In re Mason
| Decision Date | 27 June 2017 |
| Docket Number | Case No. 14–23058 (RDD) |
| Citation | 573 B.R. 75 |
| Parties | IN RE: Roger Allen MASON, Debtor. |
| Court | U.S. Bankruptcy Court — Southern District of New York |
Kantrowitz, Goldhamer & Graifman, P.C., pro se, by William T. Schiffman, Esq.
De Moya & Associates, P.C., for the debtor, by Desiree de Moya, Esq.
This contested matter, which has a fairly complicated procedural history, eventually reduces to a simple issue: was the obligation of the debtor herein (the "Debtor") to pay a portion of his ex-wife's legal fees to her matrimonial counsel, Kantrowitz, Goldhamer, & Graifman, P.C. ("KGG") satisfied when she paid a greater portion of her legal fees to KGG than the amount owed by the Debtor, but not all of the legal fees that she owed?1
This Memorandum of Decision states the Court's reasons for holding that KGG's claim against the Debtor will not be satisfied until the difference between Ms. Mason's debt to KGG and her settlement payment is paid. It is only upon such payment that KGG's judicial lien on the Debtor's property in Rockland County, New York should be discharged.
On December 17, 2013, KGG obtained a judgment against the Debtor for $52,526. Mason v. Mason, Index No. 2010–11533 , which it recorded on the same day with the Clerk of Rockland County, New York, where the Debtor resides. KGG was counsel to the Debtor's wife, Ms. Mason in a contested divorce action, and the judgment derived from a decision and order after trial in that action providing, in relevant part, that the Debtor must pay $50,000 of Ms. Mason's counsel fees, "[g]iven the extreme difficulties that plaintiff [Ms. Mason] encountered in this case, including defendant's failure to pay his Court-ordered obligations, resulting in multiple contempt applications and the eventual incarceration of defendant, as well as the ‘relative merit of the parties' positions." Mason v. Mason, Decision and Order after Trial, Index. No. 11533/10 (LSJ), at 20 (internal citations omitted) [Dkt. No. 23, Ex. B] (the "Decision and Order"). The state court later entered a judgment of divorce incorporating that decision, Mason v. Mason, Index No. 2010–11533 (GEL), at 5–6 ( [Dkt. No. 14, Ex. B], stating, in relevant part, "Defendant shall pay Plaintiff's counsel, [KGG], the sum of $50,000 on or before July 31, 2013, as and for counsel fees."
KGG's judgment remained unpaid when the Debtor filed this chapter 7 case on July 26, 2014.
Thereafter, KGG obtained a declaration from the Bankruptcy Court that its judgment was non-dischargeable pursuant to 11 U.S.C. § 523(a)(15).2 Kantrowitz, Goldhamer & Graifman, P.C. v. Mason (In re Mason ), 545 B.R. at 467 (Bankr. S.D.N.Y. 2016) (Lane, B.J.).
The present matter came before the Court when the Debtor moved, by notice of presentment dated November 3, 2016, to avoid KGG's judicial lien on his residence. Debtor's section 522(f) Motion to Avoid Judgment Lien, dated October 26, 2016 [Dkt. No. 18] (the "Motion"). Although primarily focusing on avoiding KGG's lien pursuant to 11 U.S.C. § 522(f) as impairing the Debtor's homestead exemption, the Motion also stated that Ms. Mason had satisfied KGG's $98,576.62 separate judgment against her for legal fees pertaining to the divorce action, which, the Debtor argued, satisfied KGG's judgment against the him for a lesser included portion of such fees, requiring the lien to be discharged. Id. at ¶¶ 6, 8–9.
KGG's Objection to the Motion addressed the Debtor's section 522(f) argument, pointing out that 11 U.S.C. § 522(f)(1)(A) by its terms does not permit the avoidance of "a lien that secures a debt that is specified in section 523(a)(5)" of the Bankruptcy Code, 11 U.S.C. § 522(f)(1)(A), and contending that its $52,526 debt was non-dischargeable under section 523(a)(5). Objection of [KGG] in Opposition to Notice of Presentment to Avoid Judgment Lien for Attorneys' Fees, dated November 30, 2016 [Dkt. No. 23].
