In re Comer

• Decision Date: 15 March 1983
• Docket Number: BAP No. NC-82-1168 EVK,Adv. No. 81-0627.,Bankruptcy No. 581-01586
• Citation: 27 BR 1018
• Parties: In re Richard Arthur COMER, Debtor. Richard Arthur COMER, Appellant, v. Elaine F. COMER, Appellee.
• Court: U.S. Bankruptcy Appellate Panel, Ninth Circuit

27 B.R. 1018 (1983)

In re Richard Arthur COMER, Debtor Richard Arthur COMER, Appellant, v. Elaine F. COMER, Appellee.

BAP No. NC-82-1168 EVK, Bankruptcy No. 581-01586, Adv. No. 81-0627.

United States Bankruptcy Appellate Panels of the Ninth Circuit.

Argued November 19, 1982.

Decided March 15, 1983.

John Walshe Murray, Murray & Murray, Palo Alto, Cal., for appellant.

Dennis M. Trusty, Dellergo & Tinsley, Redwood City, Cal., for appellee.

Before ELLIOTT, VOLINN and KATZ, Bankruptcy Judges.

ELLIOTT, Bankruptcy Judge:

Elaine Comer ("Elaine") filed this action against her ex-husband, Richard Comer (the "Debtor") seeking to have her claim for unpaid alimony and child support declared nondischargeable under Title 11 United States Code (the "Bankruptcy Code" or "Code") § 523(a)(5). She also sought relief from the automatic stay to enforce her claim. The trial court entered judgment for Elaine. We Affirm.

I STANDARD OF REVIEW

At the time established for trial on Elaine's action the court heard argument but it admitted no evidence. The court orally refused to permit proof of various facts to be submitted by the Debtor and it is upon this basis that the Debtor's appeal primarily lies. Notwithstanding this failure to admit evidence, the court subsequently entered a document prepared by counsel for Elaine labeled "JUDGMENT EXCLUDING EVIDENCE AND DETERMINING THE NON-DISCHARGEABILITY OF DEBT." Although the intended characterization of this "Judgment" is unclear and it does not comply with Bankruptcy Rule 921(a), we construe it as a grant of summary judgment. By deeming the evidence offered by the Debtor irrelevant, the court, in effect, determined that even if the Debtor's assertions were true they did not raise a material issue of fact. See Fed.R.Civ.P. 56(c), (made applicable by Bankruptcy Rule 756).

Thus on review we must reverse if any of the facts alleged by the Debtor are proper defenses to Elaine's claim for relief.

II FACTS

The Debtor and his wife separated in 1967 while residents of the State of New York. At the time of the separation, an agreement was executed calling for weekly alimony and child support. The Debtor claims that this agreement was modified by various orders of the Family Law Courts of the State of New York prior to October, 1973 which drastically reduced the obligation. At that time Mr. Comer, having moved to California, obtained a dissolution of the marriage in the Superior Court of California in San Bernardino. The interlocutory order confirmed the earlier New York court awards setting payments at a reduced rate.

Notwithstanding these events, in mid 1979 Elaine obtained a default judgment in the New York courts based upon breach of the original 1967 separation agreement. The Debtor contends that the amount of the judgment (about $38,000) was computed on the basis of the original alimony and support agreement without taking account of the later modifications or of some payments made by the Debtor. He admits owing approximately $8,000 in unpaid alimony and child support. The Debtor was duly served in the action; his only excuse for allowing the default was his alleged inability to travel to New York to dispute the claim and his stated belief that the New York courts could no longer assert personal jurisdiction over him.

About two months after obtaining the default judgment Elaine obtained a "sister state" judgment in the Santa Clara Superior Court based upon the New York default judgment. Shortly thereafter, the Debtor sought to vacate the "sister state" judgment on various grounds including fraud, lack of jurisdiction in the New York court, and failure to credit amounts paid. In March, 1980, the Superior Court refused to vacate the judgment, and specifically found that the New York court had jurisdiction over the Debtor and that Elaine had "properly" obtained the New York default judgment. That decision has not been appealed.

The Debtor filed his chapter 7 bankruptcy petition in May of 1981.

III ISSUES PRESENTED

The Debtor does not dispute that the New York and corresponding California judgments were entered for alimony and child support as those terms are defined as a matter of federal law. Rather, his contentions on appeal frame the issues:

1. Should the trial court have considered evidence showing the Debtor\'s relative financial need compared to his ex-wife\'s both at the time of the petition and at the time the support obligation was created notwithstanding that any amount owed is admittedly child support or alimony?

2. Should the trial court have considered evidence showing that the New York judgment and the corresponding California "sister state" judgment did not accurately reflect the amount of the debt actually owed?

