Bush v. Taylor

• Decision Date: 30 August 1990
• Docket Number: No. 88-2145,88-2145
• Citation: 912 F.2d 989
• Parties: , 23 Collier Bankr.Cas.2d 1294, 20 Bankr.Ct.Dec. 1499, Bankr. L. Rep. P 73,607, 12 Employee Benefits Ca 2260 Cleda D. BUSH, Appellee, v. Alvin G. TAYLOR and Barbara F. Taylor, Appellants.
• Court: U.S. Court of Appeals — Eighth Circuit

Page 989

912 F.2d 989

59 USLW 2171, 23 Collier Bankr.Cas.2d 1294,

20 Bankr.Ct.Dec. 1499, Bankr. L. Rep. P 73,607,

12 Employee Benefits Ca 2260

Cleda D. BUSH, Appellee, v. Alvin G. TAYLOR and Barbara F. Taylor, Appellants.

No. 88-2145.

United States Court of Appeals Eighth Circuit.

Submitted April 10, 1990.

Decided Aug. 30, 1990.

Richard Medlock, Little Rock, Ark., for appellants.

Frank Poff, Jr., Little Rock, Ark., for appellee.

Before LAY, Chief Judge, McMILLIAN, ARNOLD, JOHN R. GIBSON, FAGG, BOWMAN, WOLLMAN, MAGILL, and BEAM, Circuit Judges, en banc.

BOWMAN, Circuit Judge.

Alvin and Barbara Taylor, Chapter 7 debtors under the Bankruptcy Code (Code), have attempted to discharge as a debt the sole and separate property interest of Cleda Bush, Alvin Taylor's former wife, in a portion of a government pension payable to Alvin Taylor. The Bankruptcy Court ¹ held that Bush's share of the pension was not a debt dischargeable in bankruptcy and the District Court ² affirmed. In this appeal brought by the Taylors, we affirm.

On January 3, 1975, a Decree of Dissolution of the marriage of Cleda and Alvin Taylor was entered in Washington State Superior Court for Pierce County. Under the terms of the decree, Cleda and Alvin each were awarded as his or her "sole and separate property" one-half of the pension benefits to which Alvin Taylor was entitled pursuant to his government employment. The government mailed the monthly pension check to Alvin Taylor. It was his responsibility to pay over to his former wife, on a timely basis, her half of each check. By 1982, Alvin Taylor was seriously in arrears on payments to his former wife, now Cleda Bush, so further court action was required. In the same Washington state court, Bush and Taylor executed an agreed judgment and a covenant not to execute. The terms of the court's order and the covenant were as follows: Bush was granted a judgment against Taylor for $16,412.52, an amount equal to the one-half share of pension benefits that Taylor owed Bush through the end of June 1982. In addition, the court modified its previous division of the pension, reducing Bush's share from one-half of the pension to a flat $500 per month, plus one-half of any increases in the pension payments after June 30, 1982. For the rest of his life, Alvin Taylor was to pay Bush's share over to her on the fifteenth of each month. Bush agreed to refrain from any action to execute the judgment provided Taylor paid Bush $8500 by July 15, 1982, and thereafter complied with the monthly payment terms as modified by the order. If, however, Taylor was ever more than twenty days late in remitting a monthly payment, the agreement as to non-execution would terminate and Bush could seek the full amount of the judgment by any legal means necessary.

On May 29, 1987, Taylor, who had stopped making the court-ordered payments to Bush, together with his wife Barbara filed a joint Chapter 7 bankruptcy petition in bankruptcy court in Arkansas, where the Taylors then lived. He listed Bush's interest in the pension as a debt. Bush filed her proof of claim and an objection to discharge. On February 4, 1988, the Bankruptcy Court discharged "[a]ll indebtedness owed by the defendant [Taylor] to the plaintiff [Bush]" that had accrued between execution of the judgment and covenant in 1982 and the Taylors' bankruptcy filing in 1987. Order of Bankruptcy Court at 2. The court further found "that it would be an inequitable result to [Bush] and an unjust enrichment to [Taylor] to allow [him] through a bankruptcy filing to deprive [her] of marital property rights which she received upon divorce," thus refusing to discharge Taylor's obligation to make post-petition payments. Id. at 2-3. The Taylors appealed to the District Court. The District Court agreed that all the elements of a constructive trust were present, and also found that "[p]ayments [that] are not yet due and payable do not represent a debt under the Code." Memorandum Opinion of District Court at 4, 5. The Taylors appealed.

During the pendency of this appeal, this Court has received from Barbara Taylor a suggestion of the death of Alvin Taylor. Thus, before we can proceed to the merits, we must decide whether Taylor's death moots the case. We agree with Bush that the case is not moot and that we therefore still have jurisdiction.

