Theophilus Williams v. Adam Goodman

Summarized by Amir Shachmurove , Brown Rudnick LLP
4 years 2 weeks ago

Case Type:

Consumer

Case Status:

Affirmed

Citation:

21-24 (10th Circuit, Feb 04,2022) Not Published

Tag(s):

Ruling:

The U.S. Bankruptcy Appellate Panel of the Tenth Circuit (BAP) found no abuse of discretion in the "common-sense" decision of the U.S. Bankruptcy Court for the District of Colorado (BC) to order the chapter 13 trustee in the bankruptcy case of Theophilus S. Williams (DR) to place any potential distributions to the DR's ex-spouse, Emese Williams (EW), in trust pending the outcome of the DR's appeal of the BC's judgment in favor of EW in the adversary proceeding (AP) she initiated asserting that she was an unsecured creditor and equitable co-owner of the DR's real property and sale proceeds.

Procedural context:

On March 7, 2018, seven days before a status conference was to be held in the dissolution-of-marriage action filed by the DR and EW in the District Court of Weld County, Colorado (State Court), regarding the DR's noncompliance with a series of prepetition permanent orders, and before the marital residence at 10167 Falcon Street, Firestone, Colorado (the Property) was to be sold, the DR filed a chapter 13 bankruptcy petition in the BC. Subsequently, EW filed three proofs of claim, which appeared on the claims register as Claims 5, 6, and 7, in April 2018. Over the ensuing months, the DR filed at least six chapter 13 plans, ultimately winning confirmation of the amended chapter 13 plan filed on June 24, 20208, on June 25, 2020, all prior to disposition of the adversary proceeding launched by EW. EW had commenced the AP against the DR in June 2018, one month after she filed her proofs of claim. The complaint in the AP asserted four claims for relief, including claims for: (1) a determination of her ownership interest in the Property and its sale proceeds pursuant to 11 U.S.C. § 541(d), and a judgment imposing an equitable trust over the Property to carry out the terms of the orders entered by the State Court; (2) denial of the DR's discharge pursuant to 11 U.S.C. § 1325(a)(3), § 1325(a)(7), and § 1325(a)(4), or alternatively, dismissal of the DR's bankruptcy case pursuant to 11 U.S.C. § 1307(c)(11); (3) denial of the DR's discharge pursuant to 11 U.S.C. § 727; and (4) a determination that the amounts owed to her by the DR as determined by the State Court are non-dischargeable pursuant to 11 U.S.C. § 523(a)(2)(A) and § 523(a)(4). By the time of trial, the BC had dismissed all but three claims between the parties, with only one relevant to this appeal: a determination of EW's ownership interest in the Property and its sale proceeds pursuant to § 541(d), and a judgment imposing an equitable trust over the Property to carry out the terms of the orders entered by the State Court. On January 8, 2021, after a trial on the merits, the BC—among other things—entered relief in favor of EW on her claim under § 541(d), concluding that her vested equitable interest in the Property is not property of Mr. Williams’s bankruptcy estate. Later, the BC denied the DR's request to alter or amend its findings and conclusions on that issue, and the DR appealed the order to the BAP, which separately affirmed it. As such, the BC's judgment remained in full force and effect. Even as the above maneuvers were ongoing, the TR began distributions. Without issue, the TR disbursed funds to all higher priority classes under the DR's confirmed chapter 13 plan. However, when it came to class four general unsecured claims, which potentially included EW's Claims 5, 6, and 7, the TR had his doubts. Accordingly, the TR filed a motion seeking guidance from the BC as to how funds should be disbursed in light of the pending appeal. Both the DR and EW responded. On June 4, 2021, the BC issued the order regarding the TR's disbursement motion. It held that the TR should disburse funds pro rata on Claims 6 and 7 as Class Four general unsecured claims, and that all pro rata disbursements with respect to Claim 5 should be held pending resolution of all appeals of the AP judgment and order. “To the extent the Adversary Order is affirmed," the BC directed EW "to immediately withdraw Claim No. 5." But, "[t]o the extent the Adversary Order is reversed," the BC added, "the Trustee shall disburse those funds held in trust to" EW. The DR timely appealed this disbursement order.

Facts:

Prepetition state court proceedings set the stage for this complicated case. Sometime before the DR filed, he and EW were parties to a dissolution-of-marriage action filed in and adjudicated by the State Court. As part of the permanent orders entered in that action, which dealt with the parties’ real and personal property, including their marital residence at 10167 Falcon Street, Firestone, Colorado (the Property) and the DR's 401(k) account with Halliburton, the DR and EW agreed (and were ordered) to sell the Property, with each party to receive 50% of the net sale proceeds after payment of all costs related to the sale. The parties also agreed (and were ordered) that—starting in April 2017—EW would receive $900 per month of rental income from the Property, which the DR had leased to a third party, and would equally divide the funds in the DR's 401(k) account, payable within thirty days of receipt of the proceeds from the sale of the Property. Because the Property was not listed by the order-specified deadline, the state court issued another set of permanents order in September 12, 2017, that did the following: (1) awarded EW the first $24,800 of the proceeds from the sale of the Property, with the remaining sale proceeds to be divided equally; (2) finding that the DR had withdrawn all of the funds from the account and failed to pay EW her one-half share, reduced EW's share of the 401(k) account to a judgment in the amount of $7,121.50, with 8% annual interest; and (3) entered entered a judgment in EW's favor in the amount of $4,500, with 8% annual interest due to the DR's failure to turn over the required rental payments. Having so determined, these orders required the DR to satisfy those judgment debts, along with another judgment for past-due child support and maintenance payments, from the proceeds of the sale of the Property. The DR's continued delay prompted the next round of orders. By January 2018, the Property still had not been sold. Thus, EW filed a motion to enforce the Permanent Orders. On March 3, 2018, the state court entered an order appointing Kathryn Ruhl (Ruhl) as the realtor and requiring the parties to sign a listing contract with Ruhl for the Property at a price determined by Ruhl, to cooperate with Ruhl, and to appear for a status conference on March 13, 2018.

Judge(s):

Terrence L. Michael; Cathleen D. Parker; and William T. Thurman

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!