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Reed v. Reed

United States District Court, District of Maryland

September 30, 2014

STEVEN KENNETH REED, Appellant,
v.
DEBORAH A. REED, Appellee. Bankr. No. 12-21819-RAG Adversary No. 12-629

MEMORANDUM OPINION

Richard D. Bennett, United States District Judge

In this case, Appellant Steven Kenneth Reed (“Appellant”) contends that the United States Bankruptcy Court for the District of Maryland erred in granting Appellee Deborah A. Reed’s (“Appellee”) Motion for Summary Judgment and denying Appellant’s Motion to Dismiss Appellee’s Adversarial Complaint. Appellant’s appeal specifically requires this Court to determine (1) whether the Bankruptcy Court, in determining the dischargeability of a debt, properly afforded preclusive effect to a state court’s order granting summary judgment against Appellant where Appellant, despite earlier activity in the case, had failed to respond to the Appellee’s motion; and (2) whether Appellee’s Complaint complied with the applicable pleading standards.

This Court has jurisdiction over this matter pursuant to 28 U.S.C. § 158(a)(1), which extends jurisdiction to the United States District Courts to hear appeals from the final judgments, orders, and decrees of the United States Bankruptcy Courts.[1] The parties’ submissions have been reviewed, and no hearing is necessary. See Local Rule 105.6 (D. Md. 2014); Fed. R. Bankr. Pro. 8012. For the reasons that follow, the Bankruptcy Court’s Order Granting Summary Judgment and Excepting Debt from Discharge (ECF No. 1-75) is AFFIRMED and this Court further notes that the Bankruptcy Court’s refusal to grant Appellant’s Motion to Dismiss was proper. Accordingly, Appellant’s appeal is DENIED.

BACKGROUND

I. The Parties’ Divorce and the Marital Settlement Agreement

Appellant and Appellee were previously married, and they jointly owned a home at 8280 Patapsco Avenue, Pasadena, Maryland 21122 (the “Property”). On September 7, 2006, Appellee filed a Complaint for Absolute Divorce. In May of 2007, Appellee and Appellant contracted to sell the Property to Robert and Madelaine Binner (the “buyers”). After signing the contact of sale but prior to settlement, the Appellant and Appellee entered the Marital Settlement Agreement. Notably, Paragraph 8.3 of that Agreement provided that:

Until the said property is sold and settled, [Appellant] shall be solely responsible for all expenses associated with either the ownership or occupancy of said [Subject] Property. He shall also be solely responsible for all costs and expenses associated with maintaining and/or improving the said [Subject] Property so that it can be sold and, upon the signing of this Agreement, any legal or financial responsibility that Wife [Deborah A. Reed] may have had with regard to any monies that are or may be due as a result of the ownership of the [Subject] Property shall be assumed by Husband [Steven K. Reed]. Husband shall indemnify and hold Wife harmless as to all such legal and financial responsibilities.

See ECF No. 1-13. On September 6, 2007, the Circuit Court for Anne Arundel County, Maryland granted Appellee an absolute divorce and incorporated the Marital Settlement Agreement into its Judgment. See ECF No. 1-14 (“IT IS FURTHER ADJUDGED, ORDERED AND DECREED . . . that the Marital Settlement Agreement, dated June 4, 2007, . . . be incorporated, but not merged, in this Judgment.”).

II. The Buyers’ Suit Against the Parties

Sometime after the closing of the sale of the Property on July 6, 2007, the buyers became dissatisfied with the condition of the Property. Accordingly, the buyers filed suit against the Appellant and Appellee alleging breach of contract, non-disclosure or concealment, and negligent mis-representation.[2] According to the buyers’ complaint, the claims against Appellee arose out of various work performed on the Property by Appellant prior to the sale of the Property. See ECF No. 1-15, at ¶ 23. The Appellee subsequently filed a cross-claim against Appellant in that action, requesting indemnification and contribution against Appellant for any and all liability for damages that Appellee might have to the buyers. Appellant initially failed to respond but, at Appellant’s request, was able to vacate the default and file an answer to Appellee’s cross-claim. Appellee settled the claims as they pertained to her, [3] and she subsequently filed a motion for summary judgment against the Appellant with respect to her cross-claim. Appellant, who was proceeding pro se, failed to file responsive papers. Therefore, the Circuit Court for Anne Arundel County entered an order granting the motion for summary judgment and awarding Appellee $49, 352.53 in damages.[4]

III. Appellant’s Bankruptcy Proceeding

Appellant filed for relief under Chapter 7 of the Bankruptcy Code on June 25, 2012. In his papers, Appellant listed Appellee as a judgment creditor holding an unsecured, non-priority claim of $55, 000.00. Appellee filed an Adversary Complaint against Appellant on September 21, 2012; specifically, Appellee sought to except the state court’s judgment from discharge under Section 523(a)(15) of the Bankruptcy Code.[5] Thereafter, Appellee filed a Motion for Summary Judgment, and Appellant filed a Motion to Dismiss with Prejudice. In essence, Appellee argued that the judgment arose from a marital obligation and was therefore not dischargeable under Section 523(a)(15). The Appellant, however, argued that the state court’s judgment was essentially a default and that Appellee was impermissibly proceeding upon a theory of collateral estoppel that was only supported by a default judgment. After briefing, the Bankruptcy Court held a hearing on June 4, 2013.

On December 11, 2013, the Bankruptcy Court found in favor of Appellee and granted summary judgment against Appellant.[6] In particularly, the Bankruptcy Judge found that collateral estoppel barred the Appellant from relitigating his liability to Appellee under the Marital Settlement Agreement. ...


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