STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY et al v. SNYDER et al
Filing
24
MEMORANDUM AND/OR OPINION. SIGNED BY HONORABLE JUAN R. SANCHEZ ON 11/6/2013. 11/7/2013 ENTERED AND COPIES MAILED TO UNREP, E-MAILED.(kk, )
IN THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF PENNSYLVANIA
STATE FARM MUTUAL
AUTOMOBILE INSURANCE
COMPANY, et al.
v.
BERNARD SNYDER, et al.
:
:
:
:
:
:
:
CIVIL ACTION
No. 13-2172
MEMORANDUM
Juan R. Sánchez, J.
November 6, 2013
Plaintiffs State Farm Mutual Automobile Insurance Company and State Farm Fire and
Casualty Company (collectively, State Farm) bring this action against Defendants Bernard
Snyder (Snyder) and his daughter, Barrie Jean Snyder, alleging Snyder violated the Pennsylvania
Uniform Fraudulent Transfer Act, 12 Pa. Cons. Stat. § 5101 et seq. (PAFTA), and the New
Jersey Uniform Fraudulent Transfer Act, N.J. Stat. §§ 25:2-20 et seq. (NJFTA), by transferring
two parcels of real property to his daughter in order to render the properties immune from
execution. For the following reasons, Snyder’s Rule 12(b)(6) motion to dismiss the Complaint
for failure to state a claim will be granted in part and denied in part.
FACTS
On May 18, 2006, State Farm brought a civil action against Snyder and other defendants,
alleging violations of the Racketeering Influenced and Corrupt Organizations Act and the
Pennsylvania Insurance Fraud Statute, and asserting various common law causes of action. On
June 29, 2011, State Farm obtained a $1,085,300 judgment against Snyder, which was
subsequently molded to $2,505,092.24 including attorneys’ fees and costs. Approximately two
years before judgment was entered against him, on or about April 20, 2009, Snyder and his nowdeceased wife, Jeanette Snyder, allegedly transferred two properties to their daughter, Barrie
1
Jean Snyder, for no consideration. The first property was located in Philadelphia, Pennsylvania,
and the second in Ventnor City, New Jersey.
State Farm alleges Snyder intentionally transferred those properties to “hinder, delay or
defraud State Farm from collecting on its judgment and/or attaching, levying and/or executing
upon the properties in the event that State Farm obtained a Judgment against [him]” in the
underlying civil action. Compl. ¶ 12. Since the judgment was entered, State Farm has been
unable to collect or execute on the properties, and Snyder is otherwise insolvent. State Farm also
alleges because Snyder received no consideration for the transfer, at a time when the judgment
against him was foreseeable, and the properties transferred represented all or substantially all of
his assets, the transfer constituted two distinct fraudulent conveyances under both the PAFTA
and the NJFTA. Count I of the Complaint therefore seeks to avoid the transfer of both the
Pennsylvania property and the New Jersey property as a violation of the PAFTA, and Count II
seeks to avoid the transfer of each property based on a violation of the NJFTA.
DISCUSSION
To survive a motion to dismiss pursuant to Rule 12(b)(6), “a complaint must contain
sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.’”
Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544,
570 (2007)). In evaluating a Rule 12(b)(6) motion, a district court first should separate the legal
and factual elements of the plaintiff's claims. Fowler v. UPMC Shadyside, 578 F.3d 203, 210
(3d Cir. 2009). The court “must accept all of the complaint’s well-pleaded facts as true, but may
disregard any legal conclusions.” Id. at 210-11. The court must then “determine whether the
facts alleged in the complaint are sufficient to show that the plaintiff has a ‘plausible claim for
relief.’” Id. at 211 (quoting Iqbal, 556 U.S. at 679). Dismissal is appropriate, for example, if
2
there is a dispositive issue of law. See Bishop v. GNC Franchising LLC, 248 F. App’x. 298, 299
(3d Cir. 2007) (citing Neitzke v.Williams, 490 U.S. 319, 326-27 (1989)).
