In re Reid
| Decision Date | 31 August 2022 |
| Docket Number | CASE NUMBER NO. 19-62673-LRC |
| Parties | In the MATTER OF: Jeffrey Paul REID, Debtor. |
| Court | United States Bankruptcy Courts. Eleventh Circuit. U.S. Bankruptcy Court — Northern District of Georgia |
Alexander Gray Hait, Hait & Kuhn, Woodstock, GA, for Debtor.
Jeffrey Paul Reid ("Debtor") objects to a claim filed by his former spouse, Angela Link ("Link") against his Chapter 13 bankruptcy estate because the amount is overstated and the claim is not entitled to priority status as a "domestic support obligation" ("DSO"). Debtor has moved for summary judgment sustaining his objection (Doc. 97, the "Motion"). In opposition, Link asserts that genuine issues of material fact remain in dispute as to the intent of the parties at the time of their divorce and whether Link is entitled to attorney's fees for pursuing a contempt action against Debtor in Cobb County Superior Court (the "State Court"). This matter constitutes a core proceeding over which this Court has subject matter jurisdiction. See 28 U.S.C. §§ 1334 ; 157(b)(2)(B).
Debtor and Link were divorced on or about May 7, 2018, pursuant to an order of the Cobb County Superior Court (the "State Court") and an amended final decree filed on or about September 24, 2018 (the "Final Decree,"). Debtor's Statement of Undisputed Material Facts ("SUMF"), ¶ 6; Doc. 83 (Debtor's Hearing Exhibit 2). In the section titled "Debts," the Final Decree states that the parties "have a joint debt with the IRS" resulting from a jointly filed tax return for the year 2015. The Final Decree provides that "[Debtor] shall be responsible for this debt." It appears that Debtor then filed married, filing separately for tax year 2016, and Debtor owed money as a result. The Final Decree clarifies that only Debtor is obligated on this debt and that Link is not responsible for this debt. The Final Decree also states, "Other than as set forth above, each party shall be solely responsible for his and her individual debts."
At the time of the divorce, Link was working 20 hours per week at $15 per hour, while Debtor was earning $2,449.20. SUMF, ¶ 8. The Final Decree ordered that (1) Debtor would pay $500 per month in child support to Link; (2) Link would receive $70,000 of Debtor's 401k account and Debtor would receive the remaining $51,000; (3) Link was awarded the marital home and all its contents, but was not required to pay the monthly mortgage payment because foreclosure of the home was expected in the near future; (4) Link was awarded a 2015 Toyota that was encumbered and ordered to pay the payment on the debt, while Debtor was awarded a 2004 Toyota that was not encumbered; (5) Debtor was ordered to pay the parties’ joint tax liability for the tax year 2015 (the "2015 Tax Obligation"); and (6) both parties waived any right to alimony. Id. , ¶¶ 7, 9, 10, 11-12.
Debtor filed a voluntary petition under Chapter 13 of the Bankruptcy Code on August 12, 2019. Id. , ¶ 1. Link filed Proof of Claim Number 3 in the amount of $9,350.07, which was comprised of $2,476.07 for reimbursement for medical bills, $3,694 arising from the IRS’ application of Link's tax refunds to the payment of Debtor's 2015 tax liability; and attorney's fees of $3,180 for filing a contempt action against Debtor in the State Court. Id. , ¶ 5; see also Proof of Claim Number 3 (the "Claim"). Debtor objected to the Claim, and the parties entered a consent order regarding a portion of the Claim. Id. , ¶ 4; see also Doc. 64. Link filed a voluntary petition under Chapter 7 of the Bankruptcy Code (Case Number 21-51633, "Link's Case"). Link received her discharge. Id. , ¶ 13.
