Mehlhaff v. Allred (In re Mehlhaff)

491 B.R. 898, 2013 WL 2402435
CourtUnited States Bankruptcy Appellate Panel for the Eighth Circuit
DecidedJune 4, 2013
DocketBAP No. 13-6012
StatusPublished
Cited by6 cases

This text of 491 B.R. 898 (Mehlhaff v. Allred (In re Mehlhaff)) is published on Counsel Stack Legal Research, covering United States Bankruptcy Appellate Panel for the Eighth Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Mehlhaff v. Allred (In re Mehlhaff), 491 B.R. 898, 2013 WL 2402435 (bap8 2013).

Opinion

FEDERMAN, Chief Judge.

Debtor Laura Elizabeth Mehlhaff appeals from the Bankruptcy Court’s Order1 finding that her prepetition claim against her former spouse for alimony is property of her bankruptcy estate, and ordering her to turn that claim over to the Trustee. For the reasons that follow, we AFFIRM.

[900]*900FACTUAL BACKGROUND

At the time the Debtor filed her Chapter 7 bankruptcy petition on June 19, 2012, the Debtor’s former spouse was obligated under a prepetition divorce decree to pay her alimony in the amount of $200 per month until their minor child turns eighteen years old. According to the Debtor, the minor child will turn eighteen in December 2014.2 The Debtor properly included the alimony award on her schedules as both an asset on Schedule B and income on Schedule I, and did not claim any portion of the alimony exempt. The Chapter 7 Trustee filed a motion for turnover of the alimony award, which the Debtor opposed. The Trustee then filed a Motion for Judgment on the Pleadings, to which the Debtor also responded. Because the pleadings included several documents as attachments, the Court treated the Motion as a motion for summary judgment and allowed the parties to present any additional materials pertinent to a motion for summary judgment pursuant to Federal Rule of Civil Procedure 12(d).3 As authorized by the Court, the Trustee filed a supplement to respond to the Debtor’s arguments. No one asserts that the Bankruptcy Court committed procedural error in treating the Motion as one for summary judgment.

Relying on its recent decision in In re Steen,4 the Bankruptcy Court held that the Debtor’s alimony award was property of her bankruptcy estate pursuant to 11 U.S.C. § 541(a)(1), granted summary judgment in favor of the Trustee, and ordered the Debtor to turn her alimony award over to the Trustee. The Debtor appeals.

STANDARD OF REVIEW

Rule 56(a) provides that “[t]he court shall grant summary judgment if the mov-ant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.”5 Here, there is no dispute as to the material facts; rather, the Debtor asserts that the Bankruptcy Court erred in its application of the law to the facts. Our review is, therefore, de novo.6

DISCUSSION

The bankruptcy estate includes “all legal or equitable interests of the debtor in property as of the commencement of the case,” wherever located and by whomever held.7 The nature and extent of a debtor’s interest in property are determined by state law.8 However, once the nature and extent of the debtor’s interest is determined under state law, federal bankruptcy law dictates to what extent that interest is property of the estate.9

Although § 541(a)(1) is broad and is intended to include property of all descriptions,10 certain types of property are [901]*901expressly excluded from the bankruptcy estate under § 541.11 Such excluded property includes powers that the debtor may exercise solely for the benefit of another, interests as a lessee under certain types of leases, and some types of accounts for retirement or education purposes.12 In addition, as the Bankruptcy Court pointed out, property that is subject to a restriction on transfer that is enforceable under “applicable nonbankruptcy law,” such as spendthrift trusts and social security benefits, are also expressly excluded from the bankruptcy estate.13

As the party asserting that the alimony award is property of the estate subject to turnover, the Trustee bears the burden of proving that it is.14 If the Trustee is able to make a prima facie case, the burden shifts to the Debtor to show that the asset is excluded from the estate, although the final burden rests with the proponent.15 Finally, if property is determined to be property of the estate, § 522(b) of the Bankruptcy Code permits a debtor to withdraw some of it by a claim of exemption, as determined by state law or § 522(d). South Dakota has opted out of the federal exemption scheme,16 and so the Debtor is limited to the exemptions provided by South Dakota law.

As stated, the issue here is whether the Debtor’s right to ongoing alimony, pursuant to the prepetition divorce decree, is property of her bankruptcy estate. The Debtor relies primarily on Kelly v. Jeter17 which, applying Nebraska law, held that alimony payments received within the 180 days postpetition are not property of the estate under § 541(a)(5)(B). Section 541(a)(5)(B) provides that the estate includes:

Any interest in property that would have been property of the estate if such interest had been an interest of the debtor on the date of the filing of the petition, and that the debtor acquires or becomes entitled to acquire within 180 days after such date ... as a result of a property settlement agreement with the debtor’s spouse, or of an interlocutory or final divorce decree.18

Thus, § 541(a)(5)(B) provides that, in addition to rights a debtor holds as of the date of bankruptcy, the estate also includes rights arising out of a property settlement entered within 180 days after bankruptcy. In Kelly v. Jeter, the BAP held that alimony payments received within the 180 days postpetition were not property of the estate by virtue of § 541(a)(5)(B) because “on its face and by its plain language, [902]*902§ 541(a)(5)(B) does not reach alimony-awards.” The Debtor asserts that, as in Kelly v. Jeter, her alimony payments are not property of the estate by virtue of § 541(a)(5)(B).

As the Bankruptcy Court did, we agree with the Debtor that her alimony award is not property of the estate by virtue of § 541(a)(5)(B). But, the question here, which the panel in Kelly v. Jeter was not called upon to decide, is whether, applying South Dakota law, the Debtor’s alimony award is property of the estate under the expansive category of “all legal or equitable interests of the debtor in property as of the commencement of the case” in § 541(a)(1). Critically, the right to such alimony did not vest after the bankruptcy, but before, when the judgment awarding alimony to the Debtor was entered. Therefore, § 541(a)(5)(B) and Kelly v. Jet-er are beside the point.

Section 541(a) includes causes of action existing at the time of the commencement of the bankruptcy case.19 When a debtor has obtained a prepetition judgment against another party, the estate succeeds to all rights under such judgment.20 And, upon the filing of a bankruptcy petition, the trustee steps into the debtor’s shoes and takes whatever interests the debtor has on the petition date.21

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Cite This Page — Counsel Stack

Bluebook (online)
491 B.R. 898, 2013 WL 2402435, Counsel Stack Legal Research, https://law.counselstack.com/opinion/mehlhaff-v-allred-in-re-mehlhaff-bap8-2013.