Damschroeder v. Williams (In Re Williams)Damschroeder v. Williams (In Re Williams)
DECISION AND ORDER
This cause comes before the Court on the Motion of the Plaintiff for Summary Judgment and Memorandum in Support, and the Defendant’s Response thereto. The Plaintiffs Motion for Summary Judgment is brought in support of her Complaint to Determine Dischargeability. For the Plaintiffs Motion for Summary Judgment, each of the Parties filed supporting memoranda and evidence regarding their respective positions. The Court has now had the opportunity to review these materials, and finds, for the reasons set forth herein, that the Plaintiffs Motion for Summary Judgment should be Granted as provided herein.
FACTS
The Plaintiff, Lisa R. Damschroeder, and the Defendant, David A. Williams, are former husband and wife. During their marriage, the Parties became jointly liable on numerous obligations, secured and unsecured, including a mortgage obligation secured against the Parties’ former marital residence. On October 24, 2006, the Parties’ marriage was dissolved through the entry of a decree of dissolution. Incorporated into this Decree was a prior separation agreement entered into by the Parties. Throughout this process, the Plaintiff, but not the Defendant, was represented by legal counsel.
On January 23, 2007, the Defendant filed a petition in this Court for relief under Chapter 7 of the United States Bankruptcy Code. (Main Case, Doc. No. 1). The Plaintiff then filed this action, seeking a determination that the Defendant’s bankruptcy discharge would not extend so as to release him from a number of the requirements imposed by the Parties’ Decree of Dissolution. (Doc. No. 1). Through her Motion for Summary Judgment, the Plaintiff then delineated that the following obligations were in controversy:
a. HFC, Account No. XXXXX-XX-XXX519-5 in the amount of $15,131.18;
b. Beneficial Account No. XX-XXXX-XX-XX5362 in the amount of $1,845.28;
c. Beneficial Account No. XXXX-XX-XXX764-7 in the amount of $1,346.29;
d. Best Buy Account No. XXXXXXXXXXXX3485 in the amount of $2,494.14;
e. Americredit Financial Services Account No. N/A in the amount of $4,914.21;
f. Leo Marks Jewelers Account No. N/A in the amount of $6,264.00; and
g. (2) Maumee OBGYN Associates for $48.36, Consultants in Lab for $52.32;
h. Toledo Hospital for $37.85;
i. Elmore Medical for $221.58, and two miscellaneous bills around $300.00;
j. The property settlement ordering Defendant to pay the Plaintiff $25,000.00;
k. The mortgage debt Defendant became responsible for when he was given all rights to the marital home and ordered to refinance within two (2) years of the Decree of Dissolution.
(Doc. No. 30, at pg. 16).
1
In the ensuing discussion, these obligations will be refer
On July 20, 2007, the Debtor was granted a discharge under
DISCUSSION
Before this Court is the Plaintiff’s Complaint to Determine Dischargeability. Proceedings brought to determine the dis-chargeability of particular debts are deemed to be “core proceedings” over which this Court has been conferred with jurisdiction to enter final orders and judgments. 28 § 157(b)(2)(I); § 1384.
The matter as to the dischargeability of those debts, listed as (a) through (k) in the Statement of Facts,
supra,
is brought before the Court on the Plaintiffs Motion for Summary Judgment.
The Plaintiff seeks a determination in this proceeding that those obligations previously delineated as (a) through (k) are nondisehargeable debts. As authority for this position, the Plaintiff relied upon, in her Complaint, two provisions of the Bankruptcy Code:
(a) A discharge undersection 727 ... of this title does not discharge an individual debtor from any debt—
(15) to a spouse, former spouse, or child of the debtor and not of the kind described in paragraph (5) that is incurred by the debtor in the course of a divorce or separation or in connection with a separation agreement, divorce decree or other order of a court of record, or a determination made in accordance with State or territorial law by a governmental unit[.]
