In re Ackley, Bankruptcy No. G92-20423-REB. Adv. No. 93-2035.

• Decision Date: 19 December 1994
• Docket Number: Bankruptcy No. G92-20423-REB. Adv. No. 93-2035.
• Citation: 186 BR 1005
• Parties: In re David G. ACKLEY, Debtor. David G. ACKLEY, Plaintiff, v. Patricia R. ACKLEY, Defendant.
• Court: U.S. Bankruptcy Court — Northern District of Georgia

186 B.R. 1005 (1994)

In re David G. ACKLEY, Debtor.

David G. ACKLEY, Plaintiff, v. Patricia R. ACKLEY, Defendant.

Bankruptcy No. G92-20423-REB. Adv. No. 93-2035.

United States Bankruptcy Court, N.D. Georgia, Gainesville Division.

December 19, 1994.

COPYRIGHT MATERIAL OMITTED

Charles Ratz, Gray, Gilliland & Gold, P.C., Atlanta, GA, for plaintiff.

G. Michael Banick, Bruce Callner, Alembik, Fine & Callner, Atlanta, GA, for defendant.

ORDER

ROBERT E. BRIZENDINE, Bankruptcy Judge.

This adversary proceeding is before the Court on cross-motions for summary judgment. In his complaint, Plaintiff-Debtor seeks a determination that a jury award of $250,000 to Defendant arising out of the parties' divorce is dischargeable because it constitutes a property settlement. Defendant counters that the obligation is in the nature of alimony, maintenance, or support and thus is nondischargeable pursuant to 11 U.S.C. § 523(a)(5). This matter is a core proceeding pursuant to 28 U.S.C. § 157(b)(2)(I). After reviewing the record and evidence presented, and after considering the argument presented in the briefs, the Court concludes that Defendant's motion should be granted and Plaintiff-Debtor's motion should be denied.

The following material facts are not in dispute. On December 2, 1992, after a jury trial, the Superior Court of Cobb County, Georgia entered a Final Judgment and Decree in which the parties were granted a divorce. The provisions of the Decree also fixed and adjusted the parties' rights and obligations and the court incorporated therein the jury's verdict regarding child support, property division, and alimony. Defendant herein was awarded custody of the minor child of the marriage and child support was granted to her for a certain period of time in the amount of $1,250 per month. Additionally, various debt obligations and certain real and personal property were equitably divided between the parties. Finally, the jury granted Defendant herein the following award denominated as alimony:

We, the jury, find as to the issue of alimony the following appearing to be inserted by hand

(1) That the Plaintiff Defendant herein shall receive as alimony in kind the house at 2468 Hampton Glen Ct. Marietta, Ga. and all furnishings therein.

(2) That the Plaintiff Defendant herein shall receive as lump sum alimony the sum of $250,000 to be paid at the rate of $50,000 per year for a period of 5 years to begin on April 1, 1993 and every year thereafter until complete sum is paid.

(3) Periodic alimony: None.

See Jury Verdict of October 5, 1992, attached as Exhibit "4" to Defendant's motion.

In paragraph 19 of the Decree, the trial judge basically restated these awards, but added, with respect to the property located at 2468 Hampton Glen Court, that said transfer "is subject to all liens and encumbrances which Plaintiff Defendant herein shall assume and pay in a timely manner." See Final Judgment and Decree of December 2, 1992, at 10-11, attached as Exhibit "1" to Defendant's motion. Similarly, in paragraph 20, the judge added that the award of lump sum alimony "is not contingent upon the life of either party, nor is it contingent upon the remarriage of either party." Id. at 11.

Based on Defendant's uncontroverted affidavit, it appears that the parties had been married ten years during which time she worked for Plaintiff in his business without pay. See Exhibit "B," attached to Affidavit of Patricia Ackley.¹ Further, she was the primary caretaker of their infant son and maintained the household. The couple enjoyed a high standard of living and acquired substantial property. Defendant further states that a significant disparity existed with respect to their incomes. Whereas her monthly income was approximately $2,083 at the time of the trial, she claims that Plaintiff's gross monthly income was $14,044. Notwithstanding Plaintiff's contention that a substantial portion of his assets were separate, nonmarital property, Defendant maintained that her former husband had a vast estate and that she was entitled to an award of alimony and equitable division of property.² Defendant also avers that she needed support, that she testified about such need at the trial, that her contributions to the marriage warranted an award of alimony, and that Plaintiff had the ability to pay same from his substantial income and personal resources.

