In re Renzulli

• Decision Date: 23 September 1982
• Docket Number: Bankruptcy No. 81 B 1895,Adv. No. 81 A 1362.
• Citation: 28 BR 41
• Parties: In re Edmund M. RENZULLI, Jr., Debtor. Barbara Lynn RENZULLI, n/k/a Barbara Lynn Zagors, Plaintiff, v. Edmund M. RENZULLI, Jr., Defendant.
• Court: U.S. Bankruptcy Court — Northern District of Illinois

28 B.R. 41 (1982)

In re Edmund M. RENZULLI, Jr., Debtor Barbara Lynn RENZULLI, n/k/a Barbara Lynn Zagors, Plaintiff, v. Edmund M. RENZULLI, Jr., Defendant.

Bankruptcy No. 81 B 1895, Adv. No. 81 A 1362.

United States Bankruptcy Court, N.D. Illinois, E.D.

September 23, 1982.

John D. Kightlinger, of Meinhardt & Kightlinger, Ltd., Arlington Heights, Ill., for Barbara Lynn Renzulli.

Michael H. Rotman, of Rotman, Medansky & Elovitz, Ltd., Chicago, Ill., for Edmund M. Renzulli, Jr.

ORDER

LAWRENCE FISHER, Bankruptcy Judge.

This matter coming on to be heard upon the Complaint of Barbara Lynn Renzulli, n/k/a Barbara Lynn Zagors, (hereinafter referred to as Barbara Lynn Renzulli) to determine the dischargeability of debt claimed to be nondischargeable pursuant to clause five of section 523(a) of the Bankruptcy Code, and upon the Defendant's Answer thereto, and the parties appearing by their respective attorneys; and

The Court having examined the pleadings filed in this matter and having received and examined the Memoranda of Law submitted by the parties in support of their respective positions, and having heard the arguments of counsel, and the Court being fully advised in the premises;

The Court Finds:

1. On February 23, 1981 Edmund M. Renzulli, Jr., Debtor herein, filed a voluntary petition in bankruptcy under chapter 7 of the Bankruptcy Code.

2. Barbara Lynn Renzulli and Edmund M. Renzulli, Jr. were married September 20, 1975 in Cook County, Illinois.

3. Said marriage was dissolved by a Judgment for Dissolution of Marriage entered February 22, 1979 in the Circuit Court of the Nineteenth Judicial Circuit, McHenry County, Illinois, under case number 78 D 225.

4. Incorporated within the Judgment for Dissolution of Marriage was the Marital Separation Agreement which provided in pertinent part as follows:

ARTICLE VIII

MAINTENANCE

Husband agrees and shall pay to Wife, as and for a lump sum settlement in lieu of all maintenance, alimony, support, property rights, or other marital rights, the sum of Fifty Thousand Four Hundred Dollars ($50,400.00), said sum to be paid in installments (periodic payments) in the manner set forth hereunder for a period in excess of ten (10) years and three (3) months, One Hundred Twenty-three, (123) months, commencing and following entry of a Judgment of Dissolution in the presently pending action.

A. The sum of Two Hundred Dollars ($200.00) upon the entry of a Judgment of Dissolution herein.

B. The sum of Twelve Hundred Fifty Dollars ($1,250.00) on the last day of March, 1979.

C. The balance of Forty Eight Thousand Nine Hundred Fifty Dollars ($48,950.00) paid in quarterly installments of Twelve Hundred Fifty Dollars ($1,250.00) each payable on June 30, September 30, and December 31, 1979, and on the like day of each year thereafter for a period of ten (10) years.

D. A final payment of Two Hundred Dollars ($200.00) payable on the last day of March, 1989.

It is further specifically understood by and between the parties that the remarriage of the Wife shall not in any way serve to diminish or to divest Wife of any part of the above payments.

It is further specifically understood and agreed by and between the parties that the Husband waives any claim to maintenance he may now have or hereinafter have from Wife.

5. Plaintiff claims that the obligation owed her by the Debtor constitutes maintenance and is therefore nondischargeable pursuant to section 523(a)(5) of the Bankruptcy Code. The Debtor argues that the Marital Separation Agreement defines the $50,400.00 obligation as a property settlement and as such is dischargeable under section 523(a)(5).

6. Section 523(a)(5) of the Bankruptcy Code provides in relevant part as follows:

(a) A discharge under 727, 1141, or 1328(b) of this title does not discharge an individual debtor from any debt —

. . . . .

(5) to a spouse, former spouse, or child of the debtor, for alimony to, maintenance for, or support of such spouse or child, in connection with a separation agreement, divorce decree, or property settlement agreement, but not to the extent that —

. . . . .

