Paulus et al v. Paulus

UNITED STATES BANKRUPTCY COURT
NORTHERN DISTRICT OF OHIO
WESTERN DIVISION
In Re:
Mark Paulus,
Debtor.
Barbara S. Paulus,
Plaintiff,
v.
Mark L. Paulus,
Defendant.
) 	Case No.: 10-35882
)
) 	Chapter 7
)
) 	Adv. Pro. No. 10-3392
)
) 	Hon. Mary Ann Whipple
)
)
)
)
)
)
)
)
MEMORANDUM OF DECISION AND ORDER
Plaintiff, Barbara S. Paulus, commenced this adversary proceeding against Defendant, Mark L.
Paulus, her ex-husband and debtor in the underlying Chapter 7 case, in order to determine the
dischargeability of an obligation to pay a credit card debt as set forth in a Judgment Entry Granting
Dissolution (“Dissolution Decree”) and Separation Agreement incorporated therein. Plaintiff alleges in her
complaint that the Dissolution Decree requires Defendant to pay the amount owed on a joint Chase credit
The court incorporates by reference in this paragraph and adopts as the findings
and orders of this court the document set forth below. This document has been
entered electronically in the record of the United States Bankruptcy Court for the
Northern District of Ohio.
Dated: June 27 2011
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card account, with an the account number ending in 5151, and to hold Plaintiff harmless with respect to that
debt. [Doc. # 1, Complaint, ¶ 4]. Plaintiff also alleges that Defendant “has failed to hold [her] harmless on
the aforementioned debt . . . by listing her as a co-debtor on the Petition Defendant/Debtor filed . . . and
failing to maintain payments on the account.” [Id. at ¶ 5]. Finally, Plaintiff alleges that “said obligation
should be found non-dischargeable pursuant to 11 U.S.C. Section 523(a)(5) and/or 11 U.S.C. Section
523(a)(15)” and that “Plaintiff should be granted judgment holding her harmless as to this debt in the
amount of $6,345.00 plus interest . . . and her costs in this action. . . .” [Id. at ¶ 6]. Defendant filed an
answer, admitting Plaintiff’s allegation in paragraph 4 of the complaint. [Doc. # 6, Answer, ¶ 4]. In his
answer, Defendant also avers that “[a]ttorney for Defendant contacted Plaintiff’s attorney prior to the filing
of the adversary to work out a stipulation that [Defendant] would not be discharged of the debt owed to
Chase Bank. At all times Defendant has acknowledged that he owes the debt to Chase regardless of the
bankruptcy.” [Id. at ¶ 4]. 	This adversary proceeding is now before the court on Plaintiff’s unopposed
Motion for Judgment on the Pleadings, seeking a determination of nondischargeability under § 523(a)(15).
[Doc. # 12].
The district court has jurisdiction over this Chapter 7 case pursuant to 28 U.S.C. § 1334(a) as a case
under Title 11. It has been referred to this court by the district court under its general order of reference.
28 U.S.C. § 157(a); General Order 84-1 of the United States District Court for the Northern District of
Ohio. Proceedings to determine the dischargeability of debts are core proceedings that the court may hear
and determine under 28 U.S.C. § 157(b)(1) and (b)(2)(I). For the reasons that follow, the court will grant
the Motion to the extent it seeks a determination that Defendant’s obligation owed to Plaintiff pursuant to
the Dissolution Decree to hold her harmless as to the Chase credit card debt is nondischargeable but will
deny the Motion to the extent it seeks an award of Plaintiff’s costs or a determination that the debt owed
directly to Chase is nondischargeable.
LAW AND ANALYSIS
I. Rule 12(c) Standard
Plaintiff’s Motion is brought under Rule 12(c) of the Federal Rules of Civil Procedure, made
applicable in this proceeding by Federal Rule of Bankruptcy Procedure 7012(b). A Rule 12(c) motion for
judgment on the pleadings is granted when no material issue of fact exists and the party making the motion
is entitled to judgment as a matter of law.” Rawe v. Liberty Mut. Fire Ins. Co., 462 F.3d 521, 526 (6th 2006).
The proper standard for deciding a Rule 12(c) motion is the same as for a motion pursuant to Fed R. Civ.
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P. 12(b)(6). See Comm’l Money Ctr., Inc. v. Ill. Union Ins. Co., 508 F.3d 327, 326 (6th Cir. 2007). Under
that standard, the court must “construe the complaint in the light most favorable to the nonmoving party,
accept the well-pled factual allegations as true, and determine whether the moving party is entitled to
judgment as a matter of law.” 	Id. 	The court “need not accept the plaintiff's legal conclusions or
unwarranted factual inferences as true. To state a valid claim, a complaint must contain direct or inferential
allegations respecting all the material elements under some viable legal theory.” 	Id.
II. 11 U.S.C. § 523(a)(15)
Section 523(a)(15) was amended by the Bankruptcy Abuse Prevention and Consumer Protection Act
of 2005 (“BAPCPA”), effective October 17, 2005. Because Defendant’s bankruptcy case was filed after
that date, Plaintiff’s complaint is governed by the amended statute, which provides in relevant part as
follows:
(a) A discharge under section 727 . . . of this title does not discharge an individual debtor
from any debt –
. . . .
(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.
