In re Berlingeri

• Decision Date: 24 February 2000
• Docket Number: Bankruptcy No. 96-29325(NLW). Adversary No. 97-2174.
• Citation: 246 BR 196
• Parties: In re Francis BERLINGERI, M.D., Debtor. Joanne Buglione, Plaintiff, v. Francis Berlingeri, M.D., Defendant.
• Court: U.S. Bankruptcy Court — District of New Jersey

246 B.R. 196 (2000)

In re Francis BERLINGERI, M.D., Debtor Joanne Buglione, Plaintiff, v. Francis Berlingeri, M.D., Defendant.

Bankruptcy No. 96-29325(NLW). Adversary No. 97-2174.

United States Bankruptcy Court, D. New Jersey.

February 24, 2000.

Stuart Gold, Budd, Larner, Gross, Rosenbaum, Greenberg & Sade, PC, Short Hills, NJ, for Plaintiff.

Vincent D. Commisa, Commisa & Campanile, PC, Livingston, NJ, for Debtor/Defendant.

NOVALYN L. WINFIELD, Bankruptcy Judge.

This matter came before the Court on an adversary complaint for relief under 11 U.S.C. §§ 523(a)(5), (a)(6) and (a)(15). On plaintiff's motion in limine for a determination that plaintiff's claims accrued postpetition and are thus non-dischargeable, the Court grants relief.

The following constitutes the Court's findings of fact and conclusions of law as required by Federal Rule of Bankruptcy Procedure 7052. The matter is a core proceeding under 28 U.S.C. § 157(b)(2)(I), and the Court has jurisdiction under 28 U.S.C. § 1334 and the Standard Order of Reference issued by the United States District Court for the District of New Jersey on July 23, 1984.

BACKGROUND

In August 1994, after seventeen years of marriage, the debtor/defendant, Francis Berlingeri ("Berlingeri"), filed for divorce from Joanne Buglione ("Buglione"). Just prior to the commencement of the trial before the Honorable Thomas Zampino, in the Superior Court of New Jersey, Berlingeri filed the instant Chapter 7 case on October 17, 1996. Counsel for Buglione requested and received from this Court an order for relief from the automatic stay so that the trial might proceed before Judge Zampino.

Judge Zampino issued his opinion on January 14, 1997, and a judgment incorporating his rulings was entered on March 4, 1997. The court dissolved the marriage and directed, inter alia, that Berlingeri (i) make regular alimony and support payments, (ii) pay Buglione's attorney's fees and certain other professional fees, and (iii) hold Buglione harmless with respect to marital debts identified on the Case Information Statement filed in the matrimonial case.

Additionally, Berlingeri and Buglione entered into a consent judgment in March, 1997 to resolve Buglione's counterclaim based on marital tort. Berlingeri agreed to pay Buglione $25,000 over time, plus the fees for her trial expert. Berlingeri further stipulated that his obligations under this settlement were non-dischargeable under 11 U.S.C. § 523(a)(6).

Buglione thereafter filed this adversary proceeding. In Counts I and II, she seeks a determination that the relief afforded her by the March 4, 1997 judgment of the matrimonial court is non-dischargeable under §§ 523(a)(5) and (a)(15), respectively. In Count III, she requests that the $25,000 settlement amount, which resolved her marital tort (the "Tevis" claim¹), be declared nondischargeable under 11 U.S.C. § 523(a)(6). Berlingeri does not seriously contest the non-dischargeability of the Tevis claim. However, he does not concede that the obligations to pay the professional fees or to hold Buglione harmless with respect to matrimonial debts constitute non-dischargeable support obligations under 11 U.S.C. § 523(a)(5). Rather, Berlingeri urges that they constitute elements of equitable distribution which are subject to discharge because he does not have the ability to pay them, and thus 11 U.S.C. § 523(a)(15)(A) is applicable.

As part of her pre-trial submission to this Court, Buglione argued that the Court need not try the matter because her claims for support and equitable distribution from Berlingeri arose after his Chapter 7 case was filed and thus do not constitute prepetition debts subject to discharge. After consideration of the argument of counsel, the Court finds Buglione's argument persuasive and grants summary judgment in her favor on all counts.

DISCUSSION

The issue in this case is whether Buglione's claims for support and equitable distribution arose after Berlingeri filed for Chapter 7 relief. If Buglione's claims arose subsequent to Berlingeri's bankruptcy filing, they constitute post-petition debts and are non-dischargeable under 11 U.S.C. § 727(b). However, if Buglione's claims for support and equitable distribution arose prior to Berlingeri's bankruptcy filing, § 727(b) is inapplicable, and the Court must determine the dischargeability of each claim under §§ 523(a)(5) and, if necessary, (a)(15). Because the Court finds that Buglione's claims, under Counts I and II, arose post-petition, they are non-dischargeable under § 727(b). A dischargeability determination under §§ 523(a)(5) and (a)(15) is therefore unnecessary. The Court also finds that the Tevis claim in Count III is non-dischargeable because Buglione and Berlingeri stipulated, as part of the consent judgment, that this claim was non-dischargeable under § 523(a)(6).

