Fox v. Kelly et al

UNITED STATES BANKRUPTCY COURT
DISTRICT OF NEW MEXICO
In re: 	DARLA J. KELLY, 	No. 7-15-10164 JA
Debtor.
CARL FOX,
Plaintiff,
v. 	Adversary No. 15-1048 J
DARLA J. KELLY,
Defendant.
MEMORANDUM OPINION
Plaintiff Carl Fox and Defendant Darla J. Kelly are former spouses. 	Plaintiff seeks
summary judgment on his claim that certain debts he asserts arose from the parties’ dissolution
of marriage proceedings in state court are non-dischargeable under 11 U.S.C. § 523(a)(5) and 11
U.S.C. § 523(a)(15) 1 . See Plaintiff’s Motion for Summary Judgment (“Motion”) - Docket No.
13, and Memorandum in Support of Plaintiff’s Motion for Summary Judgment (“Brief) - Docket
No. 14. Defendant opposes the Motion. See Response to Request to Judgment (“Response”) -
Docket No. 19. After consideration of the parties’ submissions, and being otherwise sufficiently
informed, the Court finds that the facts not subject to genuine dispute establish that the debts at
issue in this adversary proceeding are non-dischargeable as a matter of law. The Court will,
therefore, grant the Motion.
1 All future statutory references in this Memorandum Opinion are to the Bankruptcy Code, Title 11 of the United
States Code.
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SUMMARY JUDGMENT STANDARDS
The Court will grant summary judgment when the requesting party demonstrates that
there is no genuine dispute as to a material fact and that the movant is entitled to judgment as a
matter of law. See Fed.R.Civ.P. 56(a), made applicable to adversary proceedings by
Fed.R.Bankr.P. 7056. “[A] party seeking summary judgment always bears the initial
responsibility of informing the ... court of the basis for its motion, and ... [must] demonstrate the
absence of a genuine issue of material fact.” Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106
S.Ct. 2548, 91 L.Ed.2d 265 (1986).
In considering a motion for summary judgment, the Court must “examine the factual
record and reasonable inferences therefrom in the light most favorable to the party opposing
summary judgment.” Wolf v. Prudential Ins. Co. of America, 50 F.3d 793, 796 (10th Cir. 1995)
(quoting Applied Genetics Int’l, Inc. v. First Affiliated Sec., Inc., 912 F.2d 1238, 1241 (10th Cir.
1990)). “[A] party opposing a properly supported motion for summary judgment may not rest on
mere allegations or denials of his pleading, but must set forth specific facts showing that there is
a genuine issue for trial” through affidavits or other supporting evidence. Anderson v. Liberty
Lobby, Inc., 477 U.S. 242, 256, 106 S.Ct. 2505, 91 L.Ed .2d 202 (1986).
New Mexico Local Bankruptcy Rule 7056-1 requires the movant to number all material
facts movant contends are not subject to genuine dispute, with references to the portions in the
record upon which the movant relies to establish each material fact. See NM-LBR 7056-1 (“The
facts shall be numbered and shall refer with particularity to the portions of the record relied
upon.”). Similarly, the party opposing a motion for summary judgment must number each
material fact the party contends is in genuine dispute, with references to particular portions of the
record upon which the party relies, and must identify which of the moving party’s numbered
facts the opposing party contends are disputed. See NM-LBR 7056-1(b). Unless the party
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opposing summary judgment specifically controverts a material fact, all properly supported
material facts identified in the motion for summary judgment are deemed admitted. See NM-
LBR 7056-1(b) (“All facts in movant’s statement of facts that are properly supported shall be
deemed admitted unless respondent specifically controverts them.”). Defendant is not
represented by counsel. Her Response does not comply with the requirements of NM-LBR
7056-1(b) because it does not include a statement of numbered facts Defendant alleges are
disputed, nor does the Response identify by number which of the Plaintiff’s facts she contends
are subject to genuine dispute. Instead, the Response attempts to respond to the Motion and
Brief in narrative form. See Docket No. 19. The Response also attaches copies of various
documents in support of Defendant’s position. Despite Defendant’s failure to comply with the
requirements of NM-LBR 7056-1(b), the Court will consider the substance of Defendant’s
Response together with the documents attached to the Response to determine whether any
material facts are subject to genuine dispute.
