In re Miller, Bankruptcy No. LA 93-37464-KM. Adv. No. LA 93-03724-KM.
| Decision Date | 01 April 1994 |
| Docket Number | Bankruptcy No. LA 93-37464-KM. Adv. No. LA 93-03724-KM. |
| Citation | 167 BR 202 |
| Court | U.S. Bankruptcy Court — Central District of California |
| Parties | In re Arline MILLER, Debtor. Arline MILLER, Plaintiff, v. Lionel WALPIN, Defendant. |
COPYRIGHT MATERIAL OMITTED
Donald W. Henry, Chapter 11 Trustee, Wilke & Henry, Woodland Hills, CA.
Byron Z. Moldo, Saltzburg, Ray & Bergman, Los Angeles, CA, for Donald Henry, Chapter 11 Trustee.
Maurice Wainer, Snipper, Wainer & Markoff, Los Angeles, CA, for debtor.
Ivan L. Kallick, McDermott, Will & Emery, Los Angeles, CA, and Peter T. Hermes, Zonni, Ginocchio & Taylor, Glendale, CA, for defendant Lional A. Walpin, M.D.
OPINION ON CROSS-MOTIONS FOR SUMMARY JUDGMENT
The following facts are not disputed. Plaintiff Arline Miller and Defendant Lionel Walpin were married on June 30, 1957 and thereafter lived together as husband and wife until January, 1991. Plaintiff Miller filed for divorce. The California Superior Court entered its order dissolving the marital status of Miller and Walpin on January 14, 1993. However, the California Court's January 14, 1993 order did not divide the community property of the Miller and Walpin, and reserved jurisdiction to do so at a later date.
On August 3, 1993, Plaintiff Miller filed a voluntary petition under Chapter 11 of the Bankruptcy Code.1 As of the date the bankruptcy case was filed, Miller and Walpin's community property had not been divided, either by the California Court or by agreement of the parties, except possibly with respect to two bank accounts.2
On September 22, 1993, Plaintiff Miller brought the instant adversary proceeding against Defendant Walpin. The adversary proceeding complaint seeks a declaration from this Court that certain assets and interests are community property and are property of the bankruptcy estate (Complaint, at prayer, paragraph 3, page 3).
Both Plaintiff Miller and Defendant Walpin have filed cross-motions for summary judgment in the instant adversary proceeding, asking this Court to interpret the word "spouse" in 11 U.S.C. § 541(a)(2), and seeking additional relief. Section 541(a)(2) provides that:
(emphasis added)
Plaintiff Miller's summary judgment motion asks this Court to rule that the phrase "all interests of the debtor and the debtor's spouse in community property" includes the community property interests of the former spouse when, as in this case, the dissolution of the marriage occurred before the bankruptcy was filed, but the community property had not been divided before the bankruptcy was filed.
Defendant Walpin's motion for summary judgment asks this Court to rule that the term "all interests of the debtor and the debtor's spouse in community property" only refers to a present spouse, and does not refer to the former spouse when, as in this case, the dissolution of the marriage occurred before the bankruptcy was filed, but the community property had not been divided before the bankruptcy was filed. Defendant Walpin's motion asks this Court to rule that (because the status of the marriage had already been dissolved prepetition), defendant was a "former spouse" on the date the bankruptcy was filed, therefore, Section 541(a)(2) does not apply. The result, Defendant Walpin argues, is that no property came into the estate pursuant to Section 541(a)(2), and Defendant Walpin's interests in community property are not property of the bankruptcy estate.
Defendant Walpin's motion is based almost exclusively on the published opinion of another bankruptcy judge in the district, Gill v. Warranty Escrow Co. (In re LaNess), 159 B.R. 916 (Bankr.C.D.Cal.1993), which adopted the restrictive reading of Section 541(a)(2) urged by Defendant Walpin. No one argues that LaNess, a bankruptcy court opinion, is binding on anyone. Defendant Walpin argues LaNess should be followed by this Court as being well reasoned.
Plaintiff Miller's summary judgment motion also asks this Court to rule that various businesses , real property (unspecified), and personal property (referred to only as scheduled in debtor's petition) were all community property as of the date Plaintiff Miller filed her bankruptcy and thus became property of the bankruptcy estate.
