Rustin v. Rustin (In re Rustin), CASE NO. 04-50890-NPO
| Decision Date | 09 November 2011 |
| Docket Number | ADV. PROC. NO. 09-05100-NPO,CASE NO. 04-50890-NPO |
| Parties | In re: GREGORY D. RUSTIN, DEBTOR. RUSTIN PLAINTIFF v. MARTHA L. RUSTIN DEFENDANT |
| Court | United States Bankruptcy Courts. Fifth Circuit. U.S. Bankruptcy Court — Southern District of Mississippi |
IN RE: GREGORY D. RUSTIN, DEBTOR. RUSTIN PLAINTIFF
v.
MARTHA L. RUSTIN DEFENDANT
CASE NO. 04-50890-NPO
ADV. PROC. NO. 09-05100-NPO
UNITED STATES BANKRUPTCY COURT SOUTHERN DISTRICT OF MISSISSIPPI
Dated: November 9, 2011
There came on for trial on September 9, 2011 (the "Trial"), the Complaint (the "Second Adversary Complaint") (Adv. Dkt. 1)1 filed by the Debtor, Gregory Don Rustin ("Greg Rustin"), and the Answer and Affirmative Defenses to Plaintiff's Complaint (the "Second Adversary Answer") (Adv. Dkt. 5) filed by Martha L. (Susie) Rustin ("Susie Rustin") in the above-referenced adversary proceeding (the "Second Adversary"). At Trial, Allen Flowers represented Greg Rustin, and Robert Alan Byrd represented Susie Rustin. The Court finds for the reasons set forth below that the lumpsum alimony and attorney's fees awarded Susie Rustin in a state-court judgment are non-dischargeable support obligations under 11 U.S.C. § 523(a)(5).
This Court has jurisdiction over the parties and the subject matter of this proceeding pursuant
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to 28 U.S.C. § 1334. Susie Rustin disputes subject-matter jurisdiction, an issue that is addressed at length below. This is a core proceeding as defined in 28 U.S.C. § 157(b)(2)(I). Notice of the Trial was proper under the circumstances.
In the Amended Pretrial Order (the "Pretrial Order") (Adv. Dkt. 32), the parties stipulated to numerous facts relating to the history of their divorce. The Court adopts these stipulations as its findings of fact. In the discussion below, findings of fact that supplement these stipulations are based upon testimony and documentary evidence presented at Trial:
1. Greg Rustin and Susie Rustin were married on October 25, 1974.
2. Greg Rustin and Susie Rustin separated on March 13, 2002, when Greg Rustin left the marital home. Shortly thereafter, Susie Rustin filed a complaint for divorce.
3. After multiple days of trial, the Chancery Court for the Second Judicial District of Jones County, Mississippi (the "Chancery Court"), rendered ajudgment (the "Judgment of Divorce") (Joint Ex. 8)3 in cause number 2002-0303, on February 10, 2004, granting Susie Rustin a divorce from Greg Rustin on the ground of adultery. On that same date, the Chancery Court issued a 77-page memorandum opinion, which was incorporated into the Judgment of Divorce (Joint Ex. 7) by reference.
4. At the time of the divorce, Susie Rustin was 48, and Greg Rustin was 52.
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5. Three children were born of the marriage, but only two of them, a son and daughter, were under the age of majority at the time of the divorce.
6. The Judgment of Divorce provided, inter alia, the following:
(a) The parties agreed that Susie Rustin would have physical custody of their daughter, and Greg Rustin would have physical custody of their son.
(b) Greg Rustin was ordered to pay Susie Rustin child support in the amount of $600.00 per month.
(c) The Chancellor approved the parties' stipulated procedure for the distribution of their personal property. Susie Rustin would prepare two lists of personal property and Greg Rustin would select the list he wanted. Susie Rustin would receive the property on the remaining list.
(d) Susie Rustin was awarded: (1) $50,000.00 from the sale of certain real properties, (2) the funds in her retirement account, and (3) $500,000.00 of the loss carry-forward resulting from the operation of a failed family business.
(e) Greg Rustin was awarded: (1) $4,000.00 from the sale of certain real property, (2) unspecified funds he retained from the sale of other real property, (3) five business entities, (4) residential property known as the "Patel House," (5) any recovery from pending lawsuits filed against third parties for alleged wrongful acts, and (6) the loss carry-forward from a failed family business, less the $500,000.00 loss carry-forward assigned to Susie Rustin.
(f) The business assets awarded to Greg Rustin were valued by the Chancery Court at $1,339,000.00, as of June 5, 2002.
(g) Susie Rustin was awarded $2,000.00 per month as periodic alimony until Susie Rustin married or died, until Greg Rustin died, or until further order of the Chancery Court.
(h) Susie Rustin was awarded lump-sum alimony in the amount of $550,000.00, payable in installments of $34,375.00 on the first day of January and the first day of July of each year, beginning on July 1, 2004, until paid in full.
