In re Wilson

• Court: U.S. Bankruptcy Court — Eastern District of Pennsylvania
• Citation: In re Wilson, 85 B.R. 722 (Bankr. E.D. Pa. 1988)
• Decision Date: 27 April 1988
• Docket Number: Bankruptcy No. 87-04007F.
• Parties: In re George WILSON, Debtor.

85 B.R. 722 (1988)

In re George WILSON, Debtor.

Bankruptcy No. 87-04007F.

United States Bankruptcy Court, E.D. Pennsylvania.

April 27, 1988.

Geri H. Gallagher, Norristown, Pa., for debtor.

David R. Rosenfeld, Abrahams & Loewenstein, Philadelphia, Pa., for movant, Mary Lou Wilson.

Edward Sparkman, Philadelphia, Pa., Standing Chapter 13 trustee.

MEMORANDUM OPINION

BRUCE FOX, Bankruptcy Judge:

Mary Lou Wilson, estranged wife of the debtor George Wilson, has filed a motion for relief from the automatic stay or, in the alternative, for discretionary abstention. The debtor vigorously opposes these requests as does the standing chapter 13 trustee.¹ Resolution of this contested matter requires a determination whether, if ever, a bankruptcy court should hear a dispute concerning equitable distribution of marital property. Counsel for both parties have thoroughly briefed this issue and have stipulated to the relevant facts which may be summarized.²

I.

On August 7, 1987, the debtor filed a voluntary petition in bankruptcy under chapter 13. Among his assets, the debtor listed his interest, as tenant by the entireties, in the real properties located at 1304 and 1308 DeKalb Pike, Lower Gwynedd, Pennsylvania. Excluding his wife, who is the movant herein, the debtor listed tax priority debts of approximately $20,000.00, a mortgage on the real estate estimated to total approximately $33,000.00, and unsecured debts of approximately $65,000.00. Mrs. Wilson is listed as an unsecured creditor in the amount of $45,000.00.³ The proposed chapter 13 plan calls for payment of 100% to all creditors. The debtor proposes that the plan be funded, inter alia, by the "liquidation" (sale) of the real estate.

Mary Lou and George Wilson were married on August 16, 1956 and separated in August 1982. The one surviving child of the marriage currently resides with Mrs. Wilson and both live in the Lower Gwynedd real estate; the debtor currently resides in Philadelphia. In September 1982, shortly after their separation, the debtor initiated divorce proceedings in the Montgomery County Court of Common Pleas, No. 82-13869. His wife responded and requested, inter alia, support and alimony. Both parties sought equitable distribution of the marital property.

Pursuant to the local court rules of the Montgomery County Court of Common Pleas, Rule 1920.51, a Master was appointed to hear evidence on the divorce and equitable distribution matters. Although bifurcation of the two issues may sometimes occur, see e.g., Wolk v. Wolk, 318 Pa.Super. 311, 464 A.2d 1359 (1983), it appears from the docket entries, (i.e. 12/1/86), that there was no bifurcation in this instance. Thus, although both parties are seeking a divorce decree, such a decree has not been entered.

After hearing evidence on the equitable distribution question, including a review of the requisite "inventory and appraisement" forms submitted by both parties, the Master issued his report on equitable distribution. Both sides filed exceptions to this report, and the matter was scheduled to be heard by the Honorable Horace A. Davenport of the Court of Common Pleas in Montgomery County on August 12, 1987. The filing of the debtor's bankruptcy petition stayed that hearing.

Ms. Wilson then filed a motion for relief from the automatic stay, pursuant to 11 U.S.C. § 362(d) arguing that "cause" exists for granting relief. Alternatively, she contends that this court should abstain pursuant to 28 U.S.C. § 1334(c)(1). By virtue of 11 U.S.C. § 362(b)(2) and the legislative history surrounding section 362(d), (H.R. Rep. No. 95-595, 95th Cong. 1st Sess. at 343 (1977)), 1978 U.S.Code Cong. & Ad. News 5787 the parties agreed that the divorce, alimony and support matters might continue in state court unfettered by this bankruptcy proceeding. However, the debtor argues that the equitable distribution of marital property should be decided by this court because its outcome is critical to the success of the debtor's proposed chapter 13 plan. The movant contends with equal vigor that this court has no expertise in distributing equitably the marital property and should leave that matter to state court. Each party cites decisions supporting his or her position.

II.

