Zimmerman v. Starnes, Civ. A. No. 82-Z-2001

CourtUnited States Courts of Appeals. United States Court of Appeals (7th Circuit)
Writing for the CourtWEINSHIENK
Citation35 BR 1018
PartiesSteven L. ZIMMERMAN, Trustee, Plaintiff, v. Dr. Harry STARNES, Defendant. Harry Dee STARNES and Connie Margaret Starnes, Plaintiffs, v. Mary Virginia FIELDS and Steven L. Zimmerman, Trustee, Defendants.
Docket Number82 Mc 0451.,Civ. A. No. 82-Z-2001,Bankruptcy No. 81 K 2679
Decision Date13 January 1984

35 B.R. 1018 (1984)

Steven L. ZIMMERMAN, Trustee, Plaintiff,
v.
Dr. Harry STARNES, Defendant.

Harry Dee STARNES and Connie Margaret Starnes, Plaintiffs,
v.
Mary Virginia FIELDS and Steven L. Zimmerman, Trustee, Defendants.

Civ. A. No. 82-Z-2001, Bankruptcy Nos. 81 K 2679, 82 Mc 0451.

United States District Court, D. Colorado.

January 13, 1984.


35 BR 1019

Richard Clark, Denver, Colo., T. Michael Turner, San Francisco, Cal., for Harry D. Starnes and Connie Margaret Starnes.

Arthur Lundquist-Kleissler, Solomon & Lindquist-Kleissler, Denver, Colo., for Steven L. Zimmerman, Trustee.

Ellen R. Welner, Denver, Colo., for Mary Virginia Fields.

MEMORANDUM OPINION AND ORDER

WEINSHIENK, District Judge.

The matter under review is an appeal from a final ruling of the United States Bankruptcy Court for this District dated September 15, 1982, and entitled "Order Discharging Back Child Support Payments Transferred to Debtor's Trustee in Bankruptcy," 23 B.R. 134. Jurisdiction to consider the appeal is found in paragraph 3(e) of this Court's General Procedure Order No. 1983-1.1

This Court has examined the appellate briefs, the record on appeal, the applicable statutory and case law, and the opinion of the Bankruptcy Court reported at 23 B.R. 134 (Bkrtcy.D.Colo.1982) sub nom In re Fields, and is fully advised and prepared to rule.

The undisputed facts reveal that Harry Dee Starnes (Starnes) and Mary Virginia Fields (Fields) were divorced by order of the Superior Court of the State of California for the County of Los Angeles on July 2, 1979. As part of the divorce decree, the California court ordered Starnes to pay child support to Fields. See Record on Appeal (R.), Vol. II.

Fields filed a voluntary Chapter 7 Bankruptcy petition in the Bankruptcy Court for the District of Colorado on June 8, 1981, and Steven L. Zimmerman was appointed trustee of her estate. Fields' petition listed as property of the estate certain back child support payments which Starnes had failed to make pursuant to the divorce decree. On November 30, 1981, the trustee (Zimmerman) commenced an adversary proceeding in the Bankruptcy Court under 11 U.S.C. §§ 3232 and 704(1)3 against Starnes to collect the child support arrearage.

On January 20, 1982, Starnes filed a voluntary Chapter 7 bankruptcy petition in the same court. The filing of the Starnes petition automatically stayed further action on the complaint filed by the trustee, under the provisions of 11 U.S.C. § 362. Starnes then filed a complaint to determine the dischargeability of the child support debt under 11 U.S.C. § 523(a)(5)(A),4 on March 3, 1982. Thereafter, the Bankruptcy Court granted Zimmerman's Motion for Consolidation and ordered the two adversary proceedings consolidated because of the substantial overlap of issues. As part of the consolidation, the Bankruptcy Court vacated the automatic stay for the trustee's complaint. R., Vol. I, p. 17.

At a hearing on August 17, 1982, the Bankruptcy Court found that the Child support arrearage amounted to $27,275.00, but took under advisement the issue of "whether

35 BR 1020
or not the debt is discharged since by law the debt is the property of the Trustee of the estate of Mary Virginia Fields." R., Vol. I, p. 18

In its Order of September 15, 1982, the Bankruptcy Court held that the debt was dischargeable. After determining that the trustee was "another entity" within the meaning of 11 U.S.C. § 523(a)(5)(A),5 the Bankruptcy Court stated: "The trustee's power to take over all legal and equitable property interests for the estate of the debtor as of the commencement of the estate under 11 U.S.C. § 541(a)(1) would be an assignment to another entity by operation of law under 523(a)(5)(A)." 23 B.R. at 136. Thus the Bankruptcy Court concluded that Fields' listing of the child support debt in her estate rendered that debt dischargeable under § 523(a)(5)(A) as a debt assigned to another entity. Id. at 137. Zimmerman has appealed from that ruling, and from the order of the Bankruptcy Court dismissing his complaint.6

I.

The Bankruptcy Court stated that "the debt of Starnes for the back child support is now property of the Trustee of the estate of Debtor Mary Virginia Fields." 23 B.R. at 135 (emphasis added). It is basic to bankruptcy law, however, that an estate includes only property interests of the debtor, as set forth in 11 U.S.C. § 541(a)(1).7 "The legislative history of § 541(a)(1) indicates that Congress intended to exclude from the estate property of others in which the debtor had some minor interest such as a lien or bare legal title." United States v. Whiting Pools, Inc., ___ U.S. ___, ___ n. 8, 103 S.Ct. 2309, 2313 n. 8, 76 L.Ed.2d 515, 522 n. 8 (1983). The Bankruptcy Court did not thoroughly analyze the issue of whether the child support debt was a property interest which belonged to the debtor Fields, or to her child.

Since 11 U.S.C. § 541 contains no test for determining what is or is not "property" for the purposes of the debtor's estate, state law furnishes the guidelines to establish which interests of the debtor are properly included. "Property interests are created and defined by state law. Unless some federal interest requires a different result, there is no reason why such interests should be analyzed differently simply because an interested party is involved in a bankruptcy proceeding." Butner v. United States, 440 U.S. 48, 55, 99 S.Ct. 914, 918, 59 L.Ed.2d 136 (1979).

This is especially true in the area of domestic relations, including support payments ordered pursuant to divorce decrees, since "Congress was undoubtedly aware that the United States courts have no jurisdiction over divorce or alimony allowances." In re Spong, 661 F.2d 6, 9 (2d Cir.1981). "In the absence of specific conflict with federal law, we must look to state law to delineate the parties' state-created support obligations. . . ." Matter of Catlow, 663 F.2d 960, 962 (9th Cir.1981) (Arizona law applied to former version of 11 U.S.C. § 523(a)(5)). Thus the Court must consider whether the right to receive child support is a property right of the parent or of the child, as interpreted under applicable state law.

35 BR 1021
II.

The issue of which state's law should be examined to determine the nature of the property interest in the instant case is a question not free from doubt.8 This Court believes, however, that California law should provide primary guidance, since the...

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