In re Marriage of Seligman

In In re Marriage of Seligman (1993) 14 Cal.App.4th 300, after a dissolution petition was filed, the husband and wife each filed separate chapter 7 petitions in bankruptcy. The wife named the husband as a creditor, scheduled community property in her petition, and alleged the community property was exempt from administration as part of her bankrupt estate. (Id. at p. 302.) The wife's bankruptcy was treated by the trustee as a "no asset" action. (Id. at p. 303, fn. 3.) After discharge, the family law court divided the community property, over the wife's objection that the court lacked jurisdiction to divide property listed in her bankruptcy petition. (Id. at p. 303.) According to Seligman, "it seems unmistakably clear that wife's principal contention is that her discharge in bankruptcy, without more, operated to deprive the state court of jurisdiction to divide between the spouses the community property in her possession. More particularly, her brief states, 'It is clear from the timing of the bankruptcy petitions that wife and husband intended to discharge their obligations to one another as well as their obligations to third parties. In spite of the ruling of the trial court, it is clear that this is what they did. Both of them received their discharges before the court divided the personal property and ordered wife to make an equalization payment.'" (Seligman, supra, 14 Cal.App.4th at pp. 305-306.) The Seligman court was decidedly unmoved by the wife's argument. The effect of wife's position "is that the ultimate ownership and right to possession of personalty, abandoned by the trustee in bankruptcy, depends on pure chance, i.e., under wife's contention, whoever happens to have possession of the abandoned property when discharge occurs ends up owning it. We suggest that community property rights cannot be divested on any such gaming theory." (Seligman, supra, 14 Cal.App.4th at pp. 307-308.) With notable disdain, Seligman dissected and rejected the wife's argument by way of example. "Take this scenario: Wife, over the years, slowly accumulated $ 136,049 worth of personal property (actually, the amount divided by the judgment of Mar. 21, 1989), and stored it in one of those self-storage operations. Then she filed a petition to dissolve the marriage. Next, she petitioned in bankruptcy, listing her husband as a creditor and scheduling all the property in the self-storage locker as exempt. Wife's trustee then abandoned the stored property, as here, after which wife obtained a discharge in bankruptcy. As argued by wife to the trial court and on this appeal, the prospective division of the scheduled community property by the family law court created a debt which was then discharged in bankruptcy, with the result that ipso facto the abandoned community property became wife's separate property which wife argued the family law court had no jurisdiction to divide. By this legal legerdemain, if permitted, husband would have been euchred out of $ 68,024.50 worth of what once was community property by means of some unilateral, mystic transmutation which he was powerless to forestall. The scenario recounted above, in effect, describes the proposed disposition of this case, as urged upon us by wife. Its recounting is enough to demonstrate its absurdity." (Seligman, supra, 14 Cal.App.4th at p. 308.)