United States District Court, D. New Jersey
MEMORANDUM AND ORDER
G. SHERIDAN, U.S.D.J.
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.
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.
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).
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.
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.
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
(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;
(A) on or within 90 days before the date of the filing of the
(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