Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-almb-1_15-ap-01079/USCOURTS-almb-1_15-ap-01079-1/pdf.json

Parties Involved:
Sara Edwards
Plaintiff
Allen Conway Colin
Defendant

Document Text:

UNITED STATES BANKRUPTCY COURT

MIDDLE DISTRICT OF ALABAMA

In re Case No. 15-11823-WRS

 Chapter 13

ALLEN CONWAY COLIN,

 Debtor

SARA EDWARDS, 

 Plaintiff Adv. Pro. No. 15-1079-WRS

 v.

ALLEN CONWAY COLIN,

 Defendant

MEMORANDUM DECISION

This adversary proceeding came before the Court for trial on July 29, 2016. Plaintiff Sara

Edwards seeks a determination that a debt owed her by Defendant Allen Conway Colin is a nondischargeable domestic support obligation. Colin contends that the debt is a non-support

property settlement that is dischargeable in Chapter 13 bankruptcy. The Court heard testimony

from Edwards, Colin, and Edwards’ divorce attorney, Robert Reneau. For the reasons set forth

below, the Court concludes that the debt is dischargeable in Chapter 13 and enters JUDGMENT

FOR THE DEFENDANT.

I. FACTS & PROCEDURAL HISTORY

A. The Marriage

Sara Edwards (“Edwards”) married Allen Colin (“Colin”) in 1982; the marriage produced

two children. Colin is an electrician who is frequently required to move for work, and testified

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that the couple had lived in approximately ten different states since 1992. Edwards has a college

degree in chemical engineering, but did not hold a full-time job during her marriage to Colin. 

She home-schooled their children, who have now reached the age of majority.

In 2008 Edwards began caring for her mother, who was afflicted with Alzheimer’s

disease, and in 2012 moved her mother into their home. Edwards is the primary caregiver for her

mother. In 2014 Colin separated from Edwards and filed for divorce in Elmore County,

Alabama.

B. The Divorce

Colin informed Edwards of his divorce petition through a letter, and the parties did not

communicate with each other during the divorce except through their attorneys. Colin retained

Connie J. Morrow (“Morrow”) as his divorce attorney, while Edwards retained Robert B. Reneau

(“Reneau”) as hers. (Ex. A). Reneau testified that the two primary points of contention in the

divorce proceedings were the amount of alimony and the share of Colin’s retirement savings that

Edwards would receive. In a January 20, 2015 letter Reneau wrote to Morrow, Edwards

demanded Colin pay her half of his retirement account and “periodic alimony at the rate of

$1,250.00 per month for the next 10 years.” (Ex. A). The very next sentence of Reneau’s letter

stated that as a condition of this offer Colin “would agree that he could not bankrupt against this

alimony requirement. . . .” (Ex. A). Reneau testified that Colin countered with an offer to pay

Edwards $350.00 per month in periodic alimony for five years and $10,000 from his retirement

account. (Ex. C). Edwards’s March 2015 mediation position statement and Reneau’s April 28,

2015 email to Morrow indicate that this impasse continued up to the parties’ mediation on April

30, 2015. (Ex. B and C).

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The mediation took place at the law office of Jeffrey J. Courtney (“Courtney”), a local

bankruptcy attorney who frequently appears before this Court. Reneau testified that he and

Edwards were in a separate room from Colin and Morrow and did not have any contact with

them except through Courtney. The mediation lasted several hours due to the parties’ continued

deadlock over alimony. Edwards wanted a sufficient amount to cover health insurance for

herself until she becomes eligible for Medicare,1

 and was concerned that Colin would seek to

later modify the amount in state court.

The parties’ testimony indicates that Courtney first proposed that the alimony be

reclassified as property settlement and reduced to $750.00 per month. Reneau testified that

Edwards agreed to this because Colin would not be able to modify it and Edwards would not

have to claim it as income on her tax returns. Colin agreed to it because it was a lower amount

than what Edwards had previously demanded.

Courtney drafted the settlement agreement (“the Agreement”), which stipulated that it

“shall be construed as if jointly drafted by the parties.” (Ex. D). Under Section III of the

Agreement, titled “Personal Property Division,” Colin agreed to pay Edwards “the sum of

$90,000.00 for property settlement . . . at the rate of no less than $750.00 per month” for 120

consecutive months. (Ex. D). The next sentence clarified that Colin would “not be precluded

from ‘prepaying’ or paying via lump sum to satisfy the said property settlement.” (Ex. D). Colin

also agreed to pay Edwards 45% of his retirement savings via a qualified domestic relations

order; the parties stipulated at trial that this had been paid in lump sum and totaled approximately

1

 During their marriage Edwards obtained health insurance through Colin. She would

lose this coverage in the divorce.

