McCafferty, In re

• Decision Date: 18 September 1996
• Docket Number: No. 95-3919,95-3919
• Citation: 96 F.3d 192
• Parties: , Bankr. L. Rep. P 77,090 In re Robert C. McCAFFERTY, Debtor. Robert C. McCAFFERTY, Petitioner-Appellee, v. Marion McCAFFERTY, Respondent-Appellant.
• Court: U.S. Court of Appeals — Sixth Circuit

Page 192

96 F.3d 192

65 USLW 2239, Bankr. L. Rep. P 77,090

In re Robert C. McCAFFERTY, Debtor Robert C. McCAFFERTY, Petitioner-Appellee, v. Marion McCAFFERTY, Respondent-Appellant.

No. 95-3919.

United States Court of Appeals, Sixth Circuit.

Argued Aug. 6, 1996.

Decided Sept. 18, 1996.

Carl D. Rafoth, James B. Dietz (argued and briefed), Friedman & Rummel Co., Youngstown, OH, for petitioner-appellee.

Marc E. Dann (argued and briefed), Marilyn M. McMillin (briefed), Betras & Dann, Youngstown, OH, for respondent-appellant.

Before: LIVELY, KENNEDY, and SILER, Circuit Judges.

LIVELY, Circuit Judge.

The question raised by this appeal is whether a portion of a husband's state government pension awarded to his former wife in a divorce decree is a dischargeable debt in the husband's subsequent bankruptcy proceeding. The bankruptcy court held that the obligation imposed upon the husband was dischargeable, and the district court agreed. We have appellate jurisdiction under 28 U.S.C. § 158(d) (1988).

I.

Robert C. McCafferty and Marion McCafferty were married in 1969. In 1992, Mr. McCafferty filed for divorce in the Court of Common Pleas in Columbiana County, Ohio. In a February 1993 order, the court granted the divorce and determined that the proceeds from a sale of the parties' marital property--including a marital residence and various household items--would be divided equally between the parties. The court also found that 97 percent of Mr. McCafferty's pension through the State Teachers Retirement System (STRS) had accrued during the marriage and held that Ms. McCafferty was entitled to one-half of the value of the pension on the date of the divorce, or $100,250.21. The court noted that the $100,250.21 judgment was awarded to Ms. McCafferty "as a distribution of her interest in [Mr. McCafferty]'s In addition, the court ordered Mr. McCafferty to pay all the joint debts of the marriage, with the exception of the debts against the marital residence, which were to be paid from the proceeds of its sale, and to pay Ms. McCafferty $200 per week in spousal support payments from March 1993 until March 1998.

                retirement plan" and called the award a "property distribution."   Mr. McCafferty was ordered to pay the $100,250.21 judgment in installments of $1,500 each month, beginning in January 1998.  At the time of the decree, Mr. McCafferty had not yet retired and had earned 24 years of service credit under the STRS
                

Mr. McCafferty filed a petition for relief under Chapter 7 of the Bankruptcy Code, 11 U.S.C. § 701 et seq. (1988), seven months after the entry of the divorce decree. He listed Ms. McCafferty as a holder of unsecured debts. On October 28, 1993, Mr. McCafferty filed an adversary complaint in the bankruptcy court to seek discharge from the judgment of $100,250.21 and the joint debts that he was obligated to pay under the divorce order. Ms. McCafferty filed an answer and counterclaim asserting that the distribution and liability for joint debts under the divorce decree were in the nature of alimony, maintenance or support and therefore exempt from discharge under 11 U.S.C. § 523(a)(5) (1988).

At the request of Ms. McCafferty, the bankruptcy court modified the automatic stay in order to permit the parties to seek clarification from the state court of its February 1993 divorce order. After Ms. McCafferty filed a motion for clarification in the state court, the state court issued a nunc pro tunc judgment entry that overruled her motion, but which stated that the distribution of the STRS benefits and the order to pay joint debts were intended as a property division, not as a spousal support award.

Both parties then filed motions for summary judgment in the bankruptcy proceeding. Ms. McCafferty argued, in relevant part, that because the February 1993 divorce order immediately divested Mr. McCafferty of any equitable interest in her share of the retirement account, the $100,250.21 judgment could not be included in the debtor's bankruptcy estate or treated as a dischargeable debt. See 11 U.S.C. § 541(d) (1988). On June 24, 1994, the bankruptcy court rejected Ms. McCafferty's argument, relying on the analysis of In re Calhoun, 715 F.2d 1103, 1109-10 (6th Cir.1983) (determining whether a debtor's assumption of joint debts pursuant to a pre-petition divorce decree was in the nature of spousal support or a property division), and granted summary judgment in favor of Mr. McCafferty. The court found that under Calhoun, the obligations at issue were dischargeable since the nunc pro tunc judgment entry by the domestic relations court unequivocally stated that the obligations were intended to operate as a property division. Ms. McCafferty appealed the decision to district court. The district court upheld the decision, also relying on Calhoun.

