Kantrowitz, Goldhamer & Graifman, P.C. v. Mason

UNITED STATES BANKRUPTCY COURT FOR PUBLICATION
SOUTHERN DISTRICT OF NEW YORK
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In re: Case No. 14-23058 (SHL)
ROGER ALLEN MASON, Chapter 7
Debtor.
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KANTROWITZ, GOLDHAMER
& GRAIFMAN, P.C.,
Plaintiff,
v. Adv. No. 14-08258 (SHL)
ROGER ALLEN MASON,
Defendant.
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POST-TRIAL MEMORANDUM OF DECISION
A P P E A R A N C E S:
KANTROWITZ, GOLDHAMER
& GRAIFMAN, P.C.
Attorneys for Plaintiff
747 Chestnut Ridge Road
Chestnut Ridge, NY 10977
By: James B. Glucksman
DE MOYA & ASSOCIATES, P.C.
Attorneys for Defendant
163 South Main Street
New City, NY 10956
By: Desiree Venicia de Moya
SEAN H. LANE
UNITED STATES BANKRUPTCY JUDGE
Before the Court are the merits of the above-captioned adversary proceeding commenced
by Kantrowitz, Goldhamer & Graifman, P.C. (the “Plaintiff” or “KGG”) in the Chapter 7
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proceeding of Roger Allen Mason (the “Debtor” or the “Defendant”). The Plaintiff filed this
adversary complaint (the “Complaint”) (ECF No. 1)1 alleging that a decision and judgment
entered in state court for, inter alia, counsel fees to the Plaintiff is non-dischargeable under the
Bankruptcy Code.2 See Complaint, Count One. The trial in this case took place on November 6,
2015. For the reasons set forth below, the Court finds that the award of counsel fees to KGG is
not dischargeable in bankruptcy.
BACKGROUND
In August 2010, Barbara Mason commenced a divorce action in the Supreme Court of the
State of New York, County of Rockland (the “Divorce Action”) against the Defendant.
Complaint ¶ 9. Ms. Mason was represented by KGG in the Divorce Action. Id. ¶ 10. The issues
of spousal maintenance, child support, equitable distribution, and counsel fees were tried before
the Honorable Linda S. Jamieson. See Decision and Order After Trial dated May 29, 2013 (the
“Divorce Decision”), PX-1. Among other things, the Divorce Decision awarded Ms. Mason
$50,000 in counsel fees. See id. at 20. The Divorce Decision provided, in relevant part, “[g]iven
the extreme difficulties that plaintiff encountered in this case, including defendant’s failure to
pay his Court-ordered obligations, resulting in multiple contempt applications and the eventual
incarceration of defendant, as well as the ‘relative merit of the parties’ positions,’ the Court finds
that it is just to award plaintiff $50,000 in counsel fees.” Id. (citation omitted).
1 Unless otherwise specified, all references to the Case Management/Electronic Case Filing (“ECF”) docket
are to Adv. Proceeding No. 14-08258.
2 The Plaintiff also alleges that the Defendant is not entitled to a discharge pursuant to 11 U.S.C. §
727(a)(2)(A) and (a)(7) because he transferred certain property located in Stony Point, New York to his former
spouse for no consideration for the purpose of hindering, delaying or defrauding the Plaintiff, within one year of
filing the bankruptcy. See Complaint, Count Two. The Plaintiff seeks relief from the automatic stay to pursue
litigation against the Defendant in state court to reverse the property transfer and enforce its judgment against the
Defendant. This claim was not addressed by the parties at the trial, and therefore, is not the subject of this decision.
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On October 11, 2013, a judgment of divorce was entered incorporating the Divorce
Decision (the “Divorce Judgment”). See Divorce Judgment, PX-2. The Divorce Judgment
ordered the Defendant to “pay [Ms. Mason’s] counsel, Kantrowitz, Goldhamer & Graifman,
P.C., the sum of $50,000 on or before July 31, 2013, as and for counsel fees.” Id. at 5–6. The
Divorce Judgment further stated: “[t]his award is not dischargeable in bankruptcy as it is in the
nature of support[.]” Id. at 6. The Defendant did not make the payment as required by the
Divorce Judgment. See Audio of Trial Held on November 6, 2015 at 55:00–56:26.3 On
December 17, 2013, a money judgment was entered in favor of KGG against the Defendant in
the amount of $50,000.00, plus costs of $2,526.00 and recorded against the Defendant’s property
located at 7 Phelps Ave., West Haverstraw, New York (“KGG’s Judgment”). See Judgment,
PX-3. KGG’s Judgment has not since been amended or vacated. See Audio of Trial Held on
November 6, 2015 at 47:20–50:52.
