In re Harrison

1

In re: STEVEN D. HARRISON, Debtor.

No. 22-10933-t13

United States Bankruptcy Court, D. New Mexico

October 27, 2023

OPINION

HON DAVID T. THUMA UNITED STATES BANKRUPTCY JUDGE

Before the Court is Racquel Harrison's Amended Motion to Determine that Stay Does Not Apply to Division of Retirement Account or, Alternatively, for Relief From Stay. To rule on the motion, the Court must construe a final divorce decree entered almost two years prepetition and determine its effect on Debtor's retirement account. The Court finds and concludes that the final decree divided all community property into the separate property of the divorcing parties including the retirement account. The motion therefore will be granted so Racquel can complete the property division ordered by the state court. However, for the reasons explained below, the order will not take effect for 30 days after entry, to give the parties time to negotiate a possible settlement.

A. Facts.^[1]

For the limited purpose of ruling on the motion, the Court finds:^[2] Debtor Steven Harrison and movant Racquel Harrison were married for about 21 years. Debtor is an air traffic controller and has been a federal employee for at least 20 years. The Court has no information about Racquel's work history or current occupation.

On June 7, 2019, Racquel filed for divorce in New Mexico state court commencing Case No. D-202-DM-2019-01754. On January 15, 2021, the state court entered a Final Decree of Dissolution of Marriage (the "Final Decree"). The economic terms of the Final Decree can be summarized as follows:

Spousal Support. Debtor must make monthly support payments of $2,000 to Racquel. The spousal support payment obligation is "indefinite and modifiable." The state court retained jurisdiction over the issue of spousal support.

Thrift Savings Plan Account. The state court ordered: "The community credit card debt set forth below shall be paid by a withdrawal from the Thrift Savings Plan ("TSP") account in Husband's name. The balance of the TSP, if any remains after payment of the debt and subject to the loan thereon, shall be divided equally between the parties. . ."^[3]

House in Paola, Kansas. Racquel receives the net proceeds from the sale of a house in Paola, Kansas ($8,011).

Albuquerque House. Debtor must pay $11,290 to the mortgage company for the shortfall in selling the former marital residence in Albuquerque, New Mexico.

Other Assets Apportioned to Racquel. The Final Decree also apportioned to Racquel:

• BBVA checking and savings account in her name (¶10(a)(i));

• A 2016 Chevrolet Sonic, subject to the debt thereon (¶10(a)(ii));

• $1,122.62 for her share of the proceeds from the garage sale whereby Husband disposed of community household goods (¶10(a)(iii)); and

• "50% of the community interest in the Federal Employment Retirement System ("FERS") benefits in Husband's name" (¶10(a)(iv)).^[4]

Other Assets Apportioned to Debtor. The Final Decree also apportioned to Debtor:

• USAA checking account (¶10(B)(i));

• First Security Bank checking account (¶10(B)(ii)); • Chase checking and savings accounts (¶10(B)(iii));

• Navy Federal CU checking account (¶10(B)(iv));

• 2016 Chevrolet Cruze (¶10(B)(v));

• One half of the garage sale proceeds (¶10(B)(vi));

• 50% of the community interests in the FERS benefits (¶10(B)(vii)); and

• His annual leave (¶10(B)(viii)).

Debtor's Debts to Racquel. The Final Decree required Debtor to pay the following amounts to Racquel:

• $4,014 as an equalization payment; and

• $2,500 as a sanction.

Joint Tax Return. Debtor and Raquel were required to file a joint tax return for 2019, sharing equally any refund or liability. They were to share equally any tax liability arising from using TSP account funds to pay the community credit card debts.

Attorney Fees. Debtor and Racquel were required to file affidavits about the attorney fees incurred in the divorce. The state court would then rule on whether to order one side pay the other side's attorney fees.

It appears Debtor did not comply with the Final Decree. On November 2, 2022, Racquel filed a Verified Motion for Contempt (the "Contempt Motion") in the divorce case, alleging that Debtor had not paid off the credit card in her name; did not give her one half of the garage sale proceeds; did not give her 50% of the FERS benefits; did not make the $4,104 equalization payment; did not pay the $2,500 sanction; and refused to file a joint 2019 income tax return. The Contempt Motion does not mention the division of the TSP account.

Debtor responded pro se to the Contempt Motion on November 14, 2022. Eight days later, he filed this chapter 13 case.

Also on November 22, 2022, the state court entered a Federal Employees Retirement System Order (the "FERS QDRO")^[5] relating to the division of the FERS benefits. The FERS QDRO was submitted by Racquel's counsel and agreed to by Debtor. No similar QDRO was entered for the TSP account.

