In re Ebel
| Decision Date | 11 September 1992 |
| Docket Number | Adv. No. 91-1158 DEC.,Civ. A. No. 92-K-177,Bankruptcy No. 90-10360 DEC |
| Parties | In re Clarence Joseph EBEL, Jr., d/b/a Haystack Mountain Golf Course and Driving Range, d/b/a Golf Haystack, SSAN: XXX-XX-XXXX, Debtor. Lois J. EBEL, Plaintiff-Appellant, v. Clarence Joseph EBEL, Jr., and Dennis King, Interim Trustee, Defendants-Appellees, and Robert Kayne E. Warren Goss, and W.F. Robinson, III, Intervenors-Appellees. |
| Court | U.S. District Court — District of Colorado |
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Nancy D. Miller, Denver, Colo., Michael R. Enwall, French & Stone, Boulder, Colo., for Lois Ebel.
J. William Barnett, Longmont, Colo., for Dennis King.
George P. Bryson, Longmont, Colo., for Kayne, Goss & Robinson.
This case is before me on an appeal from the bankruptcy court by Lois J. Ebel, the debtor's former wife. On December 9, 1991, the bankruptcy court dismissed her complaint to force the trustee to abandon a ½ interest in the Haystack Mountain Golf Course and Driving Range ("golf course"). The bankruptcy court found that the trustee's interest in the property as hypothetical judgment lienor, pursuant to 11 U.S.C. § 544(a), was superior to the wife's equitable resulting trust in the property because the wife had filed neither lien nor notice of lis pendens so as to put the trustee on notice of her claim.
In July, 1985, Lois J. Ebel ("wife" or "creditor") filed to dissolve her marriage from Clarence Ebel, Jr., ("husband" or "debtor"). Mr. and Mrs. Ebel fought bitterly in the succeeding five years of dissolution proceedings. The husband was repeatedly cited for contempt, avoiding sanctions only by last minute payoffs of overdue maintenance on the courthouse steps. A quondam barterer and full-time tax protester, he repeatedly ignored the state district court judge's orders to cooperate and to provide pertinent financial information about his management of the golf course.
The husband's fiscal irresponsibility, intransigence and contempt for the judiciary and the legal system forced the state court to appoint, in July, 1987, a receiver for the sole, significant marital asset, a nine-hole golf course and driving range located just north of Boulder, Colorado. The husband and wife owned the golf course as tenants in common with each holding a ½ undivided interest in it. The state court dissolved the marriage on August 13, and 14, 1986, but retained jurisdiction over the division of marital property. The state court began a hearing on the permanent orders on March 8 or 26, 1990. During that hearing, the husband allegedly feigned illness, forcing yet another continuance upon the court. The court reset the hearing for June 12, 1990.
The debtor filed his chapter 7 bankruptcy on June 8, 1990, and thus did not attend or present any evidence at the permanent orders hearing that was held on June 14, 1990. The wife obtained relief from the automatic stay on July 20, 1990 for the limited purpose of allowing the state court to enter judgment on the permanent orders and to make a complete division of the marital property. The state court-appointed receiver continued to operate the golf course throughout the proceedings in bankruptcy court. In 1990, the receiver paid both the wife and the trustee $25,947.56, representing 50% of the profits and earnings from the golf course. In 1991, the receiver paid each $39,500.
In re Marriage of Ebel, # 85DR1206-5, slip op. at 5 (Boulder Dist.Ct. June 14, 1990). It found that the husband had singlehandedly and intentionally caused such huge losses to the marital estate that the only fair and equitable solution would be to award the golf course to the wife. The husband filed his first bankruptcy petition on March 31, 1989, under chapter 11 of the Code. Two months later, the bankruptcy court recommended that the case be dismissed under 11 U.S.C. § 305(a). Judge Weinshienk agreed and dismissed the case on September 21, 1989. Nine months later, on June 8, 1990, the debtor filed a voluntary petition under chapter 7 of the Code. In addition to his former wife, other major unsecured creditors included the IRS and the debtor's former lawyers, the three intervenors here ("the lawyers"). Collectively, the debtor owes the intervenors in excess of $100,000.
