Spong, In re

Decision Date25 September 1981
Docket NumberD,No. 1267,1267
Citation661 F.2d 6,8 B.C.D. 150,5 C.B.C.2d 242
Parties, 5 Collier Bankr.Cas.2d 242, 8 Bankr.Ct.Dec. 150 In re Theodore W. SPONG, Debtor. Raymond J. PAULEY, Plaintiff-Appellant, v. Theodore W. SPONG, Defendant-Appellee. ocket 81-5004.
CourtU.S. Court of Appeals — Second Circuit

Raymond J. Pauley, Rochester, N. Y., for plaintiff-appellant.

Gary F. Amendola, Rochester, N. Y. (Woods, Oviatt, Gilman, Sturman & Clarke, Rochester, N. Y., on the brief), for defendant-appellee.

Before LUMBARD, MANSFIELD and VAN GRAAFEILAND, Circuit Judges.

VAN GRAAFEILAND, Circuit Judge:

Section 523(a)(5) of the new Bankruptcy Act provides that a discharge in bankruptcy does not discharge a debtor from debts "for alimony to, maintenance for, or support of" a former spouse in connection with a divorce decree. 11 U.S.C. § 523(a)(5). This case presents the question whether a debt for legal services rendered to a debtor's former spouse in connection with a divorce proceeding falls within the above exception. The bankruptcy court ruled, and the district court agreed, that, even though under existing State law and section 17(a)(7) of the former Bankruptcy Act such debts were considered alimony and therefore nondischargeable, Congress, in amending the statute, intended to make them dischargeable. For the reasons set forth below, we reverse.

In July 1979, in the midst of a contested divorce proceeding in New York State Supreme Court, defendant and his former spouse entered into a stipulation of settlement. Defendant stipulated, among other things, that his wife's reasonable counsel fees were $10,000, and he agreed to pay $4,000 of this amount in monthly installments of $200 plus $514.40 for costs and disbursements. The installments were to On October 16, 1979, defendant filed a voluntary petition in bankruptcy under the new Bankruptcy Act, which had become effective sixteen days earlier, and listed his obligation to plaintiff as an unsecured claim. In this suit, brought by plaintiff to determine the propriety of discharge, the bankruptcy court held that the debt was dischargeable. In re Spong, 3 B.R. 619, 622 (Bkrtcy.W.D.N.Y.1980). The district court affirmed on the reasoning and authorities set forth in the bankruptcy court's decision and this appeal followed.

be paid to plaintiff who represented defendant's wife throughout the divorce proceedings. The stipulation was subsequently incorporated in a final judgment of divorce entered on November 7, 1979.

Although the Bankruptcy Act of 1898, ch. 541, 30 Stat. 544, did not expressly except from discharge debts for alimony, maintenance or support of the bankrupt's wife or children, the Supreme Court held that debts arising out of the husband's natural and legal duty to support his wife were not dischargeable under the Act. Audubon v. Shufeldt, 181 U.S. 575, 577-80, 21 S.Ct. 735, 736, 45 L.Ed. 1009 (1901). Congress codified this construction of the Act in 1903 by providing that a discharge would not release a bankrupt from his liability "for alimony due or to become due, or for maintenance or support of wife or child." Act of Feb. 5, 1903, ch. 487, 32 Stat. 798. Under this provision, counsel fees that were awarded pursuant to a husband's support obligations generally were held to be nondischargeable, regardless of whether the fees were payable directly to the attorney. See, e. g., DuBroff v. Steingesser, 602 F.2d 36, 38 (2d Cir. 1979); Schiller v. Cornish, 529 F.2d 1363, 1365 (7th Cir. 1976).

In 1978 Congress enacted Pub.L.No.95-598, 92 Stat. 2549, sometimes referred to as the "Bankruptcy Reform Act of 1978", which provided that a discharge under the Act would 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 property settlement agreement, but not to the extent that

(A) such debt is assigned to another entity, voluntarily, by operation of law, or otherwise; or

(B) such debt includes a liability designated as alimony, maintenance, or support, unless such liability is actually in the nature of alimony, maintenance, or support.

11 U.S.C. § 523(a)(5).

Defendant contends that the language and legislative history of the 1978 Act evidences an intent by Congress to overrule the prior holdings concerning counsel fees. Specifically, defendant asserts that his debt is not alimony within the meaning of the statute nor is it payable to his former spouse. Although the bankruptcy court's opinion is somewhat lacking in decisiveness, it apparently holds that defendant's undertaking to pay his wife's counsel fees was in the nature of "alimony, maintenance, or support". 3 B.R. 622. The court concluded, however, that the debt was dischargeable because it was not payable to defendant's former spouse. Id. We agree with the first holding but disagree with the second.

COUNSEL FEES AS ALIMONY

Under the 1898 Act, bankruptcy courts usually looked to State law when determining whether a particular debt for counsel fees was in the nature of alimony or support. See, e. g., DuBroff v. Steingesser, supra, 602 F.2d at 37 (applying N.Y. law); Schiller v. Cornish, supra, 529 F.2d at 1364-65 (applying Ill. law). Appellee contends that Congress rejected this approach in the 1978 Act, relying for this argument on House and Senate Reports which state in part that what constitutes alimony or support "will be determined under the bankruptcy laws, not State law." H.R.Rep.No.95-595, 95th Cong., 1st Sess. 364 (1977), reprinted in (1978) U.S.Code Cong. & Ad.News, 5787, 6320. See also S.Rep.No.95-989, 95th Cong., 2d Sess. 79, reprinted in (1978) U.S.Code Cong. & Ad.News 5865. Accepting appellee's argument as correct we do not believe that it undercuts the conclusion reached by the bankruptcy court.

