590 B.R. 362
Bankr. E.D. Mich.2018Background
- Scott Schubiner and Shelley Zolman executed a 2010 prenuptial (Antenuptial) agreement allocating separate and marital property and including life‑insurance provisions: Shelley was to purchase at least $500,000 of 30‑year term life insurance naming Scott’s revocable trust as beneficiary; Scott was to assign an equivalent amount of his existing policies naming Shelley as beneficiary "as soon as practicable after marriage."
- At signing Scott owned $1.4 million of life insurance with his revocable trust (for his daughter) as beneficiary; Shelley never purchased the required policy during Scott’s lifetime.
- Scott filed Chapter 7 in March 2012, received a § 727 discharge, and died in April 2017. After his death Shelley sued the estate in Michigan probate court seeking $500,000 (and equitable relief) under the Antenuptial Agreement.
- The personal representative (Scott’s brother) reopened the bankruptcy case and filed this adversary proceeding seeking: (a) a declaration the life‑insurance obligation was discharged (or the agreement rejected in bankruptcy), (b) a ruling that Shelley violated the § 524 discharge injunction, and (c) sanctions. Both parties moved for judgment on the pleadings or summary judgment.
- The court considered extrinsic evidence and: (a) held Shelley’s claim on the life‑insurance provision fails on the merits because Scott’s obligation was conditioned on Shelley first procuring coverage (which she never did while he lived); (b) dismissed executory‑contract/rejection claims as immaterial; (c) held Shelley’s claim nonetheless qualified as a “claim”/"debt" under the Bankruptcy Code (even if unenforceable); and (d) declined to award relief for any alleged discharge injunction violation but denied summary judgment to either party on whether the debt was a nondischargeable domestic support obligation (DSO).
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether deemed rejection of the Antenuptial Agreement in Scott’s Chapter 7 erased any underlying obligation or made the issue dispositive | Rejection meant Scott’s obligation did not survive bankruptcy and any claim is valueless | Rejection does not eliminate underlying obligations or determine dischargeability; rejection only gives breach claim | Court: Rejection is immaterial to dischargeability; Counts I and III (deeming/rejection valuation) dismissed as unnecessary |
| Whether Shelley has a valid claim under the Agreement (life‑insurance obligation) | Shelley: her delay was not a substantial breach; she could cure and claims survive; intent was to provide survivor support | Plaintiff: Shelley never performed her condition precedent so Scott’s duty never triggered; estate not liable | Court: Agreement unambiguous — Scott’s duty was to assign an "equivalent" amount to what Shelley applied and paid for; because Shelley never procured insurance in his lifetime, Scott’s obligation never arose; summary judgment for estate on merits of that claim |
| Whether Shelley's probate suit violated the § 524 discharge injunction (i.e., was she attempting to collect a discharged "debt") | Plaintiff: the suit sought collection of a debt discharged in 2012, violating § 524 | Shelley: her claim was not a discharged enforceable obligation (and the indebtedness may be nondischargeable) | Court: Even unenforceable claims qualify as "claims/debts" under current precedents (Midland Funding); court could not resolve dischargeability at summary judgment; however court exercised discretion to deny any injunctive or monetary relief to plaintiff for any alleged violation |
| Whether the life‑insurance obligation is a nondischargeable Domestic Support Obligation (DSO) — i.e., "in the nature of alimony, maintenance, or support" and "established by" a separation or property settlement agreement | Shelley: The Antenuptial is a property/separation settlement and the obligation is in the nature of support | Plaintiff: The Antenuptial is a property settlement (not a separation agreement) and the obligation is property division, not support | Court: Antenuptial is a "property settlement agreement" for § 101(14A)(C) but not a "separation agreement"; genuine issues of material fact remain whether the obligation is "in the nature of" support — summary judgment denied to both sides on DSO issue |
Key Cases Cited
- Long v. Calhoun, 715 F.2d 1103 (6th Cir. 1983) (four‑part analysis for determining when an obligation is ‘‘in the nature of support’’)
- Fitzgerald v. Fitzgerald, 9 F.3d 517 (6th Cir. 1993) (refining Calhoun: if obligation is labeled alimony/support and intended as such, inquiry ends)
- Sorah v. Sorah, 163 F.3d 397 (6th Cir. 1998) (traditional indicia of support and presumption when state court labels obligation as support)
- Cohen v. De La Cruz, 523 U.S. 213 (1998) (a "claim"/"debt" construed as an enforceable obligation under Bankruptcy Code definitions)
- Midland Funding, LLC v. Johnson, 137 S. Ct. 1407 (2017) (an unenforceable claim remains a "claim" for bankruptcy purposes)
- Miller v. Chateau Cmtys., Inc. (In re Miller), 282 F.3d 874 (6th Cir. 2002) (rejection of executory contract is treated as breach allowing an unsecured claim)