Opinion ID: 762482
Heading Depth: 2
Heading Rank: 2

Heading: money judgment ruling

Text: 15 Debtor and Sun contend that the district court erred by reversing the bankruptcy court's ruling that the Pennsylvania divorce court awarded Selnick a money judgment against Debtor. We disagree. 16 The bankruptcy court's interpretation of the Divorce Decree is a question of law, cf. SEC v. United Fin. Group, Inc., 576 F.2d 217, 222 (9th Cir.1978) (citation omitted), which we review de novo. See In re Claremont Acquisition Corp., 113 F.3d 1029, 1031 (9th Cir.1997). Property interests are created and defined by state law. Butner v. United States, 440 U.S. 48, 55, 99 S.Ct. 914, 59 L.Ed.2d 136 (1979). Upon careful review of the record and of relevant Pennsylvania law, we conclude that the bankruptcy court erred by ruling that Selnick held only a money judgment against Debtor. 17 In the Pennsylvania divorce proceedings, the divorce court ordered the equitable distribution of the marital property under the immediate offset method. Under the immediate offset method, the non-pension-holding spouse receives an immediate distribution of marital assets. Elhajj v. Elhajj, 413 Pa.Super. 578, 605 A.2d 1268, 1269 (1992). Thus, Pennsylvania law frames the equitable distribution of a pension plan under the immediate offset method as the immediate and actual distribution of the pension plan assets, and not merely as the award of a money judgment against a debtor's interest in those assets. See id.; Lyons v. Lyons, 401 Pa.Super. 271, 585 A.2d 42, 46-47 (1991) (requiring an actual present distribution of [non-pension-holding spouse's] share of the pension); Zollars v. Zollars, 397 Pa.Super. 204, 579 A.2d 1328, 1330 (1990) (requiring distribution of marital property assets). 18 The divorce court's intent to award Selnick a property interest in the Pension Plan assets is further demonstrated by its explicit instruction that Debtor pay Selnick her 38.7% share of the Pension Plan directly from the Pension Plan assets instead of some other source. In addition, the divorce court's intent is clear from its entry of judgment in Selnick's favor and against both Debtor and the Pension Plan instead of only Debtor. 7 Based on the foregoing, we find that the bankruptcy court erred in ruling that Selnick held only a money judgment against Debtor. Instead, the Divorce Decree awarded Selnick an outright ownership interest in the Pension Plan assets. 19 Because Selnick owns outright 38.7% of the Pension Plan assets, her interest in those assets is not subject to discharge in Debtor's bankruptcy. Selnick's interest in the Pension Plan was established under Pennsylvania law at the time of the Divorce Decree. See In re Gendreau, 122 F.3d 815, 818 (9th Cir.1997). As we stated in Gendreau, Bankruptcy recognizes state property rights, and filing bankruptcy cannot give a debtor a greater interest in an asset than that which he owned pre-bankruptcy. Id. at 819. Because Debtor filed his bankruptcy petition after Selnick's ownership interest in the Pension Plan was created, Selnick's interest in the Pension Plan is not a debt under the Bankruptcy Code, and therefore cannot be discharged in Debtor's bankruptcy. See id. at 818-19. Instead, Selnick's ownership interest in the Pension Plan assets is separate from Debtor's bankruptcy proceedings. 20 This case is distinguishable from In re Teichman, 774 F.2d 1395 (9th Cir.1985), upon which Debtor relies. In Teichman, we determined that a debtor's past-due obligations to pay to his former spouse a certain percentage of each periodic distribution the debtor received from his military pension plan were debts dischargeable in bankruptcy. See id. at 1397. In Teichman, the divorce court was unable to order the United States Air Force to pay directly to the debtor's former spouse her share of the periodic pension plan distributions. Id. at 1398. Instead, the court ordered the debtor to pay his former spouse her share of each distribution when he received it. Id. The debtor received some of the expected distributions prior to the petition date, but did not pay his former spouse her share. Because the Pension Plan was not burdened by the divorce court's order, we held that the debtor's obligations to his former spouse that arose prior to the petition date were debts that were dischargeable in bankruptcy. See id. at 1396. In contrast, the divorce court in Selnick's case was able to, and in fact did, order the distribution to be made to Selnick directly from the Pension Plan. Therefore, Teichman does not control the outcome of this case; instead, Gendreau controls our decision. 21 In Gendreau, the divorce court awarded the debtor's former spouse an ownership interest in the debtor's pension plan, and ordered the debtor's pension plan to make payments to the debtor's former spouse. See Gendreau, 122 F.3d at 817. We held that the debtor's former spouse owned a percentage of the debtor's interest in the pension plan, and that the interest was not a debt dischargeable in the debtor's bankruptcy. See id. at 818-19. Similarly, in Selnick's case, the divorce court ordered Debtor to pay Selnick directly from the Pension Plan her 38.7% interest in the Pension Plan assets. In addition, after Debtor transferred the Pension Plan assets out of Pennsylvania to avoid the jurisdiction of that state's courts, the divorce court entered judgment in Selnick's favor and against both Debtor and the Pension Plan. 8 Therefore, as in Gendreau, Selnick holds a direct interest in the Pension Plan itself, and not just a right to receive payment from Debtor. See id. at 818-19. Consequently, Selnick's ownership interest is not a debt dischargeable in Debtor's bankruptcy. 