In re Custer, Bankruptcy No. 96-62036
| Citation | 208 BR 675 |
| Decision Date | 23 April 1997 |
| Docket Number | Bankruptcy No. 96-62036,Adversary No. 96-6172. |
| Parties | In re Alfred Lee CUSTER, Debtor. Bonnie Lee CUSTER, Plaintiff, v. Alfred Lee CUSTER, Defendant. |
| Court | United States Bankruptcy Courts. Sixth Circuit. U.S. Bankruptcy Court — Northern District of Ohio |
COPYRIGHT MATERIAL OMITTED
Wylan W. Witte, Alliance, OH, for Alfred Lee Custer.
William C. Greene, New Philadelphia, OH, for Bonnie Custer.
This matter is before the court on the complaint filed by Bonnie Lee Custer (Mrs. Custer), the former spouse of the debtor, Alfred Lee Custer (Debtor), to determine the dischargeability of certain debts dealt with by the parties in a separation agreement which was later incorporated into their decree of dissolution of marriage, and for the dismissal of the Debtor's chapter 7 petition. The Debtor filed an answer requesting dismissal of Mrs. Custer's complaint. The matter came on for trial following which it was taken under advisement.
The Debtor and Mrs. Custer were married on February 7, 1955. They were married for 31 years and together they had six children. In 1972 they moved to Ohio and the Debtor started a trucking business while Mrs. Custer raised their six children and helped to run the business from home. After several years, the business expanded from one truck to several and Mrs. Custer worked full time managing the business. In 1978 the business was incorporated as Bonniway Leasing, Inc. (Bonniway). The Debtor and Mrs. Custer were the only shareholders of Bonniway. Mrs. Custer managed the office with help from two of the parties' daughters. She generally worked seven days a week. At this time, both the Debtor and Mrs. Custer each drew $600.00 per week from the business as a salary. From 1980 to 1986 Bonniway was very profitable, and, in 1986 the company generated seven million dollars in gross revenues.
In late 1985, while Mrs. Custer was working at Bonniway, the parties separated. On June 2, 1986 they entered into a separation agreement. On September 11, 1986, the Tuscarawas County Common Pleas Court approved the parties' petition for dissolution of marriage and adopted the separation agreement.
At the time of the dissolution, Mrs. Custer was 52 years old. She remained in the marital home along with Patrick, the only minor child. Patrick had severe allergies and other medical problems. At the time of the dissolution, Mrs. Custer had no retirement savings and her only substantial work experience was from operating the office at Bonniway since 1972.1 There were no opportunities for employment at other trucking companies in the area.
At the time of the dissolution, the Debtor was 53 years old and employed full time at his company.
Both parties were represented by counsel when the separation agreement was executed. The agreement provided that the Debtor would pay Mrs. Custer $150.00 per week as alimony for 12 years, until she reached the age of 64. It also provided that Bonniway would purchase all 80 shares owned by Mrs. Custer under a stock buyout agreement with Bonniway and the Debtor. Under that agreement, Bonniway would pay Mrs. Custer, in return for her 80 shares, a down payment of $10,000.00 and present her with a promissory note in the amount of $181,622.70, which would be paid in installments of $450.00 per week for 12 years. The note was guaranteed personally by the Debtor. Thus, as a result of the separation agreement and stock buyout agreement, Mrs. Custer was to receive a total payment of $600.00 per week for 12 years.2
The separation agreement also provided that Mrs. Custer would have custody of Patrick and the Debtor would pay $350.00 per month for child support until Patrick reached age 18. Bonniway continued to operate profitably from 1986 through 1989. During this time, Mrs. Custer received the $600.00 per week payments.
In 1990, the Debtor created a new company to succeed Bonniway, Sequoyah Transportation (Sequoyah). The Debtor was the sole owner of Sequoyah and Sequoyah took over the obligation to make the weekly payments to Mrs. Custer.
After October 1990, the Debtor was involved in two truck leasing corporations, STO and LCT, but held no ownership interest in them. These corporations employed the Debtor and made the weekly payments to Mrs. Custer.
From August 1993 through April 1995, Mrs. Custer worked in the corporate office handling administrative matters. She was not paid for her efforts but she did continue to receive the $600.00 weekly payments.
