Richard D. Hines

UNITED STATES BANKRUPTCY COURT
SOUTHERN DISTRICT OF OHIO
WESTERN DIVISION
In Re
RICHARD D. HINES
Debtor
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Monika Hines
Objector
vs.
Richard D. Hines
Respondent
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Case No. 05-12959
Chapter 13
Judge Burton Perlman
ORDER ON CREDITORS OBJECTION TO CONFIRMATION
In this Chapter 13 case Monika Hines, divorced wife of
debtor,
This document has been electronically entered in the records of the United
States Bankruptcy Court for the Southern District of Ohio.
IT IS SO ORDERED.
Dated: August 10, 2005
____________________________________________________________
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(hereafter “objector”), objects to confirmation of the Chapter
13 plan presented by debtor, Richard D. Hines (hereafter
“respondent”). In her objection, objector requests a holding
that obligations due her pursuant to the Decree of Divorce
issued by the Domestic Relations Court are non-dischargable. In
addition, objector seeks a ruling that the plan provide for
payment of the parochial school education for the minor children
of the parties. Finally, objector seeks a holding “that the
debt owed Creditor for her interest in Debtor’s retirement plan
be paid at 100 percent.” Objector filed a memorandum in
support of her position, and debtor filed a memorandum in
opposition. The matter came on for hearing before the Court, at
the conclusion at which the Court reserved decision.
As an initial matter, the issue regarding parochial school
education payment has been resolved between the parties by
debtor’s agreement to include such cost in his budget. That
leaves a single issue for resolution. In its divorce decree,
the Domestic Relations Court ordered that debtor pay the
objector $12, 500.00. The objector contends that obligation is
non-dischargeable; debtor contends that it is dischargable.
Debtor has listed the debt in his schedules as an unsecured
nonpriority claim. The Chapter 13 plan proposed to pay such
creditors 5% of their claims.
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On July 2, 2001, the Domestic Relations Court of Hamilton
County, Ohio entered Decree of Divorce between the present
parties. In that Decree appears the following paragraph 11 on
page 6:
IT IS FURTHER ORDERED Defendant/Motion shall,
solely and exclusively, retain her IRA with Fidelity
Investments in its entirely, free and clear of any
interest of Plaintiff/Father. Plaintiff/Father shall,
solely and exclusively, retain his retirement/pension
plan through his employer, City of Cincinnati, free
and clear of any interest of Defendant/Mother.
However, Plaintiff/Father shall pay to
Defendant/Motion $12,500.00 no later that thirty-six
(36) months from the journalization of this Decree of
Divorce as and for her netted share of his retirement.
(In the original document in the last line the word “netted” was
inserted in place of the word “vested”, which was stricken
through.) It is the nature of the $12,500.00 obligation
provided for in the forgoing paragraph that this Court must
decide.
In support of her position that the debt is non-
dischargeable, objector simply cites three cases. In In re
Wilson 158 B.R. 709 (Bank S.D. Ohio 1993) the debtor was
employed by Sinclair Community College. In the course of his
employment he had made contributions into the Public Employees
Retirement System (PERS). In the Divorce Decree which issued in
the case, the Court found that the wife was entitled to a
marital portion in debtor’s retirement fund in the amount of
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$20,624.92. The Court ordered that she be compensated for that
interest by payment from her divorcing husband in the amount of
$11,000.00. The Court reached the conclusion that that amount
was not part of debtor’s bankruptcy estate; through operation of
the State Court divorce decree it became the sole and separate
property of the wife. The Court held that the husband held that
fund in a constructive trust for the benefit of the wife.
The objector relies as well on In re McGraw 176 B.R. 149
(Bank S.D. Ohio 1994). The McGraw case required a determination
of the nature of wife’s interest in a Navy pension being
received by the divorced husband. In that case the Domestic
Relations Court ordered that the husband pay the divorced wife
36½% of all benefits received on account of his Navy pension.
Again, the Court held that because the wife’s interest in the
pension benefit was provided for in the State Court Domestic
Relations Decree, the divorced wife’s interest never became part
of the bankruptcy estate and was not subject to discharge.
Further, again the Court held that the wife’s interest was the
subject of a constructive trust for her benefit.
In In re McCafferty 96 F.3d 192 (6th Cir. 1996) at issue was
the divorced wife’s interest in the husband’s pension benefits
in State Teachers Retirement System (STRS). The Domestic
Relation Court held the divorced wife entitled to one half the
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value of the pension on the date of the divorce, or $100,250.21.
That amount was awarded to her “as a distribution of her
interest in [Mr. McCafferty]’s retirement plan.” The husband
was directed by the order of the Domestic Relations Court to pay
the amount determined to be owing to the divorced wife at the
rate of $1,500.00 per month. Stating that the Domestic
Relations Court had held that the fund in question was the
divorced wife’s interest in the husband’s retirement plan, the
Court held that the divorced wife’s interest in the fund in
question was non-dischargeable and not property of the estate,
so determined to be prior to the filing of the bankruptcy.
While the husband in that case argued that constructive trust
was foreclosed by the case In re Omegas Group Inc. 16 F.3d 1443
(6th Cir.1994), the Court distinguished that case. It held that
while the imposition of a constructive trust in Omegas would be
prejudicial to general creditors in the bankruptcy, the same
would not be true in the case at hand because bankruptcy
creditors could not reach the divorced wife’s interest; it was
not property of the estate.
The Court holds that the case before us is controlled by the
authorities presented by the objector. Debtor seeks to
distinguish those authorities, contending that because the
language of the decree provides that each of the parties is to
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retain his or her own interest in his retirement benefits, this
precludes a holding that the debtor held anything in trust for
her. The plain language of the Divorce Decree that the
$12,500.00 payment is on account of “her netted share of his
retirement,” however, makes clear the nature of the obligation.
It is on account of an interest in debtor’s retirement benefits.
Because the divorce decree was entered prior of the bankruptcy,
the objector’s interest vested pre-bankruptcy, is not part of
debtor’s bankruptcy estate, is non-dischargeable, and is held by
debtor in constructive trust for the objector.
The objection of Monika Hines to confirmation of debtor’s
Chapter 13 plan is sustained because it proposes to treat her as
an unsecured non-priority creditor who will receive 5% under the
plan, when the debt owed her cannot be categorized simply as an
unsecured debt. The Court does hold that debt to be non-
dischargeable. To the extent that the objector seeks other
relief in the present matter, the Court declines to prescribe
how debtor’s obligation to his former wife be treated in the
plan or otherwise.
So Ordered.
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Copies to:
Michael S. Bailey
Bailey & Gunderson Co., LPA
5257 Montgomery Road
Cincinnati, OH 45212
Daniel Zegarski
Zegarski & Ice Co., LPA
700 Walnut Street; ste 202
Cincinnati, OH 45202
Richard D. Hines
5387 Timberchase Court
Cincinnati, OH 45247
Margaret A. Burks
Chapter 13 Trustee
36 E. Fourth Street; Ste 900
Cincinnati, OH 45202
U.S. Trustee
36 E. Seventh Street; Ste 2030
Cincinnati, OH 45202
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