In re Mac-Truong, Case No. 03-40283 (NLW) (Bankr.N.J. 2/14/2008)

Decision Date14 February 2008
Docket NumberCase No. 03-40283 (NLW).,Adv. No. 03-2681.
PartiesIN RE: Mac Truong and Maryse Mac-Truong, CHAPTER 7, Debtor. Steven P. Kartzman, Plaintiff, v. Mac Truong and Maryse Mac-Truong, Sylvaine Decrouy and Hugh Mac-Truong, Defendants.
CourtU.S. Bankruptcy Court — District of New Jersey

Adam G. Brief, Esq., Mellinger, Sanders & Kartzman, LLC, Morris Plains, NJ, Attorneys for Trustee.

William C. Baton, Esq., Newark, NJ, Attorneys for Barbara Ostroth.

Mac Truong and Maryse Mac Truong, Pro Se, New York, NY.



NOVALYN WINFIELD, Bankruptcy Judge.

Steven P. Kartzman ("Trustee") as Chapter 7 Trustee for Mac Truong and Maryse Mac Truong ("Debtors") has moved for an injunction to limit the Debtors' effort to repeatedly litigate matters decided adversely to them. As set forth below, with some modifications, the relief requested is granted.

This court has jurisdiction to hear and determine this matter pursuant to 28 U.S.C. § 1334 and § 157(a) and the Standing Order of Reference issued by the United States District Court for the District of New Jersey on July 23, 1984. This motion is a core proceeding within the meaning of 28 U.S.C. § 157(b)(2)(A). The following constitutes the findings of fact and conclusions of law required by Fed. R. Bankruptcy P. 7052.1


The instant motion is not the Trustee's first request for a filing injunction. At the Trustee's request, on March 20, 2006 this court entered an order that enjoined the Debtors from filing "any pleadings, motions or cross motions" in bankruptcy case 03-40283 or adversary proceeding 03-2681 without first obtaining leave of the court. This filing injunction was necessitated by the unnecessarily litigious manner in which the Debtors defended the adversary proceeding and attempted to thwart the Trustee's ability to administer the bankruptcy estate.

The adversary proceeding litigation actually began in April 2004 in the Superior Court of the State of New Jersey, Bergen County, Chancery Division ("State Court Action") on a complaint filed by Broadwhite Associates ("Broadwhite") to set aside the Debtors' transfer of their property at 327 Demott Avenue, Teaneck, New Jersey (the "Property"). The complaint was premised on the New Jersey fraudulent transfer statute. The complaint alleged that in 1999 the Debtors transferred the Property to Sylvaine Decrouy ("Decrouy"), the sister of Maryse Mac Truong, and that the deed was recorded on January 10, 2000. The complaint further alleged that in June 2001, Decrouy transferred the Property to the Debtors' son, Hugh MacTruong. The Debtors, Decrouy and Hugh MacTruong were named as defendants in Broadwhite's complaint.

Several months after the State Court Action was filed, the Debtors filed their Chapter 7 petition on September 15, 2003. Because of the bankruptcy filing the state court entered an order on September 23, 2003 which (i) dismissed the action as to the Debtors only, and (ii) provided a procedure for restoring the matter to the active trial calendar if relief from the automatic stay was obtained. Six days later, on September 29, 2003, the Debtors removed the State Court Action to the United States District Court for the District of New Jersey. By order of the Hon. William G. Bassler dated October 6, 2003 the litigation was referred to the bankruptcy court and was assigned adversary proceeding number 03-2681.

In January 2004 the Debtors moved before this court to dismiss the complaint. Among the grounds for dismissal the Debtors alleged (i) the matter had been dismissed by the state court and the Rooker-Feldman doctrine precluded continuation of the litigation in bankruptcy court, (ii) the fraudulent conveyance cause of action was barred by the applicable New Jersey statute of limitations, and (iii) the cause of action, if any, belonged to the bankruptcy estate. Opposition to the Debtors' motion was filed by Broadwhite and the Trustee. The court found that the cause of action belonged to the bankruptcy estate, and that the complaint stated a fraudulent conveyance cause of action. It also determined that the Debtors' grounds for dismissing the complaint were without foundation and entered an order dated May 5, 2004 denying the Debtors' motion to dismiss the complaint.