In January 2014, the Defendant and Ms. Mason executed a stipulation (the “Post-Divorce
Stipulation”) purporting to modify certain provisions of the Divorce Judgment relating to
maintenance, child support, and the distribution and transfer of marital assets. See Post-Divorce
Stipulation, DX-H; Joint Pre-Trial Order, Section III, ¶ 23 (ECF No. 30). In June 2014, an order
was filed with the Supreme Court, County of Rockland, implementing the Post-Divorce
Stipulation (the “Post-Divorce Order”). See Order, DX-I. On September 24, 2014, the Post-
Divorce Order was signed by the Honorable Gerald E. Loehr and entered. See id. KGG was not
given notice of the Post-Divorce Stipulation or the subsequent Post-Divorce Order. See Joint
Pre-Trial Order, Section III, ¶ 27.4
3 Neither party requested a written transcript of the trial but an audio recording exists of the proceeding.
4 In September 2014, KGG commenced a breach of contract action in state court against the Defendant and
his former spouse seeking a money judgment for unpaid legal fees, plus interest and to set aside the transfer of the
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The Defendant filed for Chapter 7 bankruptcy relief on July 26, 2014. KGG
subsequently filed this adversary proceeding contending the award of counsel fees in the Divorce
Judgment is not dischargeable pursuant to 11 U.S.C. §§ 523(a)(5) and (15). See Complaint ¶¶
21–27; Joint Pre-Trial Order, Section IV.A., ¶ 15. The Defendant argues that the Post-Divorce
Stipulation and Post-Divorce Order amended certain provisions of the Divorce Judgment and, as
a result, the Defendant is no longer obligated to pay the counsel fee award. Id. at 8–9.
DISCUSSION
A. Dischargeability of a Domestic Support Obligation Pursuant to § 523(a)(5) and (15)
Under the Bankruptcy Code a “domestic support obligation” is not dischargeable. See 11
U.S.C. § 523(a)(5). A domestic support obligation is defined by Section 101(14A) as:
a debt that accrues before, on, or after the date of the order for relief in a case under this
title, including interest that accrues on that debt as provided under applicable
nonbankruptcy law notwithstanding any other provision of this title, that is—(A) owed to
or recoverable by—(i) a spouse, former spouse, . . . (B) in the nature of alimony,
maintenance, or support . . . of such spouse, former spouse . . . without regard to whether
such debt is expressly so designated; (C) established or subject to establishment before,
on, or after the date of the order for relief in a case under this title, by reason of
applicable provisions of—(i) a separation agreement, divorce decree, or property
settlement agreement; (ii) an order of a court of record; or (iii) a determination made in
accordance with applicable nonbankruptcy law by a governmental unit . . . .
11 U.S.C. § 101(14A). “Federal bankruptcy law, not state law, determines whether an obligation
is a domestic support obligation.” In re Dudding, 2011 WL 1167206, at *5 (Bankr. D. Vt. Mar.
29, 2011). When determining whether an obligation constitutes a domestic support obligation,
property located at 7 Phelps Ave., W. Haverstraw, NY to the Defendant due to alleged fraud. See Joint Pre-Trial
Order, Section III, ¶ 28. While the Debtor was never served in that action, the Debtor contends the filing of the
action violated the automatic stay imposed by the bankruptcy. See Plaintiff’s Motion for Summary Judgment (“Pl.’s
Motion”) at 7 (ECF No. 14-3); Defendant’s Opposition to Plaintiff’s Summary Judgment Motion at 13–15 (ECF No.
17). KGG argues that the automatic stay should be lifted nunc pro tunc and further states it did not violate the
automatic stay by commencing a state court action against the Defendant, as “[n]o adversary proceeding need be
filed to obtain a determination of dischargeability as to debts that fall within the definitions of §§ 523(a)(5) and
523(a)(15).” Pl.’s Motion at 14–15 (citing In re Rogowski, 462 B.R. 435, 440 n.8 (Bankr. E.D.N.Y. 2011)). As
KGG did not file a separate motion seeking to lift the automatic stay, this issue is not currently before the Court.
