Matter of Brock, Bankruptcy No. 3-81-00925

• Decision Date: 14 March 1986
• Docket Number: Bankruptcy No. 3-81-00925,3-81-0381.,Adv. No. 3-81-0326
• Citation: 58 BR 797
• Parties: In the Matter of Donald BROCK, Debtor. Donald BROCK, Plaintiff, v. Glenda F. BARLOW fka Glenda F. Brock, Defendant. Glenda F. BARLOW fka Glenda F. Brock, Plaintiff, v. Donald BROCK, Defendant.
• Court: U.S. Bankruptcy Court — Southern District of Ohio

58 B.R. 797 (1986)

In the Matter of Donald BROCK, Debtor.

Donald BROCK, Plaintiff, v. Glenda F. BARLOW fka Glenda F. Brock, Defendant.

Glenda F. BARLOW fka Glenda F. Brock, Plaintiff, v. Donald BROCK, Defendant.

Bankruptcy No. 3-81-00925, Adv. Nos. 3-81-0326, 3-81-0381.

United States Bankruptcy Court, S.D. Ohio, W.D.

March 14, 1986.

Christopher M. Hawk, Dayton, Ohio, for debtor/plaintiff.

Dennis E. Stegner, Springfield, Ohio, for defendant.

DECISION SUSTAINING COMPLAINT FOR VIOLATION OF 11 U.S.C. § 362

DECISION DENYING COMPLAINT TO DETERMINE EXCEPTION TO DISCHARGE UNDER 11 U.S.C. § 523(a)(5)

INTRODUCTION OF ISSUES PRESENTED

THOMAS F. WALDRON, Bankruptcy Judge.

In the voluntary Chapter 7 bankruptcy case of Donald Brock, Case No. 3-81-00925, there were two adversary proceedings filed: Donald Brock (hereinafter Brock) vs. Glenda F. Barlow (hereinafter Barlow), the former spouse of Brock, filed under adversary proceeding number X-XX-XXXX; and, Glenda F. Barlow vs. Donald Brock, filed under adversary proceeding number X-XX-XXXX. Although the two adversary proceedings were not consolidated, by agreement of counsel following a pre-trial conference, it was agreed that both cases would be tried simultaneously and all evidence received would be considered in both cases and accordingly, although a separate judgment is entered in each adversary proceeding, the same opinion is provided in both adversary proceedings.

On September 29, 1980, the parties herein were divorced under the terms of a divorce decree which provided in part that Brock pay a debt to Household Finance Corporation (hereinafter H.F.C.) and hold Barlow harmless.

On March 18, 1981, a motion was filed by Barlow to find Brock in contempt of a domestic relations court order contained in a divorce decree. This motion was set for hearing in state court on April 20, 1981.

On March 24, 1981, the voluntary Chapter 7 proceeding of Brock was filed. On May 19, 1981, a complaint was filed in the bankruptcy court on behalf of Brock against Barlow alleging violation of the provisions of 11 U.S.C. § 362(a) (automatic stay). On June 15, 1981, a complaint to determine dischargeability of the debt upon which Brock was ordered to hold Barlow harmless was filed in the bankruptcy court by Barlow against Brock.

These two adversary proceedings represent matters that require a decision providing not only a recognition of the issues of comity involved in a federal/state judicial system, but also a framework for the resolution of matters repeatedly presented in connection with bankruptcy court dischargeability proceedings involving state domestic relations court judgments pursuant to 11 U.S.C. § 523(a)(5).

I. PROCEDURAL POSTURE

This is a case arising under 28 U.S.C. § 1334(a) and having been referred to this court, Adversary No. 3-81-0326 (Brock v. Barlow) is determined to be a core proceeding pursuant to 28 U.S.C. § 157(b)(2)(A), in which Brock seeks a judgment that Barlow violated the provisions of the automatic stay and an award of damages against her, and Adversary No. 3-81-0381 (Barlow v. Brock) is determined to be a core proceeding pursuant to 28 U.S.C. § 157(a)(2)(I), in which Barlow seeks a determination that the debt due to H.F.C. upon which Brock was to hold her harmless pursuant to a domestic relations court divorce decree is an exception to the debtor's discharge because the debt is alimony, maintenance or support as determined under 11 U.S.C. § 523(a)(5).

Prior to addressing the substantive issues presented in these adversary proceedings, it is important to recognize the differing jurisdictional foundations presented in each proceeding.

