

342 B.R. 183 (Bankr. D.N.J. 2006)


Ann Hiltner v USA 2-24-06 Case 05-60061 05-6012

Adversary proceeding against defendant government. The government moved to dismiss for lack of subject matter jurisdiction (sovereign immunity) and for failure to state a claim. Plaintiff failed to respond to any of the government’s grounds for dismissal. Furthermore, plaintiff had filed under Chapter 7, so only the trustee had standing to file suit, and the trustee chose not to. The Court found in favor of the government. 28 U.S.C. § 2671; Fed. R. Civ. Proc. 12(b)(6).

2006 Bankr. LEXIS 4120 (Bankr. D.N.J. Feb. 24, 2006)
2006 WL 4452992 (Bankr. D.N.J. Feb. 24, 2006)


Cora Jackson- Bostic 6-14-06 Case 02-52127

Motion brought by a Chapter 13 Debtor to enforce her plan’s cram-down provision against a second mortgagee. The Mortgagee objected, arguing that it was not given sufficient notice. Bankruptcy Rule 3015(d) requires the plan or a summary thereof be included with notice of the hearing on confirmation, which in this case was mailed pursuant to Rule 2002. Rule 9014(b), which provides for heightened notice standards, was found inapplicable because a cram-down is not a contested matter. The Court found that the Mortgagee had actual notice of the plan summary. The Mortgagee’s failure to object to plan confirmation was equivalent to acceptance (see in re Szostek, 886 F.2d 1405 (3rd Cir. 1989)) and made that plan binding upon it. Fed. R. Bankr. Pro. 3015.

2006 Bankr. LEXIS 4132 (Bankr. D.N.J. June 14, 2006)
2006 WL 4457347 (Bankr. D.N.J. June 14, 2006)


Montgomery Ward v. OTC 9-12-06 Case Delaware 00-4667 02-9282

Preferential payments made within 90 days of filing under 11 U.S.C. § 547(c)(2). Plaintiff continued to make weekly payments, a change in terms was ordinary, and Defendant continued to ship goods. Therefore payments were permissible because they were in the ordinary course of business.

348 B.R. 662 (Bankr. D. Del. 2006)


Mystic Tank Lines, Corp. 11-13-06 Case 04-28333

Debtor filed a motion to expunge claim for a software license. Because the Debtor failed to provide evidence that the software constituted non-conforming goods, it did not meet its burden to show cause, failing to overcome the presumption of validity afforded to a proof of claim filing, 11 U.S.C. § 501.

354 B.R. 694 (Bankr. D.N.J. 2006)


Andrea M. Nolan 7-10-06 Case 04-35987

Remanded from District Court for further consideration. Attorney fee application in a Chapter 13 case challenged for being grossly excessive. Applicant was entitled to keep flat fee for services that were normal and customary. For services beyond that, the lodestar method was employed to determine the appropriate fee. Here, Applicant was denied any additional fees for defending a stay relief motion where work done was routine and should have been billed as if done by an experienced Chapter 13 attorney. Additional problem with billing for time spent contacting ex-husband to meet his support obligations where Applicant should have recognized conflict of interest in simultaneous representation of both ex-spouses. N.J.R.P.C 1.7.

2006 Bankr. LEXIS 1569 (Bankr. D.N.J. July 10, 2006)
2006 WL 2085238 (Bankr. D.N.J. July 10, 2006)


Perkins v. Parise 10-25-06 Case 04-41297 05-1332

Plaintiff/trustee sought to avoid certain prepetition
transfers of funds from the corporate debtor to the defendants pursuant to 11 U.S.C. § 544(b). Debtor ran a Ponzi scheme, so it was found that all payments were made with actual intent to defraud creditors. Payments in excess of the investment in the scheme were avoided as fraudulent conveyances, N.J.S.A. 25:2-29(a)(1). Defendants allowed a good faith defense under N.J.S.A. 25:2-30(a) with regard to their returned investment.

2006 Bankr. LEXIS 2898 (Bankr. D.N.J. Oct. 25, 2006)
2006 WL 3040918 (Bankr. D.N.J. Oct. 25, 2006)


Polycel Liquidation 4-18-06 Case 00-62780

Prior to this dispute, the Chapter 11 Debtor had sold assets in its possession to a third-party in a 11 U.S.C. § 363 sale. These assets included molds that were the property of a prior customer of the Debtor. The customer was not a creditor, had not received notice of the § 363 sale, and challenged the sale of these molds. The §363(m) protections for good faith purchasers did not apply because the challenge was not an appeal of a Sale Order but rather a Rule 60(b) motion for relief. The Court granted relief, finding that the Sale Order previously signed by court was void because a sale of the true owner’s property without notice violated due process rights. Fed. R. Civ. P. 60(b)(4); Fed. R. Bankr. P. 9024. The interest in constitutional due process rights was deemed superior to the interest in the finality of bankruptcy sales.

