In re Bursztyn

366 B.R. 353

In re Miriam R. BURSZTYN a/k/a Miriam R. Pacht Bursztyn a/k/a Miriam Pacht, Debtor Catherine E. Youngman, Chapter 7 Trustee for Miriam R. Bursztyn, Plaintiff, v. Miriam R. Bursztyn, Defendant.

Bankruptcy No. 05-52541(DHS).

Adversary No. 06-01496(DHS).

United States Bankruptcy Court, D. New Jersey.

April 10, 2007.

COPYRIGHT MATERIAL OMITTED

Scarpone Staiano & Savage, LLC, Patricia A. Staiano, Esq., James J. Savage, Esq., Newark, NJ, Counsel for Catherine E. Youngman, Chapter 7 Trustee.

Law Offices of Douglas T. Tabachnik, Douglas T. Tabachnik, Esq., Manalapan, NJ, Counsel for Miriam R. Bursztyn, Defendant.

OPINION

DONALD H. STECKROTH, Bankruptcy Judge.

Before the Court is an "order to show cause with ex parte relief authorizing the bankruptcy trustee's entry into and inspection of debtor/defendant's residence to search, seize and appraise estate property." Also before the Court is a request by Miriam R. Bursztyn, the Chapter 7 Debtor (hereinafter "Debtor"), to suppress the evidence obtained by the Trustee in violation of the Debtor's Fourth Amendment rights.¹ For the reasons that follow, the order to show cause filed by Catherine E. Youngman, as Chapter 7 Trustee for the Debtor (hereinafter "Trustee") is hereby granted, and the Debtor's application to suppress the "evidence" obtained by the Trustee during her search of the Debtor's residence is denied.

The proceeding before the Court is a matter of first impression within this District and involves significant issues regarding the intersection of a bankruptcy trustee's statutory duties under the Bankruptcy Code and the application of the Fourth Amendment to the United States Constitution. Few reported decisions in other jurisdictions have addressed this issue. Due to the significance of the issues involved, an extensive recitation of the facts is warranted, despite the Debtor's concession that "[t]he essential facts of this case are undisputed." (See Sur-reply Certification and Brief in Opposition to the Trustee's Motion for an Order Authorizing the Trustee's Entry into and Inspection of the Debtor/Defendant's Residence to Secure and Appraise Estate Property, ¶ 2) (hereinafter "Debtor Surreply").

I. Statement of Facts and Procedural History

On October 14, 2005, the Debtor filed a voluntary petition under Chapter 7 of the Bankruptcy Code. The Debtor was represented by counsel at the time of filing. On October 31, 2005, Catherine E. Youngman was appointed as the Chapter 7 Trustee for the Debtor's bankruptcy estate.

Several averments made by the Debtor in her bankruptcy petition are significant to the issues before the Court. The Debtor listed her residence as 21 Grand Cove Way, Edgewater, New Jersey. On Schedule B of her bankruptcy petition,² the Debtor listed her personal property as: "Checking account Bank of America" in the sum of $350.00; "Ordinary household goods" valued at $1,000.00; "Ordinary clothing" valued at $300.00; "Misc. and costume jewelry" valued at $135.00; a contingent claim against the pension of her former husband, Enrique M. Bursztyn, in the amount of $175,000; a 1993 BMW automobile "purchased for $500.00 for son's use" valued at $500.00; and a 2001 Mercedes E320 automobile valued at $23,350.00. The Debtor noted "None" on Schedule B with respect to whether she owned any "pictures and other art objects." Based upon the foregoing valuations, the Debtor approximated her total assets at $200,635.00. The Debtor listed her total liabilities at $193,966.90. The Debtor acknowledged and declared under penalty of perjury that the representations made on her bankruptcy schedules were "true and correct to the best of [her] knowledge, information, and belief."

Moreover, on her Statement of Financial Affairs, the Debtor answered "None" to each and every one of the following inquiries: (1) "[d]escribe all property that has been attached, garnished or seized under any legal or equitable process within one year immediately preceding the commencement of this case"; (2) "[l]ist all property that has been repossessed by a creditor, sold at a foreclosure sale, transferred through a deed in lieu of foreclosure or returned to the seller, within one year immediately preceding the commencement of this case"; (3) "[d]escribe any assignment of property for the benefit of creditors made within 120 days immediately preceding the commencement of this case"; (4) "[l]ist all gifts or charitable contributions made within one year immediately preceding the commencement of this case"; (5) "[l]ist all losses from fire, theft, other casualty or gambling within one year immediately preceding the commencement of this case or since the commencement of this case"; (6) "[l]ist all other property, other than property transferred in the ordinary course of the business or financial affairs of the debtor, transferred either absolutely or as security within one year immediately preceding the commencement of this case"; and (7) "[l]ist each safe deposit or other box or depository in which the debtor has or had securities, cash, or other valuables within one year immediately preceding the commencement of this case." Again, the Debtor certified under penalty of perjury to the accuracy of the responses in her Statement of Financial Affairs.

