In re Virgili

• Court: U.S. Bankruptcy Court — District of Connecticut
• Writing for the Court: Lorraine Murphy Weil
• Decision Date: 01 March 2012
• Docket Number: CASE NO. 09-31897 (LMW),ECF NO. 80
• Citation: In re Virgili, CASE NO. 09-31897 (LMW), ECF NO. 80 (Bankr. Conn. Mar 01, 2012)
• Parties: In re: ROBERT VIRGILI, DEBTOR.

IN RE: ROBERT VIRGILI, DEBTOR.

CASE NO. 09-31897 (LMW)

ECF NO. 80

UNITED STATES BANKRUPTCY COURT DISTRICT OF CONNECTICUT

Dated: March 1, 2012

Not for Publication

CHAPTER 7

APPEARANCES

Zenas Zelotes, Eq.

P.O. Box 1052

Norwich, CT 06360

Jefferson Hanna, III, Esq.

Attorney for Objector Kimberly Ann

Virgili

Attorney for the Debtor

MEMORANDUM AND ORDER RE: OBJECTION TO EXEMPTION

Lorraine Murphy Weil, Chief United States Bankruptcy Judge

The matter before the court is Kimberly Virgili's (the "Objector") objection (ECF No. 80, the "Objection")¹ to the above-referenced debtor's (the "Debtor") claim of exemption pursuant to 11 U.S.C. § 522(d)(10)(D) (the "Exemption") with respect to a certain alleged "alimony" debt owing from the Objector to the Debtor. This court has jurisdiction over this contested matter as a core proceeding pursuant to 28 U.S.C. §§ 157 and 1334(b) and that certain Order dated September 21, 1984 of this District (Daly, C.J.).² This memorandum represents the findings of fact and conclusions of law mandated by Rule 52 of the Federal Rules of Civil Procedure (made applicable here by Rules 9014 and 7052 of the Federal Rules of Bankruptcy Procedure). For the reasons discussed below, the Objection is sustained.

I. BACKGROUND

A. In General

This chapter 7 case was commenced by a voluntary petition filed on July 13, 2009. (See ECF No. 1.) Filed with the petition were schedules and a statement of financial affairs (included in ECF No. 1, collectively, the "Original Schedules"). Schedule F (Creditors Holding Unsecured Nonpriority Claims) lists the Objector as a creditor and "co-maker on various loans." (See ECF No. 1.) Schedule H (Codebtors) lists the Objector as a codebtor with respect to three debts. (See id.) Schedule B (Personal Property) lists (among other things) the following property: "Debtor is owed back alimony and child support from . . . [the Objector]," (id.). Schedule C (Property Claimed as Exempt) elects the "federal list" of exemptions pursuant to 11 U.S.C. §§ 522(b)(2) and 522(d), but does not claim the Exemption. (See id.)

On September 11, 2009, the Debtor was examined under oath by the Chapter 7 Trustee at the meeting of creditors (the "Section 341 Meeting") convened in this case pursuant to 11 U.S.C. § 341.³ It appears that the Original Schedules were not completely candid. (Cf., e.g., ECF No. 107 at 32:23-33:1, at 36:17-25, at 38:6-25, at 44:13-19 (testimony of the Debtor).) The Original Schedules were amended from time to time. (See ECF Nos. 19, 20, 78.) On December 18, 2009, the Debtoramended his original Schedule C again to elect the "federal list" and to claim (for the first time) the Exemption as follows: "Debtor is owed back alimony and child support from . . . [the Objector] to date of filing of bankruptcy petition (7/13/09)" pursuant to 11 U.S.C. § 522(d)(10)(D). (See ECF No. 78.)

The Objector filed the Objection on December 18, 2009. (See ECF No. 80.) In material part the Objection asserted that "the [D]ebtor's contractual right to receive alimony (in the amount of $1,442.23 per week [the "Weekly Payment"] for eight years) is a disguised property settlement and that the aforementioned sum exceeds the amount 'reasonably necessary for the support of the [D]ebtor and any dependent of the [D]ebtor,"' (ECF No. 80 ¶ 13). No other objections to the Exemption were filed.⁴

On September 11, 2009, the chapter 7 trustee filed a notice of assets available for distribution and a bar date for proofs of claim. (See ECF No. 25.) The Debtor filed a waiver of his chapter 7 discharge on October 19, 2009. (See ECF No. 39.) On November 19, 2009, an order issued approving the waiver and directing that no discharge enter in this chapter 7 case. (See ECF No. 61.)

B. The Trial and the Continued Trial

The Objection came on for trial (the "Trial")⁵ on February 22, 2010. The Debtor appeared at the Trial (both personally and through counsel). The Objector appeared at the Trial through counsel, but did not appear personally because she was incarcerated at "York Correctional Facility in Niantic" for contempt for having not paid the Weekly Payments. (See id. at 42:8-15 (testimonyof the Debtor).)⁶ The Debtor was called as a witness for the Objector at the Trial, was cross-examined by his own counsel and the Objector introduced documentary evidence into the record. (See ECF No. 107.) The Objector did not seek her own release in order to enable herself to testify at the Trial pursuant to a writ of habeas corpus ad testificandum, nor did she seek a continuance of the Trial pending her release. (See Chapter 7 case docket; ECF No. 107.) The matter was taken under advisement at the conclusion of the Trial (subject to briefing). That briefing was completed. (See ECF Nos. 110, 112, 113.)

