In re Grijalva, Civ. A. No. 2:85-0959.
| Citation | 72 BR 334 |
| Decision Date | 07 April 1987 |
| Docket Number | Civ. A. No. 2:85-0959. |
| Court | U.S. District Court — Southern District of West Virginia |
| Parties | In re Galo Eduardo GRIJALVA, Debtor. Beatriz (Grijalva) GUERRON, Galo A. Grijalva, Lizeth C. Grijalva and Ximena Grijalva, Appellees, v. Galo Eduardo GRIJALVA, Appellant. |
Jack W. DeBolt, Charleston, W.Va., for appellees.
Ellen Maxwell Hoffman and Richard E. Rowe, Goodwin & Goodwin, Charleston, W.Va., for appellant.
Raymond G. Dodson, Charleston, W.Va., trustee.
This matter is before the Court on appeal from a decision of the Bankruptcy Court. A record has been designated for review and counsel for the parties have submitted their briefs on the issues.
The Appellant, Galo Grijalva, is a physician. He is a native of Equador. The doctor came to this country in 1955 and became a citizen in 1961. He attended medical school in Mexico and graduated in 1975. He completed his residency in pediatrics in 1979 and practiced in that field in Charleston from 1979 to 1985. Dr. Grijalva is now practicing in Florida. The Appellee, Beatriz Guerron, is the doctor's ex-wife. She, too, is a native of Equador. Mrs. Guerron married Dr. Grijalva in July of 1964. Although she has resided for several years in the United States, she does not speak English well. Her language problem was manifested at the adversary proceeding below by the need for her daughter to help her with some of the questions. Perhaps because of her difficulty with the English language, Mrs. Guerron has had no meaningful work experience outside of her home while in the United States. She was unemployed at the time of this appeal and has no income apart from that received from Dr. Grijalva.
Dr. Grijalva and Mrs. Guerron were divorced in September of 1981. Mrs. Guerron received custody of the couple's three children: Galo, Lizeth and Ximena. To provide support for Mrs. Guerron and the three children — the children were all minors at the time — and to divide their marital property, the parties executed a separation agreement which was incorporated into the divorce decree. After a "flurry of litigation" over the terms and conditions of the separation agreement, the parties executed a "Substituted Separation Agreement" on February 24, 1984, which superseded the original agreement. The Substituted Separation Agreement contained several terms. The agreement provided for alimony payments to Mrs. Guerron of $1,500.00 per month and child support payments of $400.00 per month. The doctor was also obligated to pay the expense of the children's college education. That expense, although somewhat open-ended, was limited to that normally associated with four years of undergraduate study by a state resident at a state university. Dr. Grijalva conveyed his interest in the marital residence to Mrs. Guerron and agreed to make the monthly mortgage payments of $420.00. The doctor further agreed to maintain a life insurance policy on his life in the amount of $300,000 with his children and ex-wife listed as irrevocable beneficiaries. Finally, the doctor agreed to pay some attorney fees incurred by Mrs. Guerron incident to the divorce. Although the agreement contained other terms, those are the highlights relevant to the discussion here.
Finding his many debts to be "overwhelming", Dr. Grijalva filed a Chapter 7 bankruptcy petition. In response, Mrs. Guerron, together with the three children, filed objections. She sought to have certain of the doctor's obligations declared nondischargable under the provisions of 11 U.S.C. § 523(a)(5). After an adversary hearing, the Bankruptcy Court ruled that the greater part of the Substituted Separation Agreement represented obligations which the doctor could not discharge in bankruptcy. Dr. Grijalva does not contest the nondischargability of the alimony and child support payments, but as to four specific obligations he contends that the Bankruptcy Court erred. He argues that the mortgage payments, the educational expenses, the attorney fees, and the life insurance requirement should all be discharged. Thus, he appeals.