In January 1994, the Debtor began working for his current wife, Elizabeth June (Betsy) Custer. Betsy Custer began two trucking businesses with operations very similar to Bonniway. The trucking businesses are known as Custer Trucking and Custer Leasing. Betsy Custer owns 100% of these companies. From January 1994 to the present, the Debtor has worked full time for Custer Trucking. In 1995, the Debtor did not receive a salary from Custer Trucking. In 1996, Custer Trucking had gross revenues in excess of 1.2 million dollars and the Debtor was paid a monthly salary of $1,560.00. Betsy Custer determined the amount of the Debtor's salary.
In April 1995, Mrs. Custer stopped receiving the $450.00 weekly payment. Pursuant to the stock buyout agreement, these payments were to continue through May 27, 1998. When the payments stopped, Mrs. Custer filed a contempt proceeding in the Tuscarawas County Common Pleas Court. That court found the Debtor in contempt and found he had the ability to make the payments and concealed assets to avoid making them.
In a later decision on June 24, 1996, in the same contempt proceeding, the Common Pleas Judge, citing the multiple contempts of the Debtor, ordered that he be sentenced to 30 days in jail. The judge further ordered that if Debtor paid his obligations to Mrs. Custer promptly, he would not be sent to jail.
The Debtor did not pay the amounts due to Mrs. Custer and on August 6, 1996, filed a voluntary petition for chapter 7 bankruptcy relief. Mrs. Custer initiated this adversary action on November 5, 1996, to dismiss Debtor's bankruptcy petition alleging it was not filed in good faith and to determine the dischargeability of the Debtor's obligation under the stock buyout agreement.
Mrs. Custer is now 62 years old. She has monthly living expenses in excess of $1000.00 and suffers from various illnesses which limit her ability to work. She indicated she cannot afford the cost of eye surgery to correct a double vision problem from which she suffers. She presently receives $453 per month in social security, from $600.00 to $750.00 per month from the Debtor and $100.00 rent from her son Patrick. She also receives between $75.00 to $100.00 per month for part-time work at a travel agency. Due to her financial difficulties she has had to cash in insurance policies, liquidate her small savings account and borrow money from her sister. She presently has no savings.
The Debtor is now 63 years old and has been in the trucking business since the 1950s. He is presently a dispatcher for Custer Trucking, solely owned by his present wife. His bankruptcy petition indicates Debtor has monthly income of $1,560.00. At the hearing the Debtor stated that his current wife continues to determine the amount of his salary and in 1994 and 1995 Custer Trucking made the payments for the Debtor's car. The Debtor testified that he cannot receive a large salary "because the I.R.S. is after me." In 1990 the Debtor transferred real estate to Betsy Custer by quit-claim deed and received no consideration for the transfer. The Debtor indicated he made this transfer on the advice of counsel.
Kevin Custer, the son of Mrs. Custer and the Debtor, testified that the Debtor was responsible for the operation of all the trucking companies including STO, LCT, Sequoyah and Custer Trucking.
In 1987 the Debtor was diagnosed with severe sleep apnea. He received treatment for his condition but claims he cannot now pass the physical test required to drive a truck. He has high blood pressure and a kidney ailment. At present the Debtor is eligible for social security benefits of $950.00 per month, but he has not applied for the benefits. In 1992 the Debtor declined an offer to run a business for an annual salary of $80,000. The Debtor was unable to state his current salary or remember terms of financial transactions related to the liabilities of Bonniway and Sequoyah. Since 1990 the Debtor has not acquired any property.
Betsy Custer testified that her companies, Custer Trucking and Custer Leasing have no equity and very little cash available after the bills are paid. Betsy Custer handles all financial matters for the companies.
Is the obligation of the Debtor to pay $450.00 weekly to Mrs. Custer, pursuant to the stock buyout and separation agreements, a nondischargeable debt?
The court has jurisdiction in this adversary proceeding by virtue of 28 U.S.C. § 1334(b) and General Order No. 84 entered in this district on July 16, 1984. This is a core proceeding under 28 U.S.C. § 157(b)(2)(I) and (J). This Memorandum of Decision constitutes the court's findings of fact and conclusions of law pursuant to Fed. R. Bankr.P. 7052.
Section 523 of the Bankruptcy Code provides, in pertinent part:
11 U.S.C. § 523(a)(5)(B).
Whether or not a debt is a support obligation or part of a property settlement is a question of federal bankruptcy law. Long v. Calhoun (In re Calhoun), 715 F.2d 1103 (6th Cir.1983...
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