(i) To secure payment of the lump-sum alimony, Susie Rustin was awarded equitable liens on the Patel House and on the real property and equipment owned by the five business entities awarded to Greg Rustin. She was also granted a lien on a pending lawsuit involving the five business entities.
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(j) Susie Rustin was awarded $35,110.83, plus interest at 8% annum, for payment of her attorney's fees.
7. Greg Rustin filed a voluntary petition for relief under chapter 7 of the Bankruptcy Code on February 27, 2004 (Dkt. 1).
8. On May 10, 2004, Susie Rustin filed a Complaint Objecting to Dischargeability of Debt Pursuant to Section 523(a)(15) (Joint Ex. 2) in the First Adversary, in which she alleged that the debts reflected in the Judgment of Divorce, to the extent they fell outside the purview of 11 U.S.C. § 523(a)(5), were non-dischargeable under 11 U.S.C. § 523(a)(15) (Adv. No. 04-05057-ERG, Adv. Dkt. 1).
9. On May 18, 2004, Greg Rustin filed Gregrory (sic) D. Rustin's Answer to Martha L. Rustin's Complaint (Joint Ex. 3), alleging, inter alia, that the purported alimony and attorney's fees awarded by the Chancery Court were outside the scope of the exception in 11 U.S.C. § 523(a)(5).
10. Greg Rustin appealed the Judgment of Divorce to the Mississippi Supreme Court on October 6, 2004.
11. On November 10, 2005, the Mississippi Supreme Court affirmed the Judgment of Divorce (Joint Ex. 11) and on February 6, 2006, denied a motion for rehearing en banc.
12. Greg Rustin has never paid any of the lump-sum alimony awarded to Susie Rustin.
13. Both parties filed numerous post-judgment pleadings in Chancery Court seeking citations for contempt and/or modifications of the Judgment of Divorce. According to the parties, only two of these pleadings are relevant to the present dispute: (1) Susie Rustin's Complaint for Citation for Contempt (the "First Contempt Complaint") filed on December 17, 2004, and (2) Susie Rustin's Complaint for Citation for Contempt (the "Second Contempt Complaint") (Joint Ex. 15)
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filed on December 24, 2008.
14. On May 18, 2006, the Chancery Court rendered a memorandum opinion and judgment (the "Contempt Judgment") that resolved: (1) the First Contempt Complaint and (2) Greg Rustin's Amended Cross-Complaint for Modification. The Chancery Court fixed arrearages in lump-sum alimony of $137,500.00 (through January 2006) and in periodic alimony of $10,400.00 (through December 2005). The Chancery Court also awarded Susie Rustin $41,797.50 to compensate her for the personal property sold or discarded by Greg Rustin. Due to a material change in Greg Rustin's circumstances subsequent to the Judgment of Divorce, the Chancery Court reduced Susie Rustin's periodic alimony award from $2,000.00 per month to $400.00 per month, commencing on June 1, 2006. (Joint Ex. 14). Greg Rustin did not appeal the Contempt Judgment.
15. Greg Rustin was discharged from all pre-petition debts under 11 U.S.C. § 727, except as provided under 11 U.S.C. § 523, on July 24, 2006 (Joint Ex. 4), and his bankruptcy case was closed (Joint Ex. 5).
16. The First Adversary was dismissed on November 26, 2008, after the parties "advised that the requested relief has been rendered moot" by the ruling of the Mississippi Supreme Court. (Adv. No. 04-05057-ERG, Adv. Dkt. 36).
17. In Susie Rustin's Second Contempt Complaint, she alleged that Greg Rustin had again failed to pay his alimony obligations and was in arrears in the total sum of $171,875.00 for the months of July 2006 through July 2008, together with all sums accruing after July 1, 2008. This amount did not include the $137,500.00 that the Chancery Court had previously ordered Greg Rustin to pay for past due lump-sum alimony on May 18, 2006, in the Contempt Judgment.
18. On January 29, 2009, Greg Rustin filed a Motion to Dismiss, Answer to Complaint
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for Citation for Contempt and Counter-Complaint for Modification (the "Motion to Dismiss") (Joint Ex. 16) in the Chancery Court. Greg Rustin denied that the Chancery Court had subject-matter jurisdiction on the ground that the "judgment" had been discharged in his bankruptcy case. In the alternative, Greg Rustin asked the Chancery Court to cease or reduce all alimony to Susie Rustin, due to a material change in his health and a reduction in his income. The Motion to Dismiss is still pending before the Chancery Court.
19. On September 5, 2009, Greg Rustin filed a Motion to Reopen Case to Pursue Discharge Violations and for Other Relief (Dkt. 92). Susie Rustin filed a Response to Debtor's Motion to Reopen Case to Pursue Discharge Violations and for Other Relief (Dkt. 94) on September 28, 2009. After a hearing, this Court reopened Greg Rustin's chapter 7 case by Order on Motion to Reopen Case (Dkt. 102) on November 20, 2009.
20. On...
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