In re Peterson, Bankruptcy No. 91-41367
| Citation | 133 BR 508 |
| Decision Date | 30 October 1991 |
| Docket Number | Adv. No. 91-4205.,Bankruptcy No. 91-41367 |
| Parties | In re Michael Fowler PETERSON, Debtor. Mary Alice PETERSON, Plaintiff, v. Michael Fowler PETERSON, Defendant. |
| Court | United States Bankruptcy Courts. Eighth Circuit. U.S. Bankruptcy Court — Western District of Missouri |
R. Britt Carlson, Kansas City, Mo., for plaintiff.
Jack R. Grate, Jr., Independence, Mo., for defendant and debtor.
The matter before the Court is the complaint of Mary Alice Peterson to determine the dischargeability of certain debts owed to her by debtor Michael Fowler Peterson, arising out of the dissolution of their marriage. The Court has jurisdiction over this matter pursuant to 28 U.S.C. § 1334(b), and may enter final orders pursuant to 28 U.S.C. § 157(b)(2)(I). For the reasons stated below, I find that:
1. Ms. Peterson's right to receive a portion of the General Motors Pension Benefits is not dischargeable in this bankruptcy;
2. Debtor's obligation to pay Ms. Peterson one-half of any net proceeds from a sale of the Holiday Island, Arkansas real estate, after payment of the first mortgage on the property, is a non-dischargeable obligation; and
3. Debtor's remaining obligations to plaintiff Mary Alice Peterson pursuant to the Marital Property Settlement Agreement and the Decree of Dissolution of Marriage are dischargeable in this bankruptcy.
The parties were married in August, 1976, and divorced in October, 1988. Prior to their marriage, Ms. Peterson owned a residence as well as certain other rental property. During the marriage, the rental property was sold and the proceeds used to pay living expenses. In addition, a second mortgage in the amount of $15,000.00 was placed on her residence, the proceeds of which were also used to pay the couple's living expenses.
During the course of their marriage, the parties purchased a resort lot on Holiday Island, Arkansas with the intent of building a home for retirement. That lot is encumbered by a mortgage, but appears to have value in excess of that mortgage.
Mr. Peterson was employed at a General Motors Plant during much of the couple's marriage. However, due to plant closings, layoffs, and medical problems he was unable to work for substantial periods of time, contributing to the couple's financial instability. During the three full calendar years prior to dissolution of their marriage, Mr. Peterson had an annual income of approximately $26,000.00 to $28,000.00. At the time of dissolution he was receiving sick leave pay of approximately $340.00 per week. He is now retired from General Motors and is receiving pension benefits of approximately $1,375.00 per month. At the time of the dissolution the parties were aware that he would be retired and limited to that income. During the three calendar years prior to dissolution, Ms. Peterson had income of $12,000.00 to $14,000.00 per year.
Prior to dissolution of their marriage, the parties entered into an agreement entitled "Marital Property Settlement Agreement" (the "Settlement Agreement"). The Settlement Agreement, among other things, provided for the division of the marital and non-marital property, as well as the debts, of the parties. For purposes of this action, certain of those provisions will be described herein.
First, the Settlement Agreement required Mr. Peterson to make payments on the second mortgage that encumbers Ms. Peterson's residence, as well as certain unsecured charge card debts. Settlement Agreement, ¶ 12(b)(8). Mr. Peterson, however, did not agree to indemnify and hold Ms. Peterson harmless as to such obligations.
Second, the Settlement Agreement dealt with the Holiday Island, Arkansas real estate. Ms. Peterson was to transfer to Mr. Peterson any interest held by her in such property. Mr. Peterson was to be responsible for making all payments on the mortgage encumbering the property. The parties, however, recognized that Ms. Peterson remained liable to the mortgagee, North American Savings and Loan Association. Therefore, the agreement provided that, to the extent Ms. Peterson made any payments on the mortgage, Mr. Peterson would grant her a junior lien on the property. Settlement Agreement, ¶ 12(A). She has made no such payments. The Settlement Agreement also provided that any net proceeds realized from a sale of the Arkansas real estate would be divided equally between the parties. Id.