Both Pennsylvania and New Jersey have adopted the Uniform Fraudulent Transfer Act
(UFTA), and the statutory provisions at issue in this motion are identical. Under each state’s
law:
A transfer made or obligation incurred by a debtor is fraudulent as to a creditor,
whether the creditor’s claim arose before or after the transfer was made or the
obligation was incurred, if the debtor made the transfer or incurred the obligation:
(1) with actual intent to hinder, delay or defraud any creditor of the debtor; or (2)
without receiving a reasonably equivalent value in exchange for the transfer or
obligation, and the debtor . . . intended to incur, or believed or reasonably should
have believed that the debtor would incur, debts beyond the debtor’s ability to pay
as they became due.
12 Pa. Cons. Stat. § 5104(a); N.J. Stat § 25:2-25. To state a claim for a violation of either Act,
State Farm must allege a debtor (i.e., Snyder) made a “transfer” within the meaning of the
UFTA. A “transfer” is defined as a “disposing of or parting with an asset or an interest in an
asset.” 12 Pa. Cons. Stat. § 5101; N.J. Stat. § 25:2-22. The definition of “asset,” in turn,
contains certain exclusions. That is, assets subject to both the PAFTA and the NJFTA do not
include “an interest in property held in tenancy by the entireties to the extent it is not subject to
process by a creditor holding a claim against only one tenant.” 12 Pa. Cons. Stat. § 5101; N.J.
Stat. § 25:2-21.1
1
State Farm alleges Snyder held “an ownership interest and right of survivorship in both
properties.” Compl. ¶ 9. The Complaint does not specify how the properties were held, but does
indicate both he and his now deceased wife transferred each property jointly. Id. ¶ 8. In its
Response to Snyder’s motion to dismiss, State Farm does not challenge Snyder’s
characterization of the properties in question as owned by Snyder and his wife as tenants by the
entireties. In the absence of allegations or evidence to the contrary, property held by a husband
and wife is presumed to be a tenancy by the entireties under Pennsylvania and New Jersey law.
See, e.g., Gilliland v. Gilliland, 751 A.2d 1169, 1172 (Pa. Super. Ct. 2000) (“Where property is
placed in the names of both the husband and wife, the creation of a tenancy by the entireties is
presumed.”); Wylie v. Zimmer, 98 F. Supp. 298, 299 (E.D. Pa. 1951) (“When property in
3
Commentary to the UFTA illustrates that whether property (or an interest in property)
held in a tenancy by the entireties is “subject to process by a creditor holding a claim against
only one tenant” will vary with the law of a particular state.2 If, under Pennsylvania and New
Jersey law, an interest in entireties property is “subject to process by a creditor holding a claim
against only one tenant,” then the conveyances in question involved “assets” within the meaning
of the UFTA and State Farm has adequately stated a claim for a fraudulent transfer. If, however,
an interest in entireties property is not “subject to process by a creditor holding a claim against
only one tenant,” State Farm has no cognizable statutory claims and the Complaint must be
dismissed. Because State Farm invokes both Pennsylvania and New Jersey law as to the transfer
of both properties, and because the application of each state’s law could lead to a different result,
the Court must conduct a choice of law analysis to determine which state’s law applies to each of
the two properties in question.
When conducting a choice of law analysis in a diversity action, this Court must look to
the conflicts regime of the forum state, here Pennsylvania. Echols v. Pelullo, 377 F.3d 272, 275
(3d Cir. 2004). Where a particular choice of law inquiry is “issue-specific, different states’ laws
may apply to different issues in a single case, a principle known as ‘depecage.’” Berg Chilling
Pennsylvania is owned by husband and wife, title is held as tenants by entireties.”); Canino v.
Canino, No. 2711-05T3, 2007 WL 1712863, at *1 (N.J. Super. Ct. App. Div. June 15, 2007)
(noting that N.J. Stat. § 46:3-17.3 “codifies the common law presumption that a husband and
wife hold as tenants by the entirety whenever they hold property together”). The presumption
that the properties in question were held in a tenancy by the entireties will apply for the purposes
of deciding this motion.
