Of the District of Massachusetts, sitting by designation. *

United States Court of Appeals

For the First Circuit

No. 09-9005

IN RE: NELSON J. SMITH,

Debtor.

NELSON J. SMITH,

Appellee,

v.

RITA M. PRITCHETT,

Appellant.

APPEAL FROM THE BANKRUPTCY APPELLATE PANEL

FOR THE FIRST CIRCUIT 

Before

Torruella and Boudin, Circuit Judges,

and Saris, District Judge. *

Clifford P. Gallant, Jr., with whom Beliveau, Fradette, Doyle

& Gallant, P.A., was on brief for appellant.

Mark P. Cornell, with whom Kelly Ovitt Puc and Cornell and

Ovitt Puc, PLLC, was on brief for appellee.

November 6, 2009
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TORRUELLA, Circuit Judge. This is an appeal of an order

of the Bankruptcy Appellate Panel ("BAP") reversing an order of the

Bankruptcy Court. The BAP held that a late payment penalty was not

a domestic support obligation and thus dischargeable in bankruptcy.

After thorough consideration, we affirm.

I. Facts & Procedural History

The issue in this appeal arises from the marriage and

subsequent divorce of Nelson J. Smith and Rita M. Pritchett. The

parties were married on April 20, 1986. No children were born of

the marriage. A little over nine years later, the parties filed

for divorce in the Middlesex County Probate and Family Court,

citing an irretrievable breakdown of the marriage. On October 26,

1995, the Probate Court approved a Separation Agreement

("Agreement") filed jointly by the parties. The court's order

provided that the Agreement survived as an independent contract.

The Agreement stated that it resolved all issues between

the parties, and that the parties' respective financial

circumstances had been taken into account, although the parties'

specific circumstances were not disclosed in the Agreement.

The Agreement contained and incorporated Exhibits A, B,

C, D, E, F, and G, detailing the duties of the parties. The

Exhibits were entitled "ALIMONY," "MEDICAL INSURANCE," "DIVISION OF

ASSETS," "LIFE INSURANCE," "ALLOCATION OF MARITAL DEBTS," "INCOME

TAX RETURNS," and "SPECIAL PROVISIONS," respectively. Exhibit A
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awarded Pritchett alimony payments beginning at $2,300 per month

and decreasing to $1,600 per month on a set schedule that would

terminate approximately five years after the signing of the

Agreement. In the event of Pritchett's remarriage, the Agreement

stated that alimony payments were to decrease to $1,000 per month

but nevertheless continue through the five year period. The

Agreement also included a provision requiring Smith to purchase and

transfer to Pritchett a term life insurance policy on his life for

the five year term of the alimony payments to ensure that the

alimony payments would survive Smith's death.

Under "Exhibit 'A'," entitled "ALIMONY," the Agreement

also provided that:

All alimony payments shall be due in funds

available to the Wife on or before the first

of each month, and shall be subject to a late

payment penalty in the amount of $50.00 for

each day after the first of each month upon

which they are received by or become available

to the Wife.

Exhibit A further provided that "[t]he payments made by the Husband

. . . shall be deductible for the Husband and taxable to the Wife

for income tax purposes."

With the exception of debts related to one property,

Smith was to be responsible for the parties' marital debts. In

addition, the Agreement also provided that the Husband would "pay

to the Wife $150 per month toward the maintenance of a health plan

of the Wife's choice for her benefit." Finally, the Agreement
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provided that either party would be entitled to reasonable

attorney's fees in the event of a breach.

Smith appears to have fallen in arrears almost

immediately after the Agreement became effective, and in 1998, he

filed a Complaint for Modification with the probate court. On

August 20, 1998, the court entered a Judgment of Modification

amending the terms of the alimony payments to a total payment of

$42,373 payable at a rate of $500 per month until paid in full.

Other than this change, the Separation Agreement remained in full

force and effect.

In 2005, Pritchett filed a Complaint for Contempt with

the appropriate Massachusetts probate court seeking accrued late

payment penalties from Smith. The court found that although Smith

was current on his alimony payments, and had only one remaining

payment due, his payments had been consistently late. As a result,

on September 16, 2005, the court entered judgment against Smith in

the amount of $75,010, which represented the late payment penalties

that had accumulated since the 1998 modification.

