In re Marquis

• Decision Date: 13 January 1997
• Docket Number: Adversary No. 96-1040.,Bankruptcy No. 96-10329
• Citation: 203 BR 844
• Parties: In re Russell R. MARQUIS, Debtor. Monica J. MARQUIS, Plaintiff, v. Russell R. MARQUIS, Defendant.
• Court: U.S. Bankruptcy Court — District of Maine

203 B.R. 844 (1997)

In re Russell R. MARQUIS, Debtor Monica J. MARQUIS, Plaintiff, v. Russell R. MARQUIS, Defendant.

Bankruptcy No. 96-10329, Adversary No. 96-1040.

United States Bankruptcy Court, D. Maine.

January 13, 1997.

COPYRIGHT MATERIAL OMITTED

MEMORANDUM OF DECISION

JAMES B. HAINES, Jr., Bankruptcy Judge.

Before the court on stipulated facts are plaintiff Monica Marquis' claims that certain divorce-related obligations owed her by debtor Russell Marquis are excepted from discharge under § 523(a)(5) or § 523(a)(15) of the Code.¹ For the reasons set forth below, I conclude that some of the obligations in dispute are non-dischargeable under § 523(a)(5) because they are in the nature of alimony or support, but the balance will be discharged because the plaintiff has not demonstrated nondischargeability under § 523(a)(15).

Facts

1. Divorce Obligations.

On May 22, 1995, Russell and Monica were divorced. The state court divorce judgment and associated orders obligated Russell to pay Monica $137.00 per week to support their minor son, Adam, age 17, and to pay Monica alimony of $100.00 per week for approximately two years. In addition, Russell must maintain health insurance for Monica and Adam and must pay Adam's reasonable, ongoing, uninsured medical and dental expenses.²

The divorce court also ordered Russell to:

a. Pay Monica's unpaid pre-divorce medical and counseling expenses;

b. Pay $500.00 in legal fees that Monica incurred in connection with obtaining an interlocutory order in the divorce proceedings; and

c. Pay and hold Monica harmless from existing MasterCard, Discover Card, Key Bank Credit Line, J.C. Penney (up to $180.00), and Central Maine Power account liabilities.

The divorce decree required Russell to liquidate his 401K retirement plan (which was declared "marital property") and to apply the net proceeds (after applicable taxes and penalties) against the couple's debts in the following order of priority: to cure all arrearages on the marital home mortgage; to pay all related real estate tax arrearages; to pay monthly mortgage installments until the home was sold; to pay Monica's pre-divorce medical and counseling expenses; to pay such real estate taxes as may come due for the home during 1995; and, finally, to pay the balance remaining (if any) equally to each spouse's divorce-related legal bills.

The decree anticipated that the marital home would be sold after January 1996 and that, after satisfying the mortgage and costs of sale and taxes, the proceeds remaining (if any) would be applied to unsatisfied debts (including Monica's pre-divorce medical and counseling debts) slated for payment from Russell's 401K plan proceeds. Any surplus was to be split equally between Monica and Russell.

Proceeds from the 401K plan did not discharge all of the obligations with which they were burdened by the divorce decree. After unsuccessful attempts to sell the home, Monica and Russell agreed that Monica would refinance the mortgage in her name alone and live there. The refinancing generated no funds to apply to bills.

At bankruptcy Russell remained obligated to pay and hold Monica harmless for her medical and counseling bills ($500.00 of which were yet unpaid), to pay and hold her harmless from her $500.00 legal bill, and to pay and hold her harmless from the credit accounts mentioned above.

2. Current Circumstances.

Monica resides with Adam in the former marital home. Since the divorce she has worked irregularly through a temporary employment service. She is now between jobs. From January 1, 1996, through September 22, 1996, her earnings totaled $9,356.00.³

Russell, who has remarried, resides with his wife and her three minor children. He's employed full-time. For calendar year 1996, through October 18, his gross earnings were $43,000.00. At the time he filed bankruptcy, Russell listed total monthly living expenses of $1,623.00.⁴

3. Points at Issue.

Russell concedes that his obligations to pay the sums denominated by the state court as child support and alimony are within § 523(a)(5)'s discharge exception. He has stipulated that the requirement that he maintain health insurance for Monica and Adam (and that he pay Adam's ongoing, uninsured medical and dental expenses) are similarly nondischargeable. He takes issue with Monica's claim that his divorce obligation to be solely liable for and hold her harmless from other debts survives his bankruptcy discharge.⁵

Discussion

1. Section 523(a)(5).

a. Substance of § 523(a)(5).

Monica first asserts that Russell's obligations to satisfy her pre-divorce medical and counseling bills and to satisfy her $500.00 legal bill are excepted from discharge under § 523(a)(5) because they are debts "in the nature of alimony, maintenance or support" within the statute's meaning.⁶ Section 523(a)(5) is time tested; its application straightforward.

