In re Markunes

• Decision Date: 09 October 1987
• Docket Number: Bankruptcy No. 3-87-01463.
• Citation: 78 BR 875
• Parties: In re Frank J. MARKUNES, Debtor. Georgia J. Markunes JOHNSON, Movant, v. Frank J. MARKUNES, Respondent.
• Court: U.S. Bankruptcy Court — Southern District of Ohio

78 B.R. 875 (1987)

In re Frank J. MARKUNES, Debtor.
Georgia J. Markunes JOHNSON, Movant,
v.
Frank J. MARKUNES, Respondent.

Bankruptcy No. 3-87-01463.

United States Bankruptcy Court, S.D. Ohio, W.D.

October 9, 1987.

78 BR 876

Peter J. Donahue, Dayton, Ohio, for movant.

Claude R. Bowles, Jr., Porter, Wright, Morris & Arthur, Cincinnati, Ohio, for respondent.

ORDER AND DECISION DENYING MOTION TO DISMISS

WILLIAM A. CLARK, Bankruptcy Judge.

This matter is before the court upon the motion of Georgia J. Johnson to dismiss the chapter 11 case of Frank J. Markunes on the ground that his petition in bankruptcy was not filed in good faith.

FACTS

On February 5, 1985 movant was granted a divorce from debtor in the Common Pleas Court of Montgomery County, Ohio, Division of Domestic Relations. Under the terms of the "Final Judgment and Decree of Divorce" it was ordered that movant was the owner of the following items:

Coin collection $15,000
                Savings account 10,448
                Savings previously withdrawn by Movant 12,000
                Movant's IRA 2,250
                John Hancock tax exempt fund 3,219
                Real property—equity 55,000
                

Debtor was declared to be the owner of the following property:

Kemp Precision Circuits, Inc. Stock $390,000
                His profit sharing account 87,937
                Checking account 1,338
                IRA 4,311
                Cash surrender value of life insurance 4,703
                1965 Corvette $10,000
                1980 Ford van 6,500
                Bass boat 6,500
                

It was further ordered that debtor was to pay movant by way of property settlement the sum of $206,686 on the following terms:

1. $60,000 on or before thirty days after filing of this Final Judgment and Decree of Divorce;

2. On the one year anniversary date after filing of this Final Judgment and Decree of Divorce, Defendant shall commence a series of payments of $12,000 per year to the Plaintiff on the balance plus interest at the rate of 10% per annum from the date of the Decree; however, when the parties\' child shall arrive at the age of 18 years and completes high school, or is earlier emancipated by law, or is no longer Defendant\'s obligation of support for any reason, then the next ensuing payment thereafter shall be increased to $18,000 plus interest as aforementioned and said annual payments shall continue at that rate each year until the debt is fully paid, it being recognized that the last principal payment may well be less than $18,000 and each of said annual payments shall bear interest at the rate of 10% per annum from the date of filing this Final Judgment and Decree of Divorce;

Further, debtor was required to execute a note to movant in the amount of $206,686 and to deposit all of his shares of stock in Kemp Precision Circuits, Inc. with the Clerk of Courts of Montgomery County, Ohio until the note was paid. In addition, movant was ordered to pay alimony in the amount of $325 per week for a maximum period of two years.

On April 30, 1986 a referee for the domestic relations court issued a report recommending that the debtor be found in contempt for failure to pay the property division payments and be sentenced to ten days in jail. The relevant portions of that report are as follows:

Pursuant to the property division payments due under the February 5, 1985

78 BR 877

decree, the Defendant is presently in arrears $80,000 including interest specified in the decree as of April 5, 1986. He has made none of the payments due under paragraphs 1 and 2 on page 4 of the decree.

He has submitted a detailed summary of his financial condition in his Defendant\'s Exhibit "A", and considered by the court.

His business relationship with his partner has deteriorated since the decree and his business has decreased 50% since 1984. His 1985 tax return shows an $85,582 gross income from his company.

He has been paying the weekly alimony due.

. . . .

