Menu    1 ABR 1 

UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF ALASKA




_______________________________x 
In reCase No. F89-00544
In Chapter 7
 
ALERT N. FLADLAND, aka Corky
Fladland, aka Cork Fladland,
dba Fladland Ranch Supply,
 
Debtor(s) 
_______________________________x 
LORRAINE FLADLAND, 
Plaintiff(s), 
   
v.Adv. No. F89-00544-001
   
ALERT N. FLADLAND, 
Defendant(s).MEMORANDUM OPINION GRANTING
SUMMARY JUDGMENT TO PLAINTIFF
_______________________________x 

      The plaintiff, Lorraine Fladland, moved for summary judgment to establish the nondischargeability of certain awards made to her in a divorce decree. Alert N. Fladland, the debtor defendant, filed a cross-motion for summary judgment to establish dischargeabilty. The bankruptcy court has jurisdiction to determine this matter pursuant to 28 U.S.C. § 157(b)(2)(I).

      1- FACTUAL BACKGROUND - Lorraine is the ex-wife of the debtor. She filed this adversary proceeding to establish the nondischargeability of certain debts under 11 U.S.C. § 523(a)(5).

      The June 1, 1988 divorce decree in Alert N. Fladland v. Lorraine Fladland, Case No. 4FA-87-557 Civ., in the Alaska Superior TOP    1 ABR 2  Court in Fairbanks, incorporated the parties' "Spousal Support and Property Settlement Agreement" dated May 20, 1988.

      Under ¶ II of the agreement, in a section entitled "Spousal Support," debtor was to pay Lorraine one-third of his adjusted gross income as support. An "Order Modifying Decree of Divorce" was entered on October 2, 1989 (which is post-petition) modifying debtor's obligation to one-third of his net income due to an injury or illness for which he was receiving worker's compensation. The order indicated there was $2,816.00 due at that time, but that a judgment would not be entered until debtor returned to work.

      Also, under ¶ V of the May 20, 1988 agreement, in a section entitled "Division of Marital Property," Lorraine was to receive a one-half interest in "Alert's retirement plan through the Laborer's union." The decree provided that a "Qualified Domestic Relation Order" (QDRO) would be entered by the Superior Court. A QDRO was entered, but never forwarded to the plan administrator by either party.

      Debtor filed a claim of exemptions under 11 U.S.C. § 522(d). There were no challenges to the exemptions and the main case has been closed.

      At oral argument, the parties stated that debtor is 46 years old, and the pension fund will not begin to payout for 18 more years.

TOP    1 ABR 3  2. CROSS-MOTIONS FOR SUMMARY JUDGMENT - Lorraine moved for summary judgment to establish that: (1) certain pre-petition spousal support which was reduced to a judgment was not dischargeable; and, (2)

plaintiff's retirement interest in 1/2 of debtor's retirement pension pursuant to the property settlement agreement and QDRO dated June 1, 1988, is non-dischargeable or in the alternative not an asset of the estate

See ¶ 2 of the prayer to Lorraine's complaint.

      Debtor responded to Lorraine's motion and filed his own cross-motion for summary judgment on the grounds that: (1) the complaint was time barred; (2) the pension was property of the estate and, by not opposing debtor's claim for exemption, Lorraine is foreclosed from now seeking to recover one-half the pension; and, (3) the spousal support payments which were modified post-petition due to an injury or illness debtor suffered were somehow subject to attack as preference or otherwise dischargeable.

      3. DISCUSSION -

      3.1. Timeliness of complaint - Debtor argues that Lorraine filed her complaint too late. He claims the complaint should have been filed within 60 days of the time scheduled for the first meeting of creditors. He cites Bankruptcy Rule 4004. That rule deals with discharge. This is a dischargeability action, governed by Bankruptcy Rule 4007. Under Bankruptcy Rule 4007(c), the 60-day rule only applies to complaints under 11 U.S.C. TOP    1 ABR 4  §§ 523(a)(2), (4), and (6). Lorraine's complaint does not claim relief under these sections. The complaint is not time barred.

