2020 Judge Kaplan - Opinions

Judge Michael B. Kaplan -- Opinions signed in 2020


In re: John & Patricia Cerchia, Case No. 19-12655
Motion to Modify Proof of Claim 3/3/2020

Opinion Summary: Chapter 13 Debtors’ motion to modify a proof of claim filed by Creditor who is tax sale certificate holder of Debtors’ real property. Debtors seek to apply post-petition payments first to the principal portion of the outstanding tax obligations, rather than the accumulated interest. However, both bankruptcy law and New Jersey State law afford protections for tax sale certificate holders which preclude Debtor’s request. Bankruptcy law treats the Creditor as a secured creditor holding a lien against the Debtors’ property. Under 11 U.S.C. § 506(a), the Creditor is entitled to collect interest on its claim at the rate determined by state law. Furthermore, 11 U.S.C. 1325(a)(5) determines that a debtor must make plan payments in equal monthly installments. Debtors did not propose such a payment scheme, and their request to apply payments to the interest-bearing principal first, rather than interest as mandated under state law, directly contravenes the plain language of the statute. Debtors’ request is denied.



In re: Victor Achinivu, Case No. 17-30949
Motion Seeking to Enjoin the City of Trenton from Initiating and Prosecuting Municipal Ordinance Violations 2/18/2020

Opinion Summary: Debtor filed a motion against the City of Trenton to enjoin the City from initiating and prosecuting any municipal ordinance violations with respect to real estate properties owned by the Debtor. The City holds the tax sale certificates and was granted relief from the automatic stay during the bankruptcy with respect to the outstanding real estate tax obligations. The City filed a Notice of Violation for overgrown vegetation and potentially poisonous weeds in violation of a City Ordinance. The Debtor filed a motion for injunctive relief in response. The Court engaged in a fair weighing of the established four-part test for injunctive relief and the Debtor’s need for a “fresh start.” The Court found that while the Debtor attempted to surrender the properties to the City, there was no vesting of title, as the City did not accept title—and this Court cannot compel the City to do so. This was rather an attempt by Debtor to shift and abandon his post-petition maintenance obligations to the City. The City’s ordinance to protect the welfare and the safety of the community outweighs the Debtor’s desire to be relieved as a property owner.



In re: Victor Achinivu, Case No. 17-30949
19-02285 Azzil Granite v. Canadian Pacific Railway - Opinion Granting Motions to Dismiss FINAL 4/23/2020

Opinion Summary:

Plaintiff Azzil Granite Materials, LLC (“Plaintiff” or “Azzil”) contracted with Defendants Canadian Pacific Railway Company (“CP”), Delaware & Hudson Railway Company (“D&H”), and New York & Atlantic Railway Company (“NYA”) to transport shipments of Azzil’s stone products by rail and return the empty railcars to Azzil.  The parties’ contract expired by its own terms.  Thereafter, Azzil filed for bankruptcy under chapter 11.  Azzil then filed the instant adversary proceeding alleging delays in shipments and seeking relief against all Defendants under the Carmack Amendment (49 U.S.C. § 11706), and seeking relief against NYA for fraud.  Defendant NYA filed a motion seeking dismissal of Count IV of the Complaint (the fraud claim), and the Defendants jointly filed a motion seeking dismissal of Counts I, II, and III of the Complaint (the Carmack Amendment claims).  The Court determines that the special venue provision of the Carmack Amendment controls the issue of venue and; therefore, venue is inappropriate in this Court for claims brought under the Carmack Amendment.  Additionally, the Court determines that the parties’ forum selection clause controls and, therefore, venue for Azzil’s fraud claim against NYA is inappropriate in this Court.  Given the deficiencies of the Amended Complaint, and for reasons of judicial economy, the Court is not inclined to transfer these causes of action.  All claims of the Amended Complaint are hereby dismissed without prejudice.




