1 EL ECTRONI C CI TATI ON: 2014 FE D App.0004P (6th Cir.)

File Na me: 14b0004p.06
BA NK RU P TC Y A P P ELLA TE P AN EL OF THE SI XT H C IR CU IT

I n r e : JAME S AL B ERT TH OM AS; REB ECC A M AR I E T HO MA S,
De bto rs
.

______________________________________ ) ) ) ) No. 13-8048

Appea l from the United States B ankruptc y Court f o r t h e E a s t e r

nD i s t r i c to f

K e n tu c ky
. Ba nkruptcy Case No. 13-10043

. Dec ided and F iled: J une 3, 2014
B e fo re : HU MPH REY , O PPERMA N , a nd PRE STO N, B ank

ru ptc y Ap pe llate Pane l Judg e s.

____________________ CO UN SEL
ON BRIEF: El a ina

L . H olm e s, HO L ME S L AW F I RM, As hla nd , K e ntucky , for Ap pe lla nts

. Christopher A. Conley , CAMPBEL LWOODS, PL L C, Ashland, Kentucky , for Appe llee.Debtor’ s curr ent wife is list ed as a co-a ppellant in this appea l. I n a pare nthetical, their br ief 1 argues t h at s h e s h o uld not be listed as an oblig or on Creditor’ s proof of c laim. This issue is not listed in the issues presented on a ppeal. “ ‘I ssu es adver

ted to in a per functory manner , unacc ompanied by some eff ort at develope d argumentation, are deeme d waived.’ ” Tho ma s v . A qu il ( In re Thomas ), 5 1 6 F. Ap p 'x 5 4 3 (6 t h C i r. 2 0 1 3 ) ( qu o t i n g United States v. Layne , 192 F.3d 556, 566 (6th Cir. 19 99)). Nothingin the bankruptc y court’s opinion indicate s that this is sue wa s raised befor e the ba

nkruptcy court. Moreover, the bankruptc y court’s opinion ref ere nces the Debtor in the singula r tense thr oug hout. This opinion wil l also ref er to De btor in the singula r. 2 ____________________ OP IN ION

____________________ G U Y R . HU M P HREY , Bankruptcy Appellate Pane l J udg e. De btor appea ls the order 1

overr uling his obje ction to a proof of claim filed by his ex -wife asser

ting a priority domestic support obligation debt for $12,500. The bankruptc y court a pplied the Calhoun test and found the de bt order ed to be pa id by

the domestic re lations court to the debtor' s fo rm er spouse on ac count of he r pay ment of a judgment li en and second mortg ag e ag ainst the forme r marital r esidenc e fr om proce eds from the sale of the home was “in the nature of alimony , maintenanc e, or support.” For the re asons stated below, the bankruptc y court’s or der is AF FI RMED.

ISS UE ON AP P EAL

Th e iss ue on a

pp e a l is wh e the r the ba

nk ru ptc y c ourt e rr e d in fin din g that Cr e dit or ’s c la im i s
a do me sti c su

pp or t ob lig a tio n a

nd ov e rr uli ngDe bto r’ s o bje c tio n to Cr e dit or ’s pr oo f o f c la im.

JU RI SDI CT ION AND STANDARD OF RE VI EW

Under 2 8 U. S

. C. § 158(a)( 1), this Panel has jurisdiction to hear a ppeals “ from fina l judgme nts, orders, a

nd decr ees” issued by

the bankr

uptcy court. For

purposes of a

ppeal, a n order is final if it “ends the litigation on the merits and leave s nothing for the cour t to do but e x ecute the judgme nt.” Mi d l a n d Asphalt Corp. v. United States, 489 U.S. 794, 798, 109 S. C t. 1494, 14973

(1989) ( citation and quotation marks omitted). “The conce pt of ‘finality ’ in the bankruptc y context,” howeve r, “shoul d

b e v i ew edfu n ct i o n al l y , ” w i t h ap p el l at e c o u rt s en fo rc i ng this threshold require ment “i n a more prag matic and less tec hnical wa y in bankruptcy

case s than in other situations.” Simon

v . Lis ( In re Grav es ), 4 8 3 B. R

. 1 1 3 , 1 1 5 (E

. D. M i ch

. 2 0 1 2 ) ( qu o t i n g Cottrell v. Schilling ( In re Cot tre ll), 876 F .2d 540, 541–42 (6th Cir.1989) (interna l quotat i o n m ar k s and citations omitted)); Hu ntington N

at’l Bank v. R ichardson ( In re Cybe rco Holdings, Inc.) , 7 3 4 F

. 3 d 4 3 2 , 4 3 7 ( 6 th Cir. 2013). The S ix th Circuit allows appea ls from “a n order in a bankr

uptcy case [t hat] finally

disposes of discrete disputes w ithin the larg er c ase[.]” Lin ds e y v . O'Br ie n, Tan sk