(B) such debt includes a liability designated as alimony, maintenance, or support, unless such liability is actually in the nature of alimony, maintenance, or support;

The Court Concludes and Further Finds:

1. The definition of alimony within the purview of the exception to dischargeability is firmly established by case law:

It is well established that "alimony does not arise from any business transaction, but from the relation of marriage. It is not founded on contract, express or implied, but on the natural and legal duty of the husband to support the wife," Audubon v. Shufeldt, 181 U.S. 575, 577, 21 S.Ct. 735, 736, 45 L.Ed. 1009 (1901) and it is the obligation based on this duty which is saved from discharge in bankruptcy by Section 17, sub. a(2) of the Act. Wetmore v. Markoe, 196 U.S. 68, 76, 25 S.Ct. 172, 175, 49 L.Ed. 390 (1904).

Norris v. Norris, 324 F.2d 826, 828 (9th Cir.1963). See Nichols v. Hensler, 528 F.2d 304, 307 (7th Cir.1976).

In determining what constitutes alimony, maintenance, or support for purposes of dischargeability, the actual purpose of the parties is controlling, and the bankruptcy court is not bound by the label which state courts place upon a decree. In re Woods, 561 F.2d 27, 29 (7th Cir.1977); In re Tilmon, 9 B.R. 979 (Bkrtcy.N.D.Ill.1980). In Nichols v. Hensler, 528 F.2d 304 (7th Cir. 1976), the Seventh Circuit Court of Appeals considered whether an obligation to make payments labelled alimony in an Indiana divorce decree were dischargeable in bankruptcy. The court stated that alimony for purposes of section 17a(7) of the Bankruptcy Act means "payments in the nature of support for a former spouse." Id. at 307-308.

While federal law provides the definition of alimony for purposes of dischargeability, an examination of state law may be necessary to ascertain the incidents of an award in order to determine whether it fits within that definition. In re Pelikant, 5 B.R. 404 (Bkrtcy.N.D.Ill.1980).

2. In the instant case, the Debtor raises two arguments for finding that the debt in question be discharged. First, he relies upon the fact that the Marital Separation Agreement provides that "the remarriage of the Wife shall not in any way serve to diminish or to divest Wife of any part of the above payments" as evidence that the obligation was one of property division. Debtor reasons that the nondefeasibility of the payments shows that they were not intended as support, since support payments terminate upon remarriage when the obligation shifts to another.

The Domestic Relations Act in effect at the time of the entry of the Judgment for Dissolution of Marriage herein provides in pertinent part as follows:

(b) the maintenance order shall be in such amounts and for such periods of time as the court deems just, without regard to marital misconduct, after consideration of all relevant factors, including:

(1) the financial resources of the party seeking maintenance, including marital property apportioned to him, and his ability to meet his needs independently.

Ill.Rev.Stat. ch. 40, § 504(b) (1979).

(b) the obligation to pay future maintenance is terminated upon the death of either party or the remarriage of the party receiving maintenance.

Ill.Rev.Stat. ch. 40, § 510(b) (1977).

The fact that Illinois law terminates the obligation to pay maintenance after the marriage of the party receiving maintenance, and the fact that the subject award states that the obligation shall not terminate upon remarriage of the wife, does not dictate that the subject award is not maintenance within the meaning and purview of section 523. The foregoing is a consideration in this Court's determination. However, it is not dispositive of the issue. Further, the cases cited by Debtor in support of his argument do not require such result. Debtor cites three California cases: Yarus v. Yarus, 178 Cal.App.2d 190, 3 Cal.Rptr. 50 (1960); Smalley v. Smalley, 176 Cal.App.2d 374, 1 Cal.Rptr. 440 (1959); Tropp v. Tropp, 129 Cal.App. 62, 18 P.2d 385 (1933). An analysis of each reveals that his reliance is misplaced.

In Yarus, the judgment provided that a sum was payable "solely by the way of property settlement, and not as a payment of alimony or support and maintenance." (Emphasis added) Yarus v. Yarus, 3 Cal. Rptr. at 57. The judgment further provided that upon the death or remarriage of the wife all payments required to be made by defendant shall cease. The court concluded that while monthly payments to the wife that cease upon her death or remarriage may commonly be found in judgments of alimony, a settlement of property rights may also so provide without thereby transforming the payments into the nature of alimony, support or maintenance. Id. at 58. Since the court held that defeasible payments can be incorporated within property settlements as well as payments of alimony, Yarus contradicts rather than comports with the Debtor's contention that a nondefeasibility clause is evidence of only a property settlement.

In Smalley, the wife waived all rights to support and alimony and the husband agreed to pay the wife $3,000.00 to equalize her interest in community property which was payable in $50.00 per month installments. The court found that there was no room for construction of the contract in the case. The amounts to be paid were specifically designed as the settlement of property rights. The right to alimony was explicitly waived. Contrary to the facts in Smalley, the Marital Separation Agreement before this Court contains language explicitly referring to maintenance and support payments. No explicit waiver of support or alimony payments has been made by Plaintiff in this case as there was in Smalley.

Finally, in Tropp, the decree in question contained two parts: the first provided for $250.00 per month for support until remarriage; the second provided for the payment of...