Aikens v. Miller
| Decision Date | 14 July 2021 |
| Docket Number | Case No. 20-13257 |
| Parties | ROBERT AIKENS, Appellant-Defendant, v. TIMOTHY J. MILLER, Trustee, Appellee-Plaintiff. |
| Court | U.S. District Court — Eastern District of Michigan |
Appellee Timothy J. Miller, trustee for the Chapter 7 bankruptcy estate of Alexandra Aikens ("Debtor"), filed this action seeking turnover of property under 11 U.S.C. § 542(a) and (b). According to Appellee, Appellant Robert Aikens owed the estate $42,614.62 based on the terms of a Judgment of Divorce ("JOD") agreed to between Debtor and Appellant. The parties filed cross motions for summary judgment before the bankruptcy court, and the bankruptcy court ruled in favor of Appellee. (ECF No. 3, PageID.336-37.) The bankruptcy court ordered that Appellant pay the estate $42,614.62. (Id.)
Appellant challenges the bankruptcy court's decision. (ECF No. 1.) The matter has been thoroughly briefed. (ECF Nos. 5-7.) The court has reviewed the record and does not find a hearing to be necessary. E.D. Mich. LR 7.1(f)(2). For the reasons provided below, the court will affirm the bankruptcy court's decision.
The parties agree that there are no factual disputes in this case. (ECF No. 5, PageID.527, Appellant's Brief ("It was agreed between the parties that the issues in the Suit were strictly legal in nature"); ECF No. 6, PageID.564.) The following facts are taken from the record established by both parties.
Debtor and Appellant were married and lived in a house in Canton, Michigan. (ECF No. 3, PageID.319; ECF No. 5, PageID.525.) Divorce proceedings were initiated in May 2019, and Debtor and Appellant agreed to a JOD on February 10, 2020. (ECF No. 3, PageID.319-20; ECF No. 5, PageID.525.) The JOD contained a provision that required sale proceeds from the martial house to be used to pay Debtor's and Appellant's outstanding debts:
[I]n the event the [marital home] is sold, and sale proceeds are applied to some of the parties['] debt, but there aren't enough proceeds to pay all of the parties['] debt, the parties will be equally responsible for 50% [of] the balance of the debt that remains owing and will hold the other harmless.
(ECF No. 3, PageID.52-53; ECF No. 3, PageID.320.)
On March 16, 2020, Debtor filed for Chapter 7 bankruptcy. (ECF No. 3, PageID.320; ECF No. 5, PageID.525.) Appellee was appointed as trustee over Debtor's bankruptcy estate, and upon agreement between Debtor and Appellant, the marital home was sold for $203,000.00. (ECF No. 3, PageID.320-21.) After paying closing costs and secured claims, $19,172.09 remained. (ECF No. 6, PageID.562.) Pursuant to the terms of the JOD, the proceeds from the sale were used to pay marital debt. (ECF No. 3, PageID.320-21; ECF No. 6, PageID.572.) Even after the proceeds were applied to existing marital debt, there remained $85,229.24 in debt. (ECF No. 3, PageID.321;ECF No. 6, PageID.572.) All the remaining marital debt was incurred under Debtor's name. (ECF No. 6, PageID.561; ECF No. 3, PageID.144-54; ECF No. 7, PageID.596.)
Appellee brought this suit under 11 U.S.C. § 542(a) and (b) to collect under the JOD $42,614.62, or half the remaining marital debt, from Appellant. (ECF No. 3, PageID.321.) Appellant refused to pay, arguing that the terms of the JOD did not mandate payment, and the parties filed cross motions for summary judgment. (Id.)
On December 3, 2020, the bankruptcy court issued an opinion granting summary judgment in Appellee's favor and denying summary judgment in Appellant's favor.1 (Id., PageID.318-35.) The court reviewed the elements of an action under 11 U.S.C. § 542(b). Section 542(b) states that "an entity that owes a debt that is property of the estate and that is matured, payable on demand, or payable on order, shall pay such debt to, or on the order of, the trustee." The court reasoned that "entity" under § 542(b) included individuals such as Appellant; that Appellant's legal obligations under the JOD to pay 50% of remaining marital debt constituted a "right to payment" on the part of Debtor and thus a "debt" collectable by Appellee; that the debt "matured" when the marital home was sold; and that the debt was "the property of [Debtor's bankruptcy] estate." (ECF No. 3, PageID.318-35.) Thus, according to the court, Appellant was liable to Appellee for $42,614.62. (Id., PageID.334-35.)
Appellant appealed the bankruptcy court's decision on December 11, 2020. (ECF No. 1.)