      3.2. Is the pension property the estate and is Lorraine barred from seeking to recover a portion of the pension because she did not object to the exemption? - Debtor argues that the pension fund is property of the estate. Lorraine says it is not.

      It is not clear to me what the parties seek to prove by this portion of their briefs. The trustee has abandoned the pension fund, so whether it was property of the estate for liquidation by the trustee is no longer relevant.

      Maybe debtor's position is that the pension was property of the estate, and Lorraine's failure to object to the claim of exemption bars her from claiming an interest in the property. If so, this is not correct. Objecting to an exemption is not a requirement to claiming an interest in the property which is the subject of the exemption. See In re Frazier, 104 B.R. 385 (Bankr.N.D.Cal. 1989) and In re Montgomery, 80 B.R. 385 (Bankr.W.D.Tex. 1987).

      3.3. Did the granting to Lorraine of a one-half interest in the pension fund create a "support obligation?" - If the award of one-half the pension were a support obligation, Lorraine would be entitled to seek to enforce it against the TOP    1 ABR 5  pension fund(1) or the debtor. 11 U.S.C. § 523(a)(5) indicates support obligations are non-dischargeable, and 11 U.S.C. § 522(c)(1) provides that even exempt property is liable for support obligation of the kind specified in § 523(a)(5). However, the court finds that the division of the pension fund was not "support" and is therefore not nondischargeable under 11 U.S.C. § 523(a)(5).

      Debtor is 46 years old. The pension fund will not begin to payout for 18 more years. The agreement of the parties already provided for spousal support of one-third of debtor's gross income, terminable on Lorraine's remarriage or death. The agreement has provisions for both spousal support and property division, and the division of the pension fund appears in the section about property division. The "spousal support" of one-third of debtor's annual adjusted gross income is terminable on the death or remarriage of Lorraine. There is no similar provision in agreement terminating the division of pension.

      No affidavits were submitted in support or opposition to the cross-motions for summary judgment. The parties, however, submitted the settlement agreement and the divorce decree. Based on the record before me, there appears to be not genuine issue of material fact at issue, and the court concludes that the division TOP    1 ABR 6  of the pension fund was not spousal support, but was a property settlement.

      While it is true that Lorraine has a medical condition which calls for support, this is expressly acknowledged and provided for under the section of the agreement entitled "Spousal Support."

      Determination of what is spousal support is a determination for this court. A number of Ninth Circuit cases give the court guidance. The division of the pension fund is not support, but a division of marital property. See Shaver v. Shaver, 736 F.2d 1314 (9th Cir. 1984); Stout v. Prussel, 691 F.2d 859 (9th Cir. 1982); and In re Gibson, 103 B.R.218 (9th Cir. BAP 1989).

      3.4 The award of back spousal support is "support" In the post-petition order modifying the support, the divorce court awarded $2,816.00 as past due support. I understand that this was just a liquidation of the support obligation, and would also be support which is non-dischargeable under 11 U.S.C. § 523(a)(5). The modification took place post-petition, so cannot be a preference under 11 U.S.C. § 547 which requires a transfer on or before the date of the petition. Also, the modification transferred nothing. It merely liquidated an amount due under a prior decree.

      3.5. Does Lorraine have a "vested" property interest in the pension which will prevail over debtor's discharge? Since the court in Section 3.3 of this Memorandum Opinion held that TOP    1 ABR 7  the division of debtor's pension in the divorce action did not create a nondischargeable support obligation, can she nonetheless enforce the court's property division?

      The divorce court signed a QDRO on June 1, 1988. A QDRO is an exception to the anti-alienation provisions of ERISA. 29 U.S.C. § 1056(d). The parties seem to agree that the order complies with technical requirements of a QDRO.(2)

      A pension plan administrator is required to establish procedures to determine if an order forwarded to it qualifies as a QDRO.(3) If the order is a QDRO, the former spouse is an "alternate payee" who is considered to be a beneficiary under the plan.(4)

      The parties have not briefed the issue of whether the failure of either party to forward the QDRO is fatal to Lorraine's interest in the plan. The answer is subject to debate.

