In re Daiker, Bankruptcy No. 3-79-1517

• Decision Date: 28 July 1980
• Docket Number: Bankruptcy No. 3-79-1517,Adversary Proceeding No. 80-0012.
• Citation: 5 BR 348
• Parties: In re James Bernard DAIKER, Debtor. Kathleen FRITZ, Plaintiff, v. James Bernard DAIKER, and Brian C. Southwell, Trustee in Bankruptcy, Defendant.
• Court: U.S. Bankruptcy Court — District of Minnesota

5 B.R. 348 (1980)

In re James Bernard DAIKER, Debtor.

Kathleen FRITZ, Plaintiff, v. James Bernard DAIKER, and Brian C. Southwell, Trustee in Bankruptcy, Defendant.

Bankruptcy No. 3-79-1517, Adversary Proceeding No. 80-0012.

United States Bankruptcy Court, D. Minnesota, Sixth Division.

July 28, 1980.

Keith A. Dunder, St. Cloud Area Legal Services, St. Cloud, Minn., for plaintiff.

Mark R. Jensen, Sauk Rapids, Minn., for defendant.

MEMORANDUM DECISION

JOHN J. CONNELLY, Bankruptcy Judge.

This matter came before the Court on Plaintiff's Complaint alleging that certain debts which the Defendant-debtor seeks to discharge in bankruptcy are excepted from discharge on the grounds that they constitute support and maintenance within the meaning of § 523(a)(5) of the Bankruptcy Reform Act of 1978. Defendant answered the Complaint, denying that the disputed debts came within the scope of the exception of § 523(a)(5). The parties to this action agreed at pre-trial to submit the matter on a stipulation of facts and memoranda. The stipulation of facts was filed herein on March 28, 1980. Both parties have submitted memoranda.

The Judgment and Decree entered in the marriage dissolution proceeding in Stearns County, Minnesota, state court between the parties herein is considered by this Court to be a part of the record in these proceedings. The said Judgment and Decree is before this Court as an attachment to the Plaintiff's complaint.

It appears from the Judgment and Decree, and Plaintiff's Memorandum, that the parties had entered into a stipulation prior to, and as a part of, the dissolution proceedings and that it was taken into consideration by the state court in making its final findings of fact and final judgment and decree. This stipulation has not been offered by either party as a part of the record in the matter now before this Court. The state Court's findings of fact have, likewise, not been made a part of this Court's record. Thus, the only evidence before this Court is the Judgment and Decree of the Stearns County, Minnesota court and the filed stipulated facts.

Plaintiff Kathleen Fritz, formerly Kathleen Daiker, and the Defendant, James Daiker, were married May 20, 1969. A Judgment and Decree dissolving that marriage was entered on September 24, 1979. Less than two months later, on November 5, 1979, the husband filed his petition in bankruptcy. The petition listed thirty-five debts, including the three debts which the parties in this action have stipulated as being the only ones before this Court for a determination of dischargeability. The parties have stipulated that the three debts are to the St. Cloud Federal Employees Credit Union ($4,700.00),¹ Master Charge ($200.00), and the Women's and Children's Medical Center, P.A. ($290.00), and that they were incurred in purchases of autos, furniture, gasoline, transportation, medical services and miscellaneous household items during the time the parties were married to each other. It appears from the Debtor's schedules that all thirty-five debts totalled $9,743.00 and that they all were incurred during the course of the marriage.

The Plaintiff, the former spouse, contends that the Debtor is bound to pay the three stipulated obligations, which would otherwise be dischargeable, by reason of the non-dischargeability provisions of Section 523(a)(5) of the Bankruptcy Code. This section, entitled "Exceptions to Discharge", relates to debts "to a spouse, former spouse, or child of the debtor, for alimony to, maintenance for, or support of such spouse or child, in connection with a separation agreement, divorce decree, or property settlement agreement . . ." Plaintiff's contention here is that the Defendant's assumption of joint debts ordered by the decree of dissolution and his obligation to "hold harmless and indemnify" his divorced spouse, also ordered by the decree, are in the nature of support for the parties' children and so is excepted from the operation of the Defendant's discharge in bankruptcy.

As noted above, the parties to this action entered a stipulation in the divorce proceeding and Plaintiff, in her brief, page 7, states that the dissolution decree is based upon that stipulation. The Court assumes from reading the Judgment and Decree that the state court incorporated that settlement agreement in its Judgment and Decree, which provided for the dissolution of the marriage, the custody of the children, visitation rights, payment by the husband of $75.00 per month per child for their support, hospitalization insurance for the children's benefit, the exclusive use, possession and ownership of personal property items then in each respective parties' possession, and a further division of the property by granting to the wife the colored T.V. and to the husband an automobile. Additionally, the decree provided that each party would pay their own attorneys' fees and costs, that the wife would assume responsibility for certain debts of the parties and that the husband would assume sole obligation of the remaining debts of the parties, including the three debts specifically identified in the stipulation of facts filed in this proceeding. The decree further provided that the husband was to "hold harmless and indemnify" the plaintiff in the event that any creditor pursues his ex-spouse on any of these debts.

In a paragraph separate from any of the above, the decree provides that both parties waive any right each may have to maintenance now or in the future.

Although the concepts raised in this proceeding have been the subject of much litigation in other cases under the former Bankruptcy Act, § 17(a)(7), the decision here must be determined in light of the Bankruptcy Reform Act of 1978, which made significant changes in the former law as it related to the non-dischargeability of certain debts relating to alimony, support and maintenance.

In court cases under the old Act, much confusion was generated because, in deciding whether a particular debt of the bankrupt-divorced spouse qualified as alimony, maintenance or support so as to be non-dischargeable in bankruptcy, the Bankruptcy Court was confronted with two conflicting policy considerations, that of requiring the bankrupt to fulfill obligations to his ex-wife arising out of the broken marriage contract and that of giving the bankrupt a fresh start unencumbered by the burdens of preexisting debts arising from other contracts. Lee, Joe, Commentary: In re Waller, American Bankruptcy Law Journal, vol. 50 (Spring 1976). Although, after the 1970 amendment to the Bankruptcy Act, a body of federal law developed in the Bankruptcy Courts regarding the dischargeability of alimony and maintenance obligations in bankruptcy matters, because of the application of varying state standards and definitions, reported federal case law evidenced varied and inconsistent results. It was appropriate that Congress address this problem and it did so in the enactment of Public Law 95-598 (Bankruptcy Reform Act of 1978, Section 523(a)(5)).

The parties to this proceeding have made sufficient reference to the legislative background and Congressional intent with respect to Section 523(a)(5). It would be academic...