i, Tan ze r & Y

ou ng He alt h C a r e P r o v i d

e r s ( In re D ow C

or nin g Co rp .), 86 F .3d 482, 488 (6th Cir.1996) (interna l quotation marks, alter ation, and citation omitted). “A bankruptc y court' s order

overr uling de btor' s objection to claim i s a final order f

or purpose s of appe al.” In re Mac e , 496 B.R. 252, 2013 WL4067623, at *1 (B .A.P. 6th Ci r. Aug . 13, 2013) (table ) (c iting Morton v. Morton ( In re M orton ), 298 B .R. 301, 303 (B .A.P. 6th Ci r. 2003)) . The B ankruptc y Appellate Pane l of t he S ix th Circuit has jurisdiction to decid e this appeal. The United States District Court for the Ea stern District of K entucky has autho r iz e d a

p p e a ls to th e Pa

n e l, an d n o p arty h a s ti me ly e le c te d to h a v e th is a p p e a l h ear d by

the district court. 28 U.S.C. § 158(b)( 6), (c )(1)

.

Th e Sixth C ir c uit

Court of Ap pe a ls h a s h e ld that the de te rm inatio n of no n- dis c ha

rg e a bil ity fo r a do me sti c su

pp or t ob lig a tio n is a

mixe d q ue sti on of law a nd fa c t.

We reviewthe fa ctual dete rmination o f wh ether an oblig ation c on sti tutes non dis c ha

rg e a ble su pp or t un de r t he “ c le arl y

e rr on e ou s” standard. Se e In re Pe rli n , 30 F.3d 39, 40 ( 6th Cir. 1994). On the other ha nd, the interpre tation of § 523 is a leg al issue that we r eview de novo. See In re C

alhoun , 715 F.2d 1103, 1111 ( 6th Cir. 1983) (stating that the ap p l ication of the w rong leg al standar d, and the district court’s misallocation of t h e burden of proof , would be revie wed de novo ).Debtor a sserts that the standa rd of r eview should be de novo bec ause the bankruptc y court 2 d i d n o tn e e d t o a s s e s s t h e c r e d i b i l i t y o f w i t n e s s e s d

u e t o t h e f

a c tt h a tt h e r e w a s n o l i v e t e s t i m o n y. The pa rties stipulated to cer

tain fac ts and stipulated t o t h e entry as exhibit s the 2003 and 2007 div or c e jud g me nts a s w e ll a s th e 20 09 po st- div or c e or de r. Ad dit ion a lly e a c h s ub mitte d a

n a ff ida vit in lieu of live testimony

and wa ived cr oss-examination. Even assuming D ebtor is cor rec t, the Panel holds that the result would be the sa me under a de novo sta

ndard of revie w.

These f acts a re taken primar ily

from the ba

nkruptcy court’s opinion In re Thomas , No. 13- 3 10043, 2013 WL 5493214 (B ankr. E.D. Ky

. Oct. 2, 2013). Debtor doe s not challeng e these fac tual finding s. Ra t h er , De b t or cha lleng es the infe renc es the ba nkruptcy court made from the f

actua l finding s and the ultimate conc lusion that both debts we re support obligations that are nondischarg eable

. 4 Sorah v. Sorah (

In re Sorah ), 163 F .3d 397, 400 (6th Cir. 1998). 2

F AC TS 3

A . The First Marriage

Debtor, James Thomas, and Cre ditor, J ennife r Clark, wer e orig inally marrie d on Aug ust 4, 1995. They had two children toge ther, Hanna h (born in 1997) , and Tessa ( born in 2000). De btor and Creditor purc hased a

family home on J uly

12, 1999, using a loan secur ed by a first mortg ag e on the p r o p e rt y. O nA p r i l 2 8 , 2 0 0 1 , t h e c o u p l e o b t a i n e d

a l o an i nt h e a m o u n to f

$ 1 5 , 4 6 3

. 7 9 s e c u r e d

b y a
s e c o n d m o rt g a g e o nt h e p r o p e rt y.

O nM ay 1 3 , 2 0 0 3 , t h e p art i e s e n t e r e d i n t o a s e p ar a t i o n a g r e e m e n t p e rt a i n i n g t o c h i l d c u s t o dy, division of property

and child support. The ir divorce was fina l on J une 25, 2003.

I n the 20 03 div or c e c on se nt de c re e , De bto r a g re e d to re lin qu ish any int e re st in the famil y home and Cre ditor ag ree d to assume and hold De btor harmless f rom the obl iga

tion to pay

both the first mortg ag e and se cond m o rt gage
. Debtor a lso ag ree d to pay child support in the amount of $510.00 per month, whic h was an upwar d deviation from the standa rd ca lculation of child support5

in O hio

. Th e 20 03 c on se nt d e c re e sp e c if ie d th a t “ [t]he de viatio n [in c hil d s up po rt ] is in

the be st interests of the c hildren as the Wife is pay ing both mortg ag es on the marital prope rty .” F urther, the parties a g ree d that neither of them would pay

spousal support to the other.

