Opinion
Case No. 8:18-bk-07981-RCT
01-14-2019
In re BALTASAR JIMENEZ, Debtor.
Chapter 11 ORDER GRANTING DEBTOR'S MOTION TO ENFORCE AUTOMATIC STAY , IN PART; AND GRANTING CREDITOR'S MOTION TO MODIFY AUTOMATIC STAY, IN PART, IN DOMESTIC RELATIONS PROCEEDING
Before the court is the Motion for Order Confirming Absence of Automatic Stay Nunc Pro Tunc to the Date of Filing (the "Stay Motion") filed by his former spouse Melba Jimenez ("Ms. Jimenez"). Also before the court is the Emergency Motion to Impose Automatic Stay in a Domestic Relations Collections Matter (the "Enforcement Motion") filed by Debtor, Baltasar Jimenez ("Debtor").
Doc. 16.
Doc. 26. Although titled Emergency Motion to Impose Automatic Stay in a Domestic Relations Collections Matter, the court indicated during the hearing that it would construe the paper as a Motion to Enforce Automatic Stay.
On September 3, 2014, the Circuit Court for Sarasota County, Florida, entered its Final Judgment of Dissolution of Marriage dissolving the marriage of Debtor and Ms. Jimenez (the "Final Judgment"). The Final Judgment, among other things, ordered the parties to comply with the terms of their Marital Settlement Agreement ("MSA"). Relevant here, the MSA provided for the disposition, maintenance, and sale of the parties' jointly owned real property located at 7440 Manasota Key Rd., Englewood, FL 34223 (the "Manasota Property"). More specifically, the MSA required Debtor to refrain from intentionally damaging the property and to pay all monthly expenses, maintenance and upkeep associated with the Manasota Property until sold.
Proof of Claim 6-1, Part 4 (Final Judgment of Dissolution of Marriage).
Id.
Proof of Claim 6-1, Part 5 (Marital Settlement Agreement).
Id. § 6.2; Proof of Claim 6-1, Part 9 (Second Motion for Contempt and Enforcement Regarding Manasota Key Property and Request for Expedited Hearing Time ("Second Motion for Contempt") ¶ 2).
Shortly thereafter, Ms. Jimenez began to file contempt motions in state court seeking to enforce Debtor's compliance with his obligations as to the Manasota Property. On January 11, 2018 and again on June 13, 2018, the state court found Debtor in civil contempt for his willful refusal to comply with the terms of the Final Judgment and subsequent court orders regarding the Manasota Property. On July 26, 2018, Ms. Jimenez filed her Second Motion for Contempt for Debtor's willful failure or refusal to comply with his obligations as to the Manasota Property. Ms. Jimenez asked the state court to have Debtor held in "Indirect Criminal and/or Civil Contempt and/or Enforcement pursuant to Fla. Fam L. R. P. 12.615 and Fla. R. Crim .P. 3.840." A contempt hearing was held before the circuit judge on September 6 and 14, 2018 ("the Contempt Hearing").
Second Motion for Contempt ¶¶ 2-3.
Id.
Id. ¶ 1.
Doc. 16 ¶ 5.
On September 20, 2018, the Debtor filed for bankruptcy protection under chapter 13 and filed a Suggestion of Bankruptcy with the state court that same day. Debtor's counsel, Mr. Fernandez, argued before the state court that the automatic stay applied to the Contempt Hearing. Notwithstanding, Ms. Jimenez went forward with the Contempt Hearing on September 21 and October 10, 2018. Debtor did not attend the final hearing, believing the Contempt Hearing had been stayed by his bankruptcy filing.
Doc. 1. Debtor converted to chapter 11 on November 20, 2018. See Doc. 35 (Order and Notice Converting Case to Chapter 11).
Doc. 26 ¶ 6.
Doc. 17 ¶ 5.
Id. ¶ 3.
At the October 10, 2018 hearing, the state court, once again, found Debtor in civil contempt for his willful refusal to comply with the terms of the Final Judgment of Dissolution of Marriage and subsequent court orders regarding the Manasota Property. The state court directed Ms. Jimenez's counsel, Mr. Resnick, to submit a proposed order granting the Second Contempt Motion and "all of the items I ordered" (the "Proposed Order"). The Proposed Order is pending before the state court.
Proof of Claim 6-1, Part 8 (Contempt Hearing Tr. at 3:7-14; 9:17-18).
Contempt Hearing Tr. at 43:6-9.
Proof of Claim 6-1, Part 9 (Proposed Order).
