MOTION TO AVOID JUDICIAL LIEN AND REMOVE JUDICIAL RESTRAINTS
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OCR extract:
UNITED STATES BANKRUPTCY COURT
MIDDLE DISTRICT OF FLORIDA
ORLANDO DIVISION
In re: Case No. 6:10-bk-15274-KSJ
Chapter 7
ROY THOMAS KIDD,
Debtor
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MOTION TO AVOID JUDICIAL LIEN AND REMOVE JUDICIAL RESTRAINTS
COMES NOW Roy Thomas Kidd (the “Debtor”), by and through his undersigned attorney, pursuant to 11 U.S.C 522, moves this Court for the entry of an order avoiding the judicial lien of YA Global Investments F/K/A Cornell Capital Partners, and as grounds therefore would show:
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PURSUANT TO M.D. FLA. L.B.R. 2002-4, THE COURT WILL CONSIDER THIS MOTION WITHOUT FURTHER NOTICE OR HEARING UNLESS A PARTY IN INTEREST FILES AN OBJECTION WITHIN 20 DAYS FROM THE DATE OF SERVICE OF THIS PAPER. IF YOU OBJECT TO THE RELIEF REQUESTED IN THIS PAPER, YOU MUST FILE YOUR OBJECTION WITH THE CLERK OF THE COURT AT 135 WEST CENTRAL BLVD., SUITE 950, ORLANDO, FL 32801, AND SERVE A COPY ON THE MOVANT'S ATTORNEY, ERIC A. LANIGAN, ESQ., 222 S. PENNSYLVANIA AVE, #101, WINTER PARK, FL 32789.
IF YOU FILE AND SERVE AN OBJECTION WITHIN THE TIME PERMITTED, THE COURT WILL SCHEDULE A HEARING AND YOU WILL BE NOTIFIED. IF YOU DO NOT FILE AN OBJECTION WITHIN THE TIME PERMITTED, THE COURT WILL CONSIDER THAT YOU DO NOT OPPOSE THE GRANTING OF THE RELIEF REQUESTED IN THE PAPER, WILL PROCEED TO CONSIDER THE PAPER WITHOUT FURTHER NOTICE OR HEARING, AND MAY GRANT THE RELIEF REQUESTED.
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1. On August 27, 2010, the Debtor, a married man, individually filed a Voluntary Petition under Chapter 7 [Doc. No. 1] in this cause.
2. YA Global Investments f/k/a Cornell Capital Partners, LP (“Cornell”) is a creditor in this cause. Cornell holds an unsatisfied judgment against the Debtor, individually. Final judgment was entered in favor of Cornell, and against the Debtor, in the principal amount of $342,000.00 plus costs and interest on July 18, 2005. Cornell has no judgment against the Debtor's wife.
3. On August 20, 2010, the New Jersey Superior Court issued a Writ of Execution to serve on Maxim’s Red New Jersey office. The Writ was delivered to the Monmouth County Sheriff’s Office on August 26, 2010. Under New Jersey law, upon delivery to the executing sheriff, a writ of execution perfects the judicial lien of the judgment creditor.[1] Therefore, Cornell holds a perfected judicial lien.
4. On August 20, 2010, the New Jersey Superior Court also issued a temporary restraining order prohibiting the removal of any asset from the Maxim brokerage account. That temporary restraining order remains in effect pending a hearing scheduled for October 1, 2010, in the New Jersey Superior Court.
5. The Debtor has standing to seek avoidance of the judicial lien of Cornell. See Deel Rent-A-Car, Inc. v. Levine, 721 F.2d 750 (11th Cir. 1983) (debtor has standing to avoid judicial lien of creditor when encumbered property of debtor is exempt and placement of judicial lien constitutes a preference under 11 U.S.C §522(g) and (h)).
6. Cornell's lien is a judicial lien as defined by Bankruptcy Code §101(36) in that it is obtained by a judgment, levy, sequestration or other legal or equitable process or 1 See N.J. Stat. §2A:17-10; McNamara v. New York, L. E. & W. R. Co., 56 N.J.L. 56, 28 A. 313 (1894) (A judgment in and of itself creates no lien on goods and chattels which can be reached only by an execution); Vineland Sav. & Loan Ass'n v. Felmey, 12 N.J.Super. 384, 79 A.2d 714 (Ch.1950) (In case of personalty, lien of judgment becomes effective upon making of levy by sheriff following execution, but dates back to delivery of writ to him).
proceeding and came into existence as part and parcel of the process to collect on a judgment. In re Engler, 394 B.R. 598, 604 (Bankr. M.D. Fla. 2008).
