Bendetti v. Gunness (In Re Gunness)Bendetti v. Gunness (In Re Gunness)
Before: KURTZ, BALLINGER* and PAPPAS, Bankruptcy Judges.
OPINION
KURTZ, Bankruptcy Judge.
INTRODUCTION
The debtor filed an adversary proceeding against her husband‘s ex-wife and the ex-wife‘s family law attorney seeking a determination that the debt she owes to the husband‘s ex-wife is dischargeable. The bankruptcy court granted summary judgment in favor of the debtor, holding that neither
Because the debt lacks the requisite connection to “a spouse, former spouse, or child of the debtor” (emphasis added), we agree with the bankruptcy court that
* Hon. Eddward P. Ballinger, Jr., United States Bankruptcy Judge for the District of Arizona, sitting by designation.
FACTS
The key facts are undisputed. At the time of her bankruptcy filing, debtor Patricia Gunness and her husband Paul Bendetti jointly and severally owed roughly $280,000 in attorney‘s fees to Paul‘s ex-wife Jeanette Bendetti. The attorney‘s fee awards were issued pendente lite by the Los Angeles County Superior Court in a fraudulent transfer lawsuit Jeanette filed in 2008 against both Paul and Patricia (LASC Case No. ED 008213). In turn, the fraudulent transfer lawsuit was part of the dissolution proceedings between Paul and Jeanette. Even though the dissolution proceedings were commenced in 1993, and a dissolution judgment issued in 1994, the 2008 fraudulent transfer lawsuit was filed in and connected to the dissolution proceedings because Jeanette claimed that, unbeknownst to her at the time, Paul had fraudulently transferred some of their community property assets to Patricia.
Both sides have sparred over the nature of the fee awards, in the sense of whether they are attributable to the dissolution proceedings, the fraudulent transfer lawsuit, or both, and whether the awards were needs based, conduct based, or both. These disputes are irrelevant to our resolution of this appeal.
In July 2011, Patricia commenced her chapter 7 bankruptcy case, and in October 2011 she commenced an adversary proceeding against Jeanette and Jeanette‘s family law counsel David Karton, to whom some of the fee awards were directly payable. In her complaint, Patricia sought a determination that neither
In June 2012, Patricia filed a summary judgment motion based in part on the same assertions regarding the applicability of
[Patricia] ... ignores the fact that she is a party to the divorce proceeding. As such, she is essentially a spouse because, absent the court ordering her joined as a party, only the husband and the wife can be parties to a dissolution proceeding.
Defendants’ Opposition to Motion for Summary Judgment (July 24, 2012) at 9:19-22.2
The bankruptcy court disagreed with Jeanette‘s and Karton‘s broad interpretation of
On February 15, 2013, the bankruptcy court entered both an order granting summary judgment and a separate judgment in Patricia‘s favor disposing of the adversary proceeding. Jeanette and Karton timely filed their notice of appeal on February 27, 2013.
JURISDICTION
The bankruptcy court had jurisdiction pursuant to
ISSUE
In the process of granting summary judgment, did the bankruptcy court incor-rectly
STANDARDS OF REVIEW
We review summary judgment rulings de novo. Bendon v. Reynolds (In re Reynolds), 479 B.R. 67, 71 (9th Cir. BAP 2012). The bankruptcy court‘s decision that a claim is dischargeable also is subject to de novo review. See Miller v. United States, 363 F.3d 999, 1004 (9th Cir. 2004). So is the bankruptcy court‘s interpretation of the Bankruptcy Code. See Danielson v. Flores (In re Flores), 735 F.3d 855, 856 n. 4 (9th Cir. 2013) (en banc).
DISCUSSION
This appeal hinges on a single question of law regarding the meaning and effect of the phrase “spouse, former spouse or child of the debtor” as applicable to both
Prior to enactment of the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, Pub.L. No. 109-8, 119 Stat. 23 (“BAPCPA“), the above-referenced phrase appeared directly in
(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 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....
(Emphasis added.)
BAPCPA restructured
The term “domestic support obligation” means a debt that accrues before, on, or after the date of the order for relief in a case under this title, including interest that accrues on that debt as provided under applicable nonbankruptcy law notwithstanding any other provision of this title, that is—
(A) owed to or recoverable by—
(i) a spouse, former spouse, or child of the debtor or such child‘s parent,
legal guardian, or responsible relative;4 or (ii) a governmental unit;
(B) in the nature of alimony, maintenance, or support (including assistance provided by a governmental unit) of such spouse, former spouse, or child of the debtor or such child‘s parent, without regard to whether such debt is expressly so designated;
(C) established or subject to establishment before, on, or after the date of the order for relief in a case under this title, by reason of applicable provisions of—
(i) a separation agreement, divorce decree, or property settlement agreement;
(ii) an order of a court of record; or
(iii) a determination made in accordance with applicable nonbankruptcy law by a governmental unit; and
(D) not assigned to a nongovernmental entity, unless that obligation is assigned voluntarily by the spouse, former spouse, child of the debtor, or such child‘s parent, legal guardian, or responsible relative for the purpose of collecting the debt....
(Emphasis added.)
This restructuring enabled Congress to utilize a uniform and detailed definition of the term “domestic support obligation” in several different sections of the bankruptcy code.5 Regardless, both before and after BAPCPA, the phrase “spouse, former spouse or child of the debtor” was and is part and parcel of
BAPCPA also significantly altered
(15) to a spouse, former spouse, or child of the debtor and not of the kind described in paragraph (5) that is incurred by the debtor in the course of a divorce or separation or in connection with a separation agreement, divorce decree or other order of a court of record, or a determination made in accordance with State or territorial law by a governmental unit;....