In re: Hollister Construction Servies, LLC, 19-27439 (MBK)

Opinion Summary:

The Debtor in this action is a construction company who contracted with a property owner and, in its capacity as construction manager for the project, employed subcontractors.  The third-party project owner (“NWR”) filed this motion alleging that certain subcontractors’ efforts to enforce construction liens under the New Jersey Construction Lien Law, N.J. STAT. ANN. § 2A:44A-3(a) (“NJCLL”), and pursuit of related state litigation violates the automatic stay under 11 U.S.C. § 362(a).  At issue in this case are three separate classes of actions which NWR asserts violate the automatic stay: (1) the filing of post-petition construction liens; (2) enforcement of pre-petition construction liens; and (3) pursuit of direct state law claims against NWR or the bonding company on the bond.  The Court is guided by the Third Circuit’s holding in In re Linear Elec. Co., Inc., 852 F.3d 313 (3d Cir. 2017).  The Court first holds that a post-petition construction lien constitutes an act against property of the estate and is violative of the automatic stay.  As to the enforcement of pre-petition construction liens, the Court notes that the statute and the lien claim payment process dictate that any payment to a subcontractor resulting from an action to enforce or foreclose on a construction lien would reduce the general contractor’s accounts receivable, which is part of the bankruptcy estate.  Therefore, any action to enforce or foreclose on a construction lien contravenes the automatic stay.  As to the state court claims for quantum meruit or unjust enrichment against NWR, the Court finds that the Subcontractors’ actions, by themselves, do not implicate the NJCLL and do not deplete the bankruptcy estate at the expense of other creditors and are not violative of the automatic stay.  However, the Court determines that a bonding company’s subrogation rights to assume entitlement to the receivable fall within Linear Electric’s ambit and proscriptions; therefore the Subcontractors’ actions against the bonding company negatively impact the bankruptcy estate and violate the automatic stay.  In summary, any party who files a post-petition lien, or who attempts to enforce a pre-petition lien, or who attempts to collect on a bonded claim violates the stay. However, to the extent the Subcontractors seek state law remedies against a nondebtor property owner that do not affect the bankruptcy estate—such as quantum meruit or unjust enrichment claims—there is no stay violation.






Alexander Moss v. Neptune Township., Adversary Proceeding No. 19-2191
(In re: Alexander Moss, Case No. 12-38448)

Motion Seeking Summary Judgment in Favor of Plaintiff and Cross Motion by Defendant

Opinion Summary:

Summary: Plaintiff Alexander Moss brought a Motion for Summary Judgment in his favor as to the count in his complaint asserting Defendant’s violation of the discharge order. Defendant, Neptune Township, responded by filing a Cross Motion seeking Summary Judgment and dismissing the adversary proceeding. Plaintiff received his chapter 7 discharge in November 2016 and successfully discharged several motor vehicle fines issued by Defendant for violations occurring in 1992 and 2001. This adversary proceeding was filed in October 2019 to address whether Defendant willfully and knowingly violated the discharge order by continuing to enforce fines arising from pre-petition motor vehicle violations. Defendant raised several affirmative defenses, which were rejected by the Court. First, Defendant, a governmental unit, cannot assert sovereign immunity because Section 106(a) of the Bankruptcy Code expressly waives such immunity where the bankruptcy court exercises its authority under §§ 105 and 524. Second, the New Jersey Tort Claims Act offers no coverage to Defendant when there is a wholesale waiver of sovereign immunity pursuant to § 106(a)(2). Ultimately, the Court finds that Defendant violated the Discharge Order by continuing to fine and penalize Plaintiff for motor vehicles fines dating back to 1992 and 2001 after Plaintiff successfully discharged these debts to Defendant in 2016. Summary Judgment in favor of Plaintiff is granted, and Defendant’s Cross Motion is denied. This matter is to be set down for an evidentiary hearing in September 2020 to determine the extent of damages related to Plaintiff’s emotional distress and job loss opportunities.





Veronica D. French v. Federal Home Loan Mortgage Corporation, Adv. Pro. No. 18-01501

Opinion Summary:
The Defendant's Motion for Reconsideration is denied as no showing has been made which warrants alteration of the Court's previous determination that the theories and doctrines raised by Defendant in a prior motion do not preclude this Court's consideration of the instant adversary proceeding. Nevertheless, the Bankruptcy Court, like all federal courts, is obliged to raise sua sponte the issue of whether it has jurisdiction over any pending matter. The Court determines that it does not have subject matter jurisdiction over the Debtor's state law quiet title claims—especially where her confirmed plan of reorganization does not contemplate the action. Further, the Court finds that, to the extent this Court were to have jurisdiction, permissive abstention is appropriate. The parties are granted stay relief to pursue their respective rights in another forum.





