Shapiro v. Harajli (In re Harajli)

469 B.R. 274
CourtUnited States Bankruptcy Court, E.D. Michigan
DecidedJanuary 27, 2012
DocketBankruptcy No. 10-45599; Adversary No. 11-4651
StatusPublished
Cited by5 cases

This text of 469 B.R. 274 (Shapiro v. Harajli (In re Harajli)) is published on Counsel Stack Legal Research, covering United States Bankruptcy Court, E.D. Michigan primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Shapiro v. Harajli (In re Harajli), 469 B.R. 274 (Mich. 2012).

Opinion

OPINION REGARDING THE PARTIES’ MOTIONS FOR SUMMARY JUDGMENT

THOMAS J. TUCKER, Bankruptcy Judge.

In this adversary proceeding, the Chapter 7 Trustee filed a complaint seeking to recover $119,000.00 from Debtor’s ex-wife (“Defendant”) under 11 U.S.C. § 542.1 This amount represents one-half of the $238,000.00 in total cash advances that Defendant obtained, before Debtor’s bankruptcy, on a Comerica Bank fine of credit. Debtor and Defendant were jointly liable on that line of credit, and it is secured by the home that Defendant was awarded under the 2004 judgment of divorce entered between Debtor and Defendant. The Trustee’s complaint alleges that the $119,000.00 is “property of the estate” either under the “community property” provisions of 11 U.S.C. § 541(a)(2), or under 11 U.S.C. § 541(a)(1), and thus recoverable under the turnover provisions of 11 U.S.C. § 542.2

The parties each filed motions for summary judgment.3 The Court held a hearing on the motions and took them under advisement. The Court concludes that: (1) the Trustee’s “community property” theory under 11 U.S.C. § 541(a)(2) fails; and (2) the Debtor never had any legal or equitable interest under 11 U.S.C. § 541(a)(1) in any portion of the cash advance proceeds that Defendant obtained on the line of credit. As a result, no portion of the cash advance proceeds were ever property of the bankruptcy estate. For these reasons, Defendant is entitled to summary judgment.

I. Facts

The following facts are undisputed. In 2003, while Defendant and Debtor were still married, they jointly obtained a line of credit from Comerica Bank with a limit of $238,000.00, which was secured by a mortgage on the marital home. On September 14, 2004, a default judgment of divorce (“Divorce Judgment”) was entered between Defendant and Debtor.4 The Divorce Judgment awarded Defendant the marital home “as her sole property” and provided that Defendant was to “hold [Debtor] harmless for same.”5 The Divorce Judgment said nothing about the Comerica Bank line of credit.

The line of credit was not modified or terminated during the parties’ divorce. Almost five years later, on March 11, 2009, Defendant made a $225,000.00 draw on the line of credit.6 Then on June 3, 2009, Defendant made a $13,000.00 draw on the line of credit, bringing the total amount of cash advances Defendant obtained up to the $238,000.00 limit.7 These advances en[278]*278cumbered Defendant’s home under Comer-ica Bank’s mortgage, which was the only mortgage or lien on Defendant’s home.

Debtor, by contrast, never made any draws on the line of credit, and did not receive any of the $238,000.00 in proceeds that Defendant borrowed.

On February 25, 2010, Debtor filed a voluntary petition for relief under Chapter 7. On Schedule F, Debtor listed an unsecured claim of Comerica Bank in the amount of $238,138.00, based on Debtor’s joint liability with the Defendant on the line of credit.8 On the date Debtor filed his Chapter 7 petition, Defendant still had at least $225,127.55 of the $238,000.00 in cash advance proceeds.9

On July 2, 2010, Debtor obtained a discharge of his debts under 11 U.S.C. § 727. Debtor’s debt to Comerica Bank, based on the line of credit, was discharged.

II. Jurisdiction

This Court has subject matter jurisdiction over this adversary proceeding under 28 U.S.C. §§ 1334(b), 157(a) and 157(b)(1), and Local Rule 83.50(a) (E.D. Mich.). This is a core proceeding under 28 U.S.C. § 157(b)(2)(E).

III. Discussion

A. The parties’ positions

The Trustee seeks summary judgment in the amount of $112,563.76.10 The Trustee argues that “under Bankruptcy Code § 541, half of the $225,127.55 ($112,563.76) represents property of the bankruptcy estate ... as community property [under § 541(a)(2)]”; as an equitable right under § 541(a)(1); “or on equitable grounds.” 11 The only alleged “equitable ground” the Trustee has asserted, as a basis for recovering half of the cash advance proceeds, is a theory of unjust enrichment.12 And, Trustee says, because the $112,563.76 is property of the bankruptcy estate, Defendant must turn it over under § 542.13

The Trustee’s primary argument is that Debtor’s unused contractual right to draw on the line of credit survived the divorce between Debtor and Defendant; that it was the Debtor’s “property;” and that the draws Defendant took from the line of credit were proceeds of that property. As a result, says the Trustee, one-half of the cash proceeds remaining as of the petition date, from the Defendant’s draws on the line of credit, became property of the Debtor’s bankruptcy estate.

Defendant argues that the line of credit was not “community property,” within the meaning of § 541(a)(2).14 Defendant argues further that the line of credit, and its proceeds, were not property of the Debtor, so the proceeds of Defendant’s draws on the line of credit were not property of the bankruptcy estate within the meaning of § 541(a)(1).15 And Defendant argues that “an application of the principle of unjust enrichment would imply an agreement between the [Defendant and Debtor] that, [279]*279upon entry of the divorce, and upon [Defendant] receiving sole title and ownership to the home, any rights to the line of credit which [Debtor] may have had were terminated.” 16

B. Discussion

Section 541(a) of the Bankruptcy Code defines what is property of a debtor’s bankruptcy estate. It provides, in relevant part:

(a) The commencement of a case under section 301, 302, or 303 of this title creates an estate. Such estate is comprised of all the following property, wherever located and by whomever held:
(1) Except as provided in subsections (b) and (c)(2) of this section, all legal or equitable interests of the debtor in property as of the commencement of the case.

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Cite This Page — Counsel Stack

Bluebook (online)
469 B.R. 274, Counsel Stack Legal Research, https://law.counselstack.com/opinion/shapiro-v-harajli-in-re-harajli-mieb-2012.