In re Crosby, Bankruptcy No. 98-33831-T.
| Decision Date | 25 November 1998 |
| Docket Number | Bankruptcy No. 98-33831-T. |
| Citation | 229 BR 679 |
| Court | U.S. Bankruptcy Court — Eastern District of Virginia |
| Parties | In re Gerald Vincent CROSBY, Debtor. |
John J. Trexler, Beddow, Marley, Trexler & Fitzhugh, Chesterfield, VA.
Carl M. Bates, Boleman Law Firm, Richmond, VA.
Robert E. Hyman, Richmond, VA, Trustee.
On November 8, 1998, the court took evidence and heard testimony on Henrietta A. Crosby's objection to confirmation of Gerald Vincent Crosby (debtor)'s chapter 13 plan and debtor's objection to proof of claim filed by Mrs. Crosby. At the conclusion of the hearing the court took the matter under advisement. For the reasons stated in this memorandum opinion Mrs. Crosby's objection to plan is sustained, and debtor's objection to claim is denied.
Debtor and Crosby were married on May 18, 1968, and divorced on September 8, 1980. Two children were born of the marriage. The parties entered into a separation agreement dated April 16, 1980. The separation agreement awarded Mrs. Crosby substantially all of the property of the marriage. Debtor received only a used car and his tools. Crosby was represented by counsel in drafting the separation agreement while debtor proceeded pro se. Debtor was, however, represented by counsel in the final divorce decree proceeding at which the support agreement was affirmed, ratified, and incorporated into the final decree of divorce entered by Chesterfield County Circuit Court on September 8, 1980.
Debtor filed a chapter 13 case on May 20, 1998. Mrs. Crosby timely filed a proof of claim for the children's college education expenses in the amount of $62,510.50. Mrs. Crosby alleges that the college education expenses are support payments due to her pursuant to the parties' separation agreement. The parties have stipulated that Mrs. Crosby paid for the children's college education.
At dispute is paragraph 4 of section 3, entitled child support, of the separation agreement, which states:
Husband further agrees to establish a fund or in some similar manner provide for a college education of the parties infant children for said children\'s attendance at the appropriate time of the individual lives at a four year college, Junior College, Community College or trade/vocational institution.
The Chesterfield County Circuit Court ruled that this provision is not vague and unenforceable, a ruling that was affirmed by the Virginia Court of Appeals.
The debtor's former wife objects to confirmation of debtor's chapter 13 plan because the plan does not provide for full payment of her proof of claim for their children's educational expenses as a priority claim pursuant to Bankruptcy Code § 1322(a)(2). Section 507(a)(7) gives priority status to alimony, support and maintenance payments.1 Section 1322(a)(2) requires the plan to pay priority claims in full.
The language of section 507 parallels that of section 523(a)(5).2 Because the language of the two sections is identical, if the debt is non-dischargable under section 523(a)(5) it receives priority status under section 507(a)(7). See In re Grady, 180 B.R. 461, 464 (Bankr.E.D.Va.1995). Accordingly, if the college education expenses incurred by Mrs. Crosby would be non-dischargeable to debtor pursuant to section 523(a)(5) they must be paid in full in debtor's chapter 13 plan as a priority claim. See 11 U.S.C. §§ 507(a)(7), 1322(a)(2).
Whether payments are "in the nature of alimony, maintenance, or support" is determined by the intention of the parties that the payments be for support rather than a property settlement. See In re Long, 794 F.2d 928, 931 (4th Cir.1986)(citing Melichar v. Ost, 661 F.2d 300, 302 (4th Cir.1981)). Four factors are used to determine the intent of the parties: 1) the actual language of the agreement; 2) the financial situation of the parties at the time the agreement was entered into; 3) the function served by the obligation at the time of the agreement; and 4) whether there is any evidence of overbearing at the time of the agreement that would cause the court to question the intent of a spouse. See Catron v. Catron (In re Catron), 164 B.R. 912, 919 (E.D.Va.1994)( Kettner v. Kettner, 1991 WL 549386 (E.D.Va.1991)(unpublished opinion)), aff'd, 43 F.3d 1465 (4th Cir.1994).
The actual language of the separation agreement indicates the parties intended the college education expenses to be a support payment. Among other factors a court should consider are In re Catron 164 B.R. at 919 (quoting Kettner v. Kettner, 1991 WL 549386).
Here, the separation agreement is specifically divided into topic headings; these headings include: Personal Property; Real Property; Child Support; and Separate Maintenance. The provision for payment of the children's education is found under the child support heading. The parties placement of the college education expenses in the child support section is a strong indication of the parties' intention to create a support payment. If the parties did not intend the payments to be child support they could have been included under another heading of the agreement.
Further, the structure of the child support section indicates an intention to make college education a support payment. Within the child support provisions the support obligations logically follow one another. The obligations first contemplated are for weekly child support payments until the children's age of majority. Next the agreement contemplates the medical health of the children, through the age of majority, by providing the maintenance of insurance by the debtor. Finally the agreement addresses the children's future well-being, requiring the debtor to pay for any future extraordinary medical expenses and their college education. The context of these provisions display the parties' intention to make college education a support payment.
Secondly, the court must consider the financial situation of the parties at the time of the agreement. See In re Catron, 164 B.R. at 919. At the time of the separation agreement Mrs. Crosby worked at a defense supply company, earning between five and six dollars per hour. The debtor was employed as an engineer with a steady income substantially in excess of his wife's. Mrs. Crosby was to maintain sole custody of the children. The relative financial position of the parties indicated that Mrs. Crosby would be unable to provide a college education for the children, and...
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