Pa. State Employees' Ret. Sys. v. Thomas (In re Thomas)
| Decision Date | 01 May 2015 |
| Docket Number | Bankruptcy No. 14–70184–JAD,Adversary No. 14–7032–JAD |
| Citation | 529 B.R. 628 |
| Parties | In re: Brenda M. Thomas, Debtor. Pennsylvania State Employees' Retirement System, Plaintiff, v. Brenda M. Thomas, Defendant. |
| Court | U.S. Bankruptcy Court — Western District of Pennsylvania |
In re: Brenda M. Thomas, Debtor.
Pennsylvania State Employees' Retirement System, Plaintiff
v.
Brenda M. Thomas, Defendant.
Bankruptcy No. 14–70184–JAD
Adversary No. 14–7032–JAD
United States Bankruptcy Court, W.D. Pennsylvania.
Signed May 1, 2015
Justin P. Schantz, Esq., Counsel to the Debtor/Defendant
Jeffrey M. McCormick, Esq., Counsel to the Plaintiff
Lisa M. Swope, Esq., Chapter 7 Trustee
MEMORANDUM OPINION
JEFFERY A. DELLER, Chief U.S. Bankruptcy Judge
This adversary proceeding presents the legal question as to whether the automatic
stay in bankruptcy, or alternatively the discharge in bankruptcy, precludes the Pennsylvania State Employees' Retirement System (“PSERS”) from temporarily adjusting downward certain disability pension benefits payable to Ms. Brenda M. Thomas (the “Debtor”) on account of various overpayments made by PSERS to the Debtor.
This matter is a core proceeding over which the Court has the requisite subject-matter jurisdiction pursuant to 28 U.S.C. §§ 157(b)(1), 157(b)(2)(A)157(b)(2)(G), 157(b)(2)(I), 157(b)(2)(J), 157(b)(2)(0), and 1334(b).
Because neither the automatic stay nor bankruptcy discharge precludes PSERS from “recouping” the overpayments at issue, judgment on the pleadings shall be entered in favor of PSERS. Therefore, under the unique facts and circumstances of this case, and for the reasons set forth more fully below, an order shall be entered that allows the adjustments sought by PSERS.
I.
THE ALLEGATIONS and PROCEDURAL POSTURE
The adversary complaint filed by PSERS is 66 paragraphs long and has 4 exhibits. The Debtor answered the allegations set forth in the complaint, essentially admitting a number of material factual allegations and primarily disputing the legal conclusions or contentions of PSERS.
In addition to answering the allegations set forth in the complaint, the Debtor has filed a 15 paragraph counterclaim against PSERS. A number of the material factual allegations in the counterclaim have been admitted by PSERS, but likewise the legal conclusions have been denied by PSERS.
Despite the 81 total paragraphs of allegations between the parties, and the 4 exhibits whose authenticity is not contested, the material facts not in dispute between the parties can be boiled down as follows:
1. The Debtor commenced this bankruptcy case by filing a voluntary petition for relief under chapter 7 of the United States Bankruptcy Code on March 27, 2014. See Complaint to Determine Dischargeability of Debt (the “Complaint”) at ¶ 4; Answer and Counterclaim (the “Answer”) at ¶ 4.
2. Prior to the bankruptcy filing, the Debtor was an employee of the Commonwealth of Pennsylvania and was employed with the Department of Public Welfare (the “DPW”).See Complaint at ¶ 18; Answer at ¶ 18.
3. The Debtor's active government service with the DPW was originally terminated on November 23, 2013. In connection with the same, the Debtor submitted the necessary paperwork with PSERS to commence annuity payments pursuant to an early retirement plan administered by PSERS—with a retirement date of November 24, 2013 (which is the day after the termination date of her employment). See Complaint at ¶ 19 and at Exhibit 1; Answer at ¶ 19.
4. Even though the effective date of termination was November 23, 2013, and the retirement date was November 24, 2013, the date on which the Debtor submitted her early retirement paperwork was December 27, 2013. Id.
5. Prior to the early retirement paperwork being submitted, the Debtor (through her employee union) filed a grievance with the DPW on December
5, 2013 contending that the Debtor was wrongfully terminated. See Complaint at ¶ 21; Answer at ¶ 21. The specific factual and legal basis of the wrongful termination claim has not been pled by any party to this action.