II. JURISDICTIONAL FOUNDATIONS

With regard to Barlow's complaint to determine the H.F.C. debt as an exception to a discharge, it must be kept in mind that the statutory scheme set forth in 11 U.S.C. § 523 (exceptions to discharge) contemplates that the determination of the dischargeability of a debt in certain cases is committed to the exclusive jurisdiction of the bankruptcy court (11 U.S.C. § 523(c)),¹ but in other cases is subject to the concurrent jurisdiction of a federal bankruptcy court and a state court. See generally 3 Collier On Bankruptcy ¶ 523.156 (15th ed. 1985). The particular debt in question in this proceeding, the payment of a second mortgage arising out of a divorce decree is a common example of a debt in which a bankruptcy court and a state domestic relations court have concurrent jurisdiction to determine dischargeability, provided a federal standard concerning the determination of alimony is used in reaching the decision concerning dischargeability of the debt. Long v. Calhoun (In re Calhoun), 715 F.2d 1103 (6th Cir.1983).

While a state domestic relations court in the exercise of concurrent jurisdiction may make a determination concerning the dischargeability of a debt under 11 U.S.C. § 523(a)(5) by the application of federal standards of alimony, maintenance or support, such concurrent jurisdiction does not exist with regard to the provisions of 11 U.S.C. § 362.

The automatic stay issued by the bankruptcy court which becomes effective upon the filing of a bankruptcy petition is integral to the entire statutory scheme of Title 11 and represents a considered congressional determination that a debtor, creditors and other interested parties in a bankruptcy proceeding must be guaranteed an immediate period of time in which to propose a reorganization of the debtor's financial affairs or an immediate opportunity for a court appointed trustee to examine the assets and liabilities of a debtor free from any pressure brought by an individual creditor or interested party. It is the bankruptcy court alone that has the exclusive jurisdiction to determine questions involving the automatic stay. This position was recently approved by the Sixth Circuit Court of Appeals in NLT Computer Services, Corporation v. Capital Computer Systems, Inc., 755 F.2d 1253 (6th Cir.1985) in which an involuntary bankruptcy petition was filed only minutes before a district court, sitting in the same district as the bankruptcy court, was to commence a hearing on a summary judgment motion involving a federal insolvency proceeding that had previously been filed against the debtor pursuant to 31 U.S.C. § 3713. The district court, at the time of its hearing, withdrew the case from the bankruptcy court, removed the automatic stay and heard the summary judgment motion. The court of appeals in reversing the district court stated:

In our view, the district court\'s action short-circuits the orderly procedure for the administration of bankruptcy stays by failing to recognize the legal effect of both the filing of the involuntary bankruptcy proceedings and the issuance of the automatic stay.

We assume, as did the parties and the trial judge, that the involuntary bankruptcy petition was in fact filed. Yet, in our view, the fact that bankruptcy proceedings are pending in a specific United States district court does not confer upon any judge sitting in that court the right to lift an automatic stay as to any other proceedings before him. The Bankruptcy Act and rules carefully set forth the procedures for the administration of bankruptcy proceedings. The stay provisions of Section 362 are automatic and self-operating and those who have knowledge of the pendency of a bankruptcy action and stay are bound to honor the stay unless and until it is properly lifted. See Clay v. Johns-Manville Sales Corp., 722 F.2d 1289 (6th Cir.1983), cert. denied, 467 U.S. 1253, 104 S.Ct. 3537, 82 L.Ed.2d 842 (1984).

. . . .

In our view, the trial judge in these proceedings was in a position no different from that of any judge presiding in any other pending federal, state, or local court proceedings which could affect the assets of a bankrupt. It certainly cannot seriously be claimed that were such a suit pending in another district court or in a state court, the judge of that court could proceed to decide that suit on the merits without a motion to lift the stay under 11 U.S.C. § 362(d) having first been filed in the bankruptcy proceeding itself (emphasis added).

Id. at 1258. Accordingly, the separate and distinct jurisdictional foundations involved in these two adversary proceedings demand a different analysis of the common issues raised in them.

III. FINDINGS OF FACT

The parties in this case submitted written stipulations of facts which were supplemented on three subsequent occasions. The various stipulations provide inter alia: The parties were married on October 26, 1974, and no children were born to the marriage. The parties were divorced on September 29, 1980, at which time the wife who had been employed throughout the marriage was earning approximately $220.00 per week and the husband who had been employed throughout the marriage was earning approximately $582.00 per week. The divorce decree provided that Barlow receive all of the assets of the parties, except for Brock's personal clothing and a 1978 truck which was subject to a lien in the amount of $6,500.00. The wife received pursuant to the divorce decree ten acres containing a house and barn, which had been appraised prior to the divorce at $125,000.00 and was subject to liens at the time of the divorce of approximately $78,000.00. The wife also received Arabian horses worth approximately $4,000.00 and a tractor worth approximately $6,000.00 and other assets including all of the tools, furniture and furnishings in the home and barn. The first mortgage payment was $353.25 per month. The second mortgage payment, which is the H.F.C. debt in dispute in these proceedings, was $500.00 per month. Both parties retained their own interests in their retirement plans with General Motors. At the time of the divorce the wife was thirty-one (31) years old and the husband was thirty-seven (37) and each party enjoyed good health. Although there appeared to be equity in the real estate and it was listed for sale...