Jacobson v. A1Z7, LLC (In re Jacobson)

• Decision Date: 25 November 2014
• Docket Number: Adversary No. 14–2023.,Bankruptcy No. 14–20452ASD.
• Citation: 523 B.R. 13
• Court: U.S. Bankruptcy Court — District of Connecticut
• Parties: In re Karen J. JACOBSON, Debtor. Karen J. Jacobson, Plaintiff, v. A1Z7, LLC, Defendant.

523 B.R. 13

In re Karen J. JACOBSON, Debtor.Karen J. Jacobson, Plaintiff

v.A1Z7, LLC, Defendant.

Bankruptcy No. 14–20452ASD.

Adversary No. 14–2023.

United States Bankruptcy Court, D. Connecticut.

Signed Nov. 25, 2014.

Patrick W. Boatman, Jenna N. Sternberg, Law Office of Patrick W. Boatman, LLC, East Hartford, CT, for Plaintiff.

Jeffrey M. Sklarz, Green & Sklarz LLC, New Haven, CT, for Defendant.

MEMORANDUM OF DECISION AND ORDER GRANTING MOTION TO DISMISS

ALBERT S. DABROWSKI, Bankruptcy Judge.

I. INTRODUCTION

The above-captioned matter came before the Court upon the Defendant A1Z7, LLC's (hereinafter, “A1Z7”) Motion to Dismiss Adversary Complaint Pursuant to Fed. R. Bankr. P. 7012(b)(6) (hereinafter, the “Motion”), Adv. ECF No. 15,¹ in response to a Complaint to Avoid Fraudulent Conveyance Under 11 U.S.C. §§ 522, 548 and 550 (hereinafter, the “Complaint”), filed by the Debtor–Plaintiff, Karen Jacobson (hereinafter, the “Debtor”) seeking to avoid as a fraudulent transfer a conveyance of the Debtor's real property located in Coventry, Connecticut through an involuntary public sale by the Town of Coventry and a Tax Collector's Deed to A1Z7. Through the Motion, A1Z7 is seeking to dismiss the Complaint pursuant to Fed. R. Civ. P. 12(b)(6), made applicable to this proceeding by Fed. R. Bank. P. 7012(b)(6), on the ground that the Complaint does not state a claim upon which relief can be granted. Because the Court concludes that a tax sale conducted in accordance with Conn. Gen. Stat. § 12–155 et seq. (hereinafter, the “Tax Collector's Sales Procedure”² ) conclusively establishes as a matter of law “reasonably equivalent value” within the meaning of Bankruptcy Code § 548(a)(1)(B)(i), the sale was not a fraudulent transfer and the Debtor's Complaint must therefore be dismissed.

II. JURISDICTION

The United States District Court for the District of Connecticut has jurisdiction over the instant matter by virtue of 28 U.S.C. § 1334(b). This Court derives its authority to hear and determine this matter on reference from the District Court pursuant to 28 U.S.C. §§ 157(a), (b)(1) and the District Court's General Order of Reference dated September 21, 1984 and by the consent of the parties. This is designated as a “core proceeding” under 28 U.S.C. § 157(b)(2)(H).

III. FACTUAL BACKGROUND

The relevant factual background of this contested matter, as set forth below, is not in dispute for purposes of this Motion.³

1. The Debtor commenced Case No. 14–20452 by filing a petition for relief under Chapter 13 on March 13, 2014. Molly Whiton was appointed as the Chapter 13 Trustee. On the Debtor's Amended Schedule A—Real Property, ECF No. 32, she listed as property of the bankruptcy estate, real property at 758 Wrights Mill Road, Coventry, Connecticut (hereinafter, the “Property”), describing her interest therein as an “[e]quitable interest for fair market value lost in tax lien sale,” which she valued at $190,000. On the Debtor's Amended Schedule B–Personal Property, ECF No. 53, she also listed as assets “excess proceeds from tax sale on 758 Wrights Mill Road, Coventry, CT,”⁴ and a “Fraudulent Transfer claim against A1Z7, LLC.”

2. Upon the filing by the Debtor on August 28, 2014, of a Notice of Conversion to Chapter 7 Case, ECF No. 46, the Court, on August 29, 2014, entered an Order Upon Conversion of Case Under Chapter 13 to Case Under Chapter 7, ECF No. 47. Trustee Molly Whiton was removed as Chapter 13 Trustee and Thomas C. Boscarino was appointed as Chapter 7 Trustee (hereinafter, the “Chapter 7 Trustee”).

3. The Defendant, A1Z7, is a limited liability company formed in the State of Georgia, with an office and place of business located at 102 Prince Drive, Suite E, Martinez, Georgia 30907.

4. The Debtor has been the owner of the Property for many years.⁵

5. In April 2013, the Town of Coventry (hereinafter, the “Town”) claimed taxes and interest were due and unpaid with respect to the Property for the tax years 2002 through 2012, totaling $74,174.92 (hereinafter, the “Taxes”).⁶

6. In June 2013, a public auction took place and A1Z7 purchased the Property from the Town for $200,000.

7. At that time, the fair market value for the Property was approximately $400,000.

8. On or about June 28, 2013, the Town's tax collector issued a Tax Collector's Deed pursuant to Conn. Gen. Stat. § 12–157 et seq., in favor of A1Z7 (hereinafter, the “Transfer”).