During the course of the Trustee's investigation into the Debtor's financial affairs, the Trustee obtained two written judicial decisions rendered in the Debtor's state court divorce proceedings that, according to the Trustee, belied the Debtor's disclosures on her bankruptcy petition and accompanying Schedules and Statement of Financial Affairs. (Trustee Catherine E. Youngman's Declaration in Support of Ex Parte Motion for an Order Authorizing the Trustee's Entry into and Inspection of Debtor/Defendant's Residence to Secure and Appraise Estate Property, ¶¶ 7, 10) (hereinafter "Trustee Decl."). These two judicial decisions catalyzed the Trustee's further investigation and application to this Court for an ex parte order to search the Debtor's residence. Due to their significance, the two state court decisions will be discussed in detail. The following additional facts derive from the state court judicial decisions.

The Debtor and Enrique M. Bursztyn married on November 25, 1982, and two children were born during their almost twenty-year marriage. (Bursztyn v. Bursztyn, FM-02-2235-00 (N.J.Super.Ct. Ch. Div. Oct. 18, 2002), Trustee Decl., Exhibit "C"). In March of 2000, prior to the parties' separation, the Debtor filed a complaint for divorce against her husband in the Superior Court of New Jersey. (Id.). The divorce action was tried before the Honorable Robert C. Wilson, J. S.C., who issued a written decision on October 18, 2002. The written decision issued by the trial court granted the parties a divorce and addressed the contested issues of custody, child support, spousal support, equitable distribution, tax liabilities, and counsel fees. (See generally id.).

On the issue of the equitable distribution of marital assets and after hearing extensive testimony regarding the valuation with respect to the jewelry and artwork purchased by the parties during the marriage, Judge Wilson held that:

[t]he current market value of these items could not be determined as [the Debtor] claims they were missing, but no insurance or police report was ever filed concerning this alleged loss. The Court concludes that the [Debtor] has retained them. Some of these items she purchased after having secretly consulted counsel about a divorce two years prior to her filing a complaint against [her husband].

The [Debtor] also has retained the parties' art collection. The art is composed of lithographs, photographs, and original paintings by various artists. The appraisal of these items was not accomplished.

(Id.). Judge Wilson then held that the jewelry and artwork had a combined value of $125,000 and credited the total amount to the Debtor for purposes of equitable distribution. (Id.).

Judge Wilson also noted that during the divorce proceeding, the Debtor "constantly violated Court Orders, changed counsel, retained needless experts, and generally obstructed the litigation process on numerous occasions." (Id.).

Both parties appealed the decision rendered by the trial court. The New Jersey Superior Court, Appellate Division issued a lengthy and detailed written decision approximately three months prior to the petition date. While the Appellate Division affirmed the lower court decision in all respects, the opinion is significant to the Trustee's application before this Court because of its blistering critique of the Debtor's conduct during the course of the divorce proceeding. (Bursztyn v. Bursztyn, A-3169-02T1 (N.J.Super.Ct.App.Div. Jul. 22, 2005), Trustee Decl., Exhibit "B"). The appellate decision is discussed in some detail to provide a complete picture of the confluence of facts confronting the Trustee prior to the request for ex parte relief to search the Debtor's residence.

During their marriage, and especially in the years leading up to their divorce, the parties' lifestyle far exceeded their means. (Id.). For example, the parties paid chauffeurs to drive their sons to separate private schools each day. (Id.). Mr. Bursatyn estimated the total educational expenses between $60,000.00 and $80,000.00 per year. (Id.). The parties also hosted extravagant Bar Mitzvahs for their sons. They spent approximately $95,000.00 for one Bar Mitzvah at the Waldorf Astoria Hotel. (Id.). They spent approximately $77,500.00 for a Bar Mitzvah for their second child. (Id.). The parties regularly took expensive family vacations and paid for one son's trips to Europe, Israel, and the Caribbean, as well as for both sons to attend sleep-away camps. (Id.).

The family also retained extensive domestic help year-round, including a live-in housekeeper, a landscaper, a piano tuner, a gardener, a carpet cleaner, a window washer and a drapery cleaner. (Id.). In addition,...