Kubinsky v. Leduc (In re Kubinsky)
| Decision Date | 06 October 2022 |
| Docket Number | 20-32616,Adv. 21-3006 |
| Parties | In re: JOSEPH KUBINSKY, Debtors. v. Christine A. Leduc, Defendant. Joseph Kubinsky, Plaintiff, |
| Court | U.S. Bankruptcy Court — Southern District of Ohio |
DECISION (1) DENYING THE PLAINTIFF'S MOTION FOR SUMMARY JUDGMENT AND (2) GRANTING IN PART AND DENYING IN PART THE DEFENDANT'S MOTION FOR SUMMARY JUDGMENT (DOCS. 24 & 27)
This decision concerns the dischargeability of a debt owed to a Chapter 13 debtor's ex-spouse and the total allowed amount of the ex-spouse's pre-petition claim.
On February 13, 2021 Joseph Kubinsky (the "Debtor") filed a petition for relief under Chapter 13 of the Bankruptcy Code. (Estate Doc. 1). Shortly thereafter the Debtor's ex-spouse, Christine A. Leduc ("Leduc") filed a proof of claim [3-1] claiming a priority debt in the total amount of $45,438.34 for child support and alimony arrearages. In addition, Leduc's claim included another $35,000 owed based upon an asserted property interest in the Debtor's Thrift Savings Plan ("TSP").[1] The Debtor objected to Leduc's proof of claim. Estate Doc. 55. The Chapter 13 Trustee also objected, arguing that the creditor did not provide statutory authority that the $35,000 was entitled to priority treatment. Estate Doc. 19.[2]
In his second amended plan (the "Plan"), the Debtor proposed to pay ongoing child support to Leduc in the total amount of $10,573 each month and an estimated pre-petition arrearage of $29,237.77. Estate Doc. 46 at 5. This arrearage, as a priority debt, would be paid in full. Id. at 7. Leduc objected to various iterations of the Debtor's proposed Chapter 13 plans. Estate Docs. 11, 43, 52. Leduc's objections can be distilled to two basic arguments: 1) the child support arrearage is considerably higher than the Plan has proposed to pay and 2) the Debtor owes Leduc an additional $35,000 from his TSP and this debt is a property interest of Leduc that cannot be discharged. For these reasons, Leduc argued the Plan was not proposed in good faith. Leduc's objections, and separate objections of the Chapter 13 Trustee, were resolved by an agreed order that provided that the Debtor would modify the plan as necessary pending the resolution of this adversary proceeding. Estate Doc. 56. With that agreement, the Plan was confirmed. Estate Doc. 60.
In addition, Leduc moved for relief from stay "to determine the amount of Debtor's DSO arrearage and to issue an order regarding payment of same." Estate Doc. 22 at 1. That motion was adjourned pending the resolution of this adversary proceeding. Estate Doc. 48.
The Debtor filed this adversary proceeding asserting that Leduc's claim includes property settlements dischargeable in Chapter 13, but also amounts not owed at all. Leduc continues to assert the same positions articulated in her plan objections.
The parties filed cross-motions for summary judgment (docs. 24, 27), and the court took the matter under advisement.
This court has jurisdiction pursuant to 28 U.S.C. § 1334(b). This is a core proceeding pursuant to 28 U.S.C. § 157(b)(2)(A), (B) and (I) and the Standing Order of Reference in this district. See Amended General Order No. 05-02 (S.D. Ohio Sept. 14, 2016). The parties have consented to this court entering final judgment. Doc. 7 at 2. See also In re Hart, 564 Fed. App'x. 773, 776 (6th Cir. 2014) (citing Waldman v. Stone, 698 F.3d 910, 920 (6th Cir. 2012) ()).
