Martin v. Martin
| Decision Date | 30 March 2020 |
| Docket Number | CASE NO. 19-CIV-60651-RAR |
| Citation | 618 B.R. 326 |
| Parties | Lynn Ann MARTIN, Appellant, v. Philip MARTIN, Appellee. |
| Court | U.S. District Court — Southern District of Florida |
Craig Pugatch, Rice Pugatch Robinson Storfer & Cohen, PLLC, George Leo Zinkler, III, Rice Pugatch Robinson & Schiller, P.A., Fort Lauderdale, FL, for Appellant.
Alan Roy Crane, Furr & Cohen, Boca Raton, FL, for Appellee.
ORDER AFFIRMING BANKRUPTCY COURT ORDER
This case addresses the interplay between state family law and federal law in the context of a bankruptcy proceeding. Appellant Lynn Ann Martin appeals the Order Granting Motion for Relief from Stay [ECF No. 5-1] ("R.") at 183 ("Stay Relief Order") entered by the United States Bankruptcy Court for the Southern District of Florida. The appeal boils down to one key issue: whether the bankruptcy court abused its discretion by lifting the automatic stay pursuant to 11 U.S.C. § 362(b)(2)(A)(iv) to allow Appellee to enforce an equitable distribution award stemming from a divorce proceeding. The equitable distribution award concerns Appellant's pension.
Appellant argues that the pension is property of her bankruptcy estate because her bankruptcy petition was filed before a final judgment of divorce was entered by the New York state court. Thus, Appellant maintains that Appellee's right in the pension never vested under New York law. Conversely, Appellee maintains the pension was never property of the bankruptcy estate because his ownership interest in the pension vested pre-petition—when the state court issued its "decision after bench trial"—but before it entered the "judgment of divorce." Further, Appellee argues that New York law restricts transfer of Appellant's interest in the pension to the bankruptcy estate.
Having carefully considered the record from the bankruptcy court proceeding, Appellant's Initial Brief [ECF No. 16] ("Initial Brief"), Appellee's Response Brief [ECF No. 21] ("Response"), and Appellant's Reply Brief [ECF No. 28] ("Reply"), it is hereby
ORDERED AND ADJUDGED that the Stay Relief Order is AFFIRMED as set forth herein. The Clerk is directed to CLOSE this case and any pending motions are DENIED as moot .
The relevant facts are undisputed. The parties were formerly married and lived in New York. See Initial Brief at 6; Resp. at 1. Appellant is a retired school teacher who earns income from the New York State Teachers Defined Benefits Pension Plan ("Pension"). Id. On October 1, 2015, Appellant initiated a divorce proceeding in the Supreme Court for the State of New York. Id. After more than two years of contentious litigation, the state court conducted a bench trial in November 2017. Id. The primary contested issue at trial was the equitable distribution of the Pension. See R. at 72.
On May 17, 2018, the state court entered a Decision After Bench Trial ("DABT") in the form of a 14-page written order that included credibility determinations, findings of fact, and conclusions of law. Id. The state court ordered, among other things, that Appellee was entitled to his 30% Majauskas1 share of the Pension benefit, and that all remaining amounts due by Appellant to Appellee shall be paid in the form of a 20% surcharge against the Pension. Id. at 73-74, 76, 82. The DABT also directed Appellee to "draft and submit a proposed judgment ... which is not inconsistent with this [DABT]." Id. at 82 (alteration added).
Despite the entry of the DABT, the saga continued. On June 4, 2018, 18 days after the entry of the DABT, Appellant filed for bankruptcy protection under Chapter 13 of the U.S. Bankruptcy Code. Id. at 7. The very next day, the parties filed requests to modify the DABT in the state court case. See Initial Brief at 9. And on June 21, 2018, apparently fed up with the case, the state court sent a letter to the parties stating that the process of scheduling a post-bench trial conference had "grown absurd" and instructed the parties to file their grievances with the DABT via motions instead. See R. at 118.
Appellee filed a motion for relief from the automatic stay in the bankruptcy proceeding on August 1, 2018 ("Motion for Relief from Stay"), requesting that the court lift the automatic stay pursuant to 11 U.S.C. sections 362(b)(2)(A)(iv)2 and 541(c)(2).3 Appellee maintained the DABT was a "judgment of divorce" under New York law and the automatic stay was merely preventing the "ministerial act" of entering the judgment on the docket. See R. at 64. Further, Appellee argued that the Pension never became part of the bankruptcy estate in the first place due to a New York law restricting its transfer. See R. at 143. Moreover, Appellee requested that the bankruptcy court abstain from ruling on any matter related to the state court proceeding. See R. at 64.