B . The Second M

arriage

Th e c ou ple re marr ie d o n Apr il 3 0, 20 04 . H ow e ve r, on Ap ri l 18 , 2 007, thi s ma

rr ia g e a lso ended in d i v o rc e. L ike their fir st separation, Debtor and Cre ditor rea ched a n ag ree ment for the “distribution of assets, pay ment of debts, and othe r matters.” The 2007 divorc e conse nt decr ee provided that the a g ree ment was “ in all respec ts f air, just a nd equitable” and adopted a nd approve d the t erm s o f

th e s e tt le me n t a g r e e me n t r e a c h e d b y th e p arti e s
. D e b to r

an d Cr e d it o r w e r e e a ch repr esente d by

counsel who sig ned off

on the 2007 conse nt decr ee.

Th e te rm s of the 20 07 c on se nt de c re e we re sim il ar to th e pa rt ie s’ 20 03 c on se nt de c re e in some respe cts. Neither spouse was oblig ated to provide spousal support. Creditor re ceive d primary custody of the c hildren. De btor ag ain ag ree d to give up any interest in t he property , which he ha d

never convey ed as require d by the 2003 consent decr ee. Creditor ag ree d to assume and hold De btor harmless on the f

irst mortga g e loan in the 2007 c onsent dec ree
.

Howeve r, there wer e seve ral important diffe renc es. De btor' s child support obligation was just $369.15 per month, and Debtor and Creditor a g ree d t o s p l i t t h e second mortg ag e oblig ation. Spe c if ic a lly , Se c tio n 4 of

the 20 07 c on se nt d e c re e pr ov ide s:
That [Creditor] s hall rec eive the ma rital reside nce, f

ree and cle ar of any and all claims on behalf of [ Debtor], and she sha ll assume and be responsible for the first m ortg ag e, saving[Debtor] harmless thereon, and the pa rt ie s sh a ll e qu a lly

pa y the se c on d mo rt g a g e . A ft e r t he sa le of the re a l e state , a

ny de fi c ie nc y

on the mor tg a g e ind e bte dn e ss s ha ll be divid e d

b e tw e e nth e p arti e s
. Sh o u ld th e r e b e a

n e t b a la n c e a f ter th e s a le , th e s e p r o c e e d s s h a ll b e th e s o le p r o p e rty o f [C r e d it o r ].6

Consist ent with the 2007 consent decr ee, Debtor quit -cla imed his interest in t he prope rty to Creditor by Dee d dated Apr il 4, 2007, and rec orded Ma y 31, 2007.

C. The Judgme nt Lien

On Novembe r 18, 2004, Auto Now A cce ptance Co., L L C (“Auto Now”) obtained a judg ment ag ainst Debtor in the amount of $8,082.37, plus inter est and costs. On Oc tober 20, 2005, Auto Now filed a judg ment lien ag ainst Debtor. The judgme nt lien was not addre ssed i n the 2007 conse nt decr ee even thoug h it had attache d to the proper ty prior to the second divorce

. Creditor testified that she w as
no t awa re of the jud g me nt l ie n unti l sh e of fe re d the pr op e rt

y fo r s a le . A lth ou g h D e bto r' s a ff ida vit

a dd re sse s th e c ir c ums tanc e s pre c e din g imp os iti on of the jud g me nt lie n, the re c or d d oe s n ot d isc los e whether Debtor kne w that the judg ment lien had attac hed to the prope rt y at t h e ti me of the 2007 divorce proce eding

. On ap p eal Debtor asse rts that Creditor knewabout the cir cumstance s leading to the judgme nt lien.

D. The Property Sale and 2009 O rder

Creditor sol d the family home t o third-par ty buy ers on Septembe r 18, 2008. The sa le proc eeds

we re n o ts u ff

i ci en tt o fu l l y

co v er al l o f t h e c o s t s o f t h e s al e. T h e f i rs t m o rt gage an d

s ec o n d m o rt gage debts of $66,095.64 and $15,000.00, respe ctively , wer e satisfied. Creditor neg otiated rele ase of the jud g me nt l ie n f

or $5 ,0 00 .0 0, wh ic h w a s p a id fro m the s a le s p ro c e e ds

. Af te r t he a sse ssm e nt o f a ll taxes and fee s, Creditor paid $836.14 to close the transac tion.

