In re Snider

• Decision Date: 12 June 1986
• Docket Number: Adv. No. 85-0319-B1.,Bankruptcy No. 85-00408-B3-5
• Citation: 62 BR 382
• Parties: In re David K. SNIDER, Debtor. Vernon B. HILL, Jr. & Ruben R. Pena, Plaintiffs, v. David K. SNIDER, Defendant.
• Court: U.S. Bankruptcy Court — Southern District of Texas

62 B.R. 382 (1986)

In re David K. SNIDER, Debtor Vernon B. HILL, Jr. & Ruben R. Pena, Plaintiffs, v. David K. SNIDER, Defendant.

Bankruptcy No. 85-00408-B3-5, Adv. No. 85-0319-B1.

United States Bankruptcy Court, S.D. Texas, Brownsville Division.

June 12, 1986.

Baldemar Cano, Jr., Pharr, Tex., for debtor.

Ruben R. Pena, Jones, Galligan, Key & Pena, Weslaco, Tex., for plaintiffs.

MEMORANDUM OPINION

MANUEL D. LEAL, Bankruptcy Judge.

The issue presented is whether the attorney's fees incurred by a former spouse in post-dissolution child custody litigation are non-dischargeable under 11 U.S.C. § 523(a)(5). Trial of this matter occurred on March 7, 1986, both sides appeared through their attorneys, presented evidence and post trial memoranda of law.

This Court concludes after analyzing the facts of this case, that plaintiffs have met their burden in proving that the attorney's fees incurred were in the nature of child support and, as such, are non-dischargeable in the amount of $21,500.

FACTS

Debtor David K. Snider was divorced from his former spouse, Karen Flores (Ms. Flores), by an agreed decree of divorce entered on October 30, 1978 in the 139th State District Court of Hidalgo County, Texas. The decree named Mr. Snider managing conservator of the couple's only child, John David Grey-Snider, with the mother named possessory conservator. The divorce decree also provided that the managing conservatorship would be automatically transferred to the child's mother if the debtor remarried, and "all costs of court expended in this action are adjudged against the Petitioner David Snider for which let Execution issue." Both spouses subsequently remarried. Ms. Flores commenced litigation to modify the prior divorce decree in order to be named the managing conservator of their child. A jury trial was commenced on January 3, 1984 which lasted ten days. The jury found

from a preponderance of the evidence that the circumstances of JOHN DAVID GREY-SNIDER or DAVID K. SNIDER or KAREN GREY FLORES have so materially and substantially changed since the entry of the Divorce Decree of October 30, 1978, that the retention of the present managing Conservator, DAVID K. SNIDER, would be injurious to the welfare of the child, and that appointment of KAREN GREY FLORES as the new Managing Conservator would be a positive improvement for the child.

Exh.I.C. Order Modifying Court Decree in Suit Affecting Parent Child Relationship 2.03

The Court appointed Ms. Flores managing conservator and expressly stated

3.05. Orders in Best Interest of Child: The Orders of the Court, set forth below, are in the best interest of the child in this case

Included in the court's order were three provisions on attorney's fees. They stated

4.11. Attorneys\' Fees: DAVID K. SNIDER shall pay directly to VERNON B. HILL, JR. and RUBEN R. PENA reasonable attorneys\' fees in the sum of $12,000.00, to be taxed as costs. Said attorneys may enforce this Order for fees in their own names.

4.12. Costs of Court: Costs of court in this cause are taxed against Respondent, DAVID K. SNIDER.

4.13. Appellate Fees and Costs: In the event Respondent, DAVID K. SNIDER, appeals this cause, appellate fees and costs shall be taxed as follows:

a. Appeal to Court of Appeals: If this cause is appealed to the Court of Appeals, it is not carried by appeal or writ of error the Supreme Court of Texas, and Movant, KAREN GREY FLORES, prevails, David K. Snider shall pay directly to VERNON B. HILL, JR. and RUBEN R. PENA reasonable attorneys\' fees in the sum of $5,000.00, and costs (including cost of transcript of trial) in the sum of $3,000.00, both of which awards may be enforced by said attorneys in their own names.

b. Action by Supreme Court: If the cause is carried subsequently to the Supreme Court of Texas by appeal or writ of error, and Movant, KAREN GREY FLORES, prevails, DAVID K. SNIDER shall pay directly to VERNON B. HILL, JR. and RUBEN R. PENA reasonable attorneys\' fees in the sum of $1,500.00, which award may be enforced by said attorneys in their own names.

Debtor appealed this order to the 13th Court of Civil Appeals of the State Court which affirmed the ruling in favor of Karen Flores. Debtor then filed a writ of error to the Texas Supreme Court which was dismissed on May 1, 1985.