FACTS NOT SUBJECT TO GENUINE DISPUTE 2
1. 	Defendant filed a voluntary petition under Chapter 7 of the Bankruptcy Code on
January 28, 2015. Brief, ¶ 2; Response, p.1.
2. 	Plaintiff and Defendant were divorced on November 22, 2004. Brief, ¶4;
Response, p.1.
3. 	The parties’ divorce decree, which dissolved the marriage between them, was
entered in the Thirteenth Judicial District Court, County of Valencia, State of New Mexico (the
2 Plaintiff requests the Court to deem as admitted Defendant’s unanswered requests for admission served on
Defendant on September 2, 2015. See Brief, ¶ 15. Pursuant to Fed.R.Civ.P. 36(a)(3), made applicable to adversary
proceedings by Fed.R.Bankr.P. 7036, “[a] matter is admitted unless, within 30 days after being served, the party to
whom the request is directed serves on the requesting party a written answer or objection . . . ” Fed.R.Civ.P. 36(a).
Resolution of the Motion is not dependent upon deemed admissions. Defendant’s Response together with the orders
issued in the state court action are sufficient to establish the material undisputed facts necessary to resolve the
Motion.
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“State Court”) in Case No. D-1314-DM2003-394 (the “State Court Action”). 	Brief, ¶ 4;
Response p.1.
4. 	On February 26, 2014, the State Court entered an Order Regarding January 31,
2014 Hearing in the State Court Action (the “February 2014 Order”). See Brief, Exhibit 1
attached to Exhibit 1; Response, Exhibit A.
5. 	The February 2014 Order awarded a judgment against Plaintiff for “child support
arrears.” See February 2014 Order, ¶ 19.
6. 	On August 14, 2014, the State Court entered a Default Order in the State Court
Action (the “August 2014 Order”). 	See Brief, Exhibit 2 attached to Exhibit 1; Response, Exhibit
B-1.
7. 	The August 2014 Order entered a “consolidated judgment” in favor of Plaintiff
and against Defendant for the following expenses: a) guardian ad litem fees; b) orthodontic
work for the parties’ child; c) expenses relating to a trip the parties’ child took with the Travel
Club; and d) Plaintiff’s attorneys’ fees and costs. Id.
DISCUSSION
At issue is whether the debts arising from the February 2014 Order and the August 2014
Order are non-dischargeable under § 523(a)(5) or § 523(a)(15). In a Chapter 7 case, debts for
“domestic support obligations” as well as debts owed to a former spouse that do not constitute
domestic support obligations but that are otherwise “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” are non-dischargeable. See 11 U.S.C. § 523(a)(5) (domestic support
obligations); 11 U.S.C. § 523(a)(15) (other debts arising from a divorce proceeding that are not
domestic support obligations under subsection (5)). By enacting these sections, Congress has
made a policy choice that favors the enforcement of obligations to former spouses arising from a
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dissolution of marriage over the debtor’s fresh start. See Taylor v. Taylor (In re Taylor), 737
F.3d 670, 675 (10th Cir. 2013) (Sections 523(a)(5) and 523(a)(15) “‘reflect the congressional
preference for the rights of spouses to alimony, maintenance or support over the rights of debtors
to a ‘fresh start’ free of debts.’”) (quoting Gianakas v. Gianakas (In re Gianakas), 917 F.2d 759,
761 (3d Cir. 1990) (remaining citations omitted)); Sampson v. Sampson (In re Sampson), 997
F.2d 717, 721 (10th Cir. 1993) (observing that § 523(a)(5) “departs from the general policy of
absolution, or ‘fresh start’ in order to enforce an overriding public policy favoring the
enforcement of familial obligations.”) (citation and internal quotation marks omitted).3 These
two non-dischargeability subsections work in tandem to render nearly all debts owing to a former
spouse arising out of a dissolution of marriage proceeding non-dischargeable in a Chapter 7
bankruptcy case.4 Generally, either the debt constitutes a domestic support obligation and is,
therefore, non-dischargeable under § 523(a)(5); or, the debt does not qualify as a domestic
support obligation, but arises from a separation agreement or divorce decree, or arises as a result
of a court order entered in connection with a divorce proceeding, and is consequently non-
dischargeable under § 523(a)(15).5 	Plaintiff alleges that the debt arising from the February
