Crist, Matter of

• Decision Date: 17 December 1980
• Docket Number: 79-1114,Nos. 78-3575,s. 78-3575
• Citation: 632 F.2d 1226
• Parties: In the Matter of James F. CRIST, Jr., Debtor. James F. CRIST, Jr., Debtor, in possession, Appellant, v. Jane S. CRIST, Appellee. In the Matter of Frederick H. PINKERTON, Jr., Bankrupt. Frederick H. PINKERTON, Jr., Appellant, v. Betty Jane PINKERTON, Appellee.
• Court: U.S. Court of Appeals — Fifth Circuit

Page 1226

632 F.2d 1226

In the Matter of James F. CRIST, Jr., Debtor.

James F. CRIST, Jr., Debtor, in possession, Appellant, v. Jane S. CRIST, Appellee.

In the Matter of Frederick H. PINKERTON, Jr., Bankrupt.

Frederick H. PINKERTON, Jr., Appellant, v. Betty Jane PINKERTON, Appellee.

Nos. 78-3575, 79-1114.

United States Court of Appeals, Fifth Circuit.

Dec. 17, 1980.

James W. Penland, Atlanta, Ga., for James F. Crist, Jr.

Charles A. Ratz, Atlanta, Ga., for Jane S. Crist.

T. Brian Glass, Wilbur T. Fitzgerald, Atlanta, Ga., for Frederick H. Pinkerton, Jr.

Joseph J. Burton, Jr., Atlanta, Ga., for Betty Jane Pinkerton.

Appeals from the United States District Court for the Northern District of Georgia.

Before RUBIN and POLITZ, Circuit Judges, and POINTER ^*, District Judge.

POLITZ, Circuit Judge:

These cases were consolidated on appeal because both concern, inter alia, the constitutionality of § 17(a)(7) of the Bankruptcy Act of 1898, codified in 11 U.S.C. § 35(a)(7), which was modified and replaced subsequent to this suit by the Bankruptcy Reform Act of 1978, 11 U.S.C. § 523(a)(5). In each case the district court affirmed findings by the bankruptcy judge that the debts involved were non-dischargeable alimony obligations. For the reasons assigned, we affirm the decision of the district court in each case.

A. The Pinkertons

Betty Jane and Frederick H. Pinkerton were married in Miami, Florida in 1948 and had three children prior to being divorced there in 1969. The Florida divorce decree incorporated two agreements. The first, dated March 1, 1968, required the husband to provide the wife with periodic support and maintenance payments which were subject to increase if the husband's income increased and were to terminate upon the wife's remarriage. This agreement also contained provisions for support of the parties' three children. The second accord, executed on July 11, 1969, reaffirmed the first agreement and provided for a payment of $35,000 in cash as "full and final settlement and division of property between husband and wife." Frederick Pinkerton paid the $35,000, moved to Georgia and later remarried. Subsequently, Betty Jane Pinkerton filed suit in Georgia alleging that her former husband had fallen into arrears, totalling $13,000, under the alimony and child support provisions of the March 1968 accord. That litigation was settled on May 21, 1975, by a compromise agreement which expressly superseded all prior agreements. The compromise provided for the lump sum payment of $10,000 for the alimony and child support arrearage, and the delivery of a promissory note for $30,000 payable in 36 monthly installments of $833.33. The note provided penalties for default, specifically acceleration of the unpaid balance, 8% interest and attorney's fees. The 1975 settlement agreement further provided:

The aforesaid promissory note of $30,000 being delivered to the wife as full and final settlement of any and all claims for any and all alimony, support, and all other benefits, rights and privileges to which the wife is now entitled, has been entitled, and may or will be entitled to in the future by virtue of the former Agreements of the parties. Said note represents full, final and absolute settlement of all benefits due the wife under the aforesaid Agreements and Decree of Divorce.

In June 1975, the Florida court approved the compromise settlement, amended the Pinkertons' divorce decree to include the new accord, and adopted a stipulation of the parties which declared, in pertinent part:

(T)he (settlement) Agreement of May 21, 1975 (is) a true and accurate reflection of (the Pinkertons') intentions as to alimony and other property dispositions to which they have agreed, and that said Agreement is executed pursuant to paragraph 15 of their original Agreement of March 1, 1968. ¹

Frederick Pinkerton initially complied with the 1975 agreement by making the $10,000 payment and four monthly payments. He thereafter defaulted and filed a voluntary petition in bankruptcy, listing as a debt, for which he sought a discharge, the balance on the $30,000 note. Betty Jane Pinkerton was granted a summary judgment accelerating the principal balance due, plus interest, but was denied attorney's fees, without prejudice, pending final disposition of the debt-discharge issue. The bankruptcy judge opined that § 17(a)(7) precluded a discharge of the alimony obligation; the district court affirmed this conclusion.