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$169,000. (Ex. D). Under Section V of the Agreement, titled “Alimony,” “[b]oth parties forever

waive[d] alimony.” (Ex. D). The Agreement does not say anything about the parties intending

the payments to be for the support of Edwards. The Agreement does not mention the possibility

of bankruptcy, and all witnesses testified that the possible consequences of bankruptcy were not

considered at the mediation. Both parties and their attorneys signed and notarized the

Agreement, and the divorce court entered a judgment incorporating the Agreement.

C. The Bankruptcy

After the divorce Colin lost his job in Montgomery, Alabama and moved to Dothan,

where he experienced financial difficulty. Colin filed Chapter 13 bankruptcy on September 9,

2015, and proposed in his plan to pay Edwards as a non-priority creditor out of a “pot” of

$10,350.00. Edwards v. Colin (In re Colin), 546 B.R. 455, 457 (Bankr. M.D. Ala. 2016)

(denying Colin’s motion for summary judgment).2 Edwards filed a proof of claim for $87,750.00

that she asserts is entitled to priority as a domestic support obligation, and objected to

confirmation of Colin’s plan; Colin objected to the priority status of Edwards’s claim. Id. Those

issues are under advisement pending the outcome of this adversary proceeding.

2

 The parties filed three summary judgment motions in this adversary proceeding. The

Court’s prior opinion in this case denied Colin summary judgment on the ground that he could

not use the parol evidence rule to exclude consideration of evidence of the parties’ intent outside

the Agreement. Colin, 546 B.R. at 460-63. Colin had filed that motion with his answer. The

other two summary judgment motions were cross-motions filed at the close of discovery, and

were denied orally by the Court. (Docs. 13, 16, and 20).

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II. ANALYSIS

The Court has jurisdiction pursuant to 28 U.S.C. §§ 1334(b) and 157(a), and the District

Court’s General Order of Reference dated April 25, 1985. This is a core proceeding under 28

U.S.C. § 157(b)(2)(I). This is a final order.

A. Domestic Support Obligations

“The issue in this case is whether the debt Colin owes Edwards is a domestic support

obligation under 11 U.S.C. § 523(a)(5), or a mere debt arising out of divorce under 11 U.S.C. §

523(a)(15).” Colin, 546 B.R. at 458. A debt for a domestic support obligation is “never

dischargeable” while a debt arising out of divorce under § 523(a)(15) is dischargeable in Chapter

13 bankruptcy. Id. (citing Saggus v. Saggus (In re Saggus), 528 B.R. 452, 457 (Bankr. M.D. Ala.

2015)); see also 11 U.S.C. § 1328(a)(2). “Also, a claim for domestic support obligation is

entitled to priority under 11 U.S.C. § 507(a)(1)(A), while a claim for a mere debt arising out of

divorce is not entitled to priority.” Colin, 546 B.R. at 458 (citing Coon v. Henderson (In re

Coon), 522 B.R. 357, 361 (Bankr. M.D. Ala. 2014)). “The Bankruptcy Code defines the term

‘domestic support obligation’ as a debt owed to a former spouse of the debtor that is ‘in the

nature of alimony, maintenance, or support . . . of such spouse, . . . without regard to whether

such debt is expressly so designated[.]” Coon, 522 B.R. at 361 (quoting 11 U.S.C. §

101(14A)(B)). 

“Whether a given debt is in the nature of support is an issue of federal law[,]” but state

law provides guidance in determining whether an “obligation should be considered ‘support’

under § 523(a)(5).” Cummings v. Cummings (In re Cummings), 244 F.3d 1263, 1265 (11th Cir.

2001). “To make this determination a bankruptcy court should undertake ‘a simple inquiry as to

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whether the obligation can legitimately be characterized as support, that is whether it is in the

nature of support.’” Id. (quoting Harrell v. Sharp (In re Harrell), 754 F.2d 902, 906 (11th Cir.

