In re Manning

• Decision Date: 06 November 1992
• Docket Number: Adv. P. No. 92-1224.,Bankruptcy No. 92-10192-T
• Citation: In re Manning, 149 B.R. 388 (Bankr. V.I. 1992)
• Parties: In re Larry A. MANNING, Debtor. Larry A. MANNING, Plaintiff, v. Page A.M. WETTERBERG, Defendant.
• Court: U.S. District Court — Virgin Islands, Bankruptcy Division

149 B.R. 388 (1992)

In re Larry A. MANNING, Debtor Larry A. MANNING, Plaintiff, v. Page A.M. WETTERBERG, Defendant.

Bankruptcy No. 92-10192-T, Adv. P. No. 92-1224.

United States Bankruptcy Court, E.D. Virginia, Alexandria Division.

November 6, 1992.

Richard A. Bartl, Alexandria, VA, for debtor.

Richard J. Stahl, Fairfax, VA, for defendant.

MEMORANDUM OPINION

DOUGLAS O. TICE, JR., Bankruptcy Judge.

Trial on the debtor's complaint to determine dischargeability of debt pursuant to 11 U.S.C. § 523(a)(5) was held in Alexandria, Virginia, on October 29, 1992. At the conclusion of trial the court ruled from the bench that the items in controversy would be excepted from discharge as obligations of the debtor in the nature of alimony. This opinion supplements the court's bench ruling.

Findings of Fact

The debtor and the defendant were previously married and had two children. They were divorced by a decree of the Circuit Court of Prince William County, Virginia, entered October 16, 1989. In connection with their divorce, the parties entered into two agreements which were incorporated in the divorce decree.

The first agreement, dated March 29, 1988, was entitled SEPARATION, CUSTODY, SUPPORT AND PROPERTY SETTLEMENT AGREEMENT. Section VII of this agreement, entitled DIVISION OF PROPERTY, contained the following paragraph:

F. It is agreed and understood that wife is to receive 50% of husband\'s disposable retirement pay and she will be responsible for Federal and State taxes on her portion of same. Additionally, husband agrees to take a reduced annuity in order to insure that wife will continue to receive husband\'s retirement pay in the event that he predeceases her. It is further agreed and understood that on the first day of the month following husband\'s retirement from the U.S. Army, wife will receive 50% of his disposable retirement pay as previously stated as well as an additional sum which will when added to the 50% of his retirement pay be equal to $2,500 and will continue until wife reaches age 65 at which time the additional sum will terminate.

This provision is also set out in full in the parties' divorce decree. In a schedule attached to the agreement, which listed joint debts of the parties for which debtor assumes responsibility, there is a listing of the $2,500.00 mentioned in paragraph VII F, which is labeled as "alimony."

The divorce decree contains the following provisions:

ADJUDGED, ORDERED and DECREED that pursuant to Paragraph VII (F) to the aforementioned Separation, Custody, Support and Property Settlement Agreement, the Defendant is hereby Ordered to name and maintain the Complainant as sole beneficiary of the survivor benefits from his U.S. Army retirement plan; and it is further

ADJUDGED, ORDERED and DECREED that at such time as the Complainant attains the age of sixty-five (65) years, the Defendant shall execute a voluntary allotment, directing that fifty percent (50%) of his disposable retirement pay be paid directly to the Complainant; . . .

Debtor has retired from the U.S. Army and receives a military pension payment each month. In accordance with their agreement, debtor has been remitting to defendant one-half of the monthly military retirement pay. Additionally, he has paid a portion of the $2,500.00 obligation mentioned in paragraph VII F.

In their income tax returns for years since their divorce, debtor has claimed a deduction for payments to defendant made by him pursuant to paragraph VII F of the agreement, and the defendant has included these sums in her taxable income.

On August 16, 1989, the parties entered into an addendum to the agreement of March 29, 1988, which contained the following paragraph:

IV. A. The Husband shall pay to the Wife the sum of $250.00 per month per child for the support of the parties\' minor children. This support is to be paid on the first day of each month, commencing April 1, 1988. As each child reaches the age of eighteen (18) and has completed high school, dies, is otherwise emancipated, or is no longer living with the Wife, the said child support for that child shall automatically convert to spousal support and shall be paid directly to the Wife on the first day of each month thereafter without any lapse in payment by the Husband. However, if the minor child has not yet completed his senior year of high school at the time of his eighteenth (18th) birthday, the support shall remain as child support until the child\'s high school graduation, at which time it shall automatically convert to spousal support as described above. Said spousal support shall terminate upon the death of either party or Wife attaining the age of sixty-five (65), whichever first occurs.

