In re Stone, Bankruptcy No. 95-03837-TBB-7. Adversary No. 95-00437.

CourtU.S. Bankruptcy Court — Northern District of Alabama
Writing for the CourtTHOMAS B. BENNETT
Citation199 BR 753
PartiesIn re Mark Alan STONE, Debtor. Stephanie Leigh STONE, Plaintiff, v. Mark Alan STONE, Defendant.
Decision Date22 August 1996
Docket NumberBankruptcy No. 95-03837-TBB-7. Adversary No. 95-00437.

199 B.R. 753 (1996)

In re Mark Alan STONE, Debtor.
Stephanie Leigh STONE, Plaintiff,
Mark Alan STONE, Defendant.

Bankruptcy No. 95-03837-TBB-7. Adversary No. 95-00437.

United States Bankruptcy Court, N.D. Alabama, Southern Division.

August 22, 1996.

199 BR 754

James S. Witcher, Jr., Birmingham, Alabama, for Stephanie Leigh Stone.

Suzanne Yayman, Birmingham, AL, for Mark Alan Stone.


THOMAS B. BENNETT, Bankruptcy Judge.

A. Fact Environment1

Often a consequence of the ending of a marriage is financial difficulty for former spouses. This is just such a case. The marriage of Stephanie Leigh Stone (Mrs. Stone) and Mark Alan Stone (Mr. Stone) was dissolved by order of the Judicial Circuit Court of Jefferson County, Alabama entered on January 10, 1995 (Divorce Decree). The Stones' have one child who resides with Mrs. Stone. Under the Divorce Decree's terms, Mrs. Stone was awarded primary custody of the child.

Within six months of the divorce becoming final, on June 30, 1995, Mr. Stone filed a voluntary chapter 7 bankruptcy case. By October 2, 1995, in an attempt to avoid the discharge of certain marital debts made obligations owed by Mr. Stone under the terms of the Divorce Decree, Mrs. Stone filed an adversary proceeding requesting that certain of these debts be nondischargeable under 11 U.S.C. § 523(a)(15) as obligations not in the nature of alimony, maintenance, and/or support for which (i) Mr. Stone had the ability to pay, and (ii) the benefit of discharging these marital debts does not exceed the detriment to Mrs. Stone and/or the Stones' child from their discharge. In the alternative, Mrs. Stone has requested denial of discharge of her former husband under 11 U.S.C. § 727(a)(4)(A) for his alleged knowing and fraudulent making of a false oath or account in connection with his bankruptcy case.

At the commencement of trial, the parties stipulated that certain responsibilities of Mr. Stone set forth in the Divorce Decree are nondischargeable under 11 U.S.C. § 523(a)(5)2: (i) child support of five hundred fifteen dollars ($515.00) per month; (ii)

199 BR 755
health insurance coverage for Mrs. Stone and the child; (iii) payment of any medical bills incurred by Mrs. Stone and the child after the divorce but before the health insurance coverage was obtained; (iv) and payment of the child's reasonable and necessary college expenses. Also and under the terms of the Divorce Decree, periodic alimony has been waived by both Mr. and Mrs. Stone

As a result of the stipulations, the trial was of the exception to discharge contentions concerning three debts. One is Mr. Stone's obligation under the terms of the Divorce Decree to pay ten thousand dollars ($10,000.00) as alimony in gross in thirty-six monthly payments of two hundred seventy-seven dollars ($277.00) each. As of the date of the filing of his chapter 7 case, Mr. Stone's obligation had been reduced to eight thousand six hundred fifteen dollars ($8,615.00).3 The other two are Mr. Stone's responsibility for two credit card obligations: a MasterCard and a Rich's revolving charge account. The alimony in gross, the MasterCard, and the Rich's revolving charge account obligations are hereinafter collectively referred to as the Disputed Marital Debts.

At the time of the divorce, Mrs. Stone earned ten dollars and fifty cents ($10.50) an hour as a dental assistant. Her total income in 1994 was eighteen thousand seven hundred sixty-three dollars and seventy-five cents ($18,763.75). At the time of trial, she was being paid eleven dollars ($11.00) an hour and her monthly expenses were asserted to exceed one thousand eight hundred dollars ($1800.00). No evidence of or other information upon which the Court could determine her 1995 income or estimates of her 1996 income were presented by either of the parties. Also, the expense evidence for Mrs. Stone included various items vouched to be monthly when, in fact, they were for undefined periods such as a "summer" or a portion of a year.