On J anuar y 15, 2009, the state court enter ed anothe r orde r in the 2007 divorce proce eding (the

“ 20 09 or de r” ), wh ic h p ro vid e d in pa rt :

2. Def endant [Debtor] shall reim burse the Plaintiff [Creditor] $7,500.00 for his intere st in the secondar y mortg ag e.7 3. De fe nd ant sh a ll r e imb ur se the Pla int if f $ 5, 00 0. 00 fo r m on ie s p a id by he r f or pa y ingof f a jud g me nt l ie n o f h is.

E. TheDi sp ute d Cl aim

Debtor f iled a petition for r elief unde r cha pter 13 of the Ba

nkruptcy Code. Debtor’ s schedules listed two obligations to Creditor. The f irst was a $560.00 unse cure d priority claim for c hild support

on Sc he du le E, wh ic h w a s n ot d isp ute d. Th e oth e r w a s a $15, 00 0. 00 un se c ur e d c la im o n Sc he du le F de sc ri be d o nly

a s “ De bt. ” Cr e dit or

fi le d Pr oo f o f C la im 6– 1 a sse rt inga pr ior ity un se c ur e d c la im for “[a] limony , maintenanc e, or suppor t” in the amount of $12,500.00 for the sec ond mortg ag e debt

an d t h e j u d g m e n tl i e nd e b t

. D e b t o r o b j e c t e d , ar g u i n g t h a t C l a i m 6

- 1 i s n o ti nt h e n a tu r e o f a l i m o n y, maintenanc e, or suppor

t, but “is for a second mortga g e debt and judgment l ien on property that wer e satisfied whe nth e r e a l e s tate w a s s o ld b y c r e d it o r p r e v io u s ly , ” an d

is th u s n o t a d o me s ti c s u

pport obligation.

F. The Parties' Evidence

Debtor and Creditor submitted a joint sti pulation of fac ts, acknowle dg ing e ntry of the 2007 consent de cre e and the 2009 order and attaching copies of ea ch. The parties e ach pr esente d testimony by af fi davit. No objections we re r aised a nd the af fidavits wer e admitted as the direc t testimony of the witnesses. At the e videntiary hear ing, both parties ag ree d to fore g o cross-e x amination, allowing the af fidavits to stand as the witnesses' only testimony . I n ad d i t i o n to their direc t testimony , eac h pa rt y su bmi tte d a n e xhibi t li st a

nd cop ies o f r e le va

nt d oc ume nta

ry e vid e nc e . T he e xhibi ts o f b oth parties we re a dmitted without obj ection.

The ba nkruptcy court e ntere d an opinion and order finding C reditor’ s claim is in the nature of “alimony , maintenanc e or support” and overr uling Debtor’s objection to her proof of claim. In re Thomas , No. 13-10043, 2013 WL5493214 (B ankr. E.D . Ky . Oct. 2, 2013). D ebtor timely filed an

a pp e a l to thi s p ane l.8 DI SCU SSIO N
“Sections 523(a )(5) and (15) operate to pr ovide g reater prote ction for a limony , maintenanc e, and support oblig ations owing to a spouse, forme r spouse, or c hild of a debtor in ba nkruptcy [,] ” In re Johnson, 3 9 7 B. R

. 2 8 9 , 295 (B ankr. M.D.N .C. 2008) (citation omitted). Such debts ar e nondischarg eable for individuals in a Chapter 7, 11 or 12. Howeve r, unlike those cha pters, cha pter 13 distinguishes be t ween § 523(a) (5) domestic suppor t obligations, which a

re non- discharg eable , and other § 523(a )(15) “post-mar ital o b l i gati ons,” including proper ty settlements, which ar e discharg eable

. Id. See11 U. S.C. § 1 32 8( a )( 2) . In addi ti on , do mestic su pp or t ob lig a tio ns , a s a priority debt, must be paid in ful l during the cha pter 13 plan. 11 U .S.C. §§ 507(a)(1) (A) a nd 1322(a) (2).

“ Do me sti c su

pp or t ob lig a tio n” is d e fi ne d b y the B ank ru ptc y Cod e a s f

oll ow s:
(14A) The ter

m “domestic support obligation” means a debt that a ccr ues bef ore, on, or af ter the date of the order for r elief in a case under this title, including inter est that acc rues on that debt as provide d under a pplicable nonba

nkruptcy law notwithstanding any other provision of this title, that is-- (A) owed to or r ecove rable by

