In re LaRue

• Citation: 204 BR 531
• Decision Date: 23 January 1997
• Docket Number: Adv. No. 96-3116.,Bankruptcy No. 96-30505
• Parties: In re Richard S. LaRUE, Debtor. Lori McCRACKEN, Plaintiff, v. Richard S. LaRUE, Defendant.
• Court: United States Bankruptcy Courts. Sixth Circuit. U.S. Bankruptcy Court — Eastern District of Tennessee

204 B.R. 531 (1997)

In re Richard S. LaRUE, Debtor.

Lori McCRACKEN, Plaintiff, v. Richard S. LaRUE, Defendant.

Bankruptcy No. 96-30505, Adv. No. 96-3116.

United States Bankruptcy Court, E.D. Tennessee.

January 23, 1997.

S. Randolph Ayres, Athens, TN, for Plaintiff.

Moore, Brooks & Ragle, C. Allen Ragle, Knoxville, TN, for Debtor.

MEMORANDUM

RICHARD S. STAIR, Jr., Chief Judge.

The Plaintiff, Lori McCracken, and the Debtor, Richard S. LaRue, were married on February 14, 1994. They have one daughter, Megan Caroline LaRue, who is two years old. The Plaintiff was granted a divorce from the Debtor, by default, in a January 6, 1996 Final Decree, entered by the Circuit Court for McMinn County, Tennessee. The Circuit Court granted custody of the parties' daughter to the Plaintiff.

As material to this adversary proceeding, the January 6, 1996 Final Decree imposed certain obligations on the Debtor. Specifically, the Final Decree provides for the Debtor to pay child support, attorney's fees and certain of the parties' joint marital obligations as follows:

It is further ORDERED that child support is set at $70.00 per week, payable through the Clerk\'s office, plus the 5% collection fee. Defendant the Debtor is in addition to immediately obtain and keep current medical insurance upon the minor child of the parties and upon his agreement as announced in open court, shall pay any and all remaining medicals not covered by such effective insurance, including a current doctor bill in the approximate sum of $100.00 owed to Dr. Johnny Carter of Athens, Tennessee, on behalf of the child, Megan. He shall pay the same within 30 days of this judgment order. Defendant is also ordered to pay all attorney\'s fees of $500.00 and court costs in this case He shall pay the attorney\'s fees within 90 days of this judgement order.

. . . In addition, he shall pay the outstanding balances on the Lowe\'s charge card, Citibank, in the approximate sum of $5,100.00, and the Tennessee Teacher\'s Credit Union account, in the approximate sum of $3,200.00.¹

The Final Decree contains no "hold harmless" language requiring the Debtor to indemnify or reimburse the Plaintiff for any portion of the parties' joint obligations she is required to pay.

On February 13, 1996, the Debtor filed a Chapter 7 petition with this court. The Plaintiff commenced this adversary proceeding on May 20, 1996, with the filing of a Complaint which seeks a determination that the Debtor's obligations arising out of the January 6, 1996 Final Decree are nondischargeable pursuant to 11 U.S.C.A. § 523(a)(5) or (15) (West 1993 & Supp.1996). On November 7, 1996, the court entered a Scheduling Order prepared and submitted by the parties. The Scheduling Order defines the issue to be resolved as follows: "Are the debts and obligations imposed upon the Debtor/Defendant by the parties' Final Decree of Divorce nondischargeable under the provisions of 11 U.S.C. § 523(a)(5), 11 U.S.C. § 523(a)(15)(A), and/or 11 U.S.C. § 523(a)(15)(B)?"

The Debtor, in a January 10, 1997 Brief and at the trial, stipulates that the following child support obligations are nondischargeable under § 523(a)(5): (1) his obligation to pay seventy dollars per week in child support, plus a five percent collection fee; (2) his obligation to obtain and keep current medical insurance for the parties' minor child; and (3) his obligation to pay any and all remaining medicals not covered by such insurance, including the $100.00 doctor bill owed to Dr. Johnny Carter of Athens, Tennessee. Therefore, the issue before the court, restated in terms of the statute involved, is whether the obligation to pay certain of the parties' joint debts imposed upon the Debtor by the January 6, 1996 Final Decree is nondischargeable pursuant to 11 U.S.C.A. § 523(a)(5) or (15), those joint debts being the outstanding balances owed: (1) on the Lowe's charge card; (2) to Citibank, in the approximate sum of $5,100.00; and (3) to the Tennessee Teacher's Credit Union, in the approximate sum of $3,200.00. An additional issue involves the obligation imposed upon the Debtor to pay attorney's fees and court costs. The trial of this adversary proceeding was held on January 17, 1997.

