2008 D e c i sion s O p inion s of the U nit e d S t at e s C our t of Appe al s for the Thir d C ir c uit 7-7-2008 

# In Re: M a c T

r uong P r e c e de n t i al or N on-P r e c e de n t i al : N on-P r e c e de n t i al D ocke t N o . 07-3239

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Thi s de c i sion i s br ou gh t t o you for f r e e a nd ope n a c c e s s b y the O p inion s of the U nit e d S t at e s C our t of Appe al s for the Thir d C ir c uit at V i l l a no va U nive r sity S choo l of L a

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. It h as be e n a c c e pt e d for inclusion in 2008 D e c i sion s b y a n author i z e d a dmini s tr at or of V i l l a no va U nive r sity S choo l of L a

w Di git al Re posit or y

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w . vi l l a no va . e du . Re c omme nde d C it at ion " In Re: M a c T

r uon g " (2008). 2008 D e cisio n s . P ape r 891. http://d i git alc ommon s .l a

w . vi l l a no va . e du/thir dc ir c uit_2008/891C L D - 229 NOT P RE CE DE NT I AL UN I TED STATES CO UR T OF A PP EALS F O R T H E T H IR D C IR C U IT

___________ N o. 07- 3239

___________ I N R E : M AC T RU ONG M AR YS E M AC T RU ONG M a c T ru o n g , M a ryse M a c T ru o n g , S y lv a in e D e C ro u y , H u g h M a c T ru o n g , A p p e llan ts

____________________________________ O n A p p ea l from the U n it ed S tat es D istri ct C o u rt

fort he D i s t r i ctof N ew J er s ey ( D . C . C i vi l N o. 06- cv- 05511) D istri ct Ju d g e: H o n o rab le G arrettE . B row n , Jr.

____________________________________ S u b mi t t e d f

o rP o s s i b l e Di s mi s s a l P u r s u a n tt o 2 8 U. S . C. § 1 9 1 5 ( e ) ( 2 ) ( B) o r S u m m a ry A c tio n P u rs u a n t to T h ir d C ir c u it L A R 2 7 .4 a n d I.O .P . 1 0 .6 J une 12, 2008 B efor e: A M B R O , FU E N T E S and J O R D A N , C i r cui tJ udges

( O pi ni on fi l ed: J ul y7, 2008)

_________ OP I NI ON

_________ P E R C UR I AM M ac Truong and M ary s e M ac- T ruong, Sy l vai ne D eC r ouy , and H ugh M ac- T ruong have a ppeal ed, pr o s e, fr om an or derof t he U ni t ed St at es D i s t r i ctC our tfort he D i s t r i ctof N ew J er s eyent er ed on J ul y5, 2007, w hi ch af fi r m ed or der s of t he U ni t ed St at es-2-

Bank rup t c yCour tfo rt he D i s t r i c tof N e w J e r s e ygr a nt i ng s umm a r yj ud gmen tt o St e ve n P. K artzm an , the T ruo n g s’ C h ap ter 7 trustee . B ec au se th is ap p ea l from the d istri ct co u rt p r e s e n t s u s wi t h “ n o s u b s t a n t i a l q u e s t i o n , ” we wi l l s u mma r i l ya f f i r m. S e e 3 d Ci r . L. A. R. 27. 4 and I . O . P. 10. 6. I. T o s um m ar i ze the fa ct s and pr ocedur al backgr ound br i efl y , acc or di ng t o t he r ecor d, a j udgm entfor$356, 509. 83 w as ent er ed aga i ns tt he Truongs , and i n favorof B r oadw hi t e A s s oci at es , fora br eac hed l eas e agr eementi n J anuary2000. A tt he t i m e of t he j udgm ent , t he Truongs ow ned and r es i ded ata home l ocat ed at327 D emot tA venue, T eane ck, N ew J er s ey . T w o day s aft ert he j udgm entw as ent er ed aga i ns tt hem, t he T ruongs t r ans ferr ed the pr oper t yt o Sy l vai ne D ecr ouy , M ary s e M ac- T ruong’ s s i s t er . T he pr oper t yw as l at ert r ans ferr ed byD ecr ouyt o H ugh M ac- T ruong, t he Truongs ’ s on. T he T ruongs fi l ed forC hapt er7 bankrupt cyi n Sept ember2003. K ar t zman w as des i gnat ed as t he C hapt er7 t rus t ee c har ged w i t h l i qui dat i ng t he as s et s of t he Truongs ’ bankrupt cy estate. Se e 1 1 U . S . C . § 3 2 3 (a). T h e p rog ression o f th e T ruo n g s’ un d erly ing C h ap ter 7 bankrupt cypr ocee di ng r es ul t ed i n K ar t zman bei ng s ubs t i tut ed as a part ypl ai nt i ff i n an adv ers aryact i on againstt he T ruong s, i nit i al l ycom m enced i n a suitbyt he T ruong s’ cr edi t orB r oadw hi t e A s s oci at es i n A pr i l 2003 i n t he Super i orC our tof N ew J er s ey , w hi ch s oughtt o hol d t he Truongs acc ount abl e fora fr audul entconvey ance of pr oper t yunder N e w J e rs e yla w .T h e re co rd in d icates tha t M T -E A R S L L P w as re g ist ere d just da y s b ef o re 1 p ro p e rt yw a s tr a n s f

