Erspan v. Badgett, 79-4011

• Decision Date: 10 June 1981
• Docket Number: No. 79-4011,79-4011
• Citation: 647 F.2d 550
• Parties: Bankr. L. Rep. P 68,050 Mary Frances ERSPAN, Plaintiff-Appellee Cross-Appellant, v. Lloyd J. BADGETT, Defendant-Appellant Cross-Appellee. . Unit A
• Court: U.S. Court of Appeals — Fifth Circuit

Page 550

647 F.2d 550

Bankr. L. Rep. P 68,050

Mary Frances ERSPAN, Plaintiff-Appellee Cross-Appellant, v. Lloyd J. BADGETT, Defendant-Appellant Cross-Appellee.

No. 79-4011.

United States Court of Appeals, Fifth Circuit.

Unit A

June 10, 1981.

Stephen F. Hefner, Sherman, Tex., for defendant-appellant cross-appellee.

Colbert N. Coldwell, El Paso, Tex., for plaintiff-appellee cross-appellant.

Appeals from the United States District Court for the Western District of Texas.

Before AINSWORTH and SAM D. JOHNSON, Circuit Judges, and HUNTER ^*, District Judge.

SAM D. JOHNSON, Circuit Judge:

This is an action to enforce the terms of a 1963 divorce decree that awarded to plaintiff one-half of defendant's accumulated right under a United States Army retirement benefits program. Following a nonjury trial, the district court awarded plaintiff accrued and unpaid benefits in the amount of $34,641.90 plus interest from the date of judgment, and ordered defendant to maintain with the United States Army an allotment order providing for the payment directly to plaintiff of her one-half share of all future payments to which she is entitled. The district court also permanently enjoined defendant from proceeding with his civil contempt action against plaintiff in the United States District Court for the Eastern District of Missouri, Southeastern Division, the court from which defendant obtained a discharge in bankruptcy in 1973. The judgment of the district court is affirmed.

I.

Plaintiff and defendant were divorced in 1963. The divorce decree, which was rendered in the state district court in El Paso, Texas, provided in part that defendant's accumulated right to United States Army retirement benefits was community property, and, as such, was the joint property of plaintiff and defendant upon divorce. The decree ordered defendant to execute all documents necessary to accomplish the payment directly to plaintiff of her one-half share of each payment made after defendant's retirement from the Army, and provided that defendant was personally responsible to plaintiff for such payments in the event that they could not be made directly to her by the Army.

Shortly after the divorce, defendant retired from the Army. He paid to plaintiff one-half of his military retirement benefits from the date of his retirement through March 1967; he has paid nothing to plaintiff since that time. In 1971, plaintiff obtained a judgment against defendant for accrued benefits due her in the amount of $8,606.28. The judgment was entered by the state district court in Denton County, Texas. This judgment was affirmed by the Texas Court of Civil Appeals in Badgett v. Erspan, 476 S.W.2d 381 (Tex.Civ.App. Fort Worth 1972, no writ), but defendant has not paid it. No execution has ever been requested or issued on the Denton County judgment.

In 1972, defendant filed a petition in bankruptcy in the United States District Court for the Eastern District of Missouri, Southeastern Division. He listed among his debts plaintiff's 1971 Denton County judgment as well as the El Paso divorce decree. Plaintiff received notice of the petition in bankruptcy, but filed no claim in the bankruptcy proceedings, and did not object to the discharge in bankruptcy that defendant obtained thereby.

Jurisdiction in the case sub judice is predicated upon diversity of citizenship, 28 U.S.C. § 1332. Plaintiff seeks from defendant her share of the retirement benefits paid by the government to defendant, but not forwarded to her, since June 10, 1967, the date of the Denton County judgment. Plaintiff also seeks an order that will ensure her ability to receive future retirement benefits to which she is entitled. In response, defendant argues that his 1973 discharge in bankruptcy absolved him of any liability to plaintiff for either past or future retirement benefits.