A court "shall grant summary judgment if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(a) (). A factual disagreement is genuine if "a rational trier of fact could find in favor of either party on the issue." SPC Plastics Corp. v. Griffith (In re Structurlite Plastics Corp.), 224 B.R. 27, 30 (B.A.P. 6th Cir. 1998) (citing Schaffer v. A.O. Smith Harvestore Prods., Inc., 74 F.3d 722, 727 (6th Cir. 1996)). A fact is material if it might affect the outcome of the suit under substantive law. Niecko v. Emro Mktg. Co., 973 F.2d 1296, 1304 (6th Cir. 1992) (quoting Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986)). When reviewing a motion for summary judgment, a court views all evidence and draws all inferences in the light most favorable to the nonmoving party. Matsushita Elec. Indus. Co., LTD. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986).
A. To the Extent it Still Exists, Leduc Holds an Equitable Property Interest Up to the Amount of $35,000 in the TSP.
On March 27, 2018 the Final Judgment of Dissolution of Marriage between the Debtor and Leduc (the "Decree") was entered by the Circuit Court of the Thirteenth Judicial Circuit, In and For Hillsborough County, Florida, Family Law Decision. Stipulated Doc. 1 (doc. 23). The Decree incorporated a Mediated Partial Settlement Agreement as to an Equitable Distribution (the "Agreement"). Id. at 39-63. The Agreement addressed the Debtor's TSP as follows:
The Parties agree that by agreement, the Equitable Distribution Payment reflected on attached Exhibit A has been negotiated and as such, the payment shall be $35,000.00. Husband has a Thrift Savings Plan. Wife is hereby entitled to $35,000 of said account as of April 27, 2017 ("valuation date"), subject to passive gains and losses from the valuation date to the date of segregation of Wife's benefits from the account. There are no loans against this account, and to the extent that there are, they shall not reduce the Wife's share of the account. The Court shall reserve jurisdiction to enter a Qualified Domestic Relations Order (hereafter "QDRO") to effectuate this transfer, if such an order is necessary. If a QDRO is necessary, the Parties agree that the Husband may select his attorney to prepare the order, and Husband shall pay the cost of hiring the QDRO preparer. Both parties shall cooperate in providing whatever documents the QDRO preparer requests, including account statements. The parties agree to re-execute any documents necessary to effectuate this paragraph at the request of the QDRO preparer. The QDRO will be entered contemporaneously with the entry of the Final Judgment of Dissolution of Marriage but in no event later than December 31, 2017. The parties agree that this payment resolves the division of the Husband's Thrift Savings Plan and the Husband shall not owe any further amounts to the Wife relating to this plan.
Agreement at 42 (Section F, "Equitable Distribution Equalizing Payment.") (emphasis added).
The Equitable Distribution Equalizing Payment provided that the parties had a total net worth subject to distribution of $286,898, with $195,051 to be distributed to the Debtor, and the other $91,847 to Leduc. Id. at 50 (Exhibit A, "Schedule of Equitable Distribution"). To equalize the distribution, the Debtor was required to pay $51,602 to Leduc. Id. However, at the bottom of the Schedule of Equitable Distribution, it also states that "[b]y agreement, [the $51,602] shall be reduced to $35,000, which Husband shall transfer to Wife pursuant to the parties' Partial Marital Settlement Agreement out of his Thrift Savings Plan via a qualified domestic relations order." Id.
The Debtor argues, in essence, two points. First, he asserts that the $35,000 was just a part of the total equitable distribution of assets and the Agreement only provided "that this payment could come from that account." Doc. 27 at 8. Therefore, the Debtor believes it is like any other property settlement in a divorce decree and is dischargeable in Chapter 13. Second, the Debtor argues that any equitable property interest of Leduc in the TSP, if it ever existed, does not presently exist because the TSP was "closed long ago." Id. Further, the Debtor argues, but notably does not assert in his affidavit, that Leduc was paid $35,000 when the TSP was closed.
It is correct that, unlike Chapter 7, in which any and all debts relating to a decree of divorce or dissolution are non-dischargeable, Chapter 13 debtors may discharge debts arising from a divorce decree or separation agreement that do not meet the definition of a domestic support obligation. 11 U.S.C. §§ 523(a)(5) & (15), and 1328(a)(2). A domestic support obligation (DSO) is defined as follows:
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