-- ( i ) a spouse, f

ormer spou s e, o r child of the debtor or suc h child' s pare nt, leg al g uardia n, or re sponsible relative; or (i i) a g ov e rnme nta l un it; (B ) i n the nature of alimony , maintenanc e, or suppor t (including assis t ance provided by

a g overnme ntal unit) of such spouse, f ormer sp ou se , o r c hil d o f t

he de bto r o r s uc h ch ild ' s p are nt, wi tho ut r e g ard to whether such debt is expressly

so desig nated; (C) e sta bli sh e d o r s ub

je c t to e sta

bli sh me nt be fo re , on , or a ft e r t he date of the or de r fo r re lie f in a c a se un de r thi s ti tle , b y re a so n o f a

pp lic a ble provisions of--9 (i ) a se pa ratio n a g re e me nt, div or c e de c re e , o r p ro pe rt y se ttl e me nt a g re e me nt; (i i) an orde r of a

court of r ecor d; or (i ii) a det e rm inatio n ma de in a c c or da nc e wi th a

pp lic a ble nonbankruptc y

law by a g overnme ntal unit; and (D) no t ass ig ne d to a nong ov e rnme nta l ent ity , unle ss that ob lig a tio n is assig ned voluntarily

by the spouse, for

mer spouse, c hild of the debtor, or such c hild's pa

rent, leg al g uardia

n, or re sponsible relative for the purp os e of

c oll e c tin g the de bt. 11 U.S.C. § 101(14A).

I n Long v. Calhoun (

In re Cal houn ), 71 5 F .2 d 11 03 , 11 09 -1 0 (6 th Cir

. 19 83 ), the Sixth C ir c uit enunciated a f

our-pa rt ana ly sis for making t he dete rmination whether an oblig ation that was not sp e c if ic a lly de sig nat ed a s a lim on y

or ma int e na nc e wa s a c tua lly

in t he natur e of

su pp or t, a nd thu s, nondischarg eable . As subsequently re- stated in Fi tzge ra ld :

First, the oblig ation constitutes support only if the state c ourt or par ties int e nd e d to c re a te a

su pp or t ob lig a tio n. Se c on d, the ob lig a tio n mu st have the actua l effe ct of p roviding nece ssary support. Third, if the first two condit i o n s are satisfied, the c ourt must determine if the obligation i s s o excessive as to be unr easona ble under traditional conce pts of support. Fourt h , i f t he amount is unrea sonable, the obligation is di s charg eable to the extent necessar y to serve the purposes of f

eder al bankr

uptcy law.
Fitzgerald v. Fitzgerald (

In re Fi tzge ra ld

), 9 F. 3 d 5 1 7 , 5 2 0 (6 t h C i r. 1 9 9 3 ) ( ci t i n g Calhoun , 715 F.2d at 1109-10). “The burden of demonstrating that an obligation is in the nature of support is on the nondebtor.” Fi tzge ra ld , 9 F. 3 d at 5 2 0 (c i t i n g Calhoun , 715 F.2d at 1111).I n Fi tzge ra ld , 9 F.3d at 520 and Sorah , 163 F.3d at 401, the S i x t h C i rc uit modified the 4 Calhoun standard to e liminate the “pre sent needs” test, holding that the curr en t n ee d s o f t he non-debtor s p o u s e s h ould not be considere d when de termining if the oblig ation was intende d as su pp or t. T his pr on g is n ot r e le va nt t o th is a

pp e a l. 10 The ba nkruptcy court a pplied the pr o p er te st and ana ly zed the claim at issue using the Calhoun fa c tor s. Thomas , 2 01 3 WL 54 93 21 4 at *4 . D e bto r’ s b ri e f o n a pp e a l f oc us e s o n th e fi rs t e le me nt, 4 that is , w he the r t

he state c ourt

or pa rt ie s in te nd e d to c re a te a

su pp or t ob lig a tio n. Ac c or din g ly , th is opinion will not addre ss the rema inder of the Calhoun te st.

A. Second M

ortgage Debt

Th e ba nk ru ptcy court

de te rm ine d th a t it

wa s th e int e nt o f t

he state c ourt

and the pa rt ie s to

c re a te a su pp or t ob liga tio n. Th e ba

nk ru ptc y c ourt c ite d f ive re a so ns fo r i ts d e c isi on : ( 1) su pp or t is i n fe rr ed b eca

use the sec ond mortg ag e pay ments protecte d the childre n’s home; (2) the lack of an up wa rd de viatio n in c hil d su

pp or t pa y me nts in t he 20 07 c on se nt d e c re e ind ic a te s a su pp or t pa y me nt; (3) the 2007 c onsent dec ree ’s provision that if a sale of the fa mily home cr eate d a deficienc y debt that the par ties split the debt, while i f i t cre ated a surplus, Creditor was entitled to all of t he surplus, wa s intended to assist in providing a home f or the c hildren; (4) Cre ditor’s hold harmless ag ree ment in the 2003 consent de cre e does not re lieve De btor from his obligation to pay the di sputed claim; and (5) the a g re e me nts do no t sh owthat D e bto r w a s e nti tle d to sp ou sa l su pp or t.

