Ramirez, In re

• Decision Date: 04 August 1986
• Docket Number: No. 84-2612,84-2612
• Parties: , Bankr. L. Rep. P 71,293 In re Joe P. RAMIREZ, Jose Presiado Ramirez. COUNTY OF SANTA CLARA, Appellant, v. Joe P. RAMIREZ, Jose Presiado Ramirez, Appellees.
• Court: U.S. Court of Appeals — Ninth Circuit

Page 1494

795 F.2d 1494

55 USLW 2179, Bankr. L. Rep. P 71,293

In re Joe P. RAMIREZ, Jose Presiado Ramirez.

COUNTY OF SANTA CLARA, Appellant, v. Joe P. RAMIREZ, Jose Presiado Ramirez, Appellees.

No. 84-2612.

United States Court of Appeals, Ninth Circuit.

Argued and Submitted Aug. 12, 1985.

Decided Aug. 4, 1986.

Gloria F. DeHart, Dist. Atty. Gen., San Francisco, Cal., for appellant.

Mary S. Reiss, Phillips & Reiss, Burlingame, Cal., for appellees.

Appeal from the United States District Court for the Northern District of California.

Before TANG, and FERGUSON, Circuit Judges, and GRAY, ^* District Judge.

OPINION

TANG, Circuit Judge:

The County of Santa Clara (the "County") appeals from the district court's affirmance of the bankruptcy court's decision that a parent's debt to the County for reimbursement of Aid for Families with Dependent Children ("AFDC") payments made to his spouse for the support of their two minor children is dischargeable in bankruptcy. The County made the AFDC payments during a period when Mr. Ramirez was under no support order nor any dissolution decree or separation agreement requiring support. We affirm.

I. BACKGROUND

Jose and Yolanda Ramirez were married in February 1973 and subsequently parented two children. In July 1977 they separated, but without a dissolution decree or court order for alimony or child support.

In December 1979, Mrs. Ramirez requested AFDC from the County. As a condition of eligibility for aid she was required to assign to the County any accrued rights to support from Mr. Ramirez which she had in behalf of herself or her children. Cal.Welf. & Inst.Code Sec. 11477(a); 42 U.S.C. Sec. 602(a)(26).

In September 1980, the County filed an action against Mr. Ramirez pursuant to section 11350 of the California Welfare and Institutions Code seeking reimbursement for the AFDC benefits the County had provided Mrs. Ramirez and her children. Mr. Ramirez failed to appear or answer. A default judgment in the sum of $14,750 was entered in April 1981 against Mr. Ramirez for AFDC payments to Mrs. Ramirez between November 1977 and January 1981. (There is no explanation why the judgment covered AFDC payments beginning in November 1977 when Mrs. Ramirez did not seek AFDC until December 1979.) The court also ordered Mr. Ramirez to pay $250 a month child support to Mrs. Ramirez commencing January 1, 1981.

After entry of judgment, the County began garnishing Mr. Ramirez's wages for reimbursement of AFDC benefits. In April 1982, Mr. Ramirez filed a petition for Chapter 7 bankruptcy. Mr. Ramirez owned no real property, possessed $1,317 worth of personal property, and earned less than $17,000 during the two years preceding his bankruptcy. In his Chapter 7 petition Mr. Ramirez listed four creditors: one secured creditor, to whom he owed $563.00; an attorney, to whom he owed $226.58; Mrs. Ramirez, to whom he owed $3,750.00 for child support (for the fifteen months since the court support order); and the County, to which he owed $14,825.00 under the judgment for AFDC reimbursement. On April 16, 1982, the bankruptcy court granted Mr. Ramirez a discharge of all dischargeable debts.

On July 12, 1982, Mr. Ramirez filed a complaint in bankruptcy court to determine the dischargeability of the judgment debt to the County for AFDC reimbursement. The bankruptcy court entered an order discharging the debt and granting Mr. Ramirez's motion for summary judgment.

The County appealed to the district court. The district court concluded that the debt to the County for reimbursement of AFDC payments was dischargeable, and affirmed the decision of the bankruptcy court. The County timely appeals.

II. STANDARD OF REVIEW

This appeal involves the interpretation of federal and California law and is reviewable de novo. In re McLinn, 739 F.2d 1395, 1397-98 (9th Cir.1984) (en banc); United States v. McConney, 728 F.2d 1195, 1201 (9th Cir.) (en banc), cert. denied, --- U.S. ----, 105 S.Ct. 101, 83 L.Ed.2d 46 (1984).

III. DISCUSSION

This case presents conflicting policies of bankruptcy law, which ordinarily permits the dischargeability of debt, and family law, which obligates parents to support their minor children. Mr. Ramirez concedes a currently existing and continuing obligation to pay $250 a month for direct support of his children, and that this obligation is not dischargeable in bankruptcy. He seeks only to have discharged his $14,750 judgment debt to the County for AFDC benefits paid to his spouse. He asserts that discharge of his past debt will enable him to meet current support obligations to his children.

