United States Bankruptcy Court
Central District of California
Chief Judge Sheri Bluebond, Presiding
Wednesday, May 20, 2015 Hearing Room 1475
2:15-11273 [debtor] Chapter 11
#7.00 Motion for an Order Rejecting Family Law Contract
The parties’ marital settlement agreement IS an executory contract. The issue is whether there are unperformed obligations remaining on both sides of the contract that are sufficiently material that, if either party failed to perform these obligations, it would constitute a breach of the contract, relieving the other party of a duty of further performance. Counsel for [the debtor] claims that [her] only remaining obligations are ministerial and therefore do not count. This is not true. Cooperating with transfers of title of real property is not merely a ministerial act in this context. Refusing to cooperate in transfers of title would constitute a material breach of the contract. The fact that the debtor would be able to compel performance and, if necessary, have a court official execute deeds on her behalf does not mean that these are not material obligations. But there are other ongoing obligations as well that have been held sufficient to cause a given contract to be treated as executory, including the parties’ obligations to indemnify each other and hold each other harmless from and against certain obligations, the obligations with regard the payment of tax liabilities and expenses, and the like. Find more details about family laws practice here.
[The debtor] has cited to a handful of cases in which various obligations were treated as not being sufficient to make a given contract executory. A careful review of executory contracts cases would reveal that the identical obligation has been held sufficient to cause a contract to be characterized as executory in one instance and to be insufficient in another. This is because courts, adopting an outcome-oriented approach, have either attempted to avoid adverse results or to create desired benefits for one party or the other by manipulating the definition of executoriness. This court rejects that approach. Properly understood, rejection does not result in avoidance of the contract. It merely constitutes a thorough breach of the contract that is deemed to have occurred immediately prior to the petition date. For an extensive, scholarly discussion of these issues, see M. Andrews, “Executory Contracts in Bankruptcy: Understanding ‘Rejection,'” 59 U. Colo. L. Rev. 845 (1985).
