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UNITED STATES BANKRUPTCY APPELLATE PANEL

OF THE NINTH CIRCUIT

In re: ) BAP No. NC-13-1300-DJuKi

)

WALLACE EUGENE FRANCIS, ) Bk. No. 12-11910

TRACY DANIELLE FRANCIS, )

) Adv. No. 13-01040

Debtors. )

______________________________)

)

WALLACE EUGENE FRANCIS, )

)

Appellant, )

)

v. ) O P I N I O N

)

DEBRA LYN WALLACE, )

)

Appellee. )

______________________________)

Argued and Submitted on February 20, 2014

at San Francisco, CA

Filed - March 11, 2014

Appeal from the United States Bankruptcy Court

for the Northern District of California

Honorable Alan Jaroslovsky, Bankruptcy Judge, Presiding

 

Appearances: Thomas P. Kelly, III, argued for Appellant Wallace

Eugene Francis; Deborah S. Bull argued for

Appellee Debra Lynn Wallace.

 

Before: DUNN, JURY, and KIRSCHER, Bankruptcy Judges.

FILED

MAR 11 2014

SUSAN M. SPRAUL, CLERK

U.S. BKCY. APP. PANEL

OF THE NINTH CIRCUIT
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DUNN, Bankruptcy Judge:

Wallace Eugene Francis (“Francis”), a chapter 71 debtor,2

appeals the bankruptcy court’s summary judgment determination

that his obligation to “pay and hold Wife harmless” from certain

credit card obligations, as provided in the stipulated marital

dissolution judgment with his former spouse, appellee Debra Lyn

Wallace (“Wallace”), was excepted from his discharge under

§ 523(a)(15). We AFFIRM.

I. FACTUAL BACKGROUND

The relevant facts in this appeal are straightforward and

are not in dispute.

Francis filed a petition for relief under chapter 7 on

July 12, 2012. Wallace was listed as an unsecured creditor on

Francis’ Schedule F. However, the amount of Wallace’s claim was

stated as “unknown,” and Francis specified Wallace’s claim as

“contingent,” “unliquidated” and “disputed.”3

1 Unless otherwise indicated, all chapter and section

references are to the federal Bankruptcy Code, 11 U.S.C. §§ 101-

1532, and all “Rule” references are to the Federal Rules of

Bankruptcy Procedure, Rules 1001-9037. The Federal Rules of

Civil Procedure are referred to as “Civil Rules.”

2 The joint debtors in the underlying main bankruptcy case

are Francis and his current wife, Tracy Danielle Francis, but

since all issues in this appeal relate solely to Francis, no

further references to Ms. Francis will be made.

3

 Francis did not include the schedules filed in his main

chapter 7 case in his excerpts of record. However, in order to

review the complete record of relevant documents, we accessed the

bankruptcy court’s electronic docket and the imaged documents

(continued...)

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Prior to the bankruptcy filing, the parties stipulated to a

marital dissolution judgment (“Judgment”) that was entered by the

Sonoma County Superior Court in case no. SFL-44977 on May 26,

2009. Part C of the Judgment, titled “Property Division,”

included the following preamble in Section 1.01:

Husband [Francis] will be confirmed, awarded and

assigned as his separate property, those assets and

liabilities as set forth below, including without

limitation, those assets which are his separate

property. Wife [Wallace] transfers to Husband as his

separate property all of her right, title and interest

in each asset. Husband will pay and hold Wife harmless

from each liability. 

(Emphasis added.) Section 1.01 goes on to list various property

items that were recognized as the separate property of Francis

and various debt obligations, including credit card debts

(“Credit Card Debts”), that Francis covenanted to pay and from

which, he agreed to hold Wallace harmless. Part D, Section 1.05

states that:

This [Judgment] is the result of the joint efforts of

the parties. This [Judgment] and each of its

provisions will be interpreted fairly, simply, and not

strictly for or against either party.

The Judgment further provided that it would be “governed by, and

interpreted in accordance with California law.” Part D, Section

1.07 of the Judgment.