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courts “look to the substance, and not merely the form, of the payments.” Brody v. Brody (In re
Brody), 3 F.3d 35, 38 (2d Cir. 1993). Additionally, courts have found that “the nature of the debt
[is] more important than the identity of the payee.” In re Rogowski, 462 B.R. 435, 443 (Bankr.
E.D.N.Y. 2011) (citing In re Spong, 661 F.2d 6, 9–10 (2d Cir. 1981)). For example, in In re
Rogowski, the court found that an award of attorney’s fees in a matrimonial action, payable
directly to the former spouse’s attorneys, constituted a domestic support obligation and therefore,
was not dischargeable in bankruptcy. Id. at 436–37. “[A] New York court must, at a minimum,
find that the former spouse requires financial support before the court can properly award that
spouse matrimonial attorney’s fees.” Id. at 446. Thus, an award of matrimonial attorney’s fees
is “in the nature of alimony, maintenance, or support.” Id. “It is well settled in [the Second
Circuit] that obligations in the nature of alimony, maintenance and support may include
attorney’s fees incurred by a former spouse in connection with a divorce proceeding, custody
dispute, or obtaining and enforcement of alimony and support awards.” In re Klein, 197 B.R.
760, 761 (Bankr. E.D.N.Y. 1996).
In addition to the non-dischargeability provision in Section 523(a)(5), Section 523(a)(15)
of the Bankruptcy Code excepts from discharge any debt to a spouse or former spouse that is
incurred “in the course of a divorce or separation or in connection with a separation agreement,
divorce decree or other order of a court of record . . . .” 11 U.S.C. § 523(a)(15). Thus, Section
523(a)(15) encompasses a broader category of debt than a domestic support obligation under
Section 523(a)(5). Thus, a court “need not make a determination on whether the amounts
awarded under the [j]udgments at issue constitute domestic support obligations under 11 U.S.C.
§ 523(a)(5) if the [p]laintiff can demonstrate that the [j]udgments would be nondischargeable in
any event under 11 U.S.C. § 523(a)(15) . . . .” In re Golio, 393 B.R. 56, 62 (Bankr. E.D.N.Y.
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2008) (finding attorney’s fees awarded pursuant to a divorce agreement were non-dischargeable
under 11 U.S.C. § 523(a)(15)). As a result, “courts have recognized that attorney’s fees awarded
in a divorce proceeding are non-dischargeable under § 523(a)(15) regardless of whether or not
the fees are considered to be in the nature of support or for some other purpose.” In re
Schenkein, 2010 WL 3219464, at *5 (Bankr. S.D.N.Y. Aug. 9, 2010); see In re Tarone, 434 B.R.
41, 49 (Bankr. E.D.N.Y. 2010) (finding it irrelevant whether awards for maintenance and
attorneys’ fees awarded by the state court were true support obligations because they were non-
dischargeable pursuant to Section 523(a)(15)); cf. In re Golio, 393 B.R. at 63 (concluding that
exempting plaintiff spouse’s attorneys’ fees and costs from discharge given defendant’s willful
failure to comply with the state court judgments and orders was “consistent with the legislative
purpose of 11 U.S.C. §§ 523(a)(5) and (a)(15)”).
B. The Award of Counsel Fees are Non-dischargeable
The Defendant conceded at trial that the debt would be non-dischargeable but for the
Post-Divorce Order. See Audio of Trial Held on November 6, 2015 at 33:35–34:12. Putting
aside the Post-Divorce Order, the award of Ms. Mason’s counsel fees easily satisfies the
requirements for non-dischargeability. As it was part of the Divorce Judgment and subsequent
Divorce Order, it was “incurred in the course of a divorce.” 11 U.S.C. § 523(a)(15). It is
irrelevant that the attorneys’ fees are payable directly to Ms. Mason’s matrimonial attorneys. See
In re Golio, 393 B.R. at 63. As the debt is payable to Ms. Mason’s attorneys for her benefit, the
requirement of 11 U.S.C. § 523(a)(15) that the debt be owed to a former spouse is satisfied. See
In re Tarone, 434 B.R. at 49. Moreover, this debt appears likely to also satisfy the requirements
of a domestic support obligation under Section 523(a)(5). See In re Rogowski, 462 B.R. at 446–
47.
