Franklin v. State of N.M. ex rel Dept. of Human Services, 83-1476

• Citation: 730 F.2d 86
• Decision Date: 26 March 1984
• Docket Number: No. 83-1476,83-1476
• Parties: , Bankr. L. Rep. P 69,787 Billy Paul FRANKLIN, Plaintiff-Appellee, v. STATE OF NEW MEXICO, ex rel. DEPARTMENT OF HUMAN SERVICES, Defendant-Appellant.
• Court: United States Courts of Appeals. United States Court of Appeals (10th Circuit)

Page 86

730 F.2d 86

11 Bankr.Ct.Dec. 1055, Bankr. L. Rep. P 69,787

Billy Paul FRANKLIN, Plaintiff-Appellee, v. STATE OF NEW MEXICO, ex rel. DEPARTMENT OF HUMAN SERVICES Defendant-Appellant.

No. 83-1476.

United States Court of Appeals Tenth Circuit.

March 26, 1984.

Dorsett C. Bennett, II, Asst. Atty. Gen., State of N.M., Roswell, N.M., for defendant-appellant.

Douglas T. Francis of Francis & Arland, P.A., Albuquerque, N.M., for plaintiff-appellee.

Before SETH, Chief Judge, and BREITENSTEIN and McWILLIAMS, Circuit Judges.

SETH, Chief Judge.

After examining the briefs and the appellate record, this three-judge panel has determined unanimously that oral argument would not be of material assistance in the determination of this appeal. See Fed.R.App.P. 34(a); Tenth Cir.R. 10(e). The cause is therefore ordered submitted without oral argument.

In this appeal, the State as assignee of a debtor's child support obligations, challenges the determination of governing law in the debtor's bankruptcy proceedings. The State also challenges the constitutionality of the bankruptcy provision allowing for discharge of child support obligations assigned to the State.

Plaintiff-appellee Billy Paul Franklin in 1981 filed a petition in bankruptcy and a complaint. The hearing on the matter was had in 1982. Mr. Franklin instituted the proceeding to determine the dischargeability of a debt owed to the State of New Mexico for assistance provided for an illegitimate child of whom Mr. Franklin is alleged to be the father.

Prior to October 1, 1979, support obligations owed to the State were not dischargeable. However, this type of debt became dischargeable after that date pursuant to 11 U.S.C. Sec. 523(a)(5). But on August 13, 1981, the Code was amended to again disallow the discharge of this type of debt.

Thus at the time of filing of the bankruptcy petition the debt was dischargeable, but by the time of the hearing the bankruptcy law had been amended to disallow the discharge of the debt. The Bankruptcy Court found the debt to be non-dischargeable, applying the law in effect at the time of the hearing. The United States District Court for the District of New Mexico reversed the Bankruptcy Court, finding that case precedent and the legislative scheme of the Bankruptcy Code dictates application of the law in effect at the time of the filing. We agree.

Under Bradley v. Richmond School Board, 416 U.S. 696, 94 S.Ct. 2006, 40 L.Ed.2d 476, a court is to apply the law in effect at the time it renders its decision unless doing so would result in manifest injustice or there is statutory direction or legislative history to the contrary. The Bankruptcy Act provides a legislative scheme in which the time of filing is determinative of many substantial rights. For example, rights pertaining to the operation of the stay, the evaluation of secured claims, and the determination of what constitutes property of the estate are determined as of the time of filing. 11 U.S.C. Secs. 362, 506, and 541 (1979). The District Court said:

"The time of the filing of the petition in bankruptcy is so dominant in creating and preserving rights under the Code that, in order to be consistent with the legislative scheme, a court should apply the law in effect at the time of the filing of the petition." (Citations omitted.)

This court generally disfavors retrospective application of a law without a clear expression of legislative intent. Edgar v. Fred Jones Lincoln-Mercury of Oklahoma, Inc., 524 F.2d 162 (10th Cir.1975). The amendment to the Code making state-assigned child support obligations non-dischargeable contains no indication of a legislative intent that it apply retrospectively:

"(c) The amendments made by this section shall become effective on the date of the enactment of this Act."

The Omnibus Budget Reconciliation Act of 1981, Pub.L. No. 97-35, Sec. 2334(c). This provision indicates an intent for prospective application of the amendment. Accord, In re Morris, 21 B.R. 816 (Bkrtcy.N.D.Iowa 1982); In re Flamini, 19 B.R. 303 (Bkrtcy.E.D.Mich.1982).

3 Collier on Bankruptcy p 523.15, at 523-112 (15th ed.), discusses the August 13, 1981 amendment:

"While the decision of one court might indicate that the date of the dischargeability hearing should be used as the controlling date, the better view is that the law in existence on the date of the filing of the petition should govern." (Footnotes omitted.)

Under Bradley v. Richmond School Board, 416 U.S. 696, 94 S.Ct. 2006, 40 L.Ed.2d 476, relied on by the trial court, the determination of whether an injustice would result from the application of the law in effect at the time of decision may be made by analyzing "(a) the nature and identity of the parties, (b) the nature of their rights, and (c) the nature of the impact of the change in law upon those rights." Bradley, at 717, 94 S.Ct. at 2019. In comparing the rights of the parties, it is clear that both the State and Mr. Franklin have strong interests: Mr. Franklin in having his statutory right to pursue a "fresh start" and to avoid unexpected obligations without notice and an opportunity to be heard, and the State in recouping the money spent on AFDC programs. However, as the District Court pointed out, the State's interests have been vindicated with the 1981 amendment making such debts assigned to the State non-dischargeable. The court stated:

"The state has only a small interest in recouping those small amounts at issue in bankruptcies filed between October 1, 1979 and August 13, 1981, but not heard until after August 13, 1981."

The matter of what obligations will be discharged in the proceedings must be the center of the decision as to whether to file the petition or not to file. The law at the time the petitioner here made his decision and filed was that the obligation was dischargeable. That was also the state of the law when the proceedings appealed from were commenced by pe...