In re Shaver, CV-R-83-135-ECR

• Court: United States District Courts. 9th Circuit. United States District Courts. 9th Circuit. District of Nevada
• Writing for the Court: EDWARD C. REED, Jr.
• Citation: 40 BR 964
• Parties: In re Peter Frank SHAVER, Debtor. Nancy H. SHAVER, Plaintiff-Appellee, v. Peter Frank SHAVER, Defendant-Appellant.
• Docket Number: Bankruptcy No. 82-192,No. CV-R-83-135-ECR,Adv. No. 82-157.,CV-R-83-135-ECR
• Decision Date: 30 September 1983

40 B.R. 964 (1983)

In re Peter Frank SHAVER, Debtor.
Nancy H. SHAVER, Plaintiff-Appellee,
v.
Peter Frank SHAVER, Defendant-Appellant.

No. CV-R-83-135-ECR, Bankruptcy No. 82-192, Adv. No. 82-157.

United States District Court, D. Nevada.

September 30, 1983.

40 BR 965

Alan Smith, Reno, Nev., for defendant-appellant.

William Bernard, Reno, Nev., for plaintiff-appellee.

MEMORANDUM DECISION AND ORDER

EDWARD C. REED, Jr., District Judge.

Appellee initiated this case by a complaint in Bankruptcy Court asking that an obligation owed to her by Appellant, her former husband, be declared nondischargeable pursuant to 11 U.S.C. § 523(a)(5). The statute provides that bankruptcy does not discharge an individual debtor from any debt to a former spouse for alimony to, maintenance for or support of that spouse in connection with a divorce decree or property settlement agreement.

The marriage of the parties hereto was dissolved by a decree handed down by an Indiana Superior Court on June 27, 1979, after a trial. The decree provided for the custody of the parties' four children, ordered Appellant to pay child support in the amount of $1500 per month and further ordered him to pay to Appellee, "in final settlement of the property rights of the parties and division of marital assets," the sum of $150,000 in equal monthly installments of $2,000 each over a period of 75 months. Nothing was said as to the consequences of the death of either party prior to completion of the payments.

Subsequently, Appellant filed a motion to correct errors, which is an Indiana procedural requirement preparatory to appeal. While the motion was pending, extensive negotiations took place. Agreement was reached as to revisions to be made to the decree of divorce, the revisions being the result of input from the attorneys of both parties. The attorneys mutually presented their proposed revisions to the Superior Court Judge the evening of New Year's Eve, 1979. He signed an amended decree the same date, December 31, 1979.

The amended decree provided that "as and for Appellee's complete discharge of her marital and dower rights arising from the marriage," she was to be paid the sum of $197,300 in periodic payments over 121 months. The payments were to abate in the event of her death.

Thus, Appellant obtained smaller monthly obligations ($1500 per month for 100 months and then $1,000 per month for 21 months, after initial lump sum payments totalling $26,300), whereas Appellee would receive an extra $47,300 if she lived the whole 121 months. Testimony at a hearing in Bankruptcy Court indicated several reasons for the change. The smaller monthly

40 BR 966

payments would be easier for Appellant to make. Further, the change qualified him to deduct from his income, for income tax purposes, the amount of the payments to the extent they are includable in Appellee's gross income pursuant to 26 U.S.C. § 71. The extra $47,300 for Appellee was meant to represent interest for having to wait an extra 46 months before the whole amount was received, as well as to compensate her for the income tax liability arising from the change

After a hearing, U.S. Bankruptcy Judge Samuel J. Steiner ruled in favor of Appellee, holding that the $197,300 represents alimony, which is nondischargeable. In doing so, the Judge rejected Appellant's contention that the sum represents a property settlement, which would be a debt dischargeable in bankruptcy. Judge Steiner's opinion is reported at 27 B.R. 452.

Appellant's appeal to this Court brings into play Local Bankruptcy Rule 118. It provides that, in conducting review of a bankruptcy judge's order or judgment, the district judge may accept, reject or modify, in whole or in part, the order or judgment, "and need give no deference to the findings of the bankruptcy judge."

In their briefs on appeal, both sides agree that the ultimate issue is whether the debt from Appellant to Appellee represents a property settlement (dischargeable in bankruptcy) or alimony (nondischargeable). Appellant's major contentions are as follows:

(1) Under Indiana law, unless a spouse is so physically or mentally incapacitated as to be unable to support herself, a court may not award alimony except if the parties agree to it in writing; no written agreement was received in evidence by the Bankruptcy Court;

(2) The amended decree was intended to divide property; the income tax provisions of 26 U.S.C. § 71, taken advantage of by Appellant, apply to periodic payments under a property settlement as well as for alimony;

(3) No mention is made of "alimony" in the amended decree;

(4) The $197,300 amount in the amended decree is based on the $150,000 property settlement fixed in the original decree, plus interest to compensate Appellee for having to accept smaller monthly payments over a longer period of time; the $150,000 figure clearly was determined by the extent of the parties\' marital property; and

(5) Because there are no ambiguities in the amended decree, the Bankruptcy Judge erred in allowing parol evidence concerning the intent of the parties.

In turn, Appellee emphasizes the following significant facts:

(a) The $150,000 figure in the original decree was not conditioned by any provision for termination of monthly payments in the event of the death of Appellee; the amended decree specifies that monthly payments under the $197,300 figure shall abate upon her death;

(b) Appellant testified in a Bankruptcy

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