Ms. Jimenez now seeks an order from this court confirming the absence of the automatic stay. She argues that she is entitled to entry and enforcement of the Proposed Order because the Contempt Hearing constituted "the commencement or continuation of a criminal action or proceeding against the debtor" and as such is excepted from the automatic stay under § 362(b)(1). She further argues that the Contempt Hearing constituted "the commencement or continuation of a civil action or proceeding ... for the establishment or modification of an order for domestic support obligations" and as such is excepted from the automatic stay under 11 U.S.C. § 362(b)(2)(A)(ii). Alternatively, if the automatic stay was implicated, Ms. Jimenez seeks relief under §362(d)(1) on the basis that her interest in the Manasota Property is not adequately protected, and under §362(d)(2) on the basis that the Debtor does not have equity in the Manasota Property and such property is not necessary to an effective reorganization.
Statutory references are to 11 U.S.C. §§ 101-1532 ("Code" or "Bankruptcy Code"), unless otherwise stated.
Doc. 16.
Debtor opposes the Stay Motion and argues that the automatic stay was in place as of September 20, 2018 and that the September 21 and October 10, 2018 hearings were held in violation thereof. Debtor moves for an order staying the Contempt Hearing, including entry and enforcement of the Proposed Order, and voiding all activity that occurred in the domestic relations case since the filing of the bankruptcy.
Doc. 17.
Doc. 26.
The court heard both Motions on December 20, 2018. At that time, counsel for Ms. Jimenez stated that he would like to present evidence of "bad faith" to support her claim for nunc pro tunc relief from the automatic stay if the court determined that the stay applied to the September 21 and October 10, 2018 hearings that were held after Debtor filed bankruptcy.
DISCUSSION
A. Debtor's Interest in the Manasota Property Is Property of the Bankruptcy Estate
First, the court must determine whether Debtor's interest in the Manasota Property is property of the bankruptcy estate. Section 541(a)(1) provides that the bankruptcy estate contains "all legal or equitable interests of the debtor in property as of the commencement of the case." It is undisputed that prior to the filing bankruptcy, Debtor held a legal interest in the Manasota Property. Article VI § 6.1 of the MSA begins: "The Parties jointly own real property located at 7440 Manasota Key Road, Englewood, Florida 34223." In addition, Debtor listed the Manasota Property on his Schedule A/B as "[o]wned jointly w/non-fili[n]g Melba Jimenez." Accordingly, under § 541(a)(1), Debtor's interest in the Manasota Property is property of the bankruptcy estate. B. The September 21 and October 10 , 2018 Contempt Hearings Violated the Automatic Stay Unless An Applicable Exception Applies
Proof of Claim 6-1, Part 5 (Marital Settlement Agreement).
Doc. 14 (Schedule A/B: Property § 1.2).
Upon the filing of a bankruptcy petition the Code imposes an automatic stay prohibiting all collection and enforcement activities against the debtor, his property, and property of the estate. However, the statute does not stay all proceedings involving the debtor. Section 362(b) expressly provides that certain actions are not stayed by the filing of a bankruptcy petition. "Exceptions to the automatic stay should be construed narrowly to further the purpose of the stay. One of those purposes is to protect the debtor from having to convince a state court judge that the state court matter should not proceed . . . the burden is on the creditor not to seek relief against a debtor in violation of the stay."
In re Montana, 185 B.R. 650, 652 (Bankr. S.D. Fla. 1995) (citations omitted).
Id.
In re Sutton, 250 B.R. 771, 774 (Bankr. S.D. Fla. 2000) (internal citations omitted).
Accordingly, the court must decide whether the exceptions to the automatic stay found in 11 U.S.C. §§ 362(b)(1) and 362(b)(2)(A)(ii) apply to the relief Ms. Jimenez sought and obtained at the September 21 and October 10, 2018 Contempt Hearings.
1. The Contempt Hearing Was Not a Criminal Proceeding Under 11 U.S.C. § 362(b)(1)
Section 362(b)(1) excepts from the automatic stay "the commencement or continuation of a criminal action or proceeding against the debtor." To fall within this statutory exception, the court must determine that the Contempt Hearing was for a criminal contempt. Under Florida law, "a criminal contempt proceeding is maintained solely and simply to vindicate the authority of the court or to punish otherwise for conduct offensive to the public in violation of an order of the court." In a civil contempt proceeding an aggrieved party is primarily seeking relief, personal and private to themselves. "A creditor cannot turn enforcement actions into a criminal matter merely by requesting punitive sanctions. If that were the case, any creditor could avoid the automatic stay's limitations merely by adding a request for punitive sanctions to a request for remedial sanctions." It is apparent from the record that the purpose of Ms. Jimenez's Second Motion for Contempt and the Contempt Hearing that ensued was to coerce Debtor's compliance with the terms of the Final Judgment and subsequent court orders regarding the Manasota Property. Indeed, at the October 10, 2018 hearing, the state court found the Debtor in civil contempt of court stating:
Pugliese v. Pugliese, 347 So.2d 422, 424 (Fla. 1977) (citations omitted).
