Matter of Hursa
| Decision Date | 17 May 1988 |
| Docket Number | Adv. No. 88-0057.,Bankruptcy No. 87-07081 |
| Parties | In the Matter of Joseph HURSA, Jr., a/k/a Joseph Hursa, Debtor. Jonathan KOHN, Trustee, of the Estate of Joseph Hursa, Jr., etc., Plaintiff, v. Faith HURSA; Citizens First National Bank; Internal Revenue Service, an Agency of the USA; and State of New Jersey, Defendants. |
| Court | U.S. Bankruptcy Court — District of New Jersey |
Rothbard, Rothbard & Kohn by Jonathan Kohn, Newark, N.J., for plaintiff/trustee.
Michael S. Kopelman, Hackensack, N.J., for defendant, Faith Hursa.
This adversary proceeding is before the Court based upon a complaint filed by Jonathan Kohn, Trustee of the Estate of Joseph Hursa, against Faith Hursa, wife of Joseph Hursa.1 The complaint seeks an order from this Court for leave to sell certain property free and clear of liens pursuant to 11 U.S.C. § 363. Joseph and Faith Hursa are presently involved in divorce proceedings before the state court. Defendant filed a notice of motion seeking to have this Court abstain from hearing said matter and allowing the state courts of New Jersey to proceed with equitable distribution. A hearing was held before this Court concerning defendant's abstention motion and decision was reserved. This Court has jurisdiction over the present matter pursuant to 28 U.S.C. § 157(b)(2)(A) and 28 U.S.C. § 1334. The following constitutes this Court's findings of fact and conclusions of law.
1. Joseph Hursa ("debtor") filed a petition under Chapter 7 of the Bankruptcy Code on November 19, 1987. Jonathan Kohn ("plaintiff") was subsequently appointed trustee of the debtor's estate.
2. Faith Hursa ("defendant"), wife of the debtor, instituted a divorce action against the debtor in the Superior Court of New Jersey, Chancery Division, Bergen County, on July 12, 1985 (Docket No. FM-02168-86). As of the date of the hearing in this matter a judgment for divorce had not been entered.
3. Joseph and Faith Hursa had acquired real property known as 867 Circle Avenue, Franklin Lakes, Bergen County, New Jersey, by deed dated November 2, 1973, and recorded November 7, 1973. Said property served as the marital home. Faith Hursa continues to reside in the marital home with the five children of her marriage to the debtor. Three of the children are unemancipated. Joseph Hursa currently resides outside the former marital residence.
4. Debtor's bankruptcy petition indicates that the marital home has a fair market value of $375,000 and is subject to the following mortgage balances:
1. Hudson City Savings Bank
First Mortgage to Purchase Home
(November 2, 1973) $26,106.40
2. First Fidelity Bank
Loan to Make Home Improvements
(August 24, 1979) $ 7,574.11
3. Citizens First National Bank
Third Mortgage on Home
(August 8, 1980) $43,068.12
The Court notes that both Faith and Joseph Hursa signed each of the three mortgages.2
5. On July 6, 1987, the wife filed a Notice of Lis Pendens pursuant to N.J.S.A. § 2A:15-6, et seq., which was duly recorded in the Bergen County Register's office in Book 87, page 271. The Notice of Lis Pendens states in relevant part:
This Lis Pendens is filed in connection with the litigation entitled Hursa vs. Hursa, Docket # FM-02168-86, Superior Court of New Jersey, Chancery Division, Family Part, in which the wife has a claim against the husband\'s interest in the below described premises by virtue of equitable distribution and as security for support. The original Complaint for Divorce was filed on July 12, 1985.
6. In addition to said mortgages, debtor's petition indicates taxes owing to the following entities:
Internal Revenue Service of
the United States of America $79,129.613
State of New Jersey $82,492.58
7. On January 29, 1988, a hearing was held before the Honorable Isabel B. Stark in the Superior Court of New Jersey, Chancery Division, Bergen County. This hearing was attended by Faith and Joseph Hursa and their respective counsel. At said hearing, Judge Stark stated that the marital home would be held as security to enforce the debtor's arrearages in alimony and child support that had accumulated. By order dated February 5, 1988 (see exhibit "C" attached to defendant's papers), Judge Stark set arrearages in the amount of $16,192.38.4
8. On January 22, 1988, plaintiff/trustee brought this present adversarial action against the wife and other interested parties seeking to sell the marital residence free and clear of liens and the interests of the lien creditors. The defendant filed a notice of motion to have this Court abstain pursuant to 28 U.S.C. Section 1334(c)(1) and (2).
