Rogers v. Rogers

• Citation: 51 Va. App. 261,656 S.E.2d 436
• Decision Date: 12 February 2008
• Docket Number: Record No. 0608-07-1.
• Court: Virginia Court of Appeals
• Parties: Jerry D. ROGERS v. Deborah N. ROGERS.

656 S.E.2d 436

51 Va. App. 261

Jerry D. ROGERS v. Deborah N. ROGERS.

Record No. 0608-07-1.

Court of Appeals of Virginia.

February 12, 2008.

S. Neil Stout (Michael W. Bohner; Stout, Billy & Seli, P.C., on brief), Richmond, for appellant.

Breckenridge Ingles (Martin, Ingles & Ingles, Ltd., on brief), Gloucester, for appellee.

Present: KELSEY, HALEY and BEALES, JJ.

JAMES W. HALEY, JR., Judge.

In this appeal concerning spousal support, the various assignments of error by Jerry D. Rogers (husband) are interdependent. We consolidate those necessary for present resolution. Husband contends the trial court: (1) erred in finding husband had not presented evidence of prior business expenses at an earlier hearing, to permit a comparison with current business expenses, and (2) erred in considering husband's pending bankruptcy proceeding in determining present spousal support. We reverse and remand for a new hearing consistent with our decision, upon such evidence as the parties may then adduce.¹ We deny wife's request for costs and attorney fees associated with this appeal.

FACTS AND ANALYSIS

We recite only those facts necessary for resolution of the consolidated issues.

A. Business Expenses

A divorce decree entered October 19, 2005 reserved the issue of spousal support for a further hearing.² A portion of that decree is here relevant. The trial court stated it received "the representation of counsel that matters of equitable distribution have been compromised, settled and agreed."³ The October 19 decree, endorsed without objection as to equitable distribution provisions, contains the following concerning the joint credit card debt of the parties: "8. Debt: . . . The BB & T credit card debt and the debt associated with the MBNA Visa credit card ... are hereby assigned to [husband]. [Husband] shall be responsible for the timely payment of the foregoing debts."⁴ The decree also contains a provision, likewise relevant, granting title to the marital residence to wife, subject to existing mortgages upon the same.

The hearing on spousal support was held on November 2, 2005, resulting in a letter opinion dated December 22, 2005 incorporated in a decree of February 10, 2006. The transcript of the November hearing recites extensive testimony concerning "Jerry's Bushhog Services" and the introduction of documentary evidence of gross income and tax returns associated with this business. The trial court's letter of December 22 states in part:

His [husband's] 2004 business receipts indicate an average gross monthly income exceeding $9,000.00. In a loan application in May 2004, he reported his gross monthly business income as $8,000.00.2005 business records show his average monthly deposits exceed $9,500.00.... Recognizing from his earlier tax returns that would have legitimate business expenses, I nevertheless conclude that his monthly business income, after expenses, is $6,000.00....

In finding as a fact that husband's net business income was $6,000 per month, the trial court discerned his monthly business expenses, based on the three figures cited as gross income, to range from $2,000 to $3,500, or an average of $2,750 per month.

Husband subsequently filed a motion to reduce spousal support, and the same court that had heard the matter which resulted in the February 10, 2006 decree held a hearing on the same on November 1, 2006. Husband again offered evidence as to the income and expenses of his business.

By letter opinion dated December 4, 2006, the trial court concluded there had been a change in circumstances justifying spousal support modification, and recited husband "has submitted documentation of his current [business] expenses and income." But, though repeatedly referring to its earlier opinion letter of December 22, 2005, the trial court continued:

The difficulty with [husband's] argument is that there is not also an explanation of former expenses with which to compare his current expenses.... To allow his current submission of expenses to govern without reference to former expenses would effect no more than a rehearing of the original award.... No reduction, therefore, will be based upon his "increased" expenses.

This letter opinion was incorporated in a February 8, 2007 decree, the one here challenged.

While the evidence presented at the instant hearing was not the same type of evidence presented at the November 2, 2005 hearing, the trial court did not need the same type of evidence for comparison, but only monetary amounts of business expenses. Thus, having earlier concluded monthly business expenses ranged from $2,000 to $3,500, the trial court erred when it concluded that it could not compare the earlier expense figures with the newly provided expense figures.