Debtor filed a chapter 13 plan on December 16, 2022. The plan proposes to pay allowed unsecured claims 100% without interest. The plan also proposes to pay the $2,000 monthly support payment to Racquel "outside the plan."

Debtor filed bankruptcy schedules on December 19, 2022. Among his scheduled assets are the TSP account and the FERS benefits, each with the notation "subject to division in disso." None of the other assets apportioned to Racquel in the Final Decree were scheduled.

Debtor scheduled a general unsecured claim of $25,000 owed to Racquel as a "TSP equalization payment." It is not listed as disputed. Debtor also scheduled a second debt to Racquel of $11,740 and listed it as disputed. It is not clear how this amount was calculated.

On January 12, 2023, the state court held a hearing on the Contempt Motion.

The deadline for Racquel to file a proof of claim was February 1, 2023. For reasons unknown, she did not file a proof of claim.

The state court issued a preliminary ruling on the Contempt Motion on April 4, 2023. The court made the following findings:

1. Respondent has failed to comply with the Final Decree of Dissolution of Marriage, filed on January 15, 2021, as follows:

a. Respondent has failed to pay the Wells Fargo American Express credit card in Petitioner's name (Account No. ending 5854);

b. Respondent has failed to pay Petitioner the $1,122.62 due and owing to her for her share of the proceeds from the garage sale whereby Respondent disposed of community household goods;

c. Respondent has failed to pay Petitioner the $4,410 equalization payment due and owing to her; and

d. Respondent has failed to pay Petitioner the $2,500 in sanction due and owing to her.

2. Respondent testified that he was unable to take a withdrawal from his Thrift Savings Plan ("TSP") account, as ordered, due to the outstanding loan on the TSP.^[6] Respondent further testified that the TSP loan would be paid off in August of 2023 and thereafter he would be able to pay Petitioner's Wells Fargo American Express as well as the other amount due and owing to Petitioner.

The state court also found that "The amounts due and owing to [Racquel] pursuant to [the Final Decree] . . . as well as [Racquel's] entitlement to her share of [Debtor's] TSP are in the nature of support and must be paid."

On April 6, 2023, Racquel filed a stay relief motion so she could complete the division of the FERS benefits. In response, Debtor pointed to the FERS QDRO and argued that the division had already been completed.

On April 18, 2023, the state court issued a supplemental ruling on the Contempt Motion, opining that it should not make a final decision until this Court lifted the automatic stay or the bankruptcy case had been concluded.^[7]

The Court confirmed Debtor's plan on May 9, 2023. The plan is a "100% plan," meaning that all allowed unsecured claims are to be paid in full.

On May 19, 2023, Racquel filed the motion now before the Court, seeking stay relief so she can complete the division of the TSP account or, alternatively, for a ruling that the automatic stay does not apply. Debtor objected, arguing that the Final Decree did not give Racquel any property interest in the TSP account, but instead created an additional debt that Debtor owed to Racquel.

B. The Final Decree is Entitled to Full Faith and Credit.

The Final Decree is a final judgment and is entitled to full faith and credit. As stated in Holm v. Shilensky, 388 F.2d 54 (2d Cir. 1968):

The divorce decree is a final decree, Nevada Rev. Stats. § 125.130(1); it is elementary that, under the Full Faith and Credit Clause of the U.S. Constitution, U.S. Const. Art. IV, § 1, and also under 28 U.S.C. § 1738, a final decree of divorce rendered in one state 'should have the same credit, validity and effect, in every other court in the United States, which it had in the State where it was pronounced,' Hampton v. M'Connel, 16 U.S. (3 Wheat.) 234, 235, 4 L.Ed. 378 (1818) (Marshall, C.J.), as long as the jurisdictional facts, including domicile, are validly established whenever the decree is questioned. Williams v. State of North Carolina, 317 U.S. 287, 293-294, 63 S.Ct. 207, 87 L.Ed. 279 (1942). See also Alton v. Alton, 347 U.S. 610, 74 S.Ct. 736, 98 L.Ed. 987 (1954) (per curiam); Davis v. Davis, 305 U.S. 32, 59 S.Ct. 3, 83 L.Ed. 26 (1938); compare Williams v. State of North Carolina, 325 U.S. 226, 65 S.Ct. 1092, 89 L.Ed. 1577 (1945).

388 F.2d at 56; see also Gov't Personnel Mut. Life Ins. Co. v. Kaye, 584 F.2d 738, 739 (5^th Cir. 1978) (citing Holm); Desjardins v Desjardins, 308 F.2d 111, 116 (6^th Cir. 1962) (Ohio divorce decree is a final judgment entitled to full faith and credit); Rash v. Rash, 960 F.Supp. 280, 282 (M.D. Fla. 1997) (same); see generally Moucka v. Windham, 483 F.2d 914, 916 (10^th Cir. 1973) (full...