The dispute in this case revolves around the central question of whether Dr. Grijalva's obligations to the four Appellees are in the nature of alimony and support payments or are a division of property and debts. The importance of the distinction is found in the controlling provision of the Bankruptcy Code: 11 U.S.C. § 523(a)(5). That section provides that an obligation incurred by the debtor in connection with a divorce decree or property settlement agreement is dischargable unless such liability is actually in the nature of alimony, maintenance or support.* It is well settled that federal bankruptcy law, not state law, determines whether a debt constitutes alimony, maintenance or support. In re Seidel, 48 B.R. 371 (Bankr.C.D.Ill.1984); Matter of Stranathan, 15 B.R. 223 (Bankr.D. Neb.1981); In re Trichon, 11 B.R. 658 (Bankr.S.D.N.Y.1981).
The Appellees have listed in their brief twelve factors which the courts have from time to time applied in assessing the obligations of a debtor spouse. Although not all are relevant to the instant dispute, they are set forth below:
Appellant's brief at 5. This then is the Court's task: To determine whether the Bankruptcy Court erred in finding the obligations of Dr. Grijalva to be nondischargable.
As a further matter, the Court notes that the standard of review on this appeal counsels deference to the Bankruptcy Court. The findings of that court will not be set aside unless they are clearly erroneous. Bankruptcy Rule 8013. See also Boyle v. Donovan, 724 F.2d 681, 683 (8th Cir.1984); In re Coil, 680 F.2d 1170, 1172 (7th Cir. 1982). With this standard in mind, the Court now turns to each of the points preserved by Dr. Girjalva.
The Bankruptcy Court found the doctor's obligation to make mortgage payments on the former marital residence to be in the nature of alimony and child support and, therefore, nondischargable. The Bankruptcy Court opined that amount of the mortgage payments, when added to the other alimony and child support payments, was reasonable in light of the size of the former family. The Court respectfully disagrees.
The mortgage payments required to be made by Dr. Grijalva are not referenced under either of the sections covering alimony or child support. The obligation is contained in the separation agreement's section titled "Parties' Residence." The separation agreement itself opens with a request to the state court that it declare the Substituted Separation Agreement "to be fair and equitable and that the same be ratified, approved and confirmed as a settlement of the property rights as set forth in such Substituted Separation Agreement." (Emphasis added). The agreement does close with the comment that "all payments to Beatriz under this agreement shall be considered as contractual alimony as provided in this agreement. . . ." It must be remembered, however, that the mortgage payments in issue would be made to a third party, not to Mrs. Guerron. Moreover, the closing language reinforces the conclusion that "alimony" under the terms of the agreement means payments to Mrs. Guerron. The section containing the referenced alimony is labeled "Payments to Wife."
The Appellees argue that the cessation of the obligation to make mortgage payments upon the death or remarriage of Mrs. Guerron indicates that the payments are in the nature of alimony, support or maintenance. Counterbalancing that feature, however, is Dr. Grijalva's obligation to pay the remainder of the mortgage principal even in the event that Mrs. Guerron sells the house before the mortgage is liquidated. This obligation, included as it is in the same paragraph as Dr. Grijalva's commitment to convey the marital residence, evidences a property division rather than an arrangement for support.
The intent of the parties can be further gleaned from the amount of the alimony and child support payments as designated. Those two amounts when added together equal $1,900.00. And that sum does not include the health and dental insurance coverage which the doctor was obligated to provide. The size of that payment militates against a conclusion that the mortgage payments were intended to be in the nature of alimony, maintenance or support. Rather, the totality of the circumstances convinces the Court that the payments bear more of the characteristics of a property settlement.
The Bankruptcy Court held that the obligation of Dr. Grijalva to keep a life insurance policy in effect on his life was nondischargable. Specifically, the court found the life insurance policy to be "the safety-net of the child support and alimony." R. 53. The Bankruptcy Court concluded that it was "a foundation that should be kept in place to protect the family." Id. The doctor retorts that the policy is an unwarranted expense which does not provide immediate support and maintenance for the family. The Court disagrees.
The basis for the...
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