At some point in time, Francis stopped making payments on

3

(...continued)

included therein to review Francis’ Schedule F. See O’Rourke v.

Seaboard Sur. Co. (In re E.R. Fegert, Inc.), 887 F.2d 955, 957-58

(9th Cir. 1989) (holding that this Panel can take judicial notice

of the bankruptcy court record).

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the Credit Card Debts, and Wallace filed suit in California state

court to enforce the Judgment. Francis’ chapter 7 filing

followed closely thereafter.

Francis filed an adversary proceeding against Wallace,

seeking a determination that any obligation to pay the Credit

Card Debts under the Judgment was not excepted from his discharge

under § 523(a)(15). Wallace answered the adversary proceeding

complaint, requesting that Francis’ obligations under the

Judgment “be deemed non-dischargeable and that [Wallace] be

awarded the costs of defending this action, attorney’s fees and

such other relief as this Court determines is just and proper.” 

Wallace subsequently filed a motion for summary judgment (“SJ

Motion”), arguing that Francis’ obligation to pay the Credit Card

Debts under the Judgment, along with any attorneys fees and costs

incurred to enforce the Judgment, was excepted from his discharge

under § 523(a)(15). Francis opposed the SJ Motion, arguing that

the “hold harmless” language of the Judgment did not support a

nondischargeable debt to Wallace under § 523(a)(15) because there

was no explicit obligation to “indemnify” her for purposes of

California law. 

The bankruptcy court heard argument on the SJ Motion on

May 24, 2013 and took the matter under submission. It entered

its Memorandum on Motion for Summary Judgment (“Memorandum”)

granting Wallace’s SJ Motion on May 30, 2013. The summary

judgment order and a judgment in favor of Wallace in the

adversary proceeding were entered on June 12, 2013. 

Francis filed a timely notice of appeal. 

//

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II. JURISDICTION

The bankruptcy court had jurisdiction under 28 U.S.C.

§§ 1334 and 157(b)(1) and (b)(2)(I). We have jurisdiction under

28 U.S.C. § 158.

III. ISSUE

As stated by Francis, the sole issue in this appeal is, “Did

the Bankruptcy Court err by failing to apply California law in

granting the Appellee’s Motion for Summary Judgment?”

IV. STANDARDS OF REVIEW

We review a bankruptcy court’s legal conclusions, including

its interpretation of provisions of the Bankruptcy Code, de novo. 

Roberts v. Erhard (In re Roberts), 331 B.R. 876, 880 (9th Cir.

BAP 2005), aff’d, 241 F. App’x 420 (9th Cir. 2007). We also

review de novo a bankruptcy court’s decision to grant a motion

for summary judgment. Marciano v. Fahs (In re Marciano), 459

B.R. 27, 35 (9th Cir. BAP 2011), aff’d, 708 F.3d 1123 (9th Cir.

2013). De novo review requires that we consider a matter anew,

as if no decision had been made previously. United States v.

Silverman, 861 F.2d 571, 576 (9th Cir. 1988); B-Real, LLC v.

Chaussee (In re Chaussee), 399 B.R. 225, 229 (9th Cir. BAP 2008). 

We may affirm the decision of the bankruptcy court on any

basis supported by the record. Shanks v. Dressel, 540 F.3d 1082,

1086 (9th Cir. 2008).

V. SUMMARY JUDGMENT STANDARDS

Summary judgment is appropriately granted where review of

the relevant record establishes that there is no genuine issue as

to any material fact, and the moving party is entitled to

judgment as a matter of law. Civil Rule 56(a), applicable in

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adversary proceedings in bankruptcy under Rule 7056; Celotex

Corp. v. Catrett, 477 U.S. 317, 322 (1986); Ilko v. Cal. State

Bd. of Equalization (In re Ilko), 651 F.3d 1049, 1052 (9th Cir.

2011).

VI. DISCUSSION

1. Section 523(a)(15) – Its Interpretation and Application

While our consideration of issues with respect to exceptions

to discharge under § 523(a), and particularly § 523(a)(15), is

informed by state law, our interpretation of § 523(a)(15) is

fundamentally a question of federal law. See, e.g., Taylor v.

