In re Edwards

• Decision Date: 26 September 1994
• Docket Number: Bankruptcy No. 91-50503. Adv. No. 91-5172.
• Citation: 172 BR 505
• Court: U.S. Bankruptcy Court — District of Connecticut
• Parties: In re William S. EDWARDS, d/b/a Edwards Excavating, Debtor. Patricia A. TAVELLA, f/k/a Patricia T. Edwards, Plaintiff, v. William S. EDWARDS, Defendant.

172 B.R. 505 (1994)

In re William S. EDWARDS, d/b/a Edwards Excavating, Debtor Patricia A. TAVELLA, f/k/a Patricia T. Edwards, Plaintiff, v. William S. EDWARDS, Defendant.

Bankruptcy No. 91-50503. Adv. No. 91-5172.

United States Bankruptcy Court, D. Connecticut.

September 26, 1994.

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Jamie K. Gerard, Nevas, Nevas & Capasse, Westport, CT, for plaintiff.

Andrew F. Fink, Carron, Grace, Weinstein & Fink, Westport, CT, for debtor/defendant.

MEMORANDUM AND ORDER ON COMPLAINT TO DETERMINE DISCHARGEABILITY OF DEBT UNDER 11 U.S.C. SECTION 523(A)(5)

ALAN H.W. SHIFF, Bankruptcy Judge.

The plaintiff seeks a determination that a certain hold harmless obligation created by a dissolution decree is nondischargeable under § 523(a)(5). For the reasons that follow, I find that the debt is nondischargeable.

SCOPE OF INQUIRY

Parties and state courts are increasingly aware of the effect of a subsequent bankruptcy discharge on a state court domestic relations award. Accordingly, an attempt may be made to draft unambiguous language so that the obligation created by the state court decree will not be thwarted by the bankruptcy discharge. Those efforts commonly employ language expressing an intent that the obligation is actually in the nature of alimony, maintenance, or support so that it will be excepted from discharge under § 523(a)(5).

It is well settled that the bankruptcy court has "no jurisdiction over divorce or alimony allowances." Pauley v. Spong (In re Spong), 661 F.2d 6, 9 (2d Cir.1981). This court was never intended to render or modify judgments awarding alimony or dividing marital assets, or to serve as an appellate court to review the propriety of such judgments. Thus, as discussed in more detail infra at pp. 512-13, my task is not to determine whether the plaintiff needed alimony at the time of the dissolution, but rather to determine whether the state court intended to create a debt that was actually in the nature of alimony, i.e. necessary for the plaintiff's support. If that intention is clear from the state court's decree, I need go no further in the determination of whether that debt is nondischargeable. If it is not, I must look beyond the four corners of the decree to the evidence before that court to determine whether it made such an award.

BACKGROUND

The marriage of the plaintiff and defendant was dissolved after a contested trial by the decree of the Superior Court for the Stamford/Norwalk Judicial District of the State of Connecticut on November 8, 1990. See Plaintiff's Exhibit 1 (the "Decree"). The relevant portions of the Decree include the following:

The evidence indicates that the marriage has irretrievably broken down, and judgment may enter dissolving the marriage on that ground.

The plaintiff is 28 years old, and the defendant is 29 years old. Both enjoy good health. Both are gainfully employed at the present time. The evidence revealed that the cause of the breakdown of this marital relationship was the behavior of the defendant towards the plaintiff. The defendant has acted in an immature and irresponsible manner during this short marriage.

The court has carefully considered the criteria set forth in Connecticut General Statutes sections 46b-62, 46b-81 and 46b-82 in reaching the decisions reflected in the orders that follow.

The following orders may enter.

1. The defendant shall pay to the plaintiff as periodic alimony the sum of one hundred ($100) dollars per week. The payments shall commence on Monday, November 19, 1990 and each Monday thereafter until the death of either party, the plaintiff\'s remarriage or for a period of three years, whichever event first occurs. . . .

2. The court finds that the defendant owes an arrearage of $3,050 on the pendente lite alimony order. The defendant\'s motion to modify that order is denied. The defendant has failed to sustain his burden of proof that there has been a substantial change of circumstances since the original order was entered. . . .

3. The defendant shall transfer his interest in the marital residence located at 16 Lufberry Avenue, Norwalk, Connecticut, to the plaintiff. The plaintiff shall indemnify and hold harmless the defendant from any liability on the outstanding mortgage.

