January 28, 2008
RAYMOND LUBERTAZZA, PLAINTIFF-APPELLANT,
CHRISTOPHER W. HLIBOKI, ESQ., DEFENDANT-RESPONDENT.
On appeal from Superior Court of New Jersey, Law Division, Bergen County, Docket No. L-100-07.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Argued January 9, 2008
Before Judges Wefing, R. B. Coleman and Lyons.
This is a legal malpractice case in which plaintiff Raymond Lubertazza alleges that defendant Christopher W. Hliboki, Esq. was careless and negligent and failed to act with reasonable care, skill, and diligence ordinarily possessed and exercised by other attorneys when he prepared a deed in June 2006 so that plaintiff's ex-wife's interest in the former marital home would be transferred to plaintiff. Plaintiff appeals from two orders, each entered on June 8, 2007. The first order denied plaintiff's application to declare plaintiff's transfer in 1995 of "his one-half interest" in the former marital home to his step-mother, Alice Lubertazza, to be free and clear of certain liens. The second order granted summary judgment to defendant and dismissed with prejudice plaintiff's claims for legal malpractice. We affirm.
The following factual and procedural history is relevant to our consideration of the issues advanced on appeal. On June 5, 1970, plaintiff and his ex-wife Julie Lubertazza (Julie) were married. Plaintiff and Julie purchased a home in Fairfield, New Jersey on April 3, 1972. The home was owned by them as tenants by the entirety.
In 1988, plaintiff and his father started a company known as Fairfield Paving. In addition, plaintiff and his father began a real estate development project. At a certain point in time, they encountered financial difficulties. On March 2, 1995, plaintiff transferred "his undivided one-half (1/2) interest" in the marital home to his step-mother Alice Lubertazza for a stated consideration of "$10.00 and release of other debts." On May 23, 1997, plaintiff filed for bankruptcy protection and was discharged from bankruptcy on February 9, 1998.
On June 5, 1998, plaintiff and Julie were divorced. The dual final judgment of divorce incorporated a Property Settlement Agreement (PSA) dated June 3, 1998. The PSA provided in Article VI, paragraph 1, that "Wife agrees to convey to Husband or his assigns all right, title, claim or interest she might have by equitable distribution or otherwise in and to" the marital home. The PSA provided and acknowledged that the home was subject to certain liens and that plaintiff agreed to be responsible for those obligations, as well as indemnify Julie for any claims by third-parties or entities against the property. The transfer was to "be by bargain and sale deed with covenants against grantor's acts."
On February 8, 2000, R.A. Hamilton Corporation (Hamilton) docketed a default judgment that was entered on January 24, 2000, against plaintiff and his father in the amount of $87,128.75. On August 11, 2000, the Internal Revenue Service (IRS) filed with the Register of Essex County a notice of federal tax lien in the amount of $44,194.09.
In November 2005, plaintiff met with defendant in order to review how to place the marital property in his name, as well as satisfy his creditors. In June 2006, defendant prepared a deed transferring Julie's interest in the marital home to plaintiff. Later in 2006, plaintiff resolved his debts to Hamilton and the IRS.
On January 4, 2007, plaintiff filed a complaint for legal malpractice against defendant arguing that it was negligent for defendant to have prepared a deed to transfer Julie's interest in the former marital home to plaintiff because that event caused his creditors' judgments and liens to attach to the marital home. On May 3, 2007, plaintiff filed a motion requesting that the trial court make certain legal determinations, particularly that the May 2, 1995, transfer from plaintiff to his step-mother of his interest in the marital home was valid, and that the Hamilton and the IRS liens did not attach to the property until the June 2006 deed from Julie to plaintiff was recorded. On May 25, 2007, defendant filed opposition to plaintiff's application, as well as a cross-motion for summary judgment.
Oral argument was heard on June 8, 2007. The trial court, in its oral decision, found that the March 2, 1995, transfer was not valid and, thus, the Hamilton judgment and IRS lien attached to the property before the recording of the 2006 deed from Julie to plaintiff. The court found that the property was owned by plaintiff and Julie during their marriage as tenants by the entirety and that neither party was permitted to partition the tenancy. The court further found that if defendant had acted to transfer title to plaintiff in 2006 in an attempt to avoid plaintiff's creditors attaching the property, that defendant would have been violating the Uniform Fraudulent Transfer Act (UFTA), N.J.S.A. 25:2-20 to -34. Consequently, the court denied plaintiff's application and entered summary judgment in defendant's favor. This appeal ensued.