      In In re Pederson, 875 F.2d 781 (9th Cir. 1989), a husband who was awarded the family home which he had owned before the marriage. The wife was given a judgment lien in recognition to her contribution to improvements on the home. The husband then filed bankruptcy and sought to avoid the judicial lien under 11 U.S.C § 522(f). The court held that the "judicial lien" could be avoided, declining to follow Boyd v. Robinson, 741 F.2d 781 (8th TOP    1 ABR 8  Cir. 1984). If Lorraine's claim were treated as a "judicial lien," debtor might prevail.

      On the other hand, in In re Teichman, 774 F.2d 1395 (9th Cir. 1985) the court considered whether pension payments which were not due on the date of filing were discharged. The court said:

The district court correctly held that under the dissolution decree, the wife has an ownership interest in forty-three percent of the retirement fund. Because the state court at the time of the divorce proceedings could not order the United States Air Force directly to pay the wife her share, it ordered the husband to pay a portion of each payment to the wife. The husband was to be a conduit through which the wife would receive her interest in the retirement fund.

The husband is under no obligation to pay his former wife until the Air Force pays him; therefore, a debt does not arise under the Code until each payment is due. See 11 U.S.C. §§ 101(4), (11). Since the post-petition and prospective payments are not debts under the Code, they are not subject to discharge in this bankruptcy. 11 U.S.C. § 727(b).

Id at 1398.

      Since debtor's pension payments are not due to begin for about 18 years, Lorraine would prevail under Teichman. The court feels bound to follow Teichman and determine that Lorraine's interest in the future pension fund payments are not discharged, but that debtor will be a "conduit" to have the payments made to her. Of course, with a QDRO the duty to pay does not even remain with debtor, but passes to the pension administrators. See Rice v. Rice, 757 P.2d 60, 62 (Alaska 1988).

TOP    1 ABR 9  There has been some sound criticism of Teichman, but it is still the law in this circuit. See Bush v. Taylor, 893 F.2d 962 (8th Cir. 1990) (holding that even future pension fund payments were "claims" under 11 U.S.C. §101(4, 11), subject to discharge). Bush at 965, fn2, specifically reserved the question of whether a direct payment by the Department of Defense under 32 C.F.R. Pt. 63, similar to a QDRO, would make a difference, or whether a property division in specie would be treated differently. Bush at 966.

      Therefore, the division of the pension fund is not dischargeable as to future payments. Lorraine should be authorized to transmit the QDRO to the plan administrator.

      4. CONCLUSION - Summary judgment should be granted to Lorraine. The division of the pension fund does not create a dischargeable debt, and Lorraine should be permitted to send the QDRO to the plan administrator. The $2,816.00 support arrearage found by the Fairbanks Superior Court in its "Order Modifying Decree of Divorce" entered on October 2, 1989 is not dischargeable.(5) This is not a case for Rule 11 sanctions and each party should bear his or her costs and attorney fees.

TOP    1 ABR 10 

DATED: May 22, 1990 
  
 __/s/ Herbert A. Ross__
 HERBERT A. ROSS
 Bankruptcy Judge


Serve: 
Robert Noreen, Esq., for Plaintiff 
Valerie Therrien, Esq., for Defendant 
Peggy Gingras, Adv. Case Mgr.H2955



N O T E S:

TOP    1 ABR 5  1. Enforcement against a pension fund is not a foregone conclusion. There are anti-alienation provisions in ERISA. See 29 U.S.C. § 1056(d).

TOP    1 ABR 7  2. See 29 U.S.C. § 1056(d)(3)(C) and (D).

TOP    1 ABR 7  3. See 29 U.S.C. § 1056(d)(3)(G).

TOP    1 ABR 7  4. See 29 U.S.C. § 1056(d)(3)(J).

TOP    1 ABR 9  5. A non-debtor is subject to the automatic stay under 11 U.S.C. § 362(a) prohibiting the filing of a motion to modify a support award during a bankruptcy. In re Stringer. 847 F.2d 549 (9th Cir. 1988). As the court understands the facts of this case, the debtor initiated the modification proceeding.