Ronald William Kipps
OPINION
I. INTRODUCTION
Before the Court are several matters in a battle between former spouses that started as a state court divorce action in 2012 and now has continued in this Court since the filing of the debtor Ronald William Kipps (“Debtor“) bankruptcy case in 2019. To the extent this Court is able, this Opinion is meant to be the final chapter in the bankruptcy phase of this domestic-financial dispute. Pending before this Court are: (1) the Debtor‘s Fifth Amended Chapter 13 Plan and the objections filed by the Chapter 13 Trustee and creditor Margaret Stinavage-Kipps; (2) the Debtor‘s Objection to Claim No. 5 of Margaret Stinavage-Kipps; and (3) Ms. Stinavage-Kipps’ Motion for Relief from Automatic Stay.
For the reasons set forth below, the Court concludes that (i) the Debtor has not satisfied his burden to show that cause exists to approve a plan that provides for payments over a period that is longer than 3 years pursuant to
II. JURISDICTION
This Court has jurisdiction over this matter pursuant to
III. FACTS
This Court‘s Opinion dated March 31, 2022 granting summary judgment to Ms. Stinavage-Kipps in the Adversary Action set forth in detail the underlying facts of the case, and as such, those facts shall not be repeated here and are incorporated herein. The facts relevant and specific to the many plans filed by the Debtor and the objections filed thereto, the objection to Ms. Stinavage-Kipps’ Claim and her Motion for Relief shall be discussed.
A. State Court Divorce Proceedings
At the time of the bankruptcy filing, the Debtor and Ms. Stinavage-Kipps were parties to a pending divorce action that was commenced in 2012 in the Pennsylvania Court of Common Pleas, Susquehanna County (“State Court“) captioned Margaret Stinavage-Kipps v. Ronald W. Kipps, No. 2012-2213-CP (“State Court Action“). The Debtor filed his Chapter 13 case to stop collection and contempt proceedings pending in the State Court Action.
On March 10, 2017, the Court of Common Pleas of Susquehanna County, Pennsylvania (“State Court“) entered an order (“2017 Equitable Distribution Order“) overruling and sustaining certain objections
Prior to the bankruptcy filing, Ms. Stinavage-Kipps sought to collect on her State Court award. On January 30, 2019, the State Court issued an order freezing all Debtor‘s bank accounts up to an amount of $80,000.00 and scheduled a hearing for May 3, 2019 on Ms. Stinavage-Kipps’ Emergency Petition For Special Relief. See Adv. Dkt. # 82-2. By letter dated April 22, 2019, the Debtor notified Ms. Stinavage-Kipps’ State Court attorney that the Debtor had filed bankruptcy. Adv. Dkt. # 85-1, ¶1, Ex. H. The State Court, post-petition, held the contempt hearing and ordered the Debtor to convey the Property required by the 2017 Equitable Distribution Order.2 The State Court found that, based on its concurrent jurisdiction with federal bankruptcy courts over determinations regarding the applicability of
B. The Bankruptcy Case
1. The Petition and Schedules
On April 22, 2019, the Debtor filed his Voluntary Petition for Relief under Chapter 13 of the Bankruptcy Code. On June 14, 2019, the Debtor filed his Schedules. Dkt. # 28. On his Schedule A/B: Property, Debtor lists several parcels of real property having a value of $1,659,300.00 and miscellaneous personal property totaling $89,817.29 for total assets of $1,749,117.29. The liabilities listed on Schedule E/F are his former spouse, Margaret Stinavage-Kipps4, in the amount of $419,871.09 and other creditors totaling $85,222.60 for total liabilities of $505,093.69.5 Based upon his
On Schedule I, Debtor indicates that he is a “Retired-Farmer” and his sole income is $770.00 from social security benefits and $497.00 from a “Trust Fund” for a total monthly income of $1,267.00. On Schedule J, Debtor lists $4,759.83 in monthly expenses for a net monthly loss of $3,492.83.
