Jelin v. NRG Barriers

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SUPERIOR COURT CIVIL ACTION DOCKET: CV-04-403 STATE OF MAINE YORK, ss. BETH JELIN, et al., Plaintiffs ORDER NRG BARRIERS, INC., et al., Defendants This case comes before the Court on Defendant NRG Barriers, IIIC.'SMotion for Summary Judgment in this Declaratorrr Judgment action.' The sole issue is whether Beth Jelin or NRG has priority over stocks and other assets of Frederick Jelin, Beth Jelin's former husband. FACTUAL BACKGROUND On June 10, 1996, NRG Barriers, Inc., a Delaware corporation with its principal place of business in Maine,' obtained a judgment in the Courts of Chancery of the State of Delaware against Frederick T. Jelin in the amount of $809,234.19. On February 21, 2001, Beth Jelin filed for a divorce from Frederick Jelin in the Maine District Court at Biddcford, Fv/IairLc. On May 25, 2001, NRG registered its Delaware judgment in New Jersey and obtained a Writ of Execution against Karnak Corporation stock owned by Frederick 1 2 Ms. Jelin also filed a Motion to Stay action in this case. That Mot~on Denied. is NRG was formerly owned by William J'elin, Frederick's sibling. Upon M'illia~lisdeath, a trust was created to hold the proceeds from the sale of NliG L Jol-uns Manville. \Yilliiin~ o Jelin devised to his sibling, Fred Jelin, certain shares of stock in a number of busiiiesses. 01ie ol those busincsses is the Karnak Corporation in New Jersey. Others were sold resulting in cash proceeds to the Estate. Jelin. On August 1, 2001, NRG registered its Delaware judgment in Maine and obtained against distributions owed to Frederick Jelin by the Estate of a Writ of Executio~~ William Jelin. On September 18, 2001, NRG filed its Writ of Execution with the Maine Secretary of State and provided notice of its clainl of lie11 to the Estate of William Jelin pursuant to 14 h4.R.S.A. 5 4651 -A.3On January 23, 2002, Beth Jelin obtained an Order of in u $750,000, which Attachment and Trustee Process in the Divorce act~on the a l ~ ~ o ~of n t she served on the Estate of Willianl Jeli11on Janciary 28,2002. On March 21, 2002, the parties appeared before the New Jersey court in a dispute concerning the effectuation of a levy on the Karnak stock owned by Frederick Jelin4 The New Jersey court declined to rule on the superiority of NRG's interest versus Beth Jelin's interest in child and spousal support. That court placed the Karnak Stock in escrow until the Courts of Maine decide the issues of priority over Frederick Jelin's assets. On October 2, 2003, in an Interim Order from the Biddeford District Court, Beth Jelin obtained a judgment for child support anearages in the amount of $104,852.70. On September 7, 2004, the divorce was finalized and the District Court Ordered Frederick to pay spousal support and child support.? Since then, Beth has not received any child support or spousal sr~pport. - 3 NRG did not notify Beth Jelin. 4 Beth Jelin was granted interpleader status. 5 When the complaint in this action was filed, Mr. Jelin owed $1 77,274.02 to 41s. Jelin. Mr. Jelin has not paid any support to Ms. Jelin. 6 'The divorce court noted that Frederick did not file a child support affidsvit or a financial statement pursuant to M.R. Civ. P. 80(c) despite warnings from the court. Furthermore, it drew an that being that he has adverse inference from Frederick's failure to file these required docun~ents; substantial income a n d assets well beyond that discussedin the Interim Order and that he has chosen nut to d~sclose them to the court or to the plaintiff. Beth Jelin contends that her attorney notified NRG of the filing of the divorce in May 2001, before NRG perfected its interest in September 2001, to infornl it that preliminary injunctions were in place. (Pl. SMF ¶ 2). NRG argues that the date of the filing of the divorce is irrelevant to the issue in this case. (Def. Final Reply SIvIF ¶ 2). The parties dispute when Beth Jelin served the Estate of -William Jelin with a copy of the Writ of Execulion she obtaineci on January 23, 2002 in the divorce action. NRG claims that F e t l ~ Jelin waited 60 days froin tlie entry of judgment to serve the Estate, and therefore did not preserve her trustee process rights (Def. ShIF qq 7, 8). Beth Jelin maintains that she served the Estate within 30 days, as required under 14 M.R.S.A. 5 