Earl Ray Boyette, Jr.

UNITED STATES BANKRUPTCY COURT
EASTERN DISTRICT OF NORTH CAROLINA
WILSON DIVISION
IN RE:
EARL RAY BOYETTE, JR.,
DEBTOR
CHAPTER 13
CASE NO. 09-04573-8-RDD
ORDER DISMISSING MOTION TO DETERMINE STATUS OF CLAIM
Pending before the Court is the Motion to Determine Status of a Claim (the “Motion”) filed
by Lynanne D. Boyette, (“Mrs. Boyette”) and the Response in Opposition to the Motion to
Determine Status of a Claim (the “Response”) filed by Earl Ray Boyette Jr. (the “Debtor”). The
Court conducted a hearing in Wilson, North Carolina on October 19, 2010 to consider the Motion
and the Response.
Pursuant to the Motion, Mrs. Boyette requests that the Court determine that (1) the obligation
owed to Mrs. Boyette is a post-petition obligation which is not subject to discharge under the
Bankruptcy Code and (2) the provisions of the automatic stay do not prevent Mrs. Boyette from
filing a domestic action in State court which would include division of marital property, allocation
of debts and equitable distribution.
SO ORDERED.
SIGNED this 17 day of November, 2010.
________________________________________
Randy D. Doub
United States Bankruptcy Judge
____________________________________________________________
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BACKGROUND
The Debtor and Mrs. Boyette entered into a Premarital Agreement on April 13, 2000.
Subsequently, the Debtor and Mrs. Boyette were married. On January 27, 2003, the Debtor deeded
certain real property to himself and Mrs. Boyette as tenants by the entirety. The real estate consists
of the Debtor’s residence. The Debtor still resides at this property. At the time of the conveyance,
the Debtor and Mrs. Boyette were married.
The Debtor and Mrs. Boyette modified and amended the Premarital Agreement at the time
of the conveyance. 	Since the conveyance, the Debtor and Mrs. Boyette have modified the
Premarital Agreement a second time. The Second Modification and Amendment to the Premarital
Agreement was executed on June 22, 2006. It provides that the Debtor and Mrs. Boyette “desire to
make certain improvements and additions to the aforementioned property” and to do so, it was
necessary for Mrs. Boyette to sign a Promissory Note in the amount of $101,000.00. In the event
of a divorce, the Premarital agreement provides Mrs. Boyette will immediately reconvey “all of her
right, title and interest in the hereinabove referred to property” to Debtor and the Debtor will
reimburse Mrs. Boyette “for all monies she has expended toward the payment” of the promissory
note with interest.
On June 3, 2009, the Debtor filed a voluntary petition for relief under Chapter 13 of the
Bankruptcy Code. When the Debtor filed the petition, he and Mrs. Boyette were still married and
living together. In July 2009, one month after the bankruptcy filing, the Debtor and Mrs. Boyette
separated. 	On April 14, 2010, the Debtor amended his Schedules and added Mrs. Boyette as a
creditor. Mrs. Boyette’s claim was designated as an unliquidated unsecured claim. At any time,
either party is eligible to file for divorce. Upon the divorce, the financial obligations of the Debtor
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to Mrs. Boyette will no longer be contingent. As of the hearing date and without consideration of
the claim of Mrs. Boyette, the Debtor is twenty-one dollars and fifty cents ($21.50) from completing
his Chapter 13 Plan and receiving his discharge.
Mrs. Boyette argues that any claim she may have against the Debtor arises post-petition and
is not subject to the discharge in the event the Debtor obtains a discharge. 	Additionally Mrs.
Boyette contends she may proceed with her domestic actions in State Court without obtaining relief
from the automatic stay.
The Debtor contends that a contract existed between the parties at the time of the filing of
his petition and, although liability under the contract was not liquidated at the time of the filing of
the petition, the liability nonetheless existed. Therefore, he asserts that the claim of Mrs. Boyette
is subject to determination, estimation, and/or liquidation in this bankruptcy proceeding.
DISCUSSION
The question before the Court is whether the obligation of Mrs. Boyette arose pre-petition
or post-petition, and whether the obligation is subject to determination, estimation and/or liquidation
in this proceeding.
A debtor is relieved “of personal liability for all pre-petition debts but those excepted under
the Bankruptcy Code[,]” upon receiving a discharge in bankruptcy. In re Perry, Case No. 02-09032-
8-JRL at 3 (Bankr. E.D.N.C. Aug. 4, 2006) (citing River Place E. Housing Corp. v. Rosenfeld (In
re Rosenfeld), 23 F.3d 833, 836 (4th Cir. 1994)). Whether a claim arises pre-petition or post-petition
is a “question of federal bankruptcy law.” 	In re Perry, Case No. 02-09032-8-JRL at 3 (Bankr.
E.D.N.C. Aug. 4, 2006) (citing Georgetown Steel Co., LLC v. Capital City Ins. Co., Inc. (In re
Georgetown Steele Co., LLC), 318 B.R. 313, 327 (Bankr. D. S.C. 2004)).
