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Martin v. Awve

United States District Court, W.D. Wisconsin

September 28, 2016


          OPINION & ORDER

          JAMES D. PETERSON District Judge

         Appellant Leslie E. Martin, III appeals two final decisions by the United States Bankruptcy Court for the Western District of Wisconsin. One decision granted appellee Jeanne Awve relief from the automatic bankruptcy stay so that she could enforce her rights under a judgment of divorce. Dkt. 1-2. The other dismissed Martin's case for lack of good faith. Dkt. 1-1.

         The bankruptcy court did not err when it granted Awve relief from the automatic stay; the court will affirm that decision. But because the bankruptcy court dismissed Martin's case without notice, the court will reverse that decision and remand the case so that Martin has the chance to convince the bankruptcy court that his petition is in good faith.


         Martin and Awve are ex-spouses, and some background on their divorce proceedings is necessary to understand the issues in Martin's bankruptcy. On January 18, 2013, the divorce court entered findings of fact, conclusions of law, and judgment of divorce. The order provided that “[e]ach party is awarded 100% interest in the retirement and bank accounts in his or her own name.” Dkt. 4-1, at 51. The order also provided that Martin owed Awve “an equalization payment of $116, 695 by February 21, 2013.” Id. This initial order provided that Awve could choose to receive the payment from Martin's retirement account. Id. But on October 21, 2014, the divorce court entered an amended order, which provided, in relevant part:

Respondent [Awve] was previously awarded the right to chose [sic] whether she wants payment via QDRO from Petitioner's [Martin's] retirement assets or cash. Exhibit A delegates the portions to be satisfied by cash payment and a portion via QDRO: that value as of the date of the divorce, to be assigned to her via QDRO, with all gains/losses since the date of divorce.
All prior orders not inconsistent with the terms herein shall remain in full force and effect.

Id. at 58. Apparently, based on state court records, Martin declined to make the QDRO transfer to Awve, and Awve tried to enforce the QDRO through the divorce court.

         On July 8, 2015, Martin filed a chapter 13 voluntary bankruptcy petition. B. Dkt. 1.[1]The next day, July 9, 2015, the divorce court entered an oral ruling regarding the relationship between the divorce proceedings and Martins' bankruptcy case. B. Dkt. 59, at 6-13. The divorce court determined that the divorce proceedings were subject to the automatic bankruptcy stay. The court also commented on the parties' retirement accounts. The court stated that “the money that was ordered paid by Mr. Martin is not subject to the bankruptcy estate, and I think ultimately, that will be the finding of the bankruptcy court. . . . This obligation-this property belonged to Ms. Martin as of February of 2013.” Id. at 10. The court also noted that “the bankruptcy court is more than competent to make that decision. If they don't, then you can come back to this Court. And if there is a discharge of that obligation in this divorce decree, then I am powerless to go further.” Id. The divorce court's comments are not dispositive of the issues that were before the bankruptcy court, although if there were ambiguity in the meaning of the divorce court orders, these comments would be informative.

         Martin filed his first chapter 13 plan on July 30, 2015. B. Dkt. 15. Awve objected, B. Dkt. 27, and the bankruptcy court scheduled a preliminary hearing on confirmation of the plan. Before the preliminary hearing, Martin filed an amended plan, soon followed by a second amended plan. B. Dkt. 30 and B. Dkt. 35. Awve objected, B. Dkt. 38, as did the trustee, B. Dkt. 37. The bankruptcy court scheduled a final hearing on confirmation of the plan for January 15, 2016. B. Dkt. 47.

         Several weeks before the final hearing, Awve moved for relief from the automatic bankruptcy stay. B. Dkt. 55. Awve sought leave to return to the divorce court to compel Martin to “execute a Broker/Dealer form, or any other such document as required by H.T.L.F. Investment Services to memorialize that Court's previous award and assignment of funds held in the Debtor's name at H.T.L.F. Investment Services.” Id. at 1. In other words, Awve wanted the opportunity to secure funds from Martin's retirement account pursuant to the divorce court's division of property orders. Martin objected, arguing that Awve's claim was unsecured: the divorce court did not award Awve a vested interest in Martin's individual retirement account, just a right to payment that could be discharged in bankruptcy. Martin then filed a third amended chapter 13 plan. B. Dkt. 57.

         On January 4, 2016, the bankruptcy court held a preliminary hearing on Awve's motion for relief from the automatic stay. Dkt. 3-1. At the hearing, the bankruptcy court granted Awve's motion-“per reasoning of Bigelow v. Brown, 168 B.R. 331”-and dismissed Martin's case as “filed in lack of good faith per In re Schaitz.” Id. at 5. The court reasoned that “[t]his is clearly a case in which the debtor is seeking to avoid paying Ms. Awve, and it is not a case in which it was directed to the general payment of creditors.” Id. The bankruptcy court issued a short written order the following day, noting that it had dismissed Martin's case after finding “that no Plan meeting the requirements of Chapter 13 of Title 11, United States Code has been presented: and further finding that no cause has been shown why this case should not be dismissed.” Dkt. 1-1.

         The court has subject matter jurisdiction over this appeal pursuant ...

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