2006 WL 4452982 (Bankr. D.N.J. Apr. 18, 2006)


Ivan Salinas v. U.S. Dept of Education 12-18-06 Case 93-28792 02-3450

Dischargeability of student loans under 11 U.S.C. § 523(a)(8). Because the loans did not come due more than seven years before the petition date and the government is not subject to the equitable defense of laches, the loans are nondischargeable. Congress specifically abolished any statute of limitations on collection of defaulted loans by virtue of 20 U.S.C. § 1091a(a). Therefore the loan is not dischargeable under 11 U.S.C. § 523(a)(8) as in effect on the petition date.

2006 Bankr. LEXIS 4218 (Bankr. D.N.J. Dec. 18, 2006)
2006 WL 4497004 (Bankr. D.N.J. Dec. 18, 2006)


Santis Jara v. NJ Higher Education 9-27-06 Case 04-47384 05-1451

Discharge of student loan under 11 U.S.C. § 523(a)(8). Debtor established undue hardship under the Brunner (831 F. 2d 395) test, showing (1) the debtor could not maintain, based on current income and expenses, a minimal standard of living for herself and her dependents if forced to repay the loans; (2) additional circumstances existed indicating that this state of affairs is likely to persist for a significant portion of the repayment period for student loans; and (3) the debtor had made good faith efforts to repay the loans. Because of medical hardship (manic-depressive [bi-polar] disorder), the discharge was granted.

2006 Bankr. LEXIS 2597 (Bankr. D.N.J. Sept. 27, 2006)
2006 WL 2806556 (Bankr. D.N.J. Sept. 27, 2006)


Wayne D. Steward 2-24-06 Case 05-43278

Debtor’s motion for violation of automatic stay, under 11 U.S.C. § 362(a), when a co-op association and its attorney sought the removal of the Debtor as executor of a probate estate. Association argued for application of the Rooker-Feldman doctrine to bar the bankruptcy court from reviewing a claim that was litigated in state court. The Court held that a continuation of a proceeding is not an implicit ruling that the state court judge considered the automatic stay and deemed it inapplicable. Such a determination must be explicit or Rooker-Feldman will not apply. An action to remove the Debtor as executor of an estate was held to be an action against the Debtor under the broad language of §362(a)(1). Thus, there was a willful violation of the automatic stay and damages were awarded to Debtor.

338 B.R. 654 (Bankr. D.N.J. 2006)


Hala Wassef 8-21-06 Case 02-31259 04-1759 05-2621 05-2818

Objection to discharge under 11 U.S.C. § 523(a)(2)(A).
Plaintiff alleged that the fraud arose from the sale of property with an outstanding judgment lien clouding title. The defect was not disclosed in the title affidavit. The Court held affidavit to be false but not fraudulent, and found no justifiable reliance upon the misstatement. Debtor-Defendant granted discharge.

2006 Bankr. LEXIS 1976 (Bankr. D.N.J. Aug. 21, 2006)
2006 WL 2417271 (Bankr. D.N.J. Aug. 21, 2006)


Tulio Diaz v. Bernard W. Ozarowski 12-12-06 Case 02-52981 06-1245

Medical claim sought exemption from discharge under 11 U.S.C. § 523(a)(2)(A). Plaintiff failed to establish fraud by Debtor. Exemption also sought under 11 U.S.C. § 523(a)(3) because claim was not listed on the Debtor’s bankruptcy petition, but status as a no-asset bankruptcy case with no bar date prevented the claim. Final issue was whether the debt was nondischargeable under 11 U.S.C. §523(a)(4) as a debt incurred for fraud or defalcation while acting in a fiduciary capacity. Bankruptcy law does not recognize officers of an insolvent company as acting in a fiduciary capacity with respect to creditors. Exemption from discharge denied.

2006 Bankr. LEXIS 3521 (Bankr. D.N.J. Dec. 12, 2006)
2006 WL 3694547 (Bankr. D.N.J. Dec. 12, 2006)