In re Taylor

• Decision Date: 05 May 2011
• Docket Number: Adversary No. 11–1020 J.,Bankruptcy No. 7–10–15832 JA.
• Citation: 455 B.R. 799
• Parties: In re Eloisa Maria TAYLOR, Debtor.Matthew E. Taylor, Plaintiff,v.Eloisa Maria Taylor, Defendant.
• Court: U.S. Bankruptcy Court — District of New Mexico

455 B.R. 799

In re Eloisa Maria TAYLOR, Debtor.Matthew E. Taylor, Plaintiff,

v.Eloisa Maria Taylor, Defendant.

Bankruptcy No. 7–10–15832 JA.

Adversary No. 11–1020 J.

United States Bankruptcy Court, D. New Mexico.

May 5, 2011.

Bonnie B. Gandarilla, Koo Im S. Tong, Albuquerque, NM, for Plaintiff.Karl F. Kalm, Albuquerque, NM, for Defendant–Debtor.

MEMORANDUM OPINION

ROBERT H. JACOBVITZ, Bankruptcy Judge.

THIS MATTER is before the Court on the Debtor's Motion to Dismiss Matthew E. Taylor's Complaint Objecting to Dischargeability of Debts (“Motion to Dismiss”) filed by Defendant Eloisa Maria Taylor. The Court heard oral argument on the Motion to Dismiss on April 7, 2011 and took the matter under advisement. At the final hearing on the Motion to Dismiss, Bonnie B. Gandarilla represented the Plaintiff, Matthew E. Taylor, and Karl F. Kalm represented the Defendant, Eloisa Maria Taylor. Defendant requests dismissal of Plaintiff's Complaint Objecting to Discharge (“Complaint”) under Rule 12(b)(6), Fed.R.Bankr.P., made applicable to adversary proceedings by Rule 7012, Fed.R.Bankr.P., for failure to state a claim upon which relief can be granted.

Plaintiff filed this adversary proceeding to seek a determination of non-dischargeability of a debt consisting of an overpayment of spousal support. Plaintiff asserts that the debt is non-dischargeable under one or more of the following non-dischargeability provisions: 1) 11 U.S.C. § 523(a)(2)(A) as a debt procured by false pretenses, a false representation or actual fraud; 2) 11 U.S.C. § 523(a)(5) as a domestic support obligation; or 3) 11 U.S.C. § 523(a)(15) as a debt that is not a domestic support obligation but otherwise incurred in connection with a divorce decree or other order of a court and owed to a former spouse. After consideration of the Motion to Dismiss in light of the applicable code sections and case law, and being otherwise sufficiently informed, the Court finds that the Complaint fails to state a claim under 11 U.S.C. § 523(a)(2)(A) or 11 U.S.C. § 523(a)(5), but states a claim under 11 U.S.C. § 523(a)(15). The Court will, therefore, grant the Motion to Dismiss in part, and deny the Motion to Dismiss as to Plaintiff's claim under 11 U.S.C. § 523(a)(15).

STANDARD FOR EVALUATING A MOTION TO DISMISS UNDER RULE 12(b)(6)

A motion to dismiss for failure to state a claim is governed by Rule 12(b)(6), Fed.R.Civ.P., made applicable to adversary proceedings by Rule 7012, Fed.R.Bankr.P. The purpose of a motion to dismiss under Rule 12(b)(6), Fed.R.Civ.P. is to test “the sufficiency of the allegations within the four corners of the complaint after taking those allegations as true.” Mobley v. McCormick, 40 F.3d 337, 340 (10th Cir.1994). In considering a motion to dismiss, the Court must evaluate the facts alleged in the complaint in the light most favorable to the plaintiff. Moore v. Guthrie, 438 F.3d 1036, 1039 (10th Cir.2006). To survive a motion to dismiss under Rule 12(b)(6), Fed.R.Civ.P., the complaint must contain enough facts to state a cause of action that is “plausible on its face.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007). In other words, the plaintiff must “nudge [his] claims across the line from conceivable to plausible.” Id.

In applying this standard, the trial court should “ ‘look to the specific allegations in the complaint to determine whether they plausibly support a legal claim for relief.’ ” Alvarado v. KOB–TV, L.L.C., 493 F.3d 1210, 1215, n. 2 (10th Cir.2007) (quoting Miller v. Glanz, 948 F.2d 1562, 1565 (10th Cir.1991)). The Court must not “weigh the potential evidence that the parties might present at trial” in order to test the sufficiency of the complaint for purposes of Rule 12(b)(6). Sutton v. Utah State Sch. For the Deaf & Blind, 173 F.3d 1226, 1236 (10th Cir.1999) (citation omitted). Nevertheless, to withstand dismissal, the plaintiff must sufficiently allege all facts necessary to support the required elements under the legal theory proposed. Forest Guardians v. Forsgren, 478 F.3d 1149, 1160 (10th Cir.2007).

