In re Azia, Bankruptcy No. 92-41191-JFQ
| Decision Date | 22 April 1993 |
| Docket Number | Bankruptcy No. 92-41191-JFQ,Adv. No. 92-4179. |
| Citation | 159 BR 71 |
| Parties | In re Jerome M. AZIA, Debtor. Sheryl E. LINET, Plaintiff, v. Jerome M. AZIA, Defendant. |
| Court | U.S. Bankruptcy Court — District of Massachusetts |
David W. Ostrander, Hendel Collins & Newton, Springfield, MA, for debtor/defendant.
Alan L. Sachs, Enfield, CT, for plaintiff, Sheryl E. Linet.
FINDINGS OF FACT AND CONCLUSIONS OF LAW
Jerome E. Azia (the "Defendant") and Sheryl E. Linet (the "Plaintiff") were divorced on January 3, 1991 after nineteen years of marriage. The Plaintiff and Defendant have two minor children who reside with the Plaintiff. A Judgment of Divorce Nisi (the "Decree") was entered by the Probate and Family Court setting forth the following obligations of the Defendant: (1) conveyance of all of his right, title, and interest in the marital home located at 29 Canterbury Lane, Longmeadow, Massachusetts (the "residence") to the Plaintiff; (2) payment of all the obligations arising from a home equity loan secured by a second mortgage on the residence and to indemnify and hold the Plaintiff harmless thereon; (3) payment to the Plaintiff of $650 per week for support for five years or until the earlier of Plaintiff's death or remarriage; (4) payment to the Plaintiff of $250 per week to support the parties' two children until both children are either emancipated or reach age twenty-one; (5) payment to the Plaintiff of $11,000 per year for five years commencing five years from the date of the Decree; (6) payment to the Plaintiff of all amounts owing to the McLean Hospital arising from the Plaintiff's hospitalization and indemnification of the Plaintiff with respect thereto; (7) payment of the Plaintiff's attorney's fees ($20,343.75) and expenses ($8,668.80) incurred during the divorce proceeding; (8) payment of the Master's fees of $6,911.00 incurred during the divorce proceeding and reimbursement to the Plaintiff for the $1,000.00 she previously advanced toward this obligation.
The parties submitted a copy of the Master's Report and each relies on certain findings therein. I, too, rely on the Master's findings as dispositive of issues relating to income and earning potential of the parties.
The Defendant is a dentist and earns approximately $121,000 per year. The Plaintiff has a history of psychological problems which twice resulted in her admittance as an inpatient, the first time at Baystate Medical Center for eleven days and again at McLean Hospital for over three months. The Master's Report states that the Plaintiff's earning capacity is approximately $145.00 per week.
Unable to satisfy certain obligations to the Plaintiff pursuant to the Decree, the Defendant was held in contempt on January 28, 1992 and incarcerated on April 21, 1992. On April 22, 1992 the Defendant filed his chapter 7 petition.
The Plaintiff commenced this adversary proceeding seeking a determination that the obligations set forth in the Master's Report are nondischargeable in this bankruptcy proceeding. Cross motions for summary judgment have been filed. The Plaintiff contends that all the obligations set forth in the Master's Report are in the nature of alimony or support, so that they are exempt from discharge under section 523(a)(5). The Defendant concedes that the amounts designated as "support" in the Master's Report, specifically the $650 per week owed to the Plaintiff and the additional $250 per week owed for child support, are nondischargeable under section 523(a)(5). The Defendant argues, however, that the remaining obligations are in the nature of a property settlement and are therefore dischargeable. I agree with the Plaintiff's position in all respects and therefore hold that all of the debts owing by the Defendant to the Plaintiff pursuant to the Decree are in the nature of support and thus nondischargeable under section 523(a)(5).
