PHILADELPHIA – On Friday, the U.S. Court of Appeals for the Third Circuit affirmed a federal bankruptcy court ruling declaring there is no non-dischargeable obligation for one brother to reimburse another for liability-related to costs of their mother’s nursing home care.
“Appellees Thomas Skinner and his wife Anna Skinner, allegedly misappropriated the funds of Dorothy Skinner, Thomas’ mother. They also placed her in Saint Joseph’s Manor, an assisted living facility, and proceeded to misappropriate the insurance funds that were intended to pay for Dorothy’s care,” Judge D. Brooks Smith wrote.
Smith explained due to this non-payment, Dorothy was evicted with an outstanding balance of $25,049.69, plus interest and fees. Subsequently, Saint Joseph’s Manor filed a lawsuit in the Montgomery County Court of Common Pleas against Dorothy, Thomas, and William Skinner, the instant case’s appellant and Thomas’ brother – under a theory of unjust enrichment and the Pennsylvania Support Law. (Montgomery County Court of Common Pleas Case No. 2012-25014)
The Pennsylvania Support Law “obligates the children of an indigent person to care for or financially assist that person.” A default judgment was entered against Thomas in the amount of $32,225.56 in that Montgomery County Court of Common Pleas litigation.
Therefore, Thomas subsequently filed for protection under Chapter 7 of the Bankruptcy Code, and William then filed a bankruptcy complaint, claiming that Thomas has a non-dischargeable obligation to reimburse him for any liability that he may owe Saint Joseph’s Manor.
The Bankruptcy Court dismissed his complaint for lack of standing to challenge the dischargeability of Thomas’ debts, and the District Court affirmed this decision. William then appealed to the Third Circuit.
William argued in his appeal he has valid claims that are non-dischargeable, under both federal law and the Pennsylvania Uniform Fraudulent Transfer Act (UFTA).
According to Smith, a “claim” under the Bankruptcy Code “is usually referring to a right to payment recognized under state law” and thus, “only a party that has a valid claim under non-bankruptcy law has standing to challenge the dischargeability of that claim.”
However, Smith determined the District Court was correct in concluding the Pennsylvania Support Law contains “no right of contribution or indemnification”, applicable to the subject case.
Smith said William also lacks a valid claim under the UFTA, which allows “the creditor of a debtor to ‘avoid’ any fraudulent transfers made by the debtor.”
“For purposes of the UFTA claim, William concedes that Dorothy, his mother, is the debtor, and he claims that Thomas and Anna are the transferees. While he argues that he is ‘clearly a creditor of his mother because he has a claim against her under the UFTA and for unjust enrichment, we determine that it is clear that he is wrong,” Smith said.
Smith concluded the UFTA does not bestow creditor status on an individual, only that it serves as an avenue for creditors to recover funds from fraudulent transfers.
“Moreover, an unjust enrichment claim would require that Dorothy be ‘unjustly enriched at the expense of’ William, which she was not. Because William is not a creditor of Dorothy, the UFTA does not give him a valid claim. Thus, because William does not have a valid claim against Thomas, he lacks standing to challenge the dischargeability of Thomas’ debts,” Smith said.
The appellant is represented by Alan B. Kane in Norristown.
The appellees are represented by Carol B. McCullough and Stuart A. Eisenberg of McCullough Eisenberg in Warminster, and Michael Seth Schwartz in Southampton.
U.S. Court of Appeals for the Third Circuit case 15-2590
U.S. District Court for the Eastern District of Pennsylvania case 2:14-cv-06697
From the Pennsylvania Record: Reach Courts Reporter Nicholas Malfitano at email@example.com