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Claim is defined in 11 U.S.C. § 101(5) of the Bankruptcy Code as:
(A) right to payment, whether or not such right is reduced to judgment,
liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed,
undisputed, legal, equitable, secured, or unsecured; or
(B) right to an equitable remedy for breach of performance if such breach
gives rise to a right to payment, whether or not such right to an equitable
remedy is reduced to judgement, fixed, contingent, matured, unmatured,
disputed, undisputed, secured or unsecured.
11 U.S.C. § 101(5) (emphasis added).
This definition is broad and the term includes obligations of the debtor “no matter how remote or
contingent.” H.R. Rep. No. 95-595, 309 (1977). Congress desired a broad definition of claim to
allow debtors to meet all of their legal obligations in bankruptcy proceedings and give debtors a
fresh start. In re Heath, Adversary Proceeding No. L-05-00076-8-AP at 3 (Bankr. E.D.N.C. May
5, 2005) (citing Ohio v. Kovacs, 469 U.S. 274 (1985)). The parties do not dispute that Mrs. Boyette
has a claim. However, the question is whether that claim arose pre or post-petition.
The Fourth Circuit uses the “conduct test” to determine whether a claim arises pre-petition
or post-petition. In re Perry, Case No. 02-09032-8-JRL at 3 (Bankr. E.D.N.C. Aug. 4, 2006) (citing
Grady v. A.H. Robins Co., 839 F.2d 198, 201-202 (4th Cir. 1988)). Under the “conduct test” the
court focuses on the definition of “claim” under 11 U.S.C. § 101(5), to determine when a right o
payment arises. Id. As stated in § 101(5)(A) a contingent right to payment constitutes a claim. 11
U.S.C. § 101(5). The “conduct test” focuses on the “actual act that gives rise to a state or federal
claim . . . not the contingency that gives rise to the right of payment.” 	Id. 	(citing Butler v.
NationsBank, N.A., 58 F.3d 1022, 1029 (4th Cir. 1995)).
Additionally, a court shall estimate “any contingent or unliquidated claim[.]” 11 U.S.C. §
502(c). The statutory language is mandatory, not permissive. In re Nova Real Estate Inv. Trust, 23
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B.R. 62 (1982). “Subsection (c) requires the estimation of any claim liquidation of which would
unduly delay the closing of the estate, such as a contingent claim.” Id. (citing House Report No. 95-
595, 95th Cong., 1 st Sess. 354 (1977). Senate Report No. 95-989, 95th Cong., 2d Sess 65 (1978)).
In the present case, the act giving rise to Mrs. Boyette’s claim is the execution of the
Premarital Agreement and the contingency is the divorce. The Debtor and Mrs. Boyette executed
the Amended Premarital Agreement on June 22, 2006, prior to the Debtor filing his bankruptcy
petition. At the hearing, the Debtor’s attorney stated that the Debtor and Mrs. Boyette are both
eligible to file for divorce at any time either party wishes to file. They have lived separate and apart
for over one year. Upon the divorce, the Debtor will be required to pay certain sums of money to
Mrs. Boyette. Additionally the Debtor’s attorney stated that if Mrs. Boyette’s claim is not subject
to determination, estimation and/or liquidation in this bankruptcy proceeding, the Debtor will be
financially unable to pay Mrs. Boyette’s claim outside of the bankruptcy proceeding, thereby
resulting in foreclosure on the note secured by Debtor’s residence.
During the hearing, the Debtor proposed to treat Mrs. Boyette’s claim as a secured claim and
provide periodic payments to Mrs. Boyette under the Debtor’s Chapter 13 plan. 	This proposal
would prevent foreclosure, thereby giving the Debtor a fresh start upon completion of the
bankruptcy proceeding and, at the same time, would ensure that Mrs. Boyette’s claim is paid in full.
Mrs. Boyette objected to this proposal and argued that because the parties have not yet filed for
divorce, her claim is unable to be computed. However, Section 502 allows a court to estimate “any
contingent or unliquidated claim[.]”
Therefore, the Court finds that Mrs. Boyette’s obligation is a claim that should be included
under the broad definition of “claim” set forth in 11 U.S.C. § 101(5) of the Code. The “act” of
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executing the Premarital Agreement occurred pre-petition and this act gives rise to Mrs. Boyette’s
claim or right to payment even if such claim is contingent. The Court, relying on 11 U.S.C. § 502,
finds that Mrs. Boyette’s claim should be estimated and liquidated as part of the Debtor’s Chapter
13 plan. Mrs. Boyette is ordered to file a claim within thirty (30) days of the date of this order.
After review of the claim by Debtor, Debtor may file an objection and request estimation of the
contingent claim pursuant to 11 U.S.C. § 502(c). Therefore, Mrs. Boyette’s Motion is DENIED.
SO ORDERED.
END OF DOCUMENT
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