While the Debtors' motion was pending, the Trustee moved to be added as the party plaintiff and to amend the complaint to allege bankruptcy jurisdictional provisions, to add Bankruptcy Code §§ 544 and 550 as grounds for recovery of the Property, and to clarify the relief sought against Decrouy. The Debtors cross-moved for denial of the Trustee's motion, asserting the following grounds for denial:

a) Not all parties were properly served in the State Court Action, and no summons from the Bankruptcy Court had been served;

b) The State Court Action was dismissed with regard to the Debtors;

c) The discharge order precluded the Trustee from proceeding;

d) The Debtors were not insolvent at the time of the transfers;

e) The New Jersey statute of limitations barred the Trustee from proceeding; and

f) The Trustee failed to serve the Debtors with the application to retain counsel to the Trustee.

On August 27, 2004 the court issued an opinion and order granting the relief sought by the Trustee and denying the Debtors' cross-motion. The court's decision is attached hereto as Exhibit 1.

The Debtors' subsequent motion for reconsideration was denied by Letter Opinion and Order dated November 18, 2004. The court's Letter Opinion is attached hereto as Exhibit 2. Rather than appeal the ruling, the Debtor's filed a new motion for dismissal that repeated their earlier assertions for dismissal. This was denied as well. Undeterred, the Debtors recycled their allegations into a "Motion for an Order Dismissing Amended Complaint Under Rule 7012(b), and/or For Summary Judgment Under Rule 7056 and/or To Renew Under F.R.Cv.P. 60(b) Defense Motion to Vacate This Court's August 27, 2004 Order Authorizing Substitution of Trustee As Party Plaintiff and Amending Complaint." Because all of these matters had been previously addressed, the court denied this motion as well. Indeed, up to the entry of the filing injunction in March 2006 the Debtors repeatedly filed motions which simply restated each of the arguments that the court found meritless. Additionally, in the main case, 03-40283, the Debtors opposed the Trustee's retention of counsel by merely repeating the very same arguments they advanced in adversary proceeding 03-2681. When their objections were overruled by the court, they simply retooled their objections into motions to remove the Trustee. A comprehensive recitation of each motion and its disposition would unreasonably burden this opinion. However, attached to this opinion as Exhibit 3 are the court dockets for the adversary proceeding and main case, which reveal the repetitive and voluminous nature of the filings by the Debtors.

It was also necessary to enter a filing injunction with regard to pleadings filed by Hugh MacTruong. In the adversary proceeding 03-2681, Hugh MacTruong repeatedly advanced arguments identical to those advanced by the Debtors; these were likewise found to be without merit. Additionally in February 2006 Hugh MacTruong filed an action in the Superior Court of the State of New Jersey, Bergen County, Law Division, against the Trustee and his counsel claiming abuse of process. Hugh MacTruong's complaint essentially asserted that the trustee lacked authority to seek recovery of the Property from him and that all of the Trustee's actions were undertaken with the intention to cause harm to him and the Debtors. After the Trustee removed the matter to this court pursuant to 28 U.S.C. § 1452 and Bankruptcy Rule 9027, the Trustee moved to dismiss the complaint. On April 12, 2006, the Court dismissed the complaint with prejudice inasmuch as the Trustee's prosecution of adversary proceeding 03-2681 is well within the scope of his duties under Bankruptcy Code § 704. Thereafter, at the request of the Trustee, and because Hugh MacTruong's claims were devoid of legal or factual support, the Court entered an order on May 18, 2006 that prevented Hugh MacTruong from filing any papers in any state or federal forum without first obtaining leave of this Court.

Beginning in 2006, the Debtors focused much of their efforts on the appellate process; appealing various decisions rendered in the main bankruptcy case and in the adversary proceeding. As has been true with regard to the Debtors' various motions, the appeals have also been found to be either procedurally or substantively deficient. Since 2006, the Debtors have filed eleven appeals, nine of which have been either dismissed or determined adversely to the Debtors. The two most recent appeals have not yet been considered by the district court.

However, the litigation in the bankruptcy courts did not abate. In October 2006 the court granted the Trustee's motion for summary judgment, avoiding the transfer of the Property from the Debtors to Decrouy, and the transfer from Decrouy to Hugh Mac Truong.

Approximately one month later the Trustee was before the court again to request amendment of the summary judgment orders to include subsequent transferees. It appears that just before the Trustee filed his summary judgment motion Hugh MacTruong deeded the property to an entity known as MT-EARS LLP.2 The existence of this entity was never revealed to the Trustee or the court either while the motion was pending or at the hearing. Further, several days after the hearing on the summary judgment motion, on October 16, 2006, MT-EARS LLP conveyed title to the Property to an entity known as To-Viet-Dao LLP ("To-Viet-Dao"). Mac Truong executed the deed as the general partner for MT-EARS LLP. The deed to To-Viet-Dao was recorded on October 27, 2006. The Trustee only learned of these transfers as a result of a title search. On December 7, 2006, based on the record...

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