LBC Building Corp, Inc.

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Case 1-08-41946-dem Doc113 Filed 07/30/09 Entered 07/31/09 13:56:49

UNITED STATES BANKRUPTCY COURT
FASTERN DISTRICT OF NEW YORK

Inre: Case No.: 1-08-41946-dem

LBC BUILDING CORP., INC., Chapter 11

DECISION AND ORDER ON OBJ ECTION TO CLAIM
NO. 1 OF JOSEPH J. AND VICTORIA P. UNDROSKY

Appearances:

Barton Nachamie, Esq.

Jill L. Makower, Esq.

Todtman, Nachamie, Spizz & Johns. P.C.
Attomeys for Debtor

425 Park Avenue

New Y ork, New Y ork 10022

Victoria P. Undrosky
Joseph J. Undrosky
Claimants

1813 Charton Circle
Toms River, New Jersey 08755

DENNIS E. MILTON
United States Bankruptcy Judge
INTRODUCTION
The matter is before the Court on the motion of the debtor seeking an Order

pursuant to Section 502 of the Bankruptcy Code and Rule 3007 of the Federal Rules of
Bankruptcy Procedure reclassifying the secured claim against the debtor of Joseph J. Undrosky
and Victoria P. Undrosky (the “Undroskys”) and avoiding the judgment lien of the Undroskys.
As set forth more fully below, the Court grants the motion in all respects.

Also before the Coutt is the application of GHS Metro NY, LLC d/b/a Gloria

Nilson GMAC Real Estate for an award of commissions. For the reasons set forth below, the
Court defers consideration of this application until the hearing on the final fee applications in
this case.
JURISDICTION
This Court has jurisdiction over this core proceeding under 28 U.S.C. §§1334(b)
and 157(b)(2)(c) and the Eastern District of New York standing order of reference dated August
28, 1986. This Memorandum Decision and Order constitutes the Court’s findings of fact and
conclusions of law to the extent required by Fed. R. Bankr. P. 7052.
FACTUAL BACKGROUND
On April 1, 2008, LBC Building Corp. (the “debtor”) filed a voluntary petition for
relief under Chapter 11 of the Bankruptcy Code. 	Since filing, the debtor has continued to
operate its business as a debtor-in-possession. The Court has not ordered the appointment of a
trustee.
At the time of filing the petition, the debtor owned two properties in New Jersey
located at the following addresses:
(1). 1987 Pamela Court, Toms River, New Jersey (the “1987 Property”); and:
(2). 1999 Pamela Court, Toms River, New Jersey (the “1999 Property”).
By Order dated July 3, 2008, the Court approved the sale of the 1999 Property to Amboy
National Bank for a credit bid of $390,000.00 (the “1999 Sale Order”). By Order dated October
3, 2008, the Court approved the sale of the 1987 Property to County Line Construction Inc. for
$355,000.00 (the “1987 Sale Order”).
The debtor is administratively insolvent, with the debtor's estate consisting of
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sales proceeds in the approximate amount of $20,200.00.
DISCUSSION
The Undrosky Claim Should Be Reclassified Pursuant to
Section 502 0f the Bankruptcy Code. The Undrosky
Judgment Lien Should be Avoided Pursuant to Section
Section 544(a) of the Bankruptcy Code.
Pursuant to the 1987 Sale Order, the 1987 Property was transferred to County
Line Construction Inc. free and clear of all liens, claims, encumbrances and other interests,
including any liens which may have been held by the Undroskys, with such interests attaching
solely to the sale proceeds to the same extent, validity and priority that they attached to the 1987
Property immediately prior to the closing. It is undisputed that the sale proceeds total
approximately $20,200.00.
On or about May 5, 2008, the Undroskys timely filed a Proof of Claim in this
matter. 	They asserted that their deposit of funds for the construction of a home constituted the
basis for a secured claim, that they had received a judgment filed on April 1, 2008, that they
recorded the judgment as a lien on April 8, 2008 in the Superior Court of New Jersey, Chancery
Division in the amount of $76,891.17 against the debtor (the “Undrosky Lien”). By Notice of
Motion dated January 6, 2009, counsel for the debtor moved for an Order pursuant to Code
Section 502 reclassifying the secured claim and for an Order avoiding the Undrosky lien. On
February 4, 2009, the Undroskys filed a Response to the debtor's Objection to claim and
avoidance of judgment. On February 17, 2009, the Court conducted a hearing on the debtor's
Objection and took the matter under advisement.
On March 13, 2009, counsel for the debtor filed a Reply to the opposition papers
of the Undroskys. Neither the federal rules nor the Court provided counsel to file this
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Case 1-08-41946-dem Doc 113 Filed 07/30/09 Entered 07/31/09 13:56:49

