OPINION AND ORDER
Before this Court is Creditor’s Memorandum on Domestic Support Obligation [Dkt. No. 395]; Creditor’s Motion for Entry of Order on Nature of Domestic Support Obligation Payments [Dkt. No. 404]; Debtor’s Opposition to Creditor’s Motion for Entry of Order on Nature of Domestic Support Obligation Payments [Dkt. No. 440]; Creditor’s Reply to Debtor’s Opposition to Creditor’s Motion for Entry of Order on Nature of Domestic Support Obligation Payments [Dkt. No. 505]; Debtor’s Sur-Reply to Creditor’s Reply Should This Court Grant Leave to Creditor to Pile a Reply or in the alternative Opposition to Creditor’s Leave to Reply and his subsequent filing [Dkt. No. 523], Creditor’s Informative Motion Regarding State Court Judgment on Support Payments Due [Dkt. No. 454], Creditor’s Motion to Submit Certified Translation of State Court Judgment on Support Payments Due and its accompanying translations [Dkt. No. 456, 478], Debtor’s Response to Creditor’s Motion Regarding State Court Judgment on Support Payments Due [Dkt. No. 457], Debt- or’s Informative Motion Regarding State Court Judgment on Divorce Case [Dkt. No. 465], Debtor’s Motion to Compel Production of Documents [Dkt. No. 466], Debtor’s Response to Creditor’s Motion to Submit Certified Translation of Amended Judgment [Dkt. No. 480], Creditor’s Motion Requesting Entry of Order as to Domestic Support Obligation Issue [Dkt. No. 496]; and, Debtor’s Response to Motion Requesting Entry of Order as to Domestic Support Obligation Issue [Dkt. No. 498]. For the reasons set forth below, this Court determines that the $50,000.00 monthly payment in controversy is a “Domestic Support Obligation” as defined in § 101(14A) of the Bankruptcy Code.
I. Factual Background
The procedural history of this case is complex, and this Court acknowledges that facts surrounding domestic relations cases can be distracting in nature because of sensitive facts and contentious nature. Thus, this Court shall only highlight facts that it deems to be relevant to its current
On May 3, 2001, the Court of First Instance of Puerto Rico (“State Court”) issued a divorce judgment in the case of Candelario v. Efron, KDI 1999-1421 (the “Divorce Case”). On the same day, the State Court also issued an order mandating Debtor to pay Madeleine Candelario (“Creditor”) $50,000.00 per month for support until all the marital assets were divided (the “Support Payments”). Debtor subsequently did not make such payments to Creditor. On March 4, 2011, the State Court held a hearing to determine the amount Debtor owed to the Creditor in past due Support Payments. At such hearing, the State Court determined that Debtor owed Creditor a minimum of $3,314,936.40 plus corresponding interest. Subsequently, on March 25, 2011, Debtor David Efron filed for chapter 11 bankruptcy. In Debtor’s Amended Disclosure Statement [Dkt. 129], Debtor specified that the reason for his bankruptcy filing was the Creditor’s pursuit to collect on the past-due Support Payments. On January 18, 2012, Creditor filed her amended proof of claim asserting her claim for conjugal property division and domestic support payments. Debtor filed an objection to Creditor’s amended claim on February 2, 2012. On March 12, 2012, Creditor moved for relief from the automatic stay to continue the State Court proceedings in the Divorce Case. On April 9, 2012, Creditor filed a motion for payment of post-petition Support Payments due. Debtor opposed such motion on April 10, 2012. This Court held a hearing on this issue on April 24, 2012. At the hearing, this Court lifted the stay on both the Divorce Case and the division of conjugal property case, Efron v. Candelario, KAC 2001-4173 (the “Division Case”). On June 8, 2012, Debtor filed a motion requesting clarification of the order lifting the stay in the Divorce Case and a determination that the payments ordered by the Divorce Decision are not support payments. This Court issued such clarifications on the same day clarifying that the stay was modified for both state court cases to allow litigation, including any legal procedural matter necessary in order to obtain a final unappealable judgment in favor of one of the parties. On August 20, 2012, Creditor filed her objections to the first amended plan of reorganization (“Objection to Plan”). In such objection, Creditor argues that Debtor’s first amended plan of reorganization (“First Amended Plan”) could not be confirmed because Debtor was not current on his Support Payment and his plan did not provide for payment to fulfill the State Court order in the Divorce Case. Debtor filed his corresponding response to the objection on August 28, 2012. This Court held a hearing for the confirmation of the First Amended Plan on August 29, 2012. At the hearing, the parties disagreed on the nature of the payments due to the Creditor and thus this Court ordered the parties to ask the State Court to clarify the nature of such payments. In the event the State Court refused to clarify the issue, the parties were to file legal briefs in this Court. On September 21, 2012, parties informed this Court that the State Court declined to clarify the issue [Dkt. 379, 380], The parties filed legal briefs addressing the issue in this Court and their accompanying replies followed.