2956. (Pl. SMF ¶¶ 7, 8). Her denial is supported by the affidavit of Dana Prescott and a letter from Harold Pachios, personal representative of the Estate, admitting as much. Bet11 JeIin finally argues that NRG has acted in bath faith by, inter alia, not notifying her of the collection activities. (PI. Reply SMF ¶ 3).7 IVRG argued at hearing that because M.R. Civ. P. 56 does not provide for this lund of Reply, the Court should not consider it. Finally, NRG claims, and Beth Jelin denies, that Frederick Jelin received the Karnak stock by gift from his father and it was not marital property. (Def. SMF 9 4). In oppositicn to NRGfs hlotion for Summary Judgment, Bcth Jelin argues that when she filed her divorce action in May 2001, and subsequently notified NRG of this, the preliminary injunction ordered pursuant to 19-A M.R.S.A.5 903 gave Beth Jelin and her children a priority int-erest in all of Fed ]elinfs assets. She further argues that, as a 7 Beth Jeli~i contends that NRC seized a California home owned jointly by Beth and Fredericklelin and sold i t for less than the fair market valne. She also asserts that she asked NRG to notify h e r of any action to be taken by them against Frederick Jelin's assets. matter of public policy, protecttng a spouse's interest in child and spousal support supercedes the rights of other creditors, particularly when such creditors acted in bad faith. In response, NRG argues that by filing its lien wit11 the State of Maine on September 18, 2001, it perfected its interest in the Maine assets, thus establishing its priority over any claim Beth Jelin may have pursuant to 14 M.R.S.A. § 4651-A. DISCUSSION In reviewing a motion for surnrnary judgment, the Court must examine the evidence in the light most favorable to ihe nonmoving party "to determir~e whether the parties' statements of material facts and the referenced record material reveal a genuine issue of material fact." Rogers v.Jnckson, 2002 ME 140, ¶ 5, 804 A.2d 379,380. A inaterial fact is one that could potentially affect the outcome of the suit. Fflrrington's O~oners' Ass'n u.Conwny Lnke Resorts, 1 7 1 ~ . , 2005 ME 93, ¶ fl, 878 A.2d 504, 507. A genuine issue of material fact exists when the evidence requires a fact-finder to choose between competi~~g versions of the truth. Id. Absent a genuine issue of material fact, the Court determines whether the prevailing party is entitled to judgment as a matter of law. Icl. a. Preliminarv Iniuncti on in a Divorce. an Upon the filing of a divorce, the court iss~ies automatic preliminary injunction pursuant to 19-A M.R.S.A. 5 903 in order to restrain "both parties from selling or disposing of proyei-ty wit110~1ttlie i~,nsentof the other party while the divcirce proceedings [are] p e n d i n g . " ~ e s j a r d i ~ u.Dcsj~~rdilis, ls 2005 ME 77, 2, 876 A.2d 26, 27 (emphasis added). In this case, the party Beth Jelin is seeking to restrain was not a party party creditor. The preliminary ~njunction only applies to her divorce, but rather a tl~ird 8 To help insure the preservation of the marital assets for erluitable distribution, the Maine legislature provided that when a petition for divorce is filed, a standard preliniinary injunction will issue, preventing either spouse, during the course of the divorce proceeding, from "transferring, encumbering, selling, or otherwise disposing of the property of either or both of the parties, except in the usual course of business or for the necessities of life." 19-A M.R.S.A. 5 903(1)(B)(1). to restrain the divorcing parties from s e l l ~ l ~ g disposing property. It does not function or to prohibit a creditor from collecting a valid debt during a pending divorce. b. The Si~nificance Filing a Divorce Petition under Maine Law. of ,An execution lien on personal properly is creatcd by filing an attested copy of an execuhon with the Secretary of State ttrlthln one year after ~ t s issuance, unless the property is exempt from attachmellt and execution. 