ARGUMENT I: CORNELL’S JUDICIAL LIEN ENCUMBERS EXEMPT PROPERTY AND IS SUBJECT TO AVOIDANCE UNDER 11 U.S.C §522
7. Cornell’s judicial lien impairs exempt property and is therefore subject to avoidance under 11 U.S.C. 522(f). In pertinent part, 11 U.S.C 522(f) states that, “the Debtor may avoid the fixing of a lien on interest of the debtor in property to the extent that such lien impairs an exemption to which the debtor would have been entitled under subsection (b) [incorporation of state and local exemptions] of this section, if such lien is a judicial lien”.
8. In May of 2008, the Debtor and his wife, Dr. Joan Kidd, acquired 7.5 million shares of Domark International, Inc. (“Domark”) stock and the Debtor became an officer/director in that company. The Debtor and his wife subsequently acquired additional Domark stock in 2009. All of the Domark stock was issued as tenancy by the entireties property and the stock certificates denominated "Roy Thomas Kidd & Joan L Kidd Ten Ent" as the owners. Copies of the Domark stock are attached hereto and incorporated herein by reference as Exhibit “A”.
9. On September 2, 2009, Domark acquired 3.5 million shares of 310 Holdings (“310”). 310 subsequently changed their name to JBI, Inc. On September 10, 2009, as part of a management change at Domark, the Debtor and his wife received from Domark 3.5 million shares of 310 stock. All of the 3.5 million shares of 310 stock were issued as tenancy by the entireties property and the stock certificates denominated "Roy Thomas Kidd & Joan L Kidd Ten Ent" as the owners. Copies of the 310 stock are attached hereto and incorporated herein by reference as Exhibit “B”.
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10. In March/April of 2010, as a result of the 310/JBI corporate name change, the Debtor and his wife received new share certificates breaking up their remaining 310 shares into smaller blocks of JBI stock. Again, all of these new JBI certificates were issued as tenancy by the entireties property and the stock certificates denominated "Roy Thomas Kidd & Joan L Kidd Ten Ent" as the owners. Copies of the JBI stock are attached hereto and incorporated herein by reference as Exhibit “C”.
11. The Debtor and his wife then placed their JBI shares in their Maxim Group brokerage account. The Maxim account is, and always has been, owned by Roy Thomas Kidd & Joan L Kidd as tenancy by the entireties property. Copies of the Maxim account statement designating ownership as being "Roy Thomas Kidd & Joan L Kidd Ten Ent" are attached hereto and incorporated herein by reference as Exhibit “D”.
13. Based on the foregoing, the JBI stock is clearly entireties property. Both New Jersey2 and Fla. recognize entireties property. Florida exemptions apply where a debtor and his wife acquire stock while residing in Florida and the matter is pending in a Florida bankruptcy proceeding. In re Kirshner, 2007 WL 3232258 (S.D. Fla. 2007).
14. The encumbered property, the JBI stock and Maxim account, is the type contemplated under 11 U.S.C. 522(f) and all of its value is claimed as exempt by the debtor's in Schedule C filed in this case. The existence of Cornell’s judicial lien and injunctive restraints to protect said lien impair exemptions to which the Debtor would be entitled.
2 N.J. Stat. §46:3-17.2 provides that a tenancy by entirety shall be created when “a husband and wife together take title to an interest in real property or personal property under a written instrument designating both of their names as husband and wife…”
ARGUMENT II: CORNELL’S JUDICIAL LIEN CONSTITUTES A PREFERENCE AND IS THEREFORE SUBJECT TO AVOIDANCE UNDER 11 U.S.C. §522(g) and (h)
15. On August 27, 2010, the Debtor, a married man, individually filed a Voluntary Petition under Chapter 7 [Doc. No. 1] in this cause. Cornell’s Writ of Execution was delivered to the Monmouth County Sheriff’s Office on August 26, 2010. Again, under New Jersey law, upon delivery to the executing Sheriff, a writ of execution perfects the judicial lien right of the judgment creditor. The perfection of Cornell’s lien and their attempt to execute thereupon fall within 90 days before the date of the Debtor’s filing of the petition. As such, it is subject to avoidance under 11 U.S.C. 522(g) and (h).
WHEREFORE that Debtor respectfully requests the entry of an order of avoiding and canceling the judicial lien on the encumbered property, the JBI, Inc. stock and Maxim brokerage account and terminating the temporary restraint issued by the New Jersey state court.
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