The wife filed her complaint to determine interest in property and for turnover on February 20, 1991. The lawyers sought intervention on March 27, 1991. The bankruptcy court granted intervention on March 29, 1991, and refused to reconsider its order when the wife objected. The wife moved for summary judgment on July 31, 1991. Her motion claimed that the golf course was not property of the bankruptcy estate because the state court had awarded the debtor's interest in the property to her in the dissolution action. The court heard testimony and took evidence on the merits on November 4, 1991 and issued a written order on December 9, 1991, denying the motion for summary judgment and dismissing the wife's complaint. This appeal followed.
The wife argues that I should reverse the bankruptcy court for several reasons. I will discuss them seriatim.
The wife asserts that the bankruptcy court erred in allowing the lawyers to intervene in the adversary proceeding. I find no error. Fed.R.Civ.P. 24 governs intervention in an adversary proceeding. Bankr.R. 7024. Rule 24 requires intervention where a statute confers such a right to intervene, and permits intervention when the applicant's claim or defense and the main action have a common question of law or fact. Under 11 U.S.C. § 554, the trustee may not abandon property of the estate without notice to all creditors and an appropriate hearing where the creditors can be heard. Such a hearing, however, would not have been an adversary proceeding. See rule 7001 ().
I conclude that the lawyers properly intervened. The wife's adversary complaint in essence sought to compel the trustee to abandon any interest in the golf course. Had it been so styled, the bankruptcy court would have been required to hear from the lawyers. I acknowledge that the issue perhaps should have been resolved in a contested hearing rather than an adversary proceeding. As I have said before, however, I see no reason to elevate form over substance. This is especially true in cases such as this where the procedural impact upon the complaining party was slight and unburdensome. Compare In re Kennedy, 143 B.R. 776, 778 (D.Colo.1992) () and In re Lewis, 142 B.R. 952, 955 () with In re Asher Development III, Inc., 143 B.R. 788, 789 (). Accordingly, I conclude that the lawyers properly intervened in the adversary proceeding.
The wife next asserts that the bankruptcy court was bound by principles of comity and res judicata to abide by the state court's determination that she should have the entire golf course. I disagree. On June 8, 1990, the debtor filed his petition in bankruptcy. On that date, the debtor and the wife were tenants in common as to the golf course. On that date, there had not been a state court judgment to which it might look for guidance and control. Thus, the doctrines of res judicata and collateral estoppel do not apply.
Furthermore, a stay was in effect as of that date which prevented the state court from proceeding without relief from the stay. As of the date of the filing of the petition, the bankruptcy court had absolute authority and jurisdiction to determine what property belonged to the estate itself. 28 U.S.C. 1471(e); In re Gardner, 913 F.2d 1515 (10th Cir.1990). The bankruptcy court committed no error in disregarding the state court judgment.
The crux of the argument between the parties lies here. The wife asserts that as a matter of Colorado marital law she had a vested interest in the golf course (in the nature of a resulting trust) at the time of the divorce petition and that the debtor had only bare legal title to an undivided ½ interest thereafter. I agree, but only as a matter of state marital property law. As the Colorado Supreme Court put it:
at the time of the filing of the dissolution action in which the division of property will later be determined, a vesting takes place. This interest which has vested is inchoate only in the sense that, prior to the division, the property to be transferred to the wife has not been determined. Upon and after the filing of the action, the rights of the wife are analogous to those of a wife who can establish a resulting trust, irrespective of a divorce action, in the property of the husband.
In re Questions Submitted by the United States District Court for the District of Colorado, 184 Colo. 1, 517 P.2d 1331, 1335 (1974). Such an interest, she asserts, was insufficient to create a bankruptcy estate since she herself owned the beneficial interest.
She thus claims that the debtor's interest in the property never passed into the estate because he only...
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