Although broad in scope, the principal examples of debts encompassed by
To qualify as the type of marital debt excepted from discharge under
Regarding the applicability of the remaining two elements, the Parties agree that they are former husband and wife. In addition, in Article 8 of the Parties’ Decree of Dissolution, entitled “EXISTING DEBT,” it was set forth that the Defendant would assume and hold the Plaintiff harmless on those accounts listed as (a) through (f) in this Court’s Statement of Facts. (Doc. No. 30, Ex. A). A later supplement to Article 8, incorporated into the Parties’ Decree of Dissolution, then provided the same for those debts delineated as (g) through (i) in this Court’s Statement of Facts. (Doc. No. 30, Ex. B). For the obligation listed as (j) in this Court’s Statement of Facts, the Parties’ Decree of Dissolution set forth: “the Parties hereby agree on a complete property settlement in the amount of $25,000.00. Petitioner Husband agrees to pay Petitioner Wife SEVENTY FIVE DOLLARS AND 00/100 (75.00) per week until this settlement is paid in full.” (Doc. No. 30, Ex. A).
Together, this evidence, even when viewed in light most favorable to the Defendant, can only be construed one way: As applied to the first and third elements of
In his arguments to the Court, the Defendant stated:
Defendant was ordered to pay debts to third parties through the separation agreement. Plaintiff is requesting in her motion for summary judgment that said debts be declared nondischargeable. Defendant states that the debts are not owed to the Plaintiff and therefore do not constitute a debt to a spouse. Debts owed to third parties are dischargeable as they relate to the third party.
(Doc. No. 37, at pg. 5) (emphasis added). This position, however, that debts owed to third-party creditors are not subject to
The holding of
In re Gibson
is consistent with the statutory language of
Obligations arising in the field of domestic relations have been traditionally accorded favorable treatment in bankruptcy. For example, under Section 17a(2) of the Bankruptcy Act of 1898 it was provided that support obligations were not subject to being discharged in bankruptcy.
Based then on this policy, it would seem rather odd to craft a limitation for
A requirement in a divorce decree to hold harmless or indemnify a spouse for joint obligations incurred during a marriage creates a “new” debt, running solely between the former spouses.
In re Burton,
the exception to discharge for “hold harmless” agreements may not provide protection from creditors for the non-debtor spouse. The debts owed to the joint creditors are discharged as to the debtor only. The obligation that is not dischargeable in these situations is a debtor’s responsibility to hold his non-debtor, ex-spouse harmless. The non-debtor ex-spouse may look to the debtor for reimbursement pursuant to any non-dischargeable “hold harmless” obligations, but the non-debtor ex-spouse isnot immune from pursuit by the primary joint creditors.
For these reasons, it is the decision of this Court that those obligations, as delineated (a) through (j) in the Statement of Facts, meet the necessary elements of
The obligation delineated as (k) involves the Parties’ former marital home. Concerning this real property, it was provided, under the Parties’ Decree of Dissolution, that:
said real estate shall be the sole property of Petitioner Husband, free and clear of any claims on the part of the Wife. Petitioner Wife hereby agrees that she will execute any and all necessary paperwork including but not limited to a Quit-Claim Deed regarding the property within thirty (30) days of the date of the final hearing. Furthermore, if Petitioner Husband should sell the real estate within five (5) years of the final hearing any and all equity shall be divided among the parties.... Petitioner Husband will refinance within two (2) of the date of the final hearing.
(Doc. No. 30, Ex. A). In compliance with these terms, the Plaintiff quit claimed her interest in the real property to the Defendant. The Defendant, however, has yet to effectuate any of his obligations with respect to the above provision, and as a result, the Plaintiff remains liable on a note and mortgage secured against the property.
Since the time of the Parties’ divorce, the subject property has been placed in foreclosure due to the Defendant’s nonpayment of the mortgage obligation. The Plaintiff, anticipating that any foreclosure on the Parties’ former marital property will result in a deficiency judgment, “requests an order of nondis-chargeability of Defendant’s obligation to pay the mortgage” on the Parties’ former marital residence. (Doc. No. 30, at pg. 8). In response, the Defendant, while acknowledging his failure to comply with the terms of the above provision, takes the position that, since the provision is silent as to which party is responsible for the mortgage, the “proper forum to challenge the order and language is the Domestic Relations Court.” (Doc. No. 37, at pgs. 6-7). The Court agrees with the Defendant.
