Estate v. Jones-Peteet (In re Jones-Peteet)

630 B.R. 61

IN RE: Sonja JONES-PETEET, Debtor

Estate of Lonnie J. Perteet and Montel D. Perteet, Personal Representative, Plaintiffs

v.Sonja Jones-Peteet, Defendant

CASE NO: 20-32494

ADVERSARY NO. 21-03045

United States Bankruptcy Court, S.D. Texas, Houston Division, HOUSTON DIVISION.

Signed July 23, 2021

John Henry Hall, Law Office of John Henry Hall, Gary, IN, for Plaintiffs.

Melissa Rae Lanier, Law Office of Melissa Rae Lanier, PLLC, Humble, TX, for Defendant.

MEMORANDUM ORDER GRANTING, IN PART, AND DENYING, IN PART, PLAINTIFFS' MOTION FOR SUMMARY JUDGMENT AND DEFENDANT'S CROSS-MOTION FOR SUMMARY JUDGMENT

(RE: Docket Nos. 11, 13)¹

Christopher Lopez, United States Bankruptcy Judge

About 10 years ago, a Texas state court approved a Divorce Decree between Lonnie Perteet and Sonja Peteet (these are similar, but different, last names). The parties' Divorce Decree states that Mr. Perteet was awarded, and Ms. Peteet was divested of all right to, the proceeds of his pension benefits. Several years after the divorce, Mr. Perteet died. But Ms. Peteet was still listed as the beneficiary in his pension plan documents. Ms. Peteet received over $220,000 of Mr. Perteet's pension funds but never turned it over to his estate. The estate and the personal representative for the estate started a proceeding in an Indiana probate court to collect the funds. But they were unsuccessful. Ms. Peteet has acknowledged that she spent it all.

Ms. Peteet is the debtor in this case. She filed a chapter 7 case, in part, to discharge the pension-related debts. The Perteet estate and the personal representative for the estate, as Plaintiffs, filed an adversary complaint objecting to the discharge under Section 727(a)(4)(A) of the Bankruptcy Code, and a request to determine the non-dischargeability of the debt under Sections 523(a)(2)(A) and 523(a)(15) of the Bankruptcy Code. Plaintiffs then moved for summary judgment. The Debtor responded by seeking summary judgment that the debt was discharged. For the reasons stated below, the Court grants summary judgment on Plaintiffs' request to determine the dischargeability of debt under Section 523(a)(15) and denies summary judgment on the remaining requests. The Court also grants Debtor's cross-motion for summary judgment on the Section 727(a)(4)(A) and Section 523(a)(2)(A) objections and denies it on the remaining request.

Background

In December 2011, a Harris County, Texas District Court approved a Divorce Decree between Lonnie Perteet and the Debtor. Section H-4 of the Divorce Decree ordered and decreed that Mr. Perteet was awarded, and the Debtor was divested of, all right, title, interest, and claim to:

All sums, whether matured or unmatured, accrued or unaccrued, vested or otherwise, together with all increases thereof, the proceeds therefrom, and any other rights related to any profit-sharing plan, retirement plan, Keogh plan, pension plan, employee stock option plan, 401(k) plan, employee savings plan ... or other benefits existing by reason of the husband's [Mr. Perteet] past, present, or future employment.²

Both parties signed the Divorce Decree.³ They also acknowledged that, before signing the Decree, they read it, had a chance to ask questions about it, understood that the contents of the Decree resolved their divorce case, and they did not sign the Decree under any coercion or duress.⁴

In April 2017, Mr. Perteet died in Gary, Indiana. In August 2017, a petition for probate of the estate of Mr. Perteet was filed in Indiana. The probate court granted Montel Perteet letters of administration.

Before his death, Mr. Perteet participated in the Construction Workers Pension Trust Fund-Lake County and Vicinity Pension Plan, an employee benefit plan governed by ERISA. In March 2018, the Board of Trustees of the Pension Fund filed an interpleader complaint in the U.S. District Court for the Northern District of Indiana, Hammond Division, to determine who should receive Mr. Perteet's death benefits.⁵ A magistrate court found that the Debtor was the only plan beneficiary listed in his benefit documents and thus was the legal party entitled to receive the proceeds under ERISA.⁶ The court also held, however, that its ruling did not preclude the Perteet estate and its representative from pursuing state court remedies to enforce the Divorce Decree.⁷

Despite waiving her rights to the proceeds of Mr. Perteet's benefits under the Divorce Decree, the Debtor received over $220,000 and never turned it over to the estate. The Perteet estate and its personal representative started a proceeding against the Debtor in an Indiana probate court seeking turnover of the funds. In December 2019, the Debtor filed an affidavit with the probate court stating that she no longer had any of the funds and could not comply with a prior court order requiring her to deposit the funds with the clerk of the court.⁸

In May 2020, the Debtor filed this chapter 7 bankruptcy case. This Court entered the Order of Discharge in January 2021. In March 2021, Plaintiffs filed an adversary complaint objecting to the discharge under Section 727(a)(4)(A) of the Bankruptcy Code, and a request to determine the non-dischargeability of the pension fund debt under Sections 523(a)(2)(A) and 523(a)(15) of the Bankruptcy Code. Plaintiffs moved for summary judgment. The Debtor responded that the pension funds were awarded to her by the magistrate court and moved for summary judgment, arguing that the pension fund debt was discharged.

