In Re George E. Graziadei, Debtor. George E. Graziadei, Appellant-Cross-Appellee v. Marlys Graziadei, Appellee-Cross-Appellant

I. INTRODUCTION

This ease involves the question whether the Bankruptcy Appellate Panel (“BAP”) properly directed that a bankruptcy court order be dismissed for lack of jurisdiction. The BAP held that (i) the bankruptcy court lacked jurisdiction to turn over the sale proceeds of the debtor’s homestead property to his ex-wife’s lawyer, but that (ii) it was nevertheless proper for the lawyer to keep the funds that had already been given to him. We affirm the first holding of the BAP, but modify the second and remand for further proceedings.

II. BACKGROUND

Debtor George E. Graziadei (“George”) divorced his wife, Marlys Graziadéi (“Marlys”), while he was going through Chapter 11 bankruptcy proceedings. At the conclusion of the divorce proceedings, the state court ordered George to pay $23,365.20 in attorney’s fees to Marlys’ lawyer.

However, the state court failed to resolve the precise manner in which the $23,365.20 would be paid. The court held that if it had jurisdiction over George’s homestead, then the fees would come out of the sale of such property. If it lacked jurisdiction over George’s homestead, the court “recommended” that the federal bankruptcy court proceed in the…