United States District Court, Western District of Pennsylvania
DIANA M. URMANN, Appellant,
JAMES R. WALSH, TRUSTEE FOR THE BANKRUPTCY ESTATE OF DIANA M. URMANN, Appellee.
Appeal Related to Bankruptcy Case No. 11-21606
NORA BARRY FISCHER, District Judge.
Pending before the Court is an appeal from an April 15, 2014 Memorandum Opinion and Order and Memorandum Order of the Bankruptcy Court in Bankruptcy Case No. 11-21606. (ECF No. 1). Appellant Diana M. Urmann (“Appellant” or “Urmann”), appeals the Bankruptcy Court’s decisions sustaining, in part, the objections of Trustee James R. Walsh (“Trustee” or “Walsh”) to her claim of exemption for an interest in her equitable distribution claim as it related to her non-debtor spouse’s Reliance Steel & Aluminum Co. Master 401(k) Plan (the “pension”), and to the settlement of the equitable distribution claim. Based on the following, the Court will affirm the decisions of the Bankruptcy Court in all respects.
II. FACTUAL BACKGROUND
As the Bankruptcy Court has fully set forth the factual background in its findings of fact and conclusions of law supporting its decisions (ECF Nos. 1-33, 1-37), the Court restates only the facts pertinent to the instant appeal. Appellant filed a Voluntary Petition under Chapter 7 of the Bankruptcy Code on March 18, 2011 and Walsh was appointed interim Trustee. (ECF No. 1-33 at p. 2). Prior to this filing, Appellant’s husband, John C. Urmann, Jr., filed a complaint in divorce seeking dissolution of his marriage to Appellant on June 17, 2010. (Id.). As part of his divorce complaint, Mr. Urmann requested equitable distribution of their marital property. (Id.). At the time of the filing of the divorce complaint, the marital property included Mr. Urmann’s pension worth approximately $106, 224.26. (Id.). On January 21, 2011, Appellant filed her counterclaim to the divorce complaint, and asserted a claim for alimony, alimony pendent lite, and/or spousal support. (Id.). It is undisputed that at the time Appellant filed her bankruptcy petition, no final state court order had been entered related to any of the matters raised in the complaint and counterclaim in the divorce action.
Appellant represented on her Schedule B that she did not have an interest in any annuities, IRA, ERISA, or other pension plans; alimony, maintenance, support and property settlements; contingent and unliquidated claims; and/or any other kind of personal property not already listed in her schedules. (Id.). Appellant did not claim any exemptions for such property on Schedule C. (Id.). On her Statement of Financial Affairs, Plaintiff stated that she was not a party to any lawsuit filed within one year prior to filing of the bankruptcy proceeding. (Id. at pp. 2-3).
The Trustee subsequently convened a section 341 Meeting of Creditors (“MOC”) on April 18, 2011. (Id. at p. 3). Upon questioning by the Trustee, Appellant disclosed her existing divorce proceedings, and her claims for equitable distribution and support. (Id.). Thereafter, on April 25, 2011, Appellant amended her Schedules B and C, and included and exempted a one-third interest in a life insurance policy valued at $2, 058.87. (Id.). She did not, however, include her equitable distribution claim and/or spousal support claim. (Id.).
Shortly after the MOC, the Trustee, and/or Kevin J. Petak, Esquire, (“Petak”), counsel for the Trustee, repeatedly requested information from Appellant’s bankruptcy counsel, Matthew M. Herron, Esquire (“Herron”), and/or Stephanie Jones McFadden, Esquire (“McFadden”), Appellant’s divorce counsel, regarding the value of the pension. (Id. at p. 14). In failing to supply the information, Appellant averred that the information was not available. (Id.). During the evidentiary hearing before the Bankruptcy Court, however, correspondence entered into evidence revealed that Appellant had been provided information regarding the value of the pension prior to October 12, 2011, and the information was readily available to her as early as March 23, 2011. (Id. at p. 15). Despite repeated inquiries, this information was not supplied to the Trustee until October 24, 2012. (Id. at p. 14). According to correspondence introduced at the Bankruptcy hearing, the value of one-half of the pension at the time of separation was $53, 112.13, and Appellant was of the view that her equitable distribution claim was worth approximately $60, 000.00. (Id. at pp. 8-9).
