Court Opinion

ID: 4192663
Source: CourtListenerOpinion
Date Created: 2017-08-03 17:02:06.668125+00
Date Added: 2024-06-11T14:40:19.909523
License: Public Domain

FILED
                                                           NOV 15 2016
 1                        NOT FOR PUBLICATION
 2                                                     SUSAN M. SPRAUL, CLERK
                                                         U.S. BKCY. APP. PANEL
                                                         OF THE NINTH CIRCUIT
 3                 UNITED STATES BANKRUPTCY APPELLATE PANEL
 4                           OF THE NINTH CIRCUIT
 5   In re:                        )     BAP No. CC-16-1086-TaFMc
                                   )
 6   JOSEPH M. GATELY,             )     Bk. No. 9:11-bk-12041-PC
                                   )
 7                  Debtor.        )
     ______________________________)
 8                                 )
     JOSEPH M. GATELY,             )
 9                                 )
                    Appellant,     )
10                                 )
     v.                            )     MEMORANDUM*
11                                 )
     BRIAN MOORE; ELIZABETH F.     )
12   ROJAS, Chapter 13 Trustee;    )
     JONI JENEA GATELY,            )
13                                 )
                    Appellees.**   )
14   ______________________________)
15                    Submitted Without Oral Argument***
                             on October 21, 2016
16
                          Filed – November 15, 2016
17
                Appeal from the United States Bankruptcy Court
18                  for the Central District of California
19       Honorable Peter H. Carroll, Bankruptcy Judge, Presiding
20
21
          *
             This disposition is not appropriate for publication.
22   Although it may be cited for whatever persuasive value it may
     have (see Fed. R. App. P. 32.1), it has no precedential value.
23
     See 9th Cir. BAP Rule 8024-1(c)(2).
24        **
             Neither Brian Moore nor Elizabeth Rojas filed a brief on
25   appeal. As a result, they waived the opportunity to appear in
     this case.
26
          ***
27            The Panel unanimously determined that the appeal was
     suitable for submission on the briefs and record pursuant to
28   Rule 8019(b)(3).
 1
 2   Appearances:     Appellant Joseph M. Gately, pro se, on brief;
                      appellee Joni Gately, pro se, on brief.
 3
 4   Before:     TAYLOR, FARIS, and MCKITTRICK,**** Bankruptcy Judges.
 5
 6                               INTRODUCTION
 7        Chapter 131 debtor Joseph Gately appeals from an order
 8   denying his motion to avoid a judicial lien under § 522(f)(1).
 9   We AFFIRM.
10                                   FACTS
11        Prior to the bankruptcy filing, the Debtor and Joni Gately
12   were married for nearly two years.      The Debtor eventually sought
13   marital dissolution in the Family Law Division of the Superior
14   Court of California for the County of Ventura.
15        Following a trial regarding Joni’s2 assertion of spousal
16   support arrearages and the Debtor’s request for modification of
17   his interim support obligations, the family court issued its
18   Ruling on Submitted Matter (the “Ruling”).     The Ruling’s second
19   paragraph contained an express acknowledgment of Joni’s then
20   pending bankruptcy case and the fact that: “[t]he parties [had]
21   agreed that the trial could proceed on the issue of status and
22
          ****
23            The Honorable Peter C. McKittrick, United States
     Bankruptcy Judge for the District of Oregon, sitting by
24   designation.
25        1
             Unless otherwise indicated, all chapter and section
     references are to the Bankruptcy Code, 11 U.S.C. §§ 101-1532.
26
          2
27           Because Joni Gately retained the surname “Gately,” we,
     for the sake of clarity, refer to her by first name in this
28   bench memorandum. No disrespect is intended.

