Leviner v. Leviner (In re Leviner)
| Decision Date | 08 September 2017 |
| Docket Number | Case No. 16-31885 |
| Parties | In Re: TERRY EDISON LEVINER, JR. SSN xxx xx 9751 2006 Saratoga Dr Gastonia, NC 28056-6542 Debtor. KATHY LEVINER, Movant, v. TERRY EDISON LEVINER, JR. Respondent. |
| Court | U.S. Bankruptcy Court — Western District of North Carolina |
This matter came on for an evidentiary hearing on June 29, 2017 on the Movant's Objection to Confirmation ("Objection") and the Debtor's oral motion to dismiss the Movant's Objection. Present at the hearing were the Movant, Kathy Leviner ("Movant"), represented by Frederick L. Henderson Jr., and the Debtor-Respondent, Terry Edison Leviner, Jr. ("Debtor"), represented by Matthew C. Sherlock. The Movant alleges in her Objection that the Debtor's Chapter 13 plan does not propose to pay all of his domestic support obligations under the parties' pre-petition Separation and Property Settlement Agreement because paragraph 4(a) of the Debtor's plan proposes to sell the Movant's residence. The Debtor seeks dismissal of the Movant's Objection for lack of adequate due process on the grounds that the Movant did not timely file an adversary proceeding or a proof of claim.
The Court has reviewed the record in this case including the Movant's Objection and Memorandum of Law in Support of Objection to Confirmation, the Debtor's Response to Objection to Confirmation ("Response") and Brief in Support of Motion to Dismiss Movant's Objection to Confirmation ("Debtor's Brief"), and the Movant's reply brief, and the Court has heard the evidence and arguments made by counsel for the Movant and counsel for the Debtor at the hearing. For the reasons that follow, the Court determines that the Debtor did receive adequate due process of the Movant's Objection, and the Court concludes that the Debtor's obligation to maintain the mortgage payments on the note secured by the residence where the Movant lives is in the nature of support and maintenance. Accordingly, the Court determines that the obligation is a domestic support obligation as defined by 11 U.S.C. § 101(14A) that is non-dischargeable under 11 U.S.C. § 523(a)(5) and a priority claim under 11 U.S.C. § 507(a)(1)(A) that must be paid through the Debtor's plan pursuant to 11 U.S.C. § 1325(a)(8). Therefore, the Debtor's oral motion to dismiss is hereby DENIED; and the Movant's Objection is hereby SUSTAINED because the Debtor's Chapter 13 plan does not propose to maintain the mortgage payments as required by the parties' pre-petition Separation and Property Settlement Agreement.
On November 22, 2016, the Debtor filed his Chapter 13 bankruptcy petition and, on December 5, 2016, his Chapter 13 plan (Doc. 9). Section 2.a ("Secured Claims") of the Debtor's plan proposes to pay a Wells Fargo note secured by the Movant's residence at 157 Howie Drive, Mt. Holly, North Carolina "direct." Additionally, Section 4.a ("Special Terms") of the Debtor's plan proposes to sell the Movant's residence in order to fund the plan. On February 10, 2017 (three days after the final section 341 Meeting of Creditors was held), the Movant filed her Objection (Doc. No. 19). On the same day, the Objection was served by first class mail on the Debtor and his counsel. A hearing on the Objection was set for February 28, 2017, and the parties agreed to continue the matter for a special setting on April 21, 2017. The deadline in this case to challenge dischargeability of certain debts was March 6, 2017, and the deadline to file a claim in this case was April 3, 2017.
In the Objection, the Movant set forth the provisions of Section 9.A of the parties' pre-petition Separation and Property Settlement Agreement ("Settlement") that require the Debtor to refinance the note secured by the Movant's residence in his name and to be " 'solely responsible for payments on the new note and . . . make such payments in a timely manner so that the property cannot be foreclosed upon' " as well as the provision that the Movant " 'shall have the right to live in the house located at 157 Howie Drive, to the exclusion of (the Debtor) for her lifetime or until she remarries, unless (the Movant) should sooner elect to move from the property.' " Objection ¶¶ 5-6. The Movant claimed that the "Debtor's obligation to maintain the mortgage payments on the note secured by the Residence so that the Movant can live there for her lifetime is in the nature of support and maintenance . . . in light of the Movant's meager income . . . and because it extends indefinitely beyond the duration of the alimony payments toensure the Movant will not lose her home even after her income is further reduced." Id. at ¶ 8. The Movant requested that the Court deny confirmation of the plan pursuant to 11 U.S.C. § 1325(a)(8) as failing to pay all domestic support obligations under the Settlement because Section 3.b ("Priority Claims - Domestic Support Obligations") of the plan made no provision for the Debtor's ongoing obligation to support and maintain the Movant by making all of the payments on the note secured by her residence so that she could continue to live there for her lifetime. Id. at ¶¶ 11-12.
