In re Stewart

• Decision Date: 31 October 1996
• Docket Number: Bankruptcy No. 96-01624-W.
• Citation: 201 BR 996
• Parties: In re Jeffrey D. STEWART, Debtor.
• Court: U.S. Bankruptcy Court — Northern District of Oklahoma

201 B.R. 996 (1996)

In re Jeffrey D. STEWART, Debtor.

Bankruptcy No. 96-01624-W.

United States Bankruptcy Court, N.D. Oklahoma.

October 31, 1996.

Richard A. Shallcross, Tulsa, OK, for Debtor.

Katherine Vance, Assistant U.S. Trustee, Tulsa, OK.

MEMORANDUM OPINION AND ORDER ON UNITED STATES TRUSTEE'S "MOTION TO DISMISS . . ." RE APPLICATION OF 11 U.S.C. § 707(b)

MICKEY DAN WILSON, Chief Judge.

This contested matter under 11 U.S.C. § 707(b) was tried to the Court and taken under advisement. Upon consideration of evidence received, and of the record in this case and in the related Case No. 95-01081-W In re Patricia Ann Hill whereof judicial notice is taken, this Court, pursuant to F.R.B.P. 9014 and 7052, now finds, concludes, and orders as follows. Procedural history of the matter is included among "Findings of Fact"

FINDINGS OF FACT

Jeffrey D. Stewart ("Stewart"; "debtor") and Barbara Teichner ("Barbara") were high school classmates. In 1976, they both entered Williams College in Massachusetts. A year and a half later, on or about March 21, 1978, they were married. They moved to San Francisco, California; then to Long Island, New York; then to Lake Placid, New York. They had four children, born in 1980, 1981, 1983 and 1987.

During these times, Stewart worked at various jobs — as a cook or baker, driving delivery trucks, teaching ice skating. His family's standard of living was minimal. But Stewart meant to become a doctor. During their short stay in Long Island, he resumed classes at Stonybrook College; and in Lake Placid, he took correspondence courses. Barbara's parents ("Mr. and Mrs. Teichner") helped by lending them money, which was used partly for living expenses and partly to pay for Stewart's schooling. Stewart also borrowed from commercial lenders under government-sponsored educational loan programs. Eventually he obtained a Bachelor of Science degree.

In 1988, Stewart (who was then about 30 years old, with a wife and 4 children) entered the University of Oklahoma medical school at Norman, Oklahoma. Here he met Patricia Hill ("Patricia"). Domestic difficulties ensued. Stewart transferred to the University of Oklahoma medical school at Tulsa, Oklahoma; and he and his family moved to Tulsa.

Stewart and Barbara separated sometime between April and July 1990. Stewart promptly commenced a "romantic liaison" and "conjugal relationship" with Patricia, debtor's ex. 5(L) p. 2, (T) p. 3 ¶ 12.

On July 14, 1990, Stewart signed promissory notes to Mr. Teichner in the amount of $150,000 and to Mrs. Teichner in the amount of $50,000. These notes represented monies which Mr. and Mrs. Teichner had advanced to Stewart and his family from 1978 to 1990. Mr. Teichner's note was "payable upon demand upon the termination of . . . Stewart's medical training," debtor's ex. 4(C) ex. A.

On September 20, 1990, Barbara filed her petition for divorce in the District Court of Tulsa County, Oklahoma ("State court"), commencing Case No. FD-TU-90-006511-20 ("the divorce case"). The petition alleged "incompatibility," debtor's ex. 5(X) p. 1 ¶ 5; and sought approval of a "Marital Settlement Agreement," id. ¶ 6. The Marital Settlement Agreement ("the marital agreement") was dated September 20, 1990. It recited that Stewart, "in order to pursue his medical education without personal and family interruption . . . is desirous of a legal separation or divorce and that Barbara agrees not to resist Stewart's desires . . .," debtor's ex. 5(M) ex. A pp. 1-2 ¶¶ I(4)-(5). It assigned to Barbara "the sole personal responsibility of raising the four young minor children of the marriage," id. p. 2 ¶ I(1). It required Stewart to pay "support alimony" of $500 per month until "completion of an accredited residency or . . . becoming a licensed physician and training completed," id. p. 4 ¶ IV(1)(c), then $25,000 per year up to a total of $2 million, provided that, if Barbara remarried, the $2 million total would be reduced to $250,000. It required Stewart to "pay child support from his student loans in the amount of $500 per month per child for a total of $2,000" per month, id. p. 2 ¶ II(2), as well as his children's health insurance and medical expenses; and to pay "tuition, books, room and board" for his children's full-time college and post-graduate education, id. p. 3 ¶ II(5). It further provided that Stewart,

. . . upon graduation from medical school . . . will obtain a residency which enables him to earn an income for the purpose of providing said child support,

id. pp. 2-3 ¶ II(4). The divorce decree was entered without contest on October 22, 1990. It approved the marital agreement, which was "specifically not merged into the Decree," debtor's ex. 5(V) p. 2.

