In re McCauley, Bankruptcy No. 87-1313-AB

• Decision Date: 20 September 1989
• Docket Number: Civ. A. No. 89-0016A.,Bankruptcy No. 87-1313-AB
• Citation: 105 BR 315
• Court: U.S. District Court — Eastern District of Virginia
• Parties: In re Arthur P. McCAULEY, Debtor. Julie-Lyn H. BANGERT, Plaintiff/Appellant, v. Arthur P. McCAULEY, Defendant/Appellee.

105 B.R. 315 (1989)

In re Arthur P. McCAULEY, Debtor Julie-Lyn H. BANGERT, Plaintiff/Appellant, v. Arthur P. McCAULEY, Defendant/Appellee.

Bankruptcy No. 87-1313-AB, Civ. A. No. 89-0016A.

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

September 20, 1989.

COPYRIGHT MATERIAL OMITTED

John T. Donelan, John A. Mell, Alexandria, Va., for plaintiff/appellant.

H. Jason Gold, Valerie P. Morrison, Gold & Stanley, P.C., Alexandria, Va., for defendant/appellee.

MEMORANDUM OPINION

ELLIS, District Judge.

Background

In this bankruptcy appeal, the central issue presented concerns the dischargeability under 11 U.S.C. § 523(a)(5) of an $80,000 debt set forth in a final divorce decree. The pertinent facts are essentially undisputed and may be simply stated.

The parties to this appeal, Julie-Lyn Bangert and Arthur McCauley, were married in 1966, separated in 1985, briefly reconciled later in 1985, and finally divorced on May 1, 1987. Bangert remarried another that same day. During their twenty-one year marriage, the parties adopted two children, McCauley became a successful businessman, and Bangert was not employed outside the home. The parties never entered into a property settlement agreement. Instead, they litigated support, custody and property disposition in the Superior Court of Fulton County.

In November 1985, the Georgia court entered an interlocutory order awarding Bangert temporary, exclusive use of the marital home, temporary custody of the two minor children, as well as support and maintenance for herself and the children. The 1985 order also required McCauley to pay the mortgage payments on the marital home, certain listed debts and the country club monthly dues. Thereafter, in March 1986, a consent judgment order was entered which superseded the 1985 interlocutory order. The 1986 consent order purported to settle with finality the ownership of the marital home by awarding it to Bangert. This consent order also required McCauley to assume the house payments, to pay arrearages in child support, and to pay $2000 per month for future child support. The obligation to pay temporary alimony ceased. Then, in 1987, after a trial, a final decree was entered. It provided that McCauley was to pay (i) $750 in monthly support per child, (ii) $750 in monthly support and maintenance for Bangert, (iii) $9,378.77 for child support arrearages, (iv) certain medical expenses incurred for the children, and (v) $80,000 in monthly installments of $750, without interest, until paid in full.

On June 24, 1987, approximately two months after the final decree, McCauley filed a Chapter 7 petition in bankruptcy. Bangert thereafter filed a timely complaint objecting to the discharge of the various obligations contained in the Georgia court's final decree. She argued that these obligations were non-dischargeable because they were for "alimony to, maintenance for, or support" of Bangert and were "actually in the nature of alimony, maintenance, or support. . . ." 11 U.S.C. § 523(a)(5). McCauley sought summary judgment solely with respect to the $80,000 obligation. The bankruptcy court took the matter under advisement. Although no order was entered, it appears that the motion was thereafter denied as premature. Prior to trial, McCauley conceded and stipulated the non-dischargeability of the obligations to pay monthly child support, child support arrearages and medical bills. At trial, therefore, the dischargeability of the $80,000 obligation was the sole issue before the court. After hearing argument of counsel and after reviewing the 1985 and 1986 orders, the 1987 final decree, and the transcript of the Georgia court proceedings, the bankruptcy court concluded that the $80,000 obligation was discharged as it was a property settlement, and not in the nature of alimony, maintenance or support. This appeal followed.

Analysis¹

Pursuant to 11 U.S.C. § 727(a), a Chapter 7 debtor who complies with the Bankruptcy Code requirements receives a discharge of all pre-petition debts other than certain specified exceptions. Among those exceptions is 11 U.S.C. § 523(a)(5), which precludes discharge of debts to a spouse or child for alimony, maintenance or support if that debt is actually "in the nature of alimony, maintenance or support."² Resolving the question whether a debt falls within this exception for purposes of dischargeability under the Bankruptcy Code is a matter of federal, not state, law. Goin v. Rives, 808 F.2d 1391 (10th Cir.1987); Long v. West, 794 F.2d 928, 930 (4th Cir.1986); Shaver v. Shaver, 736 F.2d 1314 (9th Cir.1984). And, in this context, Bangert, as the party challenging discharge of the $80,000 obligation, has the burden of establishing that this amount was in the nature of alimony, support or maintenance. Benich v. Benich, 811 F.2d 943 (5th Cir.1987); Long, 794 F.2d 928; Hunter v. Hunter, 780 F.2d 1577 (11th Cir.1986); see Fed.R.Bankr. 4005.