(Emphasis added.)
Thus, both
Of these cases, Beaupied v. Chang (In re Chang), 163 F.3d 1138 (9th Cir.1998), is the only published Ninth Circuit Court of Appeals decision directly addressing the issue. In In re Chang, the unmarried father and mother of a minor child were fighting over custody of the child. The mother accused the father of sexually abusing the child, which led to the state court‘s appointment of a guardian ad litem and a host of neutral experts and the accrual of nearly $100,000 in expert and guardian ad litem fees. Id. at 1140. The father paid most of these fees during the course of the litigation, but the state court ultimately apportioned liability for the fees such that it ordered the mother to reimburse the father for a portion of the fees he paid and further ordered the mother to pay the guardian ad litem directly for a portion of his fees remaining unpaid. Id.
On appeal from a decision of the bankruptcy court declaring both these debts nondischargeable, this Panel reversed, holding that neither debt was owed to a spouse, former spouse or child of the debtor. Chang v. Beaupied (In re Chang), 210 B.R. 578, 582-83 (9th Cir. BAP 1997). But the Court of Appeals reversed this Panel and reinstated the bankruptcy court‘s nondischargeability judgment. In In re Chang, 163 F.3d at 1141-42. The court of appeals held that “the identity of the payee is less important than the nature of the debt,” id. at 1141, and explained that, even though the fees were not directly payable to a child of the debtor—a person explicitly covered by
Some decisions discussing Chang and other, similar cases have broken down the cases into two distinct lines of authority. See, e.g., In re Kassicieh, 425 B.R. at 474-77 (listing and categorizing cases); Simon, Schindler & Sandberg, LLP v. Gentilini (In re Gentilini), 365 B.R. 251, 254-56 (Bankr.S.D.Fla.2007) (same). The first line focuses on whether the debt arose from goods, services or other benefits or relief provided to the spouse, former spouse or child of the debtor in conjunction with domestic relations proceedings. Sometimes, the goods, services, benefits or relief provided have been referred to as the “bounty” of the debt. See In re Kassicieh, 425 B.R. at 476 (citing Levin v. Greco, 415 B.R. 663, 666-67 (N.D.Ill.2009)). And the second line of cases focuses on the economic impact discharge of the debt would have on the spouse, former spouse or child of the debtor, and whether the state court presiding over the domestic relations proceedings had provided for that impact to fall on the debtor. See, e.g., Holliday v. Kline (In re Kline), 65 F.3d 749, 751 (8th Cir.1995); Pauley v. Spong (In re Spong), 661 F.2d 6, 10-11 (2d Cir. 1981).
One thing is clear from all of these cases. Even when the debt was not directly payable or owed to the spouse, former spouse or child of the debtor, the bounty of that debt had flowed to one of those family members explicitly covered by the statute, or the discharge of the debt would have adversely impacted the finances of one of those explicitly-covered family members.
Relying on Chang and other, similar cases, Jeanette and Karton ask us to hold that the fee awards Patricia owes them are nondischargeable under either
Because the familial relationships explicitly covered by the statute are not implicated in the same manner they were implicated in any of the above-referenced decisions,
Jeanette and Karton attempt to bridge the gap between them and Patricia by asserting that the state court effectively created the missing familial relationship by joining Patricia in the dissolution proceedings as a party to the fraudulent transfer lawsuit. In essence, Jeanette and Karton contend that, by joining Patricia as a party in the dissolution proceedings, the state court effectively made Jeanette Patricia‘s spouse or former spouse for purposes of
Alternately, Jeanette and Karton argue that the requisite familial relationship can be “imputed” to Patricia. According to Jeanette and Karton, because Patricia‘s current husband Paul used to be married to Jeanette and because Patricia allegedly participated in Paul‘s scheme to fraudulently transfer community assets belonging to both Paul and Jeanette, Paul‘s familial status as Jeanette‘s former husband can and should be imputed to Patricia. Once again, Jeanette‘s and Karton‘s contention, while creative, lacks merit. The nondischargeability decisions addressing imputed conduct, intent and liability are based on long-established principles of agency and vicarious liability. See Tsurukawa v. Nikon Precision, Inc. (In re Tsurukawa), 287 B.R. 515, 524-26 (9th Cir. BAP 2002) (discussing the historical development of the law in this area). None of these decisions and none of these legal principles in any way would support our imputing a familial relationship between two unrelated parties.
On a broader level, Jeanette and Karton contend that the policy favoring the enforcement of domestic relations obligations overrides the policy favoring a fresh start for debtors to such an extent that
Put another way, each exception to discharge represents Congress’ attempt to balance the debtor‘s entitlement to a fresh start against strong competing policy concerns. See Bullock, 133 S.Ct. at 1761; see also Ghomeshi v. Sabban (In re Sabban), 600 F.3d 1219, 1222 (9th Cir.2010); In re Chang, 163 F.3d at 1140. To the extent Congress has not adequately balanced the competing policies, Congress will need to amend the discharge exceptions. It is not up to the courts to expand the coverage of the exceptions under the guise of an improper and unwarranted liberal construction of the exceptions.
CONCLUSION
For the reasons set forth above, we AFFIRM the bankruptcy court‘s summary judgment in favor of Patricia.
Notes
Although the courts have not been consistent, the language of the statute dictates that if the obligation is not one owed to the spouse, former spouse, or child of the debtor or such child‘s parent, legal guardian or responsible relative, it is dischargeable under section 523(a)(5), even though it is in the nature of support.
4 Collier on Bankruptcy ¶ 523.11[4] (Alan N. Resnick & Henry J. Sommer eds., 16th ed., 2013).