In the Motion, Debtor asserts that the amounts sought for attorney's fees and the debt arising from the loss of Link's tax refund: (1) should not exceed $994; and (2) are not entitled to priority treatment because they are not debts arising from a DSO within the meaning of the Bankruptcy Code. In response, Link argues that facts remain in dispute that are necessary for the Court to consider when determining whether the parties intended Debtor's payment of the debt at issue to provide support for Link. The facts Link believes are relevant to this inquiry include: (1) the parties were married for sixteen years; (2) Debtor was a long-term employee of Verizon, where he earned between $80,000 and $100,000 per year; (3) after the parties separated, Link was not able to find full-time employment; (4) shortly after the parties’ minor child turned 18, Debtor was quickly able to obtain a higher-paying position; (5) early in the marriage, the parties had agreed that Link would give up her career to be a stay-at-home parent; during the divorce negotiations, the parties agreed that Debtor would pay the 2015 Tax Obligation and give the marital residence with its equity to Link in exchange for not being responsible for payment of alimony and additional child support; (6) during the marriage, Debtor was responsible for filing the tax returns, and the 2015 tax liability was the result of Debtor's failure to report properly his income to the Internal Revenue Service (the "IRS"); (7) the IRS seized Link's 2016 and 2017 tax refunds to pay the 2015 Tax Obligation; and (8) Link was forced to hire an attorney to enforce the terms of the divorce decree and incurred attorney's fees in the process. Additionally, as a matter of law, Link argues that the fact that she has not been awarded attorney's fees by the State Court is not a bar to this Court's determining that such fees are also in the nature of support.
"Because [Link] would bear the burden of proof at trial, [Debtor] may support his motion by either showing ‘an absence of evidence to support [Link's]’s case’ or, alternatively, by presenting ‘affirmative evidence demonstrating that [Link] will be unable to prove [her] case at trial.’ " In re Colin , 546 B.R. 455, 459 (Bankr. M.D. Ala. 2016). Debtor has essentially relied on the plain language of the Final Decree, along with one additional fact regarding the parties’ expectation that the marital home would be foreclosed on shortly after the divorce. The Court notes that neither party has followed proper procedure regarding supporting and opposing a motion for summary judgment. Debtor has not cited to any materials in the record to support the portion of his statement of undisputed facts that is not drawn from the Final Decree itself. See In Re Schweitzer, 2015 WL 5918031, at *2 (Bankr. N.D. Ohio Oct. 8, 2015) () (quoting Celotex Corp. v. Catrett , 477 U.S. 317, 323, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986) ). And Link failed to cite materials in the record, such as an affidavit, to support the additional facts that she asserts remain in dispute and are material. See In re Lett , 2021 WL 1821885, at *2 (). Simply arguing in a brief that additional facts would make a difference to the Court's legal analysis, as Link has done here, does not aid the Court in determining whether an evidentiary hearing can be avoided.
That being said, this Court must "resolve all reasonable doubts about the facts in favor of the non-movant, and draw all justifiable inferences in his or her favor." Fitzpatrick v. City of Atlanta, 2 F.3d 1112, 1115 (11th Cir. 1993). The determination of whether a debt is a DSO is highly factual, there do appear to be disputes of fact that bear on the parties’ intent at the time of the divorce, and facts remain unknown to the Court that could bear on this issue (for example, although the Court knows the amount of the 2015 Tax Obligation paid by Link, neither party has disclosed the total amount of the 2015 Tax Obligation). For these reasons, the Court will not grant summary judgment. To guide the parties as they prepare for an evidentiary hearing, the Court includes an analysis of the legal issues.
To determine the proper amount and priority of Link's proof of claim, the Court must determine the amount that Link paid toward the 2015 Tax Obligation and whether the 2015 Tax Obligation is a DSO. If it is a DSO, it is entitled to be paid as a priority claim under § 507(a)(1)(A). If it is not a DSO, the amount paid can be allowed as a general unsecured claim. As to the amount, there is no dispute that the IRS withheld Link's 2017 tax refund in the amount of $994 and applied it to the 2015 Tax Obligation. However, the Debtor contends there is no proof that Link's 2016 tax refund was also applied to the 2015 Tax Obligation. Link stated in her brief that the IRS withheld her 2016 tax refund in the amount of $2,799, but "had not yet applied that amount to the outstanding [2015 Tax Obligation] due to a pending innocent spouse petition filed by [Link]." In her statement of material facts that remain subject to dispute, Link states that the IRS seized her 2016 and 2017 tax refunds to pay the 2015 Tax Obligation. Thus, the Court assumes that Link will be able to present evidence at an evidentiary hearing that the IRS withheld her 2016 tax refund to pay the 2015 Tax Obligation. Again, it would have been helpful if Link had filed an affidavit so stating.
As to whether the 2015 Tax Obligation is a DSO, the Bankruptcy Code defines a DSO as "a debt that accrues before, on, or after the [petition date], including interest ... that is owed to or recoverable by ... a former spouse ... [and is] in the nature of alimony...
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