e rr e d to it a n d a ls o th a t 3 2 7 D e m o tt A v e n u e w a s its re g is te re d a d d re s s . -3- I n Sept ember 2003, t he s t at e courtpr ocee di ng w as r emoved t o t he fe der al di s t r i ct cour tw hi ch then r efe r r ed t he r emoved act i on t o t he bankrupt cycour t . K ar t zman m oved fors um m ar yj udgm entundert he B ankrupt cyC ode and i n r el i ance on t he N ew J er s ey s t at e l aw s of fr audul entconvey ance . O n O ct ober11, 2006, t he bankrupt cycour tent er ed s um m aryj udgm enti n favorof K ar t zman and agai ns tt he Truongs , and gr ant ed fi nal j udgm entbydefa ul tagai ns tD ecr ouy . T he r es ul tof t he bankrupt cycour t ’ s gr antof s um m aryj udgm entforK art zman avoi ded the tr ans fer s of 327 D emot tA venue t o D ecr ouy and H ugh M ac- T ruong and r e- ves t ed the di s put ed pr oper t yi n t he bankrupt cyes t at e for t h e b e n e f

i to f t h e c r e d i t o r s i n t h e c a s e . A t i t l e s e a r c h l a t e rr e v e a l e d , h o we v e r , t h a tt wo m or e undi s cl os ed tr ans fer s of 327 D emot tA venue, t o bus i nes s ent i t i es undert he aus pi ces of t he Truongs , named M T - E A R S, L L P and T o- V i et - D ao, L L P r es pect i vel y , had t aken pl ace . D ue t o t hes e addi t i onal t r ans fer s , t he bankrupt cycour tent er ed an a m ended

1 s um m aryj udgm entor der , avoi di ng t he fur t hert r ans fer s , on D ece m ber7, 2006. T h e T ruo n g s ap p ea led to the d istri ct co u rtfro m the b an k rup tcyco u rt ’s su m m ary j u d g me n to r d e r s , a n d n u me r o u s o t h e rp r i o ro r d e r s o f t h e b a n k ru p t c yc o u r t . S e e 2 8 U. S . C. § 1 5 8 (a). In a n o p inion an d su b seq u en t ord er e n tered o n Ju ly5 , 2 0 0 7 , the d istri ct co u rtT he di s t r i ctcour tcor r ect l yl i m i t ed the s cope of i t s r evi ew t o s i x or der s di s cus s ed 2 i n t he Truongs ’ br i ef. See Fed. R . B ankr . P. 8010. D ur i ng t he pende ncyof t he l i t i gat i on i n t he di s t r i ctcour t , t he Truongs , on J une 4, 3 2007, fi l ed a mot i on, purpor t edl yr el y i ng on 11 U . S. C . § 324, s eeki ng a hea r i ng fort he purpos e of r emovi ng K ar t zman as an appe l l ee i n t he ca s e. O n J ul y5, 2007, t he di s t r i ct cour tent er ed a mem or andum orde rand ac company i ng opi ni on deny i ng t hatm ot i on. T he T ruongs have a l s o appea l ed t hatdet er m i nat i on t o t hi s cour t . See C . A . N o. 07- 3238. -4- a f f irm e d th e b a n k ru p tcy co u rt’s d e c isio n s. T h e T ru o n g s f iled a n o tice o f

