In re Gianakas
| Citation | 112 BR 737 |
| Decision Date | 22 March 1990 |
| Docket Number | Civ. A. No. 89-1500,Bankruptcy No. 88-2647. |
| Parties | In re Paul Chris GIANAKAS, Debtor. Karen GIANAKAS, Plaintiff, v. Paul Chris GIANAKAS, Defendant. |
| Court | U.S. District Court — Eastern District of Pennsylvania |
COPYRIGHT MATERIAL OMITTED
Francis E. Corbett, Pittsburgh, Pa., for Paul Gianakas.
Richard J. Kelly, Pittsburgh, Pa., for Karen Gianakas.
Joseph J. Bernstein, trustee, Pittsburgh, Pa.
Debtor Paul Gianakas appeals an order of the United States Bankruptcy Court for the Western District of Pennsylvania determining that a claim of his ex-wife, Karen Gianakas, is exempt from automatic stay and nondischargeable because it is in the nature of alimony, maintenance or support.
Paul and Karen Gianakas were divorced in March, 1983. A settlement agreement signed by the parties was incorporated into the divorce decree. At the time the agreement was signed, Paul Gianakas earned a salary of about $2,400 per month. At that time, Karen Gianakas was not employed.
The settlement agreement provided that Karen Gianakas would receive full title to the marital home, that she would pay the first mortgage on the home and a mortgage on an attached garage, and that Paul Gianakas would pay until satisfied the second mortgage on the marital home. The agreement also provided that Paul Gianakas would make child support payments while the Gianakas' children are under the age of 18 and would help finance his children's college education.
In January of 1988, Karen Gianakas stopped receiving alimony payments, as per the agreement. Also at that time, Paul Gianakas stopped making the second mortgage payments required by the settlement agreement.
On October 3, 1988, Paul Gianakas filed a claim for relief under Chapter 7 of the United States Bankruptcy Code. On November 14, 1988, Karen Gianakas filed a motion for determination that the second mortgage payments were not subject to automatic stay because they were in the nature of alimony, maintenance or support.
On February 13, 1989, the bankruptcy court held an evidentiary hearing to determine if the pre-petition arrearages on the second mortgage payments were subject to the automatic stay.1 At the hearing before the bankruptcy court, Karen Gianakas testified as to her income and expenses. At the time of the divorce, Karen Gianakas was earning no income. Ms. Gianakas stated that, at the time of the divorce, if she had had to pay the second mortgage, she could not maintain her home. (Tr. 2/13/89, at 20, In re Gianakas, No. 88-2647 (Bankr. W.D.Pa.)). She testified that it was her intent, upon entering into the settlement agreement, that the second mortgage would be paid by Paul Gianakas so that she and the children could continue to live in the home. (Id. at 22).
Paul Gianakas testified that he intended the second mortgage payment as part of the equitable distribution of the couple's assets. (Id. at 46). He stated that he also intended that Karen and the children would maintain and live in the home. (Id. at 51).
The bankruptcy court determined that the second mortgage obligation was in the nature of alimony, maintenance or support. The bankruptcy court found that the debtor intended that Karen Gianakas and the children remain in the residence, that the second mortgage payment was needed to support and maintain the family, that the effect of the assumption of the mortgage was "to provide what is necessary to insure the children's daily needs are satisfied," In re Gianakas, 100 B.R. 787, 789 (Bankr.W. D.Pa. 6/9/89), that Karen Gianakas was not able to pay the second mortgage at the time the agreement was signed, that the obligation to support one's children includes providing shelter, and that the parties intended upon entering into the settlement agreement that the second mortgage payments would be in the nature of maintenance or support.
On appeal to this Court, Paul Gianakas asks us to reverse the bankruptcy court's determination that his obligation to make a second mortgage payment is not subject to the automatic stay and is nondischargeable under 11 U.S.C. § 362(a) and 11 U.S.C. § 523(a)(5).
This Court has jurisdiction to hear appeals from final judgments, orders and decrees of the bankruptcy court. 28 U.S.C. § 158(a). This Court also has discretionary jurisdiction to hear appeals from interlocutory orders and decrees of bankruptcy judges either granted in response to a party's motion for leave to appeal under Bankr.R. 8001(b) or sua sponte when no motion for leave to appeal is filed but a notice of appeal is timely filed. Bankr.R. 8003(c). No party has made a motion for leave to appeal. Therefore, this Court has jurisdiction if the order of the bankruptcy court below is a final order or if this Court chooses to hear the appeal in its discretion.