14 M.R.S. 4651-A. Notwithstdrtding NRG's cornpliarlce \villi Mdine law regardi~igthe pel.fectioi1 of its interest in Frederick Jelin's assets in Maine, Beth Jelin is asking the Court to recognize that upon the filing of her divorce action, she Iias a priority over the Frederick Jelin's assets. This is an issue of first impression in Maine. Although the Law Court has not specifically addressed this issue, Beth Jelin directs this Court to decisions of the Court of Appeals for the First Circuit for guidance. See Da71zs 1). Cox, 356 F.3d 76, 91 (1st Cir. G~~nrarlEee Liabzlity lnsrlranc~ 7). Keiter, el als., 360 F.3d 13'16 (1st Cir. ¬? Co. 2004); Arne~icarz 2004). In Davis v. Cox, the First Circuit found that during his divorce proceedings, Cox had engaged in a pattern of misconduct by misapplying marital assets to his own use in disobedience of the court's preliminary injunction and interim order, and that Davis had exl~austed her options under the law to secure those assets. Davis, 356 F.3d at all 89. In an cttrapolation from basic hfail-ic divorcc law principles, the court dctcrmined that "after a divorce proceeding has commel~cedthe Maine courts 1~111afford such reasonable protection as may be required to ensure that a non-owner spouse's rights to equitable distr~bution not thwarted by the owner spouse prior to the time the court are Ee can issue its divorce decree dividing : k propcrty." Id. at 88 (emphasis added). Thus, CL, ,,,clrt , , , ru!cc! thzt Ccx hc!d a A v e s t IK"i upon a cor,str::ctive k s t fc?rD n v ~ s : 1,~;ith the precise scope of her beneficial ilitel-est to be ultimately determined by the divorce court. Id. at 89. While the First Circuit stated that once a divorce petition is filed each spouse is deerned to have a beneficial interest in marital property to which the other spouse holds legal title, this statement cannot be understood in a vacuum. See Davis, 356 F.3d at 89. For clarif~cation,the court firmly emphasized that this holding was specifically limited to these particular facts and Cox's contemptuous behavior before the filing for bankruptcy. Id. at 84. 111this case, even if the 1,aw Court were to follow the limited rule established in Dmis v. Cox,the facts before this Court are different and warrant a different result. The parties in Davis were two divorcing spouses, whereas this case involves a divorced spouse and a third party creditor.' Unlike the defendant in Dm~is,who engaged in blatant misconduct during his divorce proceeding, here tliere is no competent evidence that the Defendant NRG has engaged in contemptuous behavior. Finally, the purpose of the First Circuit's limited rule was to protect a non-owner spouse's rights to equitable distribution from being thwarted by the owner spouse prior to the time the court can issue its divorce decree dividing the property. Davis, 356 F.3d at 88 (emphasis added). In this case, NRG is not an owner spouse and has not attempted to thwart Beth Jelin's right to an equitable distribution of prsperty in the dis7orce action. As 2 judgment creditor, NRG is fully within its rights in seelung satisfaction of the judgment. A1though not controlling, NRG1s position is further supported by a recent amendment to 19-A M.R.S.A. 953 (6-A)(2005). Shs 2005 legislation provides: 9 Beth Jelin asserts that NRG engaged in misconduct by allegedly lorerlosing on and selling a and California home the parties owned lor $300,000 less than fair market v a l ~ ~ e by refusing to notify Beth Jelin of their actions. However, the colnmercial reaso~~ableness the sale of the California home is a of matter for the California courts. Furthermore, NIIG had n o legal obligation to notify Beth Jelin of its actions because Beth Jelin is not the debtor. After the filing of divorce complaint under section 901, a i-tonowner spouse has an inchoate equitable interest, without the need to obtain an attachment, levy or court order, in the individual retirement account or similar plan or contract on account of illness, disability, death, age or length of service of the owner spouse to the extent the account or plan is either exempt or beyond the reach of an attaching or judgment lien creditor under the state or federdl law. The Legislature considered creating inchoate equitable interests in the owner spouse's property upon the filing of a divorce and limited them to IRA or other similar accounts. The Legislature could have enacted a broader law stating that upon the filing of a divorce, the nonowner spouse obtains an inchoate equitable interest in all property to be divided by the divorce court. See Kan. Stat, Ann, 33-201(b).'0 It chose a more limited approach. This Court recognizes that Maine has a strong public policy favoring protection