In re Matson

509 B.R. 860

In re James MATSON & Kevin Mabry, Debtors.

No. 13–35361.

United States Bankruptcy Court, E.D. Wisconsin.

Signed April 29, 2014.

Ryan Anthony Blay, Kenosha, WI, for Debtors.

MEMORANDUM DECISION ON DEBTORS' OBJECTION TO SEAWAY BANK & TRUST COMPANY'S MOTION TO DISMISS OR, IN THE ALTERNATIVE, TO BIFURCATE CASE

MARGARET DEE McGARITY, Bankruptcy Judge.

This matter came before the Court on Seaway Bank & Trust Company's motion to dismiss the debtors' case or, in the alternative, to bifurcate the case. The debtors, James Matson and Kevin Mabry, who filed this joint chapter 13 petition as same-sex spouses on November 26, 2013, were legally married in Iowa and reside in Wisconsin. The debtors opposed the motion to dismiss or bifurcate and, after a preliminary hearing on April 15, 2014, the Court took the matter under advisement. This is a core proceeding under 28 U.S.C. § 157(b)(2), and the Court has jurisdiction under 28 U.S.C. § 1334. This decision constitutes the Court's findings of facts and conclusions of law pursuant to Fed. R. Bankr.P. 7052. For the reasons stated below, the motion to dismiss or bifurcate is denied.

ARGUMENTS

While both parties declined the opportunity to file briefs in support of their positions, they did provide a summary of their arguments in their pleadings.

Seaway argues a joint case may only be commenced “by an individual that may be a debtor under such chapter and such individual's spouse.” 11 U.S.C. § 302(a) (emphasis added). Traditionally, “the definition and regulation of marriage ... has been treated as being within the authority and realm of the separate States,” United States v. Windsor, ––– U.S. ––––, 133 S.Ct. 2675, 2689–90, 186 L.Ed.2d 808 (2013). Since Wisconsin does not allow or recognize same-sex marriages, Wis. Const. art. XIII, § 13, the debtors are not “spouses” for purposes of 11 U.S.C. § 302.

The debtors argue that the Supreme Court found the federal Defense of Marriage Act, which defined marriage as a union between one man and one woman, “violate [d] basic due process and equal protection principles applicable to the Federal Government.” Windsor, 133 S.Ct. at 2693. Thus, the state of Wisconsin does not have the authority to deny a lawfully wedded couple any federal benefits, which would include the right to file as spouses in a joint bankruptcy case.

Neither the United States Trustee nor the Chapter 13 Trustee have joined the motion, presumably because the Department of Justice announced that “same-sex married couples should be treated in the same manner as opposite-sex married couples for all bankruptcy purposes ... including individuals married to a person of the same sex who were legally married in a state that recognizes such marriages, but who are domiciled in a state that does not recognize such marriages.” U.S. Dept. of Just., U.S. Trustee Program, Consumer Info., http:// www. justice. gov/ ust/ eo/ public_ affairs/ consumer_ info/ (last visited April 23, 2014).

DISCUSSION

Pursuant to 11 U.S.C. § 302, “[a] joint case under a chapter of this title is commenced by the filing with the bankruptcy court of a single petition under such chapter by an individual that may be a debtor under such chapter and such individual's spouse.” 11 U.S.C. § 302(a). In this case, the parties agree the debtors' marriage is lawfully recognized by the State of Iowa, where it was performed. Also, they do not challenge the Wisconsin venue for the bankruptcy of either party. Rather, the creditor challenges the debtors' right to file a joint petition while residing in Wisconsin. Wisconsin's marriage amendment to the state constitution declares that the only “marriage” valid or recognized in Wisconsin is a marriage “between one man and one woman.” The amendment further prohibits same-sex couples from entering into a “legal status identical or substantially similar to that of marriage.” Wis. Const. art. XIII, § 13.

In United States v. Windsor, ––– U.S. ––––, 133 S.Ct. 2675, 186 L.Ed.2d 808 (2013), the taxpayer, as the surviving spouse of a same-sex married couple, was denied the benefit of the spousal estate tax deduction because the definitions of “marriage” and “spouse” under section 3 of the federal Defense of Marriage Act (DOMA) did not meet the requirement for the deduction. The plaintiff and the decedent had been married in Canada and lived in New York, which recognized the marriage as valid in New York. After an extended discussion of jurisdiction and whether a case or controversy existed, the Supreme Court decided to take up the matter of whether the surviving member of the couple, who had been bequeathed the decedent's estate, qualified as a spouse for federal estate tax purposes. The tax issue turned on whether the provision of DOMA defining for all federal law purposes “marriage” as a legal union between a man and a woman only, and “spouse” as a person of opposite sex who was a husband or wife, was invalid. This definition, codified in the federal “Dictionary Act” at 1 U.S.C. § 7, applied not just to the tax issue presented, but the Court recognized it could have implications to well over 1,000 federal statutes and regulations relating to spouses and marriages. 133 S.Ct. at 2694.

The Supreme Court held that this definition created an unconstitutional deprivation of equal protection provided by the Fifth Amendment. Id. at 2693. Since laws affecting marriage are solely within the authority of the various states, DOMA had the effect of singling out for disparate and frequently negative treatment a particular subset of unions deemed appropriate for respect by the states that recognize them. The Court found the provision invalid, because “no legitimate purpose overcomes the purpose and effect to disparage and to injure those whom the State, by its marriage laws, sought to protect in personhood and dignity.” 133 S.Ct. at 2696.

Nevertheless, section 2 of DOMA remains intact under Windsor. Section 2 creates an exception to the Full Faith and Credit Act and provides that no state shall be required to give effect to “any public act, record, or judicial proceeding respecting a relationship between persons of the same sex.” 28 U.S.C. § 1738C.¹ This section was not at issue in Windsor because the controversy involved a matter of federal tax law, and the state the couple lived in recognized their marriage. This contributes to the uncertainty surrounding interstate recognition of same-sex marriages in various contexts, such as the bankruptcy filing by the debtors here.

Unlike the parties in this case, the taxpayer in Windsor was married to her same-sex partner in Canada and lived in New York, a state that recognized and protected same-sex marriages. Thus, under the narrow ruling in Windsor, those individuals married in a jurisdiction recognizing same-sex marriage and currently living in a state that recognizes same-sex marriage are entitled to have their marriage federally recognized.

Wisconsin does not recognize same-sex marriages, a legal stance currently allowable under section 2 of DOMA. Wisconsin does not have to treat the debtors as married in any way. However, section 2 applies to states; it does not apply to federal courts and certainly does not apply to this Court. At first glance, one might think the creditor's motion would invoke an analysis of equal protection, as Windsor did, or substantive due process issues (as the majority's decision was characterized and strongly criticized in Justice Scalia's dissent), or even the Full Faith and Credit Clause of the United States Constitution. U.S. Const. art. IV § 1 (“Full Faith and Credit shall be given in each State to the public Acts, Records and judicial Proceedings of every other State.”). Instead, the issue—the right of these same-sex spouses, married in a state that...