At the time of trial, one of the parties' children had reached the age of 18.

Since the parties' divorce, defendant has remarried.

Discussion and Conclusions of Law

11 U.S.C. § 523(a)(5) excepts from discharge debts to a spouse in connection with a divorce decree if the debts are actually in the nature of alimony, maintenance, or support. The spouse who seeks to have a debt excepted from discharge under this section has the burden of proving by a preponderance of the evidence that the obligation at issue is in the nature of alimony, maintenance, or support and therefore not discharged under 11 U.S.C. § 727. See Grogan v. Garner, 498 U.S. 279, 111 S.Ct. 654, 112 L.Ed.2d 755 (1991); Bulman v. Bulman (In re Bulman), 123 B.R. 24, 26 (Bankr.E.D.Va.1990).

While state law may be relevant and probative, the question whether a debt is actually in the nature of alimony, maintenance, or support is governed by federal law. Long v. West (In re Long), 794 F.2d 928, 930 (4th Cir.1986); Pauley v. Spong (In re Spong), 661 F.2d 6 (2nd Cir.1981). See also 3 Lawrence P. King, Collier on Bankruptcy ¶ 523.151 (15th ed. 1990).

In the context of a voluntarily executed marital settlement, the test for whether the payments are "actually in the nature of alimony, maintenance, or support" is whether it was the parties' intention that the payments be for support rather than for property settlement. In re Long, 794 F.2d 928, 931 (4th Cir.1986); Tilley v. Jessee, 789 F.2d 1074, 1077 (4th Cir. 1986); Melichar v. Ost, 661 F.2d 300, 303 (1981). Although the Fourth Circuit has held that the true intent of the parties controls rather than labels within an agreement, the written agreement is still "persuasive evidence of intent." Tilley v. Jessee, 789 F.2d at 1077.

In this case, the parties entered into a settlement agreement later incorporated in their divorce decree. In dispute are the dischargeability of three obligations of debtor under the agreement, that is, whether they are spousal support or property payments.¹ In summary, the contested obligations are:

(1) Upon retirement, debtor is to repay defendant, his former wife, one-half of debtor\'s monthly military retirement pay. (Property Settlement Agreement, par. VII. F.)

(2) Upon his retirement debtor is to pay defendant a sum in addition to one-half of his monthly retirement which will bring the combined total payment up to $2,500.00 per month. Debtor\'s obligation for the additional sum terminates when defendant reaches the age of 65. (Property Settlement Agreement, par. VII. F.)

(3) Paragraph IV. A. of an addendum to the agreement provides that in addition to other child support obligations in the agreement, debtor is to pay defendant $250.00 per month each for their two children. The child support aspect of this obligation is not contested. However, as each child reaches 18 the payment nevertheless continues but as spousal support. The spousal support provision terminates upon the earlier of the death of either party or when defendant reaches 65. One of debtor\'s children has reached 18, and debtor disputes his obligation for the continuing monthly payment of $250.00.

The parties' property settlement agreement does not provide for termination of debtor's obligation for the three contested items upon defendant's remarriage.

That spousal support was the parties' intent is manifest from their settlement agreement and divorce decree, and this court finds that all of the three contested items are in the nature of spousal support and therefore excepted from discharge pursuant to 11 U.S.C. § 523(a)(5).

The $250.00 monthly payment per child provided in the agreement addendum is plainly stated to be spousal support as each child reaches 18. And although the retirement pay provisions for debtor to pay a monthly total of $2,500.00 were included under a heading of their agreement entitled "Division of Property," there are other more compelling indications within the agreement that in fact this was intended to be traditional spousal support. Thus, not only was debtor's monthly $2,500.00 obligation labeled "alimony" elsewhere in the agreement (Schedule B, p. 9) but also the operative paragraph stated that defendant was to include her receipt of this sum in her income tax return.

Evidence at trial established that defendant has included all the disputed payments in her income tax returns and that debtor in his own returns has claimed them as deductible alimony. This is further persuasive evidence of the parties' intent to treat debtor's obligations as spousal support. In fact, there is case authority to hold that the debtor is estopped under these circumstances to now argue that the payments which defendant has included as...