As Congress undoubtedly was aware, United States courts have no jurisdiction over divorce or alimony allowances. Boddie v. Connecticut, 401 U.S. 371, 389, 91 S.Ct. 780, 792, 28 L.Ed.2d 113 (1971) (Black, J., dissenting); DeLaRama v. DeLaRama, 201 U.S. 303, 307, 26 S.Ct. 485, 50 L.Ed. 765 (1906). "(T)here is no federal law of domestic relations", DeSylva v. Ballentine, 351 U.S. 570, 580, 76 S.Ct. 974, 979, 100 L.Ed. 1415 (1956), "the whole subject of (which) belongs to the laws of the States." Popovici v. Agler, 280 U.S. 379, 383, 50 S.Ct. 154, 74 L.Ed. 489 (1930), (quoting Ex parte Burrus, 136 U.S. 586, 593-94, 10 S.Ct. 850, 852-85, 34 L.Ed. 500 (1980)). Congress could not have intended that federal courts were to formulate the bankruptcy law of alimony and support in a vacuum, precluded from all reference to the reasoning of the well-established law of the States.

A husband's obligation to support his wife by providing her with the necessaries of life according to his station has been long recognized as an "unescapable duty", both at common law and by statute. McMains v. McMains, 15 N.Y.2d 283, 288, 258 N.Y.S.2d 93, 206 N.E.2d 185 (1965); see Elder v. Rosenwasser, 238 N.Y. 427, 114 N.E. 669 (1924). An award of attorney's fees may be essential to a spouse's ability to sue or defend a matrimonial action and thus a necessary under the law. Accordingly, most States treat counsel fees as being within the definition of alimony, maintenance, and support. See In re Lang, 11 B.R. 428, 430 n.5 (Bkrtcy.W.D.N.Y. May 29, 1981); In re Knabe, 8 B.R. 53, 56 (Bkrtcy.S.D.Ind.1981). Because the reasoning behind the State decisions is sound, the majority of bankruptcy courts that have considered the matter under the 1978 Act has reached the same conclusion. See In re Lang, supra, 11 B.R. at 430-31; In re Brassard, 11 B.R. 90, at 92-93 (Bkrtcy.N.D.Ill.1981); In re Gilbert, 10 B.R. 347, 351 (Bkrtcy.N.D.Ind.1981); In re Lafleur, 11 B.R. 26, at 29 (Bkrtcy.D.Mass.1981); In re Whitehurst, 10 B.R. 229, 229 (Bkrtcy.M.D.Fla.1981); In re Dorman, 3 Collier's Bankr.Cas.2d 497, 499-501 (D.N.J.1981); In re French, 9 B.R. 464, 468 (Bkrtcy.S.D.Cal.1981); In re Lineberry, 9 B.R. 700, 709-10 (Bkrtcy.W.D.Mo.1981); In re Wells, 8 B.R. 189, 193 (Bkrtcy.N.D.Ill.1981); In re Knabe, supra, 8 B.R. at 56-57; In re Bell, 5 B.R. 653, 655 (Bkrtcy.W.D.Okla.1980); In re Pelikant, 5 B.R. 404, 407-08 (Bkrtcy.N.D.Ill.1980).

If the bankruptcy court below was participating in the formulation of a bankruptcy definition of alimony and support, it correctly concluded that defendant's undertaking to pay his wife's legal bill fell within that definition.

THE DISCHARGEABILITY OF THE OBLIGATION

Under subdivision (a)(5)(A) of section 523, a debt to a former spouse for alimony, maintenance, or support is dischargeable if it has been assigned to another entity. The House and Senate Judiciary Committees submitted almost identical interpretations of this subdivision:

Paragraph (5) excepts from discharge debts to a spouse, former spouse, or child of the debtor for alimony to, maintenance for, or support of, the spouse or child. This language, in combination with the repeal of section 456(b) of the Social Security Act (42 U.S.C. 656(b)) by section 327 of the bill, will apply to make nondischargeable only alimony, maintenance, or support owed directly to a spouse or dependent. See Hearings, pt. 2, at 942.

H.R.Rep.No.95-595, supra at 364.

Appellee argues that the phrase "owed directly to a spouse" means, in effect, that the money must be payable to the spouse. See In re Crawford, 8 B.R. 552, 3 Bankr.L.Rep. (CCH) P 67,904, at 78,774 (Bkrtcy.D.Kan.1981); In re Delillo, 5 B.R. 692, 694 (Bkrtcy.D.Mass.1980). In making this contention, appellee overlooks the well-established principle of bankruptcy law that dischargeability must be determined by the substance of the liability rather than its form. See, e. g., Pepper v. Litton, 308 U.S. 295, 305-06, 60 S.Ct. 238, 244-45, 84 L.Ed. 281 (1939); Wetmore v. Markoe, 196 U.S 68, 72-77, 25 S.Ct. 172, 173-74, 49 L.Ed. 390 (19...

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