Hackler v. Arianna Holding Co. (In re Hackler)Hackler v. Arianna Holding Co. (In re Hackler)
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
BACKGROUND
The Court adopts the facts as set forth in the Bankruptcy Court's August 28, 2017 opinion. See In re Hackler,
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 ,
In her August 28, 2017 written opinion, Judge Gravelle granted Debtors' motion for summary judgment and voided the October 2016 Property transfer under
The Bankruptcy Court also discussed the substance of Debtors'
(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 transfеr was an insider; and
(5) that enables such creditor to receive more than such creditor would receive if-
(A) the case were a case under chapter 7
In the present matter it is not in controversy that the valuation of the Prоperty, estimated at $335,000, far exceeds the value of Arianna's lien, estimated at $45,000. There are no mortgage liens on the Property, although Debtors have unsecured debt. It cannot be reasonably argued that a Chapter 7 trustee would not be able to secure a higher price for the Property than the amount of the Ariаnna lien. Liquidation in this case would pay the Arianna lien in full and produce significant assets for distribution to creditors. It cannot be reasonably argued that Arianna, in receiving a $335,000 property, has not received more than the approximately $45,000 it would have received in a Chapter 7 bankruptcy.
In re Hackler ,
On appeal, Arianna presents thе following arguments: (1) the Bankruptcy Court's decision runs afoul of the Supreme Court's decision in BFP v. Resolution Trust Corp. ,
LEGAL STANDARD
This Court has jurisdiction over this appeal pursuant to
ANALYSIS
I. The Bankruptcy Did Not Err in Its Analysis of BFP
Arianna contends that the Bankruptcy Court erred in concluding that the Supreme Court's holding in BFP had no application to its
In BFP , Justice Scalia, writing on behalf of the majority, considered whether a debtor could set aside a mortgage foreclosure sale as a fraudulent transfer under
Justice Scalia agreed with the bankruptcy court, noting that a forced foreclosure sale is far different from a sale in a more relaxed open market condition; as such, a forced foreclosure sale "constitutes a reasonably equivalent value." Id. at 537-39,
BFP is distinguishable from this case for several reasons. First, BFP discussed fraudulent transfers under
(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 would reсeive if-
(A) the case were a transfer under chapter 7.
In re Friedman's, Inc. ,
Moreover, in New Jersey, there are significant procedural differences between a mortgage foreclosure and a tax sale certificate foreclosurе. "In a mortgage foreclosure, the judgment directs the property to be sold and the sale occurs after the judgment. In a tax sale certificate foreclosure, the certificate is sold and then after a two-year waiting period, the certificate holder can obtain a foreclosure judgment which vests title direсtly in the holder without further sale." In re McGrath ,
[I]n a mortgage foreclosure action, competitive bidding for the underlying property is enсouraged by means of advertising and public auction. As a result, a value for the property may be inferred. By contrast, with regard to tax sales [certificate], public bidding occurs at the inception of the process, within months after the delinquency, and is limited to the rate of interest on the unpaid taxes (which amounts have little сonnection to the value of the property). Similarly, the fixed redemption amount at the time of foreclosure of the tax sale certificate is calculated from the accrued taxes and interest thereon, not the value of the underlying property.
For the sake of completion, it is worth also briefly noting that the Court is satisfied that the Bankruptcy Court properly determined that Debtors met all five factоrs under
Finally, the Court is unpersuaded by Arianna's argument that the bankruptcy court's decision is incongruent with New Jersey law. As the Bankruptcy Court noted, New Jersey has a similar statute, under N.J.S.A. § 54:5-87, which provides limited grounds for debtors to contest the validity of a final judgment, within ninety days. Arianna's reliance on case-law that refused to set aside tax foreсlosures based on equitable principles or N.J. Ct. R. 4:50-1 is unavailing. None of the matters relied by Arianna were based on
II.
Arianna argues, alternatively, that the Bankruptcy Court erred in failing to determine that
The Tax Injunction Act states, "[t]he district courts shall not enjoin, suspend or restrain the assessment, levy or collection of any tax under State law where a plain, speedy and effiсient remedy may be had in the courts of such State."
Withholding consent to foreclose from a private citizen does not implicate the assessment, levy, or collection of any tax. The statute is intended to prevent interference with taxation by governmental entities; however, upon the sale of the tax certificate, the tax obligation is satisfied. The holder's inability to foreclose does not affect the governmental entity's ability to assess, levy, or collect any tax, and thus, the [Tax Injunction Act] is not applicable
Finally, Arianna's argument that Section 505 of the Bаnkruptcy Code,
ORDER
Having carefully reviewed and taken into consideration the submissions of the parties, as well as thе arguments and exhibits therein presented, and for good cause shown, and for all of the foregoing reasons,
ORDERED that the Bankruptcy Court's decision is AFFIRMED .
Notes
At oral argument, Arianna presented a newly minted argument that was not raised in its brief or before the Bankruptcy Court. Counsel averred, without any legal support, that because Debtors' initial June 2016 Chapter 13 filing was dismissed for failing to аttend a Section 341(a) meeting, that this somehow precludes Debtors from now availing themselves of relief under