Debtor, father possessory conservator, filed a petition under Chapter 11 of title 11 of U.S.C. on January 17, 1985. The case was converted to a Chapter 7 case by court order signed on February 27, 1986. On May 8, 1985 Vernon Hill, Jr. & Ruben R. Pena commenced this adversary proceeding styled a complaint to determine non-dischargeability of debt seeking a judgment that the $21,500. in attorneys fees incurred in the custody battle and expressly ordered by the state court were non-dischargeable under 11 U.S.C. § 523(a)(5). Debtor argues that the total amount of the fees are dischargeable or alternatively, that the fees for an appeal, costs of transcript and writ to the Texas Supreme Court are dischargeable.

Jurisdiction

A threshold issue in any contested matter or adversary proceeding is the jurisdiction of the bankruptcy court. 28 U.S.C. § 1334 vests original and exclusive jurisdiction in the district courts of all cases under title 11. 28 U.S.C. § 157 provides that the district court may provide that all cases under title 11 shall be referred to the bankruptcy court. The Chief District Judge of the Southern District of Texas signed an order entitled Order of Reference of Bankruptcy Cases and Proceedings Nunc Pro Tunc on August 9, 1984.

28 U.S.C. § 157(b) provides that the bankruptcy judge may enter final judgments in core proceedings and can submit proposed findings of fact and conclusions of law to the district court in a non-core related proceeding. Expressly included by Congress in the list of core proceedings are "determinations as to the dischargeability of particular debts." 28 U.S.C. § 157(b)(2)(I). Therefore, this Court has the power to enter a final judgment on the merits of the adversary proceedings.

11 U.S.C. § 523(a)(5) provides that a debt is non-dischargeable if it is

(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 other order of a court of record, or property settlement agreement, but not to the extent that —

(A) such debt is assigned to another entity, voluntarily, by operation of law, or otherwise (other than debts assigned pursuant to section 402(a)(26) of the Social Security Act, or any such debt which has been assigned to the Federal Government or to a state or any political subdivision of such State); or

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

Dischargeability must be determined by the substance of the liability rather than its form. Pepper v. Litton, 308 U.S. 295, 60 S.Ct. 238, 84 L.Ed. 281 (1939). The substance of the award must govern. Erspan v. Badgett, 647 F.2d 550, 555 (5th Cir.1981), cert. denied, 455 U.S. 945, 102 S.Ct. 1443, 71 L.Ed.2d 658 (1982). The crucial issue is the function the award was intended to serve. In re Williams, 703 F.2d 1055, 1057 (8th Cir.1983). Undertakings by one spouse to pay the other's debts including a debt to a lawyer for fees, can be support for bankruptcy purposes. The issue is "a question of fact to be decided by the bankruptcy court as trier of fact in light of all the facts and circumstances relevant to the intention of the parties." Id. at 1057-58. The bankruptcy court must decide each case upon its own facts and should determine the essence of the liability regardless of the label placed upon it by the parties. Ravin & Rosen, The Dischargeability in Bankruptcy of Alimony, Maintenance & Support Obligations, 60 Am.Bankr.L.J. 1, 9 (1986).

Whether a particular debt is a support obligation is a question of federal bankruptcy law, not state law. H.Rep. No. 595, 95th Cong. 1st Sess. 364 reprinted in 1978 U.S.Code Cong. & Ad.News 5787, 6319. See also In re Harrell, 754 F.2d 902, 904-05 (11th Cir.1985) (Congress, by using the word "nature" to modify support evidenced an intent that bankruptcy courts should not be bound by state court rules); In re Williams, supra at 1057 (State law characterization is not binding on bankruptcy court); Erspan v. Badgett, supra at 555 ("A federal court, for purposes of applying the federal bankruptcy laws, is not bound to the label that the state affixes to an award.") However, the Second Circuit has stated that "Congress could not have intended that federal courts were to formulate the bankruptcy law of alimony and support in a vacuum, precluded from all reference to the reasoning of the well-established law of the states." In re Spong, 661 F.2d 6, 9 (2d Cir.1981). Based on this analysis, this Court will look to the principles of state law in its interpretation of support, alimony or maintenance but will rest its ultimate decision upon federal bankruptcy considerations which require a case by case analysis regardless of state court labels.

Plaintiff's Hill and Pena have the burden of proving by a fair preponderance of the evidence that a particular debt is non-dischargeable. In re Bradford, 22 B.R. 899 (Bankr.W.D.Okla.1982) Intertwined with this evidentiary requirement, is the basic principle of bankruptcy that exceptions to discharge must be strictly construed against a creditor and liberally in favor of a debtor so that the debtor may be afforded a fresh start. Murphy & Robinson Inv. Co. v. Cross, 666 F.2d 873, 880 (5th Cir.1982).

A majority of the cases decided under § 523(a)(5) have held that an obligation to pay attorneys' fees is so tied up with the obligation of support as to be in the nature of support and excepted from discharge. In re Williams, supra at 1057; In re Spong, supra at 9; In re Gwinn, 20 B.R. 233, 234 (9th...