                                       2
 1   spousal support, but not on any other matters.”    Bk. Dkt.
 2   No. 130 at p. 10.   The family court then awarded Joni support
 3   arrearages, established the duration of the Debtor’s support
 4   obligation, and reduced the amount of Debtor’s monthly support
 5   obligation at the halfway point.    The Ruling’s concluding
 6   paragraphs included an acknowledgment that: “[a]s a result of
 7   [Joni’s] pending bankruptcy, there are certain issues which the
 8   family court cannot address.”   Id. at p. 15.
 9        As relevant to this appeal, the Ruling also awarded
10   attorney’s fees and costs to Joni and required payment of
11   $3,500 directly to Joni’s divorce attorney, Brian Moore.      The
12   Ruling acknowledged that, when considering a fee award, the
13   family court was required by California Family Code § 2032 to
14   determine what was just and reasonable given the relative
15   circumstances of the parties.   It then outlined the information
16   relied upon to reach a conclusion in that case; the information
17   expressly included “Income & Expense documentation submitted on
18   behalf of [Joni and the Debtor].”    Bk. Dkt. No. 130 at p. 14.
19   The Ruling awarded fees to Joni, concluding that: “[t]o
20   equitably apportion the cost of the pending litigation the court
21   does find that it is just and reasonable to order that [the
22   Debtor] pay for a portion of the fees incurred by [Joni].”      Id.
23        The Debtor did not pay the attorney’s fees, a writ of
24   execution issued, and the Ventura County Sheriff’s Office levied
25   on the Debtor’s wages in the amount of $3,777.90.    Unhappy with
26   this development, the Debtor filed a chapter 13 petition and
27   claimed a wildcard exemption on the funds held by the Sheriff.
28        The Debtor later moved under § 522(f) to avoid what he

                                     3
 1   characterized as the lien held by Joni’s counsel.3       Although
 2   Joni’s family court counsel did not oppose the motion, Joni
 3   did.4       Among other things, she argued that the lien was not
 4   subject to avoidance because it secured a claim that was in the
 5   nature of spousal support pursuant to § 523(a)(5) and, thus,
 6   excluded from avoidance by § 522(f)(1)(A).
 7           At the hearing on the matter, the bankruptcy court denied
 8   the Debtor’s motion.       Although the Debtor argued that the
 9   attorney’s fee award was separate and distinct from the spousal
10   support award, the bankruptcy court found that the fee award was
11   a domestic support obligation within the meaning of §§ 523(a)(5)
12   and 101(14A).       It pointed out, in particular, that case law
13   established that an award of attorney’s fees made as part of the
14   Ruling was “entitled to the same priority and
15   non-dischargeability as the spousal support itself.”       Hr’g Tr.
16   (Mar. 24, 2016) at 4:21-25.
17           Following the bankruptcy court’s entry of an order denying
18   the Debtor’s motion to avoid lien, the Debtor timely appealed.
19
             3
             The record does not describe the judicial lien at issue.
20
     Perhaps, the judicial lien is an execution lien under California
21   Code of Civil Procedure § 697.710 or a lien created by an
     earnings withholding order under California Code of Civil
22   Procedure § 706.029. Joni argued before the bankruptcy court
     that no lien existed. She also argued that the Debtor lost
23
     title to the funds at issue after levy. Because Joni does not
24   reassert these arguments on appeal, she has abandoned them and
     we do not address them.
25
             4
             A few documents were not included in the excerpts of
26   record. Thus, we exercise our discretion to take judicial
27   notice of documents electronically filed in the bankruptcy case.
     See Atwood v. Chase Manhattan Mortg. Co. (In re Atwood),
28   293 B.R. 227, 233 n.9 (9th Cir. BAP 2003).

                                          4
 1                               JURISDICTION
 2        The bankruptcy court had jurisdiction pursuant to 28 U.S.C.
 3   §§ 1334 and 157(b)(2)(A).   We have jurisdiction under 28 U.S.C.
 4   § 158.
 5                                  ISSUE
 6        Whether the bankruptcy court erred in denying the Debtor’s
 7   motion to avoid a lien pursuant to § 522(f)(1).
 8                          STANDARDS OF REVIEW
 9        Whether a creditor’s judicial lien is avoidable under
10   § 522(f)(1) is a question of law, which we review de novo.
11   McCoy v. Kuiken (In re Kuiken), 484 B.R. 766, 769 (9th Cir. BAP
12   2013).   Whether a debt constitutes a domestic support obligation
13   under the Code is a factual finding, which we review for clear
14   error.   See Beaupied v. Chang (In re Chang), 163 F.3d 1138, 1140
15   (9th Cir. 1998).   A factual finding is clearly erroneous if it
16   is illogical, implausible, or without support in inferences that
17   may be drawn from the facts in the record.   See
18   TrafficSchool.com, Inc. v. Edriver Inc., 653 F.3d 820, 832
19   (9th Cir. 2011).
20                                DISCUSSION
21        Section 522(f)(1) permits a debtor to avoid the lien of a
22   judgment creditor on exempted property.    It states in relevant
23   part that “the debtor may avoid the fixing of a [judicial] lien
24   on an interest of the debtor in property to the extent that such
25   lien impairs an exemption to which the debtor would have been
26   entitled under [§ 522(b)] . . . .”
27        To avoid the lien, the debtor must satisfy three
28   conditions: (1) that there was a fixing of a lien on an interest

