Ex-Wife who Pursued Modification of Divorce Judgment Without First Getting Stay Relief Had to Pay Damages to Debtor

Ex-Wife who Pursued Modification of Divorce Judgment Without First Getting Stay Relief Had to Pay Damages to Debtor

Debtor and his ex-wife (Creditor)  were divorced pursuant to a divorce judgment entered  by a State Court. The Divorce Judgment set aside to Creditor  her ownership interest in non-marital real estate located in Ocean City, Maryland.  The Real Property is subject to a mortgage which secures a note in the original principal amount of $276,000 signed by both parties (the “Note”).  With respect to the Note, the State Court ordered “that this Note is marital debt and the Note and its remaining balance of $258,129.62 as of May 30, 2014 is set aside to Husband and Wife, equally.” In addition, the State Court found that during eleven of the nineteen years that the parites were married, Creditor accrued benefits under a vested pension held in her name (the “Pension”).  The State Court ordered ex-wife to transfer to Debtor by qualified domestic relations order half of the Pension benefits accrued by her during that period.

Over five months later, Debtor commenced the underlying chapter 13 case by filing a voluntary petition for relief and various schedules. On Schedule E, he listed a domestic support obligation to Creditor of $3,164, of which $600 was entitled to priority treatment. On the same day, he filed a proposed chapter 13 plan (the “Chapter 13 Plan”), listing one domestic support obligation to ex-wife in the amount of $600.00. The Chapter 13 Plan further proposed to discharge as a general unsecured claim, “certain non-spousal support debts, stemming from division of marital assets, including an obligation to pay the mortgage on a condominium owner [sic] by her family members.”

Ex-wife filed the Proof of Claim on March 13, 2015, alleging a general, unsecured claim in the amount of $154,838.94 and a $600.00 domestic support obligation entitled to priority treatment. Shortly thereafter, she objected to confirmation of the Chapter 13 Plan on the grounds that, inter alia, it was filed in bad faith. Following an evidentiary hearing on October 27, 2015, a follow-up hearing on November 4, 2015 and briefing by the parties, the Chapter 13 Plan was ultimately confirmed over Creditor’s objection.

Eleven months later, Creditor’s divorce counsel filed three motions in the State Court. The first (the “Motion to Enforce”) sought an order enforcing the Divorce Judgment and directing Debtor to pay that portion of the Note allocated to him by the Divorce Judgment. The second (the “Motion for Omitted Property”) requested that the State Court re-impose an obligation on Debtor to share the marital debt owed on the Note which the Chapter 13 Plan proposes to, in her view, inequitably discharge. Finally, Creditor asked the State Court to modify the Divorce Judgment (the “Motion to Modify”) to accomplish the same result she seeks in the Motion for Omitted Property. Additionally, in light of the effects of Creditor’s confirmed Chapter 13 Plan, she requested that her spousal support be increased and that she no longer be required to pay over to Debtor a portion of her Pension.

Two days after his ex-wife filed the Motion to Enforce, the Motion for Omitted Property and the Motion to Modify (collectively, the “State Court Motions”), Debtor commenced this adversary proceeding. In his complaint seeking actual and punitive damages, he alleged that the State Court Motions constituted a willful violation of the automatic stay because they were designed to skirt the protections afforded to him by the Code and the confirmed Chapter 13 Plan. The Debtor also took action in the State Court where, through his divorce counsel, he filed an objection to the State Court Motions asserting that, in addition to certain infirmities under applicable non-bankruptcy law, the motions violated the automatic stay.

On or about November 7, 2016, ex-wife withdrew the Motion to Enforce and filed an Amended Motion to Modify Divorce Judgment Dated July 1, 2014 Regarding Spousal Support and Property (the “Amended Motion to Modify”), which is substantively similar to the original Motion to Modify.  The prayer for relief in the Amended Motion to Modify seeks to modify the spousal support and deny the Debtor any share in her Pension.  As was the case in the original Motion to Modify, the relief sought in the Amended Motion to Modify is premised on the argument that the modifications are necessary to address “any resulting burden shift in paying marital debt” arising from the proceedings in this Court.

At trial, the Debtor testified that “several motions” had been dismissed but that the Amended Motion to Modify, or some variation thereof, was in the discovery phase. He further testified that ex-wife is seeking to extend his alimony obligations to 20 years at $1,000 per month and that this proposed modification, if adopted by the State Court, would result in a spousal support award equal to the Note obligations apportioned to Mr. Foster in the Divorce Judgment.

Both after the Debtor submitted his case and again at the conclusion of the hearing, counsel for ex-wife orally moved to dismiss the Adversary Proceeding on the grounds that withdrawal of certain of the motions filed in State Court mooted the automatic stay violation action. The oral motion was taken under advisement pending submission of the post-trial briefs.

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