Taylor (In re Taylor), 737 F.3d 670, 676-77 (10th Cir. 2013):

The nature of the obligation is not restricted to the

parties’ label in the settlement agreement and is a

question of federal law. Sylvester [v. Sylvester], 865

F.2d at 1166; see Young v. Young (In re Young), 35 F.3d

499, 500 (10th Cir. 1994) (finding that shared intent

“is not limited to the words of the settlement

agreement, even if unambiguous” and stating that “the

bankruptcy court is required to look behind the words

and labels of the agreement in resolving this issue.”). 

That said, state law may inform the nature of the

interest.

Jodoin v. Samayoa (In re Jodoin), 209 B.R. 132, 137-38 (9th Cir.

BAP 1997); Gionis v. Wayne (In re Gionis), 170 B.R. 675, 681 (9th

Cir. BAP 1994):

The ultimate issue on the merits, whether a state

court’s award of $185,000 in connection with a marital

dissolution constitutes nondischargeable alimony,

maintenance, or support, is a question of federal law

with respect to which the labels that were applied

under state law are not binding.

Sweck v. Sweck (In re Sweck), 174 B.R. 532, 534 (Bankr. D.R.I.

1994) (The Bankruptcy Code requires that the bankruptcy court

“determine the nature of the debts, regardless of the labels

placed on them by the parties or the family court.”). 

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Section 523(a)(15) sets forth an exception to a chapter 7

debtor’s discharge for a debt owed “to a spouse, former spouse,

or child of the debtor and [not a support obligation] 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, . . . .”4 The legislative

history of the 1994 amendments to the Bankruptcy Code, which

added the initial version of § 523(a)(15), gives a strong

indication of congressional intent in providing the additional

exception to discharge in § 523(a)(15):

Subsection (e) [of § 304 of H.R. 5116] adds a new

exception to discharge for some debts arising out of a

divorce decree or separation agreement that are not in

the nature of alimony, maintenance or support. In some

instances, divorcing spouses have agreed to make

payments of marital debts, holding the other spouse

harmless from those debts, in exchange for a reduction

in alimony payments. In other cases, spouses have

agreed to lower alimony based on a larger property

4 § 523(a)(15), as originally adopted in the Bankruptcy

Reform Act of 1994, was modified by two affirmative defenses or

“exceptions within the exception,” for situations where:

(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.

The two quoted defenses or exceptions to the application of

§ 523(a)(15) were deleted by Congress in the amendments to the

Bankruptcy Code included in the Bankruptcy Abuse Prevention and

Consumer Protection Act of 2005. 

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settlement. If such “hold harmless” and property

settlement obligations are not found to be in the

nature of alimony, maintenance, or support, they are

dischargeable under current law. The nondebtor spouse

may be saddled with substantial debt and little or no

alimony or support. . . .

140 Cong. Rec. H 10770 (Oct. 4, 1994) (emphasis added). We note

that in Part B of the Judgment, titled “Spousal Support,” Francis

and Wallace each waived and released “all right and claim to

receive spousal support from the other at any time.”

Decisions of Circuit Courts of Appeals interpreting

§ 523(a)(15) have been consistent in recognizing its breadth. 

See, e.g., Short v. Short (In re Short), 232 F.3d 1018, 1020 (9th

Cir. 2000) (“We conclude that the debt is nondischargeable

because it was incurred by the debtor as part of the division of

property in the course of a judgment of dissolution.”); In re

Crosswhite, 148 F.3d 879, 883 (7th Cir. 1998) (§ 523(a)(15) “sets

forth as nondischargeable any marital debt other than alimony,

maintenance or support that is incurred in connection with a

divorce or separation”); Gamble v. Gamble (In re Gamble), 143

F.3d 223, 225 (5th Cir. 1998) (“Section 523(a)(15) purports to

apply to ‘any debt . . . [not in the nature of alimony or child

support] that is incurred in the course of a divorce or

separation,’ and the bankruptcy court was clearly correct to give

this provision the full reach implicated by its plain

language.”); McCafferty v. McCafferty (In re McCafferty), 96 F.3d

192, 200 (6th Cir. 1996) (“Congress amended the Bankruptcy Code

in 1994 to allow exemptions from discharge for all obligations

incurred as a result of a divorce decree.”). In In re Short, the

Ninth Circuit concluded that a debt incurred by the debtor to his

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former spouse prior to their marriage but which he agreed to pay

in their stipulated dissolution judgment was excepted from his

discharge under § 523(a)(15). 

