NIKON, INC. v. SIMON DOUEK (DJ-123295-16, MONMOUTH COUNTY AND STATEWIDE) ( 2022 )

NOT FOR PUBLICATION WITHOUT THE
APPROVAL OF THE APPELLATE DIVISION
This opinion shall not "constitute precedent or be binding upon any court ." Although it is posted on the
internet, this opinion is binding only on the parties in the case and its use in other cases is limited. R. 1:36-3.
SUPERIOR COURT OF NEW JERSEY
APPELLATE DIVISION
DOCKET NO. A-0286-21
NIKON, INC.,
Plaintiff-Respondent,
v.
SIMON DOUEK,
Defendant-Appellant.
_______________________
Submitted June 8, 2022 – Decided July 27, 2022
Before Judges Gilson, Gooden Brown, and Gummer.
On appeal from the Superior Court of New Jersey, Law
Division, Monmouth County, Docket No. DJ-123295-
16.
McManimon, Scotland & Baumann, LLC, attorneys for
appellant (Anthony Sodono, III, and Sari B. Placona, on
the briefs).
Mellinger Kartzman, LLC, attorneys for respondent
(Steven A. Jayson and Steven P. Kartzman, on the
brief).
PER CURIAM
Defendant Simon Douek appeals from an order denying his motion to
discharge pursuant to N.J.S.A. 2A:16-49.1 a judgment lien held by plaintiff
Nikon Inc. (Nikon) and a September 17, 2021 order denying his motion for
reconsideration. We affirm.
I.
On June 16, 2016, the Supreme Court of the State of New York, County
of Suffolk, issued a $697,418.28 judgment in favor of plaintiff Nikon against
defendant. Nikon docketed the judgment in the Superior Court of New Jersey
on July 14, 2016.
Defendant filed in the United States Bankruptcy Court, District of New
Jersey, a voluntary petition for relief under Chapter 7 of the Bankruptcy Code
on May 25, 2017. In the petition, defendant stated he had a fifty-percent interest
in real property located in Allenhurst, New Jersey. Defendant claimed the
property had a total value of $2,300,000 and that three mortgages encumbered
$1,847,340.78 of that total value. Thus, at the time he filed the petition,
defendant's equity interest in the remaining value of the property was
$226,329.61. In the petition, defendant exempted $23,675 of his equity pursuant
to 11 U.S.C. § 522(d)(1), leaving to the bankruptcy estate (the Estate) an equity
value in the property of $202,654.61. The day after defendant filed the petition,
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the Bankruptcy Court appointed a trustee to administer the Estate. On January
3, 2018, defendant received a discharge of his debts pursuant to section 727 of
the Bankruptcy Code. See 11 U.S.C. § 727.
On June 27, 2018, the Court entered a settlement agreement and consent
order executed by defendant and the trustee. Plaintiff was not a party to the
agreement. As memorialized in the settlement agreement, defendant and the
trustee agreed defendant would pay the Estate $175,000 in full and final
settlement of the Estate's rights to the property. With that agreement, defendant
was able to avoid the forced sale of the property by the trustee. On August 21,
2019, the trustee filed a notice of abandonment of the Estate's interest in the
property, describing the property as having an "inconsequential" value.
On December 30, 2019, defendant filed in the Bankruptcy Court a motion
to avoid and discharge judgments, including plaintiff's judgment, and any liens
arising from those judgments, pursuant to section 544 of the Bankruptcy Code.
See 11 U.S.C. § 544. In his supporting brief, defendant acknowledged a
bankruptcy discharge results in a discharge of a debtor's personal obligation on
a debt to the judgment creditor but the judgment creditor's docketed lien against
property owned by the debtor before he filed the bankruptcy petition remains.
If granted, defendant's motion would have had the effect of discharging
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plaintiff's lien and leaving plaintiff, with other remaining creditors, to recover a
share of the Estate's value after secured claims were paid. After plaintiff's
counsel objected to defendant's motion as being procedurally improper,
defendant withdrew the motion as to plaintiff.
On or about February 3, 2020, defendant moved in the Superior Court for
an order pursuant to N.J.S.A. 2A:16-49.1 to cancel and discharge plaintiff's
judgment lien. N.J.S.A. 2A:16-49.1 provides that one year after a bankruptcy
discharge, a debtor may apply to a court where a judgment has been docketed
for an order canceling and discharging the judgment. The judgment should be
canceled and discharged "[i]f it appears . . . [the debtor] has been discharged
from the payment of that judgment or the debt upon which such judgment was
recovered." Ibid. But,
[w]here the judgment was a lien on real property owned
by the [debtor] prior to the time he was adjudged a
bankrupt, and not subject to be discharged or released
under the provisions of the Bankruptcy Act, the lien
thereof upon said real estate shall not be affected by
said order and may be enforced, but in all other respects
the judgment shall be of no force or validity . . . .