In 2006, Pritchett commenced an action in the

Hillsborough Superior Court in the state of New Hampshire to

enforce the judgment and obtained an ex parte attachment to Smith's

homestead in New Hampshire. A lien was recorded accordingly in the

Hillsborough County Registry of Deeds on July 21, 2006. On

March 2, 2007, the New Hampshire court approved a stipulation by
 The Bankruptcy Code states that a Chapter 13 Plan shall "provide 1

for the full payment, in deferred cash payments, of all claims

entitled to priority under Section 507 of this title, unless the

holder of a particular claim agrees to a different treatment of

such claim." 11 U.S.C. § 1322(a)(2).

 "When a debtor declares bankruptcy, each of its creditors is 2

entitled to file a proof of claim-i.e., a document providing proof

of a right to payment-against the debtor's estate." Travelers Cas.

and Sur. Co. of America v. Pacific Gas and Elec. Co., 549 U.S. 443,

449 (2007) (internal quotations omitted); see also 11 U.S.C. § 101

(5)(A).

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the parties for a judgement of $75,010 plus applicable statutory

interest and costs.

On October 5, 2007, Smith filed a voluntary petition

under Chapter 13 of the Bankruptcy Code with the United States

Bankruptcy Court for the District of New Hampshire. Smith's

bankruptcy schedules listed Pritchett's claim to late payment

penalties in Schedule D, "Creditors Holding Secured Claims."

Smith filed a proposed Chapter 13 Plan on October 11,

2007, disclosing his intent to file a motion to avoid Pritchett's

lien pursuant to 11 U.S.C. § 522(f), maintaining that it impaired

his homestead exemption under N.H. Rev. Stat. Ann. § 480:1. On 1

November 29, 2007, Pritchett filed a proof of claim in the amount

of $81,932.04. Pritchett also filed an objection to confirmation 2

of Smith's proposed Chapter 13 plan asserting that her claim was

secured and that it was a domestic support obligation and thus

entitled to priority under 11 U.S.C. § 507(a)(1)(A). See also 11

U.S.C. § 1328(a)(2) (excepting from discharge domestic support
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obligations). On December 6, 2007, Smith filed an objection to

Pritchett's proof of claim, and a motion to avoid Pritchett's lien.

The bankruptcy court conducted a non-evidentiary hearing

on the motions and held that Pritchett's claim was a domestic

support obligation and thus denied Smith's motion to avoid

Pritchett's lien. Conceding it was a "close call," the bankruptcy

court concluded that the $50 fee "looks, smells, and feels too much

like attorneys' fees collecting alimony and support payments, which

have historically . . . been treated as in the same nature" as

alimony. Consequently, the court entered orders denying Smith's

motion to avoid Pritchett's lien on his home and overruling his

objection to Pritchett's claim. Smith appealed to the BAP, which

held oral arguments on December 29, 2008. The BAP reversed the

bankruptcy court on both counts, holding that the obligation at

issue was not in the nature of support and thus the lien on Smith's

home was avoidable and the claim was a general unsecured claim not

entitled to priority status. See In re Smith, 398 B.R. 715 (1st

Cir. BAP 2008). The BAP held that "the bankruptcy court's

statement that ' . . . it looks, smells and feels too much like

attorneys' fees" was not supported by the Agreement or the state

court order since the Agreement separately provided for attorneys'

fees. Id. at 722. Subsequent to the BAP's decision, Smith's

residence was foreclosed upon by a senior lien holder, rendering

the lien avoidance issue moot.
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II. Standard of Review

On this appeal, we are essentially in the same position

as the BAP, "reviewing the bankruptcy court's findings of fact for

clear error and affording de novo review to its conclusions of

law." In re Werthen, 329 F.3d 269, 272 (1st Cir. 2003). The

question of intent is one of fact, see In re Werthen, 282 B.R. 553,

556 (B.A.P. 1st Cir. 2002) (collecting cases), but also implicates

questions of law. See, e.g., In re Hale, 289 B.R. 788, 791 (B.A.P.