The relief sought by the Plaintiff requires that this Court read into the Parties’ Decree of Dissolution a term which is not expressly provided therein; to wit: that the Defendant, alone, should bear the burden of any deficiency that may arise as the result of a foreclosure sale of the Parties’ former marital residence. While such a reading is consistent with the fact that the Defendant was awarded in the Parties’ Decree of Dissolution exclusive ownership of the marital residence, the Plaintiffs interpretation is not compelled by such an award. To the contrary, the provision,
supra,
awarding the Defendant exclusive ownership of the Parties’ marital residence, also provides that if the property is sold within five years, any equity in the property would be divided equally among the Parties. It therefore could stand to reason that, with the Plaintiff retaining a residual equity interest in the property, the Plaintiff would also have to bear the
It is established jurisprudence that the court from which an order or judgment is rendered is in the best position to interpret its own order or judgment.
Amado v. Microsoft Corp.,
The dispute between the Parties regarding their respective liabilities on the former marital residence concerns not the issue of dischargeability, but whether there even exists a debt. A debt is defined as “liability on a claim.”
In addition to the issue of dischargeability, the Defendant also attacked the Plaintiffs right to bring this suit, raising the doctrine of “unclean hands.” According to the Defendant:
In the case at bar Plaintiff has unclean hands. The Separation Agreement was grossly unfair to Defendant in which he took on a majority of the debt and she walked away owing very little. This forced the Defendant into a bankruptcy due to the inequitable division of debt. Plaintiff and her divorce attorney knew or should have known based on the debt and the Defendant’s income that there was no way possible that he would be able to pay what was ordered through the divorce and maintain his present living expenses. Based on the doctrine of unclean hands, Plaintiff is not entitled to summary judgment.
(Doc. No. 37, pgs. 7-8).
The doctrine of unclean hands is an equitable doctrine and “bars relief to those guilty of improper conduct in the matter as to which they seek relief.” 30A C.J.S. Equity § 109. The doctrine has been applied in the bankruptcy context to preclude a plaintiff with “unclean hands” from maintaining in a bankruptcy court, as a court of equity, a determination regarding the dis-chargeability of a particular debt.
In re Uwimana,
First, concerning a separation agreement, Ohio law requires that “both spouses shall appear before the court and each spouse shall acknowledge under oath that he has voluntarily entered into the separation agreement appended to the petition, that he is satisfied with its terms, and that he seeks dissolution of the marriage.” O.R.C. § 3105.64(A). It is further provided by statute that, “[i]f, at the time of the hearing, either spouse is not satisfied with the separation agreement ... the court shall dismiss the petition and refuse to validate the proposed separation agreement.” O.R.C. § 3105.65(A). The Defendant, thus, had every opportunity to raise his concerns during the course of the Parties’ divorce, but choose to remain silent instead. Moreover, the Defendant did not thereafter seek to have the Decree of Dissolution set aside by the court entering the judgment. Under these conditions, the Court is not persuaded that equity should come to the aid of one who has slept on his rights.
See General Electric Co. v. Sciaky Bros., Inc.,
Additionally, the Defendant’s argument, regarding the inequity of his separation agreement, is an issue that is more properly brought before the court from which the Decree of Dissolution was entered. To hold otherwise, and rule on the Defendant’s argument concerning the Plaintiff s “unclean hands,” would usurp the role afforded by Ohio law, to its courts, which requires approval by the court of the parties’ separation agreement, after which time the agreement is merged into the court’s decree of dissolution. O.R.C. § 3105.65(B). Put differently, to rule on the applicability of the “unclean hands” doctrine in this proceeding would, with respect to the state court’s approval of the Parties’ separation agreement, place this Court in the role of a reviewing authority. It is, however, “black letter law that the Bankruptcy Court cannot act as an appellate court to determine whether the State Court’s decision was correct.”
Owners Corp. v. Seminole Realty Co. (In re 9281 Shore Road Owners Corp.),
In summation, for those obligations delineated in this Court’s Statement of Facts as (a) through (j), the Plaintiff has sustained her burden of showing that these obligations meet the requirements of a nondisehargeable debt under
In reaching the conclusions found herein, the Court has considered all of the evidence, exhibits and arguments of counsel, regardless of whether or not they are specifically referred to in this Decision.
Accordingly, it is
IT IS FURTHER ORDERED
that, as provided herein, those obligations the Defendant, David A. Williams, was required to assume and hold the Plaintiff harmless from, be, and are hereby, determined to be NONDISCHARGEABLE DEBTS pursuant to