Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-ca8-05-06060/USCOURTS-ca8-05-06060-0/pdf.json

Parties Involved:
Rosemarie Ziemski
Appellee
Valerian Joseph Ziemski
Appellant

Document Text:

United States Bankruptcy Appellate Panel

FOR THE EIGHTH CIRCUIT

 

No. 05-6060 EA

 

In re: *

Rosemarie Ziemski, *

*

Debtor. *

*

Rosemarie Ziemski, * Appeal from the United States

* Bankruptcy Court for the

Plaintiff - Appellee, * Eastern District of Arkansas

*

v. *

*

Valerian Joseph Ziemski, *

*

Defendant - Appellant. *

 

Submitted: February 21, 2006

Filed: March 10, 2006

 

Before KRESSEL, Chief Judge, SCHERMER and MAHONEY, Bankruptcy

Judges

SCHERMER, Bankruptcy Judge

Valerian J. Ziemski appeals the bankruptcy court’s order determining that his

post-petition receipt of certain military retirement benefits pursuant to a pre-petition

state court order was in violation of the automatic stay of 11 U.S.C. § 362; requiring

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Mr. Ziemski to turn over such military retirement benefits to the Trustee of Rosemarie

Ziemski’s bankruptcy estate; determining that Mr. Ziemski’s violation of the

automatic stay was willful; directing Mr. Ziemski to pay Ms. Ziemski’s attorneys’ fees

and costs; and redirecting payment of such benefits from Mr. Ziemski to Ms. Ziemski.

We have jurisdiction over this appeal from the final order of the bankruptcy court.

See 28 U.S.C. § 158(b). For the reasons set forth below, we reverse.

ISSUE

Mr. Ziemski identifies several issues in his brief: (1) whether the bankruptcy

court correctly interpreted and applied state law when ordering the turnover of the

military retirement benefits as property of Ms. Ziemski’s bankruptcy estate;

(2) whether the bankruptcy court correctly overruled a contempt order issued by a

state court; (3) whether the bankruptcy court erred in ordering the turnover of the

military retirement benefits; (4) whether the bankruptcy court erred in finding a willful

violation of the automatic stay; and (5) whether the bankruptcy court erred in

awarding attorneys’ fees and costs to Ms. Ziemski. We conclude that the military

retirement benefits were not property of Ms. Ziemski’s bankruptcy estate. To the

extent the balance of the order was based on that conclusion, the entire order must be

reversed.

BACKGROUND

Mr. and Ms. Ziemski were divorced in 2001. As part of the divorce decree, the

Chancery Court of Pulaski County, Arkansas (“State Court”) awarded Ms. Ziemski

forty percent of Mr. Ziemski’s military retirement benefits. The State Court entered

a Qualified Domestic Relations Order directing that forty percent of such retirement

benefits be paid to Ms. Ziemski.

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On November 3, 2004, the State Court entered an order modifying the

Ziemskis’ original division of property. The State Court required Ms. Ziemski to

forfeit her forty percent of Mr. Ziemski’s military retirement benefits and redirected

the payment thereof to Mr. Ziemski until Mr. Ziemski receives $12,442.22 plus

$1,304.74. In addition, the State Court required Ms. Ziemski to forfeit her share of

the military retirement benefits each month in an amount equal to the sixty percent

cost of Mr. Ziemski’s contribution toward Ms. Ziemski’s enrollment in the Survivor

Benefit Plan.

Ms. Ziemski filed a petition for relief under Chapter 13 of the Bankruptcy Code

on November 9, 2004. Mr. Ziemski’s retirement benefits were distributed to him in

accordance with the November 3, 2004, State Court Order. On July 5, 2005,

Ms. Ziemski initiated an adversary proceeding against Mr. Ziemski alleging that his

post-petition receipt of the military retirement benefits in accordance with the

November 3, 2004, State Court Order violated the automatic stay of 11 U.S.C. § 362.

The bankruptcy court determined that Mr. Ziemski’s post-petition receipt of military

benefits pursuant to the November 3, 2004, State Court Order constituted a willful

violation of the automatic stay; directed Mr. Zeimski to turn over to the Chapter 13

Trustee of Ms. Ziemski’s estate forty percent of the military retirement benefits he

received post-petition; and directed Mr. Ziemski to pay Ms. Ziemski’s attorneys’ fees

and costs. The bankruptcy court also redirected the future payment of forty percent

of the military retirement benefits from Mr. Ziemski to Ms. Ziemski. Mr. Ziemski

appeals that order.

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STANDARD OF REVIEW

We review findings of fact for clear error and conclusions of law de novo.

Kelly v. Jeter (In re Jeter), 257 B.R. 907, 909 (B.A.P. 8th Cir. 2001). The

determination as to what constitutes property of the bankruptcy estate is a conclusion

of law which we review de novo. Id. 

DISCUSSION

Pursuant to 11 U.S.C. § 541(a), the commencement of a bankruptcy case creates

an estate which includes all legal and equitable interests of the debtor in property as

of the commencement of the case. 11 U.S.C. § 541 (a)(1). Property rights are

determined by state law. Nobelman. v. American Savings Bank, 508 U.S. 324, 329

(1993); Barnhill v. Johnson, 503 U.S. 393, 398 (1992); Butner v. United States, 440

U.S. 48, 54-55 (1979). As a result of the November 3, 2004, State Court Order, Ms.

Ziemski was not entitled to receive any portion of the military retirement benefits

when she filed her bankruptcy petition on November 9, 2004. Without any legal right

to the military retirement benefits, such benefits did not become property of

Ms. Ziemski’s bankruptcy estate.

To the extent the military retirement benefits are not property of Ms. Ziemski’s

bankruptcy estate, no legal basis exists to direct their turn over to the Chapter 13

Trustee. Likewise, Mr. Ziemski did not violate the automatic stay because the stay did

not apply to the military retirement benefits. Mr. Ziemski therefore could not have

willfully violated the stay. Without a willful violation of the automatic stay, the award

of attorneys fees for violation of the automatic stay must be reversed.

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CONCLUSION

The bankruptcy court erred when it determined that Ms. Ziemski had an interest

in the military retirement benefits which became property of her bankruptcy estate.

The balance of the order was based on that conclusion. The order of the bankruptcy

court is accordingly REVERSED.

 

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