I.

In large measure this case turns on the point at which a claim for equitable distribution arises. Buglione argues that a claim does not arise until a judgment of divorce is entered, while Berlingeri asserts that a claim arises upon the filing of a divorce action. The Court finds Buglione's argument more persuasive.

Section 727(b) of the Bankruptcy Code specifies that "except as provided in section 523 of this title, a discharge under subsection (a) of this section discharges the debtor from all debts that arose before the date of the order for relief under this chapter. . . ." 11 U.S.C. § 727(b) (1999). Resolution of when Buglione's claims for equitable distribution arose requires (i) consideration of the New Jersey law of equitable distribution, (ii) application of the terms "debt" and "claim" as they are used in the Bankruptcy Code, and (iii) consideration of Avellino & Bienes v. M. Frenville Co. (In re Frenville), 744 F.2d 332 (3d Cir.1984).

It is well understood that the bankruptcy court must look to state law to determine the extent and nature of the property rights held by parties to a bankruptcy and that "unless some federal interest requires a different result, there is no reason why such interests should be analyzed differently simply because an interested party is involved in a bankruptcy proceeding." In re Hursa, 87 B.R. 313, 315 (Bankr.D.N.J.1988) (quoting Butner v. United States, 440 U.S. 48, 55, 99 S.Ct. 914, 59 L.Ed.2d 136 (1978)). Thus, the Court must first look to N.J.S.A. 2A:34-23 which provides that "in all actions where a judgment of divorce . . . is entered the court may make such award or awards to the parties . . . to effectuate an equitable distribution of the property, both real and personal, which was legally and beneficially acquired by them or either of them during the marriage." N.J. Stat. Ann. § 2A:34-23 (West 1999). Construing this statute, the New Jersey Supreme Court has held that "by the plain terms of the statute," the right to equitable distribution of marital property arises upon entry of the judgment of divorce. See Carr v. Carr, 120 N.J. 336, 342, 576 A.2d 872, 875 (1990).

In Carr, the New Jersey Supreme Court addressed the issue of whether the wife could maintain an equitable distribution claim against the estate of her estranged husband who died while the divorce action was pending, but before judgment was entered. Both of the lower courts had concluded that Mrs. Carr could not obtain equitable distribution because her husband's death terminated the divorce proceeding and thus, no judgment of divorce could be entered. The New Jersey Supreme Court affirmed, holding that the case was governed by the rule that "statutory equitable distribution is conditioned on termination of marriage by divorce." See id. at 343, 576 A.2d at 876. In short, in the absence of the judgment of divorce, Mrs. Carr did not have an equitable distribution claim that could be asserted against her husband's estate.

Importantly, the court in Carr observed that it had consistently interpreted the equitable distribution statute to authorize distribution of marital assets only upon termination of the marriage by divorce. See id. at 342, 576 A.2d at 875. Indeed, in one earlier case the New Jersey Supreme Court observed:

It is important to bear in mind that nothing in our statute effects any change with respect to the ownership of property as between husband and wife prior to the entry of a judgment of allocation. Prior to that event neither spouse, by virtue of this statute, acquires any interest in the property of the other.

Painter v. Painter, 65 N.J. 196, 216 n. 5, 320 A.2d 484, 494 n. 5 (1974).

Although he acknowledges the foregoing authority, Berlingeri counters that as a consequence of the commencement of the matrimonial action, Buglione possessed a potential claim for equitable distribution. In support of his contention, Berlingeri cites the Court to Di Iorio v. Di Iorio, 254 N.J.Super. 172, 181, 603 A.2d 127, 132 (Ch.Div.1991), which commented in pertinent part, that "in New Jersey, all nonimmune assets of the parties become subject to equitable distribution, and thus, each party has a potential claim to the assets of the other." Therefore, Berlingeri contends that Buglione's potential claims for equitable distribution fall within the scope of the definition of claim set forth in the Bankruptcy Code so as to constitute a debt he can discharge pursuant to § 523(a)(15).

Berlingeri correctly points out that the Bankruptcy Code defines a debt as a "liability on a claim." See 11 U.S.C. § 101(12) (1999). Further, pursuant to § 101(5), a claim is a:

(A) right to payment, whether or not such right is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed, legal, equitable, secured or unsecured;

or

(B) right to an equitable remedy for breach of performance if such breach gives rise to a right to payment, whether or not such right to an equitable remedy is reduced to judgment, fixed, contingent, matured, unmatured, disputed, undisputed, secured, or unsecured.

11 U.S.C. § 101(5) (19...