In re Tsiolas
| Decision Date | 14 July 1999 |
| Docket Number | Bankruptcy No. 97-2510-3P7. Adversary No. 97-277. |
| Citation | 236 BR 85 |
| Parties | In re George TSIOLAS, Debtor. Aaron R. Cohen, Trustee, Plaintiff, v. State of New Jersey, Division of State Lottery; George Tsiolas; Bergen County, New Jersey, Office of Probation; and Rosanne Shapiro, Defendants. |
| Court | U.S. Bankruptcy Court — Middle District of Florida |
Gary L. Butler, Daytona Beach, FL, for plaintiff.
D. Lemar Smith, Jacksonville, FL, for defendant.
FINDINGS OF FACT AND CONCLUSIONS OF LAW
This adversary proceeding was brought before the Court by the complaint of Aaron R. Cohen ("Plaintiff"), Chapter 7 trustee of the bankruptcy estate of George Tsiolas ("Debtor"). (Adv.Doc. 1.) Plaintiff seeks a judgment declaring that the right to receive all lottery proceeds due Debtor after the petition date are property of the estate, and an order directing that these proceeds be turned over to Plaintiff. A Default and Judgment was entered in this adversary proceeding against Debtor; State of New Jersey, Division of State Lottery; and the Bergen County, New Jersey, Office of Probation. (Adv.Docs. 31-33.) The only remaining claim to the proceeds is that of Debtor's former wife, Rosanne Shapiro ("Defendant"). Defendant filed a Motion for Summary Judgment on May 4, 1999. (Adv.Doc. 42.) Subsequently, Plaintiff filed a Motion for Summary Judgment and Memorandum in Support of Plaintiff's Motion for Summary Judgment and in Opposition to Defendant's Motion for Summary Judgment. (Adv.Docs. 43, 44.) At trial on May 11, 1999, the parties agreed to submit stipulated facts to allow the Court to dispose of this litigation by Summary Judgment. (Adv.Doc. 45.) At the Court's direction, the parties submitted post-trial briefs. (Adv.Docs. 47-49.) Upon stipulation of facts, argument and briefs, the Court makes the following Findings of Fact and Conclusions of Law:
FINDINGS OF FACT1
1. Debtor and Defendant had one child during their marriage, Michael Alexander Tsiolas, born on March 7, 1987.
2. On or about August 17, 1987, Debtor won the New Jersey Lottery in the amount of $747,771.00, entitling him to twenty annual installments of $37,500.00 commencing August 19, 1987.2
3. On or about October 26, 1989, Debtor was divorced from Defendant pursuant to a Consent Order entered in the Superior Court of New Jersey, Chancery Division, Bergen County ("the Consent Order"). (Adv. Doc. 49, Pl.'s App. at tab 2.)
4. Pursuant to the Consent Order, Debtor was to pay Defendant $150.00 per week child support on behalf of Michael Alexander Tsiolas.
5. On April 7, 1997, Woodbridge Financial Corporation filed a petition in bankruptcy against Debtor on an involuntary basis, alleging a total indebtedness of $46,474.87. (Doc. 1.)
6. Debtor was delinquent on his child support payments as of the date the petition in bankruptcy was filed.
7. On August 18, 1997, Plaintiff commenced the instant adversary proceeding to compel turnover of the lottery payments due Debtor beginning August 19, 1997, and running through August 19, 2007, alleging them to be property of the estate. Defendant concedes that the lottery winnings are property of the estate.
8. It is undisputed that Defendant holds an 11 U.S.C. § 507(a)(7) priority claim regarding all delinquent child support payments due and owing as of the date the petition was filed.
9. However, Debtor never granted Defendant a security interest in the lottery proceeds. Further, Defendant never received a security interest or other assignment of the lottery proceeds as approved by a court of competent jurisdiction.
Plaintiff advances three arguments in support of his Motion for Summary Judgment. Plaintiff initially argues that Defendant does not have a perfected lien on the lottery proceeds because Defendant was not granted a valid security interest pursuant to the requirements of New Jersey Law.3 Alternatively, Plaintiff asserts that Defendant is not entitled to an equitable lien and, even if she is, Plaintiff can avoid it pursuant to 11 U.S.C. § 544(a)(1). Defendant contends that she has an equitable lien on the lottery proceeds that secures her claim for future child support payments, and therefore, those funds should be disbursed in accordance with her claim.
Federal Rule of Civil Procedure 56, made applicable to adversary proceedings by Federal Rule of Bankruptcy Procedure 7056, provides for the granting of summary judgment "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." FED.R.CIV.P. 56(c); FED.R.BANKR.P. 7056.