2. The Filed Proofs of Claim
The Bar Date for filing claims in this case was set for July 1, 2019. On July 1, 2019, Ms. Stinavage-Kipps timely filed Proof of Claim No. 5 (“Claim“) in the amount of $447,964.28 based upon the 2017 Equitable Distribution Order. The Claim is comprised of the equalization payment of $419,871.09 plus interest of $28,093.19. Ms. Stinavage-Kipps asserts her Claim is secured by the Clifford Township Property. The 2017 Equitable Distribution Order also provided that if the Debtor failed to pay, the Defendant would be entitled to a first priority mortgage lien against 186.65 acres in Clifford Township and 3.18% per annum interest payable over a 10-year period.
On March 22, 2021, over 1 1/2 years after the Claim was filed, the Debtor filed his Objection to the Claim.6 Dkt. #105. The Debtor‘s Objection seeks to (1) reclassify the Claim from a secured status to unsecured; (2) reduce the claim due to the alleged violations of the stay as set forth in the Adversary Action; and (3) essentially re-litigate the amount of the Claim due to offsets from the alleged damages and increase in value of the underlying assets. Ms. Stinavage-Kipps filed a response to the Objection on April 22, 2021. Dkt. # 110.
In addition to the Claim, four (4) other creditors filed claims by the Bar Date totaling only $5,343.42. Accordingly, Ms. Stinavage-Kipps’ Claim comprises 98.82% of the timely filed claims.
3. The Debtor‘s Chapter 13 plans
On June 20, 2019, almost 2 months after filing his bankruptcy case, the Debtor filed his original Chapter 13 Plan. Dkt. # 37. Despite having over $1,000,000.00 in net assets per his filed Schedules, the plan provided for “unknown” payments to creditors or was blank, the start and end dates for payments were blank, and the payment source was to be through the liquidation of unidentified property in a blank amount.7 Not surprisingly, on November 5, 2019, the Chapter 13 Trustee filed an Objection to the Plan. Dkt. # 60.8 Later, on December 13, 2019, Ms. Stinavage-Kipps also filed an objection to the plan. Dkt. # 65. Subsequent to these objections, the Debtor filed the following amended plans:
- 12/18/19 – First Amended Plan (Dkt. # 66)
- 4/22/20 – Second Amended Plan (Dkt. # 89)
-
9/11/20 – Third Amended Plan (Dkt. # 93) - 1/21/22 – Fourth Amended Plan (Dkt. # 126)
- 2/8/22 – Fifth Amended Plan (Dkt. # 131) (referred to hereafter as the “Amended Plan“)
The Debtor‘s Amended Plan provides for a base plan of $6,750.00 in payments comprising of $100.00 per month for the first 36 months, and then stepped up to $125.00 per month for months 37 to 48, and $150.00 per month for months 49 to 60, and then on October 1, 2025 an “unknown” amount paid from litigation proceeds. The Attachment to the Amended Plan also provides for the sale of “unnecessary livestock as determined by the Debtor“, “unnecessary farm equipment; [sic] as determined by the Debtor;” and the sale of the New York property with “such liquidation to occur within one year following confirmation, as may be necessary to fully fund the Plan“, see Amended Plan Attachment at A.2.D.
Each of the Debtor‘s plans were met with objections by the Trustee and Ms. Stinavage-Kipps. The prior objections all raised similar issues including the Debtor‘s insufficient monthly net income and ambiguous terms regarding the funding of the plan and sale of assets. The last of these objections to the Amended Plan filed by the Trustee, Dkt. #134, and Ms. Stinavage-Kipps, Dkt. # 137, assert that, inter alia, the Amended Plan is not confirmable because the Debtor is a “below median income debtor,” and that a below median income debtor cannot obtain a confirmed plan that proposes payments for longer than thirty-six months unless the Court finds “cause” to approve a longer period pursuant to
4. Motion for Relief from Automatic Stay
On October 30, 2019, Ms. Stinavage-Kipps filed a Motion for Relief from Automatic Stay (“Motion for Relief“). Dkt. # 56. The Motion for Relief seeks to allow Ms. Stinavage-Kipps the right to pursue her state court rights to enforce the 2017 Equitable Distribution Order. The Debtor filed his Answer on November 12, 2019. Dkt. # 61.
