Eden v. Robert A. Chapski, Ltd.

• Decision Date: 22 April 2005
• Docket Number: No. 04-2247.,04-2247.
• Citation: 405 F.3d 582
• Parties: Larry EDEN, Plaintiff-Appellant, v. ROBERT A. CHAPSKI, LTD., and Jean Eden n/k/a Jean Eakins, Defendants-Appellees.
• Court: U.S. Court of Appeals — Seventh Circuit

405 F.3d 582

Larry EDEN, Plaintiff-Appellant, v. ROBERT A. CHAPSKI, LTD., and Jean Eden n/k/a Jean Eakins, Defendants-Appellees.

No. 04-2247.

United States Court of Appeals, Seventh Circuit.

Argued October 26, 2004.

Decided April 22, 2005.

Forrest L. Ingram, Chicago, IL, Julie A. Klingbell Boynton (argued), Chicago, IL, for Plaintiff-Appellant.

Michael C. Doyen (argued), Elgin, IL, for Defendants-Appellees.

Before EASTERBROOK, ROVNER, and SYKES, Circuit Judges.

ROVNER, Circuit Judge.

When an Illinois court dissolved the marriage between Larry Eden and his wife, Jean Eakins, it ordered Eden to compensate Eakins and her legal counsel, Robert A. Chapski, Ltd. ("Chapski"), for the attorney's fees she had incurred in the divorce proceeding. The state court later determined that this debt was not dischargeable in bankruptcy pursuant to 11 U.S.C. § 523(a)(5) and therefore survived Eden's Chapter 13 bankruptcy. That ruling prompted Eden to initiate an adversary proceeding contending that the bankruptcy court had reserved to itself exclusive jurisdiction over the dischargeability of the debt. The bankruptcy court rejected that contention and dismissed Eden's adversary complaint; and the district court affirmed. We likewise affirm.

I.

The divorce action between Eden and Eakins commenced in 1994, and that action was pending in the Circuit Court of Kane County, Illinois (the "Kane County court," or the "state court") when Eden filed for bankruptcy protection pursuant to Chapter 13 of the U.S. Bankruptcy Code on February 20, 1996. A list of unsecured creditors that Eden filed in the bankruptcy proceeding identified Chapski as the holder of a disputed claim for attorney's fees against Eden's bankruptcy estate. On August 2, 1996, the bankruptcy court confirmed a plan requiring Eden to make monthly payments of $1,088 for a period of 60 months toward the satisfaction of his outstanding debts.

One year later, on August 6, 1997, the Kane County court entered a judgment of dissolution terminating the marriage between Eden and Eakins. Among other provisions, the judgment required Eden to pay attorney's fees of $17,500 to Eakins and Chapski jointly. When Eden appealed that judgment to the Illinois Appellate Court, the Kane County court entered an order directing Eden to compensate Eakins in advance for the additional attorney's fees she would incur in defending the appeal. After Eden failed to comply with this prospective fee order, the Kane County court on December 18, 1997, ordered him to show cause why he should not be held in contempt of court. The court entered a second rule to show cause nine months later, on September 22, 1998, after Eden also failed to pay other amounts due pursuant to the judgment of dissolution. On October 5, 1998, Chapski filed a petition with the Kane County court seeking compensation for the $8,964.24 that Eakins had accrued in the appeal from the judgment of dissolution. Shortly thereafter, the court held Eden in indirect civil contempt for his failure to comply with the prospective fee order.

Eden repaired to bankruptcy court, filing both a motion to enforce the automatic stay as well as a verified complaint for an injunction against Chapski and an emergency motion asking the bankruptcy court to forbid Chapski from making any efforts to enforce the fee orders entered by the state court. Eden's complaint alleged that his wages as an air traffic controller were the only source of income to fund his Chapter 13 plan, and that he could not satisfy his obligations under that plan and pay the attorney's fees awarded by the state court at the same time. Eden also pointed out that if he were jailed pursuant to the Kane County court's contempt finding, he would be unable to continue making the payments required by the Chapter 13 plan. Eden's complaint therefore asked the bankruptcy court to enjoin Chapski from prosecuting the contempt proceedings against Eden; he also asked that in the event the bankruptcy court allowed any portion of Chapski's claim for attorney's fees (pre — or post-petition) and/or determined that the claim was not subject to the automatic stay, Eden be permitted to amend his Chapter 13 plan to incorporate Chapski's claim.

On December 8, 1998, the state court entered an agreed order staying execution of any sentence on the finding of indirect civil contempt pending the bankruptcy court's resolution of Eden's requests for relief (hereinafter, the "agreed order"). Pursuant to that order, Eden was to deposit funds into a trust account in order to comply with the prospective fee order.

