In re Francis
| Decision Date | 23 December 1981 |
| Docket Number | Bankruptcy No. 880-06574-18,Adv. No. 881-0682-18. |
| Citation | 15 BR 998 |
| Parties | In re Elizabeth FRANCIS, Debtor. ABRAHAM & STRAUS, Division of Federal Department Stores, Inc., Plaintiff, v. Joseph FRANCIS, a/k/a Joseph E. Francis, Kenneth Kirschenbaum, Trustee, Defendants. |
| Court | U.S. Bankruptcy Court — Eastern District of New York |
Stephen P. Gelfand, Smithtown, N.Y., for debtor.
Batzar & Weinberg, P.C., Rockville Centre, N.Y., for Abraham & Straus.
DECISION
Plaintiff, a retail department store, extended credit to defendant's wife, a debtor under Chapter 13 of the Bankruptcy Code.
Plaintiff seeks judgment vacating the automatic stay imposed by 11 U.S.C. § 1301 and permitting plaintiff to proceed against defendant as co-debtor on the unsatisfied obligation incurred by the Chapter 13 debtor. The complaint alleges that defendant actually received the consideration for plaintiff's claim, that plaintiff will not be paid under debtor's plan, and that failure to vacate the stay will cause irreparable harm to its interest.
The facts are set forth briefly below.
On October 27, 1980, debtor, defendant's wife, from whom defendant has been separated for fourteen years, filed a petition in bankruptcy under Chapter 13 of the Bankruptcy Code.
In her petition, debtor listed plaintiff as one of her creditors.
Debtor's plan, filed pursuant to 11 U.S.C. § 1321 and confirmed on January 13, 1981, in compliance with 11 U.S.C. § 1325, provided for the payment of 100% of the debts listed in her petition.
No proof of claim was filed by or on behalf of plaintiff within the time mandated by Bankruptcy Rule 302.
On September 2, 1981, plaintiff commenced an adversary proceeding to vacate the § 1301 stay and to collect the amount due for various consumer goods sold and delivered to defendant's wife between November 20, 1978, and June 1, 1980.
The issue before the Court is whether under any theory propounded by this plaintiff the Court may grant plaintiff relief from the automatic stay provisions of 11 U.S.C. § 1301.
The matter before the Court involves a recurring issue regarding the liability of a co-debtor for consumer purchases made by a spouse that has filed a petition in bankruptcy under Chapter 13. Because much of the law, both in bankruptcy and in domestic relations, is new in this area, the Court will examine at length the various theories presented for assessing the rights of a creditor and the liabilities of a co-debtor spouse.
Section 1301 of the Bankruptcy Code is new to bankruptcy law.1 It is designed to protect a debtor proceeding under Chapter 13 by insulating him from indirect pressure exerted by creditors or friends and relatives that may have co-signed an obligation of the debtor. See H.R.Rep. No. 595, 95th Cong., 1st Sess. (1977) 426, U.S.Code Cong. & Admin.News 1978, p. 5787. The Court in resolving a dispute between a creditor and co-debtor, as in this case, is mindful of the legislative intent to protect the debtor in the rehabilitative process. The protection that § 1301 affords the co-debtor is incidental to the protection it provides to the debtor.
Subsection (a) of § 1301 stays an action by a creditor after an individual has filed under Chapter 13. The creditor may not act, or commence or continue any civil action, to collect all or any part of a consumer debt2 of the debtor from any individual that is liable on such debt with the debtor, or that has secured the debt, unless the individual became liable or secured the debt in the ordinary course of his business, or the case is closed, dismissed or converted to Chapter 7 or Chapter 11. See 5 Collier on Bankruptcy, ¶ 1301.01 at 1301-2, 3, and 4 (15th ed. 1980).
Plaintiff does not allege that defendant became liable or secured his wife's debt in the ordinary course of business, nor has the case been closed, dismissed, or converted. Consequently, plaintiff is not excepted from the stay under subsection (a) of § 1301.
Subsection (b) relates to a negotiable instrument and is inapplicable in the instant case.
