Coon v. Henderson (In re Coon), Bankruptcy No. 13–10192–WRS.
| Decision Date | 21 November 2014 |
| Docket Number | Bankruptcy No. 13–10192–WRS.,Adversary No. 13–1103–WRS. |
| Parties | In re Charles R. COON, Debtor. Charles R. Coon, Plaintiff v. Angela Gale Henderson, Defendant |
| Court | U.S. Bankruptcy Court — Middle District of Alabama |
Jennifer R. Stanley, Enterprise, AL, for Plaintiff.
Donna C. Crooks, Daleville, AL, for Defendant.
This Adversary Proceeding is before the Court on cross-motions for summary judgment. (Docs. 15, 16, 19, 20, 21, 22). Plaintiff Charles Coon, the Debtor in the underlying bankruptcy case, seeks a determination that amounts owed his former spouse pursuant to a divorce decree are not alimony, not entitled to priority and therefore dischargeable. Defendant Angela Henderson seeks a determination that all amounts owed are alimony, entitled to priority, and excepted from discharge. For the reasons set forth below, Coon's motion for summary judgment is GRANTED IN PART AND DENIED IN PART and Henderson's motion for summary judgment is GRANTED IN PART AND DENIED IN PART.
Defendant Angela Henderson and Plaintiff Charles Coon were divorced on October 15, 2009, in proceedings in the Circuit Court of Coffee County, Alabama.1 The divorce was uncontested and the divorce decree incorporated a settlement agreement entered into by the parties. . Sections IV and VIII of the agreement are in issue here.
Under Section IV of the agreement, entitled “Periodic Alimony,” Coon was ordered to pay Henderson $2,000 per month for six months, then $3,000 per month for the next fifty-four months. If Henderson remarried or entered into an open cohabitation relationship, Coon could seek to have the alimony payments reduced to $1,500 per month. If Coon missed a monthly payment, Henderson could accelerate the balance of the remaining payments. The divorce settlement stated that the purpose of Section IV was “to enable [Henderson] to meet her continuing financial needs as a result of her assumption of the majority of the marital debt ... and to otherwise preserve the status quo of the parties [.]”2
Section VIII of the agreement, entitled “[Coon]'s Retirement Plan,” obligates Coon to pay Henderson $40,895.30, representing half of the value of Coon's TRS retirement account at that time. Coon was required to start making payments when he began receiving disbursements or when he turned 65, whichever occurred first, and was required to pay Henderson in the same intervals in which he received disbursements. The word alimony is never used in Section VIII and there is nothing in Section VIII which would suggest that it is anything other than an attempt to divide property.
On September 1, 2011, the divorce court entered a second order reducing Coon's required payments under Section IV of the divorce settlement to $1,500 per month upon determining that Henderson had entered into an open cohabitation relationship. (Doc. 15, Ex. B). In doing so, the divorce court stated that (Doc. 15, Ex. B). The divorce court also negated an income withholding order enforcing the Section IV obligation, noting that such orders were “an impermissible means of collecting spousal support[.]” (Doc. 15, Ex. B).
On September 23, 2013, the divorce court entered a third order related to the divorce. (Doc. 15, Ex. C). The divorce court denied Coon's petition to terminate payments under Section IV of the divorce settlement—and also denied Henderson's petition to increase them—pursuant to the doctrine of res judicata, ruling that it had already decided the issue in its 2011 order. The divorce court also denied Coon's petition to terminate payments of his retirement benefits under Section VIII of the divorce settlement, ruling that the required payments were “part of the parties' agreed upon property settlement” and therefore “non-modifiable.” (Doc. 15, Ex. C). Finally, the divorce court entered judgment in favor of Henderson and against Coon for $25,500.00 in alimony arrearage under Section IV, and deemed the acceleration clause of Section IV triggered as to the remaining $18,000.00 Coon owed Henderson in future monthly payments under Section IV.