To begin, discharge is generally favored under the Code. Grogan v. Garner, 498 U.S. 279, 286-87, 111 S.Ct. 654, 659-60, 112 L.Ed.2d 755 (1991). The party seeking to establish a § 523(a)(5) discharge exception carries the burden of proving the elements of nondischargeability by a preponderance of the evidence. Id.; see also Dressler v. Dressler (In re Dressler), 194 B.R. 290, 296 (Bankr.D.R.I.1996); Sweck v. Sweck (In re Sweck), 174 B.R. 532, 535 (Bankr.D.R.I.1994).

In the context of § 523(a)(5), "substance prevails over form." Warren v. Warren (In re Warren), 160 B.R. 395, 398 (Bankr.D.Me.1993), cited in In re Dressler, 194 B.R. at 295. Although the bankruptcy court may appropriately consider the content of state law under which the obligation arose, Pauley v. Spong (In re Spong), 661 F.2d 6, 9 (2d Cir.1981); In re Warren, 160 B.R. at 398-99, federal principles apply in determining whether, under the circumstances that existed at the time the obligation was created, the obligation functioned to provide support to the non-debtor obligee. In re Dressler, 194 B.R. at 295 (collecting authorities).

To assay the character of obligations arguably in the nature of alimony or support, the courts have coined and applied a number of multi-factor tests. Although the tests vary one from another in detail, their essence is to ascertain and appreciate the dissolution dynamics that led to the obligations\' creation and how these obligations functioned under extant circumstances. See In re Gibbons, 160 B.R. 473 at 475 (Bankr.D.R.I.1993) (acknowledging variety of tests employed by other courts); In re Stitham, 154 B.R. 1 at 3-4 & n. 8 (Bankr.D.R.I.1993) (applying four factor test but noting existence and substantive similarity of others). For an obligation with any given characteristics, one test may be more appropriate than another. See, e.g., In re Warren, 160 B.R. at 399 (referring to factors pertaining to whether obligations to pay college expenses constituted support); In re Stitham, 154 B.R. at 2-3 (applying four factor test to determine whether short-term lump sum payment constituted alimony or support); Wheeler v. Wheeler (In re Wheeler), 122 B.R. 645, 646-47 (Bankr.D.R.I.1991) (applying seven factor test regarding debt assumption agreement). Regardless of the analytical paradigm employed, each case turns on its own peculiar facts. See In re Gibbons, 160 B.R. at 475.

Id. at 295-96.

b. Applying the Statute.

Medical Expenses. Russell argues that the divorce court's order requiring him to pay Monica's pre-divorce accrued medical and counseling expenses should not be characterized as alimony or support because the debts were historical, not ongoing, obligations to "third parties" and because his continuing personal liability to hold Monica harmless from them arose only because his 401K liquidation and the house sale yielded insufficient proceeds to satisfy them.

I conclude, however, that the obligation is nondischargeable. To do so does not require resort to complex, multi-factor analysis. Concern for Monica's health care is a major chord in the state court's decree. Russell paid Monica's health insurance premiums before divorce. He must pay them after divorce, and acknowledges that his obligation to do so is nondischargeable. Russell would have paid (or contributed significantly toward paying) uncovered medical bills had there been no divorce. Monica must, with diminished resources, now pay uncovered expenses on her own. And payment of past bills may well affect the availability of future treatment from Monica's health care providers.

I am satisfied that Russell's obligation to hold Monica harmless from her pre-divorce medical and counseling bills fits easily within § 523(a)(5)'s discharge exception. See Hughes v. Hughes (In re Hughes), 164 B.R. 923, 928 (E.D.Va.1994) (medical insurance provision of divorce agreement established nondischargeable support obligation); In re Olson, 200 B.R. 40, 43 (Bankr.D.Neb.1996) (debtor's obligation to pay ex-wife's medical expenses survived Chapter 7 discharge and was entitled to priority payment in his subsequent Chapter 13 case) (collecting cases).

Legal Fees. The divorce court ordered Russell to pay and hold Monica harmless for $500.00 in legal fees she incurred in pursuing a "motion pending divorce." Citing Holliday v. Kline (In re Kline), 65 F.3d 749 (8th Cir.1995); and Heintz v. Tremblay (In re Tremblay), 162 B.R. 60 (Bankr.D.Me. 1993), Monica contends that the divorce court's order established a nondischargeable obligation because it was intended to operate as alimony or separate maintenance.

In Kline the 8th Circuit held, as a matter of law, that a court-ordered obligation owed by a debtor ex-husband to his former wife's attorney for divorce representation could come within § 523(a)(5) even though under the terms of the order he owed the obligation to the attorney rather than to his ex-spouse. 65 F.3d at 751. The court was clear, however, that the question whether a fee award was intended to serve as alimony, maintenance or support is a separate, factual question. Id. at...