In re Gene Douglas Balas And Carlos A. Morales

• Decision Date: 13 June 2011
• Docket Number: No. 2:11–bk–17831 TD.,2:11–bk–17831 TD.
• Citation: 65 Collier Bankr.Cas.2d 1307,449 B.R. 567
• Parties: In re Gene Douglas BALAS and Carlos A. Morales, Joint Debtors.
• Court: U.S. Bankruptcy Court — Central District of California

449 B.R. 567

65 Collier Bankr.Cas.2d 1307

In re Gene Douglas BALAS and Carlos A. Morales, Joint Debtors.

No. 2:11–bk–17831 TD.

United States Bankruptcy Court, C.D. California.

June 13, 2011.

OPINION TEXT STARTS HEREWest CodenotesUnconstitutional as Applied1 U.S.C.A. § 7

Robert J. Pfister, Klee, Tuchin, Bogdanoff & Stern LLP, Los Angeles, CA, for Debtors.Peter C. Anderson, Jill M. Sturtevant, Hatty K. Yip, Office of the United States Trustee, Department of Justice, for U.S. Trustee.

MEMORANDUM OF DECISION

THOMAS B. DONOVAN, Bankruptcy Judge; PETER H. CARROLL, Chief Bankruptcy Judge; ROBIN L. RIBLET, Bankruptcy Judge; VINCENT P. ZURZOLO, Bankruptcy Judge; ERNEST M. ROBLES, Bankruptcy Judge; ERITHE A. SMITH; Bankruptcy Judge; MEREDITH A. JURY, Bankruptcy Judge; ELLEN CARROLL, Bankruptcy Judge; SHERI BLUEBOND, Bankruptcy Judge; MAUREEN A. TIGHE, Bankruptcy Judge; THEODOR C. ALBERT, Bankruptcy Judge; RICHARD M. NEITER, Bankruptcy Judge; VICTORIA S. KAUFMAN, Bankruptcy Judge; CATHERINE E. BAUER, Bankruptcy Judge; DEBORAH SALTZMAN, Bankruptcy Judge; MARK S. WALLACE, Bankruptcy Judge; SCOTT C. CLARKSON, Bankruptcy Judge; SANDRA KLEIN, Bankruptcy Judge; GERALDINE MUND, Bankruptcy Judge; KATHLEEN THOMPSON, Bankruptcy Judge.

INTRODUCTION

This case is about equality, regardless of gender or sexual orientation, for two people who filed for protection under Title 11 of the United States Code (Bankruptcy Code). Like many struggling families during these difficult economic times, Gene Balas and Carlos Morales (Debtors), filed a joint chapter 13 petition on February 24, 2011. Although the Debtors were legally married to each other in California on August 20, 2008,¹ and remain married today, the United States Trustee (sometimes referred to simply as “trustee”) moved to dismiss this case pursuant to Bankruptcy Code § 1307(c) (Motion to Dismiss), asserting that the Debtors are ineligible to file a joint petition based on Bankruptcy Code § 302(a) because the Debtors are two males. The issue presented to this court is whether the Debtors, who are legally married and were living in California at the time of the filing of their joint petition, are eligible to file a “joint petition” as defined by § 302(a). As the Debtors state, “[T]he only issue in this Bankruptcy Case is whether some legally married couples are entitled to fewer rights than other legally married couples, based solely on a factor (the gender and/or sexual orientation of the parties in the union) that finds no support in the Bankruptcy Code or Rules and should be a constitutional irrelevancy.” Debtors' Opp. 5:24–28. In this court's judgment, no legally married couple should be entitled to fewer bankruptcy rights than any other legally married couple.

BACKGROUND

It is undisputed that the Debtors are a lawfully married California couple ² who were married at the time they filed their bankruptcy petition. The Debtors have undertaken a lifelong commitment to each other, and wish to have their marital relationship accorded treatment in this court equal to the treatment of opposite-sex married couples.³ The Debtors came to this court seeking to restructure and repay their debts under chapter 13 of the Bankruptcy Code following numerous episodes of illness, hospitalization and extended periods of unemployment. The Debtors filed their bankruptcy petition jointly pursuant to § 302(a) which allows the filing of a joint petition by any eligible individual “and such individual debtor's spouse.” It is undisputed that each Debtor is an individual and is eligible to be a debtor in this court and to file a voluntary petition for relief.

All trustee objections to confirmation were satisfied by the Debtors at the May 17 hearing on the Motion to Dismiss, and the Debtors' proposed plan of reorganization currently is eligible for confirmation but for the pending Motion to Dismiss.

The House Bipartisan Legal Advisory Group, acting through the United States Trustee, at the last minute orally requested a short continuance of the May 17 hearing in order to determine whether to intervene in this case to address the issues. Debtors consented and the court granted the request; yet, there have been no further pleadings and no challenge from the government to any issue raised by the Debtors. The government's non-response to the Debtors' challenges is noteworthy.

