Howard v. Moore

• Decision Date: 14 November 1991
• Docket Number: No. 29A02-9009-CV-00550,29A02-9009-CV-00550
• Citation: 580 N.E.2d 999
• Parties: Gary Vernon HOWARD, Appellant-Petitioner Below, v. Teresa (Howard) MOORE, Appellee-Respondent Below. 1 .
• Court: Indiana Appellate Court

Page 999

580 N.E.2d 999

Gary Vernon HOWARD, Appellant-Petitioner Below, v. Teresa (Howard) MOORE, Appellee-Respondent Below.

No. 29A02-9009-CV-00550 ¹.

Court of Appeals of Indiana Third District.

Nov. 14, 1991.

Richard K. Tardy, Noblesville, for appellant.

Melvin A. Richards, Eric J. Benner, Richards, Boje & Pickering, Noblesville, for appellee.

STATON, Judge.

Gary Howard appeals the trial court determination that certain obligations Howard owes to his ex-wife Teresa Moore as a result of a dissolution proceeding are not dischargeable in bankruptcy. He now raises four issues for our review, restated here as:

I. Whether the trial court determination is supported by sufficient findings and conclusions from the underlying dissolution action.

II. Whether the trial court erred by failing to discharge the award of maintenance.

III. Whether the trial court erred by failing to discharge a second mortgage obligation.

IV. Whether the trial court erred by failing to discharge the award of attorney's fees.

Affirmed in part, reversed and remanded in part.

The facts of this case are not in dispute. On October 12, 1989, the trial court dissolved the parties' marriage. Howard filed his voluntary petition in bankruptcy under Chapter 7 of the United States Bankruptcy Code on April 5, 1990, seeking discharge of the obligations that are the subject of this appeal. Moore filed a motion for a determination of dischargeability with the trial court. After a hearing, the trial court entered the following order:

Comes now the wife, by counsel, having filed her Motion for Determination of Nondischargeability which reads in the words and figures following, to-wit: (H.I.)

AND THE COURT BEING DULY ADVISED, now determines that the obligations of husband to wife for maintenance, a second mortgage payment on the former marital residence, and attorney's fees are nondischargeable pursuant to USC Section 523(a)(5) of the bankruptcy code.

SO ORDERED this 13th day of August, 1990.

Record, p. 123. ²

I. STANDARD FOR DISCHARGEABILITY OF DEBTS

Resolution of this appeal turns upon a provision of the bankruptcy code which exempts from discharge a debt:

to a spouse, former spouse, or child of the debtor, for alimony to, maintenance for, or support of such spouse or child, in connection with a separation agreement, divorce decree or other order of a court of record, determination made in accordance with State or territorial law by a governmental unit, or property settlement agreement, but not to the extent that--

* * * * * *

(B) such debt includes a liability designated as alimony, maintenance, or support, unless such liability is actually in the nature of alimony, maintenance, or support[.]

11 U.S.C. Sec. 523(a)(5) (1988 & Supp.1991) (hereinafter, Section 523(a)(5)).

The characterization of an allegedly nondischargeable debt as alimony, maintenance, or support must be made under federal bankruptcy law, rather than state law. Hopkins v. Hopkins (N.M.App.1989), 109 N.M. 233, 784 P.2d 420. However, the court may be guided by considerations of state law in its analysis. In re Wisniewski (Bkrtcy.E.D.Wis.1990), 109 B.R. 926; Deichert v. Deichert (1991), 402 Pa.Super. 415, 587 A.2d 319. Because dischargeability is a question of law, we will employ the same standard of review as would a federal appellate court. Thus, we will review the trial court's legal conclusions de novo. Bicknell v. Stanley (Bkrtcy.S.D.Ind.1990), 118 B.R. 652.

A debt is discharged in bankruptcy unless it is specifically excepted from discharge by statute. In re Marino (N.D.Ind.1983), 29 B.R. 797. A creditor objecting to the discharge of debt under Section 523(a)(5) bears the heavy burden of proof to establish, by a preponderance of the evidence, that the debt falls squarely within the statutory exception. In re Slingerland (Bkrtcy.S.D.Ill.1988), 87 B.R. 981; In re Schmidt (Bkrtcy.N.D.Ind.1986), 70 B.R. 634. Exceptions to discharge must be strictly construed against the creditor, and liberally construed in the debtor's favor, in order to afford the debtor a fresh start. In re Tackett (Bkrtcy.N.D.Ind.1986), 66 B.R. 77. In a case of nondischargeability under Section 523(a)(5), however, the court must balance the policy of the "fresh start" with state policies enforcing support obligations. In re Hoivik (Bkrtcy.W.D.Wis.1987), 79 B.R. 401. The concerns cited in the Hoivik case are:

1) protection of a spouse lacking in job skills, 2) protection of minor children both in the financial sense and from neglect should the custodial spouse be forced to enter the job market, and 3) protection of society as a whole should debtors be able to avoid familial responsibilities.