The Claim and the Motion were consolidated for hearing. On May 12, 2022, an evidentiary hearing was held, and the only witness was an appraiser on behalf of the Debtor. Post hearing briefs were submitted by the parties.
C. The Adversary Action
On May 24, 2019, the Debtor filed an adversary proceeding, which was docketed at A19-00064-MJC, against Ms. Stinavage-Kipps for alleged violations of the automatic stay for refusing to release bank accounts that were frozen pre-petition and for her post-petition participation in the State Court Action relating to the conveyance of former marital property and contempt proceedings (“Adversary Action“). Adv. Dkt. # 1.9 The Debtor sought damages in excess of $25,000.00, reimbursement of counsel fees, and injunctive relief. On June 14, 2019, Ms. Stinavage-Kipps filed an Answer and Request for Sanctions and Relief from Automatic Stay. Adv. Dkt. # 9.
After extended pre-trial sparring between the parties, on July 1, 2021, Ms. Stinavage-Kipps filed a motion for summary judgment (“MSJ“). Adv. Dkt. # 71. The parties fully briefed and argued the issues raised in the MSJ. The Court, by its Opinion and Order dated March 31, 2022.
IV. LEGAL ANALYSIS
A. Plan Confirmation
1. Legal Standard - Confirmation Issues
To achieve confirmation, the court must find that the chapter 13 plan: was proposed in good faith; complies with the Code; is feasible; and provides certain baseline treatment for secured and unsecured creditors. Additionally, the Debtor must: have commenced the case in good faith, have paid any outstanding filing fees, have filed all tax returns required by section 1308; and be current on any postpetition domestic support obligations.
In re Roebuck, 618 B.R. 730, 732 (Bankr. W.D. Pa. 2020) (footnotes omitted). A party objecting to confirmation of the plan bears the initial burden to come forward with evidence in support of the objection. In re Lafferty, 2019 WL 10431875, at *3 (Bankr. M.D. Pa. 2019); In re Plevyak, 599 B.R. 786, 788 (Bankr. M.D. Pa. 2019). If that burden is met, then the burden shifts to the debtor. As the proponent of the plan, the debtor holds the ultimate burden of proof based upon a preponderance of the evidence to establish that the plan meets all of the
2. Legal Standard – Cause to Extend Plan Term under §1322(d)
Pursuant to
To the contrary, courts have declined to find cause where a proposed plan extended the three year period without the approval of the Bankruptcy Court, see In re Andrews, 155 B.R. 769, 773 (B.A.P. 9th Cir. 1993), aff‘d, 49 F.3d 1404 (9th Cir. 1995), or where the extension would allow a debtor to delay payments to unsecured creditors, see In re Lindsey, 122 B.R. 157, 159 (Bankr. M.D. Fla. 1991) and In re Santa Maria, 128 B.R. 32, 35 (Bankr. N.D.N.Y. 1991).
As Judge France opined in Humes, “courts should adopt a flexible approach to the cause requirement and permit the extension of a plan beyond three years when the extension is justified by the circumstances and is necessary for the debtor to obtain effective relief under Chapter 13.” 2013 WL 6536947 at *2. This Court will follow Judge France‘s guidance and apply a flexible approach to determine if cause exists here.
3. The Parties’ Arguments
The Trustee filed his objection to the Amended Plan arguing, inter alia, that the Amended Plan is not feasible because funding relies mostly on litigation proceeds, was not proposed in good faith because the Debtor has sufficient assets that could be liquidated, and is not confirmable because the Debtor is a “below median,” and as such, cannot obtain a confirmed plan that proposes payments for longer than thirty-six months unless the Court finds “cause” to approve a longer period pursuant to
Although never requesting that the Court extend the Amended Plan term beyond the statutorily prescribed three years based upon a finding of cause, the Debtor nonetheless now suggests that cause exists because the Amended Plan calls for payment in full to all creditors and consideration of the Debtor‘s various proposed plans was delayed due to COVID-19 restrictions and changes in Bankruptcy Judges assigned to this case. The Debtor further argues that the Amended Plan was proposed in good faith as a means to pay creditors; however, the delays in the case were beyond the Debtor‘s control.