The defendant requests that this Court abstain from deciding the issue addressed in the plaintiff's complaint so that the Superior Court of New Jersey can proceed with dividing the marital assets among the husband and wife. Plaintiff asks that the Court deny the request based upon the rights possessed by the trustee to sell the marital home, free and clear of the debtor's interest pursuant to 11 U.S.C. § 363.
I.
BANKRUPTCY COURT LOOKS TO STATE LAW FOR THE CREATION AND DEFINITION OF PROPERTY RIGHTS
In order to determine the debtor's (and hence the trustee's) property rights, it is necessary to refer to the state laws of New Jersey. The Supreme Court in Butner v. United States, 440 U.S. 48, 99 S.Ct. 914, 59 L.Ed.2d 136 (1979) had occasion to note at page 55, 99 S.Ct. at page 918:
Property rights are created and defined by state law. Unless some federal interest requires a different result, there is no reason why such interests should be analyzed differently simply because an interested party is involved in a bankruptcy proceeding . . .
Thus, this Court looks to New Jersey law to determine the debtor's interest in the marital home. The question of the property interest possessed by the trustee in bankruptcy is thus grounded in state law.
II.
THE BANKRUPTCY CODE IS SENSITIVE TO THE RIGHTS OF THE FAMILY AND REFLECTS A CONGRESSIONAL INTENT TO PRESERVE THE MARITAL HOME AND PROTECT THE INTERESTS OF MINOR CHILDREN
There are several examples enumerated in the Bankruptcy Code of Congressional intent to preserve the marital home and to protect the interests of minor children. These examples include:
The debtor's rights to receive alimony and child support payments necessary for the support of the debtor and any of the debtor's dependents are exempt from creditors in bankruptcy. Code Section 522(d)(10)(D).
The debtor is entitled to exempt $7,500 in value in real property that the debtor or a dependent of the debtor uses as a residence. In the case of a husband and wife, this exemption amounts to $15,000. Bankruptcy Code Section 522(d)(1).
The debtor is not allowed to discharge his or her obligations to a spouse or minor children to pay alimony or support payments pursuant to Bankruptcy Code Section 523(a)(5).
The rights of a trustee in bankruptcy to sell property co-owned by a debtor/spouse with a non-debtor spouse are specifically restricted and require the court to make specific findings of benefit to the estate which outweigh the detriment to the co-owner pursuant to Bankruptcy Code Section 363(h).
In summary, there is a consistent philosophy that flows through the Bankruptcy Code that looks to preserve the marital home and the familial benefits of dependent children.
III.
THE MATRIMONIAL AND FAMILY LAW OF THE STATE OF NEW JERSEY MANIFEST AN INTEREST IN PRESERVING AND PROTECTING THE FINANCIAL INTEGRITY OF THE FAMILY UNIT
In the case of Daly v. Daly, 21 N.J. 599, 123 A.2d 3 (1956) the New Jersey Supreme Court was faced with a challenge to the Uniform Reciprocal Support Act. Said case gave Justice Oliphant, in writing the majority of the opinion for the court, the opportunity to note:
It is universally recognized that the family is the basic unit of the complex society in which we live and that its stability is indispensable to the public welfare and health, morals and upbringing of children is its core and essence. A child has the right to be equipped for its future mature life, and this equipment is nothing more than education in its generic and inclusive sense, implying physical, intellectual and moral development. This has been recognized in all civilizations, with few exceptions since Crito said to Socrates, "No man should bring children into this world who is unwilling to persevere to the end in their nurture and education." (Daly v. Daly, at 604, 123 A.2d 3.)
The concept of the preservation of the family unit and that a suitable environment for the raising of children is in the interests of the state was recognized in the more recent case of Daeschler v. Daeschler, 214 N.J.Super. 545 at page 553, 520 A.2d 777 (App.Div.1986) where the Appellate Division had cause to note that an important goal of family law is "assuring the financial protection of the family."
The concept that it is the state that must deal with the complex problems involving the marriage relationship was recognized by United States Supreme Court Justice Douglas in the case of Williams v. State of North Carolina, 317 U.S. 287, 63 S.Ct. 207, 87 L.Ed. 279 (1942). Justice Douglas noted at page 298, 63 S.Ct. at page 213:
Each state as a sovereign has a rightful and legitimate concern in the matrimonial status of persons domiciled within its boarders. The marriage relation creates problems of large social importance. Protection of offspring, property interests, and the enforcement of marital responsibilities are but a few of commanding problems in the field of domestic relations with which the state must deal.
In the case of Rothman v. Rothman, 65 N.J. 219, 320 A.2d 496 (1974), the state supreme court recognized at page 228, 320 A.2d 496:
It has long been well settled and now stands unchallenged that marriage is a social relationship subject in all respects...
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