Cooper v. Chilson

Filing 5

MEMORANDUM OF OPINION AND ORDER denying Trustee's 3 Motion to Hold Appeal in Abeyance. FURTHER ORDERED Trustee shall file his brief on or before 14 days from entry of this Order and Debtor shall file her brief on or before 14 days from filing of Trustee's brief. Signed by District Judge Martin Reidinger on 4/27/15. (ejb)

IN THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF NORTH CAROLINA
ASHEVILLE DIVISION
CIVIL CASE NO. 1:15-CV-20
BANKRUPTCY CASE NO. 12-10848

IN RE:

)
)
AMY HOPE CHILSON,
)
Debtor,
)
________________________________ )
)
LANGDON M. COOPER,
)
TRUSTEE,
)
Appellant,
)
)
vs.
)
)
AMY HOPE CHILSON,
)
Appellee.
)
________________________________ )

MEMORANDUM OF
OPINION AND ORDER

Langdon M. Cooper, the Chapter 7 Trustee (“Trustee”) below, has filed
a motion herein [15cv20 Doc. 3]1 seeking an order from the Court holding
this appeal in abeyance. For the reasons that follow, the Court will deny the
Trustee’s motion.

1

Citations to the present appellate record in this Court contain the relevant document
number referenced preceded by the case file number. (E.g., [15cv20 Doc. x]). Citations
to the previous appellate record in this Court contain the relevant document number
referenced preceded by the prior appeal case file number. (E.g., [14cv45 Doc. x]).
Citations to the record in Bankruptcy Court, Case No. 1:12-BK-10848 (W.D.N.C.), have
the prefix letter B before the document number referenced on the Docket Sheet. (E.g.,
[B Doc. x]).

PROCEDURAL BACKGROUND
On October 24, 2012, Amy Hope Chilson (“Debtor”) filed a voluntary
Chapter 7 Petition. [B Doc. 1]. The Debtor claimed one individual retirement
account held by Merrill Lynch both as personal property on Schedule B of
her Petition and as property exempt from her Bankruptcy Estate on Schedule
C. [B Doc. 1 at 7; 9]. On November 28, 2012, the Trustee held a meeting of
creditors as required by 11 U.S.C. § 341(a). [B Doc. 3]. At the creditors’
meeting, the Trustee spoke with a listed creditor and the Debtor’s former
husband, Gary Chilson, who provided the Trustee with copies of the
separation agreement and New York divorce decree terminating the
Chilsons’ marriage in 2007. [B Doc. 31-1]. Upon reviewing these documents,
the Trustee learned that Mr. Chilson maintained an individual retirement
account with TIAA CREF containing money he earned while married to the
Debtor, a portion of which was adjudged to be the property of the Debtor in
2007 pursuant to the divorce decree. [Id.]. Specifically, paragraph 5.3.3 of
the separation agreement, which was incorporated into the divorce decree
[Id. at 2], states:
For his TIAA CREF account, the Husband will transfer one half
of the current balance, plus any applicable investment gains and
less any losses on that portion of the Wife's share from the date
this Agreement is executed until distribution to the Wife through
a qualified domestic relations order in a form acceptable to the
Plan Administrators.
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[Id.]. No qualified domestic relations order was ever prepared or executed.
Consequently, the Debtor’s retirement money – that portion of her exhusband’s TIAA CREF retirement account belonging to her by judicial decree
– was never removed from Mr. Chilson’s IRA. [B Doc. 28 at 1].
On October 4, 2013, the Trustee moved the Bankruptcy Court, in
accordance with 11 U.S.C. § 542, for an order directing the Debtor’s former
spouse to turnover to the Trustee the Debtor’s share of funds held in his TIAA
CREF account. [B Doc. 25]. Shortly thereafter, the Debtor moved the
Bankruptcy Court to amend Schedules B and C of her Petition to claim these
funds both as personal property and as exempt from her Bankruptcy Estate.
[B Doc. 26]. The parties responded to each other’s motions after which the
Bankruptcy Court entered an Order on December 27, 2013, granting the
Trustee’s motion for turnover of the Debtor’s retirement funds and denying
the Debtor’s motion to amend her Petition. [B Doc. 33]. Fourteen days later,
the Debtor filed two motions. Her first motion asked the Bankruptcy Court to
reconsider its December 27, 2013, Order.

[B Doc. 34].

The Trustee

responded thereto. [B Doc. 36]. Her second motion sought an extension of
time to give notice of appeal in the event the Bankruptcy Court denied her
first motion. [B Doc. 35].

