Menu    1 ABR 155 

UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF ALASKA



In re: Case No. A90-00584 )
)
RICHARD TODD PALMATIER, )
)
Debtor.          )
__________________________________________)
LISA PALMATIER, ) Adversary No. A90-00584-001
) Chapter 7
Plaintiff,          )
v. )
)
RICHARD TODD PALMATIER, )
)
Defendant.          )
__________________________________________)


OPINION AND ORDER

I. Factual Background.

        Richard T. Palmatier and Lisa Palmatier were married in 1975. They had two children. The Palmatiers separated in September, 1988. A divorce complaint was filed and extensive negotiations ensued. During the negotiation process, Palmatier, a veterinarian, paid $968.00 monthly in child support. This amount allowed Mrs. Palmatier to make house payments. She went back to work as a secretary to pay for additional household expenses.

        Finally, in April of 1990, the parties entered into a child custody, child support and property settlement agreement (hereafter the agreement). The agreement provided for payments of child support in the amount of $392.00 per month. It also   TOP      1 ABR 156  provided, in part under paragraph 3 entitled "Division of

Property at subparagraph c:
        The parties currently own a home located at 1916 Commodore Drive, Anchorage, Alaska 99507. The parties agree, for purposes of the children's stability over the upcoming year, that mother and children shall occupy the residence. Father shall contribute nine hundred ($900.00) dollars a month toward the mortgage payments on the home.

        In March 1991 the residence shall be listed for sale with a real estate brokerage of husband's choice. Mother may remain in the residence while it is being shown for sale, but agrees to take all action to encourage sale of the home, including maintaining the home in an attractive manner when it is shown.

        If the home has not sold by September 1991, and mother continues to reside there, mother agrees that she will contribute at least one-third of the monthly mortgage, tax and insurance payments on the home beginning on the first day of September, 1991 and continuing the first of each month thereafter until the house is sold or until mother vacates the home.

        Mother agrees to vacate the home when the home is sold.

        All tax and mortgage payment credits shall be taken by father on his income tax returns.

        At the time of closing on the sale of the home, father and mother shall share equally in any net proceeds realized after payment of the first deed of trust, closing costs, brokerage fees, appraisal costs and any other costs related to the sale that are mutually agreed upon.

        In the event an offer is made on the home and the parties are unable to agree on the sales price, the parties agree that each of them shall obtain an estimated reasonable sales price for the home from a real estate agent or broker of their choosing. The acceptable sales price of the home shall be the average of the two prices given by the agents.

  TOP      1 ABR 157          The parties subsequently stipulated to modification of the agreement on May 1, 1990 with a stipulation stating:
COME NOW, the Parties, by and through their respective counsel, and stipulate and agree that the monthly amount of Child Support that shall be paid by Defendant to Plaintiff is in the amount of Four Hundred ($400.00) Dollars. At the time of the sale of the family residence, child support may be recalculated in accordance with Civil Rule 90.3.
A divorce decree was entered thereafter on May 23, 1990.

        Richard Palmatier, despite a substantial income in excess of $50,000.00 a year, never made the monthly payments for the home or the child support. He contacted a bankruptcy attorney in May and filed a petition for relief under chapter 7 on July 2, 1990. Richard was found in contempt of court in state court for failing to make his child support payments. Richard Palmatier agrees that his debt to FedAlaska Federal Credit Union Visa is non-dischargeable in the approximate sum of $2,484.35.

II.    Exception to Discharge.

        A.    The Legal Standard.

        11 U.S.C. § 523(a) (5) Provides an exception to discharge. It states:

(a) A discharge under section 727, 1141, 1228(a), 1228(b), or 1328(b) of this title does 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   TOP      1 ABR 158  connection with a separation agreement, divorce decree or other order of a court of record, determination made in accordance with State or territorial law by a governmental unit, 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 (other than debts assigned pursuant to section 402(a)(26) of the Social Security Act, or any such debt which has been assigned to the Federal Government or to a State or any political subdivision of such State); 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; . . .

        "The Congressional intent makes clear that what constitutes alimony, maintenance, or support will be determined under the bankruptcy laws, not State law." 3 Collier on Bankruptcy, 15th ed., paragraph 523.15, p. 523-105.

        The Ninth Circuit Bankruptcy Appellate Panel has addressed the issue of support versus property settlement in a recent decision. Although the decision dealt primarily with spousal support and not child support, its reasoning is equally applicable here.

