495 B.R. 166
Bankr. D.P.R.2013Background
- May 3, 2001 state divorce judgment requiring Debtor to pay Creditor $50,000/month for support until asset division.
- Debtor filed Chapter 11; Creditor sought to classify the $50,000/mo as Domestic Support Obligation (DSO) under §101(14A) with priority under §507(a)(1).
- State court later clarified the payments were advances from community property, not alimony, though the Divorce Decision labeled them variously as support/maintenance.
- State court proceedings continued on conjugal property/division; multiple state orders and appellate opinions addressed the nature of the payments.
- Debtor argued the payments are advances on property division (not DSO) and thus nonpriority unsecured; Creditor argued they are DSO under federal bankruptcy law.
- Court determines the $50,000/month is a Domestic Support Obligation under §101(14A).
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the $50,000 monthly payment is a DSO under §101(14A). | Candelario argues the payments are advances from community assets and meet DSO criteria. | Efron contends the payments are property distribution, not support, and thus not a DSO. | Yes; the payments are a DSO under §101(14A). |
Key Cases Cited
- Smith v. Pritchett (In re Smith), 586 F.3d 69 (1st Cir. 2009) (ten indicators and totality-of-circumstances approach for intent need)
- Werthen v. Werthen (In re Werthen), 329 F.3d 269 (1st Cir. 2003) (focus on substance of obligation rather than label)
- In re Sternberg, 85 F.3d 1400 (9th Cir. 1996) (multi-factor/totality approach to determine if obligation is support)
- Milligan v. Evert (In re Evert), 342 F.3d 358 (5th Cir. 2009) (discusses characteristics of alimony vs. property distribution)
- Marrana v. Citizens Bank of Mass., 549 U.S. 365 (2007) (fresh-start policy and priority for DSO considerations)