Demetree v. State ex rel. Marsh, 89 So.2d 498, 501 (Fla. 1956).
In re Marriage of Weis, 232 P.3d 789, 797 (Colo. 2010).
So I'll find that based on [Debtor's] financial records, he had the ability to pay. Based on the evidence, [Debtor's] behavior is willful and contemptuous, that he voluntarily and intentionally refused or failed to keep the [Manasota Property] in showable, reasonable condition, or maintain it pursuant to the marital settlement agreement, and to make those payments. . . . I will find, as I already have, Dr. Jimenez in civil contempt.And, the state court awarded Ms. Jimenez monetary damages for her efforts. In addition, Ms. Jimenez seeks an order from this court "confirming the absence of the automatic stay nunc pro tunc to the date of filing so that [she] may proceed with enforcement of the Final Judgment . . . against the Debtor."
Contempt Hearing Tr. at 8:19-25; 9:1, 17-18.
Contempt Hearing Tr. at 10:18-20; 22:22-25; 43:6-10. Specifically, the state court ordered the Debtor to (i) reimburse Ms. Jimenez for all expenses, plus interest, related to the reconversion of the Manasota Property garage back to its original sellable state; (ii) pay invoices for expenses related to upkeep and maintenance of the Manasota Property as set forth in the MSA; and (iii) pay Melba's attorney's fees related to the litigation for the second amended contempt.
Doc. 16 (emphasis added).
Based on the state court's findings, the Contempt Hearing was not a criminal proceeding and, therefore, not excepted from the automatic stay under § 362(b)(1). The central issue Ms. Jimenez pursued during the Contempt Hearing was to enforce the terms of the Final Judgment. Substantively, the Contempt Hearing was coercive in nature - to "enforce[], against the debtor or against property of the estate, [] a judgment obtained before the commencement" of the Debtor's bankruptcy under § 362(a)(2) which is subject to the automatic stay.
2. The Contempt Hearing Did Not Fall Under 11 U.S.C. § 362(b)(2)(A)(ii)
Additionally, Ms. Jimenez argues that the Contempt Hearing held on September 21 and October 10, 2018 did not violate the automatic stay because it was a proceeding "for the establishment or modification of an order for domestic support obligations[,]" and, thus, fell within the exception under § 362(b)(2)(A)(ii).
A domestic support obligation is a debt owed to a former spouse that was incurred as a result of a property settlement agreement that is "in the nature of alimony, maintenance, or support ... [of that former spouse] without regard to whether such debt is expressly so designated." Thus, the court must decide whether Debtor's obligation to pay all monthly expenses, maintenance and upkeep associated with the Manasota Property and to reimburse Ms. Jimenez in the event of his failure to do so as provided for in the MSA is a domestic support obligation.
To make this determination, "a court should look beyond the label the parties have given to a particular debt and determine whether the debt is actually in the nature of alimony or support." In sum, a debt is a domestic support obligation if the parties intended it to function as support or alimony, even if they called it something different. The court's decision should also consider applicable state law. But, there are other factors a court should consider too, including: "(1) the agreement's language; (2) the parties' financial positions when the agreement was made; (3) the amount of the division; (4) whether the obligation ends upon death or remarriage of the beneficiary; (5) the frequency and number of payments; (6) whether the agreement waives other support rights; (7) whether the obligation can be modified or enforced in state court; and finally (8) how the obligation is treated for tax purposes."
In re Benson, 441 Fed.Appx. 650, 651 (11th Cir. 2011) (citing Cummings v. Cummings, 244 F.3d 1263, 1265 (11th Cir. 2001).
Id.
Id.
Id. (citing In re McCollum, 415 B.R. 625, 631 (Bankr. M.D. Ga.2009)).