Summary Judgment Standard

Federal Rule of Civil Procedure 56 permits a party to move for summary judgment, "identifying each claim or defense — or the part of each claim or defense — on which summary judgment is sought." Fed. R. Civ. P. 56(a). Federal Rule of Bankruptcy Procedure 7056 incorporates Rule 56 in adversary proceedings. When presented with two competing motions for summary judgment, a court must analyze them independently and on their own merits. State v. Rettig , 987 F.3d 518, 526 (5th Cir. 2021). Movants are entitled to summary judgment if they show "that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Id. "A ‘material’ fact is one ‘that might affect the outcome of the suit under governing law.’ " Renwick v. PNK Lake Charles, L.L.C. , 901 F.3d 605, 611 (5th Cir. 2018) (internal citations omitted). A factual dispute is genuine if the evidence is such that a reasonable factfinder could return a verdict for the non-movant. See Harville v. City of Houston, Mississippi , 945 F.3d 870, 874 (5th Cir. 2019). In determining whether summary judgment is appropriate, all inferences are drawn in the non-movant's favor. Id.

Section 727(a)(4)(A)

A chapter 7 debtor receives a discharge unless a statutory exception applies under Section 727(a).⁹ Section 727(a)(4)(A) states that a debtor will not receive a discharge if the debtor knowingly and fraudulently, in or in connection with the bankruptcy case, made a false oath or account.¹⁰ Plaintiffs claim that the Debtor made an implied false statement by spending pension funds that, under the Divorce Decree, she waived the right to receive. This is, however, a prepetition act that is not evidence of a false oath or account made in or in connection with the case. See In re Wagner , 492 B.R. 43, 57 (Bankr. D. Colo. 2013) ("[ Section] 727(a)(4) is not directed at prepetition activity, it is specifically directed toward activity that takes place ‘in or in connection with the bankruptcy case.’ "); In re Bub , 502 B.R. 345, 355 (Bankr. E.D.N.Y. 2013) (a debtor's prepetition conduct, even if harmful to creditors, is not a valid basis to object under Section 727(a)(4)(A) ). And Plaintiffs' claims that the Debtor (i) remained silent during the chapter 7 case about waiving her right to receive the pension funds and (ii) listed a prepetition payment to an attorney using allegedly fraudulently obtained pension funds both include disputed facts.¹¹ For example, the Debtor argues the magistrate court awarded her the funds.¹² And disclosing prepetition payments in a statement of financial affairs is not enough to grant summary judgment here.

Summary judgment is also denied for another reason. Bankruptcy Rule 4004(a) required Plaintiffs to file a complaint objecting to the discharge under Section 727(a)(4)(A) no later than 60 days after the first date set for the Section 341 meeting of creditors.¹³ Courts strictly enforce this deadline. See, e.g. , In re Ward , 978 F.3d 298, 302 (5th Cir. 2020).

The Notice of Chapter 7 Bankruptcy Case was issued in May 2020.¹⁴ The Notice stated the date for the first meeting of creditors was June 3, 2020 and that the deadline to object to the Debtor's discharge was August 3, 2020. Counsel for Plaintiffs and Mr. Montel Perteet were served with the Notice.¹⁵ Plaintiffs filed an adversary complaint on March 29, 2021, which is over 200 days late.

Section 523(a)(2)(A)

Section 523(a)(2)(A) excepts from the discharge debts for money obtained by false pretenses, a false representation, or actual fraud.¹⁶ Plaintiffs argue the Debtor made false representations when she waived her right to Mr. Perteet's pension funds under the Divorce Decree.¹⁷ To establish a false representation, a debtor must have made a representation that was (1) a knowing and fraudulent falsehood, (2) describing past or current facts, and (3) relied upon by the other party. See Shellpoint Mortg. Servicing, LLC v. Barnett (In re Barnett) , Case No. 20-3116, 2020 WL 5031924, at *4 (Bankr. S.D. Tex. Aug. 25, 2020). Based on the record there is insufficient evidence about whether the Debtor made a false representation to grant summary judgment. For example, the Debtor received the pension funds because she was listed as the beneficiary in Mr. Perteet's benefit documents. And she admits receiving and spending the funds. Refusing to turn over the pension funds may violate the terms of the Divorce Decree, but that is not enough to grant summary...