2009 Judge Wizmur - Opinions
Judge Judith H Wizmur -- Opinions signed in 2009
The Chapter 7 trustee sought to avoid a mortgage given to the defendant by the debtor within one year before the filing of the debtor's bankruptcy petition. The trustee asserted that the transfer of the lien was a voidable preference under section 547 and that the defendant was an insider of the debtor, making the one-year period during which the transfer occurred applicable. On the defendant's motion for summary judgment, additional counts of the complaint, including fraudulent transfer, recharacterization of the loan as an equity contribution, and equitable subordination, were dismissed, leaving only the preference claim. Because the defendant was neither a "person in control of the debtor" under section 101(31)(B)(iii) nor a non-statutory insider, the trustee's preference claim was dismissed.
The debtor sought to sell its New Jersey license to operate a nursing home, along with all of its regulatory rights to operate 104 beds, to the successful third party bidder at a court auction. The debtor's landlord objected to the sale, contending that the "bed rights" to operate 104 nursing home beds were not property of the debtor's bankruptcy estate, the debtor had no independent ownership of the bed rights, and that therefore, the debtor could not sell those rights. The court determined that there was a difference between ownership of a license and ownership of the bed rights that must accompany an application for a license, i.e., the right to operate particular beds that have been approved, either before or since the advent of the certificate of need program. The debtor owned the license, but the landlord owned the right to operate the beds. The landlord's ownership interest in the operational nursing home facility was not purchased by the debtor, and reverted back to the landlord at the end of the lease between the parties. Because the debtor could not sell property that was not property of the estate, the plaintiffs were granted declaratory judgment sustaining their objection to the proposed sale, and declaring their ownership of the bed rights of the nursing home.
The Chapter 13 debtor moved to avoid a pre-petition judgment lien held by certain creditors, pursuant to section 522(f). The creditors objected to the debtor's motion, claiming that the avoidance provisions of section 522(f) may not be exercised by the debtor, because the debtor's opportunity to utilize section 522(f) is limited by section 522(h). Alternatively, the creditors claimed that the debtor's proposal for immediate lien avoidance should be denied because a Chapter 13 debtor must first complete his plan before such lien avoidance may be effected. The court granted the debtor's motion to avoid the creditors' lien because the debtor's quest under section 522(f), to avoid a judicial lien that impairs his exemptions under section 522(b)(2), is independent of the limitations on the debtor's avoidance opportunities under section 522(h). The court also rejected the creditors' argument that a Chapter 13 plan must be completed before the avoidance of a judicial lien may be effected.