The burden of proof with respect to a motion for summary judgment rests with the moving party. Clark v. Coats & Clark, Inc., 929 F.2d 604, 608 (11th Cir.1991); Celotex Corp. v. Catrett, 477 U.S. 317, 322-23, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). Once the moving party has met its burden, the non-moving party must then establish an essential element of its case for which it bears the burden of proof. Id. at 322, 106 S.Ct. 2548. Absent such a showing, there is no genuine issue of material fact. Id. at 322-23, 106 S.Ct. 2548. However, the requirement for a genuine issue of material fact is not satisfied by the simple existence of a dispute between the parties. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). Anderson, 477 U.S. at 248, 106 S.Ct. 2505.
When a motion for summary judgment is at issue, the Court is required to view the facts in the light most favorable to the non-moving party. Macks v. United States (In re Macks), 167 B.R. 254, 256 (Bankr.M.D.Fla.1994) (citing Adickes v. S.H. Kress & Co., 398 U.S. 144, 157, 90 S.Ct. 1598, 26 L.Ed.2d 142 (1970); United States v. Diebold, Inc., 369 U.S. 654, 82 S.Ct. 993, 8 L.Ed.2d 176 (1962)). If the Court then determines that reasonable minds can come to but one conclusion, and that conclusion is in favor of the moving party, the Court must enter the judgment. Anderson, 477 U.S. at 250, 106 S.Ct. 2505. In other words, the motion must be granted if the Court is satisfied that no real factual controversy is present so that the remedy can serve "its salutary purpose in avoiding a useless, expensive and time consuming trial where there is no genuine, material issue to be tried." Lyons v. Board of Education, 523 F.2d 340, 344 (8th Cir.1975). However, if reasonable minds could reach different conclusions, the Court must decline to enter the judgment. Anderson, 477 U.S. at 250-51, 106 S.Ct. 2505.
When determining whether an equitable lien should be imposed, the Court must look to applicable state law. See First Union National Bank of Florida v. Diamond (In re Diamond), 196 B.R. 635 (Bankr.S.D.Fla.1996) (citing Bob Cooper, Inc. v. City of Venice (Matter of Bob Cooper, Inc.), 65 B.R. 609, 611 (Bankr. M.D.Fla.1986)). The prevailing view in Florida is that equitable liens may be founded upon two bases: (1) a written contract that indicates an intention to charge a particular property with a debt or obligation; or (2) a declaration by a court out of general considerations of right or justice as applied to the particular circumstances of a case. See Jones v. Carpenter, 90 Fla. 407, 413-14, 106 So. 127 (1925); Ross v. Gerung, 69 So.2d 650, 652 (Fla. 1954); Bob Cooper, 60 B.R. at 583.
In the instant proceeding, Defendant alleges that the Consent Order demonstrates a contractual intent to secure the child support obligation with a lien against the lottery proceeds. The Consent Order specifically addresses the lottery winnings and awards Defendant half of the proceeds as part of a division of marital property.4 Although the Consent Order requires Debtor to pay child support payments to Defendant, it does not expressly grant a lien or security interest to secure those payments. A thorough examination of the Consent Order reveals that the document was not intended to grant Defendant a lien on the lottery proceeds to secure her right to future child support payments.
Accordingly, the Court must now examine the second ground that supports granting an equitable lien in Florida. The Plaintiff points out that the bankruptcy court in Diamond stated that "the imposition of an equitable lien based upon general considerations of right or justice requires some equitable basis supporting a court's equitable jurisdiction such as fraud, mutual mistake, estoppel or reprehensible conduct." 196 B.R. at 639 (citations omitted). The Court notes that the court in Diamond was dealing with the imposition of an equitable lien on homestead real property, while in the present case, the Court is faced with the issue of whether an equitable lien should be imposed upon a specified source of money. 196 B.R. at 639. See Fidelity Serv. Co. v. Grocki (In re Grocki), 147 B.R. 274, 278 (Bankr. S.D.Fla.1992) (); Meltzer v. Mantovani (In re Meltzer), 171 B.R. 166, 168-69 (Bankr.S.D.Fla.1994) (same); see also Rinker Materials Corp. v. Palmer First Nat'l Bank & Trust Co., 361 So.2d 156 (Fla.1978) (); but see North Am. Airlines, Inc. v. McCracken (Matter of Jet Executive Int'l, Inc.), 27 B.R. 61, 63 (Bankr.S.D.Fla.1983) ().
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