On September 8, 2010, the court issued that certain Order Scheduling Status Conference and Requiring Attendance of Counsel to consider (among other things) "whether the record of the . . . [the Trial] should be reopened to permit the Objector to testify (if she desires) and to permit the Debtor to testify to rebut her testimony (if he desires) . . . ," (ECF No. 128 at 1). That status conference was convened on September 29, 2010 at which time the court exercised its discretion to reopen the record of the Trial (over the objection of the Debtor's counsel) for the foregoing purpose (the Objector no longer being incarcerated), and scheduled a continued trial (the "Continued Trial") for October 14, 2010. (See Oral Record of 9/29/2010 status conference at 11:49:52 et seq. (the court was "not comfortable" with the record as it stood).)

The Continued Trial was convened as scheduled.⁷ The Objector appeared as her own witness, was cross-examined by counsel for the Debtor and introduced documentary (and recorded) evidence into the record. The Debtor appeared for himself as a rebuttal witness and was cross-examined by counsel for the Objector.⁸ At the conclusion of the Continued Trial, the court took the matter under advisement (subject to briefing). That briefing is complete (see ECF Nos. 142, 145, 149), and this matter is ripe for decision.

II. FACTS

This matter arises in substantial part from a certain Judgment of the Connecticut Superior Court dated November 15, 2007 (a copy of which is included in Exh. 1, the "Judgment of Dissolution") issued in that certain action captioned Virgili v. Virgili, FA 06 4005-775, then pending in the Judicial District of Middlesex at Middletown (the "Dissolution Proceedings"). The Judgment of Dissolution dissolved the marriage of the parties. (See id.) Attached to and incorporated by reference into the Judgment of Dissolution (see Judgment of Dissolution at 2) is a certain Separation Agreement (the "Separation Agreement") between the parties dated November 15, 2007 and approved by the Superior Court as "fair and equitable." (See Judgment of Dissolution at 2.) For analytical purposes, the facts set forth below are organized as follows: relevant pre-marital background of the parties; significant events of the marriage/business relations of the parties prior to the Dissolution Proceedings; the Dissolution Proceedings; the Separation Agreement; and relevant post-Dissolution events.

A. Relevant Pre-Marital Background of the Parties

The Objector was born on July 15, 1960. (See ECF No. 107 at 10:23 (testimony of the Debtor).) The Objector has a bachelor's degree in museum science from Virginia Commonwealth University, and a master's degree in business from the University of Rochester. After school, the Objector worked in museums for several years, rising to the level of assistant director at a children's museum. Thereafter, the Objector left museum work and took a job with Bronson & Hutensky in Connecticut selling trade show booths and sponsorships for the Celtics basketball team. (See ECF No. 136 at 9:11-10:15) (testimony of the Objector).)⁹

The Debtor was born on November 4, 1948. (See ECF No. 107 at 10:24 (testimony of the Debtor).)¹⁰ At the time the Debtor and the Objector first met, the Debtor was a sales agent for a company called Sharon Sales out of Massachusetts selling lawn and garden supplies to the trade. (See ECF No. 136 at 10:20-23 (testimony of the Objector).) As of that time, the Debtor had been in the lawn and garden business for about three or four years. (See id. at 10:24-11:4 (testimony of the Objector).)

B. Significant Events of the Marriage/Business Relations of the Parties Prior to the Dissolution Proceedings

The parties married on August 27, 1988. (See Exh. 1 at 1.) The marriage produced one child who was a minor as of the entry of the Judgment of Dissolution, a daughter (the "Daughter") born on May 5, 1995. (See Exh. 1 at 1.)

The Debtor stayed with Sharon Sales for a total of six or eight years. "[T]hat company . . . [was] put up for sale, so the gentleman that worked with . . . [the Debtor] that . . . [he] was the closest to in the company . . . [and the Debtor] formed a company with . . . [their] wives called Four Seasons Marketing." (ECF No. 107 at 17:14-19 (testimony of the Debtor).) That company was very successful, had five sales people and ten office staff, and had about $23,000,000 or $24,000,000 ingross sales per year. (See id. at 17:19-23 (testimony of the Debtor).) The Objector wanted to downsize and did not want to take on so much responsibility for doing business with independent garden centers and having outside sales people, so the Debtor and the Objector "broke up with . . . [their] partners in Massachusetts at the time and started Target Marketing [Incorporated (formerly known as Target Marketing, Inc., collectively, "Target Marketing")]." (See id. at 17:24-18:5 (testimony of the Debtor).)¹¹

Target Marketing . . . held its organizational meeting May 24, 1999.[¹² ] It filed as a Connecticut Corporation with 5,000 shares issued and outstanding May 25, 1999. [The Debtor] . . . was named President and Director. [The Objector] . . . was named as Secretary and Director.[¹³ ] Each

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