Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-canb-4_06-ap-04018/USCOURTS-canb-4_06-ap-04018-0/pdf.json

Parties Involved:
Carey Sanchez Para
Defendant
Daniel Para
Plaintiff

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UNITED STATES BANKRUPTCY COURT

NORTHERN DISTRICT OF CALIFORNIA

In re No. 05-46300 TK 

Chapter 7

CAREY SANCHEZ PARA,

Debtor.

___________________________/

DR. DANIEL PARA, A.P. No. 06-4018 AT

Plaintiff,

vs.

CAREY SANCHEZ PARA,

Defendant.

___________________________/

MEMORANDUM OF DECISION

Prior to the commencement of this bankruptcy case, in connection

with the divorce proceeding of the plaintiff (the “Plaintiff”) and

defendant (the “Debtor”) in this adversary proceeding, the Alameda

County Superior Court (the “family law court”) imposed two

obligations on the Debtor: i.e., for $36,185 and $31,500,

respectively (the “Equalizing Payment Obligations”). These

obligations were imposed on the Debtor to compensate for property or

Signed: September 26, 2006

________________________________________

LESLIE TCHAIKOVSKY

U.S. Bankruptcy Judge

________________________________________

Entered on Docket 

September 27, 2006

GLORIA L. FRANKLIN, CLERK 

U.S BANKRUPTCY COURT 

NORTHERN DISTRICT OF CALIFORNIA

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debt awards made by the family law court that favored the Debtor. In

this adversary proceeding, the Plaintiff seeks a judgment of

nondischargeability as to the Equalizing Payment Obligations pursuant

to 11 U.S.C. § 523(a)(15). The parties have filed cross-motions for

summary judgment with respect to this claim. The motions were heard

and taken under submission. Having considered the undisputed facts,

based on the admissible evidence presented by the parties, and the

applicable law, for the reasons stated below, the Debtor’s motion

will be granted, and the Plaintiff’s motion will be denied.

APPLICABLE LAW

A. SECTION 523(a)(15)

As applicable here, 11 U.S.C. § 523(a)(15) provides as follows:

(a) A discharge under section 727...of this

title does not discharge an individual debtor

from any debt– 

---

 (15) 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, a determination made

in accordance with State or territorial law by a

governmental unit unless– 

 (A) the debtor does not have the ability to

pay such debt from income or property of the

debtor not reasonably necessary to be expended

for the maintenance or support of the debtor or

a dependent of the debtor and, if the debtor is

engaged in a business, for the payment of

expenditures necessary for the continuation,

preservation, and operation of such business, or

 (B) discharging such debt would result in a

benefit to the debtor that outweighs the

detrimental consequences to a spouse, former

spouse, or child of the debtor; 

 

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Section 523(a)(5) provides that all domestic support

obligations are nondischargeable. As applied to all cases filed on

or after October 17, 2005, 11 U.S.C. § 523(a)(15) provides that all

domestic nonsupport obligations are also nondischargeable. 

However, the Debtor commenced this case prior to October 17, 2005. 

Therefore, the form of 11 U.S.C. § 523(a)(15) quoted above governs

the dispute in this adversary proceeding.

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11 U.S.C. § 523(a)(15).1 

The plaintiff has the burden of proving that the debt is a

nonsupport debt incurred by the debtor in the course of a divorce or

separation. The burden of proof then shifts to the debtor. To avoid

a determination of nondischargeability, the debtor must prove that

she is either unable to pay the debt or that requiring her to repay

the debt would be more of a hardship than discharging the debt would

be to her former spouse. See In re Jodoin, 209 B.R. 132, 138-41

(Bankr. 9th Cir. 1997). These “defenses” need not be applied on an

all-or-nothing basis. If the evidence presented at trial warrants

it, the Court may grant a partial discharge. See In re Myrvang, 232

F.3d 1116, 1122-24 (9th Cir. 2000). 

