In re Fisher

• Decision Date: 17 November 1986
• Docket Number: Motion No. 813 M/E 19.,Bankruptcy No. 86 B 3186 E
• Citation: 67 BR 666
• Parties: In re Melvin Dean FISHER, et al., Debtor. Linda Mae JOHNSON, Applicant, v. Melvin Dean FISHER, et al., Respondents.
• Court: U.S. Bankruptcy Court — District of Colorado

67 B.R. 666 (1986)

In re Melvin Dean FISHER, et al., Debtor Linda Mae JOHNSON, Applicant, v. Melvin Dean FISHER, et al., Respondents.

Bankruptcy No. 86 B 3186 E, Motion No. 813 M/E 19.

United States Bankruptcy Court, D. Colorado.

November 17, 1986.

William D. Nelsch, Denver, Colo., for debtor/respondent.

Linda Mae Johnson, Yuma, Colo., pro se.

ORDER ON APPLICATION FOR RELIEF FROM AUTOMATIC STAY

CHARLES E. MATHESON, Bankruptcy Judge.

This matter came on for hearing before the Court on the motion of Applicant, Linda Mae Johnson ("Applicant") for relief from stay. By her application Applicant seeks an order of this Court which would permit her to conclude her domestic relations case which is still pending in the District Court for Yuma County, Colorado.

The dissolution of marriage action between the Applicant and the Debtor herein was filed in the state court on January 10, 1986. On March 17, 1986, the district court in which the dissolution action is pending granted to Applicant temporary maintenance (which she alleges has never been paid to her) and on May 15, 1986, entered a decree of dissolution of marriage. By that decree the Yuma County Court dissolved the marriage, restored Applicant's maiden name, and specifically retained jurisdiction "to determine the matters of maintenance and division of property and attorneys fees". Applicant now desires to proceed in that action to effect a division of marital property and to obtain, if appropriate, an award of maintenance.

The within bankruptcy case was filed on April 16, 1986, after the dissolution action had been filed but prior to the decree being entered on May 15, 1986. Applicant now asserts that some or all of the assets owned by the Debtor and scheduled as a part of the Debtor's estate in this case, constitute marital property. Applicant in effect seeks leave to proceed in the Yuma County District Court to obtain a decree which would allocate to her a share of marital property held by the Debtor to which she claims to be entitled. The Debtor conversely argues that his former spouse is no more than an unsecured creditor of this bankruptcy estate to be paid out of the assets of this estate or under a confirmed Chapter 11 plan, together with all other unsecured creditors.

Bankruptcy Code § 541(a)(1) states that the commencement of a bankruptcy case creates an estate which is comprised of "all legal or equitable interests of the debtor in property as of the commencement of the case." Section 541(a)(2) specifically includes as property of the estate all interests of the debtor and the debtor's spouse in "community" property as of the commencement of the case that is (A) under the sole, equal or joint management and control of the debtor, or (B) is liable for an allowable claim against the debtor. While "community property" is not defined by the Code, and the phrase is not embellished in the legislative history, it nonetheless appears clear that the phrase "community property" is a term of art and Section 541(a)(2) is applicable only in those few states where spouses equally or jointly manage and control all their community property. 4 L. King, Collier on Bankruptcy, para. 541.15 (15th ed. 1986).

The determination of what constitutes property of the bankruptcy estate is inherently an issue to be determined by the bankruptcy court. In re Cohn, 7 B.R. 223 (Bankr.Mass.1980); In re Puerto Rico Multi Products, Inc., 23 B.R. 25 (Bankr.P. R.1982); In re Vermont Real Estate Inv. Trust, 25 B.R. 813 (Bankr.Vt.1982). However, in making such a determination the bankruptcy court must turn to state law to define such property rights. In re Jenkins, 13 B.R. 721 (Bankr.Colo.1981), rv'd on other grounds at 19 B.R. 105 (D.C.Colo. 1982); In re Lloyd, 18 B.R. 624 (Bankr.E. D.Penn.1982); In re Jenkins, 19 B.R. 105 (D.C.Colo.1982); In re Lambert, 34 B.R. 41 (Bankr.Colo.1983); Zimmerman v. Starnes, 35 B.R. 1018 (D.C.Colo.1984).

Issues pertaining to marital property and the rights of the respective spouses in such property were considered at length by the Colorado Supreme Court in the case of In re Questions Submitted by the United States District Court for the District of Colorado, 184 Colo. 1, 517 P.2d 1331 (1974). The Court there held that during the marriage the wife does not have joint ownership in jointly acquired property. Thus, during the marriage and absent the institution of divorce proceedings, the parties have their separate property and generally have the right to dispose of it as he or she sees fit. However, once a dissolution proceeding is filed, a wife may be entitled to a division of the husband's property. Prior to the filing of the dissolution action, the wife's interest is completely inchoate, but that interest vests at the time the divorce action is filed. As to the nature of that vested interest, the Colorado Supreme Court stated:

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. We use this analogy because we are not saying that after the filing of the divorce action it is necessary for both spouses to enter into the conveyance of property held in the name of only one. Ibid, 517 P.2d at 1335.

The property rights of the respective spouses, as decreed by state law, must then be examined in light of the provisions of the Bankruptcy Code. That has previously been done in this jurisdiction in the case of In re Harms, 7 B.R. 398 (Bankr. Colo.1980). In the Harms case, a bankruptcy case had been filed by Mr. Arnold Harms. Prior to the filing of the bankruptcy case, Mr. Harms had been divorced and in the divorce proceeding the domestic relations court had entered its order dividing the marital property. Thereafter, in the bankruptcy case, the former wife sought to withdraw and exclude property from the bankruptcy estate pursuant to the preceding decree of the divorce court dividing the marital property.

The Bankruptcy Court in Harms considered the effect of the Colorado Supreme Court decision in In re Questions, supra, in light of the provision of 11 U.S.C. § 544. Under that section, the trustee in bankruptcy (in this case the debtor-in-possession) is clothed with the status of a hypothetical lien creditor and a hypothetical bona fide purchaser of real property from the debtor. The Court in Harms concluded that the wife had no right to reclaim specific property from the bankruptcy estate unless she could establish that she had a separate recorded interest in the debtor's real estate perfected by recording the decree of the divorce court or an execution lien on the debtor's personal property which had been perfected by filing a writ of execution with the sheriff. Since the former wife had done neither, the Court...