Debtor’ s brief impl ies that Creditor’s obli g ation to pay both mortg ag es i n the 2003 di vorce decr ee is binding despite entry of t he 2007 consent decre e and the 2009 order , but does not cite any authority for t h i s p ro p o s ition. The bankruptcy court took the be tter view, that is, that the 2007 consent de cre e and the 2009 order superc eded the 2003 d i v orce terms. Howe ver, the bankruptc y
c ourt did a lso c on sid e r t

he te rm s o f the 20 03 div or c e in d e te rm ini ngthe state c ourt and pa rt ie s’ int e nt.

Debtor a lso challeng es the ba nkruptcy court’s r eli ance on the fa ct that in the 2007 conse nt d ec re e ch i l d s u

p p o rt p ay m en t s we n td o wn , b u tt h at De b t o r b ec am e o b l i gat edo nt h e s ec o n d m o rt gage11

as a f urther indication that the obl igation was in the nature of support. Debtor a rg ues that the re cord indicates that the r eason f or the re duction in child support was the fa ct th at h e wa s unemploy ed. Whil e that fa ct is supported by the record, that fac t does not neg ate the ba nkruptcy court’s infe renc e. Th e y are no t mu tua lly

e xclu siv e . T he 20 03 up wa rd de viatio n f

ro m th e sta

nd ard c a lc ulatio n o f c hil d support clea

rly ties pay ment of t he second mortg ag e to the children’s support. The fa ct that Debtor was out of wor

k at the time of the second divorce and the amount labeled as “child support” decr ease d but that he obtained a

new oblig ation to pa

y half of the second mortg ag e supports an infe renc e that the mor tg a g e pa y me nt w a s p art

of su pp or t f or the c hil dr e n. As state d b y on e ba nk ru ptc y c ourt :
[T] he majority

of cour ts considering whether

a mortg ag e debt a s s u

med by or orde red to be paid by a debtor pursuant to a judg ment of divorce have he ld that such an oblig ation is in the na t u re o f “suppor t.” See, e .g ., Gi an ak

as v . G ian ak

as ( In re Gianak

as ), 9 1 7 F.2d 759, 764 (3d C i r. 1 9 9 0 ) ( “T h e g r ea twe i gh to f a u t h o ri t y h o l d s t h at a s p o u s e's a ssumpt ion

of mor tg a g e de bts wh ic h e na

ble me mbe rs of the fa

mil y to rema in in th e ma

r it a l r e s id e n c e is an o b li g a ti o n in th e n a tu r e of su pp or t, m a int e na

nc e or a lim on y .” ) ( c oll e c tin g c a se s) ; In re J ohnson , 397 B.R. at 297–98 ( “Numer ous courts hav e h el d that an oblig ation that is e sse nti a l to e na

ble a pa rt y to m a int a in b a sic ne c e ssi tie s o r t o protec t a re side n c e c o nstitut es a nondischa rg eable support obligation.” (c oll e c tin g c a se s) ). An d a lth ou g h the div or c e jud g me nts be fo re so me c ourt s in c lud e d a

ho ld h arm le ss c la

us e, th e ab se nc e of

su c h a c la us e here is not dispos itive. In re Trump , 309 B.R. at 593–94 ( “Eve n absent [hol d harmless or ind em n ification] langua g e, the Ag ree ment cre ated a leg ally enfor cea ble obligation for [the debtor] to make pay ments on the sec ond mortg ag e note.” ).

In re Pa lm ie ri , No. 11-51224, 2011 WL 6812336, at *5 (B ankr. E.D. Mich. Nov. 21, 2011)

. Se e als o In re King , 461 B.R. 789, 794 n.23 (B ankr. D . Alaska 2010) (collec ting c ases)

.

The ba nkruptcy court a lso found that Debtor’ s pay ment of the sec ond mortg ag e provide d

nece ssary support beca

use the unc ontradicte d testimon y o f C reditor wa s that her income was insufficient to cove r both the first and second mortg ag e pay ments. Although D ebtor ha s asserte d that he wa s out of work at the time an d that Creditor made more money , Debtor ha s not disputed the finding that Creditor could not af ford both the f

irst and sec ond mortg ag e pay ments.12

Debtor a rg ues that the de bt cre ated by the requirement in the 2007 conse nt decr ee that he pay half of the second mortg ag e is a prope rty settlement rathe r than a domestic support obligation. He argues t hat not hing in either divorce decre e was labeled as spousal support and that the 2003 c onsent decr ee spe cifica lly

say s that no alimony

o r s p o u s al s u pport was a war ded. De btor asser

ts that the bankruptc y

court err oneously relied on “stock lang uag e” in the 2007 consent decr ee, which re fer red to spousal support, even thoug h none had be en aw arde d. See Thomas , 2013 WL 5493214 at *8.