1st Cir. 2003). In this case, we agree with the BAP that the

bankruptcy court judge's determination that the $50 fee was like

attorneys' fees is not supported by the Agreement and thus clearly

erroneous. In any event, the parties agree that the relevant facts

are undisputed and therefore our review is de novo.

III. Discussion

The term "domestic support obligation" ("DSO") is a newly

defined term in the Bankruptcy Code, as updated by the Bankruptcy

Abuse Prevention and Consumer Protection Act of 2005 ("BAPCPA").

See Pub. L. 109-8, 119 Stat. 23 (2005). As relevant here, a DSO is

defined as 

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 [owed to] a former spouse

[and that is] in the nature of alimony,

maintenance, or support . . . without regard

to whether such debt is expressly so

designated.
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11 U.S.C. § 101(14A). Thus, pursuant to the statute, for an

obligation to a former spouse to be considered a DSO, it must

actually be in the nature of support. This issue is one of federal

bankruptcy law, and not state law. See In re Werthen, 329 F.3d at

272-73.

DSO creditors receive special treatment in bankruptcy.

They are given priority over most other creditors, see 11 U.S.C.

§§ 507(a)(1)(A), (B), and their claims are also nondischargeable

under chapters 7 and 13. See 11 U.S.C. §§ 727(b), 1328(a)(2). The

party seeking to have a debt determined a DSO and thus

nondischargeable bears the burden of proving that the obligation is

in the nature of support. In re Werthen, 329 F.3d at 271-72

(stating that moving party "bore the burden of showing that the

debts were nondischargeable") (citing Grogan v. Garner, 498 U.S.

279, 287-88 (1991)).

"[S]upport payments are, roughly speaking, what is given

to provide for the upkeep of the recipient spouse and children."

In re Werthen, 329 F.3d at 273. The label applied to the

obligation by the court or the parties is not necessarily

controlling for Bankruptcy Code purposes. Id. We have said that

one of the principal issues is "whether the divorce court judge

'intended' a particular award to be for support or for something

else." Id. In other words, the intended purpose the obligation was

meant to serve. To discern this intent, "courts look to a range of
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factors, including the language used by the divorce court and

whether the award seems designed to assuage need, as discerned from

the structure of the award and the financial circumstances of the

recipients." Id. This Court has not adopted a specific multifactor test used to discern intent when determining whether an

obligation is in the nature of support. See In re Soforenko, 203

B.R. 853, 859 (Bankr. D. Mass. 1997) (describing the multitude of

multi-factor tests used in this Circuit). Agreeing with the BAP

that "[a]s in all fact intensive inquiries, the critical factors

depend on the totality of circumstances of a particular case," we

decline to do so now. In re Smith, 398 B.R. at 722.

A trial court may look beyond the separation agreement to

discern the parties' relative financial circumstances at the time

of the divorce as evidence of the intent of the parties. See,

e.g., In re Werthen, 329 F.3d at 273-74. In this case, the

bankruptcy court decided that supplementing the record with

additional information was unnecessary, because 

whatever [the parties'] relative status was is

totally subsumed by the fact that they agreed

to a schedule of alimony payments that were

fixed . . . and that was approved by the

Court, so that, to me, is the final reflection

by the agreement of the parties and by the

order of the Court on what their economic

disparity in terms of assets and earning

potential and income were at the time.

Hearing Tr. Jan. 30, 2008, at 38. The parties do not dispute this

holding.
 At oral argument and in response to this Court's question, 3

Pritchett argued that the fee was intended to compensate her for

the time value of her alimony payments, and the cost of procuring

interim financing while her alimony payments were outstanding.

This court will generally "not consider an issue raised for the

first time at oral argument," Piazza v. Aponte Roque, 909 F.2d 35,

37 (1st Cir. 1990), but our holding in this case would not be

different even if Pritchett had advanced this position in her

brief.

