In re Andrus

• Decision Date: 14 March 2006
• Docket Number: Bankruptcy No. 05-86582.,Adversary No. 05-5863.
• Parties: In re Douglas E. ANDRUS, Debtor. Douglas E. Andrus, Plaintiff, v. Nancy Ann Ajemian, Defendant.
• Court: United States Bankruptcy Courts. Tenth Circuit. U.S. Bankruptcy Court — Eastern District of Michigan

338 B.R. 746

In re Douglas E. ANDRUS, Debtor. Douglas E. Andrus, Plaintiff, v. Nancy Ann Ajemian, Defendant.

Bankruptcy No. 05-86582.

Adversary No. 05-5863.

United States Bankruptcy Court, E.D. Michigan, Southern Division.

March 14, 2006.

COPYRIGHT MATERIAL OMITTED

Michael A. Greiner, Financial Law Group, P.C., Warren, MI, for Debtor.

OPINION DENYING (1) DEFENDANT'S MOTION TO DISMISS; (2) DEFENDANT'S MOTION TO ABSTAIN; AND (3) DEFENDANT'S MOTION FOR SUMMARY JUDGMENT; AND GRANTING PLAINTIFF'S MOTION FOR SUMMARY JUDGMENT

PHILLIP J. SHEFFERLY, Bankruptcy Judge.

I. Introduction

Douglas Andrus is the Debtor in this Chapter 7 case. The Debtor filed this adversary proceeding seeking a determination that a debt of $146,184.04 owed by him to his former spouse, Defendant, Nancy Ajemian, is a dischargeable debt. Ajemian filed a motion to dismiss the Debtor's complaint or, alternatively, to abstain, a counter-complaint seeking a determination that the debt is non-dischargeable and a motion for summary judgment. The Debtor then filed his own motion for summary judgment. The Court held a hearing on Ajemian's three motions and the Debtor's motion on February 9, 2006. For the reasons set forth in this opinion, the Court denies Ajemian's motions and grants the Debtor's motion for summary judgment.

II. Facts

The following are the undisputed facts in this case. The Debtor and Ajemian were married for nine years. On April 1, 2003, Ajemian filed a complaint for divorce in Wayne County Circuit Court. The Debtor and Ajemian attended a binding arbitration within that case before John Foley. At the conclusion of the arbitration, the arbitrator made an award and a judgment of divorce after binding arbitration was entered by the Wayne County Circuit Court on July 20, 2005 ("Judgment"). Ajemian and her attorney approved the Judgment for entry by the Wayne County Circuit Court. It was not approved for entry by the Debtor and his attorney. After the court entered the Judgment, the Debtor filed an appeal of the Judgment with the Michigan Court of Appeals. That appeal is still pending.

On October 15, 2005, the Debtor filed a Chapter 7 petition. On November 12, 2005, the Debtor filed this adversary proceeding seeking a determination that the indebtedness owing by him to Ajemian under the Judgment is a dischargeable debt and not within the exception to discharge set forth in § 523(a)(5).¹ Ajemian filed a motion to dismiss the complaint and a motion requesting the Court to abstain from determining whether the debt owed by the Debtor to Ajemian is non-dischargeable. In addition, Ajemian filed a counter-complaint requesting in the alternative that, if this Court should find that the debt is not a non-dischargeable debt within § 523(a)(5), the Court then determine that it is a non-dischargeable debt within § 523(a)(15).

III Jurisdiction

This Court has jurisdiction pursuant to 28 U.S.C. §§ 1334(a) and 157(a). This is a core proceeding under 28 U.S.C. § 157(b)(2)(4

IV. Analysis

A. Ajemian's Motion to Dismiss

Ajemian moves for dismissal under Fed.R.Civ.P. 12(b)(6). Ajemian did not specifically apply Rule 12(b)(6) in her motion to dismiss or brief in support. She incorrectly assumed that matters outside the complaint were presented to the Court. Under Rule 12(b), if a motion for dismissal of a pleading for failure to state a claim upon which relief may be granted presents "matters outside the pleading[,] ... the motion shall be treated as one for summary judgment and disposed of as provided in Rule 56 ...." Fed.R.Civ.P. 12(b). The only "matter" that Ajemian points to is the Judgment. However, the Debtor's complaint included a copy of the Judgment. Therefore, Ajemian's motion to dismiss is not automatically treated as a motion for summary judgment.

Rule 12(b) is made applicable to adversary proceedings by Fed. R. Bankr.P. 7012(b). In deciding a motion to dismiss for failure to state a claim.

[t]he court must construe the complaint in the light most favorable to the plaintiff, accept all the factual allegations as true, and determine whether the plaintiff can prove a set of facts in support of its claims that would entitle it to relief. A court may not grant a Rule 12(b)(6) motion based on disbelief of a complaint's factual allegations.

