In re Fort

• Decision Date: 30 June 2009
• Docket Number: Adversary Proceeding No. 08-07075.,Bankruptcy No. 07-70004.
• Citation: 412 B.R. 840
• Parties: In re Curtis L. FORT, Kathleen D. Fort, Debtors. Curtis L. Fort and Rebecca B. Connelly, Trustee, Plaintiffs, v. State of Florida Department of Revenue o/b/o Avalon Coleman, Defendant.
• Court: U.S. Bankruptcy Court — Western District of Virginia

412 B.R. 840

In re Curtis L. FORT, Kathleen D. Fort, Debtors Curtis L. Fort and Rebecca B. Connelly, Trustee, Plaintiffs, v. State of Florida Department of Revenue o/b/o Avalon Coleman, Defendant.

Bankruptcy No. 07-70004.

Adversary Proceeding No. 08-07075.

United States Bankruptcy Court, W.D. Virginia, Roanoke Division.

June 30, 2009.

COPYRIGHT MATERIAL OMITTED

COPYRIGHT MATERIAL OMITTED

Michael Dean Hart, Michael D. Hart, PC, Roanoke, VA, for Plaintiff.

Frederick F. Rudzik, State of Florida, Dept. of Revenue, Tallahassee, FL, for Defendant.

MEMORANDUM DECISION

WILLIAM F. STONE, JR., Bankruptcy Judge.

The matters before this Court are the Motions for Partial Summary Judgment ("the Motions") filed by Curtis Fort and the State of Florida in an adversary proceeding in which Mr. Fort, in essence, seeks a determination of the following issues: (1) whether the State of Florida's claim will be paid in full according to the Order entered by this Court on October 11, 2007 allowing such claim in reduced amount upon and subject to the Debtors' successful completion of their payment obligations under their confirmed plan; and (2) if so, whether the State of Florida should be permanently enjoined from any further collection activity against Mr. Fort. In addition, Mr. Fort ultimately seeks a refund of $8,917.07, the amount he asserts has been overpaid to the State, though that issue has been reserved pending the ruling of this Court on the Motions. In his Motion, Mr. Fort seeks judgment in his favor based primarily on the asserted res judicata effect of the Order allowing the claim in reduced amount and Confirmation Order, and, in its Motion, the State of Florida seeks judgment in its favor based on the non-dischargeability of domestic support obligations and based on several doctrines which it asserts limit the Court's jurisdiction to grant the relief sought by Mr. Fort. Because the proof of claim filed by the State of Florida involved money allegedly due for domestic support arrears, the matter before the Court presents challenging issues regarding bankruptcy court jurisdiction. A hearing was held on this matter on May 11, 2009, during which counsel for both parties argued their respective positions taken in the Motions for Summary Judgment. At the conclusion of this hearing, the Motions were taken under advisement. The parties now having been fully heard on the matters, and based on the following, this Court partially grants and partially denies both Motions.

FINDINGS OF FACT

The facts relevant to the matter presently before this Court for the most part are not disputed. On January 3, 2007, Curtis and Kathleen Fort ("the Debtors") filed a voluntary chapter 13 petition with this Court. The State of Florida Department of Revenue, Child Support Enforcement Program ("Florida" or "the State") filed a proof of claim in the case on April 12, 2007, alleging that the State held a priority claim in the amount of $14,393 for domestic support arrears owed by Curtis Fort ("Mr.Fort"). In response, the Debtors filed an Objection to Claim on August 20, 2007, alleging accounting errors and asserting that the amount of domestic support actually owed was $2,850.22 and seeking a determination that the claim ought to be disallowed to the extent that it exceeded such acknowledged amount. This Objection was served upon Florida's counsel with respect to this matter, Mr. Frederick F. Rudzik, who continues to represent it in this Court in this adversary proceeding. The Court's Order served with the Objection provided as follows regarding a response to the Objection: "[I]t is [ordered] that claimants [State of Florida] shall have thirty (30) days from the date of this order to file with the ... Court ... a written response to said objection(s), and, absent same, claimant shall be in default and the Movant may tender an Order sustaining the objection without further notice or hearing. If claimant timely files a response ..., a hearing shall be held[.]" While no response was filed to the Objection, a hearing was nonetheless held on the matter on October 9, 2007, at which no one appeared on Florida's behalf and during which the Debtors' counsel made certain representations to this Court and also offered two exhibits, which this Court admitted into the record. Relying upon this evidence, the Court entered an Order sustaining the Debtors' Objection on October 11, 2007, and allowed Florida's claim in the amount contended by the Debtors of $2,850.22. This Order was served upon counsel for the State. Based on this ruling, the Debtors on October 22, 2007 filed an Amended Chapter 13 Plan, which Plan provided for the payment in full of such allowed claim and was confirmed by this Court's Order entered December 6, 2007. Florida did not file any objection to confirmation nor did it appeal or otherwise challenge either the Order disallowing most of its claim or the Order confirming the Amended Plan.

