In re Chang, BAP No. NC-96-1296-RyMeR

• Decision Date: 18 July 1997
• Docket Number: Bankruptcy No. 95-32027-BDMM,Adversary No. 95-3384-DM.,BAP No. NC-96-1296-RyMeR
• Citation: 210 BR 578
• Parties: In re Amy A. CHANG, Debtor. Amy A. CHANG, Appellant, v. Aleta BEAUPIED, and George O. Ting, Appellees.
• Court: U.S. Bankruptcy Appellate Panel, Ninth Circuit

210 B.R. 578 (1997)

In re Amy A. CHANG, Debtor Amy A. CHANG, Appellant, v. Aleta BEAUPIED, and George O. Ting, Appellees.

BAP No. NC-96-1296-RyMeR, Bankruptcy No. 95-32027-BDMM, Adversary No. 95-3384-DM.

United States Bankruptcy Appellate Panel of the Ninth Circuit.

Decided July 18, 1997.

Argued and Submitted May 23, 1997.

Amy Chang, San Francisco, CA, pro se.

Brian J. McCaffrey, Larson & Weinberg, San Francisco, CA, for Aleta Beaupied.

Kenneth R. Wachtel, Leland, Parachini, Steinberg, Flinn, Matzger & Melnick, San Francisco, CA, for George Ting.

Before RYAN, MEYERS and RUSSELL, Bankruptcy Judges.

OPINION

RYAN, Bankruptcy Judge.

Appellee Aleta Beaupied filed a complaint against Appellant-Debtor Amy Chang ("Debtor") seeking to have her claim in Debtor's bankruptcy given priority under Bankruptcy Code (the "Code")¹ § 507(a)(7). George O. Ting filed an objection (the "Objection") to Debtor's Chapter 13 Plan (the "Plan"). Because of the overlapping legal and factual issues involved in the two proceedings, the bankruptcy court, with the parties' consent, consolidated the two actions. After a trial, the bankruptcy court held that Beaupied's and Ting's respective debts were nondischargeable under § 523(a)(5) and entitled to priority under § 507(a)(7). Debtor appealed the bankruptcy court's judgment. We REVERSE and REMAND.

I. FACTS

Prepetition, Debtor and Ting were involved in a highly contested and protracted custody dispute (the "Custody Action") for their minor child ("Child").² Because of the seriousness of some of the issues raised in the Custody Action, the state court appointed several health professionals (the "Health Professionals") to evaluate Child and monitor Ting and Debtor.³ Additionally, Beaupied was appointed by the state court to represent Child's interests.

On May 17, 1995, the state court awarded Ting sole legal and physical custody of Child. The state court judgment (the "Judgment") established the amount of Health Professionals' fees that Ting and Debtor were to pay.⁴ Additionally, the Judgment required Debtor to pay $10,579 of Beaupied's fees.⁵

On June 1, 1995, Debtor filed her chapter 13 bankruptcy petition. The Plan proposed to pay all secured creditors in full and pay nothing to the unsecured creditors. The Plan also denied priority to the Health Professionals' fees and Beaupied's fees. Thus, under the Plan, the Health Professionals and Beaupied were to be paid nothing.

On September 11, 1995, Ting filed the Objection to the Plan. The Objection stated that Debtor's share of the Health Professionals' fees owed to Ting, because he had paid them in full, was nondischargeable under § 523(a)(15).⁶ On October 6, 1995, Beaupied filed a complaint seeking to have all fees owed to her by Debtor resulting from her representation of Child treated as a priority claim under § 507(a)(7).⁷ By agreement of the parties, these two actions were consolidated for trial on January 22, 1996. At trial, it was agreed by the parties and the court that the Objection would be treated as a nondischargeability action under 523(a)(5).⁸

On March 5, 1996, the bankruptcy court published a memorandum decision and issued a judgment holding Beaupied's and the Health Professionals' fees nondischargeable under § 523(a)(5). Beaupied v. Doe (In re Doe), 193 B.R. 12 (Bankr.N.D.Cal.1996).⁹ On March 15, 1996, Debtor timely filed a notice of appeal from the bankruptcy court's judgment.

II. ISSUES ON APPEAL

1. Whether the bankruptcy court erred in determining that Beaupied's fees were non-dischargeable under § 523(a)(5).

2. Whether the bankruptcy court erred in determining that the Health Professionals' fees were nondischargeable under § 523(a)(5).

III. STANDARD OF REVIEW

We review the bankruptcy court's findings of fact for clear error and the court's conclusions of law de novo. Neben & Starrett v. Chartwell Fin. Corp. (In re Park-Helena Corp.), 63 F.3d 877, 880 (9th Cir. 1995), cert. denied sub nom., ___ U.S. ___, 116 S.Ct. 712, 133 L.Ed.2d 667 (1996) (citing Sousa v. Miguel (In re United States Trustee), 32 F.3d 1370, 1372 (9th Cir.1994)). A finding of fact is clearly erroneous if, after a review of the record, the reviewing court is "left with the definite and firm conviction that a mistake has been committed." Anderson v. City of Bessemer City, 470 U.S. 564, 105 S.Ct. 1504, 84 L.Ed.2d 518, § 73 (1985) (citing United States v. United States Gypsum Co., 333 U.S. 364, 395, 68 S.Ct. 525, 541-42, 92 L.Ed. 746 (1948)).