Coon filed a petition pursuant to Chapter 13 of the Bankruptcy Code on January 31, 2013, initiating case number 13–10192. Coon listed his retirement account in the amount of $106,582.24 as exempt on his Schedule C. (Case No. 13–10192, Doc. 1). On his Schedule E, Coon listed Henderson as an unsecured creditor holding a priority claim of $9,000.00 for a domestic support obligation but did not otherwise list her as a non-priority creditor. (Case No. 13–10192, Doc. 1). Coon's plan proposed to pay Henderson $9,000.00 as a priority claim and was confirmed without objection on May 16, 2013. (Case No. 13–10192, Docs. 7 & 20). Henderson filed a twice-amended proof of claim of $84,395.53 for “Alimony and Retirement” and claimed all of it was entitled to priority. (Case No. 13–10192, Claim 9–2). It is evident from the divorce settlement and the divorce court's 2013 order that Henderson claims $43,500.00 pursuant to Section IV of the divorce settlement and $40,895.30 pursuant to Section VIII.3
Coon then initiated this adversary proceeding against Henderson, objecting to the priority status of Henderson's proof of claim and seeking a determination of dischargeability under 11 U.S.C. § 1328(a)(2). (Doc. 1). Specifically, Coon contends that the required payments under Sections IV and VIII of the divorce agreement were intended as a property settlement, and not as spousal support for Henderson. Henderson answered, asserting that her claim was entitled to priority status and therefore non-dischargeable. (Doc. 8). Both parties have moved for summary judgment on all claims.
This Court has jurisdiction over this case pursuant to 28 U.S.C. §§ 1334 and 157(a), and the district court's General Order of Reference dated April 25, 1985. This is a core proceeding under 28 U.S.C. § 157(b)(2)(I) and (K). Venue is proper under 28 U.S.C. § 1409(a). This is a final judgment.
Henderson argues that this Court has no jurisdiction over her interest in Coon's retirement account because it is not property of the estate. (Doc. 8). “[B]y filing a claim against a bankruptcy estate [a] creditor triggers the process of ‘allowance and disallowance of claims,’ thereby subjecting [her]self to the bankruptcy court's equitable power.” Langenkamp v. Culp, 498 U.S. 42, 44, 111 S.Ct. 330, 112 L.Ed.2d 343 (1990) (quoting Granfinanciera, S.A. v. Nordberg, 492 U.S. 33, 58–59, 109 S.Ct. 2782, 106 L.Ed.2d 26 (1989) ). Since Henderson has filed a proof of claim for her interest in Coon's retirement benefits she has triggered the process of allowance or disallowance of the claim, so the Court has jurisdiction over her interest. 28 U.S.C. § 1334(a).
Motions for summary judgment are governed by FED. R. BANKR. P. 7056, which incorporates FED. R. CIV. P. 56. Rule 56 mandates the Court to grant summary judgment “if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” A material fact is one “that might affect the outcome of the suit under governing law....” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). A dispute is genuine “if the evidence is such that a reasonable jury could return a verdict for the non-moving party.” Id. If there is a genuine dispute of material fact, however, a motion for summary judgment must be denied. See Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986) ().
The question presented is whether, and to what extent, Henderson's claim is entitled to priority under 11 U.S.C. § 507(a)(1)(A). Section 507(a)(1)(A) states, in relevant part:
(a) The following expenses and claims have priority in the following order:
Thus, a claim is entitled to priority under § 507(a)(1)(A) only if it is for a domestic support obligation. The Bankruptcy Code defines the term “domestic support obligation” as a debt owed to a former spouse of the debtor that is “in the nature of alimony, maintenance, or support ... of such former spouse, ... without regard to whether such debt is expressly so designated [.]” 11 U.S.C. § 101(14A)(B). Therefore, if Henderson's claim is for an obligation “in the nature of alimony, maintenance, or support,” it is entitled to priority under § 507(a)(1)(A).
The extent to which Henderson's claim is entitled to priority controls the extent to which it is non-dischargeable in Chapter 13 bankruptcy. Debt “for a domestic support obligation” is excepted from discharge pursuant to 11 U.S.C. §§ 523(a)(5) and 1328(a). Debt owed to a former spouse “not of the kind described” in § 523(a)(5) that is “incurred by the debtor in the course of a divorce”—i.e., distribution of marital property—is also typically non-dischargeable under 11 U.S.C. § 523(a)(15). In the context of a Chapter 13 bankruptcy, however, a debtor who completes his plan payments will receive “a discharge of all...
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