On appeal, Frederick Pinkerton poses two alternative theories in support of his claim of entitlement to a discharge. First, he insists that the non-discharge provisions of § 17(a)(7) are inapplicable to his situation because the May 1975 agreement involved a property settlement and not alimony. Second, he asserts that § 17(a)(7) creates an impermissible gender-based classification which is violative of the due process clause of the Fifth Amendment. We discuss these contentions in Parts I, II and III below.

B. The Crists

Jane S. and James F. Crist were granted a divorce by a Georgia court on March 4, 1977. The parties executed a separation agreement, incorporated into the divorce decree, providing that the husband would pay the wife $30,000 in a lump sum upon the sale of their house, or in installments which were to be completed by March 1978. James Crist further agreed to pay Jane Crist: as alimony, the sum of $350 per month until the aforementioned $30,000 was paid in full; $5,000 for attorney's fees she had incurred; and $350 per month for the support of their minor daughter. Both the $30,000 and $5,000 obligations were evidenced by promissory notes. Crist secured these obligations by executing a deed to the house which transferred a security interest to his former wife. He also agreed to transfer certain personal effects, including home furnishings and an automobile.

James Crist paid $7,500 in March 1977, $2,500 of which was in payment on the $5,000 attorney fee commitment with the remainder applicable to the $30,000 note. In April 1977, he paid $2,500 on the $30,000 note. During the months of April and May, 1977, he paid the monthly alimony stipends of $350.

James Crist made no payments after the May 1977 alimony installment. He filed a bankruptcy petition in July 1977. The issue of the dischargeability of the obligations due Jane Crist was presented to the bankruptcy court, which ruled that none of the above listed obligations were dischargeable. The bankruptcy court found a balance of $22,500 due on the $30,000 note, $2,500 due on the $5,000 attorney's fee note and an accrued arrearage on the $350 monthly alimony payments, through February 1978, of $3,150, and concluded that § 17(a)(7) proscribed a discharge of any of these debts as all were alimentary obligations. The bankruptcy court rejected the contention that § 17(a)(7) created a gender classification inconsistent with the Fifth Amendment and the contention that the obligations at issue constituted a voidable preference under § 60 of the Bankruptcy Act, 11 U.S.C. § 96. The district court, 460 F.Supp. 891, affirmed.

On appeal, James Crist asserts the same Fifth Amendment and voidable preference arguments that were presented to the bankruptcy court. We discuss these contentions in Parts III and IV below.

Part I: Alimony or Property Settlement

Two tribunals, the bankruptcy court and the district court, have classified the Pinkertons' May 1975 agreement as an alimony accord. Under the relevant standard of review, findings of fact are not to be disturbed unless clearly erroneous. "The test ... is not whether a different conclusion from the evidence would be appropriate, but whether there is sufficient evidence in the record to (reflect) clear error in the trial judge's findings." Matter of Bardwell, 610 F.2d 228, 230 (5th Cir. 1980). Frederick Pinkerton insists that the facts in the record support his position with the force and urgency required by this standard. Characterization of the $30,000 note as a property settlement unquestionably would make it a dischargeable debt, not subject to § 17(a)(7), which provides in relevant part:

A discharge in bankruptcy shall release a bankrupt from all of his provable debts, whether allowable in full or in part, except such as ... are for alimony due or to become due, or for maintenance or support of wife or child ....

Resolution of this issue requires a determination of the intention of the parties, as reflected by the substance of the agreement, viewed in the crucible of surrounding circumstances as illuminated by applicable state law. In re Nunnally, 506 F.2d 1024, 1027 (5th Cir. 1975); In re Smith, 436 F.Supp. 469, 476 (N.D.Ga.1977); Golden v. Golden, 411 F.Supp. 1076, 1078 (S.D.N.Y.), aff'd, 535 F.2d 213 (2d Cir. 1976).

Several facts convince us that the Pinkertons intended the May 1975 compromise to constitute an amended alimony agreement rather than a property settlement. The July 1969 agreement stated that "the husband agrees to pay the wife as full and final settlement and division of property between the husband and the wife, the sum of Thirty-Five Thousand ($35,000.00) Dollars cash." (Emphasis added.) Upon payment of this amount, the property settlement was complete. Before addressing the substantive alimony provisions, including the terms of the $30,000 note, the May 1975 agreement declared that "the parties are desirous of reforming and revising said Agreements and wish to modify same as provided for in paragraph 15 of said Agreement of March 1, 1968." Moreover, the stipulation between the Pinkertons attested to the fact that the May 1975 accord was "executed pursuant to paragraph 15 of their original Agreement of March 1, 1968."

The March 1968 agreement involved alimony and child support. The July 1969 instrument related to the property settlement, was concluded and no longer executory when, in May 1975, the alimony arrearage litigation was compromised and settled. The evidence is overwhelming that the...