In re Verner

• Decision Date: 06 January 2005
• Docket Number: Bankruptcy No. 02-28206-MBM.,Adversary No. 04-2460-MBM.
• Citation: 318 B.R. 778
• Parties: In re Thomas James VERNER, Debtor. Thomas James Verner, Plaintiff, v. Beverly Verner, Defendant.
• Court: U.S. Bankruptcy Court — Western District of Pennsylvania

318 B.R. 778

In re Thomas James VERNER, Debtor Thomas James Verner, Plaintiff, v. Beverly Verner, Defendant.

Bankruptcy No. 02-28206-MBM.

Adversary No. 04-2460-MBM.

United States Bankruptcy Court, W.D. Pennsylvania.

January 6, 2005.

COPYRIGHT MATERIAL OMITTED

Mary Bower Sheats, Pittsburgh, PA, for Thomas James Verner.

Candice L. Komar, Brian C. Vertz, Pollock, Begg, Komar, Glasser LLC, Pittsburgh, PA, for Beverly Verner.

MEMORANDUM OPINION

M. BRUCE MCCULLOUGH, Bankruptcy Judge.

Thomas James Verner, the above-captioned debtor and instant plaintiff (hereafter "the Debtor"), brings the instant adversary action against Beverly Verner, the instant defendant and the Debtor's ex-spouse (hereafter "Mrs. Verner"), to (a) enforce the discharge injunction imposed by virtue of the entry of his Chapter 7 discharge and pursuant to 11 U.S.C. § 524(a)(2), which discharge injunction the Debtor contends has been, and continues to be, violated by Mrs. Verner's continued pursuit, subsequent to the entry of the Debtor's Chapter 7 discharge, of her right that accrued pre-petition to equitable distribution against the Debtor in the Pennsylvania Court of Common Pleas for Washington County (hereafter "the State Court"), and (b) obtain a declaration to the effect that (i) such equitable distribution right constitutes a pre-petition claim that has been discharged, and (ii) Mrs. Verner is henceforth enjoined from pursuing such equitable distribution right.

Mrs. Verner defends by raising several arguments, the most compelling of which may be restated as follows, to wit that (a) her right to equitable distribution, which right she represents to this Court she will henceforth pursue only as the same pertains to a 401(k) retirement plan and an ALCOA pension that are presently titled solely in the name of the Debtor (hereafter "the 401(k) Plan," "the ALCOA Plan," and, when referred to collectively, "the Pension Plans"), does not constitute a pre-petition claim against the Debtor, (b) such equitable distribution right consequently has not been discharged by way of the entry of the Debtor's Chapter 7 discharge, and (c) she consequently has not violated, and will not violate in the future, the aforesaid discharge injunction by virtue of her continued pursuit of such equitable distribution right.

For the reasons set forth below, the Court holds that

(a) Mrs. Verner's equitable distribution right, to the extent that she confines her pursuit of the same to a request for an "in kind" division or assignment of the Pension Plans, constitutes a property interest in the Pension Plans even if the same might also constitute a discharged pre-petition claim against the Debtor,

(b) such property interest in the Pension Plans, because it is a property interest, is not susceptible to discharge in bankruptcy but rather may only be avoided via bankruptcy,

(c) such property interest in the Pension Plans has neither thus far been, nor can it any longer be, avoided, which means that such property interest shall survive the Debtor's Chapter 7 discharge,

(d) Mrs. Verner consequently has not violated, and will not violate in the future, the aforesaid discharge injunction by virtue of her continued pursuit of her equitable distribution right to such "in kind" relief, and

(e) Mrs. Verner's equitable distribution right with respect to the Pension Plans, to the extent that the same could ultimately result in the State Court's establishment of some sort of prospective equalization payment obligation by the Debtor to Mrs. Verner in lieu of, and so as to compensate Mrs. Verner for what she would otherwise obtain via, an "in kind" division or assignment of the Pension Plans, constitutes nothing but a pre-petition claim against the Debtor that has been discharged in bankruptcy, which discharged claim, of course, Mrs. Verner thus may no longer pursue without also violating the § 524(a)(2) discharge injunction.

STATEMENT OF FACTS

Mrs. Verner commenced an action for divorce against the Debtor on August 29, 2001, in the State Court, wherein Mrs. Verner also requested equitable distribution of the parties' marital property. Included among such marital property are the Pension Plans, which pensions the parties stipulate are "ERISA-qualified plans" that are excluded from the Debtor's bankruptcy estate pursuant to 11 U.S.C. § 541(c)(2).

The Debtor commenced the instant bankruptcy case on August 1, 2002, or nearly one year subsequent to the date upon which Mrs. Verner requested equitable distribution in the State Court. The State Court neither resolved prior to August 1, 2002, nor has yet resolved Mrs. Verner's request for equitable distribution — in other words, equitable distribution of the parties' marital property remains pending as of the present time.