Under Section 523(a)(5), the burden of proof is on Defendant to establish that the lump sum cash award of $250,000 was "actually in the nature of alimony, maintenance, or support" as distinguished from a property settlement, and thus nondischargeable. See Harrell v. Sharp (In re Harrell), 754 F.2d 902, 905 (11th Cir.1985); Edwards v. Edwards (In re Edwards), 31 B.R. 113 (Bankr. N.D.Ga.1983); see also Youngman v. Youngman (In re Youngman), 122 B.R. 612, 614 (Bankr.N.D.Ga.1991). Although the validity and enforceability of a claim is determined by reference to state law, federal law governs with respect to the characterization of an obligation as support and thus, whether it is dischargeable in bankruptcy. In this case, issues regarding alimony and property division were submitted to a jury which rendered a verdict. Accordingly, this Court's inquiry is directed to ascertaining the substance of the obligation and the jury's intent in regard thereto. See Long v. West (In re Long), 794 F.2d 928, 931 (4th Cir.1986).³

Plaintiff argues that the label affixed to the award in state court does not conclusively establish the nature of the obligation in question. Instead, he contends, the Court must focus on the substance of the obligation rather than its form. It is the function or purpose for which the award is intended to serve that ultimately is determinative on the issue of dischargeability. Further, he claims that the award's structure in providing for periodic payments until a stated sum certain is paid has consistently been held under Georgia law to be a property settlement. See Taulbee v. Taulbee, 243 Ga. 52, 252 S.E.2d 481 (1979). In addition, Plaintiff contends that an intent to settle property rights is expressed when such payments, as in this case, continue irrespective of death or remarriage. See Hathcock v. Hathcock, 246 Ga. 233, 271 S.E.2d 147 (1980), appeal after remand, 249 Ga. 74, 287 S.E.2d 19 (1982).

Defendant counters that state law is not determinative herein and that the Georgia cases cited by Plaintiff address whether a particular award is modifiable, not whether an award is intended as support. See Harrell, supra, 754 F.2d at 904-05; Myers v. Myers (In re Myers), 61 B.R. 891, 894-95 (Bankr.N.D.Ga.1986); see also Collins v. Collins, 208 Ga.App. 862, 863, 432 S.E.2d 605 (1993) (purpose of a property settlement may be to provide support); accord Youngman, supra, 122 B.R. 612. Further, recipients often want a nonmodifiable award, but such a characteristic, she claims, is not necessarily inconsistent with an award of support.⁴ Defendant asserts that the fact that a lump sum award was deliberately entered in the verdict as alimony, separate from and in addition to a specific verdict for the division of property, proves that the lump sum alimony award was clearly and expressly intended for her maintenance and support.

Both parties seek to bolster their positions by referring to the instructions presented to the jury. For example, Defendant contends that the definition of alimony given by the trial judge, coupled with her "need," shows that the award was meant to provide for her support. She states that the trial judge explained that alimony, as distinguished from a property settlement, is an allowance from one party's estate for the support of the other, that can be awarded in various forms. Even in its nonmodifiable lump sum form, she contends, such an award is still alimony because it is awarded to provide for support.

Plaintiff argues, however, that the jury was told, in effect, that lump sum alimony is a method of transferring property that could not otherwise be transferred under equitable division. Defendant disputes this contention and argues that the jury was not told that lump sum alimony and equitable division were comparable devices for transferring property. She claims that the import of the instructions to the jury was, upon finding that Defendant was entitled to alimony, that it could then fashion such an award from either Plaintiff's marital property or his separate non-marital estate.⁵

Further, Plaintiff maintains that awards which are unconditional as to death or remarriage, as in this case, are not intended to address the support needs of the recipient. The jury, in its verdict as incorporated by the court in its Decree, decided that Plaintiff would be required to pay a non-terminable lump sum over a period of five years regardless of death and that these payments of future alimony would not cease upon remarriage. The "permanent," non-contingent structure of the lump sum alimony award in question, Plaintiff argues, clearly demonstrates the jury's decision to grant Defendant a "property award" in fixed installments and not periodic alimony, which is more closely associated with need and which, unless modified, may continue indefinitely absent death or remarriage.

Additionally, Plaintiff asserts that had the jury intended to award support, it would have provided that the lump sum installment payments were to begin immediately and it would have tailored the award to match Defendant's needs as reflected in her financial affidavit, neither of which, he contends, it decided to do. By awarding approximately $4,166 per month, in addition to $1,500 in child support, instead of $2,698.50, the amount claimed as needed in the financial affidavit, the jury could not have intended the award to relate to maintenance needs.⁶ Thus, he asserts, the award in this case is different in substance from the obligation in Myers, supra, 61 B.R. at 894-95.⁷

In response, Defendant counters that in...