In re Wisniewski

• Decision Date: 12 January 1990
• Docket Number: Adv. No. 89-0097.,Bankruptcy No. 89-00183
• Citation: 109 BR 926
• Parties: In re Wayne Douglas WISNIEWSKI, Debtor. F. William RUSSO, Plaintiff, v. Wayne Douglas WISNIEWSKI, Defendant.
• Court: U.S. Bankruptcy Court — Eastern District of Wisconsin

109 B.R. 926 (1990)

In re Wayne Douglas WISNIEWSKI, Debtor F. William RUSSO, Plaintiff, v. Wayne Douglas WISNIEWSKI, Defendant.

Bankruptcy No. 89-00183, Adv. No. 89-0097.

United States Bankruptcy Court, E.D. Wisconsin.

January 12, 1990.

COPYRIGHT MATERIAL OMITTED

Diane Loftus, Milwaukee, Wis., for F. William Russo.

Wayne Douglas Wisniewski, pro se.

DECISION

M. DEE McGARITY, Bankruptcy Judge.

This proceeding is an offshoot of that most bitter and contentious form of litigation — the divorce of parents and the disputed custody of their minor children. The plaintiff was the former wife's attorney. The debtor/defendant is the former husband, who is obligated by the judgment of divorce to pay a portion of the attorney fees incurred by his former wife in the divorce action. The attorney asks that this court find those fees nondischargeable as support; the debtor asks that they be discharged as property division. For the reasons stated herein, I find that the debtor's obligation is nondischargeable.

BACKGROUND

Linda and Wayne Wisniewski were married in 1983. Two children were born to the couple: Chrisanne, born September 30, 1983, and Nicholaus, born October 6, 1986. When the marriage soured, Linda initially moved out and left the children with Wayne. During that time, there was a temporary order requiring that she pay $200 per month child support. Later, she requested sole custody as part of the final judgment. After three days of trial, the circuit court awarded her custody on November 28, 1988. Wayne was ordered to pay child support of 25% of his gross income from all sources in accordance with the support standards required by Wis. Stat. § 767.25(1j), with the initial amount set at $545.24 per month.

The remaining issues incident to the divorce were resolved by agreement and placed on the record on December 5, 1988. Maintenance (alimony) was waived by Linda. Wayne received the homestead valued at $26,000 and subject to a lien of $44,000, and vacant land in Rusk County, Wisconsin, valued at $5,000 and subject to a lien of $3,000. Other assets were nominal, with the result that the estate to be divided had a negative value. Wayne's pension plan was to be divided in kind at a later date. The major debts were for Wayne's attorney fees for several attorneys that represented him in the divorce, and for which only he was liable. He was the only liable party on the home mortgage. Wayne also agreed to pay $2,000 to the plaintiff, Linda's attorney. The attorney was given a lien on the Rusk County land to secure those fees, but Wayne filed his Chapter 7 bankruptcy before the divorce judgment was entered or recorded. Consequently, the lien is unperfected and is not at issue. Wayne's property is sufficiently minimal to be within the federal exemptions, and the trustee filed his report of no distribution. Additional facts will appear in the discussion section of this decision.

DISCUSSION

Stated simply, 11 U.S.C. § 523(a)(5)¹ makes obligations owed for alimony, maintenance and support of a child or former spouse nondischargeable. Conversely, obligations arising out of a property division are dischargeable. The determination of the category of a particular obligation, however, is not simple. Bankruptcy courts must fit those obligations into pigeon holes for which they were not intended, because neither the parties nor the divorce court contemplated the effect of a subsequent bankruptcy when the obligation arose. This court cannot say that when Linda and Wayne negotiated the attorney fee provision in their divorce judgment that they consciously intended for it to be either property division or support; to form such intent they would have to have known the legal consequences of a bankruptcy that might follow. In re Alloway, 37 B.R. 420, 425 (Bankr.E.D.Pa.1984). They were wrapping up a bitter fight, and this provision was just part of the package. They did not intend to classify the obligation; they only intended that it be paid. This court must, therefore, determine their constructive intent. To do so, the court must measure the effect or function of this provision as revealed by the acts and circumstances of the spouses at the time of the divorce. Id.; In re Jenkins, 94 B.R. 355, 360 (Bankr.E.D.Pa.1988).

