Wolff v. Tzanides (In re Tzanides), Case No. 16–11410 (RG)

• Decision Date: 28 August 2017
• Docket Number: Adv. No 16–1261(RG),Case No. 16–11410 (RG)
• Citation: 574 B.R. 489
• Parties: IN RE: Andrew TZANIDES, Debtor. David Wolff, Chapter 7 Trustee, Plaintiff, v. Helen Tzanides, Defendant.
• Court: U.S. Bankruptcy Court — District of New Jersey

574 B.R. 489

IN RE: Andrew TZANIDES, Debtor.

David Wolff, Chapter 7 Trustee, Plaintiff,

v.Helen Tzanides, Defendant.

Case No. 16–11410 (RG)

Adv. No 16–1261(RG)

United States Bankruptcy Court, D. New Jersey.

Signed August 28, 2017

Trenk, DiPasquale, Della Fera, & Sodono, P.C., BY: Andrea Dobin, Esq., 427 Riverview Plaza, Trenton, New Jersey 08611, Special Counsel to Plaintiff, David Wolff Chapter 7 Trustee

Law Offices of David Wolff, LLC, BY: David Wolff, Esq., Trustee, 396 Route 34, Matawan, New Jersey 07747, Chapter 7 Trustee

LoFaro & Reiser, LLP, BY: Glenn R. Reiser, Esq., 20 Court Street, Hackensack, New Jersey 07601, Attorney(s) for Defendant, Helen Tzanides

Rabinowitz, Lubetkin & Tully, L.L.C., BY: Jay L. Lubetkin, Esq., 293 Eisenhower Parkway, Suite 100, Livingston, New Jersey 07039, Counsel for Debtor, Andrew Tzanides

OPINION

ROSEMARY GAMBARDELLA, BANKRUPTCY JUDGE

MATTER BEFORE THE COURT

Before the Court is a Motion to Dismiss pursuant to Fed. R. Civ. P. 12(b)(6) and Fed R. Bankr. P. 7012, or in the alternative, for Summary Judgment pursuant to Fed. R. Civ. P. 56 and Fed. R. Bankr. 7056, filed by the Defendant seeking entry of an order dismissing the Chapter 7 Trustee's Adversary Complaint and compelling Plaintiff to discharge a Notice of Lis Pendens recorded with the Bergen County Clerk on April 19, 2016.

David Wolff Chapter 7 Trustee v. Helen Tzanides , Adv. Pro. No. 16–1261(RG). The Complaint asserts a claim for avoidance of an alleged fraudulent transfer of the estate's interest in real property known as 47 Eisenhower Drive, Cresskill, New Jersey pursuant to Sections 544(b) and 550 of the United States Bankruptcy Code and New Jersey's Uniform Fraudulent Transfer Act, N.J.S.A. 25:2–25(a), and a claim for the imposition of a constructive trust pursuant to Section 105 of the Bankruptcy Code and authority to sell co-owner's interest pursuant to 11 U.S.C. § 363(h). The Trustee filed Opposition to the motion and Defendant filed a Reply. This Court held a Hearing on October 11, 2016 and reserved decision. The following constitutes this Court's findings of fact and conclusions of law.

JURISDICTION

The Court has jurisdiction over this matter pursuant to 28 U.S.C. §§ 1334(a) and 157(b), and the Standing Order of Reference from the United States District Court for the District of New Jersey dated July 23, 1984 and amended September 18, 2012. This matter constitutes a core proceeding pursuant to 28 U.S.C. § 157(b)(2)(H).

STATEMENT OF FACTS AND PROCEDURAL HISTORY

Background Information

On November 25, 1992, Andrew Tzanides ("Debtor") and his wife, Helen Tzanides ("Defendant"), purchased real property located at 47 Eisenhower Drive, Cresskill, Bergen County, New Jersey (the "Cresskill Property"). By deed dated November 1, 1993, the Debtor transferred his ownership interest in the Cresskill Property to the Defendant, his wife, for $100. A deed was recorded with the Bergen County Clerk on November 15, 1993 ("1993 Deed"). On June 1, 2002, Defendant filed a corrective deed with the Bergen County Clerk ("2002 Deed").¹

On November 9, 2005, Defendant sold the Cresskill Property for $1,800,000. According to the Trustee, Defendant used the proceeds from the sale to purchase a single family residence located at 517 Witch Terrace, River Vale, New Jersey (the "River Vale Property"), where she currently resides with the Debtor. On April 19, 2016, Trustee caused a Lis Pendens to be recorded with the Bergen County Clerk concerning the River Vale Property.

Debtor's Previous Bankruptcy Case

Prior to Defendant's sale of the Cresskill Property, on December 12, 1997, the Debtor, Andrew Tzanides, filed a petition under chapter 13 of the Bankruptcy Code in the United States Bankruptcy Court for the District of New Jersey. In re Andrew Tzanides , Case No. 97–44472–RG ("Previous Case"). On April 21, 1998, the Court entered an Order converting the Chapter 13 case to Chapter 7. Albert Russo was appointed as the Chapter 7 Trustee ("Mr. Russo" or "Previous Trustee") by the Office of the United States Trustee. See Reiser Decl., Ex. 13, at Docket No. 17.