Giantsea New Energy Technology Co., Ltd. V. Li et al, Adversary Proceeding No. 20-01389
(In re: Xeuhai Li, Case no. 20-14367)

Motion Seeking Dismissal of Amended Complaint


Summary: Chapter 11 Trustee’s Motion to dismiss the amended complaint filed by Giantsea New Energy Technology Company (“Giantsea”). Debtor is a minority shareholder and an executive of Giantsea, and Debtor’s father is chairman of the board and has more than two-thirds of Giantsea’s outstanding shares. The amended complaint asserted that pursuant to a loan agreement (“Loan Agreement”), Giantsea loaned money to Debtor and Debtor’s ex-spouse, and this money was used to purchase a property in Princeton, New Jersey. The Loan Agreement also stated that should the money be used to purchase any real property, Giantsea was to be secured by a recorded mortgage. Debtor failed to record the mortgage or to timely repay the loan, so Giantsea initiated an action in state court to which they were successful in obtaining a default money judgment in 2016 after Debtor failed to file and answer. The ex-spouse was never joined in the state court matter. In the current matter, Giantsea sought the imposition of a constructive trust on the Princeton property, or in the alternative, a determination that it was entitled to a first priority lien and security interest that was superior to all named defendants in the amended complaint. The Court considered the effect of the Entire Controversy Doctrine and held that there was no justification for not bringing the ex-spouse as a party when all claims under the Loan Agreement were to be litigated in the state court action. Furthermore, the Court saw the requests for equitable relief as state law constructs that could have been brought in the state court action. In addition, the Court held that the imposition of a constructive trust would be inappropriate because it would deny the Debtor (and the bankruptcy estate) the right to redeem the property. Finally, the Court held that the Loan Agreement was an express contract, and therefore any claims for equitable relief could not be enforced because equitable remedies must take a backseat to an express contract. The Trustee’s motion to dismiss the adversary complaint was granted. 



Fertima C. Nealy v. Ivy Holdings, LLC, Adversary Proceeding No: 20-1038
(In re: Fertima C. Nealy, Case No. 20-33672)

Motion Seeking Summary Judgment in Favor of Plaintiff/Debtor


Plaintiff/Debtor Fertima C. Nealy’s (“Debtor”) objective in this Adversary Proceeding was to avoid a tax foreclosure sale that allegedly constituted a fraudulent transfer and/or preferential transfer pursuant to 11 U.S.C. §§ 547, 548, 550 and 551. Debtor brought a Motion for Summary Judgment in her favor to void the transfer of real property located in Neptune, New Jersey to Defendant as a result of a final judgment of foreclosure, and to re-vest title with Debtor. After considering the initial pleadings to Debtor’s Summary Judgment Motion and oral argument, the Court requested supplemental briefing from the parties to address 1) Debtor’s standing to pursue an avoidance action when considering the limitations set forth by 11 U.S.C. § 522(h); and 2) Debtor’s ability to establish a prima facie claim in light of the Third Circuit’s holding in In re Majestic Star Casino, LLC, 716 F.3d 736 (3d Cir. 2013), in which the Third Circuit queries the propriety of the debtor bringing an avoidance action that offers no benefit to creditors.

The Court held that summary judgment could not be found due to material issues of fact, including the value of the property in question, Debtor’s interest in said property, and whether Defendant had filed a lis pendens on the property. However, certain determinations of law were made, such as Debtor’s inability to bring avoidance actions to achieve the relief sought in the Summary Judgment motion. To grant the relief sought would not further goals of the bankruptcy statutes at issue and would go beyond the purpose and limitations of § 522(h) and (g)(1). Nevertheless, the Debtor may be successful under § 552(h) in recovering the value of her exemptions if Debtor can successfully resolve the issues of fact previously discussed.








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