[Ibid.]
Defendant argued the court had to discharge plaintiff's judgment lien because
plaintiff had not executed and levied on the property and because the property
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was subject to the trustee's avoidance pursuant to section 544 of the Bankruptcy
Code. See 11 U.S.C. § 544.
While defendant's motion was pending, plaintiff filed in the Bankruptcy
Court an amended proof of claim in which it left the "Secured Claim" section
blank. According to plaintiff's counsel, plaintiff filed the amended claim at the
trustee's request "for the purpose[] of [the trustee] being able to administer the
[Estate], and make a distribution from the [E]state."
In a decision placed on the record on April 30, 2020, Judge James J.
McGann denied defendant's discharge motion, finding plaintiff's lien had
survived defendant's bankruptcy "to the extent of . . . [d]efendant's equity" in
the property above the $23,675 exemption under 11 U.S.C. § 522(d)(1). The
judge recognized defendant's bankruptcy operated to discharge the underlying
debt in plaintiff's judgment, meaning plaintiff could not pursue collection of the
debt through, for example, a wage execution or bank levy but found plaintiff
was "free to proceed in rem." The judge held the trustee could not have avoided
the remaining balance of the lien and, consequently, defendant could not avoid
it and it was not subject to discharge. He issued an order denying the motion on
May 7, 2020. In an order dated September 17, 2021, the judge denied
defendant's motion for reconsideration, finding unpersuasive defendant's
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interpretation of and reliance on an unrelated, unpublished Appellate Division
decision issued after his initial decision.
Five days after Judge McGann issued his initial decision, defendant
moved in the Bankruptcy Court for an order that would "clarify" the settlement
and consent order between defendant and the trustee by stating that defendant's
property had been abandoned "free and clear of all judgment liens" pursuant to
11 U.S.C. § 544; defendant had paid to the trustee any equity he had in the
property; and plaintiff's lien was void because plaintiff's amended proof of claim
demonstrated plaintiff's claim was not secured.
While that motion was pending, plaintiff filed in the Bankruptcy Court
another amended proof of claim, listing its judgment as "partially secured";
describing the "nature of property or right of setoff" as "Real Estate,"
specifically a "Lien Against Non-Estate (Abandoned) Real Property"; and
asserting a secured claim of $202,654.65 against the property and an unsecured
claim of $494,763.63.
In a decision placed on the record on December 1, 2020, the Bankruptcy
Court denied defendant's motion and granted plaintiff leave to amend its proof
of claim. The Bankruptcy Court held (i) the settlement agreement clearly was
between defendant and the trustee and those parties could not and did not in that
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agreement impact the validity of plaintiff's lien; (ii) plaintiff could file an
amended claim bifurcating its claim as being partially secured by the property
in the amount of $202,654.65 and partially unsecured in the remaining amount
of $494,763.63; and (iii) defendant's arguments were barred by Judge McGann's
decision, with which the Bankruptcy Court agreed, finding it would not have
granted an avoidance of plaintiff's lien given the amount of equity the Estate had
in the property before the settlement agreement. The Bankruptcy Court also
found unpersuasive defendant's interpretation of and reliance on the unpublished
Appellate Division decision issued after Judge McGann's initial decision. The
Bankruptcy Court issued an order on February 16, 2021, denying defendant's
motion, bifurcating plaintiff's claim into secured and unsecured claims,
discharging defendant's in personam obligation regarding plaintiff's secured
claim but allowing plaintiff's secured claim to pass through defendant's
bankruptcy as an in-rem lien against defendant's interest in the property, and
fixing the judgment lien at $202,654.65.
Two days later, defendant appealed that order to the United States District
Court for the District of New Jersey. In a written opinion, the District Court
affirmed the Bankruptcy Court's order. See Douek v. Nikon, Inc. (In re Douek),
No. 21-02983, 2022 U.S. Dist. LEXIS 13098 (D.N.J. Jan. 25, 2022). The
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District Court held the Bankruptcy Court had not abused its discretion in
allowing plaintiff to file an amended proof of claim; had correctly determined
that defendant's $175,000 payment under the settlement agreement did not
reduce the amount of plaintiff's $202,654.61 judgment lien, the value of which
was determined at the time defendant had filed the bankruptcy petition, which
was before he entered into the settlement agreement with the trustee 1; and had
correctly found sections 502 and 506 of the Bankruptcy Code did not convey to
defendant a right to avoid plaintiff's lien, see 11 U.S.C. §§ 502, 506. The District
Court concluded plaintiff's claim was an "allowed secured claim." Douek, 2022
U.S. Dist. LEXIS 13098, at *21.
