Opinion
CASE NO: 20-32494 ADVERSARY NO. 21-03045
2021-07-23
IN RE: Sonja JONES-PETEET, Debtor Estate of Lonnie J. Perteet and Montel D. Perteet, Personal Representative, Plaintiffs v. Sonja Jones-Peteet, Defendant
John Henry Hall, Law Office of John Henry Hall, Gary, IN, for Plaintiffs. Melissa Rae Lanier, Law Office of Melissa Rae Lanier, PLLC, Humble, TX, for Defendant.
John Henry Hall, Law Office of John Henry Hall, Gary, IN, for Plaintiffs.
Melissa Rae Lanier, Law Office of Melissa Rae Lanier, PLLC, Humble, TX, for Defendant.
MEMORANDUM ORDER GRANTING, IN PART, AND DENYING, IN PART, PLAINTIFFS' MOTION FOR SUMMARY JUDGMENT AND DEFENDANT'S CROSS-MOTION FOR SUMMARY JUDGMENT
If any finding of fact is construed as a conclusion of law, it is adopted as such. If any conclusion of law is construed as a finding of fact, it is adopted as such. This is a core proceeding under 28 U.S.C. § 157(b)(2)(I). The Court has jurisdiction under 28 U.S.C. § 1334.
Christopher Lopez, United States Bankruptcy Judge
About 10 years ago, a Texas state court approved a Divorce Decree between Lonnie Perteet and Sonja Peteet (these are similar, but different, last names). The parties' Divorce Decree states that Mr. Perteet was awarded, and Ms. Peteet was divested of all right to, the proceeds of his pension benefits. Several years after the divorce, Mr. Perteet died. But Ms. Peteet was still listed as the beneficiary in his pension plan documents. Ms. Peteet received over $220,000 of Mr. Perteet's pension funds but never turned it over to his estate. The estate and the personal representative for the estate started a proceeding in an Indiana probate court to collect the funds. But they were unsuccessful. Ms. Peteet has acknowledged that she spent it all.
Ms. Peteet is the debtor in this case. She filed a chapter 7 case, in part, to discharge the pension-related debts. The Perteet estate and the personal representative for the estate, as Plaintiffs, filed an adversary complaint objecting to the discharge under Section 727(a)(4)(A) of the Bankruptcy Code, and a request to determine the non-dischargeability of the debt under Sections 523(a)(2)(A) and 523(a)(15) of the Bankruptcy Code. Plaintiffs then moved for summary judgment. The Debtor responded by seeking summary judgment that the debt was discharged. For the reasons stated below, the Court grants summary judgment on Plaintiffs' request to determine the dischargeability of debt under Section 523(a)(15) and denies summary judgment on the remaining requests. The Court also grants Debtor's cross-motion for summary judgment on the Section 727(a)(4)(A) and Section 523(a)(2)(A) objections and denies it on the remaining request.
Background
In December 2011, a Harris County, Texas District Court approved a Divorce Decree between Lonnie Perteet and the Debtor. Section H-4 of the Divorce Decree ordered and decreed that Mr. Perteet was awarded, and the Debtor was divested of, all right, title, interest, and claim to:
All sums, whether matured or unmatured, accrued or unaccrued, vested or otherwise, together with all increases thereof, the proceeds therefrom, and any other rights related to any profit-sharing plan, retirement plan, Keogh plan, pension plan, employee stock option plan, 401(k) plan, employee savings plan ... or other benefits existing by reason of the husband's [Mr. Perteet] past, present, or future employment.
Final Decree of Divorce, Docket No. 11-4, at 2–3 (Section H-4). The Debtor was also awarded, and Mr. Perteet was divested of, her benefits. Id. at 4 (Section W-3).
Both parties signed the Divorce Decree. They also acknowledged that, before signing the Decree, they read it, had a chance to ask questions about it, understood that the contents of the Decree resolved their divorce case, and they did not sign the Decree under any coercion or duress.
Id. at 9.
