Bankruptcy — divorce — separation agreement

BOSTON — Where a debtor’s former husband has moved for summary judgment, the motion must be allowed on Count III, seeking a declaration that the bankruptcy estate does not include what he was awarded in the divorce: the 30 percent net equity interest up to $250,000 in the marital residence, as well as ownership of the personal property in the marital residence.

“… In Counts I and II, [Robert] Nickse argued that ‘all of the debt owed to [him]’ is nondischargeable pursuant to 11 U.S.C. §§523(a)(5) and (a)(15), respectively. In Count III, Nickse sought a declaration that the Personal Property and the 30% net equity interest up to $250,000 in the Marital Residence that were awarded to him (the ‘Residential Interest’) in their divorce are not property of the estate pursuant to 11 U.S.C. §541. …

“To properly frame the analysis, I start with the premise that Nickse claims two distinct property interests — the Residential Interest and the Personal Property. Through his complaint, he advances three theories to obtain or protect these interests. Although Nickse does not acknowledge them as such, his theories are mutually exclusive. For example, if he were to prevail on Count III and obtain a declaratory judgment that one or both of the claimed property interests are not property of the estate, there would be no debt to except from discharge under Counts I and II. If, on the other hand, a debt exists, which is contrary to the relief requested in Count III, it could not be both a domestic support obligation under 11 U.S.C. §523(a)(5) and a property settlement under 11 U.S.C. §523(a)(15). Thus, Nickse may only prevail on one count per claimed property interest. …

“… To determine the extent to which the Marital Residence constitutes property of the estate, I must first examine the title. …

“… In Massachusetts, ‘[b]y law, an accomplished judgment of divorce will convert a tenancy by the entirety to a tenancy in common.’ Therefore, as a result of the Divorce Judgment, Nickse and the Debtor held the Marital Residence as tenants in common. Moreover, the Separation Agreement, which was incorporated by the Divorce Judgment, fixed their tenancy interests such that Nickse is entitled to 30% of the net equity up to a maximum of $250,000.00. Accordingly, I find that Nickse held both record legal title to and the equitable interest in the Residential Interest on the petition date such that it did not become part of the Debtor’s estate. …

“Nickse’s claim to the Personal Property, which the Debtor did not expressly oppose either in the Opposition or at oral argument, is based on Article Five of the Separation Agreement. It provides, in relevant part, that ‘[t]he Husband shall take the following items from the Marital Residence upon the sale of the Marital Residence … [and] [t]he wife shall keep all remaining personal property in the Marital Residence.’ Admittedly, Article Five of the Separation Agreement could have been drafted with greater precision. Nevertheless, I find the unambiguous intent of this language was to grant Nickse full ownership of the listed Personal Property free of any claim by the Debtor. I do not read the phrase ‘upon the sale of the Marital Residence’ as a condition to the divestment of the Debtor’s interest in the Personal Property, but simply to mean that Nickse could not remove the Personal Property, which I note consists of furniture and décor that may have been necessary to the operation of the bed and breakfast, from the Marital Residence until the sale. I conclude that in the interim, the Debtor simply has legal possession of the Personal Property without any ownership interest. As such, the Personal Property is not property of the estate. Again, Nickse is entitled to judgment on Count III, but not Counts I and II.”

In Re: Daniel, Jane C. (Lawyers Weekly No. 04-025-15) (14 pages) (Hillman, J.) (USBC) Bailey Buchanan Nowak, of Metaxas Brown Pidgeon, for Robert Nickse; Kenneth E. Lindauer for the debtor (Chapter 7 Case No. 13-16365-WCH; Adversary Proceeding No. 14-1038) (April 13, 2015).

This opinion was reported by Tom Egan of Massachusetts Lawyers Weekly, a sister publication of The Daily Record.

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