At the time of the divorce, Mr. Stone was employed by Banctec and earned an aggregate of fifty-three thousand one hundred eighty-four dollars ($53,184.00) per year which included overtime pay, a bonus, and certain other employee benefits such as a 401(k) plan contribution. His testimony was that his net pay ranged from around two thousand one hundred dollars ($2100.00) to two thousand five hundred dollars ($2500) per month. His expenses were asserted to be approximately three thousand dollars ($3000.00) per month. Mr. Stone's bankruptcy schedules reflect a monthly income after various tax and wage related deductions of two thousand four hundred sixty-nine dollars and nineteen cents ($2469.19) with monthly expenses of two thousand six hundred thirty-six dollars and thirty-three cents ($2636.33). Subsequent to his divorce, Mr. Stone voluntarily left Banctec and obtained employment as a salesperson at Gateway Homes with a yearly salary of twenty-six thousand dollars ($26,000). He also moved so he could live at his parents' house to reduce living expenses. At the time of trial, his take home pay after payroll deductions was represented to be about one thousand six hundred dollars ($1600.00) per month, and his monthly expenses were asserted to be approximately two thousand dollars ($2000.00). No evidence was presented regarding either Mr. Stone's or Mrs. Stone's future financial prospects. Also, the evidence of Mr. Stone's financial status as of the date of filing of his bankruptcy case to and including trial is not as conclusive or believable as Mr. Stone asserts. This is due to his voluntary, uninterrupted payment of debts which are otherwise dischargeable or for which he is not liable — at least one SouthTrust Bank loan and an American Express credit card debt — coupled with the incurring of additional debt to pay off pre-bankruptcy indebtedness.

It was and is undisputed that Mr. Stone failed to schedule three debts in his bankruptcy petition. He did not list an indebtedness to American Express and two promissory notes evidencing two loans made by SouthTrust Bank. One of the SouthTrust Bank loans was to Mr. Stone's grandfather for the down payment on the Stone's marital home. No evidence was presented to demonstrate

199 BR 756
that Mr. Stone has ever been liable for repayment of this debt. The other was one cosigned by his father which was used as a bill consolidation loan. The monies obtained were used, at least in part, to repay Mr. Stone's pre-bankruptcy American Express credit card indebtedness. After filing his bankruptcy, Mr. Stone repaid his American Express credit card debt to the extent of three thousand twenty-six dollars and thirty-six cents ($3026.36). Mr. Stone presented no evidence that the American Express obligation was not dischargeable. The evidence presented was that at the time of and after filing bankruptcy, Mr. Stone has been paying both SouthTrust Bank obligations. Continued payment of these obligations is inconsistent with Mr. Stone's professed inability to pay obligations owed to Mrs. Stone which are the subject of this suit. Likewise, Mr. Stone equivocated about the date he borrowed additional monies to repay his American Express debt. He could not state whether it was before or after his bankruptcy case was filed

The only evidence presented at trial for Mr. Stone's failure to schedule at least one of the two SouthTrust Bank loans for which he believes he has an obligation to repay — the one for which no evidence exists to prove his liability — and the American Express credit card debt was Mr. Stone's mistaken understanding that a debt which he planned to pay in full did not have to be scheduled in his bankruptcy petition. This was not controverted by any evidentiary facts presented by Mrs. Stone.

Further casting a pale on the credibility of Mr. Stone's testimony regarding his financial capacity is his deposition testimony of January 16, 1996, during which he did not disclose various financial obligations and expenses. Yet at trial these obligations and expenses were disclosed for the first time in an attempt to avoid the impact of an exception to discharge of the Disputed Marital Debts. So, too, for his inconsistent statements at trial regarding his income and expenses in response to questions by his counsel versus his answers to Mrs. Stone's counsel's inquiries. Based on the absence of evidentiary facts in the record coupled with the Court's discounting of Mr. Stone's credibility, insufficient facts were present at trial to enable the Court to determine the ability to pay of Mr. Stone under 11 U.S.C. § 523(a)(15)(A) and the benefit-detriment comparison of 11 U.S.C. § 523(a)(15)(B).

Although in the majority of cases involving exceptions to discharge, evidence is presented by both parties to a sufficient degree and quality to allow the trier of fact to rule without dealing with which party bears the burden of proof on a particular aspect of a case, this is not such a case. Here, resolution of the exception to discharge of the Disputed Marital Debts of Mr. Stone under § 523(a)(15) is required to be resolved by determination of who is assigned the burdens of proof for subsections (A) or (B) of 11 U.S.C. § 523(a)(15).4 Making this determination is complicated by the fact that this Court must allocate the burdens of proof from the environment of an increasingly unclear body of case law taking divergent and often conflicting positions on who must prove what under § 523(a)(15). Before addressing this burden of proof allocation, one preliminary issue needs to be resolved: are the three types of disputed marital debts in the nature of alimony, maintenance, and support within the scope of 11 U.S.C. § 523(a)(5)?

B. In the Nature of Alimony, Maintenance, or Support

Mrs. Stone claims as one basis for the exception to discharge of the Disputed Marital Debts that they are in the nature of alimony maintenance, and/or support under 11 U.S.C. §...

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