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In re Hackler

United States District Court, D. New Jersey

March 22, 2018

In Re FRANK and DAWN HACKLER, Debtors
v.
ARIANNA HOLDING COMPANY, LLC, Defendant-Appellant, FRANK J. HACKLER and DAWN A. STELZE-HACKLER, Plaintiffs-Appellees,

          MEMORANDUM AND ORDER

          PETER G. SHERIDAN, U.S.D.J.

         Appellant Arianna Holding Company (hereinafter, "Arianna") appeals an order by Bankruptcy Court Judge Christine M. Gravelle. (ECF No. 4). On August 28, 2017, Judge Gravelle granted Plaintiff-Debtors Frank and Dawn Stelze-Hackler's (hereinafter, "Debtors") motion for summary judgment; declared the Final Judgment Foreclosure null and void, under 11 U.S.C. § 547(b); and ordered that Debtors' property be returned to them. (ECF. No. 1-2 at 2). The Court affirms the decision of the Bankruptcy Court for the reasons set forth herein.

         Background

         The Court adopts the facts as set forth in the Bankruptcy Court's August 28, 2017 opinion. See In re Hackler, 2017 Bankr. LEXIS 2437 (Bankr. D.N.J. Aug. 28, 2017). Debtors owned real property as tenants by the entireties in North Brunswick, New Jersey (the "Property"). Id. at *2. On June 25, 2013, the Township of North Brunswick held a tax sale on the property for unpaid municipal liens. Id. The tax sale certificate was sold to Phoenix Funding, Inc., which paid a premium of $13, 500 for the right to purchase the tax sale certificate and continued to pay Debtor's delinquent taxes, charging an interest rate of 18%. Id. After sending a notice to foreclose to Debtors, Phoenix assigned its tax sale certificate to Arianna on May 9, 2016. Id.

         On June 17, 2016, Debtors filed for Chapter 13 bankruptcy, which was later dismissed on September 9, 2016 due to Debtor's failure to attend a Section 341(a) meeting and make all required pre-confirmation payments to the trustee. (Bankruptcy Docket 8 ¶ 13). A month later, after Debtors failed to timely redeem the tax sale certificate, a Final Judgment in the Foreclosure was entered on October 6, 2016, which vested Arianna with title to the property. (Id. at ¶¶ 14, 16).

         Less than three months later, on December 14, 2016, Debtors again filed for Chapter 13 bankruptcy. In re Hackler, 2017 Bankr. LEXIS 2437, at *2-3. As part of their bankruptcy petition, Debtors included their Property, valued at $335, 000, and identified Arianna's lien as worth $45, 000. Id. Debtors identified approximately $89, 000 of additional judgment liens against the Property. Id. That same day, Debtors also filed an adversary proceeding complaint against Arianna, seeking to avoid the October 6, 2016 transfer of the Property to Arianna. Specifically, Debtors sought relief, contending that the transfer constituted a constructively fraudulent transfer under 11 U.S.C. § 548 or an avoidable preference under 11 U.S.C. § 547(b).

         In her August 28, 2017 written opinion, Judge Gravelle granted Debtors' motion for summary judgment and voided the October 2016 Property transfer under 11 U.S.C. § 547(b). Judge Gravelle first addressed Arianna's federalism argument, which focused on a potential conflict between voiding property transfers under Section 547 and "the stability of title to real property." Id. at *5-6. The Bankruptcy Court began by discussing at length the Supreme Court's decision in BFP v. Resolution Trust Corporation, 511 U.S. 531, 546-47 (1994), which Arianna relies heavily on. Id. at *5-8. Because BFP was limited to setting aside fraudulent transfer of mortgage foreclosures under 11 U.S.C. § 548, Judge Gravelle concluded that BFP's holding was inapplicable for the present motion, which implicated Section 547(b). Id. at *8.

         The Bankruptcy Court also discussed the substance of Debtors' Section 547(b) claim and the five elements necessary to support such a claim. Id. at * 11-12. Section 547(b) allows a debtor to set aside the transfer of property if the transfer was:

(1) to or for the benefit of a creditor;
(2) for or on account of an antecedent debt owed by the debtor before such transfer was made;
(3) made while the debtor was insolvent;
(4) made-
(A) on or within 90 days before the date of the filing of the petition; or
(B) between ninety days and one year before the date of the filing of the petition, if such creditor at the time of such transfer was an insider; and
(5) that enables such creditor to receive more than such creditor ...

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