2
The commentary to the UFTA addressing the definition of an “asset” notes the definition
“include[s] the interest of a tenant by the entirety although in nearly half the states such an
interest cannot be subjected to liability for a debt unless it is an obligation owed jointly by the
debtor with his or her cotenant by the entirety. . . . The definition in this Act requires exclusion
of interests in property held by tenants by the entirety that are not subject to collection process by
a creditor without a right to proceed against both tenants by the entirety as joint debtors.”
4
Sys., Inc. v. Hull Corp., 435 F.3d 455, 462 (3d Cir. 2006); see also Taylor v. Mooney Aircraft
Corp., 265 F. App’x 87, 91 (3d Cir. 2008) (“Although Pennsylvania courts have not explicitly
addressed it, this Court has assumed that Pennsylvania's choice of law analysis employs
depecage.”).
The PAFTA does not address choice of law issues. This Court will apply Pennsylvania’s
choice of law rules for tort claims because under Pennsylvania law, a fraudulent conveyance
claim is generally perceived as a tort. See In re Sverica Acquisition Corp., Inc., 179 B.R. 457,
469 (Bankr. E.D. Pa. 1995) (“[T]he conclusion that a fraudulent conveyance is a tort has not
been disputed in Pennsylvania jurisprudence.”). Pennsylvania follows a “flexible [choice of law]
rule which permits analysis of the policies and interests underlying the particular issue before the
court.” Griffith v. United Air Lines, Inc. 203 A.2d 796, 805 (Pa. 1964). Applying the analysis in
Griffith, this Court first must identify whether there are relevant differences between the states’
laws affecting the disposition of the litigation. See Hammersmith v. TIG Ins. Co., 480 F.3d 220,
230 (3d Cir. 2007).
If there are no relevant differences, there is no conflict, and the Court can
refer to the state laws interchangeably. Id. If there are relevant differences, there is an actual
conflict, and the Court must then analyze the nature of the conflict and determine whether the
conflict is true, false, or an “unprovided for” situation. Id.
Turning first to Pennsylvania law as it relates to the definition of “asset” in the UFTA,
the Pennsylvania Supreme Court has held “property owned by tenants by the entireties is not
subject to the debts of either spouse, and they may alien it without infringing upon the rights of
their individual creditors.” Stauffer v. Stauffer, 351 A.2d 236, 245 (Pa. 1976); see also Klebach
v. Mellon Bank, N.A., 565 A.2d 448, 450 (Pa. Super. Ct. 1989) (“[I]f only one spouse is a debtor,
entireties property is immune from process, petition, levy, execution or sale.”). Under these, and
5
other Pennsylvania precedents, entireties property is “not subject to process by a creditor holding
a claim against only one tenant,” and cannot be considered an asset that may be fraudulently
transferred under the PAFTA.
The parties agree on this point, but the inquiry does not end there. Primarily relying on a
case from the Bankruptcy Court for the Eastern District of Tennessee, State Farm argues while
the “physical properties themselves may not fall under the definition of ‘asset’ in the uniform
fraudulent transfer acts,” Snyder’s interest in the properties—his contingent right of
survivorship—is an “asset” which may be fraudulently conveyed under Pennsylvania law. Pl.’s
Resp. to Mot. to Dismiss 3; see also In re Chadwick, No. 09-11047, 2011 WL 477858 (Bankr.
E.D. Tenn. Feb. 7, 2011). When considering the definition of asset under Tennessee’s version of
the UFTA (which mirrors the PAFTA), the Tennessee court drew a distinction between a
debtor’s “present possessory interest” in the property and his or her “contingent right of
survivorship” interest in the property.
In re Chadwick, 2011 WL 477858, at *6.
Under
Tennessee law, because a creditor can obtain an enforceable judgment against one spouse’s right
of survivorship interest, his or her interest is subject to the collection process and accordingly
falls under the definition of asset, even though the “present possessory interest” does not. Id.
Like Tennessee, Pennsylvania recognizes separate interests in entireties property, which
encompasses both a possessory interest and a right of survivorship interest.
Berhalter v.
Berhalter, 173 A. 172, 173 (Pa. 1934) (“The incidents of [a tenancy by the entirety] are unity of
interest, title, time, and possession, with the right of survivorship.”); Gasner v. Pierce, 134 A.