of Servs. v. dependent spouses and children. See 19-A M.R.S.A. $j 2202(1);11 Dep't of H~~nznn Hnflord, 2003 ME 15, 815 A.2d 806. Thc Court also recognizes and sympathizes with Beth Jelin's struggle to secure Frederick Jelin's assets to best provide for herself and her I0 The Kansas stat~rte reads in pertinent part: All property owned by rnarried persons, . . . whether held ~ndividuallyor by the spouses in some form of co-ownership, such as joint tenancy or tenancy in common, shall bccorne marital property at the time of commencement by one spouse against tlie other of an action in which a final decree is entered for divorce . . . . Each spouse has a common ownership in marital property which vests at the time of commencerneiit of such action, the extent of the vested interest to be determined and finalized by the court, pursuant to K.S.A. 60-1610 and amendments thereto. Kan. Stat. Ann. 23-201(b). 11 19-A M.R.S.A. 5 2202(1) provides: 1. PURPOSE. The Legislature finds and declares that child support is a basic legal right of the State's parents and children, that mothers and fathers have a legal obligation to provide financial support for their children and that child support payments can have a substantial impact on child poverty and state welfare expenditures. It is therefere the Legislature's intent tc encmrage payment of child support to decrease overall costs to the State's taxpayers while increasing the amount of financial support collected for the State's children. 'The departme~it authorized to is initiate action under this section against individuals who are not in compliance with an order of support. children. After all, it has been Mr. Jelin's untoward behavior that led to the Delaware judgment against him and his failure to meet his support obligations that led to the Maine judgment against him. She a n d the children bear no responsibility for h s behavior. However, in this case, ATRG's rights as a judgment creditor vested before those of Ms. Jelin. The entry will be as follows: NRG's Motion for Summary Dated: January q 2006 SUPERIOR COURT LOCATION: YORIC CIVIL ACTION DOCKET NO. ,.% STATE OF MAINE YORK, ss. ',.(.'';{. $! , J 1 BETH M. JELIN, individually and on behalf of her three minor Children, 1 JOSI-IUA P. JELIN (d.0.b. 1/27/87) 1 1 M. SAMUEL JELIN (d.0.b. 5/17/90) 1 JAMES I-I. JELIN (d.0.b. 7/29/94 1 1 ORDER GRANTING SUMMARY JUDGMENT IN FAVOR OF NRG HARRIERS. INC. 1 1 Defendant 1 1 1 1 FREDERICK T. JELIN 1 NRG BARRIERS, INC. Party in Interest Hased upon the pleadings, Allidavit and lilings submitted by the parties, and fol!owing notice and hearing the Court entered the follo~ving rllling and order in this 1)eclaratory Judglneilt Action: 1) The minor children of Beth Jelin, Joshua, M. Sainuel and James Jelii~, hereby are dismissed as pal-ties, and sullllllary juclglneilt entered against thein ill favor of NRG Barriers, Inc. ("IURG") since said children hold no judgment, lien or other claiin giving them a justiciable issue regarding the property of Frederick Jelin. 2) 'I'lle lien ~x)silion and enlitlemelil. to [lie tusnover o f l ~ r o p c ~ .all[\ stock 01' ty 17redet-icliJelin lielil i n c s c ~ c ~hy/ the ]<state oE1Villiani .felin is superior in sight to \\ tllal ol'I3etl1 Jelin. I l j li)lIo\viii;~, liquitlalion and application or 1 . 1 1 ~ aforesaicl property, the Sudgment oi'?!~!:<~ satislied, n11tl pr:lceeils r.elnaini~ig is sll:~11he tu1.11cdover to 13eth .leiill fill. application 011 her J ~ ~ d g l n e n l . 3) NliCi h a s a valid ancl enlbl-ce:!!>le lissl right lo the !~~l.no\ie~- p~~oceetls all(! 01' Karnak Cospol-ntion ant1 I<a~.li;~I(-Sor~ll~ llelil i n escrow ~111cler j irisd diction stock the oi'~he Ci)l~rts C i u ' e ~ v ~ .iersey. Noiiling i l l lile tiivosce actio~i ol'jelin v. Jeii11, Riddeli)rd Distsici Coul.1 (Disiricl 1 O rlocliel N o . I'bl-01-73, 01- any orders ) , enicrcd LII~I-cin, givcs Beill .lziii-i a n y liens or righis in sail{ic?ck superior io NRC;. ,') /" ' / /-.: 1 Dated: .ludgt, Sul;epk,r (::OLIS~ i Beth M. Jelin, Indiv. & o/b/o Joshua P. Jelin, M. Samuel Jelin & James H. Jelin - PLS - Pro se U. Charles Remmel, Esq. - DEF. NRG Barriers, Inc. Harold Pachios, Esq. - DEFS. William S. Jelin, Irrevocable Trust Frederick T. Jelin - Party-in-Interest - Pro se & Estate of William S. Jelin

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