Id. at 6–7.
In April 2017, Mr. Perteet died in Gary, Indiana. In August 2017, a petition for probate of the estate of Mr. Perteet was filed in Indiana. The probate court granted Montel Perteet letters of administration.
Before his death, Mr. Perteet participated in the Construction Workers Pension Trust Fund-Lake County and Vicinity Pension Plan, an employee benefit plan governed by ERISA. In March 2018, the Board of Trustees of the Pension Fund filed an interpleader complaint in the U.S. District Court for the Northern District of Indiana, Hammond Division, to determine who should receive Mr. Perteet's death benefits. A magistrate court found that the Debtor was the only plan beneficiary listed in his benefit documents and thus was the legal party entitled to receive the proceeds under ERISA. The court also held, however, that its ruling did not preclude the Perteet estate and its representative from pursuing state court remedies to enforce the Divorce Decree.
N.D. Ind. Magistrate Court Amended Opinion and Order, Docket No. 14, at 1–2.
See id. at 7 (citing Metlife Life & Annuity Co. of Conn. v. Akpele , 886 F.3d 998, 1007–08 (11th Cir. 2018) ) ("[A] party who is not a named beneficiary of an ERISA plan may not sue the plan for any plan benefits. A party, however, may sue a plan beneficiary for those benefits, but only after the plan beneficiary has received the benefits.").
Id. at 7–8.
Despite waiving her rights to the proceeds of Mr. Perteet's benefits under the Divorce Decree, the Debtor received over $220,000 and never turned it over to the estate. The Perteet estate and its personal representative started a proceeding against the Debtor in an Indiana probate court seeking turnover of the funds. In December 2019, the Debtor filed an affidavit with the probate court stating that she no longer had any of the funds and could not comply with a prior court order requiring her to deposit the funds with the clerk of the court.
Sonia Jones-Peteet Affidavit, Docket No. 11-6.
In May 2020, the Debtor filed this chapter 7 bankruptcy case. This Court entered the Order of Discharge in January 2021. In March 2021, Plaintiffs filed an adversary complaint objecting to the discharge under Section 727(a)(4)(A) of the Bankruptcy Code, and a request to determine the non-dischargeability of the pension fund debt under Sections 523(a)(2)(A) and 523(a)(15) of the Bankruptcy Code. Plaintiffs moved for summary judgment. The Debtor responded that the pension funds were awarded to her by the magistrate court and moved for summary judgment, arguing that the pension fund debt was discharged.
Summary Judgment Standard
Federal Rule of Civil Procedure 56 permits a party to move for summary judgment, "identifying each claim or defense — or the part of each claim or defense — on which summary judgment is sought." Fed. R. Civ. P. 56(a). Federal Rule of Bankruptcy Procedure 7056 incorporates Rule 56 in adversary proceedings. When presented with two competing motions for summary judgment, a court must analyze them independently and on their own merits. State v. Rettig , 987 F.3d 518, 526 (5th Cir. 2021). Movants are entitled to summary judgment if they show "that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Id. "A ‘material’ fact is one ‘that might affect the outcome of the suit under governing law.’ " Renwick v. PNK Lake Charles, L.L.C. , 901 F.3d 605, 611 (5th Cir. 2018) (internal citations omitted). A factual dispute is genuine if the evidence is such that a reasonable factfinder could return a verdict for the non-movant. See Harville v. City of Houston, Mississippi , 945 F.3d 870, 874 (5th Cir. 2019). In determining whether summary judgment is appropriate, all inferences are drawn in the non-movant's favor. Id.