                                      5
 1   of the debtor in property; (2) that the lien impairs an
 2   exemption to which the debtor would have been entitled; and
 3   (3) that the lien is a judicial lien.     Culver, LLC v. Chiu
 4   (In re Chiu), 304 F.3d 905, 908 (9th Cir. 2002).     But
 5   § 522(f)(1) specifically excludes some liens including: “a
 6   judicial lien that secures a debt of a kind that is specified in
 7   [§] 523(a)(5).”   See 11 U.S.C. § 522(f)(1)(A).
 8        Section 523(a)(5) excepts from discharge a debt for a
 9   “domestic support obligation.”   In relevant part, that term is
10   defined by the Code as a debt “owed to or recoverable by . . .
11   [a] former spouse . . . in the nature of alimony, maintenance,
12   or support . . .” of the former spouse, by “reason of . . . a
13   separation agreement, divorce decree, or property settlement
14   agreement,” and “without regard to whether such debt is
15   expressly so designated . . . .”     11 U.S.C. § 101(14A)(A)-
16   (C)(i).   The debt cannot be “assigned to a nongovernmental
17   entity,” unless voluntarily assigned by a statutorily designated
18   person.   Id. § 101(14A)(D).
19        Here, the Debtor argues that the bankruptcy court erred in
20   determining that the attorney’s fees awarded to Joni in the
21   Ruling were in the nature of spousal support.     He contends that
22   the fees constituted “an equalization payment subject to
23   discharge under § 523(a)(15) . . . .”     In support of his
24   position, the Debtor asserts that the family court awarded
25   support to Joni under one section of the California Family Code
26   and awarded attorney’s fees to her attorney under a different
27   section of the statutory scheme.     We disagree with the Debtor’s
28   assertions.

                                      6
 1        An award of attorney’s fees in a marital dissolution
 2   proceeding may be in the nature of a domestic support obligation
 3   for the purposes of §§ 523(a)(5) and 101(14A).5   See Gionis v.
 4   Wayne (In re Gionis), 170 B.R. 675, 682-84 (9th Cir. BAP 1994),
 5   aff’d, 92 F.3d 1192 (9th Cir. 1996); see also Rehkow v. Lewis
 6   (In re Rehkow), 2006 WL 6811011, at *3 (9th Cir. BAP Aug. 17,
 7   2006) (“Cases in the Ninth Circuit and in other circuits
 8   customarily have held that attorneys’ fees awarded in connection
 9   with a dissolution proceeding are non-dischargeable in
10   bankruptcy under § 523(a)(5) as alimony, maintenance, or
11   support.”), aff’d, 239 F. App’x 341, 342 (9th Cir. 2007)
12   (“Attorneys’ fees . . . fall within the exception for discharge
13   for support obligations.”).
14        Labels in a divorce decree do not control the question of
15   whether a fee award constitutes a domestic support obligation.
16   See In re Gionis, 170 B.R. at 682.    Instead, the bankruptcy
17   court “must look behind the state court’s award and make a
18   factual inquiry to determine whether the award is actually in
19   the nature of support.”    Id. at 681.
20        “What constitutes support within the meaning of
21   [§] 523(a)(5) implicates a number of factors that are
22   potentially relevant on a case-by-case basis to this federal
23   question.”   Id. at 682.   For example, financial need is
24   indicative of support and “[t]he bankruptcy court may look to
25
          5
             In 2005, Congress amended § 523(a)(5) and (a)(15) and
26   added § 101(14A). The definition contained in § 101(14A)
27   substantively tracks the prior language in § 523(a)(5). See
     Rivera v. Orange Cty. Prob. Dep’t, 832 F.3d 1103, 1106 (9th Cir.
28   2016).

