In Re: Erlewine

The only thing that the trustee can say by way of challenge to the property settlement provided by the divorce decree is that the state court divided the community assets unevenly. Whatever concerns might arise in other cases, this divorce which was fully litigated, without any suggestion of collusion, sandbagging, or indeed any irregularity should not be unwound by the federal courts merely because of its unequal division of marital property.

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The only thing that the trustee can say by way of challenge to the property settlement provided by the divorce decree is that the state court divided the community assets unevenly. Whatever concerns might arise in other cases, this divorce — which was fully litigated, without any suggestion of collusion, sandbagging, or indeed any irregularity — should not be unwound by the federal courts merely because of its unequal division of marital property. Click here for the full text of this decision FACTS:Husband and wife were divorced in 1999. Husband was awarded custody of the couple’s child and was awarded more than 50 percent of the community property, including the couple’s commercial real estate. The divorce court justified the uneven distribution on the grounds that wife had spent too much money on drug rehabilitation and illegal prescription drugs, and had raised unreasonable arguments during the divorce, leading to unusually high attorneys’ fees for husband. Less than a year later, wife filed for Chapter 7 bankruptcy, and her bankruptcy trustee filed an adversary proceeding against husband to recover community property transferred to him during the divorce. Bankruptcy Code �548 says a trustee may avoid “any transfer of an interest of the debtor in property, or any obligation incurred by the debtor, that was made or incurred on or within one year before the date of the filing of the petition, if the debtor voluntarily or involuntarily. . . received less than a reasonably equivalent value in exchange for such transfer.” The bankruptcy court granted the trustee’s first motion, which was on whether the divorce decree effect a “transfer” of an interest in property within the meaning of �548. The bankruptcy court denied the trustee’s second motion, originally and on reconsideration, which was based on whether wife received a “less than a reasonably equivalent value in exchange for such transfer.” Simultaneously, the bankruptcy court granted husband’s motion for summary judgment on the same issue. Wife’s trustee appealed the rulings on the second motion to the district court, which affirmed without opinion. HOLDING:Affirmed. Husband argues the Rooker-Feldman doctrine bars the trustee from essentially relitigating the marital property division. The doctrine, which holds that the inferior federal courts lack jurisdiction to exercise appellate review over state court decisions, should not be extended to cases where neither res judicata or collateral estoppel would apply, the court rules. Related to that, the court finds that neither res judicata or collateral estoppel applies here because the trustee was not a party to the divorce action, and the interests of wife’s creditors were not represented. Despite those findings, the court nonetheless holds that wife did not receive “less than a reasonably equivalent value in exchange. The uneven property division by the divorce case was based on the fact that wife spent a disproportionate share of the community assets and taken an unreasonable position in the divorce litigation. Again examining �548, the court finds the section was never intended to upset the finality of judgments in an area traditionally governed by states laws, such as divorce decrees. The court says statement judgments still may be attacked under this provision, perhaps when there is evidence of collusion, sandbagging or any other irregularity, but “the only thing that the Trustee can say by way of challenge to the property settlement provided by the divorce decree is that the state court divided the community assets unevenly.” OPINION:King, C.J.; King, C.J., Higginbotham and Barksdale, JJ.

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