However, perhaps because of the Motion's somewhat perfunctory discussion of the issue, KGG did not respond to the Debtor's alternative argument that Ms. Mason's satisfaction of KGG's judgment against her relieved him of his debt to KGG for a subset of her fees. Id.
At the hearing on the Motion, the Debtor's counsel stated that she was not going to argue that the debt underlying KGG's judicial lien was beyond the reach of 11 U.S.C. § 523(a)(5), and, therefore, that it was susceptible to avoidance under 11 U.S.C. § 522(f). Audio of Hearing Held on December 28, 2016 at 28:06. The Court agreed with this concession, stating that although Judge Lane's non-dischargeability decision did not definitively hold that KGG's debt was nondischargeable under 11 U.S.C. § 523(a)(5) (), section 523(a)(5) would apply to the debt. Id. at 37:36. See, e.g., In re Rogowski, 462 B.R. 435, 443, 445–46 (Bankr. E.D.N.Y. 2011) ; Mordas v. Schenkein (In re Schenkein ), 2010 WL 3219464, at *5–6, 2010 Bankr. LEXIS 2700, at *13–15 (Bankr. S.D.N.Y. Aug. 8, 2010). While it is clear from the state court's Decision and Order that the court directed the Debtor to pay $50,000 of Ms. Mason's counsel fees based in part on the Debtor's conduct, the award does not appear to be a sanction or punitive in nature, but was, rather, as the court specified, "support" consistent with N.Y. Dom. Rel. Law § 237(a) and, therefore, nondischargeable under section 523(a)(5). Accordingly, based on the plain terms of 11 U.S.C. § 522(f)(1)(A), the Court denied the Motion's request to avoid the fixing of KGG's judicial lien on the Debtor's residence pursuant to that section.
The Debtor's counsel pressed the argument, however, that Ms. Mason's payment to KGG satisfied not only her own obligation but also KGG's judgment against the Debtor. KGG's counsel responded that based on the Stipulation of Settlement pursuant to which KGG and Ms. Mason settled her debt, Ms. Mason had not, in fact, paid her counsel fees in full and that, in settling her debt for a lesser sum, she and KGG had fully reserved KGG's right to collect its judgment against the Debtor, subject to a single satisfaction. The Court directed the parties to present the facts in greater detail and brief the satisfaction issue, which they later did.
As noted, KGG obtained not only a $52,526 judgment against the Debtor for some of the counsel fees that Ms. Mason owed KGG (at the time, in excess of $91,000),3 but also a March 8, 2016 judgment of $98,578.62 against Ms. Mason for all of its counsel fees in the divorce action, plus interest. Kantrowitz, Goldhamer & Graifman, P.C. v. Barbara Mason and Roger Mason, Index No. 2015–000348 (TEW) ( [Dkt. No. 27, Ex. N].
KGG and Ms. Mason resolved her debt in a Stipulation of Settlement, dated August 18, 2016. Kantrowitz, Goldhamer & Graifman, P.C. v. Mason, Index. No. 032712/2016 (Sup. Ct. Rock. Cty. 2016) [Dkt. No. 25, Ex. E] (the "Settlement Stipulation"), which provided that, in return for Ms. Mason's payment of $90,000, KGG would provide a recordable satisfaction of its $98,578.62 judgment against her. Id.¶¶ 1, 3. It is undisputed that Ms. Mason paid the $90,000 and that on September 12, 2016 KGG recorded the satisfaction of judgment contemplated by the Settlement Stipulation with the Rockland County Clerk.
The Settlement Stipulation also addressed KGG's judgment against the Debtor, stating that "the resolution of this Special Proceeding by this Stipulation of Settlement shall resolve all issues as and between KGG and [Ms. Mason], in regard to the Collection Case and the Collection Judgment, but shall not affect the rights of KGG to collect from [the Debtor] on the Judgment for Attorneys' Fees or the Bankruptcy Judgment any amounts owed by [the Debtor], pursuant to the separate judgment held by KGG against [the Debtor]." Id. at 3.
In its post-hearing submissions, KGG makes two arguments why it should continue to have a claim, and, therefore, an enforceable judicial lien, against the Debtor for the difference between Ms. Mason's settlement payment and the amount of KGG's judgment against her.
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