On appeal, defendant relies on the unrelated, unpublished Appellate
Division case issued after Judge McGann's initial decision and argues the judge
erred in failing to discharge and cancel plaintiff's lien.
II.
We review a trial court's legal determinations de novo. Rowe v. Bell &
Gossett Co., 239 N.J. 531, 552 (2019); see also Manalapan Realty, L.P. v. Twp.
Comm. of Manalapan, 140 N.J. 366, 378 (1995) (finding a "trial court's
1
The District Court calculated the lien to be $202,654.61 and noted the four-
cent discrepancy between its calculation and the parties' calculations. Id. at *19
n.7.
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interpretation of the law and the legal consequences that flow from established
facts are not entitled to any special deference"). We review under an abuse-of-
discretion standard a denial of a reconsideration motion. Branch v. Cream-O-
Land Dairy, 244 N.J. 567, 582 (2021).
Defendant bases his appeal largely on his interpretation of an unpublished
Appellate Division decision unrelated to this case that was issued after Judge
McGann's initial decision. Defendant's interpretation of that case was rejected
by Judge McGann and by the Bankruptcy Court. More important, his reliance
on that case in this appeal is misplaced because pursuant to Rule 1:36-3, the case
has no precedential value and is not binding on any court. As we stated in
Badiali v. New Jersey Manufacturers Insurance Group, 429 N.J. Super. 121, 126
n.4 (App. Div. 2012), aff'd, 220 N.J. 544 (2015), "as a general matter,
unpublished opinions are not to be cited by any court absent certain specified
circumstances." None of those circumstances apply to the unrelated,
unpublished case on which defendant extensively relies.
We see no basis to depart from the conclusions reached by the Bankruptcy
Court and the District Court in affirming the Bankruptcy Court. We recognize
those decisions are unpublished, but they relate directly to the parties, the
bankruptcy, and the issues before us and, accordingly, our citations to them "are
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appropriate not only to provide a full understanding of the issues presented but
also because their citations herein meet the 'any other similar principle of law '
exception" of Rule 1:36-3. Badiali, 429 N.J. Super. at 126 n.4 (quoting R. 1:36-
3).
Unlike Judge McGann when he issued his initial decision, we have the
benefit of hindsight and the subsequently-issued decision of the Bankruptcy
Court and the affirming decision of the District Court. The Bankruptcy Court
held plaintiff could file an amended proof of claim, bifurcating its claim between
a $494,763.63 unsecured claim and a $202,654.65 secured claim. The District
Court affirmed that decision. Thus, plaintiff had a secured lien. As expressly
set forth in its order denying defendant's motion to clarify the settlement, declare
defendant's property free of all judgment liens, and declare plaintiff's lien void,
the Bankruptcy Court discharged defendant's in personam obligation regarding
plaintiff's secured claim but allowed plaintiff's secured claim to pass through
defendant's bankruptcy as an in-rem lien against defendant's interest in the
property. The District Court affirmed that decision.
We see no basis to take a different position on those issues. "Although
the Bankruptcy Court does not have exclusive jurisdiction of matters involving
dischargeability in bankruptcy, . . . the Bankruptcy Court is most qualified to
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deal with the issue [because t]he question of dischargeability is an everyday
issue in that court which has significant expertise." Cohen v. Dir., Div. of Tax'n,
19 N.J. Tax 58, 64 (Tax 2000); see also D'Atria v. D'Atria, 242 N.J. Super. 392,
409 (Ch. Div. 1990) ("It is not this Court's function . . . to displace the
Bankruptcy Court in the fair administration of the assets of the debtor before
it.").
We affirm Judge McGann's order denying defendant's motion to discharge
plaintiff's judgment lien pursuant to N.J.S.A. 2A:16-49.1 and his subsequent
order denying defendant's motion for reconsideration. N.J.S.A. 2A:16-49.1 does
not allow for the discharge of a judgment lien where – as here – the lien "may
be enforced" because "the judgment was a lien on real property owned by the
[debtor] prior to the time he was adjudged a bankrupt, and not subject to be
discharged or released under the provisions of the Bankruptcy Act."
Affirmed.
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