Upon receiving the suggestion of death, this Court asked the parties for supplemental briefs on the jurisdictional issue. Barbara Taylor submitted a letter brief contending that the case is moot because Alvin Taylor's obligation to Bush died with him. Bush's supplemental brief suggests, inter alia, that the United States Office of Personnel Management (OPM), the payor of the pension, has withheld a portion of Taylor's pension benefits pending our disposition of this case. Such a fund held in escrow by a third party clearly would have meant that the case is not moot. In a reply letter brief, however, Taylor argues that those are not the facts, despite a letter dated September 26, 1989, to Bush's attorney in Washington state from the OPM stating its intention to begin withholding funds from Taylor's payments as Bush had requested. Based on all the information furnished to the Court, it appears that Alvin Taylor received 100% of the post-petition pension benefits and that the Taylors spent all of the money, despite the orders of the federal courts below and the Washington state court. According to Barbara Taylor, there are not even any assets to open a probate estate for her deceased husband. Therefore, Barbara Taylor argues, the funds to which Bush claims she is entitled do not exist, and, according to the state court's order, her right to future payments did not survive Alvin Taylor's death.

Under Article III of the Constitution, we are without jurisdiction unless a case or controversy exists at the time we decide the appeal, not just at the time the suit is instituted. U.S. Const. art. III, Sec. 2; Preiser v. Newkirk, 422 U.S. 395, 401, 95 S.Ct. 2330, 2334, 45 L.Ed.2d 272 (1975). "To satisfy the Art. III case-or-controversy requirement, a litigant must have suffered some actual injury that can be redressed by a favorable judicial decision." Iron Arrow Honor Soc'y v. Heckler, 464 U.S. 67, 70, 104 S.Ct. 373, 375, 78 L.Ed.2d 58 (1983). If our decision would not afford Bush some actual redress, we would be issuing only an advisory opinion and that we are not constitutionally empowered to do. North Carolina v. Rice, 404 U.S. 244, 246, 92 S.Ct. 402, 404, 30 L.Ed.2d 413 (1971).

We conclude, however, that this controversy is still a live one: Taylor's death settles only the question of Bush's entitlement to a share of future pension payments, as there will be no such payments; it does not determine her right to a share of the post-petition pension payments made by OPM before Taylor's death. Barbara Taylor is still a party to the bankruptcy action and so also to this appeal. There remains the practical question whether any decision we may make can remedy the alleged wrong, since the Taylors apparently have spent all the funds to which Bush claims she is entitled. On the present record, however, we cannot say that Bush will not be able to obtain some relief, after our resolution of the dischargeability issue, through further legal proceedings, and obviously she cannot venture to seek that relief without this Court's favorable decision. The Taylors apparently have willfully converted Bush's share of the pension benefits to their own use in violation of the Washington state court order, the Bankruptcy Court order, and the District Court order. ³ Barbara Taylor, we are informed, continues to receive an annuity as life beneficiary of the same pension plan that is at issue here. She also receives a pension of her own, so she is not impecunious. Without expressing any opinion as to the remedies available to Bush against Barbara Taylor or anyone else, we recognize that without a decision from this Court holding that Bush's share of the pension is not dischargeable in bankruptcy, she will be unable to pursue whatever remedies she may have for the financial loss she has suffered.

Where there is ... a concrete case admitting of an immediate and definitive determination of the legal rights of the parties in an adversary proceeding upon the facts alleged, the judicial function may be appropriately exercised although the adjudication of the rights of the litigants may not require the award of process or the payment of damages.

Aetna Life Ins. Co. v. Haworth, 300 U.S. 227, 241, 57 S.Ct. 461, 81 L.Ed. 617 (1937); cf. In re Van Iperen, 819 F.2d 189, 191 (8th Cir.1987) (case seeking recovery of property was moot because property at issue was in hands of third party, but by unquestionably legal means). We hold that this case is not moot and turn now to the merits. ⁴

The issue raised in this appeal, whether Alvin Taylor's post-petition obligation to pay Bush her share of the pension for as long as he lived was a dischargeable debt within the meaning of the Code, is a question of law. A district court sitting as an appellate court reviews the bankruptcy court's legal conclusions de novo. In re Euerle Farms, Inc., 861 F.2d 1089, 1090 (8th Cir.1988). In reviewing a district court's affirmance of a bankruptcy court's decision, this Court "sit[s] in the same position as did the district court." 861 F.2d at 1090. That is, we review the bankruptcy court's legal conclusions de novo.

Under the Bankruptcy Code, "[t]he court shall grant the debtor a discharge" of his debts at the conclusion of the bankruptcy proceedings, subject to certain exceptions. 11 U.S.C. Sec. 727(a) (1988). A debt under the Code is defined as "liability on a claim," and a claim is a "right to payment, whether or not such right is reduced to judgment, ... fixed, contingent, matured, unmatured...." 11 U.S.C. Sec. 101(4), (11) (1988). Barbara Taylor contends that Bush's right to her share of Alvin...