In re Degraffenreid, Bankruptcy No. 87-01481

• Decision Date: 05 August 1988
• Docket Number: Bankruptcy No. 87-01481,Adv. No. 88-0020.
• Citation: In re Degraffenreid, 101 B.R. 688 (Bankr. E.D. Okla. 1988)
• Parties: In re Elvin Charles DEGRAFFENREID a/k/a Charles Degraffenreid, Debtor. Janice HANKINS, formerly Degraffenreid, Plaintiff, v. Elvin Charles DEGRAFFENREID, a/k/a Charles Degraffenreid, Defendant.
• Court: U.S. Bankruptcy Court — Eastern District of Oklahoma

101 B.R. 688 (1988)

In re Elvin Charles DEGRAFFENREID a/k/a Charles Degraffenreid, DebtorJanice HANKINS, formerly Degraffenreid, Plaintiff, v.Elvin Charles DEGRAFFENREID, a/k/a Charles Degraffenreid, Defendant.

Bankruptcy No. 87-01481, Adv. No. 88-0020.

United States Bankruptcy Court, E.D. Oklahoma.

August 5, 1988.

Steven L. Parker, Tecumseh, Okl., for plaintiff.

D. Neal Martin, Shawnee, Okl., for defendant.

ORDER

JAMES E. RYAN, Bankruptcy Judge.

On June 24, 1988, this Court received for consideration Defendant's Motion for Summary Judgment and Brief in Support thereof in the above captioned adversary proceeding.Plaintiff's Brief Opposing the Motion for Summary Judgment was submitted and received on July 20, 1988.

After review of the Motions, the file and applicable law, we FIND:

FINDINGS OF FACT

1.This matter is a "core" proceeding for purposes of 28 U.S.C. § 157(b).This Order is given in compliance with Bankruptcy Rule 7052.There is no genuine issue as to any material fact making disposition by summary judgment appropriate in accordance with Bankruptcy Rule 7056.

2.Charles Degraffenreid(Defendant) filed for Chapter 11 relief on December 30, 1987.Janice Degraffenreid(Plaintiff), Defendant's former spouse, filed a Proof of Claim listing three obligations arising from a Divorce Decree and subsequent property settlement totaling $243,849.

3.The parties were divorced in Pottawatomie County District Court on January 11, 1985 with a consensual Divorce Decree being filed on February 28, 1985.Subsequently, an Order Vacating Property Settlement of Divorce Decree and Entering New Property Division(Vacating Order) was entered into between the parties on January 10, 1986.This settlement dealt strictly with a reallocation of property between the parties and not with the divorce itself, as demonstrated by language throughout the Vacating Order.

4.Defendant received through this agreement much of the jointly acquired real property (including their family home and the majority of the Sonic properties) as well as stock in the Sonic Drive-In businesses and his separate property.

Plaintiff received her mother's house with house trailer, the Tecumseh rent house, the Tecumseh Sonic property, stock in the Tecumseh Sonic Drive-In, personal property and a provision for "alimony in lieu of property from Charles to Janice."

5.The "alimony in lieu of property" provision awards $140,000 to Plaintiff to be paid over ten (10) years in 120 equal payments with 10% fixed interest beginning February 5, 1986.The Note is secured by a Second Mortgage upon the family home.This is the source of Plaintiff's first claim of $148,600, including interest, which she claims is support alimony and thus nondischargeable.

6.Plaintiff's Second Claim arises from a provision in the Vacating Order as to a "hold harmless" clause which states:

"Business Liabilities.Excepting those business liabilities related to the corporation or real estate associated with Sonic Drive-In, Tecumseh, Inc., upon closing Charles covenants and agrees to hold Janice harmless from any and all business related indebtedness incurred during the course of their marriage, including, but not limited to, lease agreements, franchise agreements, and note indebtednesses."

Plaintiff is presently obligated, due to her prior action of co-signing on a business obligation, to the FDIC in the amount of $91,749.Pursuant to this "hold harmless" clause, Plaintiff seeks this obligation deemed nondischargeable as to Defendant.

7.Plaintiff also claims $3,500 in attorney's fees stemming from the divorce action which she has reduced to judgment.

8.Plaintiff filed an Adversary Proceeding on April 8, 1988 for a determination by this Court as to the nondischargeability of these debts.

CONCLUSIONS OF LAW

A.In accordance with 11 U.S.C. § 523(a)(5), a Chapter 11 debtor is unable to discharge obligations to a former spouse for alimony, maintenance or support owed to such spouse when such payments are "actually in the nature of alimony, maintenance or support."The ultimate determination of a divorce decree's award characterization, i.e., support alimony or property settlement, is governed by federal bankruptcy law rather than state law.In re the Matter of Norman, 3 Collier Bankr.Cas.2d(MB) 2d 497 (Bankr.D.N.J.1981).However, state law remains applicable in providing guidance to the Bankruptcy Court in enunciating the considerations used by the Trial Court.In re Norman, 4 CollierBankr.Cas.2d(MB) 1573 (Bankr.W. D.Mo.1981).The Bankruptcy Court is not expected to be forced into deciding the characterization issue in a vacuum in the absence of federal law concerning domestic relations.Pauley v. Spong,661 F.2d 6(2d Cir.1981).Since no Tenth Circuit position was presented to this Court, we chose to look elsewhere, in Oklahoma state law, for guidance.

B.The Divorce Decree and subsequent Order Vacating Property Settlement of Divorce Decree and Entering New Property Division was granted pursuant to Okla. Stat.Ann. tit. 12, § 1289(West Supp.1988), which provides:

"(A) In a divorce decree which provides for periodic alimony payments, the Court shall plainly state, at the time of entering the original decree, the dollar amount of all or a portion of the payment which is a payment pertaining to a division of property.The Court shall specify in the decree that the payments pertaining to a division of property shall continue until completed . . .

(B)The Court shall also provide in the divorce decree that upon death or remarriage of the recipient, the payments for support, if not already accrued, shall terminate . . . "

The term "alimony in lieu of property," as used in the Vacating Order, is not addressed in this section or elsewhere in Oklahoma Statutes.However, the Oklahoma Courts have defined the term in stating that:

". . . there is a vital distinction between alimony for support and alimony in lieu of property division.Jointly-acquired property must be divided when a divorce is granted.A Court may divide the property in kind or set the same apart to one of the parties and require the other to pay such sum as may be just to effect a fair and just division . . . Indeed, unlike payments for support, payments pertaining to a division of property are dischargeable in bankruptcy and do not terminate on the death of either the husband or wife."Isenhower v. Isenhower,666 P.2d 238, 240(Okla.1983) citing numerous additional Oklahoma Supreme Court decisions.

It is clear in the Vacating Order that the purpose of the alimony in lieu of property clause was to convey an equitable division of property — a sum of cash in substitution for Defendant taking much of the jointly acquired real property.

Where the intent of the parties with respect to the designation of alimony as support or alimony in lieu of property division is...