9. The value of the Property at the time of the Transfer exceeded the amount of the Taxes.

10. In connection with the Transfer, the Debtor was provided by law, see Conn. Gen. Stat. § 12–157(f), with a six-month “redemption” period with respect to the Property, expiring on December 23, 2013.

11. The Debtor failed to redeem the Property within that six-month period and the Tax Collector's Deed was recorded by the Town on the Coventry Land Records on December 26, 2013, at Volume 1223, Page 1181. Thereafter, the Town was paid the entirety of its unpaid taxes and the balance of the funds, after said taxes, fees and charges in the amount of $64,440.79 was deposited with the Tolland Superior Court pursuant to Conn. Gen. Stat. § 12–157(i)(1)(B), subject to claim by owners and/or encumbrancers.

12. The purchase by A1Z7 left the Debtor insolvent. The transfer of the property to A1Z7 was involuntary.

13. In her Complaint, the Debtor is seeking to have the Court avoid the Transfer as a fraudulent conveyance and either reconvey the Property to the Debtor or enter an order for monetary damages equal to the value of the Property plus interest, less the amount of the Taxes, plus the costs and disbursements of this proceeding.⁷ In response, A1Z7 filed the Motion and a Memorandum in Support of Motion to Dismiss Adversary Complaint Pursuant to Fed. R. Bankr. P. 7012(b)(6), Adv. ECF No. 16. The Debtor has filed in response, Plaintiff's Memorandum of Law in Opposition to Defendant's Motion to Dismiss (hereinafter, the “Plaintiff's Memorandum”), Adv. ECF No. 26. Attached thereto is Affidavit # 1, signed by Peter R. Marsele (hereinafter, the “Marsele Affidavit”), a licensed real estate appraiser and assessor for the Town of Bloomfield, Connecticut. Thereafter, A1Z7 filed Defendant's Reply to Plaintiff's Memorandum of Law in Opposition to Motion to Dismiss, Adv. ECF No. 27. On July 24, 2014, the respective parties appeared before the Court through counsel and were heard on the Motion.⁸

IV. DISCUSSION

A. Connecticut Tax Collector Sales Procedure⁹

Connecticut state law grants municipalities and their tax collectors unique remedies to assist in the collection of local property tax revenue. In relevant part, Connecticut law gives tax collectors several real property execution options, including:

(a) If any person fails to pay any tax, or fails to pay any water or sanitation charges within thirty days after the due date, the collector or the collector's duly appointed agent shall make personal demand of such person therefor or leave written demand at such person's usual place of abode or deposit in some post office a written demand for such tax or such water or sanitation charges, postage prepaid, addressed to such person at such person's last-known place of residence....

(b) After demand has been made in the manner provided in subsection (a) of this section, the collector may ... (2) enforce by levy and sale any lien upon real estate for any unpaid tax or levy upon and sell such interest of such person in any real estate as exists at the date of the levy for such tax.

Conn. Gen. Stat. § 12–155 (2008). In this case, the tax collector opted to levy and sell the Debtor's Property in order to collect the Taxes. The contours of the Connecticut Tax Collector Sales Procedure are set out in detail at Conn. Gen. Stat. § 12–157, in relevant part, as follows:

(a) When a collector levies one or more tax warrants on real estate, he shall prepare notices thereof, containing the name of the taxpayer, a legal description of the real property, including the street address, upon which taxes are due, the amount of the tax or taxes due, including any interest and charges attributable to the property as of the last day of the month immediately preceding the notice, a statement that additional taxes, interest, fees and other charges authorized by law accruing after the last of the month immediately preceding the notice will be added to the amount indicated as due and owing in the notice, and the time and place of sale. The collector shall post one notice on a signpost in the town where such real estate is situated, if any, or at some other exterior place near the office of the town clerk, which is nearest thereto; one shall be filed in the town clerk's office of such town and such town clerk shall record and index the same as a part of the land records of such town, and one shall be sent by certified mail, return receipt requested, to the taxpayer and each mortgage[e], lienholder and other record encumbrancer of record whose interest will be affected by the sale. Such posting, filing and mailing shall be done not more than twelve and not less than nine weeks before the time of sale and shall constitute a legal levy of such warrant or warrants upon the real estate referred to in the notice Such collector shall also publish a similar notice for three weeks, at least once each week, in a newspaper published in such town, if any, otherwise in a newspaper published in the state having a general circulation in such town. The first notice shall be published beginning not more than twelve and not less than nine weeks before the time of sale and the last shall be published not more than four weeks nor less than two weeks before such sale. He shall also send by certified mail, return receipt requested, to the delinquent taxpayer and to each mortgagee, lienholder and other record encumbrancer whose interest in such property will be affected by such sale, a similar notice which shall not be required to list information pertaining to properties in which the person to whom the notice

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