494, 495 (Pa. 1926) (defining tenancy by the entireties as “an interest held by a husband and wife
together so long as both live, and, after the death of either, by the survivor so long as the estate
lasts” (internal quotation marks omitted)). Pennsylvania’s recognition of separate interests in the
6
possession and right of survivorship in entireties properties means the legal sufficiency of the
instant Complaint turns on whether, under Pennsylvania law, the right of survivorship interest is
“subject to process by a creditor holding a claim against only one tenant,” and therefore falls
within the definition of an asset.3
Whether a right of survivorship interest held by one spouse in a property held in a
tenancy by the entireties is subject to process by a creditor of that spouse is currently unsettled
under Pennsylvania law.
Because there is no controlling decision on this issue by the
Pennsylvania Supreme Court, this Court must “predict how Pennsylvania’s highest court would
decide this case.” Berrier v. Simplicity Mfg., Inc., 563 F.3d 38, 45-46 (3d Cir. 2009). After
careful review of the applicable precedent, the Court concludes the weight of authority suggests
Snyder’s right of survivorship interest was not subject to process at the time the joint conveyance
occurred. This Court predicts the Pennsylvania Supreme Court would therefore find Snyder’s
right of survivorship interest is excluded from the definition of an asset under the PAFTA.
In arguing against this conclusion, State Farm relies primarily on Fleek v. Zillhaver, 12
A. 420 (Pa. 1887). In Fleek, the Pennsylvania Supreme Court held an enforceable lien on one
spouse’s right of survivorship interest could be obtained, and when the non-debtor spouse died,
3
Snyder contends whether a creditor can levy against a debtor’s survivorship interest in
entireties property “is irrelevant in the instant action because the plaintiff did not assert a claim
for levying upon the defendant’s interest in the transferred entireties property.” Def.’s Supp.
Mem. 5. The Court rejects this argument. State Farm asserted claims for violations of the
PAFTA and the NJFTA, and under both of those statutes, a “transfer” includes disposition of an
asset (in this case the entireties property) or “an interest in an asset.” A reasonable reading of the
Complaint, construed in the light most favorable to the plaintiff, shows State Farm may be
entitled to relief even if the Complaint does not directly assert a claim for levying upon Snyder’s
interest in the transferred properties. Cf. Phillips v. Cnty. of Allegheny, 515 F.3d 224, 233 (3d
Cir. 2008) (noting after Twombly, it “remains an acceptable statement of the standard . . . that
courts accept all factual allegations as true, construe the Complaint in the light most favorable to
the plaintiff, and determine whether, under any reasonable reading of the Complaint, the plaintiff
may be entitled to relief” (citation and internal quotation marks omitted)).
7
the entireties property could be sold in aid of execution on a judgment against the debtor-spouse.
While Fleek does appear to suggest the right of survivorship interest held by one tenant is subject
to process, and the case has never been expressly overruled, subsequent decisions have cabined
and eroded Fleek’s holding. The weight of existing caselaw now suggests the lien on a debtor
spouse’s right of survivorship recognized in Fleek is subject to execution and process only in
limited circumstances, if the non-debtor spouse dies and the creditor’s expectancy in the right of
survivorship is therefore realized. See In re Hope, 77 B.R. 470, 475 (Bankr. E.D. Pa. 1987)
(concluding the nature of a creditor’s interest in a debtor spouse’s right of survivorship is not
altogether clear under Pennsylvania law, but agreeing with the Third Circuit’s understanding that
“[a]t most, a creditor of either spouse may obtain a presently unenforceable lien upon that
spouse’s expectancy of survivorship—a lien that becomes enforceable only when the other
spouse dies.” (quoting Napotnik v. Equibank & Parkvale Sav. Ass’n, 679 F.2d 316, 319 (3d Cir.
1982)); see also Beihl v. Martin, 84 A. 953, 956 (Pa. 1912) (distinguishing Fleek on the basis
that because one spouse cannot unilaterally alienate his or her expectancy of survivorship while
the other spouse lives, “the lien on the expectant interest of [one spouse] becomes enforceable
only when the expectancy ripens into a realized fact”); Gasner, 134 A. at 495 (holding one
spouse cannot “dispose even of the expectancy of survivorship . . . and creditors of either
[interest] acquire no enforceable lien by obtaining judgment or title by sale on execution”).
