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In re Heilman

April 26, 2010

IN RE: NICHOLAS P. HEILMAN DEBTOR.
PAM HEILMAN, APPELLANT,
v.
NICHOLAS P. HEILMAN, APPELLEE.



Appeal from the United States Bankruptcy Court for the Eastern District of Washington Honorable Patricia C. Williams, Bankruptcy Judge, Presiding. Bk. No. 05-08319-PCW, Adv. No. 08-80093-PCW.

The opinion of the court was delivered by: Hollowell, Bankruptcy Judge

ORDERED PUBLISHED

OPINION

Submitted Without Oral Argument on November 24, 2009

Before: HOLLOWELL, MONTALI and PAPPAS, Bankruptcy Judges.

The parties to this appeal are former spouses. Approximately six months prior to their divorce, Nicholas Heilman (the Debtor) filed, individually, for chapter 7*fn1 bankruptcy relief and received a discharge. Pam Heilman (Heilman) later sought a declaratory judgment against the Debtor to declare that the Debtor was obligated, by the terms of their dissolution decree, to hold Heilman harmless on a prepetition community debt owed to Heilman's parents. The bankruptcy court held that the loan to Heilman's parents had been discharged and therefore, Heilman could not be held harmless for a nonexistent obligation. For the reasons given below, we AFFIRM.

I. FACTS

The Debtor and Heilman were married in April 2002. During their marriage, from March through December 2004, Heilman's parents, Richard and Laurel Beyer (the Beyers), loaned Heilman approximately $42,000 for the primary purpose of supporting Heilman's daughter (the Beyer Loan).

On October 3, 2005, the Debtor filed an individual chapter 7 bankruptcy petition. A review of the bankruptcy case docket and underlying bankruptcy schedules reveals that the Debtor did not list the Beyer Loan on his schedules or include the Beyers on the creditor mailing matrix.*fn2 The Debtor's case was a no-asset case and he received a discharge on January 11, 2006.

Approximately seven months later, on June 9, 2006, Heilman filed a Petition for Dissolution of Marriage in Washington State Superior Court for Lincoln County. The marriage was dissolved by an agreed Decree of Dissolution on September 19, 2006 (the Dissolution Decree). The Dissolution Decree allocated certain debts to the Debtor. It identified the Beyer Loan as one of four "Community Liabilities to be Paid by the Husband." The Dissolution Decree did not allocate any community liabilities to Heilman. The separate liabilities for each spouse were described only as those obligations that were incurred prior to the marriage or after Heilman and the Debtor separated. The Dissolution Decree also contained a provision that each spouse would hold the other harmless from any collection action relating to the separate or community liabilities that were allocated to the parties in the Dissolution Decree (the Hold Harmless Provision).

On August 15, 2008, Heilman filed an adversary proceeding against the Debtor seeking a declaratory judgment that the Hold Harmless Provision obligated the Debtor to indemnify her for any demands made on her to pay the Beyer Loan.

Heilman filed a motion for summary judgment on February 3, 2009. On March 17, 2009, the Debtor filed a Memorandum of Authorities in Support of Answer to Complaint for Declaratory Judgment Regarding Discharge of Debt. The bankruptcy court heard the matter on March 24, 2009, and denied the motion for summary judgment on March 25, 2009. The parties subsequently agreed to have the bankruptcy court decide the matter on pleadings and a trial was vacated. On April 23, 2009, the bankruptcy court entered an Order Dismissing the Adversary Proceeding and issued its decision finding that the community obligations referenced in the Dissolution Decree had been discharged and the Hold Harmless Provision could not revive a discharged debt. Heilman v. Heilman (In re Heilman), 2009 WL 1139468 (Bankr. E.D. Wash. 2009). Heilman timely appealed.*fn3

II. JURISDICTION

The bankruptcy court had jurisdiction pursuant to 28 U.S.C. § 157(b)(1). We have jurisdiction under 28 U.S.C. § 158.

III. ISSUE

Does the Dissolution Decree obligate the Debtor to pay the Beyer Loan or to hold Heilman harmless for the Beyer Loan?*fn4

IV. STANDARDS OF REVIEW

We review a bankruptcy court's legal conclusions, including its interpretation of the bankruptcy code and state law, de novo. Hopkins v. Cerchione (In re Cerchione), 414 B.R. 540, 545 (9th Cir. BAP 2009). We may affirm the bankruptcy court on any basis supported by the ...


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