On July 29, 1999, Bankruptcy Judge Ginsberg entered a brief order (which we shall refer to as the "July 29 order") addressing Eden's obligations to Chapski pursuant to the state court's orders. The July 29 order provided as follows: (1) Any allowed pre-petition claim by Chapski against Eden could be paid only pursuant to the confirmed Chapter 13 plan, and any other attempt to collect on that pre-petition debt was subject to the automatic stay; (2) any post-petition debt to Chapski was not dischargeable in Eden's Chapter 13 bankruptcy; (3) any effort to collect on Eden's pre — or post-petition debt to Chapski was subject to 11 U.S.C. § 1306(a) (identifying items that constitute property of the estate), and because Eden's wages were property of the estate, they were subject to the automatic stay unless the court modified the stay on notice and motion; and (4) "this Court will not make a finding that [Eden's pre-petition debt to Chapski] is determined to be non-dischargeable unless Chapski prevails in an adversary proceeding regarding that issue."

In response to the July 29 order, Chapski and Eakins moved in the bankruptcy court to modify the automatic stay, so that they could make efforts to collect on Eden's debt for the attorney's fees. The bankruptcy court did not reach that motion until after Eden had been discharged from bankruptcy on October 25, 2002; in view of the discharge, the court denied the motion as moot. While the bankruptcy remained pending, neither Chapski nor Eakins initiated an adversary proceeding in order to determine whether Eden's pre-petition debt was non-dischargeable in bankruptcy.

On November 26, 2002, one month after Eden was discharged from bankruptcy, Judge Ginsberg entered an order disposing of the adversary proceeding Eden had initiated four years earlier with his complaint for injunctive relief (hereinafter, the "November 26 order"). Pursuant to that complaint, Eden in 1999 had filed a motion seeking a turnover of the funds he had paid into a trust account pursuant to the agreed order in state court. Eden argued that these funds, intended to compensate Eakins for her fees in the appeal of the dissolution order, were property of the estate and, as such, were subject to the automatic stay. Judge Ginsberg rejected that argument, noting that Eden had presented no evidence that the funds he had tendered pursuant to the agreed order derived from his wages and were necessary to meet his obligations under the Chapter 13 plan. See In re Heath, 115 F.3d 521, 524 (7th Cir.1997) (Chapter 13 plan, on confirmation, returns to control of the debtor property which is not necessary to fulfill his obligations under the plan). The judge therefore denied Eden's turnover motion and dismissed the adversary proceeding. Eden took an appeal to the district court, but Judge Aspen affirmed Judge Ginsberg's decision. In re Eden, No. 03 C 116, 2003 WL 21147830 (N.D.Ill. May 14, 2003) ("Eden I").

In the course of his November 26 decision, Judge Ginsberg took the opportunity to note that his July 29 order was meant to resolve all of the issues related to the automatic stay that had been properly noticed and presented. November 26 order at 10. He went on to observe that the dischargeability of the attorney's fees owed to Chapski and Eakins was not one of those issues: "[B]ecause Chapski and [Eakins] did not file a complaint to determine the dischargeability of the Debtor's obligations under the Judgment of Dissolution, ... questions of dischargeability are not before this Court." Id. at 11.

On July 9, 2003, the Kane County court conducted a hearing to determine whether Eden's pre-petition debt to Chapski was dischargeable in bankruptcy. Soon after that hearing, the court held that Eden's pre-petition obligation to Chapski for attorney's fees was a debt in the nature of alimony, maintenance, or support, and as such was not dischargeable pursuant to 11 U.S.C. § 523(a)(5). The debt had therefore survived Eden's discharge from Chapter 13 bankruptcy.

The state court litigation as to the non-dischargeability of the attorney's fees prompted Eden to commence an adversary proceeding against Chapski and Eakins in bankruptcy court. His amended complaint in that proceeding requested, among other relief, an order staying any further efforts to collect on Eden's debt to Chapski for Eakins' attorney's fees. Eden alleged that pursuant to the bankruptcy court's July 29 order, Chapski was to initiate an adversary proceeding if he wanted the pre-petition debt declared non-dischargeable. Because Chapski had never taken that step, Eden asserted that he was absolved of any liability for the pre-petition portion of the debt when he was discharged from bankruptcy in 2002. Chapski and Eakins moved to dismiss the amended complaint, noting among other things that the dischargeability of the pre-petition debt had just been litigated in state court. In reply, Eden acknowledged that the Kane county court (which by this time had ruled) had found the debt to be non-dischargeable, but Eden insisted that Judge Ginsberg's July 29 order had required the parties to resolve that issue in the bankruptcy court and no other forum.

Bankruptcy Judge Barbosa, who had succeeded Judge Ginsberg as the assigned judge, granted the motion to dismiss, rejecting Eden's construction of the July 29 order. Judge Barbosa believed it important...