3. Was the trial court obliged to refuse to consider evidence and argument submitted by Elaine in opposition to Debtor\'s motion for reconsideration because the opposition was filed after the deadline established by local rule?

IV ANALYSIS

We consider each issue in order.

A. Relative Financial Condition

The Debtor relies upon In re Warner, 5 B.R. 434 (Bkrtcy.D.Utah 1980) for the proposition that the trial court had a duty to balance the financial health of the debtor with that of his former spouse in determining whether to discharge Code § 523(a)(5) claims. The author of Warner argues that notwithstanding the absence of express authority to weigh these questions, the legislative intent of the Bankruptcy Code to give the debtor a "fresh start" mandates such an inquiry.

We decline to follow Warner. We agree with the district court's analysis in In re Nelson, 20 B.R. 1008, 1010 (D.C.M.D.Tenn. 1982), rev'd, 16 B.R. 658 (Bkrtcy.M.D. Tenn.). In reversing the bankruptcy court, which had adopted the Warner reasoning, the district court held that the absence of an express hardship exception in Code § 523(a)(5) when compared to the existence of such a provision in § 523(a)(8), relating to student loans, evidences legislative intention that dischargeability of § 523(a)(5) debts not be subject to a balancing of hardships by the bankruptcy court. Such balancing is properly within the province of the state family law courts.

In reaching this decision we note that the Warner decision does not enjoy widespread acceptance. No appellate decision has approved its holding. It has been held to control in the reported decisions of only two other bankruptcy courts: In re Harrell, 13 B.R. 302 (Bkrtcy.N.D.Ga.1981) and the now reversed In re Nelson decision, supra. Although the Harrell court follows Warner, it does so without independent reasoning. Other decisions citing Warner as support do not significantly add to its authority or persuasiveness with respect to this issue. See In re Lovett, 6 B.R. 270, (Bkrtcy.D. Utah 1980) (reaffirmation of Warner holding by its author); In re French, 9 B.R. 464, 468 (Bkrtcy.S.D.Cal.1981) (debt held nondischargeable; discussion of Warner type balancing in dicta); In re Singer, 18 B.R. 782, 787 (Bkrtcy.S.D.Ohio 1982) (dicta); In re Voss, 20 B.R. 598 (Bkrtcy.N.D.Iowa 1982) (dicta); In re Bradley, 17 B.R. 107 (Bkrtcy. M.D.Tenn.1981) (reaffirmation of the subsequently reversed Nelson decision by its author).

B. Evidence that Prepetition Judgments Did Not Properly Reflect Amount Owed

The Debtor argues, on the authority of Pepper v. Litton, 308 U.S. 295, 60 S.Ct. 238, 84 L.Ed. 281 (1939), that the bankruptcy court should reexamine the amount of the debt actually owing to Elaine. Elaine argues that the New York default judgment and the California "sister state" judgment established the amount owing as a matter of res judicata citing Heiser v. Woodruff, 327 U.S. 726, 66 S.Ct. 853, 90 L.Ed. 970 (1946).

As a general proposition the bankruptcy courts are not free to disregard the prior judgments of other state and federal tribunals where the doctrines of res judicata or collateral estoppel would otherwise apply. The relevant issue in Pepper was whether the principles of res judicata required the bankruptcy court to allow, as a claim against the corporate debtor's estate, a debt evidenced by a judgment fraudulently and collusively obtained by the individual in control of the debtor as part of his scheme to defraud a creditor of the corporation. The Supreme Court ruled that the bankruptcy court properly looked behind the fraudulent claim and properly disallowed or subordinated the debt. It reached this conclusion even though a prior collateral attack on the judgment had been mounted and had been defeated in the state courts. The Court held that the collateral attack in the state court had been so procedurally and substantively limited in its scope that it left unadjudicated the critical questions, later decided by the bankruptcy court, concerning the validity of the alleged debt and the propriety of its subordination on equitable grounds to the claims of other creditors. Id., 308 U.S. at 302-04, 60 S.Ct. at 242-244.

In Heiser v. Woodruff, the Court was again asked to determine to what extent the bankruptcy court could refuse to allow a claim against the estate which had previously been reduced to judgment in another court. In that case a creditor obtained a default judgment in a federal district court. Prior to filing his petition, the bankrupt sought to vacate the judgment on the grounds that damages were computed on the basis of fraudulent and perjured testimony. The district court refused to vacate the judgment. After the bankrupt filed his petition, he and his trustee again sought to vacate the judgment on similar grounds. Again the district court refused relief and this refusal was affirmed by the court of appeals. The Supreme Court refused to allow the bankruptcy court to reexamine the judgment for the purposes of claim allowance. It distinguished its previous holding in Litton on the grounds that, unlike the Litton situation, the only issue that supplied equitable grounds for setting aside or subordinating the judgment, fraud, had...