Court Opinion

ID: 9917025
Source: CourtListenerOpinion
Date Created: 2024-01-11 15:05:26.840223+00
Date Added: 2024-06-11T07:54:49.211248
License: Public Domain

NOT FOR PUBLICATION WITHOUT THE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-1300-22

UNITED SUPPLY COMPANY,
DIVISION OF USCO/INC.,

          Plaintiff-Appellant,

v.

WALTER J. MCCOLLUM,

          Defendant-Respondent,

and

MCCOLLUM MECHANICAL
LLC,

     Defendant.
___________________________

                   Argued December 5, 2023 – Decided January 11, 2024

                   Before Judges Rose and Perez Friscia.

                   On appeal from the Superior Court of New Jersey, Law
                   Division, Ocean County, Docket No. DC-009743-16.

                   Andrew R. Turner argued the cause for appellant.

                   Joseph Albanese argued the cause for respondent.
PER CURIAM

      Plaintiff United Supply Company, Division of USCO/Inc., appeals from a

December 16, 2022 Special Civil Part order discharging its judgment against

defendant Walter J. McCollum pursuant to N.J.S.A. 2A:16-49.1. We affirm.

      We summarize the pertinent facts and procedural history from the limited

record provided on appeal. Plaintiff was a supplier of equipment to businesses

in the heating, plumbing, and air conditioning trade. In March 2008, McCollum

personally guaranteed payment of all goods purchased from plaintiff by his

company, defendant McCollum Mechanical LLC (collectively, defendants).

      Defendants thereafter failed to make payments and presented a dishonored

check. Accordingly, in November 2016, plaintiff filed a three-count complaint

against defendants demanding $13,357.08 plus interests and costs.

      In February 2017, the county clerk's office entered judgment against

defendants for $13,785.19. A writ of execution followed, but the court officer

was unable to locate any personal property of McCollum within Ocean County,

where the business entity was located.

      In October 2017, the Superior Court Clerk's Office docketed the judgment

in the amount of $13,865.32, which included accrued interest and costs. The

parties do not dispute the docketed judgment automatically became a lien on

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McCollum's real estate, see N.J.S.A. 2A:16-1, but whether plaintiff failed to

execute a levy on any real property owned by McCollum in New Jersey, see R.

4:59-1(d).

      On a date not disclosed in the record, McCollum relocated to Maine.1 In

October 2018, McCollum filed a voluntary Chapter 7 petition in bankruptcy in

the District of Maine. See 11 U.S.C. § 727. In his petition, McCollum claimed

he had no interest in real estate.2 Plaintiff was listed as a creditor holding an

unsecured nonpriority claim against McCollum.           In February 2019, the

bankruptcy court discharged the judgment over plaintiff's objection.

      Because the judgment remained docketed, in September 2022, McCollum

moved in the Special Civil Part to discharge plaintiff's judgment pursuant to

N.J.S.A. 2A:16-49.1. In opposition, plaintiff essentially argued the lien passed

through bankruptcy unaffected and, as such, was not discharged.            More

particularly, plaintiff contended that granting McCollum's motion would

constitute an "advisory or hypothetical opinion[] . . . because no property ha[d]

1
   In his ensuing bankruptcy petition, McCollum acknowledged he had resided
in Maine for more than six months.
2
  McCollum declared he purchased a single-family home in Jackson, Maine in
2016, but the property was awarded to his ex-wife pursuant to a 2018 divorce
decree and, as such, his interest in the property was $0.
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been identified from which to remove the lien"; "the lien w[as] automatically

perfected upon recording" with the clerk of court; and a levy was not a condition

precedent for perfecting the lien.

      McCollum acknowledged a judgment lien was, in a sense, "perfected"

when the lien was docketed, but countered that "[t]he trustee's lien is superior to

that of a judgment creditor." Because plaintiff failed to obtain an execution levy

against any "hypothetical" real property held by McCollum prior to bankruptcy,

McCollum argued he was entitled to relief pursuant to N.J.S.A. 2A:16-49.1.

      In a decision placed on the record, the motion judge ordered the judgment

discharged primarily based on his review of the governing statute and our

decision in Assocs. Com. Corp. v. Langston, 236 N.J. Super. 236 (App. Div.

1989). This appeal followed.

      Reprising the same contentions raised before the motion judge, plaintiff

urges us to reverse. Because the appeal turns on a purely legal determination,

our review is de novo. Manalapan Realty, L.P. v. Twp. Comm. of Manalapan,

140 N.J. 366, 378 (1995); see also In re Registrant H.D., 241 N.J. 412, 418

(2020) (recognizing statutory interpretation is reviewed de novo).

      N.J.S.A. 2A:16-49.1 provides that one year or more after a bankruptcy

discharge, a debtor may apply to a court where a judgment has been docketed

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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. However,

            [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. (emphasis added).]

      Thus, the statute consists of three pertinent parts: (1) a bankrupt debtor

may move to discharge docketed judgments one year or more after the debt was

discharged in bankruptcy; (2) if the debtor establishes the debt was so

discharged, the Superior Court shall enter an order requiring the clerk to cancel

and discharge the judgment; and (3) a pre-bankruptcy lien must be discharged,

unless it was "not subject to be discharged or released under the provisions of

the Bankruptcy Act." The crux of plaintiff's argument on this appeal is that

McCollum failed to satisfy the third criterion because plaintiff's lien passed

through bankruptcy and McCollum apparently owned no pre-petition real

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property in New Jersey. Thus, plaintiff maintains the judgment lien was not

"subject to be discharged or released" by the bankruptcy court.