On appeal, plaintiff presents the following arguments for our consideration:
THE TRANSFER OF THE PREMISE TO ALICE LUBERTAZZA BY RAYMOND LUBERTAZZA ON MARCH 2, 1995 WAS A VALID TRANSFER.
THE COURT'S HOLDING THAT THE TRANSFER OF [JULIE LUBERTAZZA'S] INTEREST IN THE PREMISES TO ANYONE OTHER THEN [SIC] THE APPELLANT WOULD, AS A MATTER OF LAW, HAVE BEEN A VIOLATION OF N.J.S.A. 25:2-20, WAS ERRONEOUS.
Plaintiff argues that his March 2, 1995, transfer by deed of his "undivided one-half (1/2) interest" in the marital property divested him of any interest in the real property. Hence, the argument is made that plaintiff had no interest in the real property which could be levied upon or attached until the June 2006 deed from Julie to plaintiff was executed and recorded. Defendant argues that the 1995 transfer was not permitted by law as it constituted an improper alienation by the husband of his interest as a tenant by the entirety; that it was a fraudulent transfer; and that it is belied by certain statements and actions taken by plaintiff which evidence his continued ownership.
In King v. Greene, 30 N.J. 395, 411 (1959), the Supreme Court stated that "[i]t is our view that the husband could, at common law, alienate his right of survivorship, or, more properly, his fee simple subject to defeasance." We have explained the attributes of a tenancy by the entirety as follows:
Suffice it to note that in an estate by the entirety, husband and wife in effect hold as tenants in common for their joint lives; that survivorship exists which is indestructible by unilateral action, and that the rights of each spouse in the estate are alienable, the purchaser becoming a tenant in common with the remaining spouse for the joint lives of the husband and wife and acquiring the fee if the grantor spouse becomes the survivor. Creditors of a debtor spouse can levy upon and sell the debtor spouse's one-half interest in the life estate for the joint lives as well as that spouse's right of survivorship. King v. Greene, supra 30 N.J. at 412-13. However, during coverture, neither spouse may have partition of an estate by the entirety. Gery v. Gery, 113 N.J. Eq. 59, 64-65 (E. & A. 1933); Mueller v. Mueller, 95 N.J. Super. 244 (App. Div. 1967). A levying creditor, or purchaser at an execution sale, acquires no greater rights in the property than those of the debtor spouse. In King v. Greene, supra, our Supreme Court held that the levying creditor could sell the debtor spouse's one-half interest in the life estate for the joint lives as well as the debtor spouse's right of survivorship. However, nowhere was it indicated that the fee could be sold free of the survivorship interest of the non-debtor spouse. [Dvorken v. Barrett, 100 N.J. Super. 306, 308-09 (App. Div.), aff'd, 53 N.J. 20 (1968).]
"A tenant by the entirety can alienate his or her right of survivorship, and the judgment creditor of either spouse may levy and execute upon such right." Capital Fin. Co. of Del. Valley v. Asterbadi, 389 N.J. Super. 219, 227 (Ch. Div. 2006) (citing King, supra, 30 N.J. 395). "The law only forbids the involuntary partition of real property owned by the entirety during the existence of coverture." Ibid.
Therefore, we agree with plaintiff that he could alienate his interest in the tenancy by entirety, but that he could not involuntarily destroy Julie's right of survivorship in doing so. We note, however, that the deed from plaintiff to his stepmother did not convey all of his right title and interest in the marital property, but merely "his undivided one-half (1/2) interest." It does not appear that the March 2, 1995, deed transferred and conveyed his right of survivorship, which he apparently retained. That, of course, would result in him having maintained an interest in the real property after March 2, 1995.*fn1
Defendant argues that the March 2, 1995, deed was also invalid based upon plaintiff's actions, statements, and filings. However, the PSA is ambiguous in that it represents in Article VI that "[t]he parties recognize that they have jointly owned real property known as 151 Fairfield Road, Fairfield, New Jersey," the marital residence. Plaintiff's counsel stressed during oral argument that the phrase "have jointly owned" refers to the period of time before March 2, 1995. Plaintiff's counsel also argued that the fact that he continued to live in the property and was listed as an insured is not determinative of a real property interest plaintiff may have had. Furthermore, counsel argued that plaintiff's statements in response to an Information Subpoena concerning his ownership of the property were made after the deed from Julie was recorded. We agree that the proofs pointed to by defendant do not create an estoppel which would prevent plaintiff from denying an ownership interest in the property.