3 See also Taylor v. Taylor (In re Taylor), 455 B.R. 799, 808 (Bankr.D.N.M. 2011), aff’d, 478 B.R. 419 (10 th Cir.
BAP (2012), aff’d, 737 F.3d 670 (10 th Cir. 2013) (“Taylor I”) (“[T]he non-dischargeability protections afforded by
11 U.S.C. § 523(a)(5) and (a)(15) evidence Congress’ determination to temper the policy of protecting and favoring
the debtor’s fresh start when the debt at issue arises in connection with a divorce.”) (citing In re Crosswhite, 148
F.3d 879, 881-82 (7 th Cir. 1998)).
4 Cf. Taylor v. Taylor (In re Taylor), 478 B.R. 419, 428-29 (10 th Cir. BAP 2012), aff’d, 737 F.3d 670 (10 th Cir. 2013)
(“Taylor II”) (“‘Essentially, the combination of amended § 523(a)(5) and (15) [ ] exclude from discharge all marital
and domestic relations obligations, whether support in nature, property division, or hold-harmless, provided that
they were incurred in the course of a divorce or separation, or established 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.’”) (quoting Hon. William Houston Brown & Lawrence R. Ahern III, 2005 Bankruptcy
Reform Legislation with Analysis 2d § 7:42 (2006)).
5 See Taylor, 737 F.3d at 683 n. 3 (acknowledging the practical result of determining that a debt is nondischargeable
under § 523(a)(15) is that it is unnecessary to determine whether the debt is non-dischargeable under § 523(a)(5)
because “the debt will be non-dischargeable either way” but nevertheless analyzing whether a debt is a “domestic
support obligation” because the plain language of § 523(a)(15) requires that the debt “not be a ‘domestic support
obligation’”) Yelverton v. De Nagy-Unyom (In re Yelverton), 2012 WL 4434087, *7 (Bankr.D.D.C. Sept. 24, 2012)
(noting that “[i]n chapter 7, both categories of debt are, without exception, nondischargeable, making it generally
unnecessary to distinguish between the two.”) (citation omitted).
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2014 Order is non-dischargeable under 11 U.S.C. § 523(a)(5) and the debt arising from the
August 2014 Order is non-dischargeable under § 523(a)(15). The Plaintiff bears the burden of
proving that a debt is non-dischargeable, whether under § 523(a)(5) or § 523(a)(15), by a
preponderance of the evidence.6 The Court will address each debt in turn.
The February 2014 Order
Section § 523(a)(5) makes debts for domestic support obligations non-dischargeable. 11
U.S.C. § 523(a)(5). The Bankruptcy Code defines “domestic support obligation” as a debt
“owed to a spouse, former spouse, or child of the debtor . . . 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 . . . . by reason of applicable provisions of
. . . an order of a court of record.” 11 U.S.C. § 101(14A).7 Whether a debt constitutes a
6 See Grogan v. Garner, 498 U.S. 279, 286-87, 111 S.Ct. 654, 112 L.Ed.2d 755 (1991) (establishing preponderance
of the evidence standard for non-dischargeability determinations); Sampson, 997 F.2d at 723 (“The party seeking to
hold the debt non-dischargeable [under § 523(a)(5)] bears the burden of proving by a preponderance of the evidence
that the parties intended the obligation as support and that the obligation was, in substance, support.”) (citation
omitted); In re Okrepka, 533 B.R. 327, 334 (Bankr.D.Kan. 2015) (“The burden of proof regarding dischargeability
actions [under §523(a)(15)] is by a preponderance of the evidence and rests with the objecting nondebtor spouse,
former spouse, or child.”) (citing Grogan v. Garner, 498 U.S. at 286-87).