      It is well settled that "[t]o establish a lien against a judgment debtor's real

property, a creditor need only enter a judgment in the records of the Superior

Court; a levy and execution on real property owned by the judgment debtor are

not required." New Brunswick Sav. Bank v. Markouski, 123 N.J. 402, 411

(1991). "A holder of a docketed judgment has a lien on all real property held by

the judgment debtor in the state." Id. at 412 (citing N.J.S.A. 2A:16-1, 2A:17-

17); see also Chemical Bank v. James, 354 N.J. Super. 1, 8 (App. Div. 2002).

However, a judgment lien against a debtor's real property must be "perfected

. . . by levying against it prior to the filing of the bankruptcy petition." New

Century Fin. Servs. v. Staples, 379 N.J. Super. 489, 497 (App. Div. 2005).

      Thus, when a debtor attempts to discharge a valid and perfected judgment

lien on real property under N.J.S.A. 2A:16-49.1, "the threshold and controlling

issue is whether the judgment [lien] was subject to discharge or release in

bankruptcy." Gaskill v. Citi Mortg., Inc., 428 N.J. Super. 234, 241 (App. Div.

2012), aff'd 221 N.J. 501 (2015). The statute applies if "the debtor could have

obtained a discharge of the lien through the bankruptcy proceedings , [but] the

debtor need not have actually obtained a discharge of the lien." Ibid.

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      In Chemical Bank, we held abandonment of real property by a bankruptcy

trustee, and consequent survival of liens against that property, did not alter the

fact that a judgment lien against the property could have been discharged during

the bankruptcy proceeding. 354 N.J. Super. at 9, 11. A judgment lien becomes

non-dischargeable only if it is levied upon either before bankruptcy filing or

after the bankruptcy trustee's abandonment of the property. Id. at 9, 11-12; see

also Gaskill, 428 N.J. Super. at 243; Party Parrot, Inc. v. Birthdays & Holidays,

Inc., 289 N.J. Super. 167, 171-72, 175 (App. Div. 1996). As we explained in

Party Parrot:

            A lien on the real estate enforced by levy, as opposed
            to the underlying judgment or indebtedness by [the]
            defendants for a deficiency, is not subject to discharge
            or complete avoidance under the provisions of the
            Bankruptcy Code. If unperfected, however, [the]
            plaintiff's lien was subject to avoidance under the Code
            and therefore may now be discharged of record.

            [Id. at 171.]

      The statute has been described as a housekeeping measure to assure that

judgments discharged in bankruptcy do not remain of record, cloud title, or

require payment in the future. Id. at 173. The statute's purpose is aligned with

"the intention of the Bankruptcy Act, i.e.[,] to give the bankrupt a fresh start in

life." Langston, 236 N.J. Super. at 240. Otherwise, "[i]f judgments that have

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been discharged in bankruptcy are allowed to remain of record, the practical

effect may be to require payment at sometime in the future, thereby negating the

intended benefits of the bankruptcy proceedings." Ibid. (quoting Sponsor's

Statement to N.J.S.A. 2A:16-49.1 (July 10, 1967)).

      In the present matter, a lien against any real property in New Jersey owned

by McCollum was created when plaintiff's judgment was docketed in October

2017, prior to the filing of McCollum's October 2018 petition in bankruptcy.

See N.J.S.A. 2A:16-1; see also Markouski, 123 N.J. at 412. Plaintiff did not,

however, perfect the lien by levying against McCollum's real property prior to

the filing of defendant's bankruptcy petition. See New Century Fin. Servs., 379

N.J. Super. at 497. McCollum filed his bankruptcy petition more than one year

after the bankruptcy court discharged his debts and the discharge included the

debt underlying plaintiff's judgment. Because plaintiff's lien was not perfected,

it was "subject to be discharged or released" by the bankruptcy court under

N.J.S.A. 2A:16-49.1. We therefore discern no reason to disturb the motion

judge's order discharging plaintiff's judgment lien, which squarely addressed the

issues raised in view of the governing law and gave effect to the Legislature's

intent.

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      Nor are we persuaded by plaintiff's argument that the judge's decision was

"hypothetical" or "advisory."     The issue decided was whether plaintiff's

judgment lien was dischargeable under N.J.S.A. 2A:16-49.1. Plaintiff's lien

applied against all real property owned by McCollum within New Jersey. See

Markouski, 123 N.J. at 412. In McCollum's bankruptcy petition, he did not

claim any interest in real property in New Jersey. Although we recognize

plaintiff's contention that it therefore could not levy on any real property, the

fact remains no levy issued. Even if McCollum held any pre-bankruptcy interest

in real property in this state, the driving force underpinning N.J.S.A. 2A:16-49.1

is the removal of clouds on title. See Langston, 236 N.J. Super. at 241. To

effectuate that purpose, the statute's requirements ensure dormant liens do not

remain attached to a debtor's real property following bankruptcy. See ibid.

      To the extent not addressed, plaintiff's remaining contentions lack

sufficient merit to warrant discussion in a written opinion. R. 2:11-3(e)(1)(E).

      Affirmed.

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