Gral v. Estate of Margolis (In re Gral)

572 B.R. 709, 2017 Bankr. LEXIS 895
CourtUnited States Bankruptcy Court, E.D. Wisconsin
DecidedMarch 31, 2017
DocketCase No. 16-21329-GMH; Adv. Proc. No. 16-02193-GMH
StatusPublished

This text of 572 B.R. 709 (Gral v. Estate of Margolis (In re Gral)) is published on Counsel Stack Legal Research, covering United States Bankruptcy Court, E.D. Wisconsin primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Gral v. Estate of Margolis (In re Gral), 572 B.R. 709, 2017 Bankr. LEXIS 895 (Wis. 2017).

Opinion

DECISION AND ORDER

G. Michael Halfenger, United States Bankruptcy Judge

The Estate of Peter Margolis (“Margol-is”) holds a judgment against Michael A. [712]*712Gral and his wife, Julia Gral, entered by the Milwaukee County Circuit Court. Case No. 16-21329, Claim No. 3-2, Margolis domesticated that judgment in Miami-Dade County, Florida. M; see also Case No. 16-21329, CM-ECF Doc. No. 119 at 6. Margolis then commenced a state-court collection action in Miami-Dade County against Michael and Julia Gral; the Michael A. Gral and Julia G. Gral Living Trust dated June 13, 2006 (the “Trust”); Gral Holdings, Ltd.; and Gral Holdings Key Biscayne, LLC (“Key Biscayne”). CM-ECF Doc. No. 15 at 1-2; Case No. 16-21330, CM-ECF Doc. No. 35 at 1-2.

After Margolis sued in Florida, Michael Gral and two related entities filed chapter 11 petitions. Margolis seeks to continue its Florida collection suit against Julia Gral. Margolis contends that Julia Gral, who is not a debtor, owns property in which Michael Gral has no interest, including a fifty-percent share of Margolis Gral LLC (“Margolis Gral”). (Margolis, unsurprisingly, owns the other fifty-percent of Margolis Gral.)

Plaintiffs Michael Gral and Key Biscayne commenced this adversary proceeding to enjoin Margolis from continuing its collection lawsuit against Julia, the Trust, and Gral Holdings, Ltd., another non-debt- or. CM-ECF Doc. No. 1. The plaintiffs contend, among other things, that Margol-is’s effort to collect from Julia Gral necessarily entails an act to collect from marital property, which is property of Michael Gral’s bankruptcy estate. Id. Michael Gral separately moved for sanctions against Margolis, contending that Margolis’s pursuit of Julia in the Florida state-coui’t litigation violates § 362(a)’s stay of acts to collect from property of the bankruptcy estate. 11 U.S.C. § 362(a)(3). Case No. 16-21329, CM-ECF Doc. No. 265.

This decision resolves a central question to both the adversary plaintiffs’ request that I enjoin Margolis’s pursuit of collection in Florida and Michael Gral’s contention that the automatic stay enjoins Mar-golis’s pursuit of Julia, namely, whether Julia Gral owns a fifty-percent interest in Margolis Gral as individual property or as marital property. (Margolis also asserts that Julia individually owns an interest in Glendale Medical Investments, LLC. The parties largely ignore this contention. I follow suit because its resolution is unnecessary to decide the matters immediately at hand.2)

The parties have presented the matter for decision on the undisputed facts described below.

I

Michael and Julia Gral are the settlors and co-trustees of the Trust. The Trust has held their marital assets since its creation in 2006, One asset held by the Trust before September 8, 2011, was the Grals’ fifty-percent interest in Margolis Gral. CM-ECF Doc. No. 32-1 at ¶ 3.

In the summer of 2011, Glendale Medical Center, LLC, an entity indirectly owned by Margolis Gral, needed new financing. CM-ECF Doc, No. 30 at 1-2, Ex, A. American Equity Investment Life Insurance Company was willing to lend to Glendale Medical Center on the condition [713]*713that Michael Gral, who is a convicted felon, divest his ownership interest in Glendale Medical Center and Margolis Gral. Id.-, see also CM-ECF Doc. No. ¾ at 3, Ex. B.

On September 8, 2011, the Trust transferred its membership interest to Julia Gral using the Assignment of Membership Interest pictured below:

ASSIGNMENT OF MEMBERSHIP INTEREST
This Assignment of Member's Interests (the “Assignment"), dated as of the t day of September, 2011, is made by and between Michael A. Gral and Mia G. Gral, as Trustees of the Michael A, Grsleud Julia G, Gral Living Trust Dated June 13,2006 ("Assignor”) and Julia G, Gral (“ Assignee"), ■
RECITALS
WHEREAS, Assignor desires to assign a fifty (50%) membership interest ("Subject Merest") in Margolis Gral, LLC, a Flordia limited lisblity company (the "Company") to Assignee; and
WHEREAS, Assignee desires to accept assignment of the S ,__,
NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereby agree as follows:
1. Assignment of Interest. Assignor does hereby assign and transfer to Assignee, absolutlcy and unconditionally, the Subject Merest la the Company, '
2. Effective Bate of Assignment. The Assignment shall bo effective as of the date first written above,
3> Governing Law. This Assigmenl shall be governed by and construed in accordance with the internal laws of the state of organization of the Company, and such state shall have jurisdiction over all matters arising under this Assignment
IN WITNESS WHEREOF, the parties hereto have executed this Assignment of Member's Interests effective as of the date first set forth above.
ASSIGNOR: ASSIGNEE:
Michael A, Gral and Julia G. Gral, As Trustees of the Michael A. Oral and Julia G. Gral
[[Image here]]

CM-ECF Doc. No. 30 at 7.

Margolis contends that this assignment (“Assignment”) divested Michael Gral of any marital property interest in Margolis Gral. Michael Gral disagrees, arguing that the property remains marital property owned by Julia, rather than by the Trust.

[714]*714II

Wisconsin marital property rights are creatures of Wisconsin law. That law also governs the Trust. The law of Florida, the state under which Margolis Gral is organized, governs the Assignment. The parties make nothing of these issues.

The parties instead look to Wisconsin law in addressing the marital property issues and otherwise refer to precedents from a variety of jurisdictions. This decision follows that course. The parties have forfeited all choice-of-law arguments.

A

The Grals are domiciled in Wisconsin, and they married after Wisconsin’s Marital Property Act (the “Act”) became effective. See Wis. Stat. ch. 766. No one disputes the Act’s general applicability.

The Act provides, “[a]ll property of spouses is marital property except that which is classified otherwise by [the Act] and that which is described in sub. (8).” Wis. Stat. § 766.31(1). Under the Act, “[e]ach spouse has a present undivided one-half interest in each item of marital property”. Wis. Stat. § 766.31(3). “The transfer of property to a trust does not by itself change the classification of the property.” Wis. Stat. § 766.31(5).

Michael Gral reports that he transferred his membership interest in Margolis Gral to the Trust “as of June 13, 2006.” CM-ECF Doc. 32-1 at ¶3.

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Cite This Page — Counsel Stack

Bluebook (online)
572 B.R. 709, 2017 Bankr. LEXIS 895, Counsel Stack Legal Research, https://law.counselstack.com/opinion/gral-v-estate-of-margolis-in-re-gral-wieb-2017.