11 U.S.C. § 523(a)(15).
Generally, this section governs the dischargeability of debts incurred in connection with property
settlements and hold harmless agreements set forth in divorce decrees and separation agreements. Prior to
the enactment of BAPCPA, § 523(a)(15) provided certain affirmative defenses, which, if established,
permitted a court to discharge such debts, notwithstanding that they otherwise fell within the scope of that
subsection. 11 U.S.C. § 523(a)(15)(A) & (B) (2004). Also before BAPCPA was enacted, debts that fell
within the scope of § 523(a)(15) were automatically discharged unless a creditor invoked the equitable
powers of the bankruptcy court by filing an adversary proceeding seeking a determination that the debt was
nondischargeable. 11 U.S.C. § 523(c)(1) (2004). BAPCPA, however, eliminated the affirmative defenses
in former subsections (A) and (B) and made property settlement debts encompassed under § 523(a)(15)
unqualifiedly nondischargeable. Blackburn v. Blackburn (In re Blackburn), 412 B.R. 710, 712 (Bankr.
W.D. Pa. 2009) (quoting 4 Collier on Bankruptcy ¶ 523.21 (15th ed. Rev.) and stating that Congress
amended § 523(c)(1) to add debts referred to in § 523(a)(15) to the list of debts “that will be automatically
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discharged unless a creditor files an adversary proceeding in the bankruptcy court to have the debt declared
nondischargeable). Thus, the court now has the following very narrow inquiry in determining whether a
debt is excepted from discharge under this section: the debt must (1) be to a spouse, former spouse or child
of the debtor; (2) not be of the type described in paragraph 5 of § 523, which excepts domestic support
obligations; and (3) have been incurred in the course of a divorce or separation or in connection with a
separation agreement, divorce decree or other order of a court.
In his answer, Defendant admits that the Separation Agreement, incorporated into the Dissolution
Decree, requires him to pay the Chase credit card account and to hold Plaintiff harmless thereon. This
provision created a new obligation running from Defendant to Plaintiff. 	Cf. 	Gibson v. Gibson (In re
Gibson), 219 B.R. 195, 204-05 (B.A.P. 6th Cir. 1998) (finding the debtor’s obligation set forth in the divorce
decree to pay a joint prepetition debt created an additional obligation in favor of his ex-wife to pay the debt
notwithstanding the absence of a hold harmless provision). This is a separate obligation owed to Plaintiff
that was incurred under the divorce decree as distinguished from Defendant’s obligation owed to Chase
Bank under the credit card agreement. See id. And the Separation Agreement provides that neither party
is responsible for payment of spousal support to the other, nor does it refer to any children of the marriage
or child support obligation. [Doc. # 1, Complaint, ¶ 5, Ex. A, Separation Agreement].1 The plain language
of the statute provides that all such debts owed to a former spouse that are not support obligations are
nondischargeable.
As discussed above, however, § 523(a)(15) only excepts from discharge debts owed to a spouse,
former spouse or child of the debtor. To the extent that Plaintiff’s Motion seeks an order that the debt owed
by Defendant directly to Chase Bank is nondischargeable under § 523(a)(15), the Motion will be denied.
“Such debts not being owed to a spouse, former spouse or child of the debtor are not excepted from
discharge under this subsection.” Sears v. Sears (In re Sears), No. 07-3175, 2008 WL 111231, *3, 2008
Bankr. LEXIS 40, *8 (Bankr. N.D. Ohio Jan. 8, 2008).
Finally, in the complaint, Plaintiff seeks an award of the costs of this action, including court cost of
$250.00. However, as discussed above, Plaintiff was not required to commence this adversary proceeding.
1 Paragraph five of the Complaint states that the Dissolution Decree and Separation Agreement is “attached hereto as
Exhibit A.” Rule 10(c) allows the incorporation of exhibits or writings attached to a pleading, Fed.R.Civ.P. 10(c), and “makes
them an integral part of the pleadings for all purposes.” 5 Charles Alan Wright & Arthur R. Miller, Federal Practice & Procedure
§ 1327 (2d ed.1990). Although, in his answer, Defendant neither admits nor denies paragraph five of the complaint, an allegation
is admitted if it is not denied. Fed. R. Civ. P. 8(b)(6); Fed. R. Bankr. P. 7008.
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The debt owed to her by Defendant was nondischargeable without her taking any action at all. Moreover,
according to Defendant’s averments in his answer, he had made it clear before this proceeding was
commenced that he agreed the debt is nondischargeable. Under these circumstances, the court finds an
award of costs unwarranted.
CONCLUSION
For the foregoing reasons, the court will grant Plaintiff’s Motion only to the extent that it seeks a
determination that the obligation owed by Defendant to Plaintiff pursuant to the Dissolution Decree to hold
her harmless as to the Chase credit card debt is nondischargeable but will deny the Motion to the extent it
seeks a nondischargeability determination as to the debt owed by Defendant directly to Chase Bank.
For good cause shown,
IT IS ORDERED that Plaintiff’s Motion for Judgment on the Pleadings [Doc. #12] is GRANTED
in part, with Plaintiff entitled to judgment in her favor on the Complaint to the extent that it seeks to have
Defendant hold her harmless as to the Chase credit card debt and DENIED in part, with Plaintiff 	not
entitled to judgment in her favor on the Complaint to the extent that it seeks 	a nondischargeability
determination as to the debt owed by Defendant directly to Chase Bank. The court will enter a separate
judgment in accordance with this memorandum of decision.
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