A bankruptcy court order granting or denying a creditor relief from an automatic stay, even though the bankruptcy litigation will continue as a whole, is final and appealable. In re Amatex Corp., 755 F.2d 1034 (3d Cir.1985); In re Comer, 716 F.2d 168 (3d Cir.1983).2 Therefore, the bankruptcy court's order granting Ms. Gianakas relief from the automatic stay provisions of 11 U.S.C. § 362 is a final order. This Court thus has jurisdiction to hear the present appeal.3
Findings of fact by the bankruptcy court are reviewable only for clear error, and legal questions are subject to plenary review. Brown v. Pennsylvania State Employees' Credit Union, 851 F.2d 81 (3d Cir.1988). "Due regard shall be given to the opportunity of the bankruptcy court to judge the credibility of the witnesses." Bankr.R. 8013.
Paul Gianakas asserts that the trial court improperly placed the burden of proof on him to prove dischargeability of the second mortgage payments. The bankruptcy judge stated that the burden was on Paul Gianakas to prove that the obligation was not alimony, maintenance or support. (Tr., 2/13/89, at 70.) Such allocation of the burden of proof was incorrect. The party objecting to discharge, here Karen Gianakas, has the burden of proving that the debt is in the nature of alimony, maintenance or support. Bankr. R. 4005; Schlect v. Thornton, 544 F.2d 1005, 1006 (9th Cir. 1976); Household Finance Corp. v. Danns, 558 F.2d 114, 116 (2d Cir.1977); In re Kleppinger, 27 B.R. 530, 531 (Bankr.M. D.Pa.1982), quoted in In re Alloway, 37 B.R. 420, 423 (Bankr.E.D.Pa.1984). This Court will review the bankruptcy court's findings in light of the burden of proof placed upon Ms. Gianakas.
Congress chose to exempt alimony, maintenance and support payments and make them nondischargeable in bankruptcy. Congress balanced the interests of the Bankruptcy Code, which gives a debtor a fresh start free of pre-existing debts after discharge, and the weighty state interests requiring people to help support their families after divorce. Congress did not intend to provide immunity from bankruptcy for all debts between a divorcing husband and wife. To receive protection, the debts must actually be in the nature of alimony, maintenance or support, as opposed to a settlement of property between the parties.
Title 11 U.S.C. § 362(b)(2) states: "The filing of a petition in bankruptcy does not operate as a stay . . . of the collection of alimony, maintenance, or support from property that is not property of the estate." Title 11 U.S.C. § 523(a)(5) states, in part:
A discharge under § 724 . . . does not discharge an individual debtor from any debt . . . (5) to a spouse, former spouse, or child of the debtor, for alimony to, maintenance for, or support of such spouse or such spouse and child, in connection with a separation agreement, divorce decree, 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.4
The determination of whether a debt constitutes alimony, maintenance or support is to be made according to federal law. H.R.Rep. No. 595, 95th Cong., 1st Sess. 364 (1977), reprinted in 1978 U.S. Code Cong. and Admin.News 5787, 6320; S.R. No. 989, 95th Cong., 2nd Sess. 79 (1978), reprinted in 1978 U.S.Code Cong. and Admin.News 5787, 5865.
When courts determine whether a debt is actually in the nature of alimony, maintenance or support, the intent of the parties when creating the agreement is generally viewed as the most important fact a court should consider. In re Chedrick, 98 B.R. 731, 733 (W.D.Pa.1989); In re Miller, 34 B.R. 289 (Bankr.E.D.Pa.1983). At the time the debtor entered into the settlement agreement, whether the debtor intended that the obligations under the settlement agreement would be in the nature of support or in the nature of a contract to equalize a division of property is clearly relevant to determining whether the debt is characterized as nondischargeable support.5
If it is not clear that the parties intended the obligation to be in the nature of alimony, maintenance or support, the inquiry should not end at this point.
Very often the parties have no intent to differentiate between an alimony debt and a property settlement debt and will view both merely as financial obligations arising from the separation or divorce. The parties would have no purpose or rationale in making the distinction without some awareness of the legal consequences of the choice such as that found in the disciplines of tax and bankruptcy law.
In re Alloway, 37 B.R. 420, 425 (Bankr.E. D.Pa.1984). Because the parties often do not have a clear intent as to the nature of the debt and because the proper inquiry for the bankruptcy court is not to determine the intent of the parties but to determine the nature of the debt, the court should also consider the financial circumstances of the parties and the function of the obligation. See Miller, 34 B.R. at 292. Some courts find that these factors are...
To continue reading
Request your trial