1985)) (emphasis in original). “In conducting this inquiry, a court cannot rely solely on the label

used by the parties” because “‘it is likely that neither the parties nor the divorce court

contemplated the effect of a subsequent bankruptcy when the obligation arose.’” Id. (quoting

Gianakas v. Gianakas (In re Gianakas), 917 F.2d 759, 762 (3d Cir. 1990)). “The court must

therefore look beyond the label to examine whether the debt is actually in the nature of support or

alimony.” Id. “However, bankruptcy courts should not relitigate the issues between the divorced

spouses, duplicate the efforts of the state court, or alter the terms of the award due to changed

circumstances.” Christison v. Christison (In re Christison), 201 B.R. 298, 306 (Bankr. M.D. Fla.

1996) (citing Harrell, 754 F.2d at 906-07) (emphasis in original). “A debt is in the nature of

support if at the time of its creation the parties intended the obligation to function as support or

alimony.” Cummings, 244 F.3d at 1265 (emphasis added).

In this Court’s prior cases it has relied on an eight-factor guide suggested by the Eleventh

Circuit for determining whether a debt is a domestic support obligation. See Benson v. Benson

(In re Benson), 441 Fed. Appx. 650, 651 (11th Cir. 2011) (citing McCollum v. McCollum (In re

McCollum), 415 B.R. 625, 631 (Bankr. M.D. Ga. 2009). “In considering these factors, however,

it must be remembered that ‘the touchstone for dischargeability under § 523(a)(5) is the intent of

the parties.’” Colin, 546 B.R. at 459 (quoting Cummings, 244 F.3d at 1266). As the party

seeking to hold the debt non-dischargeable, Edwards has the burden of proving by a

preponderance of the evidence that the parties intended the obligation as support for her. See

Cummings, 244 F.3d at 1265; cf. Grogan v. Garner, 498 U.S. 279, 287 (1991).

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B. Colin Did Not Intend the Obligation as Support for Edwards

“The starting point of any § 523(a)(5) analysis is the language of the divorce judgment or

agreement.” Saggus, 528 B.R. at 457. It is difficult to conceive of a less ambiguous contract

than the Agreement between Edwards and Colin. To begin with, both parties “expressly

waive[d] alimony.” (Ex. D). The obligation at issue is located in the section titled “Personal

Property Division” and the Agreement repeatedly and unwaveringly refers to it as “property

settlement.” (Ex. D). Nowhere does the Agreement make any mention about the parties

intending this obligation as support. (Ex. D).

Also, there is no provision in the Agreement that would terminate the obligation if

Edwards were to die or remarry. (Ex. D). An obligation that is intended as support to the

beneficiary loses its purpose in the event of the beneficiary’s death or remarriage, the former

because the beneficiary would no longer have any use of support and the latter because the new

spouse would be expected to provide support. Shaver v. Shaver, 736 F.2d 1314, 1316 (9th Cir.

1984). The Agreement makes no mention of whether the obligation can be modified, but Reneau

testified that it cannot and that both parties expressly bargained for the obligation to be nonmodifiable. Support obligations are generally subject to modification in Alabama while property

settlements generally are not. See Waites v. Reaves, 506 So. 2d 1007, 1008 (Ala. Civ. App.

1987). Finally, Colin testified that he did not deduct the payments he made pursuant to this

obligation as alimony on his 2015 tax return, and Edwards did not testify that she claimed the

payments she received as income on her tax return. Alimony payments can be deducted from

taxable income by the paying party, and must be claimed as taxable income by the beneficiary. 

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See Coon, 522 B.R. at 362 (criticizing a debtor for asserting that an obligation was a

dischargeable property settlement after he had deducted his payments on his tax return).

The strongest factor favoring Edwards is the disparity in income between her and Colin at

the time they entered the Agreement. See Benson, 441 Fed. Appx. At 651 (listing “the parties’

financial positions” as a factor to consider). Reneau and Edwards testified that Edwards makes

approximately $1,000 per month cleaning houses, and that her ability to work has been

significantly compromised by the need to care for her 85-year old mother. Edwards testified that

she had been taking her mother with her to work with her, but that it is becoming difficult to do

so. At 56 years old and with no vocational experience, Edwards has no reasonable prospects of

obtaining employment in her educational field of chemical engineering. Reneau testified that

Colin made approximately $75,000 to $80,000 per year as a contract electrician when he entered

the Agreement. There is no serious dispute between the parties that Edwards needs the payments

to support herself.