In determining the debtor’s ability to pay, the “disposable

income” test set forth in 11 U.S.C. § 1325(b) is the appropriate

starting point. However, in the context of 11 U.S.C. § 523(a)(15),

given the possibility that a spouse may manipulate his or her budget

to gain an advantage in the litigation, the test should utilize

prospective income, not just actual current income, as well as

reasonable expenses. Jodoin, 207 B.R. at 142. In balancing the

hardships, the Court must exercise its discretion, and its decision

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in this regard is reviewed for abuse of discretion. Myrvang, 232

F.3d at 1120. 

B. SUMMARY JUDGMENT STANDARDS

Summary judgment motions are governed by Rule 56 of the Federal

Rules of Civil Procedure (“FRCP”), made applicable to this adversary

proceeding by Rule 7056 of the Federal Rules of Bankruptcy Procedure

(hereinafter “FRBP”). FRCP 56(c) provides that summary judgment

should be rendered if the evidence presented shows that “there is no

genuine issue as to any material fact” and if the “moving party is

entitled to a judgment as a matter of law.” The moving party has the

initial responsibility to inform the court of the basis for the

motion. Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). The

burden then shifts to the opposing party to establish that a genuine

issue exists as to a material fact. Matsushita Elec. Indus. Co.,

Ltd. v. Zenith Radio Corp., 475 U.S. 574, 586 (1986). In determining

whether summary judgment should be granted, the evidence presented by

the opposing party, and all reasonable inferences that may be drawn

from that evidence, must be accepted as true. Anderson v. Liberty

Lobby, Inc., 477 U.S. 242, 255 (1986); Matsushita, 475 U.S. at 587.

 

DISCUSSION

A. UNDISPUTED FACTS

The Debtor and Plaintiff were married in 1987. They separated

in 1997 and subsequently divorced. Plaintiff is a doctor. The

Debtor is a graduate of Stanford University. During the marriage,

the Debtor worked to assist the Plaintiff in obtaining his medical

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degree. The couple had a daughter, Maya, in 1997. When the couple

divorced, the Debtor was awarded primary custody of Maya. Maya has

some health problems that require more than normal parental care. 

As part of the divorce proceeding, Plaintiff paid to enable the

Debtor to obtain an MBA. Since she obtained that degree, for several

years, Plaintiff has been under family law court order to search

diligently for a job commensurate with her abilities and educational

degree. To date, she has failed to find such a position. 

Instead, the Debtor does work part-time for the City of

Pleasanton and does some consulting on her own. She earns only

$1,700 per month and has no benefits through her employment. Her

expenses are over $4,000 per month. Her total income in 2005 was

less than $14,000. She also has student loan debt and pays $100 per

week for child care during the summer. The Debtor lives with her

daughter and her disabled parents in a rental house in Castro Valley,

California. The Debtor pays half the rent. Other than by sharing

expenses, the Debtor’s parents do not contribute to the Debtor’s

support.

 Plaintiff is a surgeon in Lake Havasu, Arizona. He has

remarried and has four children under the age of seven. His income

in 2004 was $225,939 and in 2005 $147,146. His income has continued

to decrease in 2006. He believes that his decreased income is caused

by defamatory statements made about him by a colleague whom he is

suing as a result. He has substantial secured and unsecured debts

and monthly expenses of approximately $29,000. He has recently been

compelled to borrow approximately $70,000 to pay his malpractice

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insurance, among other things. He owns a 2001 Ebbtide boat and is

making payments on two late model cars. 

In addition, Plaintiff pays approximately $1,000 per month for

membership in a golf club and approximately $200 per month for

private school tuition. He dines out frequently and spends

substantial sums for luxury items, such as $653 for cigars and $1,284

to mount a game fish.

The family law court ordered Plaintiff to pay the Debtor child

and spousal support. He is currently in arrears in making these

payments in the approximate amount of $75,000, including accrued

interest.

B. EVIDENTIARY OBJECTIONS 

With her reply, the Debtor filed evidentiary objections to

portions of Plaintiff’s opposition and cross-motion. 