The movant cannot and does not dispute that, by virtue of the debtor's bankruptcy filing, 28 U.S.C. § 1334(d) grants exclusive jurisdiction of all property interests of the debtor to the district court. Accord e.g. In re Modern Boats, Inc., 775 F.2d 619 (5th Cir.1985). This exclusive jurisdiction has been transferred to this bankruptcy judge pursuant to 28 U.S.C. § 157(a). Raff v. Gordon, 58 B.R. 988, 991 n. 5 (E.D.Pa.1986) (blanket referral of bankruptcy cases has been made in this district). See also In re Heslar, 16 B.R. 329 (Bankr.W.D.Mich.1981) (construing former 28 U.S.C. § 1471(e)). The debtor's interest in entireties property (i.e., the marital residence) is part of the debtor's estate by virtue of the broad delineation of property of the estate found in 11 U.S.C. § 541(a). Napotnik v. Equibank & Parkdale Savings Ass'n., 679 F.2d 316 (3d Cir.1982). See also Kalevitch, Some Thoughts on Entireties in Bankruptcy, 60 Am.Bankr.L.J. 141 (Spring, 1986).⁴ This interest passes to the trustee upon commencement of the case.⁵

In addition to controlling the debtor's various property interests, the Bankruptcy Code by virtue of 11 U.S.C. § 363(f), (h) allows the trustee,⁶ in certain circumstances, to partition and sell entireties property including the interest of the nondebtor owner.

Since it is the duty of both this bankruptcy court and the bankruptcy trustee to assert control over all property of the estate, there can be little question that pending state court equitable distribution of property proceedings are stayed by the bankruptcy filing of one spouse. E.g. In re Ziets, 79 B.R. 222 (Bankr.E.D.Pa.1987) aff'd C.A. No. 87-7756 (E.D.Pa., February 25, 1988); In re Johnson, 51 B.R. 439 (Bankr.E.D.Pa.1985); In re Murray, 31 B.R. 499 (Bankr.E.D.Pa.1983). See also Missouri v. United States Bankruptcy Court of the Eastern District of Arkansas, 647 F.2d 768 (8th Cir.1981) cert. denied 454 U.S. 1162, 102 S.Ct. 1035, 71 L.Ed.2d 318 (1982). Indeed, the Superior Court of Pennsylvania has acknowledged the primacy of bankruptcy courts in controlling marital property when one spouse has filed for bankruptcy. Taylor v. Taylor, 349 Pa. Super. 423, 503 A.2d 439 (1986).

Although I accept the debtor's argument that this court obtained exclusive jurisdiction over the entireties property when this bankruptcy case commenced, I reject his position that the outcome of equitable distribution should differ because of his bankruptcy filing. As the Supreme Court explained in discussing the Bankruptcy Act of 1898

. . . Congress has generally left the determination of property rights in the assets of a bankrupt\'s estate to state law. Property interests are created and defined by state law. Unless some federal interest requires a different result, there is no reason why such interests should be analyzed differently simply because an interested party is involved in a bankruptcy proceeding. Uniform treatment of property interests by both state and federal courts within a state serves to reduce uncertainty, to discourage forum shopping, and to prevent a party from receiving "a windfall merely by reason of the happenstance of bankruptcy."

Butner v. United States, 440 U.S. 48, 54-55, 99 S.Ct. 914, 918, 59 L.Ed.2d 136 (1979) quoting Lewis v. Manufacturers National Bank, 364 U.S. 603, 609, 81 S.Ct. 347, 350, 5 L.Ed.2d 323 (1961) (footnote omitted).⁷

The two premises of the Butner holding apply when analyzing 11 U.S.C. § 541. The extent of the debtor's estate is generally defined by nonbankruptcy law, typically state law. In re Farmers Markets, Inc., 792 F.2d 1400, 1402 (9th Cir.1986); In re Stephen Smith Home for The Aged, Inc., 80 B.R. 678 (E.D.Pa.1987); In re Loughnane, 28 B.R. 940 (Bankr.D.Colo.1983). 4 Collier on Bankruptcy ¶ 541.021 (15th ed. 1987). Furthermore, this property interest is generally determined as of the time the bankruptcy petition is filed. In re Stephen Smith Home for The Aged, Inc., 80 B.R. at 686; In re West, 64 B.R. 738, 744 n. 12 (Bankr.D.Or.1986).⁸ Therefore, whichever forum decides the issue of equitable distribution must apply Pennsylvania law. E.g., In re Ziets; In re Palmer, 78 B.R. 402 (Bankr.E.D.N.Y.1987); In re Johnson.

The relevant state statute which governs the equitable division of marital property is found in § 401 of the Pennsylvania Divorce Law of 1980, 23 P.S. § 401(d):

(d) In a proceeding for divorce or annulment, the court shall, upon request of either party, equitably divide, distribute or assign the marital property between the parties without regard to marital misconduct in such proportions as the court deems just after considering all relevant factors including:

(1) The length of the marriage.

(2) Any prior marriage of either party.

(3) The age, health, station, amount and sources of income, vocational skills, employability, estate, liabilities and needs of each of the parties.

(4) The contribution by one party to the education, training, or increased earning power of the other party.

(5) The opportunity of each party for future acquisitions of capital assets and income.

(6) The sources of income of both parties, including but not limited to medical, retirement, insurance or other benefits.

(7) The contribution or dissipation of each party in the acquisition, preservation, depreciation or appreciation of the marital property, including the contribution of a party as homemaker.

(8) The value of the property set apart to each party.

(9) The standard of living of the parties established during the marriage.

(10) The economic circumstances of each party at the time the division of property is to become effective.

Although not mentioned in § 401(d), § 401(b) makes equitable distribution dependent upon a decree terminating the marriage,...