In 1938, without mentioning Fleek, the Pennsylvania Supreme Court characterized a
tenancy by the entireties as entitling each tenant to “enjoyment of the entirety and to
survivorship,” and noted neither spouse “has any individual portion which can be alienated or
separated, or which can be reached by the creditors of either spouse.” Madden v. Gosztonyi Sav.
& Trust Co., 200 A. 624, 627-28 (Pa. 1938). One year later, the same court also found a
8
“husband and wife can convey the [entireties] property free from judgments . . . against the
husband and also from any contingent interest or ownership by the trustee in bankruptcy in the
event of the husband surviving the wife.” C. I. T. Corp. v. Flint, 5 A.2d 126, 128-29 (Pa. 1939).
Having so found, the court held because the creditor at issue possessed nothing more than an
expectancy, “[a]s long as the title was held by entireties it was not an asset of [the debtor]
available for his creditors.” Id. at 129. Because the creditors could “not have attached it or his
interest in it[,] . . . [the entireties property] could have been conveyed by him and his wife so as
to be forever beyond their reach.” Id.
According to the allegations of the Complaint, this is exactly what happened here—prior
to his wife’s death, Snyder and his wife jointly transferred the properties in question to their
daughter.4
Their joint conveyance severed the tenancy by the entireties, and thereby
extinguished any unrealized expectancy State Farm may have held in Snyder’s right of
survivorship. Before Snyder’s wife died, State Farm had, under Pennsylvania law, “nothing
more than a potential lien against the property in the event that [the debtor] should survive his
wife. Meanwhile, husband and wife could convey the property free from any lien of the
[creditor’s] judgment.” Stop 35, Inc. v. Haines, 543 A.2d 1133, 1136 (Pa. Super. Ct. 1988).
Even if State Farm had held an actual lien at the time the properties were transferred, it was
4
In its surreply to Snyder’s motion to dismiss, State Farm suggests there is a factual issue
outside the pleadings as to whether the properties were in fact jointly conveyed. Because this
Court must limit itself to the allegations in the Complaint, it will not consider this possibility
when resolving this motion to dismiss. See In re Burlington Coat Factory Sec. Litig., 114 F.3d
1410, 1426 (3d Cir. 1997) (“As a general matter, a district court ruling on a motion to dismiss
may not consider matters extraneous to the pleadings.”); Rehab. Inst. of N.J., Inc. v. Home Depot
Inc., No. 12-4035, 2012 WL 5944658, at *2 (D.N.J. Nov. 27, 2012) (“An argument that relies on
proof of facts outside the Complaint cannot succeed on a motion to dismiss.”). The Complaint
provides the following allegation with respect to this issue: “On or around April 20, 2009,
Bernard Snyder . . . and his now deceased wife, Jeanette Snyder, transferred [the properties in
question] to their daughter.” Compl. ¶ 8. The only reasonable reading of this allegation is that
the properties were jointly conveyed.
9
unenforceable and inchoate until Snyder’s wife’s death triggered his right of survivorship
interest. In the interim, State Farm, the holder of the unenforceable and inchoate lien, “must hold
[that lien] subject to its possible extinction in either of two events, the predecease of the [debtor],
or the alienation of the estate by the joint act of the parties. The efficiency of the lien depends
upon the nonhappening of either.” Beihl, 84 A. at 956; Murphey v. C. I. T. Corp., 33 A.2d 16, 18
(Pa. 1943) (citing Beihl and holding even where a creditor has a claim “reduced to judgment, [the
claim is] subject to extinction in the event of the alienation of the estate by the joint act of the
owners”).
When the properties were jointly conveyed in 2009, State Farm could not have exercised
any potential lien it may have held on Snyder’s right of survivorship, and under Pennsylvania
law, “it follows that the conveyance itself could not have been fraudulent as to [the potential lien
holder].”
Stauffer, 351 A.2d at 245.