 This part of the Agreement read, in relevant part: 4

All alimony payments shall be due in funds available to

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The question then is whether, given the language of the

agreement, the $50 per day late payment fee provision was intended

as support to Pritchett, or, alternatively was intended as a

punitive measure to deter Smith from paying late. Pritchett argues

that the language in the Agreement supports her position that the

$50 fee was intended to serve as alimony, maintenance, or support.

She points out that the fee provision was included in an Exhibit

entitled "ALIMONY." She also points out that the Agreement did not

distinguish between the alimony schedule and the $50 late fee, and

stated that any payments made by Smith under the Exhibit were to be

treated the same way alimony is normally treated for income tax

purposes. That is, the payments were deductible as alimony to him,

and taxable to her.3

We find Pritchett's arguments to be unavailing. First,

at the same time that the provision was located under a heading

called "ALIMONY" in the Agreement, the language of the provision

referred to it as a "late payment penalty." In any event, the 4
the Wife on or before the first of each month, and shall

be subject to a late payment penalty in the amount of

$50.00 for each day after the first of each month upon

which they are received by or become available to the

Wife.

 This was a position that was not advanced by Pritchett, as noted 5

above, but which we consider here only for the sake of argument.

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labels parties give to obligations are not controlling here, as

discussed supra. See also In re Werthen, 329 F.3d at 273 (noting

that "federal courts have been unwilling to treat the label applied

by the divorce court as controlling for Bankruptcy Code purposes").

While the tax treatment of the provision constitutes a factor

favoring Pritchett, we are persuaded that the late fee was intended

to encourage payment of alimony and was not itself alimony.

First, the fee was contingent on Smith's tardiness to

pay, and was not certain to materialize at all. Since Pritchett

had no expectation of this payment unless and until Smith was late,

it follows that the only way this contingent payment could be

considered alimony is if it was meant to compensate Pritchett for

the time during which she was waiting for her alimony payment.5

However, that argument is belied by the fact that the $50 fee was

a fixed charge that had no connection to the actual alimony owed to

Pritchett. Whether Smith was late by a single dollar or by the

entire alimony payment, he would still owe Pritchett the same $50.

Second, the Agreement called for Smith's monthly alimony

payments to decrease every year, from $2,300 to $1,600, and to as
 Massachusetts provides statutory interest for judgments 6

precisely to mitigate the incremental costs arising from late

payments. See Osborne v. Biotti, 533 N.E.2d 1341 (1989).

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low as $1,000 if Pritchett remarried. In contrast, the fee for a

late payment was fixed throughout the term of the Agreement. A $50

per day fee completely disconnected from any amount that Smith owed

Pritchett cannot have been expected to be directly related to her

recouping those costs. Had the parties provided for an interestbased fee, contingent on the amount of alimony outstanding,

Pritchett would have a stronger argument.6

The substantial provisions for Pritchett's support

outlined in the agreement also weigh against finding that the late

payment fee was intended to provide for Pritchett's support. The

Agreement that Smith and Pritchett entered into was relatively

sophisticated. In addition to alimony that continued even in the

event of Pritchett's remarriage, the Agreement provided for

contributions toward her medical insurance premiums, and mandated

that the support outlive Smith's death. Legal fees incurred in

enforcing the agreement, a provision not always contemplated in

such contracts, were clearly provided for in this instance.

Pritchett also received the only real estate owned by the parties

that was not in foreclosure, and Smith was solely responsible for

the parties' debts incurred prior to the divorce.

We therefore agree with the BAP's conclusion that the

obligation to pay a $50 fee per day that Smith was late in alimony
 We clarify that our holding today does not speak to the validity 7

of the Agreement between the parties. Our decision only affects

the treatment of Pritchett's claim in bankruptcy.

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payments was "intended to ensure that Pritchett's need was

assuaged, though it was not itself intended to assuage the need."

In re Smith, 398 B.R. at 723. Accordingly, we conclude that

Pritchett's claim is a general unsecured claim not entitled to

priority status and can be discharged in Smith's bankruptcy. See

11 U.S.C. §§ 523(a)(15), 1328(a)(2).7

Affirmed.