7 Section 101(14A) provides in full:
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; 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.
11 U.S.C. § 101(14A).
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“domestic support obligation” and is, consequently, “non-dischargeable under § 523(a)(5) is a
dual inquiry into both the parties’[ ] intent and the substance of the obligation.” Sampson, 997
F.2d at 723. 8 The label the parties used to describe the obligation is not determinative. See
Taylor, 737 F.3d at 676– 77 (“The nature of the obligation is not restricted to the parties’ label . .
.”) (citations omitted).
The facts not subject to genuine dispute establish that the debt created by the February
2014 Order is non-dischargeable under § 523(a)(5) as a domestic support obligation. The
February 2014 Order was entered in the State Court Action and created a debt owed to Plaintiff
by his former spouse. It awarded Plaintiff judgment for “child support arrears.” See February
2014 Order. Defendant acknowledges that the debt represented by the February 2014 Order is
“back child support owed to minor child Carleigh Mary-Jett Fox,” but argues that such debt “will
be caught up with the court[’]s direction to mediate a payment schedule.” See Response, p. 2.
Defendant’s acknowledgement contained in her Response, together with the language of the
February 2014 Order, sufficiently establish the parties’ mutual intent for the obligation to be in
the nature of support for their minor child, and that the obligation is, in fact, in the nature of
support. The Court, therefore concludes that the debt arising from the February 2014 Order is
non-dischargeable under § 523(a)(5) as a domestic support obligation.
The August 2014 Order
It is not entirely clear whether the debts arising under the August 2014 Order are
domestic support obligations that are non-dischargeable under § 523(a)(5) or debts arising in
8 Congress modified the language in 11 U.S.C. 523(a)(5) with the enactment of the Bankruptcy Abuse Prevention
and Consumer Protection Act of 2005 (“BAPCPA”) to apply to “domestic support obligations” as defined in 11
U.S.C. § 101(14A). But because this change did not change the standard for determining whether an obligation is
in the nature of support, it is appropriate to apply the same test for determining non-dischargeability under 11 U.S.C.
§ 523(a)(5) established by the Tenth Circuit before the enactment of BAPCPA. See Taylor I, 455 B.R. at 804
(stating that BAPCPA did not change the standard under § 523(a)(5), and finding it appropriate to continue
application of the pre-BAPCPA test to determine whether a debt is in the nature of support) (citations omitted).
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connection with a divorce decree other than domestic support obligations that are non-
dischargeable under § 523(a)(15), or whether some of the debts fall in each category. It is clear,
however, that all of the debts arising under the August 2014 Order fall into one of those two
categories. Because the debts are non-dischargeable regardless of whether they fall under§
523(a)(5) or § 523(a)(15), the Court need not decide which section applies to each debt.
As discussed above, child support obligations are domestic support obligations that are
non-dischargeable under § 523(a)(5). Non-dischargeability under § 523(a)(15) requires proof of
the existence of a debt that is: 1) owed to a spouse, former spouse, or child of the debtor; 2)
incurred in connection with a separation agreement, divorce decree, or other order of a court; and
3) not of a kind found in § 523(a)(5). 11 U.S.C. § 523(a)(15). This exception to discharge
expands the range of marital obligations beyond those covered by § 523(a)(5), and is construed
more liberally than other exceptions to discharge found in § 523(a). Taylor II, 478 B.R. at 431 n.
26.
The facts not subject to genuine dispute are sufficient to establish that the debt
represented by the August 2014 Order is non-dischargeable under either § 523(a)(5) or §
523(a)(15). The August 2014 Order granted judgment in favor of Plaintiff creating a debt owing
to Defendant’s former spouse. The August 2014 Order was entered by the State Court in the
same State Court Action as the divorce decree. It was entered in the State Court Action as part
of the parties’ dissolution of marriage proceeding and creates obligations connected to the
divorce decree. That the parties’ divorce decree was entered nearly ten years earlier, in
November of 2004, makes no difference.