                                      7
 1   state law in determining whether the family court intended to
 2   base the award on need.”   Id.   Another relevant factor is how
 3   the debt is characterized under state law.    In re Chang,
 4   163 F.3d at 1140.
 5        Here, the bankruptcy court relied on the Ruling in finding
 6   that the family court awarded attorney’s fees as spousal
 7   support.   On this record, its finding was not illogical,
 8   implausible, or without support in the record.
 9        First, the family court recognized that, as a result of
10   Joni’s bankruptcy, it could decide only issues related to status
11   and spousal support.   Given this express recognition in the
12   Ruling, it is implausible that the family court then engaged in
13   a division of assets or took any action with regard to awarding
14   fees that was not correctly characterized as support.    Nothing
15   in the record establishes to the contrary.
16        Second, the Ruling reflects that there was a claim for
17   attorney’s fees made by one or both of the parties.    Consistent
18   with its duties under California Family Code § 2030(b)(2),6 the
19   family court considered what was “‘just and reasonable under the
20   relative circumstances’ of the parties in connection with
21
          6
22            California Family Code § 2030(b)(2) provides that:
23        When a request for attorney’s fees and costs is made,
24        the court shall make findings on whether an award of
          attorney’s fees and costs under this section is
25        appropriate, whether there is a disparity in access to
          funds to retain counsel, and whether one party is able
26        to pay for legal representation of both parties. If
27        the findings demonstrate disparity in access and
          ability to pay, the court shall make an order awarding
28        attorney’s fees and costs.

                                      8
 1   ‘determining how to apportion the overall cost of the litigation
 2   equitably between the parties.’”     Bk. Dkt. No. 130 at p. 14.   As
 3   part of its analysis, the family court considered, among other
 4   things, income and expense documentation submitted by both of
 5   the parties.   It then ordered that the Debtor pay a portion of
 6   Joni’s fees incurred in the marital dissolution proceeding and
 7   directed that the Debtor “pay attorney’s fees incurred by [Joni]
 8   directly to counsel for [Joni], Mr. Brian Moore, in the amount
 9   of $3,500.00.”    Id.
10        The plain text of the Ruling makes clear that the fee award
11   was directly related to the fees incurred by Joni during the
12   course of the marital dissolution proceeding and her ability to
13   pay these fees.    In awarding fees, the family court considered
14   the disparity in income between the parties and awarded the fees
15   to Joni based on her financial need.     This, in turn, constituted
16   an award in the nature of spousal support for the purposes of
17   §§ 523(a)(5) and 101(14A).
18        Contrary to the Debtor’s argument, it is irrelevant that
19   the fee award was payable directly to Brian Moore, Joni’s family
20   court counsel.    The operative inquiry is whether the obligation
21   was based on the need of the Debtor’s ex-spouse.     See Bendetti
22   v. Gunness (In re Gunness), 505 B.R. 1, 2, 7 (9th Cir. BAP
23   2014); In re Gionis, 170 B.R. at 679, 682-684; see also
24   In re Chang, 163 F.3d at 1141.   And Joni had standing to object
25   to the exemption; if the Debtor does not pay Mr. Moore, Joni
26   will lose this element of support and will be required to pay
27   herself.   The fees are owed to or recoverable by Joni even
28   though they are payable to her attorney because they are