22 Debtor and Sun contend that the divorce court awarded Selnick a money judgment and not a property interest because the divorce court awarded Selnick 38.7% of the value of Debtor's interest in the Pension Plan. However, the immediate offset method used by the divorce court to divide the marital property required the divorce court to value the marital assets. See Lyons, 585 A.2d at 46-47 (immediate offset method requires a calculation of the present value of the pension benefits); Zollars, 579 A.2d at 1330 (immediate offset method reduces all marital property to a present value prior to distribution). Therefore, the divorce court's use of the word value in its equitable distribution order is consistent with the award of an ownership interest in the Pension Plan assets. 23 Debtor contends that any property interest the Divorce Decree may have created in favor of Selnick was extinguished when the divorce court entered a later judgment in favor of Selnick. We disagree. 24 In March 1993, after Debtor had transferred the Pension Plan assets out of Pennsylvania, the divorce court entered a $5.3 million judgment in Selnick's favor and against both Debtor and the Pension Plan. That judgment was merely an alternative method that Debtor forced the divorce court into using so that Selnick would have a chance to recover the assets with which Debtor had absconded. See 23 Pa.C.S.A. § 3502(e)(1) (permitting court to enter judgment in addition to any other remedy). Because neither the assets nor Debtor were within the Pennsylvania court's jurisdiction, the divorce court had no other option than to give Selnick a judgment that she could attempt to execute in the various states into which Debtor had transferred the Pension Plan assets. Therefore, the divorce court's entry of judgment against both Debtor and the Pension Plan did not extinguish Selnick's property interest in the Pension Plan assets. For these reasons, Debtor's reliance on Kessler v. Old Guard Mut. Ins. Co., 391 Pa.Super. 175, 570 A.2d 569, 573 (1990), is misplaced. 25 Debtor and Sun rely on Boggs v. Boggs, 520 U.S. 833, 117 S.Ct. 1754, 138 L.Ed.2d 45 (1997), to contend that Selnick cannot hold a property interest in the Pension Plan because the divorce court did not issue Selnick a QDRO. This argument is without merit because the Pension Plan was not an ERISA-qualified plan on the petition date. 9 Therefore, Boggs does not apply. 26 Sun contends that the money judgment finding was not properly before the district court because the bankruptcy court failed to make the necessary findings of fact for the district court to review, and that therefore the district court impermissibly considered the issue. We disagree because, as stated above, the interpretation of the Divorce Decree is a question of law, not of fact. Cf. United Financial Group, 576 F.2d at 222. Therefore, the cases on which Sun relies are distinguishable because in each of those cases the bankruptcy court had either made no factual findings or ambiguous factual findings, requiring remand to the bankruptcy court. See 550 West Ina Road Trust v. Tucker, 989 F.2d 328, 330 (9th Cir.1993) (good faith); Great Western Bank v. Sierra Woods Group, 953 F.2d 1174, 1176 (9th Cir.1992) (fairness); Oaks of Woodlake Phase III, Ltd. v. Hall, Bayoutree Assocs., 939 F.2d 802, 804-05 (9th Cir.1991) (bad faith). In the present case, there was no similar need to remand this case to the bankruptcy court because the district court was faced with a question of law, not fact. 27 Sun also contends that it was deprived of notice that the district court would consider the property interest issue because the narrow issue of the existence, nature, and extent of Selnick's rights was not contemplated in the broader issue of the confirmation order appeal. We disagree because Selnick's notice of appeal stated that she was appealing the bankruptcy court's ruling that she did not have an ownership interest in marital assets pursuant to the equitable distribution made at the time of the divorce of the parties. The notice of appeal was therefore sufficient to put Sun on notice that the money judgment ruling would be considered with the Confirmation Order appeal. 28 Finally, Sun asks us to decide whether Selnick's property interest in the Pension Plan assets is subject to Sun's direct claim against the Pension Plan. Sun won a judgment against the Pension Plan in the United States Bankruptcy Court for the District of New Jersey, but that judgment was reversed on appeal by the United States District Court for the District of New Jersey. Although Sun has appealed the district court's reversal of that judgment to the Third Circuit, that appeal has not yet been decided. Because Sun's claim against the Pension Plan is contingent on the outcome of this undecided appeal, we decline to reach this issue as it is not yet ripe for review. See Poland v. Stewart, 117 F.3d 1094, 1104 (9th Cir.1997) (An issue is not ripe for review where the existence of the dispute itself hangs on future contingencies that may or may not occur.); Clinton v. Acequia, Inc., 94 F.3d 568, 572 (9th Cir.1996) ([A] federal court ought not resolve issues involv[ing] contingent future events that may not occur as anticipated, or indeed may not occur at all.).