A nondebtor ex-spouse in a § 523(a)(15) action bears the

burden of proof to establish by a preponderance of the evidence

that the subject debt 1) is not a support obligation of the kind

described in § 523(a)(5), and 2) was incurred by the debtor in a

divorce or separation or under a separation agreement, divorce

decree or marital dissolution judgment or order. See, e.g.,

McFadden v. Putnam (In re Putnam), 2012 WL 8134423 at *18 (Bankr.

E.D. Cal. Aug. 30, 2012); Burckhalter v. Burckhalter (In re

Burckhalter), 389 B.R. 185, 188 (Bankr. D. Colo. 2008); Ruhlen v.

Montgomery (In re Montgomery), 310 B.R. 169, 175-76 (Bankr. C.D.

Cal. 2004). Since, as noted above, the parties each waived

support in Part B of the Judgment, the first element is

undisputed. There likewise can be no dispute that Francis’

obligation to pay and hold Wallace harmless from the Credit Card

Debts arises directly from his covenants in part C of the marital

dissolution Judgment. There is no requirement in § 523(a)(15)

that a debt obligation incurred as part of a dissolution judgment

be payable directly to the ex-spouse in order to be excepted from

a debtor’s discharge. In re Montgomery, 310 B.R. at 177-78;

Johnston v. Henson (In re Henson), 197 B.R. 299, 303 (Bankr. E.D.

Ark. 1996):

Section 523(a)(15) does not require that a court order

the debt be paid directly to the spouse. The statute

provides that a debtor is not discharged from any debt

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

connection with a divorce decree. The statute does not

impose a “direct pay” requirement.

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(Emphasis in original.) See also Wodark v. Wodark (In re

Wodark), 425 B.R. 834, 838 (10th Cir. BAP 2010).

2. Section 101(12) and California Indemnity Law

Francis’ sole argument in this appeal is that under

California contract law, an obligation to “hold harmless” is not

synonymous with an obligation to “indemnify,” and in order for

Wallace to be able to enforce against Francis the third party

liabilities allocated to Francis in the Judgment, clear

“indemnification” language needed to be used in the Judgment. 

Accordingly, Francis’ real argument is not so much with the

bankruptcy court’s interpretation of § 523(a)(15) but rather that

Francis’ obligation to “pay and hold [Wallace] harmless” from the

Credit Card Debts in the Judgment is not a “debt” in terms of

“liability on a claim” for purposes of § 101(12). If Francis’

Judgment obligation is not an enforceable “debt,” it cannot be

excepted from Francis’ discharge under § 523(a)(15) and, in fact,

does not need to be discharged. 

That argument was not specifically made at any point to the

bankruptcy court or in the briefs Francis filed in this appeal

and could be treated as waived. See, e.g., United States v.

Carlson, 900 F.2d 1346, 1349 (9th Cir. 1990) (issues not raised

at the trial court ordinarily will not be considered for the

first time on appeal); Law Offices of Neil Vincent Wake v. Sedona

Inst. (In re Sedona Inst.), 220 B.R. 74, 76 (9th Cir. BAP 1998)

(arguments not specifically and distinctly made in appellant’s

opening brief are waived and ordinarily, will not be considered),

aff’d, 21 Fed. Appx. 723 (9th Cir. 2001). However, since

Francis’ argument presents a question of law that has a

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potentially important impact at the intersection of federal

bankruptcy law and California law, we exercise our discretion to

consider it.

Francis cites California Civil Code (“CCC”) § 2772 for its

definition of “indemnity” as “a contract by which one engages to

save another from a legal consequence of the conduct of one of

the parties, or of some other person” and argues, relying on

authorities outside the family law area, that an obligation to

indemnify is legally distinct from an obligation to hold

harmless. 