In these circumstances, the weight of Pennsylvania
authority compels the conclusion that Snyder’s right of survivorship interest was not subject to
process when the properties were conveyed, and the properties at issue and any interests therein
would therefore be excluded from the definition of asset under the PAFTA. Accordingly, if
Pennsylvania law applies to State Farm’s claims, the claims must be dismissed.
With respect to Count II, New Jersey state law differs regarding the ability of a creditor
to subject an interest in entireties property to process when holding a judgment against only one
tenant. Contrary to Pennsylvania law, “[i]t is well established [under New Jersey law] that a
debtor’s interest in property held as tenant by the entirety may be reached by the debtor’s
creditors.” S.E.C. v. Antar, 120 F. Supp. 2d 431, 449-50 (D.N.J. 2000) (citing Newman v. Chase,
359 A.2d 474 (1976), aff’d, 44 F. App’x 548 (3d Cir. 2002)); see also United States v. Avila, 88
10
F.3d 229, 234 (3d Cir. 1996) (“New Jersey long has recognized that a lien may attach to the
interest of one spouse in property held by the entireties.”).5
In 1959, the New Jersey Supreme Court held the right of survivorship may be
encumbered, as “the judgment creditors of either spouse may levy and execute upon their
separate rights of survivorship.” King v. Greene, 153 A.2d 49, 60 (N.J. 1959). This holding has
been repeatedly affirmed by the New Jersey Supreme Court in subsequent years. See Newman,
359 A.2d at 477 (“Since the decision in King[,] . . . it has been the law of this State that the
purchaser at an execution sale under a judgment entered against a tenant by the entirety acquires
the right of survivorship of the debtor spouse.”); Freda v. Commercial Trust Co. of N.J., 570
A.2d 409, 414 (N.J. 1990) (“[A] judgment creditor of a debtor-spouse may levy on and sell that
spouse’s right of survivorship”).
In light of these settled principles, state and federal courts applying New Jersey law
have found a debtor’s interest in entireties property is subject to process and such an interest
therefore constitutes an asset within the meaning of the NJFTA. See United States v. Grello, No.
07-6123, 2010 WL 4181059, at *9 (D.N.J. Oct. 20, 2010); Belding & Bernhard, Inc. v. Advokat,
No. 3263-02, 2007 WL 1108926, at *7 (N.J. Super. Ct. App. Div. Apr. 16, 2007) (“The absence
of pertinent case law reflects the clarity of the UFTA definition of asset as including one
spouse’s interest in a tenancy by the entirety, which is subject to process under New Jersey
law.”). This Court agrees, and finds New Jersey law dictates this result.6 Having found Snyder’s
5
As in Pennsylvania, the entireties property itself may not be partitioned during the marriage.
See Freda v. Commercial Trust Co. of N.J., 570 A.2d 409, 413 (N.J. 1990). As set forth above,
however, certain interests in a tenancy by the entireties property, including the right of
survivorship, are subject to attachment by the creditor of one spouse. Id. at 414.
6
Although the parties have not addressed the issue, the Court notes that in 1988, the New Jersey
legislature passed a law disallowing spouses in a tenancy by the entireties to “sever, alienate, or
otherwise affect their interest in the tenancy by entirety during the marriage or upon separation
11
interests in the properties are subject to process within the meaning of New Jersey state law, if
New Jersey law applies to the properties at issue, State Farm’s fraudulent transfer claims can
withstand Snyder’s motion to dismiss.7
Because State Farm can state a claim under the NJFTA, but not under the PAFTA, an
actual conflict exists between Pennsylvania and New Jersey state law. When presented with an
actual conflict, the Court must examine the “governmental policies underlying each law, and
classify the conflict as a ‘true,’ ‘false,’ or an ‘unprovided-for’ situation.” Hammersmith, 480
F.3d at 230. A true conflict only exists where “both of the jurisdictions’ interests would be
impaired by the application of the other’s laws.” Id. If there is a true conflict, this Court must
apply the “law of the state having the most significant contacts or relationships with the
particular issue.” Garcia v. Plaza Oldsmobile Ltd., 421 F.3d 216, 220 (3d Cir. 2005) (quoting In
re Estate of Agostini, 457 A.2d 861, 871 (Pa. 1983)). A false conflict exists where “only one
jurisdiction’s governmental interests would be impaired by the application of the other
without the written consent of both spouses.” N.J. Stat. § 46:3-17.4. In one case, a bankruptcy
court in the Middle District of Florida, applying New Jersey law, interpreted the statute as no
longer permitting a creditor of only one spouse to execute on an interest in entireties property,
thus precluding the creditor from “maintaining a fraudulent transfer action to recover proceeds
which she would not otherwise be able to access.” In re Montemoino, 491 B.R. 580, 591 (Bankr.