a p p e a l. 2 3 II. W e have j ur i s di ct i on t o r evi ew t he di s t r i ctcour t ’ s or derunder28 U . S. C . §§ 158( d) an d 1 2 9 1 . T h e d istri ct co u rth ad ap p ell ate jurisdicti o n to rev iew the b an k rup tcyco u rt ’s or der s under28 U . S. C . § 158( a) ( 1) . B eca us e the di s t r i ctcour ti n t hi s cas e s atas an a p p e llate c o u rt re v iew in g a f in a l o rd e r o f

th e b a n k ru p tcy co u rt, o u r re v iew o f its det er m i nat i on i s pl enary . See I nt er fac e G r oup- N evada , I nc. v. T r ans W or l d A i r l i nes , I nc. ( I n r e Tra ns W or l d A i r l i nes , I nc. ) , 145 F. 3d 124, 130 ( 3d C i r . 1998) . I n r evi ew i ng a det er m i nat i on of t he bankrupt cycour t , w e exe r ci s e the s ame st andar d of r evi ew as t he d i s t r i c tc o u r t , s u b

j e c t i n g t h e b a n k ru p t c yc o u r t ’ s l e g a l d e t e r mi n a t i o n s t o p l e n a r yr e v i e w, r evi ew i ng i t s fac tual fi ndi ngs forcl earerr or , and cons i der i ng i t s exer ci s e of di s cr et i on for abus e ther eof. See The R econs t i tut ed C om m . of U ns ecur ed C r edi t or s of t he U ni t ed H ea lth ca re S y s. , Inc . v . S tat e o f N . J. D ep ’to f L ab o r (I n re U n it ed H ea lth ca re S y s. , Inc . ), 396 F. 3d 247, 249 ( 3d C i r . 2005) . A cour tm aygr ants um m aryj udgm entunderFeder al R ule of C i vil P rocedu re 56(c) “i f t he p l eadings, dep osi t i on s, answ ers t o int err og at ori es, and admi s s i ons on fi l e, t ogetherw i t h t he af fi davi t s , i f any , s how t hatt her e i s no genui neT he purpos e of the N J U FT A i s t o “pr eventa debt orfr om pl aci ng hi s orher 4 pr oper t ybey ond a cr edi t or ’ s r eac h. ” G i l chi ns kyv. N at ’ l W es t m i ns t erB ank N . J . , 732 A . 2 d 4 8 2 , 4 8 8 (N . J. 1 9 9 9 ). -5- i s s ue as t o anym at er i al fac tand t hatt he movi ng par t yi s ent i t l ed t o a j udgm entas a mat t er of l aw . ” See Fed. R . B ankr . P. 7056. III . W e agr ee w i t h t he di s t r i ctcour t ’ s det er m i nat i on t hatt he bankrupt cycour tdi d not comm i terr ori n gr ant i ng s um m aryj udgm entt o K ar t zman— t hus avoi di ng t he fr audul ent convey ance of 327 D emot tA venue. T he ci r cumst ance s s ur r oundi ng the tr ans ferof 327 D emot tA venue s uppor tt hi s det er m i nat i on w hi ch the di s t r i ctcour t , i n t he cont extof 11 U . S. C . § 544( b) , expl ai ned ful l y . I n s hor t , undert he B ankrupt cyC ode, a bankrupt cy e sta te is c re a ted a t th e c o m m e n c e m e n t o f th e b a n k ru p tcy ca se . T h e b a n k ru p tcy es tate in c lu d e s, w ith so m e e x c e p tio n s, “ a ll l e g a l o r e q u itab le in ter e sts o f th e d e b to r in p ro p e rty a s o f th e c o m m e n c e m e n t o f