JURISDICTION AND VENUE

The court has jurisdiction over this bankruptcy case pursuant to 28 U.S.C. §§ 157 and 1334. Venue is proper pursuant to 28 U.S.C. §§ 1408 and 1409. The Motion to Dismiss and objections to plan confirmation that were filed concurrently herein are core matters under 28 U.S.C. § 157(b)(2)(A) & (L) that the court may hear and determine pursuant to 28 U.S.C. § 157(b)(1).

DISCUSSION

The United States Trustee brought this Motion to Dismiss pursuant to § 1307(c) as the Bankruptcy Code basis for dismissal. Section 1307(c) provides, in relevant part:

... on request of a party in interest or the United States trustee and after notice and a hearing, the court may convert a case under this chapter to a case under chapter 7 of this title, or may dismiss a case under this chapter, whichever is in the best interests of creditors and the estate, for cause, including—

(1) unreasonable delay by the debtor that is prejudicial to creditors;

(2) nonpayment of any fees and charges required under chapter 123 of title 28;

(3) failure to file a plan timely under section 1321 of this title;

(4) failure to commence making timely payments under section 1326 of this title;

(5) denial of confirmation of a plan under section 1325 of this title and denial of a request made for additional time for filing another plan or a modification of a plan;

(6) material default by the debtor with respect to a term of a confirmed plan;

(7) revocation of the order of confirmation under section 1330 of this title; and denial of confirmation of a modified plan under section 1329 of this title;

(8) termination of a confirmed plan by reason of the occurrence of a condition specified in the plan other than completion of payments under the plan;

(9) only on request of the United States trustee, failure of the debtor to file, within fifteen days, or such additional time as the court may allow, after the filing of the petition commencing such case, the information required by paragraph (1) of section 521;

(10) only on request of the United States trustee, failure to timely file the information required by paragraph (2) of section 521; or

(11) failure of the debtor to pay any domestic support obligation that first becomes payable after the date of the filing of the petition.

11 U.S.C. § 1307(c) (emphasis added).

The Motion to Dismiss is not based on any of the eleven causes for dismissal listed in § 1307(c). Instead, the “cause” asserted by the United States Trustee is that the joint petition was filed by two men. Although § 302(a) explicitly allows any qualified individual and such individual's spouse to file a joint petition, the federal Defense of Marriage Act, Pub. L. No. 104–199, 110 Stat. 2419 (Sept. 21, 1996) codified in pertinent part at 1 U.S.C. § 7 (herein referred to as “DOMA”), defines the term “spouse” for the purpose of applying federal law, as “a person of the opposite sex who is a husband or a wife.” 1 U.S.C. § 7. DOMA elaborates:

In determining the meaning of any Act of Congress, or of any ruling, regulation, or interpretation of the various administrative bureaus and agencies of the United States, the word “marriage” means only a legal union between one man and one woman as husband and wife, and the word “spouse” refers only to a person of the opposite sex who is a husband or a wife.

Id.

The United States Trustee cites two cases to support his position that this case should be dismissed “for cause” under § 1307(c). The first is In re Jephunneh Lawrence & Assoc. Chartered, 63 B.R. 318, 321 (Bankr.D.C.1986), where the court determined that a joint petition was improperly filed by a corporation and its sole shareholder. The second is In re Malone, 50 B.R. 2, 3 (Bankr.E.D.Mich.1985), where the court held that two debtors who cohabitated but had never been legally married were not entitled to file a joint petition. The decisions are neither binding on this court nor pertinent to the Debtors in this case who are two people legally married to each other. The United States Trustee provides no relevant bankruptcy case law that is controlling on this court or that supports the trustee's position. Instead, it is clear that the Motion to Dismiss simply asks for this case to be dismissed for cause under § 1307(c) based on DOMA unless the Debtors consent to “voluntarily sever their joint petition by a date certain.” Motion to Dismiss 4:17–18.

A decision announced in In re Somers, No. 10–38296, 448 B.R. 677, 683 (Bankr.S.D.N.Y.2011), on the other hand, determined that there was insufficient cause to dismiss the Debtors' joint chapter 7 bankruptcy case under the “only for cause” provision of § 707(a) based on DOMA.⁴ The same result was reached in In re Ziviello–Howell, Ch. 7 Case No. 11–22706, Civil Minutes, Docket No. 44 (Bankr.E.D.Cal. May 31, 2011) (McManus, J.) (attached to Debtors' Reply as Tab G) (denying a motion to dismiss a joint chapter 7 case filed by two women married to each other because the court in exercise of its discretion determined from the record in the case that there was no “cause” for dismissal under § 707(a)). Similarly here, cause does not exist under § 1307(c). No creditor has sought dismissal. The trustee has cited no failure by the Debtors in performing their obligations under § 1307(c). The trustee seeks dismissal solely because the Debtors are a same-sex married couple, in violation of DOMA's definition of “spouse” as the statute applies to Bankruptcy Code § 302(a).

The Debtors have asserted that the equal protection component of the Fifth Amendment “keeps governmental decisionmakers from treating differently persons who are in all relevant...