1. She objected to consideration of a three page document which

appears to represent a decision by the family law court on or about

September 6, 2005 (the “2005 Decision”) on the ground that the

document has not been properly authenticated. She also objected to

consideration of a nine page document which appears to represent a

decision by the family law court on or about November 9, 2004 (the

“2004 Decision”) on the same ground. 

Authentication as a pre-condition to admissibility is governed

by Rules 901 and 902 of the Federal Rules of Evidence. Rule 902(4)

provides that a certified copy of a publicly filed document is selfauthenticating. The copies of the decisions offered by Plaintiff are

not certified. However, Rule 901(7) states that an a public record

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Her objection to this paragraph and to a portion of

Plaintiff’s response on the ground that it is incomplete and/or out

of context is overruled as not constituting a proper evidentiary

objection.

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may be authenticated by providing “evidence that a writing authorized

by law to be...filed and in fact...filed in a public office...is from

the public office where items of this nature are kept.” The Court

concludes that the reference to the 2004 Decision in paragraph 4 of

Plaintiff’s declaration is sufficient to meet this requirement.

Thus, with respect to the 2004 Decision, the Debtor’s objection is

overruled. 

Plaintiff’s declaration neither refers to nor attaches the 2005

Decision. A copy of the 2005 Decision is merely attached to

Plaintiff’s memorandum of points and authorities and subsequently to

a notice filed with the Court by Plaintiff. Thus, with respect to

the 2005 Decision, the objection is sustained, and the 2005 Decision

will not be admitted.

2. The Debtor objected to paragraph 4 of Plaintiff’s

declaration on the ground that it is hearsay.2 In this paragraph,

Plaintiff purports to quote from a family law decision. The Debtor

is correct that the quoted portion of this paragraph constitutes

hearsay. Plaintiff has not cited any exception to the hearsay rule

that would permit this statement to be considered. Consequently, the

quoted portion of this paragraph will be stricken. The reference to

the attached 2004 Decision as a copy of Judge Grimmer’s decision will

not be stricken.

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3. The Debtor objected to the second sentence of paragraph 8

and to paragraph 11 of Plaintiff’s declaration on the ground that the

statements made therein are conclusory rather than factual. 

a. In the second sentence of paragraph 8, Plaintiff states that

the downward trend in his income reflected by a comparison of his

income in 2004 with his income in 2005 has continued during 2006.

The Court disagrees that this statement is conclusory rather than

factual. The objection is overruled.

b. In paragraph 11, Plaintiff states that staffing and billing

issues have caused his business income to decline during 2006 to

below what it was in 2004 and 2005. Again, the Court disagrees that

this statement is conclusory rather than factual. The objection is

overruled.

4. The Debtor objected to page 7, lines 6 through 10 of

Plaintiff’s response and cross-motion filed on August 3, 2006 on the

basis that it is unsupported by any evidence and constitutes hearsay.

This objection is again directed to the same quotation from a family

law decision contained in Plaintiff’s declaration. For the same

reason, the Court will sustain the objection and strike the language

in question.

C. LEGAL ARGUMENT

1. Ability to Pay

It is undisputed that the Debtor’s current monthly income is

approximately $1,400 and her monthly expenses exceed $4,000. Even if

some of her expenses are nonessential, clearly, she has no disposable

income at present. However, as noted in Jodoin, in the context of 11

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Not suprisingly, Plaintiff failed to cite In re Lonian, 226

B.R. 248, 253-57 (Bankr. W.D. Okla. 1998). In Lonian, the debtor

was a physician who had voluntarily closed his practice shortly

before the dischargeability trial. During the three years prior to

his bankruptcy filing, he had earned $330,000, $360,000, and

$181,000, respectively. Nevertheless, he had failed to pay his

income taxes and thus had substantial nondischargeable tax debt. 

After closing his practice and seeking employment, he claimed that

the best job offer he had received was for $120,000. The Court

concluded that the debtor was capable of earning more than he

claimed and thus had the ability to pay his nonsupport debt to his

former spouse. It refused to reward him by discharging the debt to

his former spouse because he had failed to pay his tax debt at a

time when he was clearly able to do so. Given the reversal of

roles in the instant case, this case is not applicable to a

determination of the 11 U.S.C. § 523(a)(15)(A) prong. However, it

does inform the Court’s decision on the 11 U.S.C. § 523(a)(15)(B)

prong.