To prevail on a motion for summary judgment, a movant must show—point out—that "there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(a). First, the moving party bears the initial burden of presentation that "demonstrate[s] the absence of a genuine issue of material fact." Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). There is no requirement, however, that the moving party "support its motion with [evidence] negating the opponent's claim." Id. (emphasis removed); see also Emp'rs Ins. of Wausau v. Petrol. Specialties, Inc., 69 F.3d 98, 102 (6th Cir. 1995).
Second, "the nonmoving party must come forward with 'specific facts showing that there is a genuine issue for trial.'" Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986) (emphasis removed) (quoting Fed. R. Civ. P. 56(e)). This requires more than a "mere existence of a scintilla of evidence" or "'[t]he mere possibility of a factual dispute." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 252 (1986); Mitchell v. Toledo Hosp., 964 F.2d 577, 582 (6th Cir. 1992) (quoting Gregg v. Allen-Bradley Co., 801 F.2d 859, 863 (6th Cir. 1986)). For a court to deny summary judgment, "the evidence [must be] such that a reasonable [finder of fact] could return a verdict for the nonmoving party." Anderson, 477 U.S. at 248. All reasonable inferences from the underlying facts must be drawn "in the light most favorable to the party opposing the motion." United States v. Diebold, Inc., 369 U.S. 654, 655 (1962); Moran v. Al Basit LLC, 788 F.3d 201, 204 (6th Cir. 2015).
District courts have jurisdiction to review bankruptcy court decisions under 28 U.S.C. § 158(a). In re Conco, Inc., 855 F.3d 703, 709 (6th Cir. 2017). "On appeal from abankruptcy court, a district court applies the clearly erroneous standard of review to findings of fact, and reviews questions of law de novo." In re Gardner, 360 F.3d 551, 557 (6th Cir. 2004).
Appellant advances four reasons why he believes the bankruptcy court should be reversed. He argues that the bankruptcy court's decision "destroy[ed] the [JOD's] mutuality of obligations"; that the court "creat[ed] a remedial provision" not contained in the JOD; that the court "altert[ed] . . . provisions" of the JOD; and the court failed to interpret the JOD against the drafting party. (ECF No. 5, PageID.537.) Each argument will be addressed in turn.
The center of the parties' dispute is the JOD provision stating that, after the sale of the marital home, "the parties will be equally responsible for 50% [of] the balance of the debt that remains owing and will hold the other harmless." (ECF No. 3, PageID.52-53.) The parties agree that the interpretation of the JOD, and whether Appellee is entitled to compensation under the agreement, is governed by Michigan law. See Raleigh v. Ill. Dep't of Revenue, 530 U.S. 15, 20 (2000) () ("The basic federal rule in bankruptcy is that state law governs the substance of claims . . . Congress having generally left the determination of property rights in the assets of a bankrupt's estate to state law."). (ECF No. 5, PageID.541-42; ECF No. 6, PageID.568.) "A divorce judgment entered by agreement of the parties represents a contract." Rose v. Rose, 795 N.W.2d 611, 613 (Mich. Ct. App. 2010). When interpreting a contract, "the court's obligation [is] to determine the intent of the parties by examiningthe language of the contract according to its plain and ordinary meaning." In re Smith Trust, 480 Mich. 19, 745 N.W.2d 754, 758 (2008) (citing Frankenmuth Mut. Ins. Co. v. Masters, 460 Mich. 105, 595 N.W.2d 832, 837 (1999)). "[It] must . . . give effect to every word, phrase, and clause in a contract and avoid an interpretation that would render any part of the contract surplusage or nugatory." Klapp v. United Ins. Grp. Agency, 468 Mich. 459, 663 N.W.2d 447, 453 (2003).
First, Appellant claims that the bankruptcy court's decision rested solely on the interpretation of the JOD language "equally responsible for 50% [of] the balance of the debt," and the court improperly issued a summary judgment determination sua sponte. (ECF No. 5, PageID.537-41.)
The premise of Appellant's argument is incorrect; the bankruptcy court's decision did not rely solely on the "50% clause." The court analyzed the 50% clause in the context of § 542(b)'s requirement that Appellant's debt be "matured." (ECF No. 3, PageID.326-27.) Appellant had argued that Debtor had not suffered harm from Appellant's refusal to pay 50% of the marital debt because Debtor declared bankruptcy and would at some point be discharged from paying the debts. (Id., PageID.327.) Thus, according to Appellant, enforcement of the JOD was not necessary to "hold [Debtor] harmless." (Id., PageID.52-53, 327.) The bankruptcy court accurately noted that Appellant's argument overlooked the 50% clause and its intimate connection to the "hold harmless clause." (Id.) The court reasoned, assuming that Appellant was correct that "his promise to hold [Debtor] harmless has not matured," his promise to be "responsible" for 50% of the marital debt had in fact matured. (Id., PageID.327-28.) The50% clause and the hold harmless clause are two...
To continue reading
Request your trial