Heidt v. BV001 Reo Blocker LLC (In re Heidt)
| Decision Date | 09 March 2021 |
| Docket Number | Adv. No.: 19-2294 (RG),Case No.: 19-32789 (RG) |
| Citation | 626 B.R. 777 |
| Parties | IN RE: Douglas J. HEIDT, Debtor. Douglas J. Heidt, Plaintiff, v. BV001 Reo Blocker LLC, and U.S. Bank, as Custodian for BV Trust 2015-1, Defendants. |
| Court | U.S. Bankruptcy Court — District of New Jersey |
NEIL J. FOGARTY, ESQ., Northeast New Jersey Legal Services, 574 Summit Avenue, Jersey City, NJ 07306, Counsel for Debtor/Plaintiff, Douglas J. Heidt.
BRIAN W. HOFMEISTER, ESQ.1 , Law Firm of Brian W. Hofmeister, LLC, 3131 Princeton Pike Building 5, Suite 110, Lawrenceville, NJ 08648, Counsel for Defendants, BV001 Reo Blocker LLC & U.S. Bank, as the Custodian for BV Trust 2015-1.
Before the Court is Debtor Douglas J. Heidt's Motion for Leave to File an Amended Adversary Complaint asserting a second cause of action pursuant to 11 U.S.C. § 548. The Defendants, BV001 Reo Blocker LLC ("BV001") and U.S. Bank, as the Custodian for BV Trust 2015-1, filed an Opposition to the Motion and also seek dismissal of the § 548 claim sought to be added to the Complaint by the Debtor under Fed. R. Civ. P. 12(b)(6). Debtor filed a Reply and Additional Submission in support of the Motion for Leave to File an Amended Adversary Complaint.2
This Court held a hearing on February 10, 2021. The following constitutes this Court's findings of fact and conclusions of law.
This Court has jurisdiction over this matter pursuant to 28 U.S.C. §§ 1334 and 157(b)(2)(A) and (H) and the Standing Order of Reference from the United States District Court for the District of New Jersey dated July 23, 1984, as amended September 18, 2012, referring all bankruptcy cases to the bankruptcy court. This matter is a core proceeding within the meaning of 28 U.S.C. § 157(b)(2)(A) and (H). Venue is proper in this Court pursuant to 28 U.S.C. § 1408.
Debtor Douglas J. Heidt ("Debtor") occupies the Property located at 3 Barber Street, Little Falls, New Jersey 07424 also identified as Block 83, Lots 6 and 7 of the tax map of Little Falls, New Jersey (the "Property") as a primary residence. Debtor asserts that the Property is valued at $220,000 as of the date of the final judgment in the New Jersey State Court Tax Foreclosure (ECF 6, Adv. No. 19-2294-RG, Certification of Cynthia Rivera) whereas the Defendants assert the Property is valued between $150,000 to $200,000 (ECF 10, ¶ 13, Adv. No. 19-2294-RG).
On December 9, 2015, Defendants or Defendants' predecessor-in-interest, BV001 Trust & Creditors, purchased a Tax Sale Certificate (No. 11-2015) for real estate taxes owed in 2015 on the Property from the town of Little Falls, New Jersey. Debtor asserts this was in the amount of $5,156.68 at 0.00% interest per annum. Defendants assert that the Tax Sale Certificate was purchased in competitive bidding and acquired at 0% interest for which BV001 Trust & Creditors paid an additional $12,800 premium to obtain. By assessment recorded on April 11, 2016, the Tax Sale Certificate was assigned by BV001 Trust & Creditors to Defendant, U.S. Bank as Custodian for BV Trust 2015-1.
On February 28, 2019, Defendants filed a Tax Foreclosure Complaint against Debtor in the Superior Court of New Jersey, Passaic County, Docket Number F-004093-19 ("Tax Foreclosure"). On June 20, 2019, an Order setting the amount, time, and place of redemption was set by the Superior Court for August 19, 2019 in the amount of $30,540.53, with costs of suit to be taxed in the sum of $1,240. On September 5, 2019, Defendants filed a Motion for Final Judgment in the Superior Court of New Jersey. On September 9, 2019, the Debtor entered into a contract of sale with regard to the Property with F&G Grand Property, LLC for $220,000, which Cynthia Rivera, Real Estate Broker-Associate at Keller Williams, certified was the fair market value of the Property. On September 18, 2019, an uncontested order for Final Judgment was entered against the Debtor in the New Jersey Superior Court, Chancery Division, Passaic County (Docket No. F-004093-19). The Debtor asserts that pursuant to the September 18, 2019 Default Final Judgment, the Defendants received the involuntary transfer of title of the Debtor's interest in the Property. Debtor filed a Notice of Motion to Vacate the Foreclosure Judgment in the New Jersey Superior Court, which was stayed by the Debtor's bankruptcy filing on December 6, 2019 when Debtor filed the petition for relief under Chapter 13 of the Bankruptcy Code. That same day, Debtor filed his Chapter 13 plan which provides that Debtor will make payments of $105.00/month for 36 months from future earnings and from the sale of the subject Property. The Plan also provides that the Debtor shall bring an adversary proceeding against Defendants to recover the Property. Also on December 6, 2019, Debtor through counsel, Northeast New Jersey Legal Services, filed such adversary complaint seeking to avoid the transfer of the Property to Defendants as a preferential transfer under § 547(b) of the Bankruptcy Code, bearing Adv. No. 19-2294-RG.