        In order to determine whether a debt is a nondischargeable spousal support obligation or a dischargeable property settlement, the court must ascertain the intention of the parties at the time they entered in their stipulation agreement, In re Yeates, 807 F.2d 874, 878 (10th Cir. 1986), and not the current circumstances of the parties. In re Spuraeon, 80 B.R. 477, 478 (W.D. Mo. 1986). The court   TOP      1 ABR 159  should look to the substance of the obligation in the agreement, In re Shaver, 736 F.2d 1314, 1316 (9th Cir. 1984); In re Freyer, 71 B.R. 912, 916 (Bankr. S.D.N.Y. 1987), and generally should disregard labels and titles. Matter of Campbell, 74 B.R. 805, 809 (Bankr. M.D. Fla. 1987); Matter of Heverly, 68 B.R. 21, 22 (Bankr. M.D. Fla. 1986). If the provision's intended function is to provide a necessity of life, it is ordinarily held to be nondischargeable maintenance support. Matter of Ouinn, 44 B.R. 622, 624-25 (Bankr. W.D, Mo. 1984).

        In interpreting a decree, and even in deciding if it is ambiguous, the court should consider the surrounding circumstances and all other relevant incidents bearing on the parties' intent when they entered into the decree. Parol evidence is admissible to clarify the parties' intent. See In re Shaver, 40 B.R. 964,968 (D. Nev. 1983), aff'd, 736 F.2d 1314 (9th Cir. 1984). A significant factor is whether there are other provisions in the agreement separate and distinct from the provision in question which is designated as support payments and which terminate at a specific date or upon a specific event. In re Smith, 61 B.R. 742, 745-46 (Bankr. D. Mont. 1986).

        Bankruptcy courts have employed various factors to determine the intent of the parties of an ambiguous divorce decree. Some of these factors include:

 1. The label given to the payments;
2. The context or location of the disputed provision in the decree;
3. The parties' negotiations understanding of the provision; and
4. Whether a lump sum or periodic monthly payments were provided for;
  TOP      1 ABR 160 
5. The relative earning power of the parties;
6. Whether the recipient spouse would be entitled to alimony under state law;
7. Whether interest accrues on the entire debt or only on the monthly payments past due; and
8. Whether the debtor's obligation of payment terminates on the death or remarriage of the recipient, or on the death of the debtor.
In re Combs, 101 B.R. 609, 615-16 (9th Cir. BAP 1989).

B.    $900.00 Monthly Payments.

        Here the disputed payments were found in the paragraph under "3. Division of Property." The payments are labelled as a "contribution". Paragraph 3 c. deals with disposition of the home. It states in part:

        The parties currently own a home located at 1916 Commodore Drive, Anchorage, Alaska 99507. The parties agree, for purposes of the children's stability over the upcoming year, that mother and children shall occupy the residence. Father shall contribute nine hundred ($900.00) dollars a month toward the mortgage payment on the home.
The context or location of the disputed provision is found in the property settlement section of the agreement. The defendant feels the obligations for payment of $900.00 were Property settlement obligations. The plaintiff understood the obligations to be child support. The attorney who drafted the agreement states that the agreement was a "hybrid" and deliberately "fuzzy". The disputed provision calls for monthly payments rather than lump sum payments.   TOP      1 ABR 161  As a veterinarian, the defendant has earning power of 2½ to 3 times that of the wife, a secretary. According to the debtor's expert, the plaintiff would not be entitled to alimony at state law. However, the expert also pointed out that courts take alimony and maintenance issues into account when making a property settlement agreement. The plaintiff is entitled to child support but according to the husband's expert not in an amount, under optimum conditions, in excess of $872.19. A party may consent to pay child support in excess of the state's guidelines. No interest accrues on the disputed payments nor does the payment terminate on death or remarriage. If the home is not sold by September 1991, husband's payments decrease by approximately $320.00 per month until the house is sold "or until mother vacates home". The husband is to receive mortgage payment credits upon his income tax return. The disputed obligation does not terminate on death or remarriage of either party.