3

On February 4, 2014, the Bankruptcy Court heard the Debtor’s
motions. [B Doc. 43]. At the hearing, the Debtor’s attorney acknowledged
that his “research wasn't as thorough as I thought it was originally,” and
provided the Bankruptcy Court with additional precedent he argued
supported the Debtor’s position that the portion of the retirement money held
in Mr. Chilson’s TIAA CREF account adjudged to be her retirement funds
were exempt property under state law. [Id. at 3-8]. The Trustee countered
that, procedurally, Fed.R.Civ.P. 60 did not provide the proper mechanism to
effectuate the relief requested by the Debtor. [Id. at 8-9]. In response to the
Debtor’s substantive argument, the Trustee maintained (as he has
previously asserted) that the Debtor’s retirement money held in Mr. Chilson’s
retirement account represented nothing more than a right to payment inuring
to the benefit of the Debtor. [Id. at 10-11]. As such, according to the Trustee,
the Debtor’s funds were subject to being turned over to him as correctly
determined by the Bankruptcy Court’s December 27, 2013, Order. [Id. at 11].
During the hearing, however, the Trustee objected to the Debtor’s tardiness
in offering additional pertinent case law, asserting that he did not have
sufficient time to review the materials submitted in court by the Debtor. [Id.].
After hearing the arguments of counsel, the Bankruptcy Court granted the
Debtor’s motion and agreed to reconsider its December 27, 2013, Order.
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[Id.]. The hearing transcript reflects the following exchange between the
Bankruptcy Court and counsel for the Trustee:
THE COURT: Well, I think I ought to consider these
matters. And so I'll grant the motion to reconsider and will
consider this new material. And, Ms. Youngs, how long do you
want to respond to that?
MS. YOUNGS: If I can have two weeks to file –
THE COURT: Okay.
MS. YOUNGS: -- a memorandum?
THE COURT: We'll give you two weeks to respond and
then I'll enter an order after that, so.2
*********
THE COURT: When I see the response I'll go to work and
get some sort of order out to you, okay?
[Id. at 11-12].
The record in the Bankruptcy Court indicates that the Trustee did not
file any memorandum fourteen days after the February 4, 2014, hearing.
Due to this omission, the Bankruptcy Court did not enter any further order,
upon reconsideration, regarding how the Debtor’s retirement funds should
be treated with regard to her Bankruptcy Estate. [B Docket Sheet]. Fifteen
The Bankruptcy Court’s written Order was consistent with this exchange. “Because the
Court is granting the Motion to Reconsider, the Debtor’s Motion to Extend Time is moot.
Counsel for the Trustee has fourteen (14) days from the date of this Order to submit a
legal memorandum in support of the Trustee’s position as to the application of the law of
the domestic case with regard to the funds at issue.” [B Doc. 39].
2

5

days after the Bankruptcy Court’s hearing, the Trustee filed a “Notice of
Appeal and (Alternative) Motion for Leave to Appeal” on February 19, 2014.
[14cv45 Doc. 1].
By Ordered entered October 21, 2014, the Court dismissed the
Trustee’s appeal and denied his alternative motion for leave to appeal.
[14cv45 Doc. 7]. The Court dismissed the Trustee’s appeal because the
Bankruptcy Court’s order, from which an appeal was sought, was
interlocutory. [Id. at 7]. The Court denied the Trustee’s alternative motion
for leave to appeal because he could not satisfy the criteria necessary for
appealing an interlocutory order. [Id. at 9].
On January 26, 2015, the Bankruptcy Court entered an Order allowing
the Debtor to amend her schedules to claim as exempt from creditors her
interest

in

her

ex-husband’s

retirement

accounts.

[B

Doc.

57].

Correspondingly, the Bankruptcy Court denied the Trustee’s motion for
turnover of the same. [Id.]. On February 3, 2015, the Trustee filed a Notice
of Appeal with regard to the Bankruptcy Court’s Order. [15cv20 Doc. 1].
Thereafter, on March 19, 2015, the Trustee filed the present motion to hold
this appeal in abeyance. [15cv20 Doc. 3]. The Debtor responded to the
Trustee’s motion by filing her opposition to it on March 30, 2015. [15cv20
Doc. 4]. This matter is now ripe for the Court’s review.
6

DISCUSSION
The Trustee, in his abeyance motion, states that one of the issues he
will raise in this appeal is “whether or not the United States Supreme Court
decision in Law v. Siegel requires the bankruptcy court to allow a debtor’s
claimed exemptions regardless of intentional misconduct and bad faith, up
to and including fraud. 134 S. Ct. 1188 (2014).” [15cv20 Doc. 3 at 2].
Further, the Trustee states that the Bankruptcy Administrator for this District
has joined in a motion for new trial filed by the Chapter 7 Trustee in In re
Tracy Layne Caillaud, No. 13-30835 (W.D.N.C.), a case unrelated to the
present matter but one which raises “the identical legal issue.” [Id.].

In

Caillaud, the Bankruptcy Court found that “[t]he facts strongly suggest that
Caillaud attempted to mislead her creditors, the Trustee, and this bankruptcy
court, convert estate property, and abuse the safe harbors of the bankruptcy
system.” Caillaud, No. 13-30835, Doc. 30 at 7. Further, the Bankruptcy
Court directed the Clerk “to forward a copy of this order to the United States
Attorney’s Office for the Western District of North Carolina to weigh whether
Caillauds’s conduct warrants criminal charges.” Id. at 8-9. The implication
flowing from the Trustee’s motion is that the Debtor in the present matter has
engaged in some intentional misconduct, bad faith and potentially criminal
activity, and that the Bankruptcy Court may be addressing such issues in a
7

similar case, and based thereon the Trustee seeks for this appeal to be put
on hold.
Even assuming that the Trustee’s recommended procedure is sound –
that this Court wait on the Bankruptcy Court’s decision in an unrelated case
– the Trustee’s abeyance motion must nevertheless be denied. Nowhere
does the Trustee cite to any evidence in the Bankruptcy Court record below,
or any findings in any order entered by the Bankruptcy Court, that the Debtor
has engaged in “intentional misconduct and bad faith, up to and including
fraud.” Without any such support in the record, the Trustee’s claim that this
matter contains “the identical legal issue” as that pending in Caillaud is
without merit.
ORDER
IT IS, THEREFORE, ORDERED that the Trustee’s “Motion to Hold
Appeal in Abeyance” [Doc. 3] is hereby DENIED.
IT IS FURTHER ORDERED that the Trustee shall file his brief on or
before 14 days from the entry of this Order. The Debtor shall file her brief on
or before 14 days from the filing of the Trustee’s brief.
IT IS SSO ORDERED.

Signed: April 27, 2015

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