Upon the filing of the various briefs and motions, the following procedural happenings also occurred: On January 8, 2013, Creditor requested this Court for leave to file its reply to Debtor’s Opposition to Creditor’s Motion for Entry of Order on
In Creditor’s initial briefing on the issue, Creditor argues that pursuant to 11 USC § 101(14A), Domestic Support Obligation is defined as having three elements: debts including its corresponding interest that is (1) owed to a former spouse; (2) in the nature of alimony, maintenance, or support of such former spouse without regard to whether such debt is expressly so designated; (3) established by a reason of a divorce decree. Creditor further points out that pursuant to Article 142 of the Civil Code of Puerto Rico, 31 L.P.R.A. § 561, “support” is defined as “... all that is dispensable for maintenance, housing, clothing, medical attention, according to the social position of the family.” Citing Lopez v. Melendez, CC-97-153,
In opposition, Debtor argues that Creditor’s claims in interest over Debtor’s property are all non-marital in nature. Creditor, in essence, is claiming an interest in a series of corporations or entities in which Debtor has an interest by virtue of substantial parental inheritance. Debtor further points out that in the Divorce Case, there are no domestic support obligations pending, but instead, these amounts are for advances to undetermined future conjugal property division. Debtor argues that pursuant to Article 100 of the Puerto Rico Civil Code 31 L.P.R.A. § 343, Creditor’s right to alimony ceases to exist once the divorce is final. Debtor argues that per the State Appellate Court Decision,
Responding to Debtor’s opposition, Creditor argues that although in Puerto Rico, there is no such thing such as advances for support, the Supreme Court of Puerto Rico has recognized the use of advances for the community assets pending division for the ex-wife support pursuant to Article 1325 of the Puerto Rico Civil Code, 31 L.P.R.A. § 3700. Creditor refers to her original Domestic Support Briefing [Dkt. No. 395] that the Puerto Rico Court of Appeals has recognized advances or Support Payments for support. Creditor further cites to In re Werthen,
In reply to Creditor’s response to Debt- or’s opposition, Debtor restates that Creditor’s claim is not a Domestic Support Obligation and thus is a general unsecured claim and therefore is not entitled to any priority. Debtor argues that Creditor relied on a 2001 temporary restraining order to claim her Domestic Support Obligation and that such temporary restraining order expired upon the finality of the divorce decree along with the ongoing property distribution case. Debtor continues to argue that the State Court reaffirmed that the $50,000.00 monthly payments are advances in her alleged participation in the community property distribution. Debtor further points out that Creditor did not argue that her original or amended proof of claim is a Domestic Support Obligation claim, rather Creditor argued such on an addendum. Debtor further argues that Creditor took the State Court’s opinion out of context and that the State Court did not hold that the $50,000.00 per month payment is to be considered alimony. Rather, Creditor took the quote from the portion of the State Court’s opinion when the Court was describing temporary relief that was vacated by the Court of First Instance upon the finality of the divorce judgment. Debtor also argues that the State Court did not require “need” to be proven in order for the Creditor to partake on the community property assets division. Thus, Debtor argues that because the divorce was final to which alimony payments terminate upon such finality, Creditor cannot argue finality of divorce to continue alimony payments based on need. Regardless, Debtor clarifies that the only interest Creditor has is to partake in the community property assets division and nothing else. Alternatively, Debtor restates his original arguments that Creditor does not have a “need” because of Debtor’s previous payments of over $2,500,000.00 and her current assets. Conclusively, Debtor also argues that under the comity clause, U.S. Constitution, Article IV, Section 2, Clause I, this Court should give deference to state courts in its determination of Domestic Support Obligations. Debtor argues that because the Circuit Court of Appeals and the First Instance Court of Puerto Rico both identified such payments to be advances in the community property, this Court should honor that interpretation.