Thereafter, Petak contacted McFadden on October 30, 2012 and January 21, 2013, requesting a status report regarding the equitable distribution claim. (Id. at p. 15). Due to Appellant’s inaction in resolving the equitable distribution claim in divorce court, Petak took steps to negotiate a settlement with Mr. Urmann’s counsel directly, informing all counsel of his intent by copy of his correspondence. (Id. at p. 16). Petak, along with Appellant, McFadden, Mr. Urmann, and Mr. Urmann’s attorney, attended the Master’s Preliminary Conference scheduled in the divorce proceedings on August 20, 2013. (Id.). The equitable distribution claim was subsequently settled for $30, 000.00. (Id. at p. 3). Petak drafted a qualified domestic relations order (“QDRO”) for Appellant’s signature in order to execute the settlement, but Appellant refused to sign the document. (Id. at p. 17).
In light of Appellant’s refusal, on November 4, 2013, the Trustee filed a Motion to Approve Settlement seeking to settle the equitable distribution claim for $30, 000.00. (Id. at p. 3). Shortly thereafter, on November 18, 2013, Appellant filed a second amendment to Schedules B and C and listed, for the first time, her interest in the pension of Mr. Urmann valued at $60, 000.00, as well as an interest in alimony, maintenance and support for an undetermined amount. (Id.). Appellant also filed Objections to the Motion to Approve Settlement on November 21, 2013, wherein she argued that she did not possess a “claim” relative to her interest in the pension, that said interest was not property of the bankruptcy estate under 11 U.S.C. § 541(c)(2), and if it was considered property of the estate, it would be exemptable. (Id.). The Trustee filed Objections to Appellant’s Amended Exemptions on December 13, 2013, and argued that Appellant did not have an interest in the pension but merely a claim for equitable distribution. (Id. at pp. 3-4).
An evidentiary hearing was held before the Bankruptcy Court on January 21, 2014 on both the Motion to Approve Settlement and the Objection to the Amended Exemptions. (Id. at p. 4). With respect to the Motion to Approve Settlement, Appellant claimed that her interest in the pension was excluded from property of the bankruptcy estate under 11 U.S.C. § 541(c)(2) and alternatively, even if it was property of the estate, the settlement should not be approved since a greater recovery was possible and the settlement was prejudicial to her. (Id. at p. 4). With respect to the Trustee’s Objections, Appellant argued that if the interest in the pension was considered to be property of the estate, then it was exemptable in full under 11 U.S.C. §§ 522(b)(3)(C), (d)(10)(E), and/or (d)(12) and/or, in part, pursuant to (d)(5). (Id. at p. 4 n.3). At the conclusion of the hearing, supplemental briefs were filed by the parties. (Id. at p. 4).
On April 15, 2014, the Bankruptcy Court issued a Memorandum Opinion granting the Trustee’s Motion to Approve Settlement. (ECF No. 1-33). The Bankruptcy Court also issued a Memorandum Order sustaining in part and overruling in part the Trustee’s Objections to the Amended Exemptions. (ECF No. 1-37). Pertinent to this appeal, the Bankruptcy Court sustained the Trustee’s objections to Appellant’s claim of exemptions with respect to the equitable distribution claim pursuant to 11 U.S.C. §§ 522(b)(3)(C), (d)(10)(E), and (d)(12). (Id.). The instant appeal ensued.
III. LEGAL STANDARD
This court has appellate jurisdiction over final judgments, orders and decrees of a bankruptcy court pursuant to 28 U.S.C. § 158(a)(1). The court reviews a bankruptcy court’s findings of fact for clear error and its conclusions of law under a de novo sta ...