In re Van Dermark, Case No. 06-35493-BJH-13 (Bankr. N.D. Tex. 2/1/2008)
| Decision Date | 01 February 2008 |
| Docket Number | Case No. 06-35493-BJH-13. |
| Parties | IN RE: JEFFREY TODD VAN DERMARK, Debtor. |
| Court | U.S. Bankruptcy Court — Northern District of Texas |
Jeffrey Todd Van Dermark (the "Debtor") filed a voluntary petition for relief under Chapter 13 on December 8, 2006. Before the Court is the Debtor's objection to the claim of Laurie Van Dermark ("Van Dermark"), the Debtor's ex-wife. The Court has jurisdiction over the subject matter and parties pursuant to 28 U.S.C. § 1334. This is a core proceeding. 28 U.S.C. § 157(b)(2)(B). For the reasons set forth below, the objection to Van Dermark's claim is overruled.
The Debtor and Van Dermark were divorced in the Superior Court of Coweta County in the State of Georgia (the "Georgia State Court") prior to the Debtor's bankruptcy filing. Ex. 1. Van Dermark was represented in the divorce by the law firm of Rosenzweig, Jones & McNabb (the "Firm"). Pursuant to the terms of the agreement between Van Dermark and the Firm, Van Dermark was required to pay the Firm's invoices upon their receipt. Ex. 2.
On November 17, 2006, the Georgia State Court entered a Final Judgment and Decree of Divorce, nunc pro tunc to September 13, 2006 (the "Divorce Decree"). Section 10 of the Divorce Decree provides that the Debtor "shall also be responsible for paying [the Firm] $25,000 attorneys' fees for [Van Dermark] within 90 days of the date of this Order." Ex. 1, § 10.
However, the Firm requested that Van Dermark pay the Firm (in accordance with her contractual agreement with the Firm) and that she then collect the $25,000 directly from the Debtor. Ex. 2. Van Dermark agreed, and paid the Firm's fees, in their entirety, on December 7, 2006 (the day before the Debtor's bankruptcy filing).1 According to Van Dermark, at the time she paid the Firm, the Firm orally assigned to her the right to collect from the Debtor the $25,000 that the Debtor had been ordered to pay in the Divorce Decree. However, that assignment was not reduced to writing until December 18, 2007, see Ex. 2 (the "Assignment"), shortly before the hearing on the Debtor's objection to Van Dermark's claim. The Assignment recites that an oral assignment of the right to collect $25,000 took place on December 7, 2006, over a year earlier, when Van Dermark paid the Firm's fees. The Assignment also purports to assign to Van Dermark "retroactively effective to December 7, 2006, any and all claims and legal rights under the Divorce Decree to collect $25,000 from Jeffrey Van Dermark." Ex. 2.
The day after Van Dermark paid the Firm's fees, the Debtor filed his petition for bankruptcy relief in this Court. On Schedule E, the Debtor listed Van Dermark as a creditor holding a priority domestic support obligation claim, but he did not list any amount owing to her, and he indicated that she was listed for "notice only." On Schedule F, the Debtor listed the Firm as being owed a $25,000 unsecured claim for attorneys' fees.
On March 6, 2007, Van Dermark filed a timely proof of claim for $25,000, which was assigned Claim No. 5 on the Court's claims register ("Claim 5").2 Claim 5 was filed as an unsecured, priority claim pursuant to 11 U.S.C. § 507(a)(1)(A), as Van Dermark argues it is a "domestic support obligation" under the Bankruptcy Code. See 11 U.S.C. § 101(14A).
On October 19, 2007, the Chapter 13 Trustee (the "Trustee") filed the "Trustee's Recommendation Concerning Claims, Objection to Claims and Plan Modification (If Required)" (the "TRCC"), in which the Trustee asserted that the $25,000 claim scheduled as being owed to the Firm should be disallowed on the ground that no proof of claim had been filed. The Trustee also recommended that Claim 5 be allowed, but be paid "direct by Debtor."
