Berse v. Langman (In re Langman)

• Citation: 465 B.R. 395
• Decision Date: 06 February 2012
• Docket Number: Bankruptcy No. 10–25658(RG).,Adversary No. 10–2160(RG).
• Parties: In re Ronald LANGMAN and Ethel Langman, Debtors.Jenny Berse, Plaintiff, v. Ronald Langman and Ethel Langman, Debtors/Defendants.
• Court: U.S. Bankruptcy Court — District of New Jersey

465 B.R. 395

In re Ronald LANGMAN and Ethel Langman, Debtors.Jenny Berse, Plaintiff,
v.
Ronald Langman and Ethel Langman, Debtors/Defendants.

Bankruptcy No. 10–25658(RG).

Adversary No. 10–2160(RG).

United States Bankruptcy Court, D. New Jersey.

Feb. 6, 2012.

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Jenny Berse, Esq., Cranford, NJ, for the Plaintiff, Jenny Berse.

Santo J. Bonanno, Esq., Wayne, NJ, for the Debtors/Defendants, Ronald Longman and Ethel Longman.

OPINION ROSEMARY GAMBARDELLA, Bankruptcy Judge.Matter Before the Court

Before the Court is a Motion filed by joint Chapter 7 Debtors Ronald and Ethel Langman seeking to dismiss the Adversary Complaint of Plaintiff Jenny Berse, Esq., for failure to state a claim upon which relief can be granted, pursuant to Federal Rule of Civil Procedure 12(b)(6) and Federal Rule of Bankruptcy Procedure 7012. Ms. Berse's Complaint seeks to except from discharge certain attorney's fees owed to her by co-debtor Ethel Langman arising out of legal representation that Ms. Berse provided her in a matrimonial action in New Jersey Superior Court. Her Complaint argues for nondischargeability of debts allegedly owed to her pursuant to an Order of the state court issued by Hon. Nancy Sivilli, J.S.C., pursuant to 11 U.S.C. § 523(a)(5) and (a)(15). A hearing was held on June 27, 2011 and this Court reserved decision.

This Court has jurisdiction pursuant to 28 U.S.C. §§ 157 and 1334. This is a core matter pursuant to 28 U.S.C. § 157(b)(2)(I). The following constitutes this Court's findings of fact and conclusions of law pursuant to Federal Rule of Bankruptcy Procedure 7052.

Statement of Facts and Procedural History I. Backgrounda. The Divorce Proceeding and Ms. Berse's Charging Lien

Co–Debtors Ronald and Ethel Langman were married on September 2, 2000. Berse Cert. Ex. B, at 1, ECF No. 5–2. Three children were born of the marriage. In or about 2009, the Langmans initiated divorce proceedings in the Superior Court of New Jersey, Chancery Division: Family Part, Essex County, before the Hon. Nancy Sivilli, J.S.C. (Docket No. FM–07–1401–09). Adv. Compl. ¶ 1, ECF No. 1.

At some point in or prior to March 2010, Ethel Langman retained Jenny Berse,

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Esq., as her matrimonial counsel. Compl. ¶ 1.

On January 26, 2010, during the pendency of the divorce matter, the Debtors listed their marital residence at 35 Hampton Terrace, Livingston, New Jersey, for sale with Coldwell Banker Realtors at a listing price of $495,000.00. Compl. ¶ 2.

On March 16, 2010, Ms. Berse filed a motion with the Chancery Division seeking to be relieved as counsel and requesting an order for a charging lien for attorney's fees in the amount of $8,893.60. That same day, March 16, 2010, Ms. Berse sent a bill for her services to Ms. Langman for the same amount. Ms. Berse asserts that her correspondence complied with N.J.S.A. 2A:13–6 and Rule l:20A–6 and included the option to pursue fee arbitration. Id. ¶¶ 3–4.

On March 30, 2010, Ms. Berse received a fax and e-mail from Joanna D. Brick, Esq., notifying her that Ms. Brick had been retained as matrimonial counsel by Ethel Langman. Id. ¶ 5.

On April 19, 2010, Judge Sivilli entered an Order for Ms. Berse to be relieved as counsel and awarding an attorney's charging lien on her behalf in the amount of $8,893.60 plus interest. The Order stated that Ethel Langman was now a pro se plaintiff. Compl. Ex. 2 ¶ 2. The Order further stated:

Upon the sale of any marital property, including the sale of the marital residence, plaintiff's [Ethel Langman's] share of the net proceeds from such sale after paying the mortgage and home equity line of credit shall be paid over to Petitioner [Jenny Berse] to be held in escrow pending the outcome of the Fee Arbitration Committee or judicial determination and enforcement of Petitioner's Charging Lien.

Id. ¶ 6. The Order also stated:

The parties, their fiduciaries, agents and representatives, including any current and succeeding attorneys[,] are hereby restrained from dissipating or otherwise disposing of any proceeds paid to the plaintiff [Ethel Langman] as a result of settlement of judicial determination in the matrimonial matter, pending the outcome of the Fee Arbitration Committee or judicial determination and enforcement of Petitioner's [Jenny Berse's] Charging Lien.

Id. ¶ 5.

