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Summit Bank v. Vessel "Harbor Light"

April 11, 2001

SUMMIT BANK, PLAINTIFF,
v.
THE VESSEL "HARBOR LIGHT," IN REM, AND ROBERT L. NICHOLSON, IN PERSONAM, DEFENDANTS.



The opinion of the court was delivered by: Simandle, District Judge

HONORABLE JEROME B. SIMANDLE

OPINION

The instant matter is before the Court on motion of defendant Robert L. Nicholson ("Nicholson"), made pursuant to N.J.S.A. 2A:16-49.1, to cancel and discharge a default judgment entered by this Court in the amount of $57,259.68 on July 31, 1995. Nicholson, whose debts were discharged in bankruptcy on March 22, 1996, claims that the judgment impairs the homestead exemption to which he was entitled in bankruptcy, and should therefore be discharged so that he may freely convey his property and obtain future credit. Plaintiff Summit Bank opposes complete cancellation or discharge of the judgment. This motion calls upon the Court to interpret the discharge provisions in 11 U.S.C. § 522(f), as amended in 1994, and to determine how a debtor's equity in jointly owned property should be valued where the debtor seeks to have a judgment against him cancelled and discharged. For the reasons stated herein, this Court will grant defendant Nicholson's motion and direct the Clerk of this Court to mark the judgment listed on this Court's docket as item 14 as cancelled and discharged.

I. BACKGROUND

The complaint in the underlying matter was filed by Summit Bank on April 13, 1995, approximately six years ago, and named the vessel "Harbor Light" as an in rem defendant and Robert L. Nicholson ("Nicholson") as an in personam defendant. On June 29, 1995, this Court issued an order directing the Clerk to issue a warrant to arrest the vessel "Harbor Light." On July 10, 1995, Summit Bank requested entry of default against Nicholson for failure to appear. On July 12, 1995, default was entered against Nicholson. On July 15, 1995, the United States Marshals Service gave notice that the vessel "Harbor Light" had been arrested. On July 21, 1995, Summit Bank requested entry of default judgment against Nicholson. On July 31, 1995, default judgment was entered against Nicholson, in personam, in the amount of $56,259.68 with costs. On August 16, 1995, pursuant to Summit Bank's request, default judgment was entered against the vessel "Harbor Light."

On November 20, 1995, Nicholson filed a Chapter 7 Bankruptcy Petition in the United States Bankruptcy Court, District of New Jersey. According to Schedule A of Nicholson's bankruptcy petition, the property at issue, namely the residence in Browns Mills that he has jointly owned with his wife since 1977 (hereinafter "the property"), was valued at $80,000.00, subject to a secured mortgage claim in the amount of $62,034.53. (See Nicholson's Supplemental Reply Letter Br., Ex. 1.) A $15,000 exemption (at the time of Nicholson's petition) was allowed for real property used by the debtor as a residence. See 11 U.S.C. § 522(d)(1). The petition also listed Summit Bank, among others, as additional creditors. (See Def.'s Certification in Support of Mot. to Cancel J., Ex. 2.) On January 30, 1996, the U.S. Marshals Service gave notice of the sale of the vessel "Harbor Light." On March 5, 1996, the case filed in this Court was closed. On March 22, 1996, the Honorable Gloria M. Burns, United States Bankruptcy Judge, issued an order releasing Nicholson from all dischargable debts. (See Def.'s Certification, Ex. 3.)

Defendant Nicholson now moves pursuant to N.J.S.A. 2A:16-49.1 *fn1 to cancel and discharge this Court's July 12, 1995 judgment against him in its entirety. Nicholson claims that the open judgment is hampering his ability to obtain credit and is preventing him from transferring title to the property at issue, which remains his residence. Because the secured mortgage debts in the property plus the homestead exemption to which he was entitled exceed his equity in the property, argues Nicholson, the judgment Summit Bank holds against him should be cancelled and discharged of record. Summit Bank opposes this motion, arguing that Nicholson may only avoid, at most, $15,000 (the maximum homestead exemption available in Bankruptcy) of the present judgment.

II. DISCUSSION

Summit Bank does not dispute that Nicholson's motion under N.J.S.A. 2A:16-49.1 is timely, since well over one year has elapsed from the time Nicholson's debts were discharged in bankruptcy. The parties also concur that the pertinent Bankruptcy Code provisions referenced in the New Jersey Statute, 11 U.S.C. §§ 522(f)(1)(A) and (f)(2)(A), provide as follows:

(f)(1) Notwithstanding any waiver of exemptions but subject to paragraph (3), the debtor may avoid the fixing of a lien on an interest of the debtor in property to the extent that such lien impairs an exemption to which the debtor would have been entitled under subsection (b) of this section, if such lien is -

(A) a judicial lien, . . .

(f)(2)(A) For the purposes of this subsection, a lien shall be considered to impair an exemption to the extent that the sum of -

(i) the lien;

(ii) all other liens on the ...


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