unauthorized submission. The Court has not considered the Reply in reaching the determination
of this motion. 1
In the motion, the debtor first sought an Order reclassifying the Undrosky Claim
from a secured claim to a general unsecured claim. The debtor argued that the claim should be
unsecured for several reasons. First, the Undroskys have failed to establish that their judgment,
filed on the same day as the debtor's petition in bankruptcy, was filed earlier in time than the
petition. Thus, the Undroskys had no lien against the debtor. Second, the debtor maintained that
even if the Undroskys had established that the filing of the Undrosky Lien predated the filing of
the petition, it was impossible for them to levy upon the Property prior to the debtor's filing of
the petition. Therefore, under New Jersey law, this failure to levy would enable the debtor to
avoid the lien under Section 544(a) of the Bankruptcy Code. See In re Mariano, 339 B.R. 344,
347 (Bankr. D.N.J. 2006); in re Martini, 2006WL 2471617 at *5, 7 (Bankr. D/N.J. 2006).
Finally, the debtor argued that any lien which the Undroskys may have obtained
on the 1987 Property was voidable under Section 547(b) of the Bankruptcy Code. Under Section
547(b), the docketing of a judgment within the ninety day period before the filing of a
bankruptcy case constitutes a transfer for purposes of this section of the Bankruptcy Code. See
11 U.S.C. § 547(b)(4); In re Walker, 389 B.R. 746, 748 (Bankr. D. Colo. 2008).
In their letter submission to the Court, the Undroskys seem to appreciate that due
to no fault of their own, under the Bankruptcy Code their claim will lose its secured status. For
the reasons set forth above, the Court, while sympathetic to their plight of the Undroskys, shall
1 The debtor's Reply was submitted in response to a statement which Victoria Undrosky made at the
hearing. The reply was an inartful, almost shameful, and gratuitous attempt to depict the Undroskys as having
engaged in inequitable conduct with regard to the sale of the 1987 Property and therefore cast them in an
unfavorable light before the Court.
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Case 1-08-41946-dem Doc 113 Filed 07/30/09 Entered 07/31/09 13:56:49

grant the debtor's application.
The Application of the Real Estate Broker for
Allowance of Compensation Is Premature
Also before the Court is the application of GHS Metro NY, LLC d/b/a Gloria
Nilson GMAC Real Estate (the “broker”) for an award of compensation. The broker is seeking
$15,250.00 in compensation. The Office of the United States Trustee has filed an Objection to an
award of this compensation at this time. 	The United States Trustee argued that the Court should
exercise its discretion and deny the application until the debtor is able to establish there are
sufficient funds in the estate to pay all administrative claims in full or until professionals have
filed their final fee applications. Since at present, there is only slightly more than $20,000.00 in
the estate, the Court shall adopt the recommendation of the Office of the United States Trustee.
The application of the broker for an allowance of compensation is denied, without prejudice,
until professionals have filed their final fee applications. 2
IT IS SO ORDERED.
Dated: Brooklyn, New York
July 30, 2009
S/Dennis E. Milton
DENNIS E. MILTON
United States Bankruptcy Judge
2 The Court also denies, without prejudice, the request of the broker for a determination that, under New
Jersey law, the broker is entitled to an equitable lien awarded against the proceeds of sale.
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