B. Effect of Pending Bankruptcy

Succinctly stated, the November 1, 2006 hearing showed that husband had not paid that portion of husband's assigned joint debt in the property settlement agreement in the amount of $15,648 on the MBNA Visa card and had filed for Chapter. 7 bankruptcy protection with respect to the same. Though filed in August 2006, that bankruptcy proceeding was still pending at the time of oral argument before this Court. There is no evidence of a pending objection to this discharge nor was there evidence of any claim by' the creditor against wife for her obligation on the husband's assigned joint debt. Also relevant is the fact that since the prior hearing, wife had sold the marital residence and accordingly had liquid assets.

In its letter opinion of December 4, 2006 the trial court wrote: "Although the bankruptcy proceeding is not complete, based on the evidence before me I am assuming [husband] will realize the discharge. Therefore any increased liquidity or return on capital that [wife] gains is then offset by the increased likelihood that she will bear the debt."

This letter opinion makes clear that the trial court in part made its determination of spousal support upon two assumptions: (1) that husband's assigned joint debt would in fact be discharged in bankruptcy, and (2) that the creditor would in fact pursue wife for collection of the same. Husband argues both assumptions are too speculative for proper consideration in setting spousal support, and, further, that the trial court erred in considering bankruptcy at all in its determination because that court "would in, effect be violating the constitutional principle of preemption which gives the bankruptcy court the exclusive authority over bankruptcy." We agree with the first argument, but not the second.

The Court first addresses whether the circuit court could use the fact of husband's bankruptcy in determining the level of spousal support payments without interfering with the jurisdiction of the federal bankruptcy court. The parties disagree over the significance of several of our precedents.

Mosley v. Mosley, 19 Va.App. 192, 194, 450 S.E.2d 161, 162-63 (1994), the bankruptcy court granted the husband a discharge of marital debts. The circuit court granted a lump sum spousal support award, but it was clear the judge intended to compensate the wife for the husband's share of the marital debt. Id. at 196-97, 450 S.E.2d at 164. This Court found this impermissible, holding the award "would, in effect, serve to circumvent the discharge granted by the federal bankruptcy court." Id. at 197, 450 S.E.2d at 164.

A similar situation occurred in Fleming v. Fleming, 32 Va.App. 822, 825-26, 531 S.E.2d 38, 40 (2000). In that case, the wife eliminated her share of marital debts in bankruptcy. Id. at 823-24, 531 S.E.2d at 39. The circuit court granted the husband a lump sum spousal support award in the amount of marital, debt the wife discharged in bankruptcy. Id. at 826, 531 S.E.2d at 40. Like Mosley, the Court found this an impermissible intrusion upon the jurisdiction of the bankruptcy court. Id.

On the other hand, this Court upheld modification of spousal support based on bankruptcy in Dickson v. Dickson, 23 Va.App. 73, 474 S.E.2d 165 (1996). The circuit court there found the husband's bankruptcy and discharge of the equitable distribution award represented a material change in circumstances justifying modification of spousal support. Id. at 82, 474 S.E.2d at 169. On appeal, the husband argued that, as in Mosley and Fleming, the circuit court punished him for using the bankruptcy system. Id. at 81, 474 S.E.2d at 169. In examining the issue, this Court noted that allowing bankruptcy to establish a change in circumstances for modifying spousal support competes with the federal interest in relieving debtors of their obligations and providing them with a new beginning. Id. at 83, 474 S.E.2d at 170. Yet the Court quoted Siragusa v. Siragusa, 108 Nev. 987, 843 P.2d 807 (1992), for the notion that "`[m]odification of an alimony award based upon a discharged property settlement obligation does not re-create a debt discharged under federal bankruptcy laws'" and therefore bankruptcy could be considered in modifying alimony. Dickson, 23 Va. App. at 83-84, 474 S.E.2d at 170 (quoting Siragusa, 843 P.2d at 813). This Court then held that "the discharge in bankruptcy of a property settlement agreement or equitable distribution award may be considered as a change in circumstances justifying the modification of spousal support obligation." Id. at 84, 474 S.E.2d at 171.

These cases are reconcilable. A court may not order a lump sum spousal support award to compensate a non-debtor spouse for the other spouse's discharge of marital obligations in bankruptcy. This would "re-create a debt discharged under federal bankruptcy laws" and impermissibly intrude upon federal bankruptcy jurisdiction. Mosley, 19 Va.App. at 197, 450 S.E.2d at 164; Siragusa, 843 P.2d at 813. However, where a material change in circumstances due to bankruptcy otherwise occurs, a court may modify a spousal support order. Dickson, 23 Va.App. at 85-86, 474 S.E.2d at 171.

The Court concludes the consideration of...