Finally, the frequency and number of payments required within the obligation is slightly

supportive of Edwards. The fact that the obligation may be paid in installments suggests that it

was intended as support, but this inference is undercut by the express provision that Colin could

make a lump sum payment if he wished to. (Ex. D). Reneau testified that it is common in

divorce proceedings to have a finite period for alimony payments, and their choice of ten years is

reasonably explained as the amount of time necessary to permit Edwards to obtain health

insurance until she could become eligible for Medicare.

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Taken as a whole, however, the Agreement strongly indicates that the obligation is

property settlement rather than alimony. It “did more than simply label payments as alimony or

property settlement. It exhibited a structured drafting that purported to deal with separate issues

in totally distinct segments of the document.” Tilley v. Jessee, 789 F.2d 1074, 1077-78 (4th

 Cir.

1986). The Agreement “erect[s] a substantial obstacle which [Edwards] [i]s required to

overcome.” Id. at 1079. The financial disadvantage Edwards faced indicates that she intended to

use the payments to support herself. But the simple fact is that, with full benefit of the advice of

counsel, she waived her right to alimony in order to obtain a tax benefit and the assurance that

the obligation would not be modifiable. Reneau admitted on cross-examination that in 38 years

of practice, he had never “disguised” alimony as a property settlement before. He also admitted

that if Colin had paid the obligation in lump sum, he would characterize the obligation as

alimony in gross – which under Alabama law is akin to property settlement. See Coon, 522 B.R.

at 363-64.

Reneau testified that he had never had an ex-spouse of a client file bankruptcy before, that

he was not aware that property settlement was vulnerable to discharge in Chapter 13 at the time

of the mediation, and that he would not have advised Edwards to waive alimony if he had known

that. However, Reneau had considered the possibility of bankruptcy during the negotiations, as

evidenced by his January 2015 letter to Morrow. Although the bare bankruptcy disclaimer he

demanded in that offer would likely not have been enforceable,3

 it suggests that he and Edwards

3

 “Pre-petition agreements to not file bankruptcy or to not seek discharge of a debt are

generally unenforceable because they violate public policy.” Saggus, 528 B.R. at 461 (citing

EFS Inc. v. Mercer (In re Mercer), 2013 WL 3367523, *2 (Bankr. M.D. Ala. Jul. 5, 2013);

Infinity Group LLC v. Lucas (In re Lucas), 477 B.R. 236, 245-46 (Bankr. M.D. Ala. 2012)).

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had decided to run the risk that Colin would discharge the obligation in bankruptcy in exchange

for keeping it non-modifiable in state court.

Even if Edwards did intend to use the obligation to support herself, § 523(a)(5) requires a

showing of mutual intent by both parties to characterize the obligation as support. Tilley, 789

F.2d at 1077-78. There is no evidence that Colin intended for the payments to support Edwards. 

He testified that Edwards’s need for health insurance was not discussed at the mediation. Even if

he was aware that she intended to use the payments for that purpose, that does not mean that he

shared her intention. He also understood that he could pay the obligation in lump sum, and

testified that there was no tacit understanding that it was really alimony instead of property

settlement. 

The parol evidence rule is inapplicable in § 523(a)(5) cases. Colin, 546 B.R. at 463. 

Nevertheless, the strongest evidence of parties’ contractual intentions is the contract itself. 

Christison, 201 B.R. at 306. When the contract is as unambiguous as the Agreement in this case

is, it raises a presumption regarding the parties’ intent that cannot be overcome absent

“substantial” evidence to the contrary. Tilley, 789 F.2d at 1078. While the Court is sympathetic

to Edwards’s situation, she has failed to overcome the presumption raised by the Agreement in

this case. She has failed to prove that Colin intended the obligation as support for her.

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III. CONCLUSION

The debt Allen Colin owes Sara Edwards is not a domestic support obligation. Therefore,

it is a debt arising out of divorce under 11 U.S.C. § 523(a)(15) and is dischargeable in Chapter 13

bankruptcy pursuant to 11 U.S.C. § 1328(a)(2).

 Done this 16th

 day of August, 2016.

United States Bankruptcy Judge

c: Russell N. Parrish, Attorney for Plaintiff

 Christopher Keith Richardson, Attorney for Defendant

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