Plaintiff Miller's interpretation of Section 541(a)(2) is correct, for the reasons discussed infra this Opinion under ANALYSIS. The Court grants summary adjudication in favor of Plaintiff Miller and against Defendant Walpin on the issue of whether the phrase "all interests of the debtor and the debtor's spouse" in Section 541(a)(2) includes community property of the debtor and the debtor's former spouse on the fact pattern here at issue. The Court holds that where, as in the instant case, the dissolution of the marital status occurred before the filing of the bankruptcy case, but the division of the couple's community property had not yet been made at the time the bankruptcy case was filed, "debtor's spouse" in Section 541(a)(2) is broad enough to include "debtor's former spouse". Thus, to the extent that provisions (A) or (B) of Section 541(a)(2) are met in this case, all community property of both Plaintiff Miller and Defendant Walpin became property of the estate pursuant to Section 541(a)(2) when Plaintiff Miller filed her bankruptcy petition.3
Because Defendant Walpin's motion for summary judgment asks the Court to rule that none of Defendant's property became property of the estate pursuant to Section 541(a)(2), Defendant Walpin's motion is denied. The narrow interpretation of Section 541(a)(2) set forth by the LaNess opinion, and here urged by Defendant Walpin, has never been adopted in any published opinion by the United States Supreme Court, Court of Appeals for the Ninth Circuit, Ninth Circuit Bankruptcy Appellate Panel, or any other court in the United States, so far as the research of the parties and the Court revealed. For the reasons discussed infra this opinion, this Court does not find LaNess well reasoned, and declines to follow it.
The portion of Plaintiff Miller's motion seeking summary judgment that all the businesses, real property and personal property were community property as of the date of the petition is denied, with one exception. The exception is that the Court grants summary adjudication in favor of Plaintiff Miller and against defendant Walpin holding that the interests that Miller and Walpin had in the businesses Roloke Co., Pleasing Patients and Wishing You Well were community property on the date the bankruptcy case was filed, subject to Plaintiff Miller and Defendant Walpin's claims against the community for contributions made to these three businesses post-separation. These additional holdings also are discussed in detail infra under ANALYSIS.
When interpreting a statute, a court must first look to the language of the statute itself, and if the statute's language is clear, the language of the statute is also where the inquiry should end, for where, as here, the statute's language is plain, `the sole function of the courts is to enforce it according to its terms'. United States v. Ron Pair Enterprises, 489 U.S. 235, 241, 109 S.Ct. 1026, 1030, 103 L.Ed.2d 290 (1989). However, if the statutory language is unclear, then it is proper to look to the legislative history of the statute to help interpret the statute. Blum v. Stenson, 465 U.S. 886, 896, 104 S.Ct. 1541, 1547-48, 79 L.Ed.2d 891 (1984).
The LaNess decision, supra, which Defendant Walpin asks this Court to follow, purports to be a plain language analysis of Section 541(a)(2). The facts of LaNess are on point. In LaNess, as here, the spouses were in the process of divorcing at the time the bankruptcy was filed. The status of the marriage had been dissolved by the California Superior Court prepetition, so the couple was divorced. However, the California Superior Court had not divided the couple's community property as of the date one spouse filed bankruptcy.
Though I dislike having to disagree with an esteemed colleague, I cannot agree with LaNess because its plain language analysis is not carried out correctly. The reasoning of LaNess, in a nutshell, is that Congress did not intend to include "former spouse" when referring to "spouse" in Section 541(a)(2), because Section 541(a)(2) does not state "spouse or former spouse". LaNess observes that Congress knew how to say "former spouse" when it wanted to, because in 11 U.S.C. § 523(a)(5)4, Congress did use the words "former spouse". LaNess, 159 B.R. at 918. Based on this reference in Section 523(a)(5), the LaNess court concluded that because Congress said "spouse" instead of "spouse or former spouse" in Section 541(a)(2), Section 541(a)(2) does not apply where a spouse has become a former spouse before the petition is filed, even though the community property has not been divided before the petition is filed. LaNess held that Section 541(a)(2) does not apply to community property held by the debtor and a "former spouse", where marital status has...
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