The ba nkruptcy court’s opinion does mention re fer ence s to “child and spousal support” in t he 2007 consent de cre e to indi ca t e a p ro b ability that the state c ourt intended something to be in the nature of spousal support. Howe ver, this re fer ence is in passing a nd is not the primary

support for the bankr uptcy court’s c onclusion. I f the ba nkruptcy court e rre d in using the “ stock l an g uag e” a s
cre ating an infe renc e of suppor t, it wa s h ar m l es s in view of the other rea sons for finding that the

mor tg a g e ob lig a tio n w a s in the natur e of su pp or t. B ank ru ptc y c ourt s ar e pe rm itt e d to fin d a de bt t o be in the natur e of suppor t reg ardle ss of the labe l used by the state c ourt. I n the pre sen t ca se, the bankruptc y

court’s pr imary

focus wa s the state cour

t’s implications that the mortga g e oblig ation was to assist in providing for the children’ s support by providing them with a home.
Finally , Debtor a sserts that the 2007 conse nt decr ee la ng uag e that contemplates the sale of the home rather than Cre ditor’s continued re side n c e th e r e , u n d e r mi n e s the bankr

uptcy court’s c onclusion. Ac c or din g ly , D e bto r argue s that the ba nk ru ptc y c ourt ’s re lia

nc e on the c hil dr e n’ s n e e d to ma int a in their home is a f

alse c onclusion and does not support a f inding that the r equire ment to pay the sec ond

mor tg a g e is i n th e natur e of

a lim on y , ma int e na

nc e or su pp or t.

Th e ba nk ru ptc y c ourt fo un d p ara g ra

ph4 o f t he 2007 con sent

de c re e to c re a te an ambi g uit y due to the languag e providing for the a llocation of sale pr ocee ds in the event of a sur plus arising from the sale of the proper

ty or a defic iency in the event that the sa le proc eeds did not equa l or exceed the mortg ag es. The ba

nkruptcy court acknow ledg ed that this parag raph c ould be re ad as a n indication of a pr operty

settlement. Howeve r, the bankruptc y court found it more likely that the orde r allowing Creditor to kee p proce eds of a possible sale, while requiring Debtor to he lp cover a def iciency was13

likely intended to provide f

or the c hildren’s ne ed for a home. AllowingCreditor t o k ee p proce eds provided he r with a possible down pa y ment on a future home, while requiring Debtor to c over pa rt of any defic iency

also incre ased c reditor’ s ability to come up with a loan pa y ment on a new

home.

L ooking a t the totality of the circ umstances, the ba nkruptcy court’s c onclusion that the parties and the state court intende d to cre ate a support obligation is not clea rly err oneous. The fact that the

mor tg a g e p ay me n ts h e lp e d p r o v id e a r e s id e n c e f o r th e c h il dr e n is a s tr o n g in d ic a ti o n tha t the pay ments were intended as suppor t rather than a pr op er t y s et t l ement. The lang uag e in the 2003

co n s en t d ec re e is t h e st ro n ges t i n d i ca t i o n t h at t h e st at e co u rt t i edt h e p ay m en to f t h e s ec o n d

m o rt gage to the children’ s support. The pa y ment of half of

the sec ond mortg ag e wa s never specific ally

labeled

a s e ith e r s up po rt or a pr op e rt y se ttl e me nt. Th e ba

nk ru ptc y c ourt ’s de te rm inatio n that it i s su pp or t is

no t c le arl y

e rr on e ou s.

B. Judgme nt Lien Debt

The b an kr

u p tc y c o u rt a ls o h e ld th a t th e $ 5 , 0 0 0 d e b t th a t ar o s e f r o m Cr e d it o r p ay in g off a judgme nt lien ag ainst the home wa s a domestic support oblig ation.

Although the 2007 Conse n t De cre e did not specific ally addre ss the J udg ment L ien, i t d i d assig n any proce eds fr om the sale of the Property to the C reditor and, as di scussed above, t hese pr ocee ds are in the nature of support. The D ebtor' s sole responsi b i lity for the J udg ment L ien is resolved co n clusively by the 2009 Orde r. The J u d gm en t L ien Debt is nec essar ily a DSO bec ause it pre vented the Creditor and he r childre n from r ec ei v i ng sales proc eeds that were intended as support. The J udg ment L ien Debt is thus “in the natur e of alimony , maintenanc e, or support,” and is prope rly char acte rized as a DSO.

In re Thomas , No. 13-10043, 2013 WL5493214 at *10 (B ankr. E.D . Ky . Oct. 2, 2013).14

Debtor a rg ues that since the judgme nt lien was not addre ssed by the divorce decr ee it ca

nnot be c o n s i d e r e d t o b e a l i m o n y , m a i n t e n an c e o r s u p p o rt

. D e b t o r ar g u e s t h a t i t w a s o b t a i n e d in Jul y 2004 whil e t h e s ec o n d marria g e wa s still intact, and that Cre ditor was fully awa re of the circ umstances lea ding to the judg ment lien.