The parties presented no evidence on the confirmation issues and seek to rely on the case docket, the legal briefs, and argument at the confirmation hearing.13
The Debtor does not dispute that he is a “below median income” debtor.14 Accordingly, he is required to establish cause to confirm a plan proposing in excess of 36 months of plan payments.
Relevant to the evaluation of cause are the facts that prompted the Debtor to file this case. It is clear to this Court that the primary reason the Debtor filed his bankruptcy case was to either further delay or avoid collection under the 2017 Equitable Distribution Order which directed that the Debtor, inter alia, convey the Property and make an “equalization payment” to the Defendant in the amount of $419,871.09. After the Debtor unsuccessfully appealed the 2017 Equitable Distribution Order, Ms. Stinavage-Kipps commenced collection proceedings that led to contempt proceedings in the State Court divorce action. Prior to a contempt hearing, the Debtor filed his bankruptcy case and immediately invoked the automatic stay to avoid his domestic obligations.
The Debtor, however, is not a “typical” debtor. The State Court indicated that the Debtor was being given approximately $2,000,000.00 of cash and assets from the divorce and the Debtor‘s Schedules indicate over $1.7 million in assets. See Dkt. # 28. Further, as a retired farmer earning $1,267.00 per month according to his Schedules, it is difficult to comprehend how the Debtor could put together a meaningful Chapter 13 plan. Instead of proposing a firm plan from the outset that would have paid his ex-spouse and other creditors within 3 years, the Debtor submitted plan after plan that was incomplete, un-confirmable and/or vague as to actual payments through liquidation of his property. See Santa Maria, 128 B.R. at 35 (finding that debtor failed to establish cause to extend plan term to 60 months where debtor‘s motivation for extension under then
B. The Debtor‘s Objection to Claim No. 5
1. Legal Standard – Objection to Proof of Claim
The standard for determining the allowance of a proof of claim was succinctly stated in In re Wells, 463 B.R. 320, 326 (Bankr. E.D. Pa. 2011):
A proof of claim is deemed allowed unless a party in interest objects.
11 U.S.C. § 502(a) . If properly filed, see Fed. R. Bankr.P. 3001(c), a proof of claim is prima facie evidence of the validity and amount of the claim, even if an objection is filed. See Fed. R. Bankr.P. 3001(f). In other words, “if a proof of claim complies with the Rules of Court and is self-sustaining (i.e., it sets forth the facts necessary to state a claim and is not self-contradictory), it is prima facie valid and the objecting party has the burden of producing evidence to refute the claim.” In re Sacko, 394 B.R. 90, 98 (Bankr. E.D. Pa. 2008). That evidence, “if believed, [must] refute at least one of the allegations that is essential to the claim‘s legal sufficiency.” In re Allegheny Int‘l, Inc., 954 F.2d 167, 173–74 (3d Cir. 1992). If the objector meets that burden of production, the claimant must produce evidence to prove the validity of the claim, id. at 174, because “the ultimate burden of persuasion is always on the claimant,” In re Holm, 931 F.2d 620, 623 (9th Cir. 1991).
With respect to the Claim, the Debtor has not questioned the prima facie validity of the proof of claim. Therefore, the Court must determine whether the Debtor has produced sufficient evidence to refute at least one of the allegations of the Claim.
2. The Parties’ Positions
The Debtor asserts that the Claim should be (i) re-classified as unsecured;17 (ii) disallowed in its entirety because of the alleged violation of the stay as set forth in the Adversary Action; and (iii) the amount of the Claim should be reduced because the interest charge is not allowed and to account for offsets due to increase in value of the Property. The Debtor argues that the value of the Property awarded by the State Court in 2017 should be re-valued as of the date the subject deeds to the Property were recorded in 2019. This delay from 2017 to 2019 was caused as a result of the Debtor appealing the award to the Superior and Supreme Courts of
The Debtor would like this Court to separate the “date of distribution” from the date of the valuation made by the State Court. However, the Debtor did not provide any supporting legal authority where a state court had changed the value of an equitable distribution award properly determined by the court due to a delay caused by that spouse. Nor did the Debtor provide any authority where a bankruptcy court changed the value of a final state court equitable distribution award.
