Roest v. Roest (In re Roest), Case No. DK 16–02246

• Citation: 569 B.R. 277
• Decision Date: 14 June 2017
• Docket Number: Adversary Pro. No. 16–80311,Case No. DK 16–02246
• Parties: IN RE: Nancy Vander ROEST, Debtor. Nancy Vander Roest, Plaintiff, v. Jerry Lee Vander Roest, Defendant.
• Court: United States Bankruptcy Courts. Sixth Circuit. U.S. Bankruptcy Court — Western District of Michigan

569 B.R. 277

IN RE: Nancy Vander ROEST, Debtor.

Nancy Vander Roest, Plaintiff,

v.Jerry Lee Vander Roest, Defendant.

Case No. DK 16–02246

Adversary Pro. No. 16–80311

United States Bankruptcy Court, W.D. Michigan.

Signed June 14, 2017

John A. Potter, Twohey Maggini PLC, Grand Rapids, MI, for Plaintiff.

Jerry Lee Vander Roest, Galesburg, MI, pro se.

MEMORANDUM OF DECISION & ORDER

PRESENT: HONORABLE SCOTT W. DALES, Chief United States Bankruptcy Judge

I. INTRODUCTION

Nancy Vander Roest (the "Plaintiff") sued her former husband, Jerry Lee Vander Roest (the "Defendant"), to obtain an order declaring that her obligations under their prepetition divorce decree are not in the nature of support, and therefore dischargeable in her chapter 13 case. She also seeks an order awarding damages for his post-petition efforts to collect the debt, which she contends he pursued willfully and in violation of the automatic stay.

After the close of discovery, the Plaintiff filed a motion for partial summary judgment (the "Motion," ECF No. 18) on the declaratory aspects of her complaint, leaving the question of damages for another day. After two extensions, the pro se Defendant filed a response (the "Response," ECF No. 24). The court has reviewed the Motion and the Response, and has determined that it may resolve the Motion without additional oral arguments.

For the following reasons, the court will grant the Motion.

II. JURISDICTION

The United States District Court for the Western District of Michigan has jurisdiction over the Plaintiff's chapter 13 bankruptcy case, and has referred the case to the United States Bankruptcy Court. See 28 U.S.C. §§ 1334(a) and 157(a); W.D. Mich. L. Civ. R. 83.1(a). Proceedings governing the automatic stay and the discharge of particular debts fall within the court's core jurisdiction, where the court's authority is at its height. Moreover, the parties have consented to the court's entry of final judgment. See Pretrial Order dated January 25, 2017 at p. 1; Wellness Int'l Network, Ltd. v. Sharif , ––– U.S. ––––, 135 S.Ct. 1932, 1939, 191 L.Ed.2d 911 (2015).

Although the court has authority to enter final judgment, today's order, which postpones a ruling on the stay violation and damages questions, is interlocutory under the single judgment rule applicable in federal court. See Fed. R. Civ. P. 54(b).

III. ANALYSIS

A court should grant a motion for summary judgment only if it is satisfied that there is no genuine factual issue warranting a trial on the merits, and that the moving party is entitled to judgment as a matter of law. See Fed. R. Civ. P. 56(c) (made applicable to this adversary proceeding by Fed. R. Bankr. P. 7056 ). The moving party bears the initial burden on the motion to show the absence of factual disputes and entitlement to judgment under applicable law. In reviewing a summary judgment motion, the court is mindful of where applicable law places the burden of proof. If the court is satisfied that there are no factual disputes warranting trial, the court must consider whether the moving party is entitled to relief as a matter of law.

In disputes involving the dischargeability of particular debts, the creditor bears the burden of bringing his claim within the exception to discharge by a preponderance of the evidence, even where, as here, the debtor filed the complaint seeking the determination. Hart v. Molino (In re Molino) , 225 B.R. 904, 907 (6th Cir. BAP 1998). Although the decision is affected by the applicable state domestic relations laws, determining whether an obligation is in the nature of support under the Bankruptcy Code is a federal question. Long v. Calhoun (In re Calhoun) , 715 F.2d 1103, 1107 (6th Cir.1983) (citations omitted)).