6. The Debtor received her first early retirement annuity pension plan payment on February 14, 2014. The amount paid by PSERS was $4,317.24, and was the amount the Debtor was to receive for the period of November 24, 2013 through March 1, 2014. See Complaint at ¶¶ 20, 32, and 34; Answer at ¶¶ 20, 32, and 34.
7. As set forth in a letter dated February 12, 2014 (which was two days prior to the Debtor's receipt of the early retirement pension payment set forth above), the Debtor and the DPW settled the wrongful termination grievance of the Debtor. While the Debtor executed the February 12, 2014 settlement letter on February 19, 2014, the terms of the settlement provided that (a) the Debtor's November 23, 2013 termination date was rescinded; (b) the Debtor's employment status was retroactively placed on a “suspension without pay or benefits” status for the period of November 23, 2013 through February 20, 2014; and (c) the Debtor would be reinstated to active employment for the period of February 21, 2014 through February 25, 2014 to enable the Debtor to submit a disability retirement application with SERS. See Complaint at ¶ 22 and Exhibit 2; Answer at ¶ 22.
8. The net effect of the settlement was that the Debtor was not eligible to receive the early retirement payment of $4,317.24 on February 14, 2014, and the Debtor acknowledges that such sums received were an “overpayment.” See Answer at ¶ 28, ¶ 32 and ¶ 34.
9. The Debtor submitted an application for disability retirement with PSERS on February 25, 2014, which was approved by PSERS with a retirement date of February 26, 2014. See Complaint at ¶ 27 and Exhibit 3; Answer at ¶ 28.
10. While the maximum vested amount payable monthly under the Debtor's disability retirement plan with PSERS was $1,640.39, see Complaint at Exhibit 3, the parties acknowledge that the amount is $1,641.48. See Complaint at 137; Answer at ¶ 37.
11. For the period of February 26, 2014 through April 30, 2014, PSERS owed $3,556.54 to the Debtor for disability annuity payments due her for the time period of February 26, 2014 through April 30, 2014. See Complaint at ¶ 35; Answer at ¶ 35.
12. By letter dated April 24, 2014, PSERS advised the Debtor that it was adjusting the disability amounts due the Debtor as a result of the early retirement overpayments. That is, PSERS advised the Debtor that it was “deducting” the overpayments ($4,317.24) from the disability payments through April 30, 2014 ($3,556.54), which left a “remaining overpayment of $760.70” due from the Debtor.See Complaint at 136 and Exhibit 4; Answer at ¶ 34 and ¶ 35.
13. In April of 2014, PSERS also erroneously sent to the Debtor two checks for the month of April, resulting in an another overpayment of $1,641.48 to the Debtor. When
it learned of the error, PSERS contacted the Debtor on or about April 24, 2014 and warned the Debtor of the error. Notwithstanding the warning, the Debtor cashed the second check thereby increasing the net amount of the overpayment to $2,402.18 (that is, the $760.70 listed above plus the $1,641.48 identified herein). See Complaint at ¶¶ 37–40 at Exhibit 4; Answer at 37–40.
14. By letter dated April 24, 2014, PSERS further advised the Debtor that the Debtor “will be required to repay [these overpayments] in one of two ways. By a lump sum payment by July 1, 2014 or by 18 equal monthly deductions to be withheld from your monthly pension payment....” See Complaint at Exhibit 4.
15. The lump sum payment was never made by the Debtor, instead she amended her schedule of creditors by adding PSERS as a creditor in May of 2014. See Complaint at ¶ 8; Answer at ¶ 8.
16. The Debtor also went on the offensive and contended that PSERS has willfully violated the automatic stay by both (a) netting the reciprocal obligations between the parties, and (b) by demanding that the remaining overpayments be repaid or returned. See Counterclaim at Exhibit A.
17. On July 6, 2014, the Debtor also filed an adversary complaint against PSERS at Adversary No. 14–7031–JAD, alleging that PSERS has willfully violated the automatic stay.
18. In light of the Debtor's position with respect to the automatic stay, PSERS never made the monthly deductions to the disability pension payments due the Debtor from and after April 30, 2014. Instead PSERS filed the instant adversary proceeding on July 11, 2016 at Adversary No. 14–7032–JAD. See Plaintiff Pennsylvania State Employees' Retirement System's Reply to Defendant/Debtor's Counterclaim at ¶ 2.
19. In the complaint filed at Adversary No. 14–7032–JAD, PSERS seeks a determination that (a)...
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