After oral argument, the bankruptcy court entered an order granting the Motion for Relief from Stay in part. Id. at 128-129 ("Bankruptcy Order"). The bankruptcy court lifted the automatic stay and allowed the state court to proceed as to the dissolution of marriage. The Bankruptcy Order clarified that "the effect of the State Court judgment as it relates to the bankruptcy estate will be determined by this Court" and "[t]he State Court judgment shall not have the effect of transferring property of the Debtor absent further order of this Court or dismissal of the bankruptcy." Id. at 129.
On October 23, 2018, the state court entered the Divorce Decree, formally recording the decisions that it made in the DABT. See Initial Brief at 10, Resp. at 4. On February 14, 2019, the bankruptcy court entered the Stay Relief Order, wherein it found that a) the DABT had the effect of a final judgment under New York law and b) Appellee's interest in the Pension was never part of the bankruptcy estate. Stay Relief Order at 3, 5. Consequently, the bankruptcy court abstained from any further matters related to the divorce proceeding and held that "[n]either the Automatic Stay nor any provision of the Bankruptcy Code or order of this Court prohibits the State Court from entering a Qualified Domestic Relations Order (QDRO) to provide for payments to Creditor under the Terms of the Final Judgment, and the Creditor has relief from the Automatic Stay to enforce the Final Judgment." Id. Appellant appealed the Stay Relief Order after unsuccessfully moving for reconsideration. R. at 179.
"The district court must accept the bankruptcy court's factual findings unless they are clearly erroneous, but reviews a bankruptcy court's legal conclusions de novo. " In re Englander , 95 F.3d 1028, 1030 (11th Cir. 1996) (citation and internal quotations omitted). "A finding is clearly erroneous when although there is evidence to support it, the reviewing court upon examining the entire evidence is left with the definite and firm conviction that a mistake has been committed." Kane v. Stewart Tilghman Fox & Bianchi, P.A. , 485 B.R. 460, 468 (S.D. Fla. 2013) (citing United States v. U.S. Gypsum Co. , 333 U.S. 364, 395, 68 S.Ct. 525, 92 L.Ed. 746 (1948) ) (internal quotations omitted). "If the lower court's assessment of the evidence is plausible in light of the record viewed in its entirety, the reviewing court may not reverse it even though convinced that had it been sitting as the trier of fact, it would have weighed the evidence differently." Id. (citing Anderson v. Bessemer City , 470 U.S. 564, 573–574, 105 S.Ct. 1504, 84 L.Ed.2d 518 (1985) ). "Under de novo review, this Court independently examines the law and draws its own conclusions after applying the law to the facts of the case, without regard to decisions made by the Bankruptcy Court." In re Brown , No. 08-1517-Orl-18, 2008 WL 5050081, at *2 (M.D. Fla. Nov. 19, 2008) (citing In re Piper Aircraft Corp. , 244 F.3d 1289, 1295 (11th Cir. 2001) ). A district court may affirm a bankruptcy court order on "any ground supported by the record." In re Gosman , 382 B.R. 826, 839 n.3 (S.D. Fla. 2007) (citing Bircoll v. Miami–Dade County , 480 F.3d 1072, 1088 n.21 (11th Cir. 2007) ) (internal citation omitted).
Moreover, "[a] decision to lift the [automatic] stay is discretionary with the bankruptcy judge, and may be reversed only upon a showing of abuse of discretion." In re Dixie Broad., Inc. , 871 F.2d 1023, 1026 (11th Cir. 1989) (citing Mitsubishi Motors Corp. v. Soler Chrysler–Plymouth, Inc. , 814 F.2d 844 (1st Cir. 1987) ; In re Holtkamp , 669 F.2d 505 (7th Cir. 1982) ); see also In re Adelphia Commc'ns Corp. , 298 B.R. 49, 52 (S.D.N.Y. 2003) () (internal citations omitted) (alteration added). "An abuse of discretion occurs if the judge fails to apply the proper legal standard or to follow proper procedures in making the determination, or bases an award upon findings of fact that are clearly erroneous." In re Air Safety Int'l, L.C. , 336 B.R. 843, 852 (S.D. Fla. 2005) (citing In re Red Carpet Corp. of Panama Cty. Beach , 902 F.2d 883, 890 (11th Cir. 1990) ).
The central dispute here is whether the Pension became property of the bankruptcy estate upon Appellant's filing of her bankruptcy petition. Appellant's position that the bankruptcy court erred in finding that the DABT constituted a "final judgment of divorce" under New York law is well taken. However, the Court affirms the Stay Relief Order on alternative grounds raised by Appellee and fully supported by the record. The Court will first address the bankruptcy court's error and then explain why, notwithstanding the error, the bankruptcy court did not abuse its discretion when it lifted the automatic stay.
A bankruptcy estate consists of "all...
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