Following submission of the instant case to the federal district court, defendant instituted contempt proceedings against plaintiff in the Missouri bankruptcy court from which he obtained his discharge, alleging that, by bringing the present action, plaintiff had violated an injunction that arose by operation of law from defendant's discharge in bankruptcy. The federal district court in the present case temporarily enjoined defendant from prosecuting the Missouri contempt proceeding, and subsequently held that defendant's discharge in bankruptcy did not affect his liability to plaintiff for either past or future retirement benefits. Consequently the court ordered defendant to pay to plaintiff $34,641.90 plus interest, which represents one-half of the benefits accrued from June 10, 1971, to the date of the federal district court's judgment herein. The court also ordered defendant to execute and keep in full force and effect with the United States Army an allotment order directing the Army to pay directly to plaintiff one-half of all future retirement benefits. Finally, the district court entered a permanent injunction preventing defendant from proceeding with his contempt action in the Missouri bankruptcy court.

On appeal, defendant argues (1) that the federal district court erred in holding that his 1973 discharge in bankruptcy did not extinguish plaintiff's claim to one-half of defendant's military retirement benefits, (2) that even if the obligation to plaintiff was exempt from discharge under former section 17(a)(7) of the Bankruptcy Act, that provision is unconstitutional on equal protection grounds, and (3) that the district court erred in enjoining defendant from proceeding in the bankruptcy court because that court has jurisdiction to determine dischargeability. Although defendant challenges on appeal the district court's determination that his discharge did not extinguish plaintiff's right to her share of the retirement benefits, he elected not to appeal the district court's award of $34,641.90 representing her share of benefits that defendant already has received. ¹

II.

Section 17(a)(7) of the Bankruptcy Act of 1938, ² former 11 U.S.C. § 35(a) (7), provided in 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

In In re Nunnally, 506 F.2d 1024 (5th Cir. 1975), this Court explored the relationship between Texas community property law, military retirement benefits, and section 17(a)(7). In that case, the former wife was awarded in the divorce proceeding, inter alia, a lien upon her ex-husband's Navy retirement benefits to secure payment of $46,779.41 which represented an advance to the community from her separate estate. Shortly thereafter, the ex-husband filed a petition in bankruptcy, and both the bankruptcy referee and the district court determined that the former wife's right to the retirement benefits was a dischargeable debt. On appeal, the issue presented to this Court was whether the former wife's right to the $46,779.41 awarded by the divorce court, and secured by the lien on the retirement benefits, was a dischargeable debt, or whether it was exempt from discharge under section 17(a) (7). This Court, although recognizing that alimony after divorce is not permitted in Texas, Francis v. Francis, 412 S.W.2d 29, 32 (Tex.1967), also noted that under the scheme of the Texas Family Code, a divorce court is authorized to divide the separate and community property between the parties in a just and equitable manner, and that

(f)actors which the Texas courts may take into account in making the division and award "include the disparity of the earning power of the parties as well as their business opportunities the physical conditions of the parties, probable future need for support, and educational background; (t)he fault in breaking up the marriage and the benefits (the) innocent spouse would have received from a continuation of the marriage

506 F.2d at 1026, (emphasis in original), quoting Cooper v. Cooper, 513 S.W.2d 229, 233-34 (Tex.Civ.App. Houston (1st Dist.) 1974, no writ). The Court also observed that, under Texas law, the future support of a former spouse "can play a significant role in the divorce court's property division and that what may appear to be a mere division of assets may in fact, under a Texas decree, contain a substantial element of alimony-substitute, support or maintenance, however, termed," 506 F.2d at 624. Finally, this Court noted that the Texas Supreme Court has recognized that support payments, although considered alimony in other states, are not so characterized in Texas. See Francis v. Francis, 412 S.W.2d at 32-33. Consequently, this Court determined that, for purposes of interpreting the federal bankruptcy laws, a federal court is not bound by the label that a state attaches to an award, but rather must look to its substance, and held that the award fell within the exception from discharge contained in section 17(a)(7). 506 F.2d at 1027.

Relying upon Nunnally, the district court in the case sub judice held that plaintiff's right to her share of defendant's retirement benefits was a nondischargeable obligation for "alimony due or to become due, or for maintenance or support" under section 17(a)(7). In Matter of Crist, 632 F.2d 1226 (5th Cir. 1980), which also involved the question of nondischargeability under section 17(a)(7), this Court stated:

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 prevent clear error in the trial judge's findings."

quoting Matter of Bardwell, 610 F.2d 228, 230 (5th Cir. 1980).

Defendant argues that, although correct at the time it was decided, Nunnally has been undermined by subsequent decisions holding that, for purposes of the federal government's consent to suit, a...