In re Meier

537 B.R. 880, 2015 WL 5559598
United States Bankruptcy Court, N.D. Illinois·Decided September 17, 2015·No. Bankruptcy No. 14-bk-10105·Published·Cited by 1 cases

Opinion

MEMORANDUM OPINION ON ALL FINAL OBJECTIONS TO MARTHA MAGGIORE’S PRIORITY PROOF OF CLAIM

JACK B. SCHMETTERER, United States Bankruptcy Judge.

Robert Meier’s (“Robert”) bankruptcy case was filed on March 20, 2014 as a Chapter 11. It was converted to Chapter 7 on December 12, 2014. While the case was in Chapter 11, Robert did not make any payments to Martha Maggiore (formerly Martha Meier, herein, “Martha”) for support as required by his divorce. A previous opinion, following a trial, explained the terms of the divorce and the Marriage Settlement Agreement, (“MSA”), [881] and that explanation will not be repeated here. (Dkt. 804, hereafter the “first opinion”.) After the conversion to Chapter 7, Martha amended her proof of claim to add a priority unsecured claim for missed payments due Under the MSA. Another creditor, Edward Shrock (“Shrock”) objected. That objection was overruled and Martha’s claim for $800,000 as a priority claim under 11 U.S.C. § 507(a)(1)(A) was allowed. (Dkt. 649, hereinafter the “second opinion”.)

Then Shrock moved to vacate the order overruling his objection. Robert’s bankruptcy counsel Bauch & Michaels, LLC and special counsel Nixon Peabody, LLP, (collectively “Chapter 11 Counsel”) who are also creditors in the case filed a motion to reconsider the second opinion and resulting order. A scheduling order was issued requiring any other objections to be filed by July 31, 2015, and setting a briefing schedule. Chapter 11 Counsel then filed an objection, which was a verbatim copy of its motion for reconsideration. No other parties have filed objection to Martha’s claim, and all scheduled responses and replies have been filed.

For ^reasons set forth below, the objections and motions attacking the second opinion are denied and overruled, and Martha’s claim is again allowed.

DISCUSSION

Jurisdiction and Venue

Subject matter jurisdiction lies under 28 U.S.C. § 1334. The district court may refer proceedings to a bankruptcy judge under 28 U.S.C. § 157, and this matter is referred here by District Court Operating Procedure 15(a) of the United States District Court for the Northern District of Illinois. Venue lies under 28 U.S.C. § 1409. This is a core proceeding under 28 U.S.C. §§ 157(b)(2)(A) and (B). It seeks to determine whether a creditor is entitled to a priority claim. Therefore, it “stems from the bankruptcy itself,” and may constitutionally be decided by a bankruptcy judge. Stern v. Marshall, — U.S. —, 131 S.Ct. 2594, 2618, 180 L.Ed.2d 475 (2011).

Reconsideration

Section 502(j) of the Bankruptcy Code provides that “A claim that has been allowed or disallowed may be reconsidered for cause. A reconsidered claim may be allowed or disallowed according to the equities of the case.” 11 U.S.C. § 502(j). Rule 3008, F.R. Bankr.P., provides “A party in interest may move for reconsideration of an order allowing or disallowing a claim against the estate.” No deadline for reconsideration appears in either the statute or the rule. Nor is the term “cause” defined. Martha argues that reconsideration should be under standards analogous to Rule 60, F.R. Civ. P.,1 because Chapter 11 Counsel had the opportunity to object to the proof of claim earlier when Shrock objected but stayed on the sidelines. Chapter 11 Counsel maintain that their [882] objection is timely because there was no deadline to file their objection to Martha’s amended claim. Chapter 11 Counsel are correct. There was and is no deadline to object and in recognition of that fact, the scheduling order was entered requiring that any and all possible issues and objections be asserted. (Dkts. 671, 673, 675.) Accordingly, Chapter 11 Counsel’s objection will be considered on the merits without consideration of the standards under Rule 60.

Post-petition, Pre-conversion Marital Support is Entitled to Priority

Chapter 11 Counsel argue that Martha is not entitled to priority for the portion of her claim for marital support which matured during the pendency of the chapter 11 case. However, as explained in the second opinion:

Section 507(a)(1)(A) of the Bankruptcy Code, Title 11, U.S.C., provides that “allowed unsecured claims for domestic support obligations that as of the date of the filing of the petition ... owed to or recoverable by a spouse, former spouse” are allowed priority claims. Section 348(d) provides that “A claim against the estate or the debtor that arises after the order for relief but before conversion ... (except for administrative expenses) shall be treated for all purposes as if such claim had arisen-immediately before the date of the filing of the petition.”
Martha’s claim is for support that arose after the order for relief but before the conversion to Chapter 7. Robert was current on support until he filed the petition. (Dkt. 304 at *2.) After that filing, he did not make any payment while the case was under Chapter 11. Those missed payments are the basis of Martha’s present priority claim. As explained in the earlier opinion, prepetition domestic support obligations are given priority status. See In re Young, 497 B.R. 904, 917-18 (Bankr.W.D.Ark.2013). The command of § 348(d) is clear. Those missed payments “shall be treated for all purposes as if such claim had arisen immediately before the date of the filing of the petition.” Id. Since the claim for the missed support payments must be treated as if it arose immediately before the date of the filing of the petition. Therefore, they are given priority status.

Dkt. 649 at 2.

Meier argues that the conclusion that Martha is entitled to priority conflicts with the conclusion of the first opinion, where the court ruled that Martha’s unmatured domestic support obligations were disallowed under § 502(b)(5), but were held nondischargeable under § 523(a)(5). (Dkt. 304 at 3.) But nothing in the first opinion conflicts with the second opinion because the second opinion concerns support payments which matured post-petition, but pre-conversion. That category of support payments was not at issue in the first opinion, so it was not considered then.

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In re Meier, 537 B.R. 880, 2015 WL 5559598 (Ill. 2015).

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