ADDITIONAL CASES In re: Karen Kao, Debtor; 18-12350 MEMORANDUM OPINION GRANTING PLAINTIFF’S MOTION FOR SUMMARY JUDGMENT Pending before this Court is a summary judgment motion filed by Ning Yen Yao (“Plaintiff” or “Yao”) against Karen Kao (“Defendant” or “Kao”).1 (“Summary Judgment Motion,” ECF Doc. # 14.) Plaintiff Yao and Defendant Kao are parties to a contentious divorce proceeding in New York State Supreme Court (the “State Court”) which, as explained below, resulted in a state court judgment that imposes payment obligations on both Yao and Kao. But as most relevant to this adversary proceeding, the state court judgment includes priority of payment provisions that condition Kao’s receipt of payments from Yao on Kao’s paying her obligation to Yao. Through her chapter 7 bankruptcy, Kao seeks to discharge her debt to her former husband Yao, while still requiring Yao to make payments to her required by the state court judgment even though the state court judgment required that she pay Yao before he had to pay her. Yao’s Summary Judgment Motion seeks an order (1) determining that the New York state court judgment, and subsequent money judgment order that require Kao to pay Yao $236,467.62, with interest at the rate of 9 percent from January 5, 2018 for non-retirement equitable distribution (the “Obligations”), are not dischargeable and (2) maintaining the priority of payment of the Obligations that require Kao to pay Yao $236,467.62 upon the entry of the judgment of divorce as a condition precedent to Yao’s payment to Kao. (“Proposed Order,” ECF Doc. # 13-14.) Plaintiff and his counsel filed Declarations in support of the Summary Judgment Motion. (“Plaintiff Decl.,” ECF Doc. # 13-1; “Borg Decl.,” ECF Doc. # 13-8.) Defendant Kao, pro se, filed two declarations in opposition to the Summary Judgment Motion. (“Opposition,” ECF Doc. # 27; ECF Doc. # 24.)2 Plaintiff filed a Reply. (“Reply,” ECF Doc. # 28.) For the reasons set forth below, the Court grants Plaintiff Yao’s Summary Judgment Motion because Kao’s debts to Yao are not dischargeable under 11 U.S.C. §523(a)(15); the Court also concludes that, pursuant to the principle of res judicata, the State Court’s determination that Kao has no right to setoff or offset Yao’s obligation to her is binding on this Court. Only a New York state court may amend, modify or reverse the State Court ruling that Kao may not offset Yao’s debt to her. I. BACKGROUND A. General Background On October 11, 2007, Plaintiff Yao filed for divorce in State Court. (Plaintiff Decl. 3.) On December 27, 2017, pursuant to an agreement made on the record as to issues concerning custody and payment of a distributive award, the State Court issued an Amended Judgment of Divorce. (“Amended Judgment of Divorce,” ECF Doc. # 10-1.) The Amended Judgment of Divorce ordered that Defendant Kao must pay Plaintiff Yao $236,467.62 in non-retirement equitable distribution. (Id. at 7.) Further, Yao must pay Kao $344,000 over the course of several years as Kao’s distributive share of Yao’s enhanced earning capacity (“Defendant’s Distributive Share”). But the Amended Judgment of Divorce only required Yao to pay Kao after he receives Kao’s payment. (Id. at 7-8.) The Amended Judgment of Divorce separately ordered a division of retirement accounts, child support, and counsel fees from Yao to Kao’s former attorney. (Id. at 8-11.) Subsequently, Yao filed an application for a money judgment for the non-retirement equitable distribution and for counsel fees incurred. On June 1, 2018, the State Court entered a money judgment order. (“Money Judgment Order,” ECF Doc. #10-2.)3 The State Court ordered that Kao pay Yao $236,467.62 with interest at the rate of 9 percent from January 5, 2018 — i.e., the Obligations — pursuant to the Amended Judgment of Divorce, and, separately, pay Yao’s counsel fees in the amount of $2,000 within thirty days of entry of the Money Judgment Order. (Id. at 3-4.)4 The Money Judgment Order stated that the State Court’s Amended Judgment of Divorce denied Kao’s application to offset her Obligations to Yao against Defendant’s Distributive Share. Further, Kao’s application for enforcement of the Amended Judgment of Divorce with regard to the transfer of marital retirement accounts was granted to the extent that Yao was directed to supply all information requested by Pension Actuaries Inc. for completion of the Qualified Domestic Relation Orders (“QDRO(s)”) in this action by June 15, 2018. (Id. at 3- 4.) On July 31, 2018, Kao filed a voluntary petition under Chapter 7 of the Bankruptcy Code. (“Petition,” Chapter 7 Case, ECF Doc. # 1.) The deadline to file a complaint objecting to Kao’s discharge was extended by stipulation to February 28, 2019. (“Stipulation Extending Time to Oppose Discharge,” Chapter 7 Case, ECF Doc. # 16; Borg Decl. 6.) On February 27, 2019, Yao filed the Complaint commencing this adversary proceeding against Kao to (1) determine that the Obligations set forth in the Amended Judgment of Divorce and Money Judgment Order are non-dischargeable and (2) maintain the priority of Kao’s payment of the Obligations as a condition precedent to Yao’s payment of his obligations to Kao. (“Complaint,” ECF Doc. # 1; Plaintiff Decl. 9.) On April 1, 2019, Kao filed an Answer. (“Answer,” ECF Doc. # 5.) At a Case Management Conference on August 21, 2019, the Court granted Yao’s request to file the Summary Judgment Motion. (Borg Decl. 15.) B. Summary Judgment Motion First, Plaintiff argues that the Obligations are not dischargeable because they are either for a domestic support obligation or debts arising out of a divorce decree or other order in the context of a matrimonial proceeding. (Summary Judgment Motion at 7-8 (citing 11 U.S.C. §§523(a)(5) and (15)).) Plaintiff contends that the Obligations are moneys that are due to Plaintiff arising out of the Amended Judgment of Divorce, which is a “divorce decree” within the meaning of both sections 523(a)(5) and (15). Even if the debt does not constitute alimony, maintenance, or support, so as to be not dischargeable pursuant to section 523(a)(5), Plaintiff argues that it is within the scope of section 523(a)(15), which pertains to all other obligations arising out of a divorce decree, other than those covered by section 523(a)(5). (Id. at 7-9.) Second, Plaintiff responds to Defendant’s assertion that the Obligations should be set off against monies due to her from Plaintiff. (Summary Judgment Motion at 9; Answer 24.) Plaintiff argues that Defendant not only fails to provide any legal or equitable basis for this purported defense but omits to acknowledge that the State Court already specifically rejected her request for such a setoff. (Summary Judgment Motion at 9-10.) Plaintiff contends that the res judicata doctrine precludes Defendant from relitigating this issue and requires that the priority of Defendant’s payment of the Obligations be maintained as a condition precedent to the payment by Plaintiff to Defendant of amounts due under the Amended Judgment of Divorce. (Id.) C. Defendant’s Opposition Defendant requests that the Court offset Defendant’s Obligations to Plaintiff with Plaintiff’s obligations toward Defendant, including Defendant’s Distributive Share, the division of retirement account assets, and payment of child support arrears. (Opposition