M.D. Fla. 2012). The Court declines to adopt the holding in Montemonio to the extent it
suggests that the statute has overruled, sub-silentio, New Jersey common law developed over the
better part of a century. Without the benefit of briefing on the issue or a ruling by the New
Jersey Supreme Court, this Court will continue to follow the rules set forth in King and its
progeny. In any event, it is not even clear from the face of the Complaint that the statute applies;
the statute was approved on January 5, 1988, and included a proviso that it “shall take effect on
the 90th day after enactment and shall be applicable to all tenancies by entireties which are
created on or after the effective date of this act.” See Freda, 570 A.2d at 411 (deciding not to
consider the statute after finding it did not apply to the property in question). The creation of the
tenancy at issue here could well have predated the passage of this statute.
7
Because Snyder only challenges whether the properties in question are “assets” under the
UFTA, this Court need not analyze the sufficiency of the Complaint as it relates to the remaining
elements of State Farm’s cause of action.
12
jurisdiction’s laws.” Lacey v. Cessna Aircraft Co., 932 F.2d 170, 187 (3d Cir. 1991).8 Where
there is a false conflict, the law of the interested jurisdiction applies. Id. An “unprovided-for”
situation is one in which neither jurisdiction’s interest would be impaired if its law is not applied.
In those cases, “lex loci delicti, the law of the place of the wrong, supplies the substantive law to
be applied.” Garcia, 421 F.3d at 220.
Here, conflicting state interests exist with respect to each property at issue, and each of
the state’s interests will be impaired by the application of the other state’s law. New Jersey has
an interest in preserving a creditor’s right to levy certain property interests held by one spouse in
a tenancy by the entireties. Pennsylvania, on the other hand, has an interest in maintaining a
stronger entireties policy, which prohibits the creditor of one spouse from subjecting any interest
in an entireties property to process while both spouses live. Applying Pennsylvania law to the
properties will impair New Jersey’s interest in protecting rights State Farm (a company that does
business in New Jersey) may otherwise have as Snyder’s creditor. Applying New Jersey law
will impair Pennsylvania’s interest in protecting Snyder’s (a Pennsylvania resident) right to
alienate his interests in entireties property free from any judgment or claim a creditor may have
against him. In these circumstances, a true conflict exists with respect to each property.
When determining which state’s law to apply in a true conflict situation, the Court must
evaluate each state’s respective contacts with the gravamen of the action, and also weigh each
state’s interests as they relate to those contacts. See Blakesley v. Wolford, 789 F.2d 236, 239 (3d
Cir. 1986) (noting the Griffith methodology “combines the approaches of both Restatement II
8
As the Third Circuit has noted, “there is some inconsistency in the way Pennsylvania and
federal courts have defined a false conflict.” Hammersmith, 480 F.3d at 229. Some courts have
considered a conflict “false” if there is no conflict. In Hammersmith, the Court of Appeals found
it is “incorrect to use the term ‘false conflict’ to describe the situation where the laws of two
states do not differ. If two jurisdictions’ laws are the same, then there is no conflict at all, and a
choice of law analysis is unnecessary.” Id. at 230.
13
(contacts establishing significant relationships) and ‘interest analysis’ (qualitative appraisal of
the relevant States’ policies with respect to the controversy)”). The inquiry requires more than a
“mere counting of contacts”; instead, the court “must weigh the contacts on a qualitative scale
according to their relation to the policies and interests underlying the particular issue.”