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Nonetheless, the Defendant argues that the Post-Divorce Order voided the earlier Divorce
Judgment. More specifically, the Defendant contends that the parties reached a new settlement
of their respective divorce obligations that did not provide for payment of their counsel fees and
that the New York Supreme Court approved this new agreement. See Joint Pre-trial Order,
Section IV.B, ¶¶ 12–16; see also Reply to Plaintiff’s Opposition to Defendant’s Cross Motion to
Dismiss ¶¶ 8–9 (ECF No. 19) (stating Judge Loehr, by signing the Post-Divorce Order,
“eradicated Defendant’s obligation to pay KGG with one swipe of his pen.”). With no counsel
fees owed, the argument goes, the question of discharge is irrelevant. But this argument fails as
a matter of law.
“It is elementary that a final judgment or order represents a valid and conclusive
adjudication of the parties’ substantive rights . . . .” Countrywide Home Loans, Inc. v. Taylor,
961 N.Y.S.2d 909, 910 (Sup. Ct. Suffolk County 2013) (citing DaSilva v. Musso, 76 N.Y.2d 436,
440 (1990)). Judicial orders and judgments “remain inviolate unless they are reversed by
appellate processes or are vacated by the court itself under its inherent powers or those statutorily
conferred upon it by CPLR 5015.” Id. at 910–11. Of course, a divorce judgment may be
modified under certain circumstances. See Nesenoff v. Nesenoff, 754 N.Y.S.2d 284, 285 (App.
Div. 2d Dep’t 2003). For example, courts have modified judgments to conform to a prior
stipulation entered into by the parties. See id. (modifying divorce judgment to comply with the
terms of the parties’ stipulation, which was dated before the divorce judgment); Lafferty v.
Lafferty, 682 N.Y.S.2d 75, 76 (App. Div. 2d Dep’t 1998) (modifying provisions of judgment that
“impermissibly altered the stipulation of settlement”). But in this case, the judgment for counsel
fees was not vacated or amended. In fact, the Defendant and his former spouse made no effort to
do so. Thus, the judgment remains valid.
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The Post-Divorce Stipulation and Post-Divorce Order do not alter the non-
dischargeability conclusion here. On the one hand, “[s]tipulations of settlement are favored by
the courts and not lightly cast aside.” Sanders v. Copley, 543 N.Y.S.2d 67, 69 (App. Div. 1st
Dep’t 1989) (citation omitted). Generally, “a stipulation will only be set aside for good cause,
‘such as fraud, collusion, mistake, accident or some other ground of the same nature.’” Id.
(citing Matter of Frutiger, 29 N.Y. 2d 143, 150 (1971)). On the other hand, however,
stipulations generally do not bind those who are not parties to them. See Baksi v. Wallman, 65
N.Y.S.2d 894, 897 (App. Div. 1st Dep’t 1946); see also N.Y. C.P.L.R. 2104 (“An agreement
between parties or their attorneys relating to any matter in an action, other than one made
between counsel in open court, is not binding upon a party unless it is in a writing subscribed by
him or his attorney or reduced to the form of an order and entered.”). The Plaintiff here did not
consent to the Post-Divorce Stipulation and the resulting Post-Divorce Order. Indeed, it is
undisputed that the Plaintiff did not receive any notice of either. See Joint Pre-Trial Order,
Section III, ¶ 27; see also Audio of Trial Held on November 6, 2015 at 31:41–32:00. Given the
lack of notice, it is not surprising that the Defendant’s argument has been rejected by the New
York courts. In Schwartz v. Muir, 747 N.Y.S.2d 551 (App. Div. 2d Dep’t 2002), the New York
Supreme Court awarded counsel fees to the former attorney for the wife in a matrimonial action,
with the fees to be paid by the husband. Id. at 551. The order was reduced to a money
judgment. Id. Subsequently, the husband and wife entered into a stipulation of settlement
disposing of all issues pertaining to the marriage, which provided in part, that “all prior
judgments, orders, and rulings entered and made herein are and shall be vacated, nunc pro tunc,
upon the signing and filing thereof.” Id. at 552. The former attorney was not a party to the
stipulation and received no notice of the “so-ordered” stipulation. Id. The New York Appellate
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Division, Second Department held that “[i]n the absence of the [former attorney’s] consent, or
the grant of a motion on notice for an order vacating the money judgment, the stipulation of
settlement between the husband and wife . . . did not have the effect of vacating the prior
enforceable judgment.” Id. (citing N.Y. C.P.L.R. 5015(a),(b)).