At the time of the divorce the Defendant had a profit sharing plan worth $87,937. He currently shows this to be worth $94,000 in March of 1986. The court concluded on page 5 of its January 11, 1985 decision that the Defendant can borrow against this plan. Further, the Defendant does have assets such as the 1965 Corvette, which could be sold to satisfy a portion of the property division due. He further shows debts in his Exhibit "A" on page 3 in support of his position of inability to pay, however, these debts are largely unpaid to date. His income does exceed his weekly living expenses listed by $132.82 weekly showing a $78,000 gross income even though his 1985 return shows a $85,582.00 gross income from salary.

The Defendant has not paid what he could afford toward this property division, but has paid nothing at all sic. The court cannot conclude he can pay nothing over the past 13 months that he has known about this exposure under the decree for property division owed.

I therefore cannot decide this matter contrary to the court\'s January 11, 1985 decision or contrary to the recent Court of Appeals decision and recommend that the Defendant be found in contempt and sentenced to 10 days in the Montgomery County Jail. . . . (Movant\'s Exhibit 2)

The debtor objected to the referee's report on May 13, 1986, but Judge Kern of the domestic relations court approved the referee's report on June 12, 1986 and found the debtor in contempt for failure to make payments according to the final judgment and decree of divorce. The debtor was ordered to appear before the court for sentencing on June 24, 1986.

Debtor appealed the judgment sentencing him for contempt to the Court of Appeals for Montgomery County, Ohio, Second Appellate District. The court noted that "by the time of his sentencing on June 24, 1986, Mr. Markunes had paid only $75 of the $80,000 that had, by that time, become due and payable pursuant to the trial court's order." (Movant's Exhibit 4 at 2) The appeals court affirmed the sentencing of debtor and noted that "the trial court evidently did not believe Mr. Markunes' testimony that he was unable to pay the amount ordered and it evidently did not believe his testimony that he was unable to borrow against his company's profit-sharing plan." (Id. at 4) "Evidently, the trial court in this case has concluded that Mr. Markunes has failed to meet his burden of proof that he was unable to make the payment ordered." (Id. at 5)

On April 30, 1987, Judge Kern ordered debtor to report to the Montgomery County Jail on May 4, 1987 to serve his ten-day sentence. On May 8, 1987 movant filed a motion with the domestic relations court for an additional contempt proceeding. On May 12, 1987 the debtor filed his petition in bankruptcy.

At the hearing on movant's motion to dismiss debtor's bankruptcy case, Mr. Markunes testified that he had no alternative to filing bankruptcy. When questioned about the purpose of his filing he stated that "it was to be able to go on about my life and stay out of prison. I could not come up with the money." Mr. Markunes, who is a 50% stockholder in Kemp Precision Circuits, Inc., stated that Kemp has undergone tremendous losses during the last three or four years and that his salary from the corporation is now $1,000 per week.

78 BR 878

With regard to Kemp's Profit Sharing Plan, the debtor and Dennis G. Peterman (also a 50% stockholder of Kemp) are the Plan's trustees. At one point in his testimony Mr. Markunes asserted that there were no loan provisions in the Plan and that borrowing was not permitted. Yet he stated that he attempted to borrow funds from the pension fund, but his request was denied. His testimony about who refused him the loan and the extent of his efforts to obtain a loan was vague and confusing. The Plan contains a provision for applying to the trustee for a loan on page 18. (Movant's Exhibit 8), and states that "the Trustee may grant this loan if he believes it has merit."

In February of 1987 Mr. Markunes transferred a $4,000 IRA to his current spouse. In December of 1986 he gave a 1965 Corvette to his daughter.

The following debts are listed in debtor's schedules:

Hunter Savings and Loan $25,000 (secured by a mortgage
                 on movant's
                 real estate)
                Georgia L. Johnson $206,000 (property settlement)
                Gary L. Froelich $11,334 (attorney fees)
                Kemp Precision Circuits $25,977 (personal expenses
                 paid by corporation)
                Diana Markunes $1,875 (personal loan)
                Walter Plattenburg $1,835 (CPA fees)

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