Thereafter, on February 7, 2020, Debtor filed the Motion for Summary Judgment in that proceeding. (ECF 6, Adv. No. 19-2294-RG).
On June 4, 2020, Defendants filed a Cross-Motion for Summary Judgment. (ECF 13, Adv. No. 19-2294-RG).
Responsive pleadings were filed thereafter.
On July 16, 2020 a hearing was held on the Debtor's Motion for Summary Judgment and the Defendants' Cross-Motion for Summary Judgment.
After that hearing and upon further research, Debtor believed he had a second cause of action under 11 U.S.C. § 548 based upon the same facts which the initial complaint rests and on July 28, 2020, Debtor filed this Motion for Leave to Amend the Complaint. (ECF 15, Adv. No. 19-2294-RG).
On January 19, 2021, this Court entered an Order denying Debtor's Motion for Summary Judgment as to the First Count of the Complaint seeking recovery of a § 547 voidable preference and granting Defendants' Motion for Summary Judgment as to the First Count of Debtor's Complaint. (ECF 28, Adv. No. 19-2294-RG). In so ruling, this Court held that the Debtor, at the time of the alleged preferential transfer, was not "insolvent" as that term is defined under 11 U.S.C. § 101(32)(A) so that as a matter of law, the Debtor could not set aside the transfer as preferential under 11 U.S.C. § 547(b).3
There are 12 total claims listed in Debtor's Chapter 13 case, including the claim of BV001. The claims total $33,833.93. Debtor filed a secured claim on behalf of BV001 on March 5, 2020, in the amount of $30,540.53, which is the only secured claim in the proceeding. The Debtor also filed approximately 11 other proofs of claim on behalf of various creditors. In Debtor's Chapter 13 plan, he proposes to sell the subject Property and pay all 12 creditors 100% of their claims.
Motion for Leave to File Amended Complaint [ECF 15]
In Debtor's Motion for Leave to File Amended Complaint, he provides that the exhibits which are already filed in this adversary proceeding demonstrate the Property was valued at $220,000 by the real estate broker who obtained a buyer for the Property at that price. The tax sale certificate debt was $30,540.53, as determined by Order of the Superior Court of New Jersey on June 20, 2019. Debtor provides it therefore cannot be reasonably disputed that Defendants obtained a property worth $220,000 in exchange for an approximately $30,000 debt, which was in the form of a tax sale certificate. For those reasons, Debtor argues he received less than a reasonably equivalent value in exchange for such transfer and became insolvent as a result and therefore has a claim under § 548 of the Bankruptcy Code. Debtor argues he makes this motion in good faith and filed the Adversary Complaint the day he filed his petition. Debtor claims he will not seek any discovery as to this cause of action. Defendants have already sought discovery which Debtor has provided. Debtor argues BV001 will not be prejudiced by the amendment of the Complaint because Debtor is simply asserting a new legal basis for relief based upon the same facts.
In Debtor's Amended Complaint, Debtor adds a Second Count in which he seeks avoidance of a constructively fraudulent transfer under 11 U.S.C. § 548. Debtor argues that on September 18, 2019, his legal interest in the Property was involuntarily transferred to BV001 by a judgment of the Superior Court of New Jersey. Debtor explains there was no sheriff's sale or bidding, and BV001 was the only party entitled to take the Property by strict foreclosure. Debtor argues he received less than a reasonably equivalent value in exchange for the Property because he only owed the Defendant a debt of $30,540.53 which was in the form of a tax sale certificate owned by BV001. Debtor provides the reasonably equivalent value of the Property was $220,000 and that as a result of the transfer, he become insolvent, as his assets, less exemptions, were less than his debts. For those reasons, Debtor seeks to avoid the transfer under 11 U.S.C. § 548.
Debtor argues that this Court should grant him leave to amend his Complaint to assert a second cause of action based upon facts already pleaded and proven. Debtor provides that under Fed. R. Civ. P. 15(a)(2), made applicable to the bankruptcy courts under Fed. R. Bankr. P. 7015, Debtor argues there is no time limit on amending one's complaint, such to further the goal of deciding suits on their merits. Debtor cites the Third Circuit case, Arthur v. Maersk, Inc. , 434 F.3d 196, 202 (3d Cir. 2006) among others, which provides that Fed. R. Civ. P. 15 "embodies a liberal approach to pleading." Debtor argues that on a Rule 15(a) motion, courts ought to consider undue delay, bad faith and the like,...
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