In re Cervantes
| Decision Date | 31 December 1998 |
| Docket Number | Bankruptcy No. 96-56831-JRG,BAP No. NC-97-1822-RyKMe,Adversary No. 97-5046. |
| Citation | 229 BR 19 |
| Parties | In re Raymond CERVANTES, Debtor. Santa Cruz County, Appellant, v. Raymond Cervantes, Appellee. |
| Court | U.S. Bankruptcy Appellate Panel, Ninth Circuit |
Mary Roth, Deputy Attorney General, San Francisco, CA, for County of Santa Cruz.
Andrew M. Lauderdale, Lauderdale Law Offices, Monterey, CA, for Raymond Cervantes.
Before: RYAN, KLEIN, and MEYERS, Bankruptcy Judges.
Chapter 13 debtor Raymond Cervantes ("Debtor") filed a complaint (the "Complaint") to determine the dischargeability of his child support obligations owed to creditor Santa Cruz County ("County"). The bankruptcy court held that the support arrearages that accrued after the entry of a state court paternity and child support judgment (the "Judgment") were nondischargeable, but that the support arrearages that were assigned to County as a condition of receiving public assistance prior to entry of the Judgment were dischargeable. With respect to the pre-Judgment support arrearages, the bankruptcy court held that the nondischargeability provisions of Bankruptcy Code (the "Code")1 §§ 523(a)(5) and 1328(a) did not apply.
County appeals that portion of the order for summary judgment providing that pre-Judgment support arrearages assigned to County were dischargeable. We AFFIRM.
The stipulated facts set forth in the bankruptcy court's published decision, Cervantes v. Santa Cruz County (In re Cervantes), 212 B.R. 643 (Bankr.N.D.Cal.1997), are summarized below. In March 1993, Monica Samudio applied for Aid to Families with Dependent Children ("AFDC") on behalf of her minor daughter, Samantha Cervantes. As a condition for receiving AFDC, Monica assigned to County all rights to support from Debtor that she had on behalf of herself or Samantha pursuant to California Welfare and Institutions Code ("CW & IC") § 11477 and the Social Security Act, 42 U.S.C. § 602(a)(26)(A). At that time, Samantha's paternity had not been legally established.
In October 1994, County obtained the Judgment against Debtor in state court. The state court ordered Debtor to make prospective child support payments in the amount of $219 per month (the "post-Judgment arrearages") and to reimburse County $4,161 for child support arrearages covering the period from March 1993 through September 1994 (the "pre-Judgment arrearages").
On September 11, 1996, Debtor filed a chapter 13 bankruptcy petition. County subsequently filed the Complaint to determine the dischargeability of the pre- and post-Judgment arrearages under § 523(a)(5). Both parties filed cross motions for summary judgment. The bankruptcy court held that the post-Judgment arrearages were nondischargeable under § 523(a)(5). However, the court held that the pre-Judgment arrearages owed to County were dischargeable because neither Monica nor Samantha had any accrued rights to assign prior to the entry of the Judgment. See Cervantes, 212 B.R. at 647-48. County filed a timely notice of appeal of the order on cross motions for summary judgment (the "Order"). County appeals that portion of the Order holding that the pre-Judgment arrearages were dischargeable.
We review issues of statutory interpretation, which are questions of law, de novo. See County of El Dorado v. Crouch (In re Crouch), 199 B.R. 690, 691 (9th Cir. BAP 1996).
Similarly, we review rulings on summary judgment de novo. See Bank of Los Angeles v. Official PACA Creditors' Comm. (In re Southland + Keystone), 132 B.R. 632, 637 (9th Cir. BAP 1991).
County argues that the bankruptcy court erred in determining that the pre-Judgment arrearages were dischargeable because the 1991 amendment to CW & IC § 11350 gave Monica and Samantha a right to support for the period preceding the date that the Judgment was entered, and thus, the assignment of this right to County was valid and nondischargeable under § 523(a)(5)(A). Additionally, County asserts that Congress's failure to include debts of a kind described in § 523(a)(18) in the nondischargeability provision of chapter 13 was inadvertent, and thus, such debts should be nondischargeable in a chapter 13 plan.