Section 727(a)(4)(A)
A chapter 7 debtor receives a discharge unless a statutory exception applies under Section 727(a). Section 727(a)(4)(A) states that a debtor will not receive a discharge if the debtor knowingly and fraudulently, in or in connection with the bankruptcy case, made a false oath or account. Plaintiffs claim that the Debtor made an implied false statement by spending pension funds that, under the Divorce Decree, she waived the right to receive. This is, however, a prepetition act that is not evidence of a false oath or account made in or in connection with the case. See In re Wagner , 492 B.R. 43, 57 (Bankr. D. Colo. 2013) ("[ Section] 727(a)(4) is not directed at prepetition activity, it is specifically directed toward activity that takes place ‘in or in connection with the bankruptcy case.’ "); In re Bub , 502 B.R. 345, 355 (Bankr. E.D.N.Y. 2013) (a debtor's prepetition conduct, even if harmful to creditors, is not a valid basis to object under Section 727(a)(4)(A) ). And Plaintiffs' claims that the Debtor (i) remained silent during the chapter 7 case about waiving her right to receive the pension funds and (ii) listed a prepetition payment to an attorney using allegedly fraudulently obtained pension funds both include disputed facts. For example, the Debtor argues the magistrate court awarded her the funds. And disclosing prepetition payments in a statement of financial affairs is not enough to grant summary judgment here.
11 U.S.C. § 727.
Id. § 727(a)(4)(A).
See Amended Summary Judgment Reply, Docket No. 18, at 8–9.
See, e.g. , Debtor's Response and Cross-Motion, Docket No. 13, at 4, 8.
Summary judgment is also denied for another reason. Bankruptcy Rule 4004(a) required Plaintiffs to file a complaint objecting to the discharge under Section 727(a)(4)(A) no later than 60 days after the first date set for the Section 341 meeting of creditors. Courts strictly enforce this deadline. See, e.g. , In re Ward , 978 F.3d 298, 302 (5th Cir. 2020).
The Notice of Chapter 7 Bankruptcy Case was issued in May 2020. The Notice stated the date for the first meeting of creditors was June 3, 2020 and that the deadline to object to the Debtor's discharge was August 3, 2020. Counsel for Plaintiffs and Mr. Montel Perteet were served with the Notice. Plaintiffs filed an adversary complaint on March 29, 2021, which is over 200 days late.
Notice of Chapter 7 Bankruptcy Case, Meeting of Creditors & Deadlines, Case No. 20-32494, Docket No. 6.
Docket No. 7.
Section 523(a)(2)(A) excepts from the discharge debts for money obtained by false pretenses, a false representation, or actual fraud. Plaintiffs argue the Debtor made false representations when she waived her right to Mr. Perteet's pension funds under the Divorce Decree. To establish a false representation, a debtor must have made a representation that was (1) a knowing and fraudulent falsehood, (2) describing past or current facts, and (3) relied upon by the other party. See Shellpoint Mortg. Servicing, LLC v. Barnett (In re Barnett) , Case No. 20-3116, 2020 WL 5031924, at *4 (Bankr. S.D. Tex. Aug. 25, 2020). Based on the record there is insufficient evidence about whether the Debtor made a false representation to grant summary judgment. For example, the Debtor received the pension funds because she was listed as the beneficiary in Mr. Perteet's benefit documents. And she admits receiving and spending the funds. Refusing to turn over the pension funds may violate the terms of the Divorce Decree, but that is not enough to grant summary judgment.
Pl. Mot. Summ. J., Docket No. 11, at 6.
In addition, Section 523(c) of the Bankruptcy Code states that a debtor is discharged from a debt specified under 523(a)(2) unless a creditor to whom the debt is owed requests a determination of the dischargeability of the debt. Bankruptcy Rule 4007(c) required Plaintiffs to file a complaint no later than 60 days after the first date set for the Section 341 meeting of creditors. Courts strictly enforce this deadline. See, e.g. , In re Dunlap, 217 F.3d 311, 315 (5th Cir. 2000). As noted above, Plaintiffs failed to timely file a complaint. This is another reason summary judgment is denied.
