Zettwoch v Zettwoch (2008 NY Slip Op 51204(U))

Zettwoch v Zettwoch

2008 NY Slip Op 51204(U) [20 Misc 3d 1103(A)]

Decided on June 10, 2008

Supreme Court, Orange County

Giacomo, J.

Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431.

This opinion is uncorrected and will not be published in the printed Official Reports.

These parties were divorced pursuant to a Judgment of Divorce dated January 17, 2007.

Now, plaintiff submits a qualified domestic relations order (the "QDRO") for the division of defendant's ERISA qualified retirement investment plan (the "retirement fund"). Defendant objects to the Court's execution of the QDRO.

Defendant, having recently filed for bankruptcy protection pursuant to the United States Bankruptcy Code, requests that the Court refrain from signing the QDRO arguing that the bankruptcy filing automatically stays the signing of the QDRO.

While the automatic bankruptcy stay (11 USC §362) does apply to most actions, it specifically does not apply to, among other things, "the collection of a domestic support obligation from property that is not property of the estate" [11 USC §362(b)(2)(B)].

The question remains whether the proposed QDRO falls under this exception. Under ERISA a spouse does not have any legal right to the property until a QDRO is filed. See, 26 U.S.C.A. §414(p)(1, 8); Employee Retirement Income Security Act of 1974, §206(d)(3)(B, K). See also, Kahn v. Kahn, 801 F.Supp. 1237, 1244 (S.D.NY,1992). Nonetheless, that a QDRO has not yet been filed does not negate the fact that the wife still has an equitable interest/separate property interest in the retirement fund. The equitable interest was granted by the divorce decree. McDermott v. McDermott, 119 AD2d 370, 379, 507 NYS2d 390, 397 (2nd Dept.,1986)(citation omitted)[Spouse's interest in pension fund "unenforceable and unallocated as it may have been prior to the divorce action, constituted the seed from which an inchoate interest in the pension emerged as a marital asset when the divorce action began...and matured into a true ownership interest when the equitable distribution judgment terminated the action."]

Plaintiff's interest in defendant's retirement fund immediately vested in plaintiff upon the issuance of the divorce judgment herein [see, Majauskas v. Majauskas, 61 NY2d 481, 485-486, 474 NYS2d 699, 463 NE2d 15 (1984)] and thus cannot be included as "property of the estate" in defendant's bankruptcy case.

More specifically, plaintiff's interest in the retirement fund does not create a debtor-creditor relationship, the QDRO is merely the method by which Mrs. Zettwoch obtains payment of her property interest in the retirement fund. See, In re Taylor, [*2]233 B.R. 639 (S.D.NY,1999).

For the foregoing reasons the Court holds that the automatic stay of the United States Bankruptcy Code (11 U.S.C. §362) does not stay this Court's execution of a QDRO.

Plaintiff shall submit a proposed QDRO ^[FN1] on notice to defendant's counsel on or before June 20, 2008.

The foregoing shall constitute the decision of the Court.

Dated: Goshen, New York