2010 Judge Kaplan - Opinions

Judge Michael B. Kaplan -- Opinions signed in 2010

In re: Clear Advantage Title, Inc. case 07-28673 10/15/2010

PROCEDURAL POSTURE: Plaintiff, Chapter 7 Trustee, filed an adversary proceeding against Defendant, 1st Constitution Bank, asserting breach of contract, negligence, recklessness and consumer fraud claims. The bank filed a motion for summary judgment seeking dismissal of the complaint, and the trustee cross moved for partial summary judgment.

OVERVIEW: The debtor, a title agency, maintained accounts with the defendant bank. A staff attorney for the debtor is alleged to have utilized numerous checks drawn on the debtor’s accounts and put the proceeds from same to his own use. As of the date of debtor’s filing, the bank honored and paid more than $1.12 million of debtor’s checks bearing forged maker signatures. The court found that the breach of contract, negligence and recklessness claims implicated issues of good faith and fair dealing and were not displaced by the Uniform Commercial Code. Additionally, these claims could not be decided without resolving disputed material facts. The court further found that the trustee’s argument that the bank violated the New Jersey Consumer Fraud Act, N.J.S.A. 56:802 et seq., was misplaced because the bank did not engage in “sharp practices,” or such other conduct violative of said statute. Lastly, pursuant to N.J.S.A. 12A:4-406, the court determined that, unless it could prove that the bank did not exercise its duties in good faith, the trustee’s relief going forward would be limited because it failed to promptly notify the bank of the unauthorized signatures within the one year period or repose set out in the statute.

OUTCOME: The court denied both the motion for summary judgment and the cross motion for partial summary judgment on the breach of contract, negligence, and recklessness claims. The bank’s motion for summary judgment was granted on the consumer fraud claim.


In re: Karen Elaine Scott case 09-44705 9/27/2010

PROCEDURAL POSTURE: The debtor filed a voluntary Chapter 13 petition, listing a 2005 Toyota Corolla S 4D as an asset valued at $6,000. The debtor filed a Chapter 13 plan which was confirmed, but subject to the court’s determination of the vehicle’s value. The court conducted a valuation hearing in which both the debtor and creditor presented expert appraisals.

OVERVIEW: The principal issue before the court was how to calculate the replacement value of a used vehicle for purposes of § 506(a)(2), including the appropriate commercial valuation guides to be used. The court held that retail value, not wholesale value, is the appropriate starting point in calculating replacement value. Specifically, the retail value for vehicles should be calculated by adjusting the National Automobile Dealers Association (“NADA”) Guide for retail value, less reconditioning and repair costs.

OUTCOME: The court adopted the creditor’s approach of starting with retail guides but found the debtor’s expert’s estimate of repair costs more credible.


In re: Michelle and Kevin Reynolds case 08-12928 7/26/2010


In re: Sandy M. Zambuto case 09-37999 9/27/2010

PROCEDURAL POSTURE: The debtor filed a voluntary Chapter 13 petition, listing a 2005 Mercedes Benz S500 as an asset valued at $20,000. The debtor filed a Chapter 13 plan which was confirmed, but subject to the court’s determination of the vehicle’s value. The court conducted a valuation hearing in which both the debtor and creditor presented expert appraisals.

OVERVIEW: The principal issue before the court was how to calculate the replacement value of a used vehicle for purposes of § 506(a)(2), including the appropriate commercial valuation guides to be used. The court held that retail value, not wholesale value, is the appropriate starting point in calculating replacement value. Specifically, the retail value for vehicles should be calculated by adjusting the National Automobile Dealers Association (“NADA”) Guide for retail value, less reconditioning and repair costs.

OUTCOME: The court adopted the creditor’s approach of starting with retail guides but found the debtor’s expert’s estimate of repair costs more credible.


In re: Suzanne Perez case 09-17729 12/7/2010

PROCEDURAL POSTURE: Defendant-Debtor, Suzanne Perez, and Plaintiff, E53 Credit Union, sought the court’s approval of a settlement agreement permitting Plaintiff to apply the proceeds of the Defendant-Debtor’s certificate of deposit to the balance due on the Defendant-Debtor’s loan with the credit union. The motion was granted. The Chapter 7 Trustee moved for reconsideration.

OVERVIEW: The court found that the credit union had a properly perfected lien against the certificate of deposit, under both the relevant Uniform Commercial Code provisions and the Federal Credit Union Act, because the credit union maintained control of the account. See N.J.S.A. 12A:9-314; N.J.S.A. 12A:9-102(47); 12 U.S.C. § 1751. The court further found that this lien was perfected before the debtor’s chapter 7 bankruptcy proceeding commenced. Therefore, the Trustee’s 11 U.S.C. § 545 avoidance powers were not triggered and the Trustee could not avoid the lien. The court did not determine whether the credit union had a contractual and/or common law right of setoff against the debtor’s certificate of deposit inasmuch as the prior two grounds were clear.

OUTCOME: The court denied the Trustee’s motion for reconsideration.