McMaster v. Small (In re Small)

Summarized by Steven Holmes , Cavazos Hendricks Poirot, PC
13 years 6 months ago

Citation:

Case No. 11-40888, Decided August 16, 2012 (Unpublished)

Tag(s):

Ruling:

Chapter 7 Debtor's former spouse's intentionally violated the automatic stay by continuing prosecution of civil contempt claims in state court, in violation of the bankruptcy court’s lift stay order. Debtor awarded $42,358.36 in costs and attorneys’ fees. In affirming the decisions of the district court and the bankruptcy court, the Fifth Circuit found that the debtor had standing to bring the stay violation claims; that the bankruptcy court’s ruling was not barred by res judicata or collateral estoppel arising from the state court’s findings; and that defendants’ acts constituted intentional violations of the automatic stay that were not protected by the exceptions for criminal proceedings or for divorce proceedings provided by Section 362(b)(1) and (2). More specifically, the court found that the defendants were aware of the automatic stay and the express conditions of the order lifting stay directing that any award for spousal support was to be paid only from the future earnings of the debtor and not from property of the bankruptcy estate. In so holding, the court affirmed the bankruptcy court's findings that Defendants sought enforcement of a civil judgment without attempting to limit recovery to property that was not property of the bankruptcy estate. The monetary award of $42,108.36 in attorneys’ fees represented only the amount of attorneys’ fees associated with the debtor's defense of the state court enforcement action.

Procedural context:

The debtor’s former spouse (McMaster) appealed the bankruptcy court’s determination of an automatic stay violation and the United States District Court for the Southern District of Texas affirmed.

Facts:

McMaster initiated divorce proceedings against the debtor (Small) and the state court entered a pretrial order for spousal support. Following a jury trial, but before the divorce decree was entered, Small filed a Chapter 7 bankruptcy proceeding. McMaster obtained an order modifying the stay to allow the divorce proceedings to continue; to enable the state court to enter a final divorce decree, including allocation of the community estate; and to determine the amount of monetary damages, if any, that McMaster held against the debtor. The lift stay order, however, stated that any state court award of future spousal support would be subject to the condition that such support is “paid from the future earnings of the Debtor and not from property of the bankruptcy estate.” McMaster continued the state court litigation resulting in the judgment against Small, including a probated prison sentence and award of $124,000.00 in unpaid spousal support, including McMasters’ attorneys’ fees, costs and continued support obligations. Small obtained a mandamus order from the Texas Court of Appeals finding that the state court had violated the automatic stay. The state court subsequently amended its judgment, limiting the relief to criminal contempt and a liquidated money judgment. Small then filed a pro se adversary proceeding alleging that McMaster and her attorney had violated the automatic stay by obtaining and attempting to enforce the state court’s order.

Judge(s):

Stewart, Elrod and Southwick per curiam.

ABI Membership is required to access the full summary. Please Sign In using your ABI Member credentials. Not a Member yet? Join ABI now - it is absolutely worth it!