Hammersmith, 480 F.3d at 231 (citations and alteration omitted); see also Taylor, 265 F. App’x
at 90-91 (noting “[t]he policy underlying a state’s law is relevant only to the extent it is
implicated by that state’s contacts with the litigation”). The contacts to be taken into account
include: (1) the place where the injury occurred; (2) the place where the conduct causing the
injury occurred; (3) the domicile, residence, nationality, place of incorporation, and place of
business of the parties, and (4) the place where the relationship, if any, between the parties is
centered. Restatement (Second) of Conflict of Laws § 145 (1971).
The first contact, the place where the injury occurred, will be given no weight in this
analysis, because “such as in the case of fraud and misrepresentation . . . there [is] little reason in
logic or persuasiveness to say that one state rather than another is the place of injury.” Id. § 145
cmt. e. The second contact, the place where the conduct giving rise to the injury occurred, is
inapplicable, because it is not clear from the Complaint where the conduct took place. The third
contact is relatively neutral. State Farm does business in both Pennsylvania and New Jersey and
is headquartered in Illinois. Snyder’s status as a Pennsylvania resident may have an incremental
influence whether or not apply Pennsylvania law to both properties, but it does not outweigh the
considerations set forth below. The single most important contact to each state is the fourth.
State Farm is attempting to execute on two properties to collect on a judgment, and Snyder
allegedly conveyed the properties to avoid losing them to State Farm. The properties thus serve
as the focal point between the parties and their respective interests, the place, if any, where the
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relationship between the parties is centered. The properties are not only the strongest contact to
the litigation, each property is central to each state’s respective interest in the dispute.
As a general matter, where choice of law issues arise in litigation concerning real
property, the location of the property is often dispositive because each state has a strong interest
in applying its own laws to property within its borders. See, e.g., Metex Mfg. Corp. v. Manson
Envtl. Corp., No. 05-2948, 2008 WL 474100, at *5 (D.N.J. Feb. 15, 2008) (declining to apply
the NJFTA to a property located in Canada, noting “[s]ince the property is located in Canada,
Canada has the stronger interest in making sure that property located in its jurisdiction was not
fraudulently transferred”); cf. Clarke v. Clarke, 178 U.S. 186, 191 (1990) (“[I]t is a principle
firmly established that to the law of the state in which the land is situated we must look for the
rules which govern its descent, alienation, and transfer.”). Many courts have found fraudulent
conveyance claims should generally be governed by the law of the state in which the property is
located. See Metex, 2008 WL 474100, at *6 (collecting cases).
Although the location of the property is not necessarily dispositive under Pennsylvania’s
choice of law rules, the Court finds it carries dispositive weight in the conflict analysis in this
case. The properties at issue form the entire basis for State Farm’s claims—the fraudulent
conveyance of a property or an interest in a property. It is also the properties themselves that
implicate both of the state interests present in this case—Pennsylvania’s entireties policy and
New Jersey’s creditor policy. Indeed, it is the divergence of each state’s law on the ability to
encumber one spouse’s interest in an entireties property that necessitated the conflict of laws
analysis in the first place. Property is at the center of this dispute, and the location of each
property is the primary contact that strengthens or otherwise influences the application of each
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state’s law. The property’s presence or absence in each state tips the scale when weighing each
state’s respective interest in the application of its laws.
This Court therefore concludes Pennsylvania law, (the PAFTA), should apply to the
Pennsylvania property and New Jersey law, (the NJFTA), should apply to the New Jersey
property. Because Snyder’s interest in the Pennsylvania property is not an interest that can be
fraudulently transferred under the PAFTA (and because the PAFTA does not apply to Snyder’s
transfer of the New Jersey property), State Farm has failed to state a claim under the PAFTA.
Accordingly, Snyder’s motion to dismiss will be granted as to Count I. The motion to dismiss
will also be granted as to Count II insofar as that Count alleges Snyder’s transfer of the
Pennsylvania property violated the NJFTA. The motion will be denied as to Count II insofar as
it alleges Snyder’s transfer of the New Jersey property violates the NJFTA.
An appropriate order follows.
BY THE COURT:
/s/ Juan R. Sánchez s
Juan R. Sánchez, J.
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