The Plaintiff bears the burden of proving nondischargeability under § 523(a) by a preponderance of the evidence. Grogan v. Garner, 498 U.S. 279, 290-91, 111 S.Ct. 654, 661, 112 L.Ed.2d 755 (1991). Moreover, the exceptions to discharge are to be strictly construed against the creditor. Manufacturer's Hanover Trust Co. v. Ward (In re Ward), 857 F.2d 1082, 1083 (6th Cir.1988). "One exception to this principle of statutory construction is found in section 523(a)(5), in which the term `support' has been given a broad construction by most courts to promote the Congressional policy that favors enforcement of obligations for spousal and child support." 4 COLLIER ON BANKRUPTCY ¶ 523.05 (15th ed. rev.1996).

This is a core proceeding. 28 U.S.C.A. § 157(b)(2)(I) (West 1993).

I

At the trial, the Plaintiff's proof focused on her alleged inability to pay the disputed debts and her contention that the Debtor has the ability to pay these debts. Conversely, the Debtor's proof focused on his alleged inability to pay the disputed debts and his contention that the Plaintiff can pay the debts.² However, a threshold issue the court must deal with as a prerequisite to its consideration of the merits of the parties' respective arguments is whether § 523(a)(5) and (a)(15) have application, as a matter of law, to the obligations imposed upon the Debtor under the January 6, 1996 McMinn County Circuit Court Final Decree. For reasons hereinafter discussed, the court has determined that the Plaintiff has no claim against the Debtor regarding the joint marital debts, attorney's fee and court costs cognizable under either § 523(a)(5) or (a)(15) emanating from the Final Decree.

II

Section 523(a)(5) provides in material part:

A discharge under section 727 . . . of this title 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 —

. . . .

(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.

11 U.S.C.A. § 523(a)(5) (West 1993).

Section 523(a)(15) provides in material part:

A discharge under section 727 . . . of this title does not discharge an individual debtor from any debt —

(15) not of the kind described in paragraph (5) that is incurred by the debtor in the course of a divorce or separation or in connection with a separation agreement, divorce decree or other order of a court of record, a determination made in accordance with State or territorial law by a governmental unit unless —

(A) the debtor does not have the ability to pay such debt from income or property of the debtor not reasonably necessary to be expended for the maintenance or support of the debtor or a dependent of the debtor and, if the debtor is engaged in a business, for the payment of expenditures necessary for the continuation, preservation, and operation of such business; or

(B) discharging such debt would result in a benefit to the debtor that outweighs the detrimental consequences to a spouse, former spouse, or child of the debtor.

11 U.S.C.A. § 523(a)(15) (West Supp.1996). One court has paraphrased this exception to discharge as follows:

"The section can be read to make property settlements nondischargeable IF a debtor is able to pay those debts or IF a discharge would be too detrimental to the ex-spouse. Congress has decided that if a debtor is able to pay the debt owed to the ex-spouse without harming him or herself more than nonpayment would harm the ex-spouse, the debtor should uphold his or her separation obligation."

Collins v. Hesson (In re Hesson), 190 B.R. 229, 237 (Bankr.D.Md.1995) (quoting Kessler v. Butler (In re Butler), 186 B.R. 371, 373 (Bankr.D.Vt.1995)).

Regardless of whether the nondischargeability complaint is raised under § 523(a)(5) or (a)(15), these subsections apply only to obligations owed by the debtor directly to a spouse, former spouse, or child "in connection with" a divorce decree, separation agreement, or related court order. Fundamental to the maintenance of any complaint seeking a determination of the dischargeability of a debt under § 523(a)(5) or (a)(15) is the requirement that the debtor must be obligated to the plaintiff under the terms of the requisite agreement or order. In the present case, the January 6, 1996 Final Decree imposes no obligation payable by the Debtor, directly or indirectly, to the Plaintiff.

III

The legislative history to § 523(a)(5) notes:

Paragraph (5) excepts from discharge debts to a spouse, former spouse, or child of the debtor for alimony to, maintenance for, or support of, the spouse or child. This language . . . will apply to make nondischargeable only alimony, maintenance, or support owed directly to a spouse or dependent. See Hearings, pt. 2, at 942.

H.R.Rep. No. 95-595, at 364 (1977), reprinted in 1978 U.S.C.C.A.N. 5963, 6320; S.Rep. No. 95-989, at 79 (1978), reprinted in 1978 U.S.C.C.A.N. 5787, 5865. Although § 523(a)(5) requires that the debt be owed directly to the former spouse, the legislative history makes clear the congressional intent that § 523(a)(5) was not intended to require direct payment to the former spouse in the case of an agreement to hold a spouse harmless on joint debts.

This provision will, however, make nondischargeable any debts resulting from an agreement by the debtor to hold the debtor\'s spouse harmless on joint debts, to the

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