Are the words “indemnify” and “hold harmless”

synonymous? No. One is offensive and the other is

defensive – even though both contemplate third-party

liability situations. “Indemnify” is an offensive

right – a sword – allowing an indemnitee to seek

indemnification. “Hold harmless” is defensive: The

right not to be bothered by the other party itself

seeking indemnification. 

Queen Villas Homeowners Ass’n v. TCB Property Management, 149

Cal. App. 4th 1, 9 (2007) (explanatory dicta in a case where the

subject contract included obligations both to indemnify and hold

harmless). See also Myers Building Indus., Ltd. v. Interface

Tech., Inc., 13 Cal. App. 4th 949, 969 (1993) (“Indemnity

agreements ordinarily relate to third party claims.” Again, that

statement is dicta in a decision involving a contract that

included both indemnification and hold harmless provisions and

where the issue was whether an attorneys fee provision was

reciprocal in its application under CCC § 1717.).

Francis argues that even if he breached his obligation under

the Judgment to pay the Credit Card Debts, the third party

creditors are not pursuing him. (At oral argument, Francis’

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counsel indicated that the Credit Card Debts had been paid by

Wallace.) His obligation to pay the Credit Card Debts was not a

direct obligation to Wallace, and in the absence of clear

indemnification language in the Judgment in her favor, Wallace

cannot enforce that obligation. Gotcha!

Francis underlines that argument by citing California

decisions for the proposition that indemnification language in a

contract “must be particularly clear and explicit, and will be

construed strictly against the indemnitee.” Appellant’s Opening

Brief at 12, citing Prince v. Pac. Gas & Elec. Co., 45 Cal. 4th

1151, 1158 (2009); Crawford v. Weather Shield Mfg., Inc. 44 Cal.

4th 541, 552 (2008); and E.L White, Inc. v. City of Huntington

Beach, 21 Cal. 3d 497, 507 (1978). Here, however, Francis

overreaches. While it is true that those decisions stand for the

proposition that in order to enforce an express indemnity, the

contract language must be clear and specific, Francis ignores the

line of California authority discussed in some of the same

decisions that recognizes that implied indemnity obligations may

be enforced as a matter of equity. 

The obligation of indemnity, which we have defined as

“the obligation resting on one party to make good a

loss or damage another has incurred” (citations

omitted) . . . may find its source in equitable

considerations brought into play either by contractual

language not specifically dealing with indemnification

or by the equities of the particular case. (Citations

omitted.)

E.L. White, Inc. v. City of Huntington Beach, 21 Cal. 3d at 506-

07. See Prince v. Pac. Gas & Elec. Co., 45 Cal. 4th at 1157-59;

Garlock Sealing Tech., LLC v. Nak Sealing Tech. Corp., 148 Cal.

App. 4th 937, 967-72 (2007) (“As our review of the cases

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demonstrates, a duty to indemnify has been implied from the

obligation of the contracting parties to perform their promises,

the reasoning being that a promise to perform includes an implied

promise to perform properly.”).

In this case, Francis “promised” in the Judgment to “pay and

hold [Wallace] harmless” from the Credit Card Debts. It is

undisputed that he breached the promise to pay the subject debts. 

Wallace apparently paid them and was damaged as a result. In

these circumstances, in spite of the absence of specific

“indemnification” language in Francis’ covenants in the Judgment,

Wallace has an implied indemnification claim against Francis

under California law that constitutes a “debt” for purposes of

§ 101(12). See In re Putnam, 2012 WL 8134423 at *8; Garlock

Sealing Tech., LLC v Nak Sealing Tech Corp., 148 Cal. App. 4th at

973 (The conceptual basis for implied contractual indemnity “is

the idea of a contracting party’s fair responsibility for

foreseeable damages caused by its breach of the promises it made

in the contract.”). By its terms, the Judgment provided that it

was to be “interpreted fairly, simply and not strictly for or

against either party.”

