In re Gibson

• Decision Date: 11 June 1993
• Docket Number: Bankruptcy No. 3-92-03881,Adv. No. 3-92-0350.
• Citation: 157 BR 366
• Parties: In re Bernard N. GIBSON, Sr., Debtor. Bernard N. GIBSON, Sr., Plaintiff, v. Andrea Lynne GIBSON, nka Benson, Defendant.
• Court: U.S. Bankruptcy Court — Southern District of Ohio

157 B.R. 366 (1993)

In re Bernard N. GIBSON, Sr., Debtor.

Bernard N. GIBSON, Sr., Plaintiff, v. Andrea Lynne GIBSON, nka Benson, Defendant.

Bankruptcy No. 3-92-03881, Adv. No. 3-92-0350.

United States Bankruptcy Court, S.D. Ohio, W.D.

June 11, 1993.

COPYRIGHT MATERIAL OMITTED

Dennis E. Stegner, Springfield, OH, for debtor.

Edward G. Bailey, Springfield, OH, for defendant.

DECISION ON ORDER GRANTING DEFENDANT'S MOTION TO RECONSIDER THE COURT'S DECISION OF APRIL 17, 1993

WILLIAM A. CLARK, Bankruptcy Judge.

Before the court is the defendant's motion for the court to reconsider its oral decision of March 17, 1993. The court has jurisdiction by virtue of 28 U.S.C. § 1334 and the standing order of reference in this district. This matter is a core proceeding under 28 U.S.C. § 157(b)(2)(I) — determinations as to the dischargeability of particular debts.

On April 17, 1993, this court issued an oral decision in which it found that $2002 of the obligation of plaintiff Bernard N. Gibson ("debtor") to defendant Andrea Lynne Gibson was nondischargeable as spousal support pursuant to 11 U.S.C. § 523(a)(5). After reviewing the defendant's "Motion to Reconsider Decision" and thoroughly reflecting upon the relevant case law, this court has concluded that it misapplied the case of Long v. Calhoun (In re Calhoun), 715 F.2d 1103 (6th Cir.1983). Specifically, the court failed to fully appreciate the fact that the debtor's obligation, unlike the obligation in Calhoun, was not the result of loan assumptions nor is there a continuing duty of support. Here the debtor's obligation to the defendant for spousal support is composed of arrearages.

FACTS

1) Plaintiff/debtor and defendant were married on January 31, 1984;

2) On September 14, 1990, the parties were granted a "Decree of Dissolution of Marriage" by the Common Pleas Court, Clark County, Ohio;

3) Incorporated into the Decree was a Separation Agreement previously executed by the parties. The Separation Agreement contained a variety of provisions dividing the ownership of automobiles, an automobile muffler business, and household goods. In addition, several hold-harmless provisions were included in the agreement;

4) With respect to support the Separation Agreement contained the following clause:

SPOUSAL SUPPORT

The husband and wife agree that the husband shall pay to the wife, as and for spousal support, the sum of $300.00 per week, plus poundage, for a total of $306.00 per week, said payments to be made through the Child Support Enforcement Agency of Clark County, Ohio, commencing with the execution of the within Separation Agreement and continuing on the same day of each and every subsequent week thereafter, until the earliest happening of one (1) of the following events, whereupon the husband\'s duty to pay spousal support shall absolutely cease and terminate:

A) the remarriage of the wife; or

B) the death of the husband; or

C) the death of the wife; or

D) the wife\'s cohabitation with an unrelated adult male person; or

E) until April 1, 1993.

The husband and wife further agree that this provision shall not be modified by any court in the State of Ohio or elsewhere. The husband and wife further agree that all of said spousal support payments paid by the husband to the wife shall be deductible by the husband and income taxable to the wife.

5) The plaintiff remarried on July 18, 1992;

6) The amount of support due to the defendant from the debtor on July 18, 1992 was $15,600.

CONCLUSIONS OF LAW

One of the major public policies underlying the Bankruptcy Code is to provide a debtor with a "fresh start" by discharging a debtor's previously incurred debts. Nevertheless, the fresh start policy is not paramount to all other public policies. "Congress has also determined that certain competing public policy interests shall take precedence to the fresh start policy. These competing concerns are reflected in the exceptions to discharge that Congress has enacted to the general rule that debts are dischargeable in bankruptcy." Forsdick v. Turgeon, 812 F.2d 801, 802 (2d Cir.1987). One such exception is § 523(a)(5) of the Bankruptcy Code which provides that a discharge under 11 U.S.C. § 727 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 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 —

(A) . . . ;

(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.