Section 523(a)(15) excepts from the discharge any debt owed to a spouse or former spouse, that is not of the kind described in Section 523(a)(5), incurred by the debtor in the course of a divorce or in connection with a separation agreement, or a divorce decree. All property settlements between a husband and wife under a divorce decree are covered by Section 523(a)(15). And unlike with Section 523(a)(2)(A), Bankruptcy Rule 4007(a) and (b) permit any creditor to seek a determination on the dischargeability of any debt under Section 523(a)(15) at any time. A creditor may even reopen a case without paying another fee to file a complaint to determine the dischargeability of such a debt.
Section 523(a)(5) excepts from discharge any debt for a domestic support obligation, which does not apply here.
See Kinkade v. Kinkade (In re Kinkade ), 707 F.3d 546, 549 n.3 (5th Cir. 2013).
Plaintiffs argue that summary judgment is warranted because the Debtor waived her right to Mr. Perteet's pension funds under the Divorce Decree, received the funds, and then improperly spent them. The Debtor argues, however, that only Mr. Perteet may seek a dischargeability determination under Section 523(a)(15). She also argues that Section 523(a)(15) does not apply because Plaintiffs hold a post-divorce breach of contract claim against her and not a debt that arose during divorce proceedings or in connection with the Divorce Decree. The Court agrees with Plaintiffs.
There are two question to decide. First, is there a debt that falls under Section 523(a)(15) ? Second, do Plaintiffs have standing to seek a determination of the dischargeability of the debt? The answer to both questions is yes.
Under the Divorce Decree, Mr. Perteet was awarded as his sole property, and the Debtor was divested of, all right, title, and claim to his pension benefits (or any other benefits related his past, present, or future employment). The award to Mr. Perteet and the Debtor's divestment applied to all such funds "whether matured or unmatured, accrued or unaccrued, vested or otherwise." Plaintiffs argue that she owes over $220,000 because she never turned over the pension funds. The Bankruptcy Code defines a "debt" as "liability on a claim." A "claim" is a "right to payment, whether or not such right is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed ...." Mr. Perteet and the Debtor agreed to a property division about his pension funds and the state court approved it during divorce proceedings and in connection with the Divorce Decree. Mr. Perteet had a contingent claim relating to his benefits when the state court approved it. Any breach of the Divorce Decree years later still relates to a "debt" incurred during divorce proceedings and in connection with the Divorce Decree. The estate and its representative assert a claim against the Debtor for breach of the Divorce Decree about a debt owed to a former spouse. This debt falls within Section 523(a)(15).
Final Decree of Divorce, at 3 (Section H-4).
Id.
Id. § 101(5).
See In re Morris , 454 B.R. 660, 663 (Bankr. N.D. Tex. 2011) (including post-divorce fees incurred to enforce divorce decree as "debts" owed to a former spouse under Section 523(a)(15) ).
The next issue is whether the estate and its representative have standing to seek a determination under Section 523(a)(15). The Debtor believes that only Lonnie Perteet has standing. And because he died, this means nobody does. She mainly relies on Hisaw v. Hisaw (In re Poppleton) , 382 B.R. 455 (Bankr. D. Idaho 2008) and Estate of Donald Bryant v. Bryant (In re Bryant) , 260 B.R. 839 (Bankr. W.D. Ky. 2001).
The Debtor's reliance on In re Brooks , 371 B.R. 761 (Bankr. N.D. Tex. 2007) is misplaced. In that case, a law firm sought a declaration of non-dischargeability against the debtor for legal fees incurred on behalf of the non-debtor spouse in the divorce proceeding. 371 B.R. at 762. The law firm intervened in the divorce proceeding and obtained separate judgments for legal fees against both parties. Id. Each spouse was separately liable for his or her own debt to the firm. Id. at 763. That case explored whether the debt owed to the law firm was covered under Section 523(a)(15). This case is distinguishable from the facts here and its holding does not change the outcome for the reasons stated above.
In Poppleton, personal representatives of a deceased ex-spouse's estate sought a determination of the non-dischargeability of certain debts the debtor was ordered to pay under a divorce decree. The bankruptcy court held that the representatives did not have standing, relying, in part, on the reasoning from In re Bryant , a pre-BAPCPA case, which stated:
382 B.R. at 455.
See id. at 459. BAPCPA amended Section 523(a)(15) to, among other things, limit non-dischargeability to debts owed to a spouse, former spouse, or child of the debtor.