On April 11, 2017, the Debtor filed his Response (Doc. No. 21). In paragraph 5 of his Response, the Debtor stated that the Movant asked the Court to evaluate whether the subject provisions of Section 9.A of the Settlement are non-dischargeable domestic support obligations. Response ¶ 5. The Debtor then proceeded to argue in his Response that the subject obligations were in the nature of property settlement and, therefore, requested that the Movant's Objection be denied and the plan confirmed. The Debtor further requested an award of attorney's fees against the Movant for defending against an action for determination of dischargeability of debt under 11 U.S.C. § 523. Id. at ¶ 22. After articulating the exact issues at the heart of the Movant's claims in her Objection and defending against them with specificity, the Debtor's Response did not seek dismissal of the Objection for lack of adequate due process.
On the eve of the hearing scheduled for April 21, 2017, the Court had to reschedule the hearing to May 26, 2017 for unexpected reasons out of the control of both the Court and the parties. During the additional time afforded by this unforeseen continuance, the Debtor served a subpoena (Doc. No. 23) on the Movant's domestic law attorney, Joy M. Chappell. The first subpoena was served on May 10, 2017, but no responsive documents existed. The subpoena was amended and served again during the week prior to the May 26, 2017 hearing, and responsivedocuments were provided immediately. On May 26, 2017, the Debtor and his counsel appeared at the hearing prepared to defend against the Movant's Objection; however, the Movant requested a continuance so that Ms. Chappell could be available to testify regarding the documents she had to produce on such short notice. Only at this time did the Debtor orally move the Court to dismiss the Objection for lack of adequate due process on the grounds that the Movant had not timely filed an adversary proceeding or a proof of claim. The Court noted that there appeared to be no due process issue, but the Court continued the hearing to June 29, 2017 and gave the Debtor an opportunity to file a brief in support of his oral motion to dismiss. At the request of the parties, the Court also conditionally confirmed the Debtor's plan as to the other provisions not at issue in the Movant's Objection and, on June 27, 2017, the Movant filed a proof of claim for the pre-petition alimony arrearage amount of $16,000.00 consistent with Section 3.b of the Debtor's plan so that the Chapter 13 Trustee's disbursements could be properly processed.
On June 23, 2017, the Debtor filed his Debtor's Brief (Doc. No. 29). The Movant filed her reply on June 28, 2017 (Doc. No. 30). At the hearing, the parties agreed that no further discovery was needed.
The Movant and the Debtor entered into the Settlement on August 1, 2011 after being married since September 25, 1976. Nancy E. Foltz testified that she represented the Movant and negotiated the Settlement over several months with J. Thomas Hunn, who represented the Debtor and who subsequently filed the Debtor's Motion for Summary Judgment for Absolute Divorce. While the Debtor made some different suggestions about the nature and extent of his representation when entering into the Settlement, the plain language of the Settlement states that the Debtor was represented by Mr. Hunn during its execution. The Movant and the Debtor ownreal estate at 157 Howie Drive, Mt. Holly, North Carolina that includes a house and a barn on two lots ("Residence"). According to the Settlement, the parties continue to own the Residence jointly for their children to inherit, and the Movant has the right to live in the Residence for her lifetime exclusive of the Debtor unless she chooses to leave or remarry.
The Debtor was always the breadwinner during the marriage, and the Movant always relied on the Debtor to provide for the cost of housing. As their kids got older, the Movant began to do some work in their children's school and worked for two years in a doctor's office to provide some supplemental income for the household. Any income she has earned has been below or around minimum wage. The Movant's 2016 Social Security Statement shows that her average annual income since her marriage to the Debtor in 1976 is only $6,425.25, peaking in 2004 at $18,431.00. On cross examination by the Debtor, the Movant admitted that the Social Security Statement calculation for her 2016 gross income was slightly different, however, the difference did not remove her from being around the minimum wage level. At the time the Settlement was signed by the parties, the Movant had been a part-time, substitute school bus driver for...
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