Creditor ar g ues that t he procee ds from the sale of the hom e were intende d to provide support fo r t he c hil dr e n. Sin c e the jud g me nt lie n re du c e d the a mou nt that sh e re c e ive d f

ro m th e ult imate sa le of the ho me , it

re du c e d th e a mou

nt o f s up po rt

sh e re c e ive d. Th e re fo re , s he argue s th e de bt s ho uld be tre ated a s a support oblig ation.

Ca se law e xpla ins t hat deb ts can qua lif y a s su pp or t and be de te rm ine d no nd isc ha rg e a ble pursuant to § 523 even if they are owed to pa rties other than the pay ees in the statute, if the forme r spouse could be he ld re s p o n sible for the de bt in question. See H olliday v. Kline (

In re Kline ), 65 F.3d 749 ( 8th Cir.1995). Se e als o Rugiero v. DiNardo , 502 F. App’ x 436, 439 (6th Cir. 2012) (holding that attorney

fee s could be prope rly

treated as a

domestic support obligation u nder the circ umstances of

that case , including the fac t that they wer e incurred in a proce eding that conce rned the we lf are of the c hil dr e n) ; Kas sic ie h v . B att ist i ( In re Kass icieh ), 482 B .R. 190 (B.A .P. 6th C ir. 2012), aff'

g 46 7 B .R. 44 5 ( B ank

r. S.D

. Oh io 20 12 ) (gua

rd ia n a d li te m f

e e s c on sti tut e d a

“ do me sti c support obligation”).
The judg ment lien debt is not a true third-par ty debt bec ause it has a lrea dy been pa id to the third party

and De btor has bee n order ed to re imburse Creditor direc tly for the pa y ment. Howeve r, the re a so nin g fo r n on -d isc ha rg e a bil ity of thi rd -p art y de bts that qu a lif

y a s su pp or t a pp lie s. Th e state court int ended Creditor to keep the family home as a residence and shelter for the children or to have the pr oc e e ds of

the sa le of

the ho me a s su

pp or t. T he 20 03 c on se nt d e c re e re qu ir e d D e bto r t o h e lp provide that support for

the childre n by

making larg er c hild support pay ments, while the 2007 consent de cre e ac tually

require d the Debtor

to pay half of the second mortg age. T h e j u d i ci al lien filed ag ainst the family

home re duced the amount of s u pport that the childre n rec eived whe n the family home was sold. Acc ording ly , the state c ourt’s orde r which r equire d Debtor to pa y Creditor15

for that r eduction in support is a domestic support obli g ation and is non-dischar g eable in his chapter 13 case

.

Th e pa rt ie s and the ba nk ru ptc y c ourt fo c us on the 20 03 and

20 07 c on sen t decr e e s to de te rm ine the natur e of the de bt that De bto r ow e s to C re dit or . H ow e ve r, bo th t he de bts a lso ari se fr om t he 20 09 or de r. Th a t or de r r e fe re nc e s Cr e dit or ’s mot ion s f or c on te mpt fo r D e bto r’ s f

a ilure to pay child support an d fo r modification of c hild support. The 2009 order notes that Creditor wi t hdrew both of those motions due to the arr ear s being paid and due to Debtor be ing la id off of work. How ever , the 2009 orde r g oes on to order Debtor to re imburse Creditor for the sec ond

mor tg a g e de bt a

nd the jud g me nt li en deb t, a s w e ll a s to re imb ur se ha lf the e xpe ns e s o f c e rt a in medi c a l b il ls

. T h e f

a c t th a t th e s e tw o d e b ts w e r e a d dr e s s e d d u r in g a h e ar in g to d e a l with support issues, further indicates that the state court and the par ties intended that these de bts be consider ed in the nature of alimony , maintenanc e or suppor t. Moreov er , at t he time of the 2009 or der, the family home had a lrea dy

been so l d . I f the intention had be en for the proc eeds of

the sale to be a proper ty settlement, the state c ourt could have made that clar ification. Be cause the pay ment of the second mortg ag e is tied to support issues in a ll thre e judgme nts, a nd the judg ment lien debt re duced the amount of support rec eived and is provided for as par t of a support orde r, the ba nkruptcy court’s fi nd ingthat th e state c ourt int e nd e d both the se de bts be tr e a te d a s su pp or t ob lig a tio ns is n ot c le arl y
e rr on e ou s.

CO NC LU SION The fa cts prese nted to the bankruptc y court support the leg al conc lusion that the debt owed to Creditor is in the nature of alimony , maintenanc e or support and is there fore non-dischar g eable

. Th e ba nk ru ptc y c ourt ’s ord e r o ve rr

uli ngDe bto rs ’ o bje c tio n to Cr e dit or ’s pr oo f o f c la im i s AFF I RMED.