Defendant also argues that the 1995 transfer was void as a violation of the UFTA because it was done to avoid creditors. We note that N.J.S.A. 25:2-25(a) provides that a transfer is fraudulent if the debtor made the transfer or incurred the obligation "[w]ith actual intent to hinder, delay, or defraud any creditor of the debtor . . . ." It is first of all questionable whether defendant's cause of action to set aside the 1995 deed is timely pursuant to N.J.S.A. 25:2-31. Even if it were timely, the question arises as to whether the transfer was, in fact, a fraudulent conveyance, and whether the proofs presented to this court were sufficient for such a conclusion to be made.
In Gilchinsky v. Nat'l Westminster Bank, 159 N.J. 463, 475-76 (1999), the Supreme Court noted that there are two relevant inquiries necessary in determining whether a transfer constitutes fraudulent conveyance.
The first is whether the debtor [or person making the conveyance] has put some asset beyond the reach of creditors which would have been available to them at some point in time but for the conveyance. The second is whether the debtor transferred property with an intent to defraud, delay, or hinder the creditor. [Ibid. (internal quotations and citations omitted).]
In this case, given the time of the transfer and the time the debts at issue arose, it is disputable whether the actions of plaintiff were intended to defraud Hamilton and the IRS. Moreover, motions for summary judgment are not ordinarily granted where an action requires determination of the state of mind or intent, such as claims of waiver, bad faith, fraud, or duress. Pressler, Current N.J. Court Rules, comment 2.3.4 on R. 4:46-2 (2008).
Consequently, from the record before us, we fail to see how the trial court could conclusively determine that the 1995 transfer was a fraudulent conveyance.
However, we disagree with plaintiff's assertion that he did not have an interest in the property until June 2006, when he received the deed from Julie conveying her interest in the marital property.
On June 5, 1998, a judgment of divorce was entered. That judgment incorporated the PSA between the parties, and that agreement provided in Article VI, paragraph 1, that Julie was obligated to convey to plaintiff or his assigns any and all of her interest in the marital home. N.J.S.A. 2A:16-7 provides that
[w]hen a judgment of the superior court shall be entered for a conveyance, release or acquittance of real estate or an interest therein, and the party against whom the judgment shall be entered shall not comply therewith by the time appointed, or within 15 days after entry of the judgment if no time be appointed therein, the judgment shall be considered and taken, in all courts of the state to have the same operation and effect, and be available as if the conveyance, release or acquittance had been executed conformably to the judgment . . . .
A judgment of divorce which requires that property be transferred, therefore, is self-operative. See Gibau v. Klein, 329 N.J. Super. 227 (App. Div.), certif. den., 165 N.J. 486 (2000). Therefore, as of June 20, 1998, the undivided one-half interest that Julie had in the property was owned by plaintiff.
N.J.S.A. 2A:17-17 provides that "[a]ll real estate shall be liable to be levied upon and sold by executions to be issued on judgments obtained in any court of record in this State . . . ."
The interest of a tenant in common "by definition [is] an undivided interest in the whole, that is, an interest that encompasses the entire property." Burbach v. Sussex County Mun. Utils. Auth., 318 N.J. Super. 228, 233 (App. Div. 1999). Accordingly, in June 1998, plaintiff had, at the very least, an undivided one-half interest in the marital home.
If subsequent proofs were to invalidate the 1995 transfer as a fraudulent transfer, plaintiff, of course, would have had the entire fee. However, for the purposes of this litigation, it is clear that in 1998, fifteen days after the judgment of divorce, plaintiff had an undivided one-half interest in the property by virtue of the judgment of divorce which incorporated the PSA. Consequently, when the Hamilton judgment was docketed and the IRS lien filed in 2000, that judgment and that lien attached to his real property interest. Therefore, the deed, which was executed and delivered by Julie in 2006, was for all intents and purposes in this matter, irrelevant. As such, it is not the proximate cause of any damage to plaintiff. Hence, the order dismissing plaintiff's case with prejudice is affirmed.*fn2