II.

On appeal, Ms. McCafferty seeks review only of the bankruptcy court's treatment of her claim to the retirement benefits as a dischargeable debt. She does not contest Mr. McCafferty's discharge from their joint debts. Citing In re Wilson, 158 B.R. 709, 711 (Bankr.S.D.Ohio 1993), and similar cases, Ms. McCafferty has reasserted her argument that by virtue of the divorce decree, her share of the pension benefits was her sole and separate property held in constructive trust by her former husband and could not be considered property of Mr. McCafferty's bankruptcy estate. In the alternative, she urges this court to adopt the approach of the Court of Appeals for the Eighth Circuit in Bush v. Taylor, 912 F.2d 989, 993 (8th Cir.1990) (en banc), which found in part that a debtor's continuing obligation to pay his ex-wife, in monthly installments, a portion of his retirement benefits did not constitute a pre-petition debt because his obligation to pay did not mature until the fifteenth of each month.

Mr. McCafferty, in turn, insists that the bankruptcy court properly applied the Calhoun analysis and that his ex-wife's constructive trust theory was foreclosed by In re Omegas Group, Inc., 16 F.3d 1443 (6th Cir.1994), which was decided four months before The bankruptcy court's decision to grant summary judgment was based purely on a conclusion of law. In re Batie, 995 F.2d 85, 88 (6th Cir.1993). Accordingly, the district court's de novo review of that decision is reviewed under a de novo standard by this court as well. Id. at 88-89.

                the bankruptcy court rendered its decision but not relied upon by the bankruptcy court.  In light of Omegas Group, Mr. McCafferty contends his ex-wife could not maintain successfully that she was the equitable owner of assets held by him in constructive trust at the time the bankruptcy case commenced unless she could show that another court had already imposed such a constructive trust.  See id. at 1449.   This, he says, she could not do.  As to the unmatured debt theory, Mr. McCafferty argues that the theory was not presented before either the bankruptcy court or the district court and thus should not be considered on appeal.  He contends that the Bankruptcy Code's broad definition of a dischargeable "debt" would clearly encompass his pension obligation to his former wife.  See 11 U.S.C. §§ 101(5), (12) (Supp.  II 1990)
                

III.

A.

Summary judgment under Fed. R. Civ. P. 56(c), made applicable to bankruptcy adversary proceedings by Fed R. Bankr.P. 7056, is appropriate where there is no genuine issue of material fact and the moving party is entitled to judgment as a matter of law. See Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S.Ct. 2548, 2552, 91 L.Ed.2d 265 (1986). Any inferences to be drawn from the underlying facts must be viewed in the light most favorable to the party opposing the motion. Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587, 106 S.Ct. 1348, 1356, 89 L.Ed.2d 538 (1986). The parties agree that the case presents no factual issues and that it was properly subject to summary judgment. Their disagreement, of course, concerns who was entitled to that judgment. Thus, we now examine the applicable law.

B.

We agree with the district court's conclusion that Mr. McCafferty's obligation to his ex-wife with respect to the STRS benefits could not be exempted from discharge under 11 U.S.C. § 523(a)(5). Section 523 of the Bankruptcy Code provides:

(a) A discharge under section 727, 1141,, [sic] 1228(a), 1228(b), or 1328(b) of this title does not discharge an individual debtor from any debt--

* * * * * *

(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....

11 U.S.C. § 523(a)(5). ¹ Where the state court or the parties to the divorce did not intend to create an obligation in the nature of support, that obligation cannot qualify for a section 523(a)(5) exemption. Calhoun, 715 F.2d at 1109. Here, as the district court found, the state court clearly indicated that the pension distribution was not intended to be a spousal support award, so Ms. McCafferty was not entitled to prevail under 11 U.S.C. § 523(a)(5). Nevertheless, the applicability of section 523(a)(5) and Calhoun is simply irrelevant if, as Ms. McCafferty claims, her share in pension benefits was not eligible for discharge because it was never part of the bankruptcy estate. We believe Ms. McCafferty's constructive trust argument, perfunctorily dismissed by the district court as "misplaced," requires further discussion.

C.

Section 541 of the Bankruptcy Code states that the bankruptcy estate is comprised of "all legal or equitable interests of the debtor in property as of the commencement of the case." 11 U.S.C. § 541(a)(1) (1988). However, section 541(d) provides that "[p]roperty in which the debtor holds ... only legal title and not an equitable interest ... becomes property of the estate ... only to the extent of the debtor's legal title to such property, but not to the extent of any equitable interest in...