Id. at 402 (citing Shaver v. Shaver (9th Cir.1984), 736 F.2d 1314, 1316).

Howard first contends that Moore cannot possibly meet her burden of establishing the nondischargeability of the debts because the trial court made no findings of fact or conclusions of law in its order granting dissolution. However, it does not appear that either party to the dissolution proceeding requested special findings of fact pursuant to Ind. Rules of Procedure, Trial Rule 52(A), and special findings are not required in dissolution cases. Coster v. Coster (1983), Ind.App., 452 N.E.2d 397. Howard does not cite to any federal bankruptcy case where special findings in the dissolution decree were prerequisite to exempting debts from discharge, and we are unable to find such a case.

Generally, two types of evidence are used by courts in determining the nature of an award: (1) the form of the award, and (2) whether the need for the award exists. Hoivik, supra, at 402. This court is not constrained to examine the language of the order alone; rather, the court is free to examine other evidence in the record indicating what the divorce court intended. Matter of Coil (7th Cir.1982), 680 F.2d 1170; Matter of Life Science Church of River Park (Bkrtcy.N.D.Ind.1983), 34 B.R. 529. In the appeal before this court, the record includes an eight page divorce decree and transcripts from two hearings in the court below. We do not believe the absence of special findings in the dissolution proceeding is fatal to Moore's challenge to the dischargeability of the disputed obligations.

To determine whether an obligation to a former spouse is dischargeable in bankruptcy, the court must determine whether the dissolution decree intended the obligation to be maintenance for the spouse or to effect a division of property and debts. In re Britton (Bkrtcy.N.D.Ind.1985), 51 B.R. 323. An obligation that is in the nature of a property division is dischargeable in bankruptcy. Coil, supra, at 1171. In determining what constitutes alimony, maintenance or support for purposes of dischargeability, the court is not bound by labels imposed by state law. Slingerland, supra, at 984. We now examine each of the disputed debts in turn.

II. MAINTENANCE/SUPPORT OBLIGATION

The dissolution decree entered by the trial court contained the following provision:

7. The respondent [Moore] shall receive an alimony/maintenance judgment in her favor and against the petitioner in the total sum of Ten thousand eighty dollars ($10,080.00), which shall be paid by petitioner to respondent at the rate of One hundred forty dollars ($140.00) per month for a period of seventy-two months, commencing October 1, 1989, until paid in full.

Record, p. 20.

Howard contends that this "alimony/maintenance judgment" actually amounts to a division of property that is dischargeable in bankruptcy, primarily because there is no Indiana law authorizing maintenance of the type awarded in this case. However, the question of what constitutes alimony or support, for bankruptcy purposes, is to be determined under federal law, not state law. Matter of Story (Bkrtcy.M.D.Fla.1983), 36 B.R. 546; Hixson v. Hixson (Bkrtcy.S.D.Ohio 1982), 23 B.R. 492. As Howard acknowledges, a court applying federal law in this area is not bound by labels imposed by state law. Slingerland, supra, at 984. Therefore, we will review federal bankruptcy law to determine whether the awards in this case are "in the nature of" alimony, maintenance or support.

At the federal level, several factors are considered to determine whether an obligation stemming from a divorce decree is in the nature of alimony, support or maintenance, or whether it is in fact a property settlement. These factors include (1) whether the obligation is subject to contingencies such as remarriage or death, (2) the nature of the obligation assumed (i.e., for necessaries or luxuries), (3) the structure of the terms of the final decree, (4) whether the payment appears to balance disparate incomes (and the "earnings potential" of each party), (5) whether the obligation is designed to rehabilitate or to assist the spouse's rehabilitation after the divorce, (6) whether the obligation is payable in installments or in a lump sum, (7) whether there are minor children in need of support, (8) whether there was an actual need for support at the time it was awarded, (9) the adequacy of support without the award, (10) whether the award is modifiable, (11) the manner of enforcement of the award (i.e., by contempt or by execution and levy), (12) and whether there was a division of property and allocation of debts between the parties. Matter of Woods (7th Cir.1977), 561 F.2d 27; In re Pattie (Bkrtcy.M.D.Fla.1990), 112 B.R. 437; In re Young (Bkrtcy.D.R.I.1987), 72 B.R. 450. While none of these factors, taken alone, is controlling, they should be considered together in determining the nature of the obligation. Pattie, supra, at 439.

Considering the factors above, it is clear that the obligation designated "alimony/maintenance" is in the nature of alimony, support or maintenance. The debt was ordered to be payed in monthly installments as opposed to a lump sum. Moore was the custodial parent of the parties' two minor children, Matthew, age 6, and Mitchell, age 8. The record...