Stewart graduated from the University of Oklahoma medical school in Tulsa in Spring 1992, and commenced his internship and residency at the University of Oklahoma College of Medicine in Tulsa. At the same time, he ceased making support payments to Barbara. On June 30, 1992, Stewart moved to modify his child support payments, alleging

that he has become a resident physician employed by the Oklahoma University Medical College; that his income from such employment is substantially less than the annualized amount of student loan proceeds that he had borrowed in prior years to meet his child support obligations; and that he is without the ability to borrow any further sums of money to meet the Court ordered child support obligation . . . ,

debtor's ex. 5(U) p. 2 ¶ 4. Two weeks later, on July 15, 1992, Stewart moved to vacate the divorce decree, alleging that the decree suffered from procedural "irregularities", debtor's ex. 5(T) p. 2 ¶¶ 8, 9; that Stewart was forced into the marital agreement by Barbara's threat "to make public his extra marital relationship", id. p. 3 ¶ 13; and that he was overreached "at a time when he was without counsel," id. p. 4 ¶ 18. Stewart was now represented by Richard A. Shallcross ("Shallcross"). Barbara agreed to reduce Stewart's child support payment to $146.50 per child or a total of $586.82 per month, debtor's ex. 5(Q). She did not agree to vacate the divorce decree or otherwise modify the marital agreement.

In November 1992, Barbara met Larry Rose. On May 29, 1993, they were married.

On June 29, 1993, Mr. Teichner sued Stewart in State court on his $150,000 note, commencing Case No. CJ-TU-93-002931-1 ("the Teichner case"). Stewart made third-party complaint against Barbara, who answered and moved for summary judgment. Her motion was eventually denied, and discovery proceeded.

In 1994, Patricia graduated from the University of Oklahoma medical school in Tulsa, and around September 1994 entered her residency at the Oklahoma University College of Medicine. At about the same time, she and Stewart moved in together at 1531 S. Columbia Avenue, Tulsa, OK 74104, see statements of financial affairs ¶ 15 in Case Nos. 95-01081-W, 96-01624-W.

On April 17, 1995, Patricia filed her voluntary petition for relief under 11 U.S.C. Chapter 7 in this Court, commencing Case No. 95-01081-W. She was represented in bankruptcy by Stewart's attorney Shallcross. With her petition, she filed statements and schedules as required by 11 U.S.C. § 521, F.R.B.P. 1007. Therein she described herself as "single," giving no hint that Stewart was living with her at the time. She reported take-home pay of $1,680 per month, expenses of $2,013 per month, assets worth $10,045 (most of which were claimed exempt), secured debt totalling $5,620, and unsecured debt totalling $153,895.47 (most of it student loans). Her Trustee reported no assets for distribution, see docket # 10. On August 16, 1995, her discharge was entered, see docket # 12.

Four and a half months later, on December 30, 1995, Patricia and Stewart were married.

In the Teichner case in State court, Teichner moved for summary judgment. On March 27, 1996, his motion was granted. On April 10, 1996, the State court entered judgment for Teichner on his complaint against Stewart, and also entered judgment for Barbara on Stewart's third-party complaint against her.

In the divorce case in State court, Stewart's motion to vacate the divorce decree was extensively pre-tried, debtor's ex. 5(K)-(P), (R)-(S), tried to the court on November 28, 1995, and continued to January 8, 1996. Sometime between those dates, Stewart bought himself a 1990 Range Rover, a 4-wheel-drive sport utility vehicle worth almost $40,000 new, for $26,466 payable at $630.21 per month. On January 8, 1996, trial resumed and was concluded; and Stewart's motion to vacate the divorce decree was denied. On January 19, 1996, the State court gave Barbara judgment against Stewart for $26,077.95 for breach of the marital agreement. Of this amount, about $21,500 was for past due spousal support, the rest for past due child support (unpaid medical bills).

Stewart moved for new trial. On April 16, 1996, the State court denied Stewart's motion for new trial, commenting as follows:

. . . Stewart\'s claim of duress makes no sense. Even by his own testimony the feared revelation had already occurred when he began to negotiate the contract which ultimately became the Marital Settlement Agreement. Stewart has the fire hydrant chasing the dogs.

. . . Stewart, a highly intelligent man in his last years of medical school, wanted a divorce and wanted it badly. He was intent on leaving the marriage and the problems of raising the four children born of it. Barbara was in ill health, virtually bedridden and saddled with children reacting adversely to the separation and impending divorce. Stewart contacted lawyers and was advised that he needed legal assistance.

Whatever compelled Stewart to make the choices he did, it was not duress or undue influence exerted by Barbara. The pressure on him was internal and of his own making. He wanted a divorce "bad" and he got one — a bad divorce. He made a bad bargain but with eyes open, fully informed and under no threat other than dealing with his

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