FACTUAL ALLEGATIONS CONTAINED IN THE COMPLAINT ¹

The Complaint alleges that Plaintiff and Defendant were married in 1988 and later divorced by Final Decree of Divorce entered on September 22, 2005 by the Circuit Court of Fairfax County, Virginia (“State Court”). See Complaint ¶ ¶ 4 and 5. The Final Decree of Divorce obligated Plaintiff to pay Defendant spousal support. Id. at ¶ 9. In April of 2009, Plaintiff filed a motion in State Court to terminate spousal support, which the State Court granted. Id. at ¶ 10 and ¶ 11. The debt at issue in this adversary proceeding consists of the judgment entered by the State Court against Defendant (“Judgment”) in the amount of $40,660.59 representing overpayment of spousal support by Plaintiff to Defendant from May 15, 2009 through August 29, 2010, plus interest at the judgment rate for that period. Id. The Judgment also awarded Defendant $10,000.00 in attorneys' fees that Defendant seeks the Court to determine is non-dischargeable. Id. The Defendant filed a voluntary petition under Chapter 7 of the Bankruptcy Code on November 22, 2010.

DISCUSSION

A. Whether the Complaint states a cause of action under 11 U.S.C. § 523(a)(2)(A)

Plaintiff contends that Defendant knew that she was not entitled to continue to receive spousal support payments and that, therefore, she obtained spousal support from Plaintiff by false pretenses, a false misrepresentation, or actual fraud within the meaning of 11 U.S.C. § 523(a)(2)(A).²See Complaint, ¶¶ 14 and 15. To prevail on a non-dischargeability claim based on false pretenses, a false representation or actual fraud, a plaintiff must demonstrate, by a preponderance of the evidence, that: “[t]he debtor made a false representation; the debtor made the representation with the intent to deceive the creditor; the creditor relied on the representation; the creditor's reliance was [justifiable] ³; and the debtor's representation caused the creditor to sustain a loss.” Fowler Bros. v. Young, (In re Young), 91 F.3d 1367, 1373 (10th Cir.1996). Plaintiff's Complaint fails to allege facts sufficient to support all of the required elements for non-dischargeability under 11 U.S.C. § 523(a)(2)(A).

Plaintiff alleges that Defendant misrepresented facts relating to her cohabitation in a relationship analogous to marriage. In order to rely on a misrepresentation, Plaintiff necessarily must first be deceived. “[A] person cannot rely on a representation if ‘he knows that it is false or its falsity is obvious to him.’ ” In re Apte, 180 B.R. 223, 229 (9th Cir. BAP 1995), aff'd, 96 F.3d 1319 (9th Cir.1996) (quoting In re Kirsh, 973 F.2d 1454, 1456 (9th Cir.1992)) (per curiam) (quoting Restatement (Second) of Torts § 545A.541 (1977)). Plaintiff filed a motion in the State Court to terminate spousal support in April of 2009 on the ground that Defendant was cohabitating in a relationship analogous to marriage, contrary to the requirements under Virginia law for continued receipt of spousal support. The State Court entered its Judgment for overpayment of spousal support during the period from May 15, 2009 through August 20, 2010. Because the Judgment awarding Plaintiff overpayment of spousal support is based solely on spousal support payments due after Plaintiff filed his motion to terminate, he could not have relied on Defendant's alleged misrepresentation when continuing to make spousal support payments after filing the motion in April of 2009. By April of 2009 Plaintiff already knew or believed that Defendant was not entitled to receive continued spousal support payments. He was not, therefore, deceived by any misrepresentation as to Defendant's right to continue to receive spousal support after April 1, 2009, and could not have made such payments in reliance on any misrepresentation by Plaintiff. Plaintiff argued that his continued payments of spousal support after the filing of the motion to terminate spousal support evidences reliance. The Court disagrees. There simply can be no reliance when the Plaintiff has not been deceived; his belief that Defendant misrepresented whether she was cohabitating contrary to the requirements under Virginia law for continued receipt of spousal support is what prompted Plaintiff to seek termination of his obligation. Similarly, because Plaintiff believed that Defendant was no longer entitled to receive spousal support, Plaintiff's loss was not caused by his reliance on Defendant's alleged deception.⁴ Because the allegations in the Complaint, even if accepted as true, fail to state sufficient facts to establish all elements necessary to establish a non-dischargeability claim based on false representations, false pretenses, or actual fraud, the Court will grant Defendant's motion to dismiss Plaintiff's claim under 11 U.S.C. § 523(a)(2)(A).

B. Whether the Complaint states a claim under 11 U.S.C. § 523(a)(5)

Pursuant to 11 U.S.C. § 523(a)(5), domestic support obligations are not dischargeable in bankruptcy. “Domestic support obligation” is defined by 11 U.S.C. 101(14A), which provides:

The term ‘domestic support obligation’ means a debt that accrues before, on, or after the date of the order for relief in a case under this title, including interest that accrues on that debt as provided under applicable nonbankruptcy law notwithstanding any other provision of this title, that is—

(A) owed to or recoverable by—

(i) a spouse, former spouse, or child of the debtor or such child's parent, legal guardian, or responsible relative; or

(ii) a governmental unit;

(B) in the nature of alimony, maintenance, or support (including assistance provided by a governmental unit) of such spouse, former spouse, or child of the debtor or such child's parent, without regard to whether such debt is expressly so designated;

(C) established or subject to establishment before, on, or after the date of the order for relief in a case...