The “consolidated judgment” embodied in the August 2014 Order covers several
different expenses, including guardian ad litem fees, the child’s orthodontic work for Plaintiff’s
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and Defendant’s child, a trip the child took, and Plaintiff’s attorneys’ fees and costs. All or some
of Defendant’s obligations to pay these expenses may constitute obligations for child support of
a type non-dischargeable under § 523(a)(5). To the extent the obligations do not constitute non-
dischargeable domestic support obligations under § 523(a)(5), they are non-dischargeable debts
under § 523(a)(15) as debts connected to the divorce decree.
Amounts Owing Under the February 2014 Order and August 2014 Order
Defendant acknowledges her responsibility to pay the debt arising from the February
2014 Order, but requests a mediated payment schedule. She also complains that the amounts the
State Court assessed in the February 2014 Order and the August 2014 Order were based on
inaccurate information and that she cannot pay the amounts due. Defendant attached
documentation to her Response that may evidence payment of some of the expenses awarded to
Plaintiff under the August 2014 Order. See Response – Exhibit C. A debtor’s ability to pay is
not relevant to the determination of non-dischargeability under § 523(a)(5) or § 523(a)(15). See,
Taylor I, 455 B.R. at 808 (observing that “‘all debts owed to a former spouse, or child of a debtor
are nondischargeable [in a chapter 7 case] if incurred in the course of a divorce proceeding,
notwithstanding the debtor’s ability to pay the debt or the relative benefits and detriments to the
parties.’”) (quoting Tarone v. Tarone (In re Tarone), 434 B.R. 41, 48 (Bankr.E.D.N.Y. 2010)).
However, because Defendant has provided some evidence that some portion the amounts
awarded to Plaintiff in the August 2014 Order may have been paid since its entry, and the State
Court may have authority to modify its child support award, the Court declines to quantify the
amount of the non-dischargeable debt. It is sufficient to conclude based on the facts not subject
to genuine dispute that the debts arising from the February 2014 Order and August 2014 Order
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are non-dischargeable under § 523(a)(5) or § 523(a)(15) in whatever amount the State Court may
determine is owed.
Enforcement of a non-dischargeable judgment, including the determination of the total
amount of the non-dischargeable debt, can be accomplished in the State Court Action. Cf.
Robbins v. Breckenridge (In re Robbins), 1997 WL 34726864, *11 (Bankr.W.D.Tenn. Aug. 13,
1997) (directing the parties to return to state court for a determination of monetary judgments,
enforcement issues, or to seek modification of the support obligations following the bankruptcy
court’s non-dischargeability determination under § 523(a)(5) or § 523(a)(15)). After this Court’s
non-dischargeability determination, the State Court can quantify (and modify, if appropriate) the
amount of the non-dischargeable debt as part of the parties’ ongoing State Court Action. See
Brennick v. Brennick (In re Brennick), 208 B.R. 613, 615 (Bankr.D.N.H. 1997) (“The state
divorce court can revisit and modify the obligations that have been determined by this Court to
be nondischargeable . . .”).
CONCLUSION
Based on the foregoing, the Court concludes that the debts arising from the February
2014 Order and the August 2014 Order cannot be discharged through Defendant’s Chapter 7
bankruptcy case. The debt arising from the February 2014 Order is a non-dischargeable
domestic support obligation. The debts arising from the August 2014 Order are non-
dischargeable either under § 523(a)(5) as domestic support obligations, or under § 523(a)(15) as
debts other than domestic support obligations connected to the divorce decree. The Motion is
granted to the extent it seeks a non-dischargeability determination for the debts arising from the
February 2014 Order and the August 2014 Order and is denied with respect to Plaintiff’s request
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for a quantified amount of the non-dischargeable debt. The Court will enter a separate judgment
consistent with this Memorandum Opinion.
_______________________________
ROBERT H. JACOBVITZ
United States Bankruptcy Judge
Date entered on docket: April 1, 2016
COPY TO:
Katharine C Downey
Sutin Thayer & Browne, A.P.C.
Attorney for Plaintiff
PO Box 1945
Albuquerque, NM 87103-1945
Darla J Kelly
Defendant
10 Jardin
Los Lunas, NM 87031
Darla J. Kelly
Defendant
PO Box 253
Tome, NM 87060
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