4. The defendant is awarded his 1983 Chevrolet truck; his 1986 Mack truck; his snowplow and frame; his roller and flat bed. . . . paragraph 5 provides for further awards of property to the defendant, and paragraph 6 provides for awards of property to the plaintiff

7. The defendant shall be responsible for the liabilities scheduled on his financial affidavit dated November 7, 1990. He also shall be responsible for the payment of the G. Fox debt of $250 and the American Express debt of $1,400 that are listed on the plaintiff\'s financial affidavit. The defendant shall indemnify and hold harmless the plaintiff from any liability for these obligations. This order is made for the purpose of freeing the plaintiff of her liability as to these past obligations so that she may properly care for herself. This indemnification is necessary for the plaintiff\'s continued economic welfare and accordingly, the defendant\'s obligation in this respect is in the nature of alimony and support.

8. The plaintiff shall be responsible for the payment of the liabilities listed on her financial affidavit dated November 6, 1990, with the exception of the G. Fox and American Express debts. She shall indemnify and hold harmless the defendant from any liability for these obligations.

9. Each party shall hold the other harmless and indemnify the other as to any income taxes and related interest and penalties as to that party\'s income through 1990.

10. Each party shall be responsible for her and his own attorney\'s fees. . . .

The defendant commenced this chapter 7 case on March 1, 1991. On July 11, 1991, the plaintiff commenced the instant adversary proceeding, seeking a determination that the defendant's obligation (the "Obligation") to hold the plaintiff harmless from certain liabilities, as provided in paragraph 7 of the Decree, was not dischargeable because it was actually in the nature of alimony, maintenance, or support within the meaning of § 523(a)(5)(B). It is undisputed that the debts included within the Obligation are (i) a debt in the original principal amount of $20,000 to the Norwalk Municipal Employees' Credit Union on which the plaintiff and defendant are jointly liable, see Plaintiff's Exhibit 3 (the "Credit Union Debt"); (ii) a debt in the original principal amount of $39,300.92 to Ford Motor Credit for the purchase of a backhoe used by the defendant in his business, which debt the plaintiff guaranteed, see Plaintiff's Exhibit 4 (the "Backhoe Debt"); (iii) a $1,400 debt to American Express, incurred for the parties' honeymoon travel (the "American Express Debt"); and (iv) a $400 debt to G. Fox, incurred to purchase a suit owned by the defendant (the "G. Fox Debt").

On June 15, 1992, the plaintiff moved for summary judgment. I determined that the issue, i.e. whether the Obligation was actually in the nature of alimony, maintenance, or support, was the same factual issue which had been actually litigated before and decided by the state court, and that the resolution of that issue was essential to the state court judgment. See Tavella v. Edwards (In re Edwards), 151 B.R. 19, 22 (Bankr.D.Conn. 1993) ("Edwards I"). I found that the language contained in paragraph 7 of the Decree was more than a mere label designating the award as "alimony," but was a finding of fact that the award was in the nature of support for the plaintiff. Accordingly, I concluded that under the doctrine of collateral estoppel, the defendant was precluded from relitigating that issue in this court. Id.

On appeal, the district court noted that even though it was "arguable that the Connecticut court may have intended to foreclose the possibility that the hold-harmless provisions would be discharged in bankruptcy", Connecticut law "clearly obligated that court to apply a standard that differs from that applicable under the Code. . . ." 162 B.R. 83, 86 ("Edwards Il"). The district court concluded that the state court did not apply the federal law standard in making its factual determinations and that collateral estoppel did not apply.

On remand, I denied the plaintiff's renewed motion for summary judgment on December 8, 1993, and this adversary proceeding went to trial on May 17, 1994.

DISCUSSION

I. FEDERAL LAW

Under § 523(a)(5), a discharge does not discharge an individual from any debt

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 other order of a court of record, determination made in accordance with State or territorial law by a governmental unit, or property settlement agreement, but not to the extent that —

(B) such debt includes a liability designated as alimony, maintenance, or support, unless such liability is actually in the nature of alimony, maintenance, or support. . . .

I note at the outset it is well settled that a debtor's obligation to hold harmless his or her former spouse from enumerated debts may be a nondischargeable obligation under § 523(a)(5).

This provision will . . . make nondischargeable any debts resulting from an agreement by the debtor to hold the debtor\'s spouse harmless on joint debts, to the extent that the agreement is in payment of alimony, maintenance, or support of the spouse, as determined under bankruptcy law considerations that are similar to considerations of whether a particular agreement to pay money to a spouse is actually alimony or a property settlement.

H.R.Rep. No. 595, 95th Cong., 1st Sess. 364 (1977), reprinted in 1978 U.S.Code Cong. & Admin.News, pp. 5787, 5963, 6320; Linet v. Azia (In re Azia), 159 B.R. 71, 74 (Bankr. D.Mass.1993). A hold harmless provision...