II. Legal Analysis and Discussion
After reviewing the arguments of the parties, and the relevant law, this court concludes that the $50,000.00 per month payment is most correctly characterized as a Domestic Support Obligation payment under the Bankruptcy Code.
This instant contention hinges on the issue of whether the $50,000.00 per month payment falls within 11 U.S.C. § 101(14A)
A. Federal Bankruptcy Code’s Definition of “Support” Governs
Section 507(a)(1) of the Bankruptcy Code, accords first-priority status for “[a]l-lowed unsecured claims for domestic support obligations that, as of the date of the petition, are owed to or recoverable by a spouse, a former spouse....” 11 U.S.C. § 507(a)(1)(A). Section 507(a)(1) was added to the Bankruptcy Code in 2005 and supersedes and replaces former Section 507(a)(7), which gave priority status to certain claims for alimony, maintenance and support. The term “domestic support obligation” is defined in the Bankruptcy Code under Section 101(14A), which provides:
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 provision under this title, that is,
(A) owed to or recoverable by—
(i) a spouse, former spouse, or child of the debtor ...
(B) in the nature of alimony, maintenance, or support ... of such spouse, former spouse, or child of the debtor ... 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 separate agreement, divorce decree, or property settlement agreement;
(ii) an order of a court of record
(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.
Under the above definition of domestic support obligation, three out of the four requirements do not seem to be in dispute, namely that, (1) Debtor owed such debt to a former spouse, § 101(14A)(A); (2) Debt- or’s debt was established before the order for relief (i.e., petition date) by a divorce decree or an order of a court of record, § 101(14A)(C); and (3) Debtor did not assign his debt to a nongovernmental entity because Creditor has not assigned the debt to anyone, § 101(14A)(D). According, the parties in this instant case dispute the remaining element: whether the debt owed to Creditor is one in the nature of alimony, maintenance, or support under 11 U.S.C. § 101(14A)(B).
In this Circuit, in order to raise an obligation as a domestic support obligation, such obligation needs to be in the nature of support and thus must be provided for the upkeep of the recipient spouse and children. See Smith v. Pritchett (In re Smith),
The First Circuit has clarified that when determining the nature of a support claim, the intent of the parties, including any guidance provided by the state court, may be taken into account “whether the state court which entered the divorce decree and the parties who entered into a divorce agreement intended the award to serve as support or as ‘something else,’ such as a division of jointly owned property.” Smith v. Pritchett (In re Smith),
In regards to the third, fourth, and fifth factors, this Court finds that there is ambiguous or contradicting evidence in the record for it to make adequate determination on these indicators. Therefore, this Court will proceed to explore the others in light of judicial economy.
