In this case, the judgment of divorce provided, among other things, for sale of the marital premises upon the wife's remarriage, with the net proceeds being divided equally between husband and wife. Sometime after the divorce, the husband conveyed his interest in the property to his wife in partial satisfaction of a bankruptcy obligation. Thereafter the wife remarried.
The novel issue raised by the wife's remarriage is whether the husband may now compel the sale of the marital premises pursuant to the divorce judgment and share in the proceeds of the sale even though he has already transferred his interest in the property to satisfy bankruptcy debts. I conclude that absent a specific exception in the deed, the conveyance of a spouse's interest in the marital home to the other spouse is a conveyance of the entire estate and extinguishes any rights and benefits the grantor may have to that property under a judgment of divorce.
The facts are as follows. Margaret and Robert Colucci were married in October 1969. About two years after their marriage the Coluccis purchased real estate known as 4 Fairmont Terrace in West Orange for $31,500. They lived together in the marital home until 1981 when, after 12 years of marriage, Robert Colucci left his wife. Margaret Colucci continued to reside in the marital home with the couple's two children.
Sometime during this period Mr. Colucci was involved in a business venture which eventually failed. In June 1982, he filed a bankruptcy petition under Chapter 7 of the Bankruptcy Code. Jonathan Kohn was appointed trustee of the debtor's estate. Colucci was adjudicated a bankrupt and his debts were discharged in November 1982. In July 1983, Robert and Margaret Colucci ended their 14-year marriage in a divorce.
During the period of separation, which preceeded the divorce, the parties negotiated a property-settlement agreement. Paragraph seven of the agreement provided as follows:
The wife and children of the marriage shall remain in the marital premises until the youngest child has become emancipated, the Wife remarries or the Wife has an unrelated male permanently residing in the premises, whichever shall occur sooner at which such time the premises would then be sold with the net proceeds being divided equally between the Husband and Wife.
Until such time as the marital premises have been sold, Husband shall be responsible to pay in addition to the child support, the cost of the mortgage, tax and homeowners insurance premium on the marital premises.
The agreement acknowledged that the husband had filed a petition for personal bankruptcy. According to the husband, when the agreement was negotiated, he was under the impression that the marital home could not be used to satisfy his bankruptcy debts. It was with this understanding, he says, that he filed the bankruptcy petition and that he agreed to be responsible for mortgage, taxes and insurance payments on the property. This claim is made although Colucci listed the home as an asset in schedule B-1 of his bankruptcy petition and estimated the value of his interest in the home at $35,000. He also listed an open mortgage on the property with a balance of $25,500. In June 1983, a month prior to the divorce, Kohn filed a complaint against Robert Colucci to sell the marital premises including the interest of the debtor's spouse. The trustee's complaint indicated that the marital home had an appraised fair market value of $82,100.
In order to prevent the loss of the home and displacement of the couple's children, Margaret Colucci negotiated a purchase of Robert's interest in the home with the bankruptcy trustee.
The credible evidence presented in support of the motion does not adequately establish whether the purchase price included a $7,500 waiver of the exemption to which the debtor spouse is entitled. 11 U.S.C.A. § 522(d)(1). Finally, in November 1984, Robert executed a deed conveying all his "rights, title and interest" in the property to Margaret for $100. At about the same time, Margaret paid the trustee $12,500 in exchange for the trustee's deed. In April 1990, Margaret Colucci remarried.
According to the Bankruptcy Code the estate of a debtor in bankruptcy is comprised of "all legal or equitable interests of the debtor in property as of the commencement of the case." 11 U.S.C.A. § 541(a)(1). The scope of this section of the code is broad and includes all property of the debtor whether tangible or intangible. United States v. Whiting Pools, Inc., 462 U.S. 198, 205, 103 S. Ct. 2309, 2313, 76 L. Ed. 2d 515 (1983). Real estate, whether wholly owned or in a tenancy by the entirety, is includable in the bankruptcy debtor's estate. Newman v. Chase, 70 N.J. 254, 262, 359 A.2d 474 (1976); Lee v. Lee, 180 N.J. Super. 90, 433 A.2d 824 (Ch.Div.1981); Napotnik v. Equibank & Parkvale Sav. Ass'n., 679 F.2d 316, 318 (3 Cir.1982); Chippenham Hosp. v. Bondurant, 7 ...