In re Hageman, 00-51970.
| Decision Date | 23 March 2001 |
| Docket Number | No. 00-51970.,00-51970. |
| Parties | In re Joyce M. HAGEMAN, Debtor. |
| Court | United States Bankruptcy Courts. Sixth Circuit. U.S. Bankruptcy Court — Southern District of Ohio |
Steven P. Beathard, London, OH, for Debtor.
Susan L. Rhiel, Rhiel & Terlecky, Columbus, OH.
Frederick L. Ransier, III, Columbus, OH, Chapter 7 Trustee.
Alexander G. Barkan, Assistant U.S. Trustee, Columbus, OH.
This Memorandum Opinion and Order constitutes the Court's findings of fact and conclusions of law on the Second Objection to the Claims of Exempt Property filed by Frederick L. Ransier ("Trustee") and the Memorandum in Support of Claimed Exemptions filed on behalf of Joyce M. Hageman ("Debtor"). The dispute involves the effort of the Trustee to administer approximately $60,000.00 in proceeds held in a retirement plan of the former spouse of the Debtor and payable to her through a Qualified Domestic Relations Order ("QDRO"). Based upon a review of documents admitted into evidence, the testimony of the Debtor, the statements of counsel, and memoranda, the Court has determined that the Trustee's Second Objection to the Claims of Exempt Property should be sustained.
The Court has concluded that because the proceeds emanate from the QDRO rather than the retirement plan, they cannot be excluded by applicable ERISA case law and constitute property of the estate subject to administration by the Trustee. In addition, the Court has found, in view of the origin of the funds and the scope of the Ohio retirement-related exemptions, those provisions are not applicable in the instant case. Finally, the Court has determined that the Ohio spousal support exemption is not applicable in view of the clear designation of the proceeds as a division of property, which the Court finds was the intent of the parties. A brief history of this case will illustrate the bases for the Court's decision.
On August 31, 1999, a Magistrate Decision and Decree of Dissolution of Marriage was entered by the Fayette County, Ohio, Common Pleas Court in the case of Thomas H. Hageman v. Joyce M. Hageman, Case No. 99-0217-DRC. As part of the dissolution, the Debtor and her former spouse executed a Separation and Property Settlement Agreement ("Agreement") which in relevant part delineated the division of marital property and provided as follows: "Retirement: Husband shall retain his retirement accounts through sic Seventh Farm Credit Retirement Savings Plan with the exception that sic wife shall be awarded sixty thousand dollars ($60,000.00) of said plan to be distributed to her by way of a qualified domestic relations order." At the time of the execution of the Agreement, there was an approximate total of $225,000.00 in the retirement plan based upon contributions of the former spouse.
The Agreement provided that the Debtor and her former spouse would hold each other harmless for credit card obligations in their respective names, and expressly set forth that, ". . . Neither party shall be awarded spousal support from the other and the Court shall not retain jurisdiction over the issue of spousal support. . . ." (emphasis supplied). The only support provided was for their daughter in the amount of $160.66 per week, and the former spouse retained two mutual fund accounts in order to defray the post-high school education of the daughter. The Debtor's former husband also retained the marital real estate, and was obligated to hold the Debtor harmless on the mortgage obligations.
The Debtor was not represented by legal counsel in the dissolution proceeding; however, the Agreement provided that the Debtor, ". . . acknowledges that she is fully aware that the attorney involved does not represent her that sic she has been given full opportunity to evaluate her need for legal representation free of any potential conflict; that she has had adequate opportunity to obtain her own legal counsel and elects to proceed without legal representation. . . ."
Approximately seven months later, on March 13, 2000, the Debtor filed the instant chapter 7 bankruptcy proceeding. In the Schedules, the Debtor disclosed her interest in her former spouse's retirement plan, which was valued at $60,000.00, but claimed that this sum was exempt pursuant to O.R.C. § 2329.66(A)(10)(c) (Individual Retirement Accounts). On "Schedule F — Creditors Holding Unsecured Nonpriority Claims," the Debtor listed a total of $39,223.14 in debt that included four credit card accounts with balances ranging from approximately $6,000.00 to $14,000.00. There were no other liabilities scheduled.