In regards to the first, second and sixth indicators, this Court notes that the State Court, in the Divorce Case, points out that Debtor’s assets as of 2001, the time of divorce, are estimated at $178,000,000. Although some amounts were acquired by inheritance and may not be included in the calculation of community property assets, this Court nonetheless finds that the Debt-
Assuming arguendo that this Court finds the third, fourth and fifth indicators to be in favor of Debtor, in exercising the totality circumstances test provided by the First Circuit, this Court still finds that the evidence tilts in finding the $50,000.00 per month payment is more correctly considered a Domestic Support Obligation. This Court must note that in exercising its independent discretion under the totality of circumstances test, in deciding whether a support payment carries non-priority status, this Court participates in a weighing between the goal of providing the Debtor a ‘fresh start’, which mandates that exceptions to discharge be confined to those plainly expressed, and an overriding public policy favoring the enforcement of familial obligations. Marrana v. Citizens Bank of Mass.,
B. State Law Considerations
Although state law mandates the determination of the duty to support, federal law nonetheless controls whether the duty or agreement is nondischargeable. William L. Norton, Jr., 3 Norton Bankr.L. & Prac.3d § 57.30 (2013); In re Perez, 12-03808,
The State Court in its Divorce Decision [Dkt. 234-2, 234-3] specified that the sum of $50,000.00 per month is to be established for Creditor’s “enjoyment of property and cash amount that would enable her to maintain herself, which [Debtor] shall pay to [Creditor].” Further, the State Court itemized the monthly amount to be the following: “a) Additional liquid sum in the amount: $30,000.00 (b) Plus the enjoyment and administration of the property that [Creditor] has in Florida, USA; and (c) The alimony she receives by order of the Court of Florida, USA.” Above and beyond the above-ordered payment, the Divorce Decision also mandated an additional $50,000.00 to be granted to the plaintiff for litigation related expenses including attorney fees, accounting fees, transcriber and other associated costs. This Divorce Decision reveals that the State Court intended the $50,000.00 per month to be used towards three items: (1) Creditor’s self-maintenance; (2) maintenance of the Florida property; and (3) to satisfy alimony from the former Florida state court decision.
Article 1325 of the Puerto Rico Civil Code, 31 L.P.R.A. § 3700, on the topic of surviving spouse and children support states:
Support shall be given out of the property owned in common to the surviving spouse and to his or her children, pending the liquidation of the inventoried estate and until their share has beendelivered to them, but it shall be deducted from their portion insofar as it exceeds what they should have received as fruits or income.
Puerto Rico state case law further reveals through its interpretation of Article 1325 of the Puerto Rico Civil Code, 31 L.P.R.A. § 3700, that a former spouse through death or divorce is entitled to receive from her husband a payment for food and court costs as determined by the final judgment set forth in her participation in the asset liquidation suit with her ex-spouse. Janer Vila v. Superior Court,
C. Totality of Circumstances Analysis Applies
Upon exercising its independent judgment in determining the intent of the parties, this Court has considered state law for guidance on the question of whether the State Court had intended to base the award of support on need. However, this Court finds that the state law concept of “support” is indeed consistent with the
Incorporating the above Puerto Rico Civil Code findings into our analysis that ex-spouses are entitled to support from the time of dissolution of such conjugal property until the performance of settlement is perfected, this Court finds such amount to be leaning towards those resembling domestic support payments as defined by the Bankruptcy Code. This finding is based on the parties’ mutually agreed facts that the Division Case is still pending as of this day in the Puerto Rico state court, years after the resolution of the Divorce Case. This Court reiterates the fact that although state law may characterize a particular obligation as support or property settlement, this determination is not binding on the bankruptcy court.
III. Conclusion
Summarily, based on the above reasoning, this Court finds the $50,000.00 per month payment to be a Domestic Support Obligation within the definition provided in the Bankruptcy Code. This instant memorandum serves as the court’s findings of facts and conclusions of law. Acting in accordance with the relevant issue resolved at hand, this Court recognizes the latín maxim Fiat justitia mat caelum — let justice be done though the heavens fall— and moves on to the next case to provide justice to the next litigant in line, on a crowded docket. See e.g., In re Aledria Corp., 10-12310 BKT,
SO ORDERED.
Notes
. Creditor in raising this issue as she did in the original motion, mirrors her original argument. She, however, clarified that her only assets are her apartment in Miami, Florida (Ritz Carlton) along with its accompanying furnishings. Thus, her other assets such as the 2005 car are part of the community property. Creditor further clarifies that she is heavily in debt and owes money to a mortgage bank as well as her friends and family.
. Section 523(a)(5) in line with the twin goals of bankruptcy as discussed by this Court in In re Ramos, 12-08816,
[T]he protection of the spouse who may lack job skills or who may be incapable of working, the protection of minor children who may be neglected if the custodial spouse entered the job market, and the protection of society from an increased welfare burden that may result if debtors could avoid their familial responsibilities by filing for bankruptcy.
Kritt v. Kritt (In re Kritt),