On July 31, 1998, Mr. Russo filed a Complaint (the "Russo Complaint") against the Debtor and the Defendant challenging the 1993 transfer of the Cresskill Property. Russo v. Tzanides, Adv. Pro. No. 98–02629–RG; see Reiser, Decl., Ex. 5. The Russo Complaint contained three counts. Count 1 alleged that the Debtor received less than reasonably equivalent value in exchange for the 1993 transfer of his interest in the Cresskill Property, and was either insolvent at the time or became insolvent as a result of the transfer. Id. ¶¶ 9–10. Count 1 further alleged that the transfer was made with "actual intent to hinder, delay, or defraud creditors" and that the Debtor concealed an asset during the one year period prior to the filing of his petition and sought denial of discharge under 11 U.S.C. § 727(a)(2)(A). Id. ¶¶ 11, 13. Count 2 alleged that if the transfer occurred within the one year prior to the petition date, such transfer date is legally and equitably tolled, and said transfer is fraudulent as to the Trustee and may be avoided by the Trustee pursuant to 11 U.S.C. § 548. Id. ¶ 15. Count 3 alleged that if the transfer occurred within the four years prior to the petition, such transfer date is legally or equitably tolled, and may be avoided by the Trustee pursuant to N.J.S.A. 25:2–1 et seq. as applied by 11 U.S.C. § 544. Id. ¶ 17.

On October 19, 1998, Mr. Russo filed an Information for Notice of Settlement of Controversy as to the First Fraudulent Transfer Case, which recited the terms of the proposed settlement as follows:

Terms of the settlement:

Debtor has established that at the time of the transfer of debtor's interest in marital home (November, 1993), debtor had assets in excess of liabilities, thus rendered debtor solvent for purposes of fraudulent conveyance statute.

Trustee proposes to dismiss adversary without cost and close his administration of this case.

Reiser Decl., Ex. 15.

Two of Debtor's creditors, EVEREN Securities, Inc. represented by the law firm of Wasserman, Jurista & Stolz, P.C., and Stephen A. North and Barbara North, objected to the proposed settlement. Reiser Decl., Exs. 9, 10. Pursuant to an Order of this Court entered on February 1, 1999, the First Fraudulent Transfer Case was settled by and between the parties and "dismissed with prejudice" and the Debtor was granted a discharge of all of his dischargeable debts. ("1999 Settlement Order"). See Order Approving Settlement, Reiser Decl., Ex. 11. As part of the settlement, the objecting creditors each withdrew their respective objections. Id. In withdrawing the objection, Stephen A. North and Barbara North were represented by the law firm of Ventura, Miesowitz, Albano & Keough. As set forth in the preamble of the 1999 Settlement Order, Mr. Russo determined that there was no basis for the continued prosecution of the First Fraudulent Transfer Case, that the Debtor's transfer of the Cresskill Property in 1993 was not a fraudulent conveyance and was otherwise not avoidable, and that no facts existed to support an objection to the Debtor's bankruptcy discharge. Id. Lastly, by the Order the Debtor agreed to pay Mr. Russo's law firm, Albert Russo, P.C., $2,500 in exchange for the settlement. Id.

On March 15, 1999, the Debtor received a Discharge. Reiser Decl., Ex. 19. On February 23, 2000, Mr. Russo filed a Report of No Distribution. Reiser Decl., Ex. 20. On March 22, 2000, the Court issued a Final Decree and closed the Case. Reiser Decl., Ex. 21.

The Current Bankruptcy Case and Adversarial Proceeding

On January 28, 2016, more than nineteen years after the first bankruptcy filing, the Debtor filed a petition under Chapter 7 of the Bankruptcy Code ("Current Case"). Chapter 7 Petition, In re Andrew Tzanides, Case No. 16–11410, ECF No. 1. On January 29, 2016, the Office of the United States Trustee appointed David Wolff as Chapter 7 Trustee ("Trustee" or "Current Trustee"). ECF No. 4.

On April 12, 2016, the Trustee filed the instant Adversary Proceeding against the Defendant. Complaint, Wolff v. Helen Tzanides, Adv. No. 16–1261, ECF No. 1. The Complaint alleges that by deed on or about May 22, 2002, the Debtor transferred his interest in the Cresskill Property to the Defendant "with intent to evade the claims of then-existing and/or future creditors" and received no consideration in exchange for the transfer. Compl. ¶¶ 10, 11, 13. Trustee alleges that "although he was no longer an owner of the Cresskill Property at the time, upon information and belief, in 2003 the Debtor was a co-borrower on a loan from Advanced Financial Services Federal Credit Union, which entity was granted a lien on an interest in the Cresskill Property, although the Debtor had no recorded interest in the Cresskill Property at that time." Id. ¶ 16. The Trustee further alleges that on March 3, 2003, the New Jersey Division of Taxation entered judgment ("2003 Tax Judgment") against the Debtor in the amount of $12,528.61. The Defendant had no liability on the 2003 Tax Judgment. Id. ¶¶ 14, 15. The Trustee alleges that during the time she was sole owner of the Cresskill Property the Defendant lacked the income sufficient to pay the mortgage on the Cresskill Property, real estate taxes or other related expenses without the Debtor's financial assistance. Id. ¶ 17. In November 2005 the Cresskill property was sold for the sum of $1,800,000.00. The Trustee alleges that a portion of the proceeds of the 2005 Cresskill sale were used to satisfy the NJ Tax Judgment. Id. ¶ 19. Trustee alleges that on June 12, 2006, Debtor and Defendant borrowed the sum of $250,000 from the Emigrant Mortgage Company, Inc., secured by a mortgage on the River Vale Property. Id. ¶ 23. Trustee alleges that Defendant lacked the income sufficient to pay the Emigrant Mortgage, real estate taxes or other expenses associated with her ownership of the River Vale Property. Id. ¶ 25. Trustee alleges that on August 23, 2007,...