On the very next day after the bankruptcy filing, March 14, 2000, a QDRO was entered by the Fayette County, Ohio, Common Pleas Court, and in relevant part it provided that the Debtor was: ". . . awarded and assigned, as (her) sole and separate property, $60,000.00 of the balance of the (former spouse's) accounts, as of August 26, 1999 under the Plan. . . ." (emphasis supplied). The QDRO further provided that, (emphasis supplied).
What followed was a flurry of litigation regarding the claimed exemption of the $60,000.00 interest. First, on May 15, 2000, the Trustee filed an Objection to the Claims of Exempt Property that related to the original exemption claim filed under O.R.C. § 2329.66(A)(10)(c) (Individual Retirement Accounts). The Objection was premised on the fact that the retirement plan at issue was not the Debtor's and that the exemption provision was inapplicable. At best, the Trustee asserted the Debtor could only claim an extremely modest exemption ($400.00) for sums due and payable pursuant to O.R.C. § 2329.66(A)(4)(a). On May 31, 2000, the Debtor filed a Reply to Objection of Trustee stating that novel issues were presented, and that in view of the sum involved, special counsel would be retained. The Court granted continuance requests in light of the Debtor's retention of special counsel.
Meanwhile, on the parallel domestic relations track, the plan administrator was engaged in the process of fulfilling its obligation under the QDRO and ERISA, and on August 8, 2000, issued a letter indicating that the terms of the QDRO would be honored under ERISA. The parties had thirty days to object, and if no objection was received the $60,000.00 would be distributed to the Debtor. No objection was raised, however; as of the last hearing in this case the Debtor had not sought a distribution.
Eight days later, on August 16, 2000, an, "Amended Schedule C-Property Claimed as Exempt" was filed on behalf of the Debtor, in which the $60,000.00 was claimed exempt under three provisions, rather than just one: O.R.C. § 2329.66(A)(10)(b) (), § 2329.66(A)(10)(c) (Individual Retirement Accounts), and § 2329.66(A)(11) (Spousal support). On August 22, 2000, the Trustee's Second Objection to the Claims of Exempt Property was filed. The Trustee, in addition to the challenge raised in his initial objection, asserted that since the Debtor's interest in the fund was premised upon the QDRO and not the retirement plan that belonged to the former spouse, her interest could not be claimed as exempt as a pension plan and/or annuity. The Trustee also argued that by virtue of the express language of the Agreement, the fund was not spousal support but rather a division of marital property, and could not be claimed exempt as support.
The Debtor provided testimony to support her exemption claims, particularly related to her assertion that the fund constituted or was in the nature of spousal support. The Court has considered this testimony, along with information disclosed in the Schedules and Statement of Financial Affairs. The Debtor testified that she was planning to leave the proceeds in her former spouse's retirement plan until she retired, and that this was an important consideration because she did not have a retirement plan in her current employment. The Schedules filed on behalf of the Debtor show she was 51 years old at the time of filing, and disclose that she has been employed as an Onsite Supervisor for Act I Temporaries for the last two and one-half years with monthly net take home pay in the amount of $1,716.92.
Other sources of income disclosed include the sum of $290.00 per month from a part-time job with the Community Action Agency and the sum of $690.00 per month in support payments received for the child. These add up to a total monthly net income of $2,696.92. This amount is slightly higher than the total monthly expenses disclosed ($2,662.25), which includes generous allowances for monthly food and recreational expenditures for the Debtor and her daughter in the respective amounts of $750.00 and $200.00. A review of the Statement of Financial Affairs shows that during the year 1999, the Debtor had gross income in the amount of $32,635.71, and year 2000 gross income, as of the date of filing, in the amount of $6,200.00. The Debtor testified, however, that her expenses would increase this year because of the loss of health coverage under her former spouse's insurance plan. The Debtor testified that she had incurred the credit card debt that is scheduled ($39,223.14) prior to the dissolution, and that she had not worked outside of the home until October 12, 1998, in order to stay with the daughter. The Debtor testified that she did not have any significant health problems.
The instant case presents issues regarding the relationship between ERISA and QDROs that determine whether the $60,000.00 may be excluded from the estate...
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