        After having reviewed the criteria extensively, I find the obligation set forth in the agreement for payment of $900.00 per month constitutes payment of maintenance or support for Lisa Palmatier and her two children. Shelter is a necessity of life. Assistance in the provision of shelter is support or maintenance. Secondly, the agreement specifically states that the payments of $900.00 per month are "for purposes of the children's stability over the upcoming year, that mother and children shall occupy the   TOP      1 ABR 162  residence." Stability here means having a place to live and go to school. Thirdly, the fact that such payment may be in excess of state guidelines for child support is meaningless for several reasons. First, a party can consent (and did consent) to pay more. Secondly, state courts frequently structure the property settlement agreement to satisfy possible maintenance issues. The distinctions found at state law are not binding on this court in making its determination. Although the provision is ambiguous, the crux of the agreement provided for support and maintenance of the wife and children. Moreover, if the home was sold, the amount of child support has to be redetermined (and increased). The $900.00 monthly payments are support and maintenance.

C.    Attorney's Fees.

The $1,500.00 in attorney's fees is also nondischargeable as it is in the nature of alimony, maintenance or support.

We agree with the Sprong (1.) decision of the Second Circuit and with the trial court opinion of In re French, 9 B.R. 464 (Bkrtcy. S.D. Cal. 1981) and the cases cited therein deciding that a claim for attorney's fees awarded to the debtor's wife's attorney in a divorce action is nondischargeable pursuant to 11 U.S.C. § 523(a)(5), even though the debt was payable directly to the attorney.. . .

The 9th Circuit has ruled under the old Bankruptcy Act that attorney's fees awarded to an attorney for a bankrupt's former spouse in a California dissolution of marriage is in the   TOP      1 ABR 163  nature of spousal support. Jones v. Tyson, 518 F.2d 678 (9th Cir. 1975). The 9th Circuit later refused to distinguish for dischargeability purposes attorney's fees awarded in divorce proceedings from those awarded in post-divorce custody litigation. In re Catlow, 663 F.2d 960 (9th Cir. 1981). The rules of Jones v. Tyson and In re Catlow have not been modified by the new Bankruptcy Reform Act.

Matter of Gwinn, 20 B.R. 233, 234-35 (9th Cir. BAP 1982). Clearly, attorney's fees here are nondischargeable. Included in those attorney's fees are any fees which may have accrued in conjunction with the child support issues addressed at the contempt hearing prior to the filing of the petition. Based upon the criteria previously enunciated, the fees were in the nature of support and maintenance for Lisa Palmatier.(2.)

D.    Agreement to Save and Hold Harmless on Joint Debts.

        Thus, any debts resulting from an agreement by the debtor to hold the debtor's spouse harmless on joint debts, to the extent that the agreement is in payment of alimony, maintenance or support of the spouse, as determined under bankruptcy law considerations that are similar to considerations of whether a particular agreement to pay money to a spouse is actually alimony or a property settlement, are nondischargeable. (footnotes omitted)

3 Collier on Bankruptcy, 15th ed., paragraph 523.15, p. 523-110. The debtor has conceded the Visa debt is nondischargeable as   TOP      1 ABR 164  support. To the extent there are any other debts arising out of the covenant to save and hold harmless, I find such obligations to be in the nature of support and not property settlement.

III.    Conclusion.

        In as much as virtually all obligations arising under the agreement are nondischargeable under 11 U.S.C. § 523(a)(5), the remaining allegations of fraud and wilful and malicious injury are moot.

        Therefore, IT IS HEREBY ORDERED, ADJUDGED AND DECREED that all of the following obligations arising out of the parties' child custody, child support and property settlement agreement as modified by the parties' stipulation are nondischargeable:

        (1)    Past, present and future payments in the sum of $400.00 designated as child support;

        (2)    Past,    present and future payments of $900.00 a month for maintenance of the home;

        (3)    Attorney's fees in the sum of $1,500.00 together with pre-petition fees arising out of the contempt action;

        (4)    Visa obligation in the sum of $2,484.35;

        (5)    Any other obligation arising out of the defendant's obligation to save and hold harmless.

        DATED:    September 11, 1990.

                DONALD MACDONALD IV
                United States Bankruptcy Judge

Serve: W. Pace, Esq.
G. Schadt, Esq.
U.S. Trustee

N O T E S:

  TOP      1 ABR 160  l.    In re Sprong, 661 F.2d 6 (2nd Cir. 1981).

  TOP      1 ABR 160  2.    Post-petition attorney's fees are not before the court. They are not subject to discharge and plaintiff's complaint in that regard is moot. See 11 U.S.C. §§ 727(b) and 502(b).