Settled circuit authority makes unmistakably clear that it is the intention of the Georgia court in this case that determines whether payments are alimony, support or maintenance as distinguished from a property settlement. See Long, 794 F.2d at 931; Benich, 811 F.2d at 943 (court must determine true nature of debt regardless of characterization placed on it by parties' agreement or court proceedings); Tilley v. Jessee, 789 F.2d 1074 (4th Cir.1986) (true intent of the parties rather than labels attached to agreement controls characterization of the obligation); Shaver, 736 F.2d 1314 (court must look beyond the language of the agreement to the intent of the parties and the substance of the obligation); Melichar v. Ost, 661 F.2d 300, 303 (4th Cir.1981) (where the obligation is embodied in an agreement of the parties, the test is the parties' intention); Shacter v. Shacter, 467 F.Supp. 64, 66 (D.Md.1979) (substance not labels govern inquiry into parties' intention and parties may intend payment to be for support even if not so labeled and even if state law technical requirements for alimony are not met). And the determination of intention underlying the court decree or the parties' agreement is essentially one of fact. Boyle v. Donovan, 724 F.2d 681 (8th Cir.1984) (determination of parties' intention is a question of fact); Cf. Melichar, 661 F.2d at 303 (classification of an agreement under state law is an important factor in determining parties' intention).

A wide range of factors may be pertinent to this intent inquiry, including whether the divorce degree contained another provision explicitly for alimony or support and whether, as is typically true of alimony, the obligation terminated on the death or remarriage of the receiving spouse. See Stout v. Prussel, 691 F.2d 859, 861 (9th Cir.1982) (existence of separate and distinct provisions in agreement regarding maintenance and property is a significant factor to be considered); Tilley, 789 F.2d at 1078 (obligations that survive despite remarriage of the obligee or death of the obligor are in direct contrast to the usual operation of marital support payments). A helpful bankruptcy court opinion lists eighteen such factors that may be taken into account in distinguishing between alimony, maintenance and support on the one hand and property settlement on the other. See Coffman v. Coffman, 52 B.R. 667, 674-75 (Bankr.D.Md.1985). Contrary to Bangert's contention, however, no authority or reason in principle requires a fact-finder to hear and assess evidence on every one of these factors. See Yeates v. Yeates, 807 F.2d 874 (10th Cir.1986) (fact that payment is necessary to maintain daily necessities indicates presence of support obligation); Shaver, 736 F.2d 1314 (factors suggesting support obligation include presence of minor children, imbalance of relative income of parties, whether obligation terminates on death or remarriage of recipient spouse, and nature and duration of obligation). Nor is there a fixed hierarchy of importance for these factors, or a precise weight assigned to any of them. Circumstances vary too widely to require this. Instead, the choice of factors to consider and the weight they should be accorded, is uniquely a function committed to the discretion of the trier of fact. Where, as here, the task is to ascertain the intent underlying a court decree, it is appropriate and sufficient for the trier of fact to focus attention on the pleadings, the orders, the transcripts of the court proceedings, and on the language of the decree itself. See West v. Bank of Commerce & Trusts, 153 F.2d 566 (4th Cir.1946) (court adjudged the true intent of a decree on the basis of the language of the decree, pleadings, pre-trial conferences and arguments).

The trier of fact in the instant case, the bankruptcy court, did precisely this. Its conclusion that the $80,000 obligation was not in the nature of alimony, maintenance or support was abundantly supported by the record, particularly by the terms of the final decree. The decree specifically identifies and segregates by paragraph each of the obligations the state court judge created. Paragraph six of the decree explicitly obligates McCauley to pay Bangert alimony commencing May 1, 1987 "for her support, maintenance, and welfare in the sum of $750 per month" (emphasis added). Significantly, this obligation terminates on Bangert's death or remarriage, a characteristic of true alimony. Paragraph three of the decree explicitly orders $750 per month in child support for each child. Like the alimony provision in paragraph six, this obligation is designated for the "support, maintenance, education, and health of the children." Paragraph seven explicitly addresses child support arrearages. Finally, in paragraph eight of the decree, a paragraph wholly separate from the provisions concerning alimony, child support and child support arrearages, the state court judge ordered McCauley to pay Bangert $80,000. Significantly, he did so in terms that reflect that the obligation was in...