                                      9
 1   reimbursement for her debt to her attorney.
 2        Nor does it matter that the fee award was set forth in a
 3   section of the Ruling separate from the determination of ongoing
 4   spousal support.    The form of the Ruling reflects a common
 5   practice in any order or judgment awarding fees and costs.
 6        It is also irrelevant that the family court referred to
 7   California Family Code § 2030, et seq. within the fee award
 8   section of the Ruling.    Sections 4320 and 2030 are not mutually
 9   exclusive provisions of the California Family Code.
10   Section 4320 relates to factors the family court must consider
11   in ordering spousal support; section 2030 supplies a basis for
12   an award of fees “[i]n a proceeding for dissolution of marriage
13   . . . and in any proceeding subsequent to entry of a related
14   judgment.”    Cal. Fam. Code § 2030(a)(1).   The need versus
15   ability to pay analysis of § 2030 reflects the analysis required
16   in § 4320 when considering a broader award of spousal support.
17        Further, the reference to California Family Code § 2030 in
18   the Ruling does not evidence an equalization payment with
19   respect to property division; instead, it relates to the family
20   court’s attempt to ensure parity between the former spouses and
21   equal access to legal representation in the marital dissolution
22   proceeding.    See Mooney v. Super. Ct. of Santa Cruz Cty.,
23   245 Cal. App. 4th 523, 535–36 (2016) (“The purpose of [a Cal.
24   Family Code § 2030] award is to provide one of the parties, if
25   necessary, with an amount adequate to properly litigate the
26   controversy.”); In re Marriage of Cryer, 198 Cal. App. 4th 1039,
27   1056 (2011) (“The purpose of [California Family Code §] 2030 is
28   to ensure parity.    The idea is that both sides should have the

                                      10
 1   opportunity to retain counsel, not just (as is usually the case)
 2   only the party with greater financial strength.”) (internal
 3   quotation marks and citation omitted).
 4        The Debtor’s references to In re Lopez, 405 B.R. 382, 384
 5   (Bankr. S.D. Fla. 2009), and In re Spence, 2009 WL 3483741
 6   (Bankr. S.D. Fla. Oct. 26, 2009),7 are also unavailing.     First,
 7   neither case is controlling or even particularly helpful as the
 8   decisions discuss fee awards under Florida law.    Second, in both
 9   cases, the fee award involved a sanction based on the debtor’s
10   “bad-faith litigation misconduct” during the dissolution
11   proceeding.   There is a difference between a typical sanction
12   award, which is not based on financial need, and a fee award,
13   where financial need is central to the analysis.   The Ruling did
14   not award fees based on sanctionable conduct.8
15        The Debtor also alleges error in the bankruptcy court’s
16   failure to consider two letters from Joni’s family court
17   counsel.   The bankruptcy court at the hearing told the Debtor
18   that one or both of the letters were not in the evidentiary
19   record before it.   This was partially untrue; the Debtor
20   attached one of the letters (dated February 19, 2010) to his
21   reply to Joni’s opposition.   That error, however, was harmless.
22        In the February 2010 letter, counsel instructs the Debtor
23
24
          7
             We assume that the Debtor’s references in his opening
25   brief are to these two particular cases. He did not provide a
     citation or other identifying information for either case, other
26
     than the singular case name.
27        8
             Sanctions in a marital dissolution proceeding are
28   imposed under California Family Code § 271.

                                     11
 1   that he should indicate in the memo line of the check that a
 2   payment under the Ruling was for “attorney’s fees,” rather than
 3   “alimony.”    The Debtor previously made this error.   This
 4   instruction is not inconsistent with our conclusion that the
 5   attorney’s fees were in the nature of support under §§ 523(a)(5)
 6   and 101(14A).
 7        As far as we can tell, the second letter - dated June 2010
 8   - is not part of the record on appeal.    It does not appear that
 9   the Debtor presented this letter to the bankruptcy court in
10   connection with his motion to avoid lien.    Thus, we do not
11   consider it on appeal.    See Graves v. Myrvang (In re Myrvang),
12   232 F.3d 1116, 1119 n.1 (9th Cir. 2000) (“Absent that rare case
13   where the interests of justice demand it, an appellate court
14   will not consider evidence not presented to the trial court[.]”)
15   (citations and internal quotation marks omitted).
16        Finally, to the extent the Debtor argues that the
17   attorney’s fee claim should be disallowed, we reject his
18   argument.    The only issue before the Panel for review on this
19   appeal is whether the bankruptcy court erred in denying the
20   Debtor’s motion to avoid lien - not whether the claim for
21   attorney’s fees should have been disallowed.    That implicates an
22   entirely different section of the Bankruptcy Code and is not
23   within the appropriate scope of this appeal.
24                                CONCLUSION
25        Based on the foregoing, we AFFIRM.
26
27
28

                                      12