In Re Sbriglio

306 B.R. 445, 51 Collier Bankr. Cas. 2d 1252, 2004 Bankr. LEXIS 305, 2004 WL 513797
CourtUnited States Bankruptcy Court, D. Connecticut
DecidedMarch 1, 2004
Docket19-50255
StatusPublished
Cited by1 cases

This text of 306 B.R. 445 (In Re Sbriglio) is published on Counsel Stack Legal Research, covering United States Bankruptcy Court, D. Connecticut primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
In Re Sbriglio, 306 B.R. 445, 51 Collier Bankr. Cas. 2d 1252, 2004 Bankr. LEXIS 305, 2004 WL 513797 (Conn. 2004).

Opinion

MEMORANDUM OF DECISION

ROBERT L. KRECHEVSKY, Bankruptcy Judge.

I.

The matter before the court in this reopened Chapter 7 joint case is the motion of Sebastian Sbriglio and Angela Sbriglio (together “the debtors”) to avoid, pursuant to Bankruptcy Code § 522(f)(1), 1 a judicial lien as impairing the debtors’ homestead exemptions (“the motion”). Rino Gnesi Co., Inc. (“Gnesi Co.”) holds the judicial lien (an attachment) recorded against a single-family residence known as 51 Cowles Street, Hartford, Connecticut (“the residence”), and objects to the granting of the motion. An evidentiary hearing on the motion concluded on December 11, 2003, following which the parties submitted initial, and in the instance of the debtors, reply memoranda of law.

II.

BACKGROUND

A. Prepetition

The debtors purchased the residence in 1970 and have continuously lived there since that date. On June 30, 2000, the debtors transferred title to the residence to their daughter, Ann M. Sbriglio (“the daughter”) by warranty deed for the stated consideration of $106,000. The daughter subsequently mortgaged the residence to Sovereign Bank for $83,000.

Gnesi Co., by complaint dated August 3, 2000, commenced an action against the debtors in the Connecticut Superior Court (“the state court”) based upon the debtors’ note and mortgage secured by commercial property owned by the debtors. On or about November 9, 2001, Gnesi Co., utilizing procedures provided by Conn. Gen. Stat. Chapters 903a (“Prejudgment Remedies”) and 904 (“Attachments”), placed an attachment against the residence. The debtors promptly moved to vacate the attachment, but the state court, on November 26, 2001, denied their request.

By complaint dated November 15, 2001, Gnesi Co. brought an action against the debtors and the daughter alleging the transfer of the residence by the debtors to the daughter was a fraudulent transfer (the “second action”). As relief, Gnesi Co. requested: “That the conveyance of an interest in real property known as 51 Cowles Street, Hartford, Connecticut, from the defendants Sebastian Sbriglio and Angela Sbriglio to the defendant Ann M. Sbriglio be set aside and declared null and void as to the Plaintiff.” (Exh. No. 3.) The debtors and the daughter appeared in the second action by counsel, but were defaulted for failure to plead. At the hearing in damages upon default, the state court, on June 25, 2002, entered a “Judg *447 ment and Order” which, in pertinent part, adjudged that the conveyance of the residence from the debtors to the daughter “is hereby set aside and that said conveyance be declared null and void as to Rino Gnesi Company, Inc.” (Exh. No. 4.)

B. Postpetition

The debtors filed their joint Chapter 7 petition on July 12, 2002. They listed the residence in “Schedule A — Real Property” of the petition with the following comment: “Ownership based on 6/25/02 Conn Superi- or Court Judgment which debtors dispute,” and they placed a current value of $1.00 on the residence. They also claimed in “Schedule C — Property Claimed as Exempt” of the petition an exemption in the residence of $1.00. The court thereafter granted the debtors a discharge and, on November 6, 2002, the court closed their case as a “no asset” estate.

The court, on April 2, 2003, granted the debtors’ motion to reopen their case. The debtors, on August 12, 2003, filed the motion to avoid the Gnesi Co. attachment. On that date, the debtors amended their Schedules A and C to value both the residence and their exemptions at $106,000. On December 11, 2003, the final day of the hearing on the motion, the debtors again amended Schedules A and C to change the value of the residence to $149,000 and to increase their exemption claims to $150,000. The debtors on both occasions added the following comment to Schedules A and C: “Ownership based on 6/25/02 Conn Superior Court Judgment which debtors dispute. Title subject to Warranty Deed to Ann Sbriglio and $80,000 Mortgage from Ann Sbriglio to Sovereign Bank.”

III.

ARGUMENTS OF THE PARTIES

The debtors argue that as a result of the state-court judgment in the second action, ownership of the residence was again vested in the debtors as of the bankruptcy petition date. The debtors contend, as such owners, they are entitled to claim their homestead exemptions and avoid the fixing of Gnesi Co.’s attachment on the residence.

Gnesi Co. analogizes the second action to a recovery of fraudulently transferred property by a bankruptcy trustee. It argues: (1) that the debtors, having voluntarily transferred their interest in the residence, are prohibited, pursuant to § 522(g), 2 from claiming exemptions therein, and (2) that the doctrine of laches time bars the motion.

IV.

DISCUSSION

The debtors can avoid the fixing of Gnesi Co.’s attachment on the residence only if the attachment impairs the debtors’ exemptions, and the debtors may claim exemptions in the residence only if the residence is property of their bankruptcy estate. Although neither of the parties has addressed in their memoranda the issue of whether the residence is property of the estate, resolution of that issue is a prerequisite or condition to the court’s consideration of the motion. See Novak v. Woodin (In re Woodin), 294 B.R. 436, 439 *448 (Bankr.D.Conn.2003) (“In order for a debt- or to exercise rights to exempt property that property must be property of the estate.... The debtor’s purported exemption of property that is not property of the estate is a nullity....”); In re Cantrell, 270 B.R. 551, 555 (Bankr.D.Conn.2001) (“[I]if the Debtor did not have a legal or equitable interest in the Property under Connecticut law as of the Petition Date, the exemption provisions of Section 522 cannot be applied at the Debtor’s behest in respect of the Property.”).

The parties’ assumption that the state-court judgment in the second action transferred ownership of the residence back to the debtors is without any foundation. Such premise is inconsistent with the relief requested in the second action, the language of the subsequent state-court judgment, and Connecticut case and statutory fraudulent transfer law. The complaint requested an order voiding the transfer to the daughter “as to the Plaintiff,” and the state-court “Judgment and Order,” declaring the debtors’ transfer of the residence to the daughter “null and void as to Rino Gnesi Company, Inc.” (Exh. No. 4.), voided the transfer only insofar as Gnesi Co.’s attachment was concerned. In addition, Connecticut case law has long held that a trial court may not reconvey ownership of fraudulently transferred property to the transferor. In Doty v. Wheeler, 120 Conn. 672, 679, 182 A. 468 (1936), the trial court, in a fraudulent conveyance action, had “set aside the conveyance entirely to the [transferee] and revested the title in the [trans-feror].” The Connecticut Supreme Court held that the form of the judgment was in error and had to be modified, ruling:

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Related

RINO GNESI COMPANY, INC. v. Sbriglio
908 A.2d 1 (Connecticut Appellate Court, 2006)

Cite This Page — Counsel Stack

Bluebook (online)
306 B.R. 445, 51 Collier Bankr. Cas. 2d 1252, 2004 Bankr. LEXIS 305, 2004 WL 513797, Counsel Stack Legal Research, https://law.counselstack.com/opinion/in-re-sbriglio-ctb-2004.