3. Enforcing California Marital Dissolution Judgments

Beyond the dubious merits of Francis’ arguments in a pure

contract context, as discussed above, the undisputed fact in this

appeal is that the parties’ agreement was incorporated and merged

into the Judgment that the Sonoma County Superior Court entered

in their marital dissolution proceeding. See Judgment, Part D,

Section 1.01; Flynn v. Flynn, 42 Cal. 2d 55, 59 (1954) (“It is

settled that a document may be incorporated either expressly or

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by apt reference into a judgment or decree so as to make it an

operative part of the order of the court.”). In the two-page

first part of the Judgment prepared and signed by the California

Superior Court judge, the court expressly reserved jurisdiction

“to make other orders necessary to carry out this [Judgment].”

Under California law, parties have many avenues for

enforcing judgment obligations. In fact, California Family Code

(“CFC”) § 290 provides that, “[a] judgment or order made or

entered pursuant to [the CFC] may be enforced by the court by

execution, the appointment of a receiver, or contempt, or by any

other order as the court in its discretion determines from time

to time to be necessary.” (Emphasis added.) The Judgment

specifically references its satisfaction of the requirements of

CFC § 2105(c) and the parties’ compliance with CFC § 2104 and

indicates that the matter was heard pursuant to CFC § 2336. See

Judgment at 1-2. Accordingly, the record reflects the undisputed

fact that the Judgment was “made or entered” pursuant to the CFC.

CFC § 290 gives courts broad discretionary authority in

enforcing the dissolution judgments they enter. That authority

includes the power to enforce a judgment party’s covenants to pay

and hold harmless his or her ex-spouse from debts to third

parties. See, e.g., In re Putnam, 2012 WL 8134423 at *10; In re

Montgomery, 310 B.R. at 180; Fithian v. Fithian, 74 Cal. App. 3d

397, 402 (1977) (“That a court in a dissolution action has the

power to order a spouse to pay money or deliver property into the

hands of a third party cannot be doubted.”); Young v. Superior

Court, 105 Cal. App. 2d 65, 67 (1951):

If [a property settlement] agreement or any of its

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provisions are actually incorporated in the [divorce]

decree and the decree orders the performance of such

agreement or such provision or provisions, then the

agreement or the provision or provisions so

incorporated are merged in the decree and may be

enforced only as an order of the court.

(citing Shogren v. Superior Court, 93 Cal. App. 2d 356 (1949)).

The Judgment obligated Francis to pay and hold Wallace

harmless from the Credit Card Debts. Wallace’s claim for

Francis’ failure to pay and hold her harmless from the Credit

Card Debts was an enforceable Judgment debt in California state

court. Although it is not material to our determination of this

appeal, we note that Francis sought the protection of the

automatic stay in bankruptcy shortly after Wallace initiated

efforts in California state court to enforce the Judgment. We

conclude that Francis’ arguments in this appeal are meritless,

and the bankruptcy court did not err in granting summary judgment

to Wallace on the § 523(a)(15) claim contested in the adversary

proceeding.

VII. CONCLUSION

For the foregoing reasons, we AFFIRM.

Concurrence begins on next page.

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JURY, Bankruptcy Judge, concurring:

I concur in the Opinion affirming the bankruptcy court’s

judgment that a debt owed by Francis to Wallace is

nondischargeable under § 523(a)(15). I also do not quibble with

the essence of the reasoning applied by the majority in reaching

that conclusion. I write separately, however, to emphasize that

the existence of a “debt” owed by Francis to Wallace arises under

application of California law and, to that extent, I disagree

with the majority’s statement “[w]hile our consideration of

issues with respect to exceptions to discharge under § 523(a),

and particularly § 523(a)(15), is informed by state law, our

interpretation of § 523(a)(15) is fundamentally a question of

federal law” (italicized emphasis added). I feel compelled to

make this distinction since Francis has submitted that the sole

issue on appeal is that the bankruptcy court erred by not

applying California law. I conclude that the bankruptcy court

did indeed apply California law to determine that Francis owes a

debt to Wallace. Under federal law, this Opinion confirms that

debt is nondischargeable.