Bovee v. Coopers & Lybrand C.P.A., 272 F.3d 356, 360 (6th Cir.2001) (citations omitted). "The standard of review require[s] more than the bare assertion of legal conclusions .... [The] Court need not accept as true legal conclusions or unwarranted factual inferences." Id. at 361 (internal quotation marks and citations omitted). "To avoid dismissal under Rule 12(b)(6), a complaint must contain either direct or inferential allegations with respect to all the material elements of the claim." Wittstock v. Mark A. Van Sile, Inc., 330 F.3d 899, 902 (6th Cir.2003). "A motion to dismiss under Rule 12(b)(6) should not be granted `unless it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief.'" Beztak Land Co. v. City of Detroit, 298 F.3d 559, 565 (6th Cir.2002) (quoting Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957)).

In this case, the Debtor's complaint contains all the material factual and legal allegations necessary to substantiate his claim that the debt is a dischargeable debt and not within § 523(a)(5) of the Bankruptcy Code, and is supported by a copy of the Judgment on which he relies. Accordingly, Ajemian's motion to dismiss for failure to state a claim is denied.

B. Ajemian's Motion for Abstention

Ajemian next asks that this Court abstain from hearing this matter. Ajemian relies on 11 U.S.C. § 305(a)(1) and 28 U.S.C. § 1334(c)(1) and (2).

Section 305(a)(1) of the Bankruptcy Code provides that the Court "may dismiss a case under this title or may suspend all proceedings in a case under this title, at any time if [] the interests of creditors and the debtor would be better served by such dismissal or suspension ...." 11 U.S.C. § 305(a)(1) (emphasis added). By its terms, § 305(a) applies to entire cases or all proceedings in a case, not particular proceedings in a case, such as this adversary proceeding.

In general, section 305 of the Bankruptcy Code grants significant discretion to the bankruptcy courts to decline, in certain circumstances, to exercise jurisdiction over a case filed under title 11.... Its narrow breadth is consistent with congressional intent to prevent the commencement and continuation of disruptive involuntary cases .... Under 28 U.S.C. § 1334(c)(1), the court may, in the interest of justice, abstain "from hearing a particular proceeding arising under title 11 or arising in or related to a case under title 11." If a party wishes the bankruptcy court to abstain from a particular adversary proceeding, section 1334(c) is the proper vehicle; if it seeks suspension of all proceedings within a case, section 305(a) should be invoked.

2 Collier on Bankruptcy ¶ 305.01[1] (15th ed. rev.2005) (quoting 28 U.S.C. § 1334(c)(1)) (footnotes omitted).

As an alternate basis, Ajemian cites to both §§ 1334(c)(1) and (c)(2). As noted, this is a core proceeding. The mandatory abstention provision of § 1334(c)(2), which applies only to related proceedings, does not apply. As a core proceeding to determine dischargeability, the permissive abstention provision of § 1334(c)(1) is applicable. In analyzing whether the "the interest of justice, or in the interest of comity with State courts or respect for State law" support abstention [c]ourts have listed the following nonexclusive factors as relevant: (1) the effect or lack of effect on the efficient administration of the estate if a court abstains; (2) the extent to which state law issues predominate over bankruptcy issues; (3) the difficulty or unsettled nature of the applicable state law; (4) the presence of a related proceeding commenced in state court or other nonbankruptcy court; (5) the jurisdictional basis, if any, other than 28 U.S.C. 1334; (6) the degree of relatedness or remoteness of the proceeding to the main bankruptcy case; (7) the substance rather than form of an asserted "core" proceeding; (8) the feasibility of severing state law claims from core bankruptcy matters to allow judgments to be entered in state court with enforcement left to the bankruptcy court; (9) the burden of this court's docket; (10) the likelihood that the commencement of the proceeding in bankruptcy court involves forum shopping by one of the parties; (11) the existence of a right to a jury trial; (12) the presence in the proceeding of nondebtor parties; and (13) any unusual or other significant factors.

Kmart Creditor Trust v. Conway (In re Kmart Corp.), 307 B.R. 586, 596-97 (Bankr.E.D.Mich.2004) (J. McIvor) (citations omitted).

The predominance of state law issues, the lack of jurisdiction other than under 28 U.S.C. § 1334, and the presence of Ajemian as a non-debtor party, all weigh in Ajemian's favor. However, the balance of the factors either weigh against her or are neutral. A significant factor, in the Court's view, is the fact that Ajemian included a count under § 523(a)(15) in her counter-complaint. The bankruptcy court has exclusive jurisdiction over such actions. Abstention by the Court over the § 523(a)(5) claim would necessarily bifurcate the determination of dischargeability between state court and bankruptcy court.²

After reviewing the factors for permissive abstention, the Court finds that there are not enough factors present in this case to lead the Court to conclude that it is in the best interest of justice or in the interest of comity with state courts that this Court abstain from hearing this adversary proceeding. The Court accordingly denies Ajemian's motion for abstention.

C. Ajemian's and the Debtor's Motions for Summary Judgment Regarding the § 523(a)(5) Claim

Fed.R.Civ.P. 56(c) for summary judgment is incorporated into Fed. R. Bankr.P....