Bendetti v. Gunness (In Re Gunness)
505 B.R. 1
| 9th Cir. BAP | 2014Background
- Debtor Patricia Gunness filed Chapter 7 after Los Angeles Superior Court awarded ~ $280,000 in attorney fees in a 2008 fraudulent-transfer action connected to her husband Paul’s 1993–94 dissolution with his ex-wife Jeanette Bendetti. Fees were assessed against Patricia and Paul, some payable directly to Jeanette’s attorney David Karton.
- Patricia sued in bankruptcy court seeking declaratory relief that the fee awards are dischargeable and not subject to 11 U.S.C. § 523(a)(5) (domestic support obligations) or § 523(a)(15) (non-support domestic relations obligations).
- Jeanette and Karton conceded neither was Patricia’s spouse, former spouse, or child, but argued § 523(a)(5)/(a)(15) apply based on the nature of the debt and because Patricia was joined in the dissolution proceedings.
- The bankruptcy court granted summary judgment for Patricia, holding the statutory phrase “to a spouse, former spouse, or child of the debtor” requires the specified familial connection and thus §§ 523(a)(5) and (a)(15) did not apply.
- The Bankruptcy Appellate Panel affirmed, rejecting arguments that (1) the state court joinder created a familial relationship, (2) familial status could be imputed, or (3) the provisions should be liberally construed beyond their plain terms.
Issues
| Issue | Plaintiff's Argument (Jeanette/Karton) | Defendant's Argument (Gunness) | Held |
|---|---|---|---|
| Whether § 523(a)(5) applies to attorney-fee awards not payable to a spouse/former spouse/child | Debt’s nature (benefit to dissolution proceedings) makes it nondischargeable despite payee identity; joining Patricia equates her to a spouse/former spouse | Statutory text requires the debt be owed to or recoverable by a spouse/former spouse/child; no such relationship exists here | Held: § 523(a)(5) inapplicable because no familial relationship or benefit flowed to a covered person |
| Whether § 523(a)(15) applies to these fee awards | Same as above: substance of obligation and joinder in divorce proceedings bring debt within § 523(a)(15) | Statutory phrase “to a spouse, former spouse, or child” limits § 523(a)(15); parties here aren’t covered persons | Held: § 523(a)(15) inapplicable for lack of required familial connection |
| Whether state-court joinder can create/impute familial status for § 523 purposes | Joinder as party in dissolution effectively makes Patricia equivalent to a spouse/former spouse | Joinder is procedural and cannot create substantive familial status for federal nondischargeability | Held: Joinder does not create or impute the requisite familial relationship |
| Whether exceptions to discharge should be liberally construed in favor of enforcing domestic-relations obligations | Domestic-relations policy warrants broader construction to protect such obligations | Exceptions to discharge must be narrowly construed according to plain statutory terms and Supreme Court precedent | Held: Exceptions are construed narrowly; court will not expand coverage beyond text — Congress must amend statute if broader scope desired |
Key Cases Cited
- Beaupied v. Chang, 163 F.3d 1138 (9th Cir. 1998) (identity of payee less important than nature of debt where benefit flowed to covered family member)
- Bullock v. BankChampaign, N.A., 133 S. Ct. 1754 (2013) (exceptions to discharge are to be narrowly construed)
- Kawaauhau v. Geiger, 523 U.S. 57 (1998) (standards for construing exceptions to discharge)
- Grogan v. Garner, 498 U.S. 279 (1991) (burden of proof and general rules governing dischargeability)