By separate order dated April 19, 2010, Defendant Ronald L. Langman's application for counsel fees and sanctions against Ms. Berse was denied by Judge Sivilli.

b. The Marital Settlement Agreement

On April 26, 2010, the Debtors executed a Marital Settlement Agreement. Berse Cert. Ex. B., at 1. That agreement intended to resolve all issues of alimony, child support, distribution of property, payment of debts, all other financial and/or property rights and counsel fees “as well as all other rights, remedies, privileges and obligations arising out of the marital relationship or otherwise.” Article VI of the agreement, titled “Debts & Obligations,” contained a subsection titled “Marital Debt” in which both Ronald and Ethel Langman set their initials to a clause stating:

The parties agree that attorney's fees Wife incurred with Joanna D. Brick, Esq. and Husband incurred with Adam E. Jacobs, Esq. in connection with their representation of the parties' divorce proceedings shall not be discharged in bankruptcy.

Id. at 21 ¶ 6.1. An additional clause, handwritten but initialed by both Debtors, states:

Under no circumstances shall Husband's or Wife's attorney be permitted to seek

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or obtain counsel fees from Wife [or] Husband for fees incurred in connection with divorce proceedings, except for post-judgment matters.

Id. The parties likewise added and initialed a provision stating: “Parties shall adhere to all directives of their bankruptcy counsel in order to obtain a joint petition being filed prior to the parties' appearances for the entry of the final judgment of divorce.” Id. at 22. Finally, Article VIII, “Counsel Fees,” provides as follows:

Each party agrees to pay and be responsible for the payment of their own counsel fees and costs incurred in connection with these divorce proceedings. Should an attorney's lien attach to the parties' joint assets, the party who incurred said lien shall be responsible therefor and shall indemnify and hold harmless the corresponding party.

Id. at 24 ¶ 8.1.

On May 12, 2010, the Debtors took their marital residence off the market. Compl. ¶ 13 & Ex. 1. They have since stated that the property is currently in foreclosure. Debtors' Br. ¶ 4, ECF No. 4–1.

c. The Langmans' Bankruptcy Filing

On May 21, 2010, the Debtors filed a joint petition for relief under Chapter 7 of title 11 of the United States Code (“Bankruptcy Code”). Compl. ¶ 14. A debt of $8,900.00 to Jenny Berse, Esq. was listed on Schedule F, “Creditors Holding Unsecured Nonpriority Claims,” as a debt of the co-debtor Ethel Langman. Pet. at 28, No. 10–25658 (Bankr. D.N.J. May 21, 2010), ECF No. 1.

The Debtors were formally divorced on May 24, 2010, as memorialized in a Dual Judgment of Divorce issued by Judge Sivilli. Berse Cert., Ex. C.

On May 25, 2010, Benjamin A. Stanziale, Esq. was appointed Chapter 7 Trustee, and on February 15, 2011, the Trustee filed a Report of No Distribution.

II. The Present Adversary Proceedinga. The Complaint

On September 8, 2010, Ms. Berse filed an Adversary Complaint before this Court seeking a determination that her attorney's charging lien in the amount of $8,893.60 is a nondischargeable support obligation and/or marital debt pursuant to 11 U.S.C § 523(a)(5) and (a)(15). Compl. ¶ 16. In her Complaint, she cites In re Maddigan, 312 F.3d 589 (2d Cir.2002), for the proposition that an award of legal fees creates a debt that is not dischargeable in bankruptcy. Ms. Berse asserts that 11 U.S.C. § 522(f)(1)(A) permits a debtor to avoid the fixing of a judicial lien, other than a lien that secures a debt of the kind specified in § 523(a)(5) of the Bankruptcy Code. Plaintiff asserts the Debtors were fully aware of the charging lien but did not make reference to it in their bankruptcy filing or file any motion to determine its dischargeability. She also asserts the Debtors failed to avail themselves of their option to try to have the lien avoided pursuant to 11 U.S.C. § 522(f)(1)(A) and knowingly failed to disclose the attorney charging lien. Id. ¶¶ 17–18.

Ms. Berse attached the following Exhibits to the Complaint:

1. A residential real estate listing from the Garden State Multiple Listing Service including the Debtors' marital home at 35 Hampton Terrace, Livingston, NJ, showing, inter alia, that the home was withdrawn from the market on May 12, 2010. Compl. Ex. 1.

2. A copy of Judge Sivilli's Order dated April 19, 2010, relieving Ms. Berse as counsel for Ethel Langman and

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granting Ms. Berse an attorney's charging lien. Compl. Ex. 2.

3. A copy of a second Order signed by Judge Sivilli on April 19, 2010, denying Ronald Langman's request for fees and sanctions against Jenny Berse. Compl. Ex. 3.

4. A copy of a letter sent from Ms. Berse to Ronald and Ethel Langman's bankruptcy counsel, Mr. Santo Bonanno, Esq. and the Chapter 7 trustee Mr. Benjamin Stanziale, asserting that her attorney's lien is a nondischargeable “statutory lien” that should be removed from Schedule F (for unsecured nonpriority claims) and advising him that if the debt is not removed, Ms. Berse would file an adversary proceeding. Compl. Ex. 4.

b. Pleadings on the Present Motion to Dismiss1. The Debtors' Motion

On September 29, 2010, Debtors Ronald and Ethel Langman filed a Motion to Dismiss the Adversary Complaint. In their Brief, they argue two main points. First, they assert that Ms. Berse's attorney's lien is not entitled to an exception from discharge under § 523(a)(5) or (a)(15) because the debt in question is not owed by a debtor to a spouse, former spouse, or child, but is instead a debt owed by one co-debtor to her attorney. The Debtors underline this point by noting that in In re...