In re Burckhalter, Bankruptcy No. 07-18249 HRT.

• Decision Date: 23 June 2008
• Docket Number: Adversary No. 07-1660 HRT.,Bankruptcy No. 07-18249 HRT.
• Citation: 389 B.R. 185
• Parties: In re James Donald BURCKHALTER, Debtor. Karen M. Burckhalter, Plaintiff, v. James Donald Burckhalter, Defendant.
• Court: U.S. Bankruptcy Court — District of Colorado

Page 185

389 B.R. 185

In re James Donald BURCKHALTER, Debtor.

Karen M. Burckhalter, Plaintiff, v. James Donald Burckhalter, Defendant.

Bankruptcy No. 07-18249 HRT.

Adversary No. 07-1660 HRT.

United States Bankruptcy Court, D. Colorado.

June 23, 2008.

Whitman Robinson, Coleman, Williams & Wilson, Grand Junction, CO, for Plaintiff.

Randall B. Pearce, Grand Junction, CO, for Defendant.

ORDER GRANTING PLAINTIFF'S MOTION FOR SUMMARY JUDGMENT

HOWARD R. TALLMAN, Chief Judge.

This case comes before the Court on Plaintiffs Dispositive Motion for Summary Judgment filed on April 28, 2008 (Docket # 25) (the "Motion"); Defendant's Response filed on May 19, 2008 (Docket # 26); and Plaintiffs Reply re: Dispositive Motion for Summary Judgment filed on June 2, 2008 (Docket # 27). The Court, having reviewed the file and being advised in the matter, makes the following findings of fact, conclusions of law and Order.

I. Background:

The Plaintiff is the ex-wife of the Debtor/Defendant. The Plaintiff commenced this adversary proceeding by filing her Complaint Objecting to Discharge of Debt on October 22, 2007 (Docket #1) (the "Complaint"). The Plaintiff seeks to except from the Defendant's discharge a $22,000 Capital One credit card bill (the "Capital One debt") and over $7,000 in child support arrearage. The Complaint asserts that both of these debts are excepted from discharge as a "domestic support obligation" under 11 U.S.C. §§ 101(14A) and 523(a). However, the Motion argues that the child support arrearage is nondischargeable under § 523(a)(5) and the Capital One Debt is nondischargeable under § 523(a)(15). Both debts are covered under an Amended Separation Agreement (with Children), which was executed and filed with the domestic court on June 7, 2004, (the "Separation Agreement"). That Separation Agreement was incorporated as Exhibit A to the Decree of Dissolution of Marriage (the "Divorce Decree") entered by the domestic court on July 6, 2004.

The Defendant's Answer was filed on November 14, 2007 (Docket #5). The Defendant, pro se at that time, stated that the debts were nondischargeable under the Bankruptcy Code and the adversary proceeding did not need to be filed. The Defendant also asserted that pursuant to the Separation Agreement and Divorce Decree, conflicts were to be handled by mediation.

The Amended Answer to Complaint Objecting to Discharge of Debt was filed by the Defendant, through counsel, on January 15, 2008 (Docket #16). In the Amended Answer, the Defendant admits that the child support obligation is nondischargeable, but denies that the payment obligation to pay the Capital One debt is a domestic support obligation, or is in the nature of spousal support. While the Defendant admits that he agreed to pay the Capital One debt, he denies that he agreed to indemnify the Plaintiff from such debt.

II. Standard for Summary Judgment:

Summary judgment is to be granted if the pleadings, depositions, answers to interrogatories, admissions, or affidavits show that there is no genuine issue of material fact and the moving party is entitled to judgment as a matter of law.¹ The moving party bears the initial burden of making a prima facie demonstration of the absence of a genuine issue of material fact and entitlement to judgment as a matter of law.² This Court will review the evidence and draw reasonable inferences therefrom in the light most favorable to the nonmoving party.³

III. Material Facts that Exist Without Substantial Controversy:

Plaintiff and Defendant were married with a daughter. They eventually filed for dissolution in District Court, Mesa County, Colorado (the "Domestic Court"), Case No. 04-DR308. The parties executed the Settlement Agreement establishing the terms of their separation. The terms of the Settlement Agreement appear to have been consensual. A certified copy of the Divorce Decree dated July 6, 2004, including the Settlement Agreement, is attached to the Motion as Appendix 1. The Defendant does not dispute the authenticity or the substance of those documents.

According to the terms of the Settlement Agreement, Plaintiff was obligated to pay a Mastercard credit card debt and the Defendant was obligated to pay the Capital One debt. The Defendant further agreed to pay child support.

In his response to the motion, the Defendant does not dispute that he is obligated to pay the child support owed to the Plaintiff.