Here, the Plaintiff has supported the Motion by including copies of the Judgment Of Divorce dated June 17, 2013 (the "JOD," Exh. 1) and the Order re: Implementation of Judgment dated December 18, 2014 (the "Implementing Order," Exh. 2), and has made various legal arguments. Against this showing, the Defendant has submitted only his unsworn brief arguing that "Judge Bell's decision was made to ensure fairness and equal justice," and that "[i]t is important this Bankruptcy Court read Judge Bell's final comments regarding this court case at the issuing of his final order on June 17, 2013." See Response at p. 2. His unsworn statements also purport to show that the Plaintiff is financially able to meet her obligations to the Defendant, and that he will suffer greater financial hardship unless his claim against his ex-wife is treated as support, particularly given his report of fire damage at the "farm house." Id. He also complains that the Plaintiff "failed to provide all of the information requested by the defendant at the March 29, 2017 deposition." Id . at 1.¹

The Sixth Circuit's decision in Sorah v. Sorah (In re Sorah) , 163 F.3d 397 (6th Cir.1998), instructs a bankruptcy court to consider traditional state law indicia that are consistent with support obligations. These include, but are not limited to:

a. a label such as alimony, support, or maintenance in the decree or agreement,b. a direct payment to the former spouse, as opposed to the assumption of a third-party debt, and

c. payments that are contingent upon such events as death, remarriage, or eligibility for Social Security benefits."

Sorah , 163 F.3d at 401.

Here, the Plaintiff contends, with good reason, that the JOD and the Implementing Order reveal the true nature of her debt as a property settlement obligation, rather than a "domestic support obligation," notwithstanding a provision within the JOD that purports to transform the debt from dischargeable to non-dischargeable upon the occurrence of the Plaintiff's default. The court agrees with the Plaintiff's construction of these documents, and with her view that the purported transformation is unenforceable under federal law. See Calhoun , 715 F.2d at 1107 (federal law controls).

For example, as originally framed, the JOD provides that neither party is entitled to alimony, "except as otherwise provided herein." JOD at p. 2. As is customary, the JOD provided for the division of specified marital debts, including the home equity line of credit ("HELOC") secured by the Galesburg real estate and awarded the property to the Defendant under the heading "Property Settlement in Lieu of Dower." Id . at pp. 4–6. The JOD's terms governing property settlement and allocation of debt require each of the former spouses to hold the other harmless for assumed debts. See, e.g., JOD at pp. 3, 5, 6.

A careful review of the JOD shows that the divorce court attempted to fortify the ex-spouses' property settlement and debt-related divisions by authorizing either party to apply to the court for treatment of these obligation as "spousal support in the amount defaulted for which that party becomes liable as a result of the defaulting party's action." See JOD at p. 7. The supposed transformation from property settlement or hold-harmless obligation to "spousal support" is described in the provisions under the heading "Anti–Bankruptcy Clause," which provides in relevant part as follows:

Spousal support is reserved in an amount equal to any and all liabilities assigned to the parties' pursuant to this Judgment of Divorce. In the event either party default's [sic] upon their respective obligation as ordered herein and the opposing party must pay for those liabilities, the opposing party will be entitled to spousal support in the amount defaulted for which that party becomes liable as a result of the defaulting party's action.

In the event the aforementioned spousal support is ordered same shall be paid through the office of the Friend of the Court.

In the event the aforementioned spousal support is ordered, said spousal support shall be non-modifiable, non-extendable and non-reviewable.

Said support does not terminate upon death of the Payor, Payee or remarriage. This spousal support shall not be taxable to the Payee and not deductible by the Payor for Federal and State income tax purposes. Other than the above provision, neither party is entitled to spousal support and both parties shall be forever barred from same.

See JOD at p.7 (the "Anti–Bankruptcy Clause"). According to this passage, the divorce court did not award spousal support originally to either spouse; instead, the putative spousal support obligation purports to spring into existence upon either party's default in meeting his or her property settlement obligations, including with respect to the HELOC. The amount of the supposed support award is measured by the unpaid property settlement obligation, rather than any particular showing of need or ability to pay at the time of the default.

From the court's review of the JOD, and especially the Anti–Bankruptcy Clause, it plainly appears that, other than labeling the post-default obligation as "support" and authorizing the Friend of the Court to collect them,² the divorce court did not imbue the obligations purportedly transformed under this clause with the traditional indicia of spousal support.

First, although true spousal support is generally modifiable to take into account the changing needs of the beneficiary or capacity of the payer, the post-default obligation under the Anti–Bankruptcy Clause is expressly termed "non-modifiable, non-extendable and non-reviewable." So, as noted above, the amount of the supposed support obligation is measured by the unpaid obligations under the various hold harmless clauses, rather than by any showing of need or capacity to pay. See M.C.L. §§ 552.23 (court may award spousal support "after considering the ability of either party to pay and the character and situation of the parties, and all the other circumstances of the case") and 552.28 (after a judgment for alimony or other allowance for either party, the divorce court may "make any judgment respecting any of the matters that the court might have made in the original action").

Second, the supposed...