Rosemarie Ziemski v. Valerian J. Ziemski ( 2006 )

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
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.
2
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.
3
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.
4
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.
5