The Debtor, however, primarily relies upon the Pennsylvania Supreme Court decision in Sutliff v. Sutliff, 518 Pa. 378 (1988) to support his position that the “date of distribution” should be the date the deeds were recorded. The facts of Sutliff are not on point. In Sutliff, the Supreme Court remanded the case because the trial court relied on the date the Sutliffs separated rather than a date closer to the actual award. Although the Sutliff Court concluded that the trial court should not use “stale” data that was over 3 years old in setting the valuation on the date of separation, the Sutliff Court did not mention anywhere that the values once properly set for equitable distribution should be or could be re-set further after a proper distribution order was entered.
Further, Justice McDermott, in his concurring opinion in Sutliff, stated:
I join in the opinion of Mr. Justice Flaherty. However, I write separately to emphasize that the distribution date is the date the common pleas court enters an order of distribution, and that the disposition date of post-trial motions or appeals does not affect the use of that original date as the valuation point. Therefore, a litigant cannot contest the relative value of assets on the grounds that they substantially changed while the case was being further litigated.
Id. at 388. Justice McDermott‘s Concurrence is directly on point to the case sub judice.
In Miller v. Miller, 617 A.2d 375 (Pa. Super. 1992), a case described as an “unduly protracted litigation over the distribution of marital property after a divorce” is similar factually to the case before this Court. Id. at 376. After the husband‘s second appeal, the Pennsylvania Superior Court recognized that the significant passage of time due to appeals since the trial court entered its order for distribution had significantly decreased the husband‘s pension value. The Husband believed the valuation should be relitigated. The Superior Court, in relying upon Sutliff, found otherwise holding “[t]he passage
Given that bankruptcy courts traditionally defer to state courts when considering family law issues (see In re Lemoine, 2012 WL 5906939, at *3 (Bankr. E.D. Pa. 2012)), and the fact that there does not appear to be any authority for this Court to alter a fully litigated State Court equitable distribution award, the Debtor‘s Objection to Ms. Stinavage-Kipps’ Claim is overruled.
C. Ms. Stinavage-Kipps is Entitled to Relief From the Stay
Generally, upon the filing of a bankruptcy petition, the protections of
(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--
- for cause, including the lack of adequate protection of an interest in property of such party in interest;
- with respect to a stay of an act against property under subsection (a) of this section, if--
- the debtor does not have an equity in such property; and
- such property is not necessary to an effective reorganization....
A party seeking relief under
The Court‘s determination of Ms. Stinavage-Kipps’ Motion for Relief requires little discussion. Given the Debtor‘s pre-petition actions in subverting Ms. Stinavage-Kipps’ ability to enforce the 2017 Equitable Distribution Order, his failure to comply with the Order since its entry, and his inability to propose a confirmable plan, the Court finds that Ms. Stinavage-Kipps has established “cause” under
V. CONCLUSION
Here, after a series of six (6) proposed plans and corresponding objections to each of the plans by the Trustee and Ms. Stinavage-Kipps, it would be futile to allow the Debtor to file another amended plan.19 A bankruptcy judge
Accordingly, for the reasons stated above, the Court (i) sustains the Objections to the Debtor‘s Amended Plan filed by the Trustee and Ms. Stinavage-Kipps (ii) denies confirmation of the Amended Plan; (iii) overrules the Debtor‘s Objection to Ms. Stinavage-Kipps’ Claim; (iv) grants Ms. Stinavage-Kipps relief from the automatic stay; and (v) shall schedule a hearing to determine if the Debtor desires to have his case dismissed or converted to one under Chapter 7.
An appropriate order will be entered.
By the Court,
Mark J. Conway, Bankruptcy Judge
Dated: September 30, 2022