Even assuming for the sake of the argument that the Post-Divorce Stipulation and Post-
Divorce Order could alter the Judgment, the text of the document does not appear to do so.5 The
Post-Divorce Order does not specifically refer to the award of counsel fees or to KGG’s
Judgment. While the Post-Divorce Order purports to waive and delete several paragraphs of the
Divorce Judgment, it does not reference the thirteenth decretal paragraph of the Judgment of
Divorce, which is the paragraph that orders the payment of counsel fees. See Post-Divorce
Order, DX-I; Divorce Judgment, PX-2 at 5; see cf. LV v. New York City Dep’t of Educ., 2005
WL 2298173, at *6 (S.D.N.Y. Sept. 20, 2005) (concluding prior post-judgment stipulations
entered into by the parties which were silent on the relief presently sought had no effect so as to
preclude that relief); Strober v. Warren Prop. Co., 444 N.Y.S.2d 475, 476–77 (App. Div. 2d
Dep’t 1981) (finding receivership was to continue until court order that it terminate, concluding
“[s]ince no decretal paragraph in the final judgment terminated the receivership, it continued
subsequent to the entry thereof . . .”); see also cf. United States v. Spallone, 399 F.3d 415, 424
(2d Cir. 2005) (stating “[c]ourt orders are construed like other written instruments,” thus they are
5 There are reasons to be skeptical of the two spouses’ intentions in seeking to change the status quo through
the Post-Divorce Stipulation without notice to all parties. Throughout the Divorce Action, the Supreme Court noted
the lack of the parties’ transparency and honesty into their financial affairs, at one point stating, “The parties, despite
having two homes, multiple vehicles, cell phones, televisions, cable and other accoutrements of a middle-class
lifestyle, claimed income of only $9,500 in 2009, and $28,000 in 2008. The Court finds this very hard to believe.”
Divorce Decision at 4 (citing to a prior decision and order rendered in the case on Ms. Mason’s motion for
contempt). The Supreme Court had also stated, “All of the above history proves that although the parties have
reported income on their past tax returns of under $30,000 per year, the Court finds that those numbers bear no
resemblance to reality.” Id. at 7.
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ordinarily interpreted by examining the four corners of the document, and noting “a court is
presumed not to intend to grant relief which was not demanded” (citations omitted)).6
CONCLUSION
For the reasons set forth above, the Court finds that KGG’s Judgment remains valid and
is not dischargeable in bankruptcy. Accordingly, the Court decides in favor of Plaintiff on Count
One of the Complaint. The Plaintiff is to settle an order on five days’ notice. In light of this
ruling, the parties shall advise the Court within ten days of this decision of whether any further
proceedings are necessary in this adversary case.
Dated: New York, New York
February 22, 2016
/s/ Sean H. Lane______________________
UNITED STATES BANKRUPTCY JUDGE
6 After arguments in the trial were concluded, the Defendant raised a question regarding the text of the notice
of the lien filed by KGG in New York Supreme Court, County of Rockland, which identifies a party other than the
Defendant, Roger Mason. The notice of lien provides, in relevant part: “Please take notice that the undersigned
attorney of record for Alan Kahn, the defendant herein, hereby claims a lien in the sum of $75,449.22 . . . .” Notice
of Lien, PX-4 (emphasis added). The name in the caption of the notice of lien correctly identifies the Defendant as
Roger Mason, see id.; Judgment, PX-3. The Plaintiff suggested this incorrect name was a typographical error. In
any event, this issue is not properly before the Court because the Defendant did not raise it in any of his pleadings or
until after the trial had concluded on the merits. Moreover, the validity of the lien is not relevant to the
dischargeability of the debt, and thus, the text of this notice of lien would not change the Court’s determination on
non-dischargeability.
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