A specific determination under § 523(a)(5) that the debt in question was for maintenance, alimony, or support is considered a factual one which is reviewed under the clearly erroneous standard. Gard v. Gibson (In re Gibson), 103 B.R. 218, 220 (9th Cir.BAP 1989) (citing Long v. Calhoun (In re Calhoun), 715 F.2d 1103, 1110 (6th Cir. 1983)).

Issues of statutory interpretation are questions of law which we review de novo. County of El Dorado v. Crouch (In re Crouch), 199 B.R. 690, 691 (9th Cir.BAP 1996) (citing Acequia, Inc. v. Clinton (In re Acequia, Inc.), 787 F.2d 1352, 1357 (9th Cir. 1986)).

IV. DISCUSSION

A. The Judgment In The Custody Action Is Entitled To Full Faith And Credit And Res Judicata; Therefore, Any Arguments Attacking The Underlying Judgment Are Not Considered.

Before discussing whether the bankruptcy court erred in determining that Beaupied's and the Health Professionals' fees were nondischargeable under § 523(a)(5), we first address several "issues" that Appellant raises in her brief that appear to attack the validity of the underlying Judgment resulting from the Custody Action. For example, Debtor argues that:

1. the state court commissioner, who is now dead, improperly held a secret hearing and permitted Ting to abduct Child without any notice or consent of Debtor;

2. Dr. Leung\'s conclusion that no sexual molestation of Child occurred was wrong and Dr. Leung was not qualified to reach such a conclusion;

3. the state court violated basic concepts of justice and committed irreparable harm to Debtor and Child;

4. the neutral experts appointed by the state court were not neutral, but were partial to Ting because he had paid their fees. Additionally, several of them assisted Ting in illegally abducting Child.

All of these attacks on the validity of the Judgment will not be considered by us. Federal courts are bound by 28 U.S.C. § 1738 to give full faith and credit to state court judgments. See 28 U.S.C. § 1738 (1994); Marrese v. American Academy of Orthopaedic Surgeons, 470 U.S. 373, 380, 105 S.Ct. 1327, 1331, 84 L.Ed.2d 274 (1985) ("preclusive effect of a state court judgment in a subsequent federal lawsuit generally is determined by the full faith and credit statute"); see also Migra v. Warren City School Dist. Bd. of Educ., 465 U.S. 75, 80, 104 S.Ct. 892, 895-96, 79 L.Ed.2d 56 (1984); Robi v. Five Platters, Inc., 838 F.2d 318, 322 (9th Cir.1988).

The Judgment is final. Debtor did not appeal it. Additionally, Debtor has not attacked the jurisdiction of the state court to enter the Judgment. Therefore, we are bound by 28 U.S.C. § 1738 to give the Judgment full faith and credit.¹⁰ Any argument of Debtor that attacks the underlying rationale or validity of the Judgment is inappropriate. The above issues, if valid, should have been raised by an appeal of the Judgment in the state appellate courts. The only issue appropriately before us is whether the bankruptcy court correctly interpreted the Judgment and federal bankruptcy law in concluding that Beaupied's and the Health Professionals' fees were nondischargeable under § 523(a)(5).

B. Beaupied's And The Health Professionals' Fees Are Dischargeable Under § 523(a)(5).¹¹

As the bankruptcy court noted, there is a "tension between the purpose of the Bankruptcy Code, to give the debtor a fresh start, and certain exceptions to that fresh start for support obligations to a spouse, former spouse, or child." Doe, 193 B.R. at 16. However, the exceptions listed in § 523 should be construed narrowly to assure the debtor has the opportunity for a fresh start. Gleason v. Thaw, 236 U.S. 558, 562, 35 S.Ct. 287, 289, 59 L.Ed. 717 (1915); Klapp v. Landsman (In re Klapp), 706 F.2d 998, 999 (9th Cir.1983).

Section 523(a)(5)¹² excepts from discharge any child or spousal support payment resulting from a separation, divorce agreement, or other order from an appropriate court of law. See 11 U.S.C. § 523(a)(5) (1994). The final determination of what portions of a state court judgment constitute nondischargeable support is a question of federal law. Gionis v. Wayne (In re Gionis), 170 B.R. 675, 681 (9th Cir.BAP 1994) (citing Shaver v. Shaver, 736 F.2d 1314, 1316 (9th Cir.1984)), aff'd, 92 F.3d 1192 (9th Cir.1996); see also Stout v. Prussel, 691 F.2d 859, 861 (9th Cir.1982) (citing H.R.Rep. No. 95-595, at 364 (1977), reprinted in 1978 U.S.C.C.A.N. 5787, 6320).¹³

Debtor argues that Beaupied's fees are dischargeable, because the fees do not represent a debt constituting support to a "spouse, former spouse, or child of the debtor." Additionally, Debtor, relying on Crouch, argues that because the court ordered payment is to a third party, it is dischargeable. Debtor's arguments also apply to the Health Professionals' fees.¹⁴

In Crouch, a county had brought a nondischargeability action against a debtor for costs incurred by the county when debtor's minor son was housed at the county's juvenile detention facility. Crouch, 199 B.R. at 691. The bankruptcy court held the debt nondischargeable, and we affirmed, stating:

§ 523(a)(5) plainly states that it applies to debts owed "to a spouse, former spouse, or child." The legislative history cited above supports the position that only debts owed directly to a family member are excepted from discharge under § 523(a)(5).

Id. at 692 (emphasis added). In reaching this holding, we were guided by our decision in Eisen v. Linn (In re Linn), 38 B.R. 762, 763 (9th Cir.BAP 1984).

In Linn, debtor appealed a summary judgment...