The bankruptcy court held that the pre-Judgment arrearages did not fall within the exception to discharge provided for under § 523(a)(5)(A). The version of § 523(a)(5)(A) that applies to this case provides in pertinent part:
11 U.S.C. § 523(a)(5)(A)(1995) (emphasis added).3
As the emphasized language indicates, if a debt for alimony or support of a spouse or child of the debtor is assigned to another entity, the debt is dischargeable, unless the debt is assigned pursuant to 42 U.S.C. § 602(a)(26). See 11 U.S.C. § 523(a)(5)(A); Visness v. Contra Costa County, 57 F.3d 775, 776 (9th Cir.1995), cert. denied, 516 U.S. 1099, 116 S.Ct. 828, 133 L.Ed.2d 770 (1996). Under 42 U.S.C. § 602(a)(26),4 a state participating in the AFDC program must condition eligibility for AFDC aid on an applicant's assignment to the state of any support rights which have accrued at the time such assignment is executed. See Visness, 57 F.3d at 776 (citing 42 U.S.C. § 602(a)(26)).5 These assigned support rights become an obligation owed to the state by the individual responsible for support. See 42 U.S.C. § 656(a)(1995).
In Visness, a case involving facts virtually identical to the facts here, the Ninth Circuit held that a debt, established by a county under CW & IC § 11350 and assigned under 42 U.S.C. § 602(a)(26) and California's implementing statute, CW & IC 11477(a), was nondischargeable under § 523(a)(5)(A) only if the debtor's child, spouse, or former spouse had accrued support rights at the time of the assignment. See Visness, 57 F.3d at 778, 780-81 (citing County of Santa Clara v. Ramirez (In re Ramirez), 795 F.2d 1494, 1496-98 (9th Cir.1986), cert. denied, 481 U.S. 1003, 107 S.Ct. 1624, 95 L.Ed.2d 198 (1987)). The Visness court, reaffirming the Ramirez holding, concluded that support rights do not accrue in favor of a child under California law and are not assignable "until a court decree or agreement establishes the noncustodial parent's support duty." Id. at 779 (citing Ramirez, 795 F.2d at 1497, 1498 n. 3).6 Because the assignment occurred before the debtor's parental support obligations were established under California law, the debt did not represent an assignment of rights that had accrued to a "spouse, former spouse, or child of the debtor." Id. at 780-81. Consequently, the court held that the debt was not excluded from discharge under § 523(a)(5)(A). Id.
The 1991 Amendment To CW & IC § 11350 Is Irrelevant To The Facts Of This Case.
County argued before the bankruptcy court that the 1991 amendment to CW & IC § 11350 eliminated the conceptual foundation of Visness—that under California law, a custodial parent and child did not have a right to support that could be assigned prior to the date a support order was obtained. The bankruptcy court rejected County's argument and held: (1) the amendment to CW & IC § 11350 did not cause the pre-Judgment arrearages to be a debt owed to a spouse, former spouse, or child of the debtor as required by § 523(a)(5); and (2) CW & IC § 11350 did not provide for retroactive assignment of support rights.7See Cervantes, 212 B.R. at 648.
In 1991, the California legislature amended CW & IC § 11350 to provide as follows:
CAL. WELF. & INST. CODE § 11350(a)(West Supp.1998)(emphasis added).8 As County correctly notes, the Ninth Circuit in Visness did not address the change in CW & IC § 11350.
County contends that the 1991 amendment to CW & IC § 11350 provided the custodial parent and child "with new and significant statutory rights to support, defined as the amount of support (money) which would have been ordered pursuant to the California child support guideline from the date of separation of the noncustodial parent from his child." Appellant's Reply Br. 6 (citing CAL. WELF. & INST. CODE § 11350(a)(2)). Thus, according to County, because the custodial parent...
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