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Schell v. Schell

Decided: February 10, 1986.


Holston, J.s.c.


This is a cause of action for divorce on the grounds of an 18 month separation without reasonable prospect of reconciliation.

Factually, the parties entered into a ceremonial marriage on May 18, 1968. The parties separated from each other on January 10, 1982. An Amended Complaint for Divorce was filed by the plaintiff Nancy J. Schell on March 1, 1983. The defendant Frederick J. Schell filed a voluntary petition under Chapter 7 of the Bankruptcy Code on July 3, 1984.

N.J.S.A. 2A:34-23 speaks in its pertinent part:

[I]n all actions where a judgment of divorce . . . is entered, the court may make such award or awards to the parties in addition to alimony and maintenance, to effectuate an equitable distribution of the property, both real and personal, which was legally and beneficially acquired by them or either of them during the marriage.

Painter v. Painter, 65 N.J. 196 (1974), established that the date a complaint is filed will fix the termination date of a marriage for purposes of equitable distribution.

11 U.S.C.A. § 362 provides that the filing of a bankruptcy petition operates as a stay of the continuation of a judicial action or proceeding against the debtor which was commenced before the commencement of the bankruptcy case. The issue of equitable distribution therefore is before this Court as a result of relief from the automatic stay pursuant to 11 U.S.C.A. § 362(e) by Order entered and filed by the U.S. Bankruptcy Court on July 18, 1985. That Order declines jurisdiction by the U.S. Bankruptcy Court of all issues concerning the equitable distribution of property arising between the debtor Frederick J. Schell and Nancy J. Schell, declines jurisdiction at that time over any matrimonial issues arising between the debtor Frederick J. Schell and Nancy J. Schell and further orders that those issues be determined by this court in this proceeding.

This case requires a determination of the inter-relationship between the applicable provisions of the Bankruptcy Code as it effects the discharge of the debtor, Frederick J. Schell, under 11 U.S.C.A. § 727 and this court's responsibility to effect an equitable distribution in this action pursuant to N.J.S.A. 2A:34-23 of property acquired by the parties or either of them from the date of the marriage to the date of the filing of the Amended Complaint. This court must therefore first determine what property is eligible for equitable distribution.

Among the assets acquired by the parties during the marriage was the marital residence located on Jackson Avenue, Clayton, New Jersey, having a tax map description with the Borough of Clayton of Block 2002, Lot 15. Title of record to this premises became vested in Frederick J. Schell and Nancy J. Schell, his wife, by deed dated June 20, 1972 and recorded in the Office of the Clerk of Gloucester County on June 21, 1972 in Deed Book 1222, page 1180.

On December 4, 1984, Notice of Proposed Private Sale by Trustee to Frederick J. Schell was directed to all creditors or other parties in interest in the bankruptcy case of Frederick J. Schell. The trustee sought to sell Frederick J. Schell's one-half undivided interest in the real estate at 812 Jackson Avenue, Franklinville (Clayton), New Jersey. The sale was subject to the undivided one-half interest of Nancy J. Schell, the debtor's wife, who holds the property as tenants by the entirety and subject to the first mortgage of Hudson City Savings & Loan and subject to any other mortgages or encumbrances of record and subject to any outstanding real estate taxes.

The sales price that was offered by Frederick J. Schell to the trustee was $7974, being composed of $1500 in cash and the remaining part of the purchase price being the debtor's statutory exemption of $6474 under 11 U.S.C.A. § 522(d)(1). The notice of the proposed private sale indicated that the real estate had been appraised by Charleen Clark of Joseph Rauh Realtors on January 12, 1984 as having a fair market value of $40,500 and that the first mortgage encumbrance of Hudson City Savings & Loan Association was $14,300.

The notice from the trustee to creditors and other interested parties indicated that the trustee would accept any higher or better offer for his interest in the property which would net the estate more than $1500 cash. The notice further stated that if no objection was filed with the Clerk and served upon the trustee on or before December 19, 1984, the sale would be consummated as proposed on December 24, 1984. Apparently no greater offer was made for the interest of Frederick J. Schell in the property, as a trustee's deed was delivered to Frederick J. Schell on June 28, 1985 by Joseph M. Weinberg, Trustee in Bankruptcy, for the sum of $7,974.

To determine what portion of the real estate constituting the marital premises is subject to equitable distribution, it is necessary to determine what interest in the real estate vested in the trustee under 11 U.S.C.A. § 541 upon Frederick J. Schell

filing his bankruptcy petition on July 3, 1984. This is because it is that interest which the trustee sold by private sale to Frederick J. Schell by deed dated June 28, 1985.

11 U.S.C.A. § 541 reads as follows:

§ 541 Property of the estate.

(a) The commencement of a case under section 301, 302, 303 of this title creates an estate. Such estate is comprised of all the following property, wherever located and by whomever held:

(1) Except as provided in subsections (b) and (c)(2) of this section, all legal or equitable interests of the debtor in property as of the commencement of the case.

11 U.S.C.A. § 522 provides in applicable ...

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