Here, the MSA clearly reflects the parties' intent with respect to the Manasota Property. The debt at issue arises under MSA §§ 6.1 and 6.2, and by reference to the Agreement for Sale of Property which deals exclusively with the Manasota Property. Debtor is obligated to pay all monthly expenses, maintenance, upkeep, etc. associated with the property until it is sold. If Debtor fails to do so, Ms. Jimenez is entitled to a claim for that amount plus interest from Debtor. Article IV of the MSA further provides that both parties waive any rights they may have to receive alimony for purposes of support and that "[t]his article does not effect or modify any property division provided by this Agreement."
But even if the Contempt Hearing involved a domestic relations order, post-bankruptcy collection proceedings for domestic support obligations are excepted from the automatic stay only to the extent that they are against "property that is not property of the estate." 11 U.S.C. § 362(b)(2)(B).
Alimony and/or support was not at issue in the Contempt Hearing. Rather, Ms. Jimenez sought to enforce a property settlement. As such, the actions taken on September 21 and October 10, 2018, after Debtor filed his petition bankruptcy, violated the automatic stay to the extent that they implicated the Manasota Property. In the Eleventh Circuit, "[a]ctions taken in violation of the automatic stay are void and without effect." Accordingly, activity in the state court proceeding that occurred after September 20, 2018 related to the Manasota Property, is void and without effect. C. Ms. Jimenez is Entitled to Modification of the Automatic Stay
Borg-Warner Acceptance Corp. v. Hall, 685 F.2d 1306, 1308 (11th Cir. 1982) (citations omitted).
See In re Jordahl, 555 B.R. 861, 864-65 (Bankr. S.D. Ga. 2016) (citation omitted).
Ms. Jimenez next argues that, if the automatic stay applies, she is entitled to relief from the automatic stay, or in the alternative, adequate protection, because (a) there is no equity in the Manasota Property for the benefit of the estate; (b) by virtue of the continued use of the Manasota Property without payment to Ms. Jimenez, the collateral is diminishing and decreasing in value and continues to do so; and (c) the Manasota Property is not necessary for a successful reorganization of the Debtor.
Relief from the automatic stay is governed by §362(d) which reads, in pertinent part:
(d) On request of a party in interest and after notice and a hearing, the court shall grant relief from the stay provided under subsection (a) of this section, such as by terminating, annulling, modifying, or conditioning such stay -
(1) for cause, including lack of adequate protection of an interest in property of such party in interest;
"Cause" is not defined in the Code and is determined on a case-by-case basis. "Allowing a matter to proceed in another forum may constitute 'cause' to lift the stay." It is within the court's discretion whether to grant relief from the stay to allow litigation to continue in another forum. When exercising such discretion courts generally will consider the "prejudice to the debtor's reorganization efforts, conservation of judicial resources, and prejudice to the movant."
See Murray Indus., Inc. v. Aristech Chem. Corp. (In Re Murray Indus., Inc.), 121 BR 635, 636 (Bankr. M.D. Fla 1990) (citation omitted).
Id. (citations omitted).
Id.
Id. at 636-37.
Here, it is appropriate to modify the stay to allow Ms. Jimenez to proceed with her case in state court (a) to liquidate any claims she has against Debtor with respect to the Manasota Property and (b) to allow the state court to supervise the sale of the jointly held property. The state court is familiar with the relevant issues and best situated to supervise the sale and resolve the amount of any monetary claim Ms. Jimenez has against the Debtor. However, the stay is not modified to permit Ms. Jimenez to collect or enforce any liquidated monetary claim against the debtor, without seeking further relief from the automatic stay.
Carver v. Carver, 954 F.2d 1573 (11th Cir. 1992). --------
Accordingly, for the reasons set forth above, it is
ORDERED:
1. The Stay Motion is granted, in part. The automatic stay is modified to permit the state court to supervise the sale of the Manasota Property and to liquidate any claims Ms. Jimenez may have against the Debtor with respect to the Manasota Property. This Order is without prejudice to Ms. Jimenez seeking further relief from the automatic stay as may be appropriate or necessary.
2. The Enforcement Motion is granted, in part. Any activity in the state court proceeding that occurred after September 20, 2018 related to the Manasota Property is void ab initio.
3. The court will conduct a trial on Ms. Jimenez's allegation that Debtor's bankruptcy petition was filed in "bad faith" so as to warrant nunc pro tunc relief from the automatic stay or dismissal of this case. The court will issue a trial schedule order separately.
ORDERED. Dated: January 14, 2019
/s/_________
Roberta A. Colton
United States Bankruptcy Judge Attorney Richard J. Cole, III is directed to serve a copy of this order on interested parties who do not receive service by CM/ECF and file a Proof of Service within 3 days of entry of the order.