Third, the Settlement Agreement provided that certain personal savings and stock held by Mr. Peterson in the General Motors Benefit Package would be divided evenly, after payment of attorneys fees. Settlement Agreement, ¶ 12(B)(6). Mr. Peterson testified that subsequent to the execution of the Settlement Agreement he cashed out the assets held by him in the General Motors Benefit Package and paid to Ms. Peterson the sum of $1,500.00, representing her one-half interest. Ms. Peterson acknowledged that she had received $1,500.00. The evidence appears to be uncontradicted, and I so find, that Mr. Peterson complied with his obligation under paragraph 12(B)(6) of the Settlement Agreement. Therefore, it is not necessary to analyze the dischargeability of this obligation.
Fourth, the Settlement Agreement dealt with the pension benefits available to Mr. Peterson, who retired the same year of the dissolution. The parties had been married approximately 12 years, and Mr. Peterson had been employed at General Motors for 30 years. It was thus agreed that Ms. Peterson would be entitled to one-half of 12/30ths of each disbursement made by General Motors to Mr. Peterson. Settlement Agreement, ¶ 12(B)(5). Pursuant to this provision, General Motors is sending Ms. Peterson her share directly, in the amount of approximately $240.00 per month.
Finally, the Settlement Agreement provided that Mr. Peterson . Settlement Agreement, ¶ 12(B)(5). Apparently, unbeknownst to the parties at the time of the dissolution, such benefits were only available to an ex-spouse for three years after a marital dissolution. That period has now passed. Mr. Peterson has not made the required payments. Instead, Ms. Peterson has maintained her insurance by making payments herself, in the amount of approximately $198.00 per month.
In addition to dividing the marital and non-marital property, as well as the debts, the Settlement Agreement specifically provided that the parties waived any claim to statutory maintenance. Paragraph 10 of the Settlement Agreement states as follows:
Similarly, in the Decree of Dissolution of Marriage (the "Decree"), which was entered on November 28, 1988, the Circuit Court of Cass County, Missouri found as follows:
That the parties hereto have entered into a written Marital Property Settlement Agreement which makes full and final disposition of all property and provides that neither party shall receive maintenance from the other, and the Court finds that said Agreement is not unconscionable and is approved. . . .
The Decree went on to order that "neither party is awarded maintenance by the Court." Decree, p. 2.
A party who objects to the discharge of a particular debt has the burden of proving non-dischargeability. Bankruptcy Rule 4005. Pursuant to existing case law, and based upon the arguments presented by the parties, I will follow a three-step analysis in determining whether an obligation imposed pursuant to a settlement agreement between spouses is non-dischargeable. First, it must be determined whether the obligation is a "debt". See Bush v. Taylor, 912 F.2d 989 (8th Cir.1990). If so, the next issue is whether the debt is in the nature of alimony, maintenance, or support, and therefore not dischargeable under the Bankruptcy Code. 11 U.S.C. § 523(a)(5). Finally, even if the debt is found not to be alimony, maintenance, or support, there can nevertheless be a holding of non-dischargeability if it is found that the creditor-spouse accepted the settlement agreement in lieu of a valid claim for alimony, maintenance, or support. See In re Horton, 69 B.R. 42, 44 (Bankr. E.D.Mo.1986).
First, I find that two of Mr. Peterson's obligations do not constitute "debts". These are the obligation to allow a portion of his pension benefits to be paid to Ms. Peterson, and the obligation to share with her the proceeds from the sale of the Arkansas real estate. In Bush v. Taylor, the Eighth Circuit considered an ex-wife's claim to one-half of her ex-husband's pension benefits. There, the husband received the entire pension amount each month, and was responsible for cashing the check and paying his ex-spouse her share. The Court found first that the husband held each month's proceeds in constructive trust for the benefit of his ex-wife. Bush v. Taylor, 912 F.2d at 993. In the alternative, the Court found that to the extent the pension monies were not yet due and payable on the date the bankruptcy was filed, they did not represent pre-petition debts dischargeable under the Bankruptcy Code. Id. For both these reasons, the Court found that the filing of the bankruptcy did not trigger the Code's discharge provisions as to the ex-wife's right to receive a portion of the debtor's pension benefits.
I find that the reasoning of Bush v. Taylor is applicable to Ms. Peterson's right to receive a portion of the General Motors Pension Benefits. To the extent that Mr. Peterson might receive pensions monies due and owing Ms. Peterson, he would hold such funds in...
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