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U.S.C. § 523(a)(15), the debtor’s current disposable income is merely

the starting point in determining her ability to pay a nonsupport

divorce related obligation. Jodoin, 209 B.R. at 49. Because a

bankruptcy discharge is forever, one must also consider the debtor’s

prospective disposable income. 

As a graduate of Stanford University, and the recent recipient

of an MBA, the Debtor presumably has the ability to earn a greater

income than she does at present. Plaintiff contends that the Debtor

has intentionally kept her income low to gain a litigation advantage

in connection with her divorce proceeding and her bankruptcy case. 

In support of this contention, he cited In re Florio, 187 B.R. 654,

657-58 (Bankr. W.D. Mo. 1995) in which income was imputed to a debtor

for purposes of 11 U.S.C. § 523(a)(15)(A) who voluntarily left her

job as a surgical technician to work at a dog grooming business that

paid her no income.3 

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The Debtor has presented no evidence explaining her failure to

obtain more remunerative employment to date as a result of her job

search. Her statements concerning Maya’s health problems and her

need for her mother’s attention are too vague to excuse the Debtor

from obtaining more remunerative employment as a matter of law.

However, it is not insufficient to create a genuine issue of fact in

that regard. Thus, both the motion and cross-motion, to the extent

that they are based on the 11 U.S.C. § 523(a)(15)(A), are denied. 

2. Balance of Hardships

Balancing the hardships under 11 U.S.C. § 523(a)(16) to some

extent requires a crystal ball. At present, the Debtor is clearly in

more straightened financial circumstances than Plaintiff. Plaintiff

may be subject to substantial debt and required to borrow to meet

certain critical current obligations. However, he lives the

lifestyle of an affluent person while the Debtor lives frugally. 

However, it is possible, perhaps even likely, that, in the

future, the Debtor’s economic circumstances will improve. It is also

possible that Plaintiff’s economic circumstances will become worse.

The Court cannot determine the future with any certainty. It is

possible that additional evidence presented at trial could help the

Court in formulating a reasonable prediction. Thus, but for one

additional undisputed fact, the Court would also deny summary

judgment on both motions on this prong.

The additional fact is Plaintiff’s failure to pay court ordered

spousal and child support in an amount totaling at present, with

accrued interest, $75,000. Balancing hardships is an equitable

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endeavor. Parties who seek an equitable determination must behave

equitably. Failing to pay court ordered support to a former spouse

and one’s child in favor of paying dues to a country club, among

other things, does not satisfy generally accepted equitable

standards. Thus, the Court will grant the Debtor’s motion for

summary judgment under 11 U.S.C. § 523(a)(15)(B) and will discharge

the Equalizing Payment Obligations. The Court will deny Plaintiff’s

cross-motion for summary judgment.

CONCLUSION

The Equalizing Payment Obligations are nonsupport obligations

incurred in connection with a divorce and thus are nondischargeable

unless the Debtor meets her burden of proving a defense under either

11 U.S.C. § 523(a)(15)(A) or (B). The Court concludes that the

neither the Debtor nor Plaintiff have established a right to summary

judgment with respect to the Debtor’s ability to pay under 11 U.S.C.

§ 523(a)(15)(A). However, the Court concludes that, based on the

undisputed evidence, pursuant to 11 U.S.C. § 523(a)(15)(B), it would

be a greater hardship on the Debtor to fail to discharge the

Equalizing Payment Obligations than it would be a hardship on

Plaintiff to discharge them. Counsel for the Debtor is directed to

submit a proposed form of order and judgment in accordance with this

decision.

END OF DOCUMENT

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COURT SERVICE LIST

James F. Beiden

Law Offices of James F. Beiden

840 Hinckley Rd., #245

Burlingame, CA 94010

Robert M. Cook

Law Offices of Robert M. Cook

1430 E. Missouri

Phoenix, AZ 85014 

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