In the Debtor's Bankruptcy Schedule C, the Debtor indicated that the Pension Plans were excluded from his bankruptcy estate pursuant to § 541(c)(2). However, the Debtor also indicated in his Schedule C that he was alternatively exempting the ALCOA Plan pursuant to 11 U.S.C. § 522(d)(10)(E); the Debtor failed to indicate that he was taking an alternative exemption with respect to the 401(k) Plan. The Court can only presume that the Debtor's purpose in making the aforesaid alternative exemption election with respect to the ALCOA Plan was so as to guard against the possibility that such pension might not be excluded from his bankruptcy estate pursuant to § 541(c)(2). The Debtor included in his Schedule C description of the 401(k) Plan language to the effect that such pension is "subject to equitable distribution claims of his estranged wife, Beverly Verner, in pending divorce proceeding;" such language is conspicuously absent with respect to the Debtor's Schedule C description of the ALCOA Plan. The Debtor, in his Schedule C, valued (a) the 401(k) Plan at $154,969.92, and (b) the ALCOA Plan at a monthly payout of $3,200.37.

Mrs. Verner had notice of, and attended, the Debtor's § 341 meeting of creditors, which meeting was held on October 28, 2002. The bar date for filing a nondischargeability action against the Debtor under 11 U.S.C. § 523(a)(15) was December 27, 2002; Mrs. Verner failed to file such an action by such date and does not presently seek to do so out of time. The Debtor obtained his Chapter 7 discharge on January 17, 2003, and the instant bankruptcy case was closed shortly thereafter.

At a February 2, 2004 hearing in State Court to resolve various issues regarding the parties' divorce and alimony for Mrs. Verner, the Debtor took the position that Mrs. Verner's right for equitable distribution could no longer be pursued, indeed had been effectively discharged, by virtue of the January 17, 2003 entry of the Debtor's Chapter 7 discharge. The February 2, 2004 hearing was ultimately adjourned because Mrs. Verner disputed, and the State Court abstained from resolving whether she was now barred by the Debtor's Chapter 7 discharge from continuing to seek equitable distribution. The Debtor subsequently moved to reopen the instant bankruptcy case so that the instant adversary action could be brought, which motion was granted by the Court.

On September 21, 2004, the Court entered a consent order which provides that, in lieu of a trial, the parties will stipulate to the pertinent facts and the issues to be decided by the Court within the context of the instant adversary proceeding. Having now received such stipulation from the parties, the Court proceeds to resolve the matter as set forth below.

DISCUSSION

The Debtor argues that Mrs. Verner's equitable distribution right constitutes a pre-petition claim that, because it has not been, and now can no longer be, declared nondischargeable pursuant to § 523(a)(15), was discharged upon entry of the Debtor's Chapter 7 discharge, thereby precluding Mrs. Verner from continuing to seek equitable distribution, even with respect to the Pension Plans which are excluded from the Debtor's bankruptcy estate pursuant to § 541(c)(2). A necessary predicate of the Debtor's position is that, because such equitable distribution right constitutes a discharged claim, the same cannot also constitute an unavoided and unavoidable property interest that would survive entry of the Debtor's Chapter 7 discharge, even with respect to the Pension Plans. As support for the Debtor's position, the Debtor relies heavily, indeed relies entirely, upon the decision in In re Schorr, 299 B.R. 97 (Bankr.W.D.Pa.2003), which reliance is not at all surprising given that the Debtor's counsel (a) also represented the debtor in Schorr, and (b) successfully obtained for such debtor in Schorr a decision therein to the effect that such debtor's ex-wife was precluded from pursuing her right to equitable distribution, which right had accrued pre-petition, on the ground that the same constituted a pre-petition claim that had been discharged by virtue of the entry of such debtor's Chapter 7 discharge, see Schorr, 299 B.R. at 98 & 107.

Mrs. Verner counters with multiple arguments, the most compelling of which is that her equitable distribution right, confined as it now is solely to the Pension Plans, has not been discharged by virtue of the entry of the Debtor's Chapter 7 discharge because (a) only pre-petition claims can be so discharged, and (b) such equitable distribution right constitutes neither a pre-petition claim nor, for that matter, a claim at all. Because Mrs. Verner argues that her equitable distribution right with respect to the Pension Plans does not constitute a claim, she necessarily argues that the same constitutes some sort of a property interest, which property interest, since she also argues that it survives the Debtor's bankruptcy discharge, she must also argue has neither been, nor may be, avoided in bankruptcy. As support for such position, Mrs. Verner relies heavily upon the decision in In re Scholl, 234 B.R. 636 (Bankr.E.D.Pa.1999), wherein it was held that (a) a right to equitable...