th e c a s e .” 1 1 U .S .C . § 5 4 1 (a )( 1 ). T he di s t r i ctcour tcor r ect l yaff i r m ed the bankrupt cycour t ’ s det er m i nat i on con cerni ng t he T ruong s’ act ual i ntentt o d efraud thei r cr edit ors. S ect i on 54 4(b)( 1) i s a v eh icl e in w h ich a tru stee m ayrec o v er f rau d u lentlytr an sfe rred asse ts of the d eb tor’s p rop ertyu n d er a stat e’s f rau d u lent co n v ey an ce law s. T h e N ew Jerse yU n ifo rm Fr audul entT r ans ferA ct( “N J U FT A ”) , underN ew J er s eySt atut es A nnot at ed § 4 25: 2- 25( a) , pr ovi des t hata tr ans feri s fr audul enti f t he debt orm ade the tr ans feror i ncurr ed the obl i gat i on “[w ] i th actual i nt entt o hi nder , del ay , ordefr aud anycr edi t orof-6-

t he debt or. . . . ” N ew J er s eys t at e l aw r ecogni zes di r ectpr oof of a ctual fr audul enti nt ent is ra re . S e e G ilch in sk y , 7 3 2 A .2 d a t 4 8 9 -9 0 . In ste a d , a c o u rt is g u id e d b ysta te s tatu te to a non- excl us i ve l i s tof fa ct or s , or“badge s of fr aud, ” fordet er m i ni ng actual i nt ent . See N .J. S tat. A n n . § 2 5 :2 -2 6 . A s th e d istric t co u rt n o ted , h e re K a rtz m a n b ro u g h t f o rth uncont es t ed evi dence s how i ng t hatm or e than a f ew of t he “ba dges of fr aud” w er e pr es ent i n t he Truongs ’ t r ans ferof 327 D emot tA venue be caus e: ( 1) t he tr ans ferw as m ade t o an i ns i der ; ( 2) t he Troungs at t empt ed t o conce al t he tr ans fer ; ( 3) t he Truongs r et ai ned pos s es s i on of t he pr oper t yaft ert he tr ans fer ; ( 4) t he tr ans ferw as m ade w hen the Truongs h a d p r e v i o u s l yb e e n s u e d b yBr o a d wh i t e As s o c i a t e s ; a n d ( 5 ) t h e Tru o n g s b e c a me i ns ol vents hor t l yaft ert he t r ans fer . T hus , t he di s t r i ctcour tcorr ect l yaff i r m ed the b a n k ru p tc yc o u rt ’s g ra n t o f s u m m a ry ju d g m e n t o n th is c o u n t. Fr audul entt r ans fer s as t o pr es entcr edi t or s — t he cr edi t orher e bei ng K ar t zman, r epl aci ng t he i nt er es t s of B r oadw hi t e A s s oci at es — ar e al s o act i onabl e underN ew J er s ey law w h ich p rov ides that a tran sfe r “is frau d u lent as to a c red it o r w h o se c lai m aro se b ef o re t he tr ans ferw as m ade . . . i f t he debt orm ade the tr ans fer. . . w i t houtr ece i vi ng a r e a s o n a b l ye q u i v a l e n tv a l u e i n e x c h a n g e f o rt h e t r a n s f

e r. . . a n d t h e d e b t o r. . . b e c a me inso lven t as a res u lto f th e tran sfe r. ” N . J. S tat . A n n . § 2 5 :2-2 7 (a). A s the d istri ct co u rt not ed, K ar t zman dem ons t r at ed t hatt he Truongs fai l ed t o r ece i ve equi val entval ue for th e ir p ro p e rtya s th e tra n sf e r to D e c ro u yw a s m a d e f o r a m e re ten d o llars inT he Truongs pr es ent ed no evi dence , ot hert han bal d as s er t i on, t hatt he tr ans fer 5 w a s m a d e f

o rc o n s i d e r a t i o n o f

a n a n t e c e d e n td e b tt o D e c r o u y. For s i m i l arr eas ons , K ar t zman w as al s o ent i t l ed t o s um m aryj udgm entunder 6 N . J . S. A . 25: 2- 25( b) , defi ni ng a fr audul entt r ans feras t o pr es entorfutur e cr edi t or s as one t hatw as m ade: W i t houtr ece i vi ng a r eas onabl yequi val entval ue i n excha nge fort he tr an sfe r or o b li g ati o n , an d the d eb tor:

. . . ( 2) I nt ended t o i ncur , orbel i eved orr eas onabl ys houl d have be l i eved that t he debt orw oul d i ncur , debt s bey ond t he debt or ’ s abi l i t yt o payas t hey become due. -7- co n side rati o n . S ee 1 1 U . S . C . § 5 4 8 (a)(1)(B )(i ). F u rt h er, as m en ti o n ed p rev iou sly , there 5 w as no di s put i ng t he fa ctt hatt he Truongs beca m e i ns ol ventatt he t i m e of the tr ans fer , or s hor t l yt her eaf

t er , as t hei rl i abi l i t i es farout w ei ghed thei ras s et s . See N . J . St at . A nn. 25: 2- 23( a) ( “a de bt ori s i ns ol venti f t he s um of t he debt or ’ s debti s gr eat ert han al l of t he debt or ’ s as s et s , ata fa i rval uat i on”) . T hus , t he di s t r i ctcour tpr oper l yaff i r m ed the bankrupt cycour t ’ s det er m i nat i on t hatK ar t zman w as ent i t l ed t o s um m aryj udgm enton t h i s c l a i m. 6 Fi nal l y , t he di s t r i ctcour t ’ s addi t i onal det er m i nat i ons conce r ni ng t he r emai ni ng bankrupt cycour tor der s ati s s ue al s o r ai s e no s ubs t ant i al ques t i on. C ont r aryt o t he ar gum ent s bel ow , a fi nal j udgm entof def aul tagai ns tD ecr ouyw as pr oper l yent er ed as s he fai l ed t o pl ead a ft ert he amended compl ai nti n t he adve r s arypr ocee di ng w as fi l ed. See F ed . R . B an k r. P . 7 0 5 5 (ap p ly ing F ed . R . C iv. P. 55 to b an k rup tcyad v ersa rypr ocee di ngs ) . Fur t her , t he Truongs ’ obj ect i ons t o t he bankrupt cycour t ’ s exer ci s e of

p erso n al j u ri sd ict ion w ere w aive d d u ri n g the p roc ee d ing s in state co u rtas th e a d v ersa ry pr ocee di ng w as t he s ame pr ocee di ng as t he N ew J er s eys t at e pr ocee di ng i ni t i al l ybr ought b yB roa d w h it e A sso ciates. Fin all y , as th e d istri ct co u rtn o ted, t h e b an k rup tcyco u rt ’s s uppl ement al s um m ar yj udgm entor derent er ed i n D ece m ber2006 w as appr opr i at e gi ven t he fur t hert r ans fer s of 327 D emot tA venue di s cover ed af t ert he i ni t i al s um m aryj udgm ent o rd e r w a s e n ter e d . T h e b a n k ru p tcy co u rt h a d th e p o w e r to e n f o rc e a n d im p lem e n t it s pr i ors um m aryj udgm entor der , and voi d anyfutur e fr audul entt r ans fer s , i n t he fa ce of t he undi s cl os ed t r ans act i ons byappel l ant s w hi ch had c ont i nued unaba t ed i n t he fa ce of t he b a n k ru p tc yc o u rt ’s s u m m a ry ju d g m e n t o rd e r. S e e F e d . R . B a n k r. P . 8 0 0 5 . IV . F o r th e re a so n s g iv e n , the d istric t co u rt, ac tin g in its a p p e llate c a p a c ity , p ro p e rly aff i r m ed the or der s of t he bankrupt cycour t . A ccor di ngl y , w e w i l l s um m ar i l yaff i r m t he di s t r i ctcour t ’ s or der . W e w i l l notcons i derappel l ant s ’ m ot i ons fi l ed i n t hi s cour tfor r emoval of t he t rus t ee, i nj unct i ve r el i ef f r om t he trus t ee, and t o di s qual i fyt he trus t ee, as t heyare not properl ybefo re us.