11 U.S.C. Sec. 523(a)(5)(A)

Ordinarily, all debts are dischargeable in bankruptcy. Oregon v. Richards, 45 B.R. 811, 812 (D.Or.1984). The bankruptcy code, however, provides an exception to this general rule in 11 U.S.C. Sec. 523(a)(5)(A). It does not permit a debtor to discharge in bankruptcy any debt

to a spouse, former spouse, or child of the debtor, for alimony to, maintenance for, or support of such a spouse or child, in connection with a separation agreement, divorce decree, or property settlement agreement, but not to the extent that--

(A) such a debt is assigned to another entity, voluntarily, by operation of law, or otherwise (other than debts assigned pursuant to section 402(a)(26) of the Social Security Act [42 U.S.C. Sec. 602(a)(26) ]; ...

11 U.S.C. Sec. 523(a)(5)(A) (emphasis added). In other words, a debt is not dischargeable if (1) it was incurred in connection with a separation agreement or divorce decree, and (2) it was assigned pursuant to 42 U.S.C. Sec. 602(a)(26).

The County contends that the debt at issue here was assigned pursuant to 42 U.S.C. Sec. 602(a)(26), as implemented by Cal.Welf. & Inst.Code Sec. 11477(a). The County's contention fails, however, because the first requirement for nondischargeability was not met. Under the plain language of section 523(a)(5)(A), Mr. Ramirez's debt was dischargeable because it did not arise from a "separation agreement, divorce decree or property settlement." This interpretation was the basis of the decision of the bankruptcy and district courts. Both courts relied on In re Leach, 15 B.R. 1005, 1008 (Bankr.D.Conn.1981), which held that a debt to the state for AFDC reimbursement which did not arise in connection with a separation agreement, divorce decree or property settlement is not excepted from discharge under section 523(a)(5)(A).

42 U.S.C. 656(b)

The County also argues that 42 U.S.C. Sec. 656(b) excepts Mr. Ramirez's debt to the County for reimbursement of AFDC payments from discharge. Section 656(b) provides:

A debt which is a child support obligation assigned to a State under section 602(a)(26) of this title is not released by a discharge in bankruptcy under Title 11.

Mr. Ramirez's debt would thus be excepted from discharge if it had been assigned to the County under 42 U.S.C. Sec. 602(a)(26). That section requires state programs for aid to dependent families to provide that as a condition of eligibility for aid, each applicant must "assign the State any rights to support ... which have accrued at the time the assignment is executed." (emphasis added) This requirement is implemented by the State of California in a statute with identical language. Cal.Welf. & Inst.Code Sec. 11477(a) (West 1980).

Our inquiry, then, must focus on whether Mr. Ramirez's debt to the County arose from Mrs. Ramirez's assignment of accrued rights to support and is thus nondischargeable under 42 U.S.C. Sec. 656(b). ¹ We conclude, as did both courts below, that Mr. Ramirez's debt to the County did not arise from Mrs. Ramirez's assignment of accrued rights because our analysis reveals that Mrs. Ramirez had no accrued rights.

The determination of child support rights is a matter of state statutory and common law. Under California law, "absent a dissolution decree ordering support payments, the parent with custody bears full responsibility for the support of the child." In re Marriage of O'Connell, 80 Cal.App.3d 849, 855, 146 Cal.Rptr. 26, 30 (1978). ² "[A] mother cannot claim reimbursement for money paid out in support of a child prior to an order of the court directing the father to pay support to meet the current needs of the child." Amie v. Superior Court, 99 Cal.App.3d 421, 425, 160 Cal.Rptr. 271, 272-73 (1979) (quoting Bierl v. McMahon, 270 Cal.App.2d 97, 105, 75 Cal.Rptr. 473, 475 (1969) ). See also In re Marriage of Koppelman, 159 Cal.App.3d 627, 633-34, 205 Cal.Rptr. 629 (1984); Dimon v. Dimon, 40 Cal.2d 516, 524, 254 P.2d 528 (1953).

In Amie, 99 Cal.App.3d at 425, 160 Cal.Rptr. at 272, the County sought reimbursement of public assistance funds based on the theory that the right to reimbursement is ancient and well-established. The Amie court held, however, that noncustodial parents had never been required to reimburse either their spouses or their children in the absence of an agreement or order. Id. The court further noted that although a minor child could sue for support in his or her own name, a child had never attempted to obtain reimbursement from a noncustodial parent for past support. Id. at 426, 160 Cal.Rptr. at 273. Thus, if Mrs. Ramirez, instead of the County, had provided the funds necessary to raise her children after her separation from their father until the state court support order in 1980, neither Mrs. Ramirez nor her children would have any right to be reimbursed for any part of the expenditure. Id. at 425-26, 160 Cal.Rptr. at 273. ³

The Seventh Circuit's treatment of a similar issue in In re Stovall, 721 F.2d 1133 (7th Cir.1983), may be distinguished from the case before us. In In re Stovall, the noncustodial parent was obliged pursuant to a divorce decree to pay $80.00 per week in child support. At the time of the separation, which occurred approximately a year prior to the divorce, Mrs. Stovall applied for and began receiving AFDC benefits, as a condition of which she assigned her right to support to the Illinois...