[T]he legislative history of § 523(a)(15) strongly suggests that only a living spouse, former spouse or child of the Debtor has standing to sue under § 523(a)(15). The whole purpose of this provision is to protect a former spouse or child from having to assume marital debts discharged by a Debtor in bankruptcy. Since the former spouse in this case is deceased, the Court has no interest in protecting his estate, as no detriment can occur to the deceased party if the debt is discharged.
See id. at 458 (quoting Bryant , 260 B.R. at 848 ) (emphasis added).
This Court respectfully disagrees with the holding in these cases for two reasons. First, Bankruptcy Rule 4007(a) states that "any creditor may file a complaint to obtain a determination of the dischargeability of any debt." A "creditor" is an "entity" that has a prepetition claim against the debtor. An "entity" includes a person and an estate. A "person" includes an individual (i.e., Montel Perteet). And as discussed above, a "debt" is simply liability on a "claim." On the petition date, the estate and its representative (both "entities") were "creditors" because they had a claim against the Debtor (whether disputed or contingent) based on the prepetition litigation in an Indiana probate court about Mr. Perteet's pension funds. Bankruptcy Rule 4007(a) allows these creditors to seek a determination of the dischargeability of any debt. That includes a debt owed to Lonnie Perteet under the Divorce Decree, for which the estate and its representative have pending litigation against the Debtor.
Fed. R. Bankr. P. 4007(a) (emphasis added).
Id. § 101(15).
Id. § 101(41).
Id. § 101(12).
Second, the statute excepts debts owed to a "former spouse" and does not distinguish between living and deceased ones. The statute is not ambiguous and so there is no need to review the legislative history. This Court must "presume that [the] legislature says in a statute what it means and means in a statute what it says there." See BedRoc Ltd., LLC v. United States , 541 U.S. 176, 183, 124 S.Ct. 1587, 158 L.Ed.2d 338 (2004) (quoting Conn. Nat'l Bank v. Germain , 503 U.S. 249, 253–54, 112 S.Ct. 1146, 117 L.Ed.2d 391 (1992) ); Esquivel v. Lynch , 803 F.3d 699, 704 (5th Cir. 2015) (same). Further, nothing in the Bankruptcy Code or the Bankruptcy Rules prevents the estate or its representative from seeking a determination on the dischargeability of the pension funds debt on behalf of Mr. Perteet. In sum, the estate and its personal representative have standing in this case. And the Court grants summary judgment.
Debtor's Cross-Motion for Summary Judgment
For the reasons stated above, summary judgment is granted on Plaintiffs' request to determine dischargeability under Section 523(a)(15). As a result, the Debtor's cross-motion for summary judgment about Section 523(a)(15) is denied. But summary judgment is granted as to Plaintiffs' objection to the discharge under Section 727(a)(4)(A) and request to determine the dischargeability of debt under Section 523(a)(2)(A).
Order
For the above reasons, it is ORDERED that summary judgment is granted on Plaintiffs' request to determine dischargeability under Section 523(a)(15) about the pension fund debts owed to Mr. Perteet under the Divorce Decree. The discharge in this case does not affect Plaintiffs' rights to enforce the Divorce Decree in another forum. Summary judgment is denied on Plaintiffs' objection to the discharge under Section 727(a)(4)(A) and request to determine the dischargeability of debt under Section 523(a)(2)(A).
It is further ORDERED that Debtor's cross-motion for summary judgment is granted on Plaintiffs' Section 727(a)(4)(A) and Section 523(a)(2)(A) objections. Summary judgment is denied as to the dischargeability of debt under Section 523(a)(15).
The Court retains jurisdiction to hear and determine all matters arising from or related to the implementation, interpretation, and enforcement of this Order.