Section 523(a)(15) provides an exception to discharge “from

any debt” to a former spouse incurred by the debtor in connection

with a separation agreement which is not excepted under (a)(5). 

The term “debt” is defined in § 101(12) as “liability on a

claim.” The term “claim” is further defined in § 101(5) to mean:

(A) right to payment, whether or not such right is reduced

to judgment, liquidated, unliquidated, fixed, contingent,

matured, unmatured, disputed, undisputed, secured, or

unsecured; or

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(B) right to an equitable remedy for breach of performance

if such breach gives rise to a right to payment, . . . .

It is subsection (B) of this definition which creates a debt —

i.e. a right to payment — in this circumstance. The Supreme

Court has held that a “right to payment” is “nothing more nor

less than an enforceable obligation.” Johnson v. Home State

Bank, 501 U.S. 78, 83 (1991). Whether a right to payment exists

in a bankruptcy case is generally determined by reference to

state law. Butner v. United States, 440 U.S. 48, 55 (1979).

Francis asserts that the nuances between the terms “hold

harmless” and “indemnification” compels the conclusion under

California law that no right to payment exists from Francis to

Wallace. As recognized by the majority, this conclusion is

wrong. An excellent discussion of the mechanism by which

California law creates this right to payment is found in an 

unpublished opinion from a bankruptcy court, McFadden v. Putnam

(In re Putnam), 2012 WL 8134423, at *9-10 (Bankr. E.D. Cal.

2012), where the judge tussled with an argument similar to the

one made here by Francis.

 In Putnam, the debtor had obligated himself under a Marital

Settlement Agreement (MSA) to make lease payments on his exwife’s (McFadden’s) car and to make other payments to third-party

creditors. After the debtor defaulted on these payments, and

therefore defaulted under the terms of the MSA, he filed

bankruptcy and sought to discharge the obligations because they

did not create a “right to payment” or debt which would be

nondischargeable under § 523(a)(15). After noting that McFadden

might be entitled to specific performance of the MSA on those

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terms, the judge recognized that was not enough under

§ 101(5)(B):

That McFadden has a right to an equitable remedy is not

quite enough. A right to an equitable remedy for

breach of performance will only constitute a ‘claim’ if

the breach of performance also ‘gives rise to a right

to payment.’ At first, it appears on the face of the

Dissolution Judgment that compelling specific

performance of Putnam’s obligations under the judgment

would result in payment to third-party creditors but

not necessarily to McFadden. However, McFadden may

have rights to payment as well, through the State

Court’s use of its equitable power in enforcing the

terms of the Dissolution Judgment. Id. at *10.

The bankruptcy court then noted, as the majority here also

does, that although a MSA is interpreted as a contract under

California law, once it is incorporated into a dissolution

judgment, post judgment remedies supplied by the Cal. Fam. Code

become available for enforcement. This analysis then leads to

the discussion of Cal. Fam. Code § 290 which provides the “right

to payment:”

Thus, to enforce her rights, McFadden may rely on

California Family Code section 290, which generally

provides that ‘[a] judgment or order made or entered

pursuant to [the California Family Code] may be

enforced by the court by execution, the appointment of

a receiver, or contempt, or by any other order as the

court in its discretion determines from time to time to

be necessary.’ This statute give the state court broad

discretion in fashioning orders enforcing family law

judgments. As a result, a court has equitable power to

determine the manner in which an obligation under a

dissolution judgment is to be paid or performed. And

this would include the ‘power to order a spouse to pay

money or deliver property into the hands of a third

party.’ Id.

Consistent with this reasoning, the Putnam court concluded 

that the state court could award monetary damages to McFadden

based on the debtor’s breach of the MSA. Id. That award of

monetary damages is a right to payment: a debt owed to a former

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spouse. 

Cal. Fam. Code § 290 applies equally here as in Putnam and

the remedy available to Wallace is enforcement of a “right to

payment” from Francis. The bankruptcy court did not err by

applying the wrong law. The debt arose under California law,

properly applied, a debt which is nondischargeable under

§ 523(a)(15). 

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