A number of principles must be applied when bankruptcy courts determine whether an obligation is excepted from the discharge by 11 U.S.C. § 523(a)(5). Federal, not state, law determines the result, although the court may be guided and informed by the way the obligation is characterized by the state court and by how the particular obligation is addressed by state law. Shine v. Shine, 802 F.2d 583, 585 (1st Cir.1986); In re Messnick, 104 B.R. 89 (Bankr.E.D.Wis.1989); In re Hicks, 65 B.R. 227, 228 (Bankr.D.N.M.1986). The parties' circumstances at the time of the divorce control, not their circumstances at the time of the bankruptcy. Sylvester v. Sylvester, 865 F.2d 1164, 1166 (10th Cir.1989); In re Fryman, 67 B.R. 112 (Bankr.E.D.Wis. 1986). The burden of proof is on the party objecting to the discharge. Messnick, supra at 92. Jenkins, supra at 359. The standard for such proof is by the preponderance of the evidence. Messnick, supra; In re Borbidge, 90 B.R. 728, 734 (Bankr.E. D.Pa.1988). Exceptions to discharge must be narrowly construed in favor of the debtor. Shine, supra; Messnick, supra at 92. If necessary, the bankruptcy court can look beyond the judgment of divorce and beyond the evidence before the divorce court to evaluate the circumstances of the parties, which will in turn assist in classifying the obligation as support or property division. See Roberts v. Poole, 80 B.R. 81 (N.D.Tex. 1987).

When an obligation does not clearly fall into the category of support or of property division, bankruptcy courts have assembled a number of factors that can be applied to aid in the inquiry.² Obviously, not all of these factors will apply in a particular case, but in general, an obligation that is based on the recipient's need for support and financial resources, that is extended over time, and that is contingent upon future events will be determined to be for support and nondischargeable. An obligation that balances a division of property and is payable to a spouse that has no need for current or future support will be dischargeable as property division. An obligation to pay the former spouse's attorney fees is analyzed using these same factors.

Bankruptcy courts have usually found that attorney fees awarded on a spouse's behalf are nondischargeable support rather than property division. In most, if not all, states, a spouse has a duty to support the other spouse, and the ability to prosecute or defend a matrimonial action is necessary for the support of the dependent spouse. In re Spong, 661 F.2d 6, 9 (2nd Cir.1981). A spouse's need may extend to an action for custody of minor children as well as for the divorce action itself, and these fees will also be nondischargeable, provided that other factors indicating support are present.³ In re Gedeon, 31 B.R. 942, 945 (Bankr.D.Colo.1983). This is not to say that attorney fees always are categorized as support. If such an award balances the property division and neither party requires additional support, it is likely to be dischargeable. See, e.g., In re Kijewski, 91 B.R. 48 (Bankr.N.D.Ill. 1988); In re Vande Zande, 22 B.R. 328 (Bankr.W.D.Wis.1982).

The duty to support may be solely or primarily that of the husband, as is the case in some states, or it may be equal as in Wisconsin. See Wis.Stat. § 49.90(1m). In any case, for the obligation to be nondischargeable under 11 U.S.C. § 523(a)(5), it must arise because one party needs the attorney's services and the other party has the duty to support and the ability to pay. If the court had awarded the fees, it would have had to make such a finding. Anderson v. Anderson, 72 Wis.2d 631, 242 N.W.2d 165 (1976); Selchert v. Selchert, 90 Wis.2d 1, 280 N.W.2d 293 (Ct.App.1979). The amount of the fees must, of course, be reasonable. Id. Here, the obligation arose by agreement, and the agreement was incorporated in the final judgment. This court is satisfied that the requisite need, duty to support and ability to pay nevertheless existed both in fact and within the understanding of the parties. Consequently, the debtor's obligation to his former wife's attorney is excepted from discharge under 11 U.S.C. § 523(a)(5). Matter of Coil, 680 F.2d 1170 (7th Cir. 1982).

Wayne argues that the fact Linda waived maintenance and she was employed shows she did not need the payment to her attorney as support. While this is one factor tending to show that the obligation is property division, the inquiry does not stop there. The absence of maintenance is not conclusive to show that support is not needed or intended. See In re West, 95 B.R. 395 (Bankr.E.D.Va.1989). The evidence showed that Linda was in need of financial support to continue this action. The judgment stated that her gross income at the time was $1,447.79, and her take-home pay was $1,107.50. Actually, her final financial declaration had been prepared by her attorney from earlier information, and Linda acknowledged that she had a 6% raise by the time of trial. This would make her take-home pay $1,173.95. Although she was receiving $545.24 in child support, Linda testified that her child care cost was $400 per month, leaving only $145 for all other expenses of two children, one of whom was still in diapers. There were a few expenses listed on the financial declaration that should also have been updated at the time of trial, but Linda's overall expenses approximated her income. This obviously does not leave room for much in the way of additional expenses, such as attorney fees. Russo stated that the amount incurred for the entire proceeding was about $8,400 in fees and costs, $7,000 of which has never been paid. There is no cushion in her stated budget, but even if Linda could squeeze...