Section 523(a)(5)(B) provides:
The question of whether a debt is support or a property settlement is one of federal bankruptcy law, not state law. H.R.Rep. No. 595, 95th Cong., 2d Sess. 364 (1978); S.Rep. No. 989, 95th Cong., 2d Sess. 79 (1978); Gianakas v. Gianakas (In re Gianakas), 917 F.2d 759, 762 (3d Cir.1990); Williams v. Williams (In re Williams), 703 F.2d 1055, 1057 (8th Cir.1983). Thus a bankruptcy court is not bound by a divorce decree's characterization of a debt as support or a property settlement. E.g., In re Gianakas, 917 F.2d at 762; Brody v. Brody (In re Brody), 120 B.R. 696, 698 (Bankr. E.D.N.Y.1990). The language of section 523(a)(5)(B) indicates a court must look beyond the label which the parties gave to the debt and inquire into the true nature of the debt. In re Gianakas, 917 F.2d at 762. As one court found, "a debt could be in the `nature of support' under section 523(a)(5) even though it would not legally qualify as alimony or support under state law." Yeates v. Yeates (In re Yeates), 807 F.2d 874, 878 (10th Cir.1986).
In determining whether a debt is in the nature of support or a property settlement, most courts begin by looking at the intent of the parties at the time the agreement was made. E.g., In re Gianakas, 917 F.2d at 762; Balvich v. Balvich (In re Balvich), 135 B.R. 323, 324 (N.D.Ind.1991); Hoffman v. Schweig (In re Schweig), 105 B.R. 140, 143 (Bankr.D.D.C.1989). In In re Gianakas, the court cited three primary factors to be considered: (1) the language and substance of the agreement in the context of surrounding circumstances, (2) the financial circumstances of the parties at the time of the agreement, and (3) the function served by the obligation at the time of the settlement. Under the last factor, an obligation which enables one party to maintain daily necessities is likely to indicate an intent to provide support. 917 F.2d at 762-3. For the reasons set forth below, I conclude that at the time of the Decree the parties intended the obligations set forth to serve as support for the Plaintiff in light of the Defendant's superior earning capacity and the Plaintiff's limited ability to earn an income sufficient to support herself and her minor children.
The Plaintiff and Defendant clearly intended the Plaintiff and the children would continue to reside in the marital home after the divorce. Courts interpret obligations which provide former spouses with daily necessities such as shelter as indicative of an intent to provide support. E.g., In re Gianakas, 917 F.2d at 764; Burch v. Burch (In re Burch), 100 B.R. 585, 590 (Bankr.M.D.Fla.1989). I therefore rule that the Defendant's obligation to convey the residence to the Plaintiff is in the nature of support.
Based on the Master's findings relating to the parties' financial situation, this intent to provide the Plaintiff and the children with a home could not have been carried out unless the Defendant paid the second mortgage. Courts have consistently held that where an obligation is essential to enable a party to maintain a basic necessity such as food, lodging, or transportation the debt is in the nature of support. Robinson v. Robinson (In re Robinson), 921 F.2d 252, 253 (10th Cir.1990) (); In re Gianakas, 917 F.2d at 762 (); In re Yeates, 807 F.2d at 879 (); Cacolici v. Transohio Savings (In re Cacolici), 108 B.R. 578, 584 (Bankr.N.D.Ohio 1989) (). These courts reason that it is counterintuitive to assume parties intended to provide family members with basic necessities but not afford them the means to pay for them. In re Gianakas, 917 F.2d at 764.
Without contributions from the Defendant toward the second mortgage, the Plaintiff would be unable to keep the residence. On nearly identical facts, the court in In re Gianakas held that an obligation to make second mortgage payments was in the nature of support thus nondischargeable. 917 F.2d 759. The court reasoned that at the time of the divorce the parties intended the Plaintiff to continue to reside in the former marital home with the couple's children. Focusing on the nature of the obligation at the time it was undertaken and without regard to the current financial situation of the parties, the court ruled the agreement to provide shelter should be construed as an obligation to provide support and found the debt nondischargeable. Id. at 763.
I similarly conclude that an obligation which enables one's family to maintain shelter is in the nature of support thus nondischargeable under 523(a)(5). The majority of courts so hold. E.g., In re Robinson, 921 F.2d at 253; In re Gianakas, 917 F.2d at 764; In re Yeates, 807 F.2d at 879; In re Balvich, 135 B.R. at 325-6; Rogers v. Kiley (In re Rogers), 117 B.R. 122, 125 (Bankr.M.D.Pa.1990); Lariccia v. Lariccia (In re Lariccia), 110 B.R. 822, 826 (Bankr. N.D.Ohio 1989); In re Cacolici, 108 B.R. at 584. The Defendant's agreement to indemnify and hold the Plaintiff harmless on that debt is nondischargeable for the same...
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