Subsection (c) requires the Court to grant relief from the stay in certain circumstances. Section 1301 states the following:
Plaintiff's position under § 1301(c)(1) is that defendant has received consideration for its claim. This rests on two presumptions implied by the marital relationship of the debtor and the defendant. The claim may be sustained, plaintiff urges, upon a finding of agency or a finding that plaintiff supplied the debtor with necessaries, thereby relieving defendant of his obligation to supply them to his dependents.
The Court will first look at the question of agency.
In Falk v. Krumm, 39 Misc.2d 448, 240 N.Y.S.2d 653, aff'd 22 A.D.2d 911, 255 N.Y.S.2d 569 (Sup.Ct. Nassau County, 1963), the court held that no agency is implied as between husband and wife from the mere fact of marriage. Plaintiff has introduced no evidence to prove any agency express or implied by which it could hold defendant liable for the purchases made by the debtor. In R.H. Macy, Inc. v. Herskowitz, 56 Misc.2d 390, 290 N.Y.S.2d 390, 393 (Civ.Ct. New York County, 1968), an action by a retailer against a husband and wife for goods sold and delivered, the court stated, "An agency by implication might have arisen if the parties had been living together, the wife, with the husband's knowledge and implied or express consent, had been making purchases for her family from plaintiff on a charge account, and the husband had always paid the bill." None of the enumerated factors is present in the instant case. Accordingly, the Court holds that no implication of agency arises either from the marital relationship or from the conduct of the parties.
The Court next addresses the question of whether defendant can be held liable on the theory that the purchases were necessaries for his wife and children which defendant was obliged to supply.3 In proceeding on this theory, plaintiff assumes that a husband is primarily responsible for such support and maintenance. This assumption is incorrect.4
Until 1977, and despite the provisions of Domestic Relations Law § 240 and Family Court Act 413, a father was held to have the primary obligation for the support of his children. The mother assumed secondary liability under Family Court Act § 414. See In re Garcy's Trust, 19 A.D.2d 811, 243 N.Y.S.2d 464 (1963).
In Carter v. Carter, 58 A.D.2d 438, 397 N.Y.S.2d 88 (1977), the Second Department, finding Family Court Act §§ 413, 414 unconstitutional, held that both the mother and father were equally responsible for the support of their children.5
In Lord v. Lord, 96 Misc.2d 434, 409 N.Y.S.2d 46 (New York County, 1978) the court faced the issue of whether the primary responsibility for support rested with the father. In finding that it did not, the court stated:
The traditional and statutory notion (DRL § 32) that a father has the primary obligation to support his children neither reflects the realities of modern life nor complies with our constitutional requirements of equal protection. Nor is such a construction consistent with the statutory dictates of DRL § 240 which requires that support be determined "having regard for the circumstances . . . of the respective parties" and "out of the property of either or both of its parents." (Emphasis added.)
In addition to defining the liability of parents to children, DRL § 32 defines the liability of one spouse to another. The statute charges spouses with the support of each other. However, prior to its amendment in 1980, wives were liable for the support of their husbands only in the event the husband was incapable of supporting himself or likely to become a public charge, DRL § 32, subsection 4. The purchases which are the basis of the disputed claim in this case were made both prior to and following the enactment of the amended statute. Nonetheless, that portion of DRL § 32 which qualified the obligation of a spouse, viz, "if possessed of sufficient means or able to earn such means, the husband or the wife may be required to pay for such support a fair and reasonable sum, as may be determined by the court," remained unchanged. Reasoning from this language,6 the court in Wiesenfeld v. State of New York, 474 F.Supp. 1141 (S.D.N.Y.1979) held
There is no evidence before the Court that there has been any court determination of the support obligations of either the husband or the wife in this dispute.
Absent a court determination that defendant must provide maintenance and support for his wife and children, plaintiff's position cannot be sustained.8 Plaintiff's allegation that defendant received the consideration for plaintiff's claim is inconsistent with the law and the facts.
Having determined that plaintiff is not entitled to relief under subsection (a) of 11 U.S.C. 1301, the Court next considers plaintiff's alternative basis for relief, i.e., the plan filed by the debtor proposes not to pay its claim (11 U.S.C. § 1301(c)(2)). However, the evidence is uncontroverted that debtor's plan did propose to pay plaintiff. The fact that plaintiff will not in fact be paid under the plan is irrelevant under this subsection.
Had plaintiff filed a proof of...
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