On December 8, 2008, the Debtors filed an Application to Quash Garnishment, seeking a ruling by this Court that an amended garnishment order issued on December 7, 2007, by a Circuit Court of the State of Florida related to the collection of the pre-petition domestic support arrears alleged in the State's proof of claim be quashed. Said Application was granted by Order entered December 11, 2008. On the same date the Application to Quash was filed, Mr. Fort also filed a complaint initiating this adversary proceeding against the State of Florida alleging that the State had engaged in a willful violation of the automatic stay by continuing to garnish funds and collect $8,917.07 more than the allowed proof of claim provided.¹ Mr Fort seeks entry of an Order which would declare that the claim has been paid in full and direct that the State of Florida refund the purported overpayment amount of $8,917.07 to the Debtors.

The State of Florida filed its Answer on February 2, 2009, in which the State denied that any willful violation of the automatic stay had occurred and pled several affirmative defenses, asserting that the doctrine of comity, the doctrine of state sovereign immunity under the Eleventh Amendment to the United States Constitution, the Tenth Amendment to the United States Constitution, and the domestic relations exception together strip this Court of subject matter jurisdiction to resolve the issues raised in the complaint. The parties filed a Stipulation of Facts on March 16, 2009. The State of Florida filed its Motion for Summary Judgment on March 30, 2009, to which Mr. Fort filed his response on April 10, 2009, and Mr. Fort filed his Motion for Summary Judgment on March 31, 2009, to which the State filed its response on April 10, 2009. The cross-motions came before this Court for hearing on May 11, 2009, at which counsel for both parties presented oral arguments supporting their respective positions.

In addition to procedural facts already noted, the parties have stipulated to the following facts: On the proof of claim filed by the State of Florida on April 12, 2007, the State identified Mr. Rudzik as the individual to whom notices should be sent and that service of the Objection to Claim was made upon Mr. Rudzik. The Debtors' confirmed Chapter 13 Plan provided for payment of the allowed claim in full. On September 24, 2007, the Circuit Court of Florida, for the Eighth Judicial Circuit in Alachua County² ("the Circuit Court"), with jurisdiction in the domestic support matter, entered an order terminating any future support obligations as of March 29, 2007. According to the records of the Clerk of that court, the official custodian of records for domestic support obligations under Florida statute, the total amount of child support arrearages owed at the filing of the instant case was $14,393, which amount has not been challenged in the circuit court having jurisdiction over the matter. Moreover, no action for determination of dischargeability of the domestic relations obligation has been filed in any court. Finally, a total of $1,120.51 of the allowed claim in the amount of $2,850.22 has been paid through the Chapter 13 Plan as of February 26, 2009.

With respect to the $14,393 figure for domestic support obligations allegedly owed, the basis for this figure is neither stipulated nor apparent from the documentation provided to this Court. Attached to Florida's proof of claim is a copy of a Modification Order entered by the Florida state court dated November 13, 1995 in which the arrearage as of October 23, 1995 was stated to be $4,553.29 plus interest, all of which was indicated to be owed to the custodial parent rather than to the State of Florida. This order established a new current support obligation going forward in the amount of $210.74 bi-weekly and further provided that the arrearage was to be satisfied by bi-weekly payments of $42.15 beginning November 15, 1995. The order also provided that Mr. Fort was responsible to pay a "clerk's depository fee" of $5.25 with each payment, resulting in a total aggregate periodic payment of $258.14. The Modification Order provided that payments had to be made to the Clerk of the Court and that only payments made to the Clerk would be credited. It appears evident that the Modification Order must not have been complied with fully by Mr. Fort afterwards because a bi-weekly payment of $42.15 towards the arrearage would have satisfied it in a little more than four years, plus whatever interest might be due, which almost certainly would have been fulfilled long before the filing date of this bankruptcy case.

CONTENTIONS OF THE PARTIES

In his complaint, Mr. Fort notes that post-petition payments made to the State of Florida applicable to its domestic support arrears claim through the date of the complaint total $11,767.29, which amount includes forty-two bi-weekly payments of $252.90 after the termination of the current support obligation made via wage deduction, totaling $10,621.38, and distributions...