IV. Material Controverted Facts:

There do not appear to be any genuine issues of material fact raised in either the Plaintiffs Motion or Defendant's Response. The only point of disagreement is that the Defendant believes the Capital One debt should be dischargeable.

V. Discussion:

There appear to be only two issues before the Court. First, did the Plaintiff sufficiently plead her request to have the Defendant's marital credit card debt held nondischargeable in her Complaint? Second, is the Capital One debt a marital obligation such that it should be held to be nondischargeable?

(A) The Complaint:

The Defendant makes the argument that because the complaint does not specify 11 U.S.C. § 523(a)(15), the Plaintiff cannot rely on that section for relief. The Plaintiffs prayer for relief requests a "judgment against Defendant declaring that the child support and Capital One credit card debts owed by the Defendant to the Plaintiff are nondischargeable pursuant to 11 U.S.C. § 523(a)." However, in the body of the complaint, the Plaintiff references 11 U.S.C. § 523(a)(5), not (a)(15).

Plaintiff has created some confusion. In her Complaint, she characterized both the child support obligation and the Capital One Debt as domestic support obligations. But in this Motion, she claims that the child support is nondischargeable under § 523(a)(5) as a domestic support obligation and that the Capital One Debt is a nondischargeable marital obligation under § 523(a)(15).

Nonetheless, under federal notice pleading rules, the Court believes that Plaintiff has adequately pleaded nondischargeability of the Capital One Debt.⁴ She has specifically identified the credit card debt she seeks to have found nondischargeable. Despite the fact that § 523(a)(15) is not identified in the Complaint as the grounds for nondischargeability of the Capital One Debt, the Plaintiffs Motion very specifically argues her basis for challenging dischargeability of that debt under § 523(a)(15) and Defendant not only had every opportunity to meet the substance of the Plaintiffs § 523(a)(15) claim he did so.

It would be a meaningless exercise for the Court, at this juncture, to deny the Plaintiff relief with respect to the Capital One Debt due to the way it was originally pled. If the Court were to do so, because Plaintiffs Complaint clearly sought nondischargeability of the Capital One Debt, she would be entitled to amend her Complaint to correct the statutory basis of nondischargeability with respect to that debt and the amendment would relate back to the original Complaint. Moreover, the Motion has specifically separated the statutory basis of nondischargeability for the support obligation from the Capital One Debt so that Defendant was able to present the Court with his argument under § 523(a)(15). The Court will not multiply the legal costs associated with this case by refusing to address the substance of the § 523(a)(15) claim. Despite pointing out the initial pleading difficulty, Defendant has clearly and cogently presented an argument in opposition to the § 523(a)(15) claim and the Court will consider the merits of that argument.

(B) Capital One Debt:

With respect to the Capital One debt, the Defendant raises the argument that, because he did not agree to indemnify or hold Plaintiff harmless in the Separation Agreement, the debt should be dischargeable. The Court disagrees.

The changes to 11 U.S.C. § 523(a)(15) in the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 ("BAPCPA") streamline the resolution of martial obligation disputes.

Section 523(a)(15) states:

A discharge under section 727, 1141, 1228(a), 1228(b), or 1328(b) of this title does not discharge an individual debtor from any debt—

...

(15) to a spouse, former spouse, or child of the debtor and not of the kind described in paragraph (5) that is incurred by the debtor in the course of a divorce or separation or in connection with a separation agreement, divorce decree or other order of a court of record, or a determination made in accordance with State or territorial law by a governmental unit; .... ⁵

Prior to the enactment of BAPCPA, the debtor had two affirmative defenses to a § 523(a)(15) claim: the undue burden defense and the balancing test. Neither of these now applies as a result of the BAPCPA revisions. As a result, all the Plaintiff must establish is that the debt in question is to a spouse, former spouse or child of the debtor; is not a support obligation of the type described in § 523(a)(5); and that the obligation appears in a separation agreement, divorce decree or other order of a court of record.

It is undisputed that the obligation to pay the Capital One Debt appears in the parties' Separation Agreement; and that it is not a domestic support obligation as described in § 523(a)(5). Defendant argues that the Court must find the debt dischargeable because it fails the first test. According to Defendant, there is no debt owed to Plaintiff because of the lack of any hold harmless or indemnification language in the agreement. Instead, the debt is owed directly to Capital One and, since the debt is not owed to the Plaintiff, it does not satisfy the requirements of § 523(a)(15). That is a position that has substantial case law support. A number of bankruptcy courts have found marital debts such as the one under consideration in this case to be dischargeable because of a lack of hold harmless or indemnification language in the parties' divorce decree or property settlement.⁶

The parties proceeded without counsel in...