"By virtue of § 523(a)(5), Congress has chosen between two competing interests — those of bankrupts and those of their former spouses and offspring — and it chose in favor of the latter." Forsdick, supra, 812 F.2d at 802.

When confronted with the question of whether a debt is in the nature of alimony, maintenance, or support, a majority of the courts of appeals has found that an intensive analysis of the obligation is not required:

We agree with the majority view, and hold that the inquiry of the bankruptcy court should be limited to the nature of the obligation at the time it was under taken. Gianakas v. Gianakas (In re Gianakas), 917 F.2d 759, 763 (3rd Cir. 1990).

The language used by Congress in § 523(a)(5) requires bankruptcy courts to determine nothing more than whether the support label accurately reflects that the obligation at issue is "actually in the nature of alimony, maintenance, or support." The statutory language suggests a simple inquiry as to whether the obligation can legitimately be characterized as support, that is, whether it is in the nature of support. The language does not suggest a precise inquiry into financial circumstances to determine precise levels of need or support; nor does the statutory language contemplate an ongoing assessment of need as circumstances change. Harrell v. Sharp (In re Harrell), 754 F.2d 902, 906 (11th Cir.1985).

Accord, Sylvester v. Sylvester, 865 F.2d 1164, 1166 (10th Cir.1989); Forsdick v. Turgeon, 812 F.2d 801, 804 (2d Cir.1987); Draper v. Draper, 790 F.2d 52, 54 (8th Cir.1986).

In the instant case, the debtor asserts that because of his former spouse's post-dissolution earnings, she did not require the full $300 per week for support. In addition, the debtor maintains that his financial condition prevented him from paying the support obligation and that to require him to pay this obligation now would interfere with his fresh start in bankruptcy. In support of his position, the debtor cites a case of this court's court of appeals: Long v. Calhoun (In re Calhoun), 715 F.2d 1103 (6th Cir.1983). The precise issue before that court was the dischargeability of a continuing obligation to hold a former spouse harmless on past marital debts. Id. at 1109 n. 9. To resolve this issue the court formulated a four-pronged test:

1) Whether the state court or the parties to the divorce intended to create an obligation to provide support through the assumption of the joint debts;

2) whether such assumption has the effect of providing the support necessary to ensure that the daily needs of the former spouse and any children of the marriage are satisfied;

3) whether the amount of support represented by the assumption is not so excessive that it is manifestly unreasonable under traditional concepts of support; and

4) if the amount of support is manifestly unreasonable, how much of such amount may be fairly considered "in the nature of" support for purposes of federal bankruptcy law. Id., at 1109-1110.

The initial question before this court is whether Calhoun and its extensive four-pronged test is applicable to a case involving spousal support arrearages. A close examination of the Calhoun decision convinces the court that the Calhoun decision is of narrow scope and is not controlling in this adversary proceeding.¹

As mentioned, the Calhoun court was confronted with the sole issue of dischargeability of a continuing obligation to hold harmless a former spouse on past marital debts. Under § 523(a)(5), obligations for support, maintenance, and alimony are not dischargeable, while debts representing property settlements are treated as "ordinary" debts and are dischargeable. Holdharmless provisions and the assumption of marital debts present special problems for the courts because their "true" nature or function is not immediately discernible, i.e., their nature may be support, a property settlement, or a combination of both. As a result, it is not possible nor desirable to simply declare that such obligations are always support, maintenance, or alimony, or always property settlements. Instead, these obligations must be carefully examined to reveal whether they are actually in the nature of support, maintenance, alimony, or a property settlement. As a prelude to the development of its four-pronged test, the Sixth Circuit recognized the peculiar nature inherent in the assumption of debt and explained why such obligations are deserving of heightened judicial scrutiny:

The initial difficulty is that every assumption of a joint loan obligation in a divorce settlement at least indirectly contributes to support. The former spouse is relieved of payments on that debt and thus has funds for other purposes including necessary support. Support in this broad sense results even if the assumption of joint marital debts is actually a division of property. It is clear from the statute and legislative history that Congress could not have intended that all assumptions of joint debts would be non-dischargeable. Such assumptions of debt are discharged "to the extent that payment . . . is not actually in the nature of alimony, maintenance or support. . . ." 124 Cong.Rec. 4,

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