Van Dermark objected to the TRCC. She asserted that 11 U.S.C. § 1322(a)(2) requires that the Debtor's plan provide for the full payment of all claims entitled to priority under Section 507, unless the holder of the claim agrees to a different treatment, and that she had not agreed to accept treatment of her claim outside the plan. The Debtor also objected to the TRCC (on grounds unrelated to the Trustee's proposed treatment of Claim 5) and objected to Claim 5, alleging that it should be disallowed because
The Court held a hearing on the Debtor's objection to Claim 5 on December 20, 2007. As noted previously, two days before that hearing, Van Dermark obtained the Assignment, which she argued memorialized her prior oral assignment. Faced with the Assignment at the December 20, 2007 hearing, the Debtor then argued that Claim 5 is not entitled to priority status under Section 507(a)(1). Because that argument had not previously been raised, the Court granted the parties' request to file post-hearing briefs. The last of the post-hearing briefs was filed on January 7, 2008, following which the Court took the Debtor's objection to Claim 5 under advisement. However, the Court had further questions to ask of the parties after reviewing those briefs, and thus the Court held a further telephonic hearing on January 14, 2008.
The Debtor's arguments have evolved in light of the Assignment.3 As it currently stands, the Debtor argues that Claim 5 is not entitled to priority under Section 507(a)(1) for the simple reason that the claim for attorneys' fees was awarded to the Firm, and that Van Dermark, as assignee of the Firm, can obtain no greater rights than the Firm held when the claim was assigned, even though she is the Debtor's former spouse. Section 507(a)(1) gives first priority to allowed unsecured claims for domestic support obligations that, as of the date of the filing of the petition . . . are owed to or recoverable by a spouse, former spouse, or child or the debtor, or such child's parent, legal guardian, or responsible relative . . . ." As the Firm is none of these entities, the Debtor argues that the Firm was never entitled to priority and therefore, as the Firm's assignee, neither is Van Dermark. The Debtor also argues that the Firm is not an entity that can assert a claim for a "domestic support obligation" as that term is defined in Section 101(14A) of the Bankruptcy Code.
In contrast, Van Dermark argues that on the date of the Debtor's bankruptcy filing, the debt in question was (i) owed to her (by virtue of the Assignment) as required by Section 507(a)(1), and (ii) the debt was "recoverable by" her "both because she owned the claim and by virtue (or as recognized) [sic] of the operation of 11 U.S.C. § 501(b) which allows a person co-liable with the Debtor to file a proof of the claim if the primary claim holder does not do so." Moreover, Van Dermark points out that the Fifth Circuit has previously held that "an award of attorneys' fees to the law firm of the debtor's child's mother in a state court paternity proceeding met the § 523(a)(5) requirement that the debt be `to a spouse, former spouse or child of the debtor.'" Br. In Supp. Of Priority Claim of Laurie Van Dermark, p. 5.
After carefully considering the parties' arguments, the Court concludes that they are largely irrelevant, as the dispute surrounding the Assignment is of no real consequence. Rather, the Court concludes that under the Bankruptcy Code's extremely broad definition of the term "claim" and Georgia law,4 Van Dermark held a direct claim against the Debtor on the date the Divorce Decree was signed.5 In other words, Van Dermark was a "creditor" of the Debtor long before the Assignment was ever made orally or reduced to writing and executed.6
The Court comes to this conclusion for the following reasons. First, the Bankruptcy Code defines the term "debt" as meaning "liability on a claim." 11 U.S.C. § 101(12). The term "claim" is defined in the Bankruptcy Code as a "right to payment, whether or not such right is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed, legal, equitable, secured or unsecured." 11 U.S.C. § 101(5)(A). This definition of the term "claim" is intentionally broad. See In re Egleston, 448 F.3d 803, 812 (5th Cir. 2006) (). State law determines the substance of claims; the validity of a creditor's claim against a debtor at the time the bankruptcy petition is filed is determined by reference to state law. Carrieri v. Jobs.com, Inc., 393 F.3d 508, 529 (5th Cir. 2004).
As relevant here, under Georgia's domestic relations law,
(a) The grant of attorney's fees as part of the expenses of litigation, made at any time during the pendency of the litigation, whether the action is for alimony, divorce and alimony, or contempt of court arising out of either an alimony case or a divorce and alimony case, including but not limited to contempt of court orders involving property division, child custody, and child visitation rights, shall be:
(1) Within the sound discretion of the court, except that the court shall consider the financial circumstances of both parties as a part of its determination of the amount of attorney's fees, if any, to be allowed against either party; and (2) A final judgment as to the amount granted, whether the grant is in full or on account, which may be enforced by attachment for contempt of court or by writ of fieri facias, whether the parties subsequently reconcile or not.
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(c) An attorney may bring an action in his own name to enforce a grant of attorney's fees made to him pursuant to this Code Section.
Ga. Code Ann. § 19-6-2 (West 2007). Therefore, while an attorney may bring an action in his own name to enforce an award of attorneys' fees in a divorce action, the divorce...
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