Court Opinion

ID: 2656307
Source: CourtListenerOpinion
Date Created: 2014-03-11 20:54:31.718835+00
Date Added: 2024-06-11T13:06:52.050592
License: Public Domain

FILED
                                                               MAR 11 2014

 1                                                         SUSAN M. SPRAUL, CLERK
                                                             U.S. BKCY. APP. PANEL
                                                             OF THE NINTH CIRCUIT
 2
 3                  UNITED STATES BANKRUPTCY APPELLATE PANEL
 4                            OF THE NINTH CIRCUIT
 5   In re:                        )       BAP No.    NC-13-1300-DJuKi
                                   )
 6   WALLACE EUGENE FRANCIS,       )      Bk. No.     12-11910
     TRACY DANIELLE FRANCIS,       )
 7                                 )       Adv. No.   13-01040
                    Debtors.       )
 8   ______________________________)
                                   )
 9   WALLACE EUGENE FRANCIS,       )
                                   )
10                  Appellant,     )
                                   )
11   v.                            )       O P I N I O N
                                   )
12   DEBRA LYN WALLACE,            )
                                   )
13                  Appellee.      )
     ______________________________)
14
15                  Argued and Submitted on February 20, 2014
                               at San Francisco, CA
16
                             Filed - March 11, 2014
17
               Appeal from the United States Bankruptcy Court
18                 for the Northern District of California
19        Honorable Alan Jaroslovsky, Bankruptcy Judge, Presiding
20
21   Appearances:     Thomas P. Kelly, III, argued for Appellant Wallace
                      Eugene Francis; Deborah S. Bull argued for
22                    Appellee Debra Lynn Wallace.
23
24   Before:   DUNN, JURY, and KIRSCHER, Bankruptcy Judges.
25
26
27
28
 1   DUNN, Bankruptcy Judge:
 2
 3        Wallace Eugene Francis (“Francis”), a chapter 71 debtor,2
 4   appeals the bankruptcy court’s summary judgment determination
 5   that his obligation to “pay and hold Wife harmless” from certain
 6   credit card obligations, as provided in the stipulated marital
 7   dissolution judgment with his former spouse, appellee Debra Lyn
 8   Wallace (“Wallace”), was excepted from his discharge under
 9   § 523(a)(15).    We AFFIRM.
10                          I.     FACTUAL BACKGROUND
11        The relevant facts in this appeal are straightforward and
12   are not in dispute.
13        Francis filed a petition for relief under chapter 7 on
14   July 12, 2012.   Wallace was listed as an unsecured creditor on
15   Francis’ Schedule F.   However, the amount of Wallace’s claim was
16   stated as “unknown,” and Francis specified Wallace’s claim as
17   “contingent,” “unliquidated” and “disputed.”3
18
          1
19           Unless otherwise indicated, all chapter and section
     references are to the federal Bankruptcy Code, 11 U.S.C. §§ 101-
20   1532, and all “Rule” references are to the Federal Rules of
21   Bankruptcy Procedure, Rules 1001-9037. The Federal Rules of
     Civil Procedure are referred to as “Civil Rules.”
22
          2
             The joint debtors in the underlying main bankruptcy case
23   are Francis and his current wife, Tracy Danielle Francis, but
24   since all issues in this appeal relate solely to Francis, no
     further references to Ms. Francis will be made.
25
          3
             Francis did not include the schedules filed in his main
26   chapter 7 case in his excerpts of record. However, in order to
27   review the complete record of relevant documents, we accessed the
     bankruptcy court’s electronic docket and the imaged documents
28                                                      (continued...)

                                         -2-
 1           Prior to the bankruptcy filing, the parties stipulated to a
 2   marital dissolution judgment (“Judgment”) that was entered by the
 3   Sonoma County Superior Court in case no. SFL-44977 on May 26,
 4   2009.       Part C of the Judgment, titled “Property Division,”
 5   included the following preamble in Section 1.01:
 6           Husband [Francis] will be confirmed, awarded and
             assigned as his separate property, those assets and
 7           liabilities as set forth below, including without
             limitation, those assets which are his separate
 8           property. Wife [Wallace] transfers to Husband as his
             separate property all of her right, title and interest
 9           in each asset. Husband will pay and hold Wife harmless
             from each liability.
10
11   (Emphasis added.)      Section 1.01 goes on to list various property
12   items that were recognized as the separate property of Francis
13   and various debt obligations, including credit card debts
14   (“Credit Card Debts”), that Francis covenanted to pay and from
15   which, he agreed to hold Wallace harmless.      Part D, Section 1.05
16   states that:
17           This [Judgment] is the result of the joint efforts of
             the parties. This [Judgment] and each of its
18           provisions will be interpreted fairly, simply, and not
             strictly for or against either party.
19
20   The Judgment further provided that it would be “governed by, and
21   interpreted in accordance with California law.”      Part D, Section
22   1.07 of the Judgment.
23           At some point in time, Francis stopped making payments on
24
25
             3
           (...continued)
26   included therein to review Francis’ Schedule F. See O’Rourke v.
27   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
28   of the bankruptcy court record).

                                         -3-
 1   the Credit Card Debts, and Wallace filed suit in California state
 2   court to enforce the Judgment.   Francis’ chapter 7 filing
 3   followed closely thereafter.
 4        Francis filed an adversary proceeding against Wallace,
 5   seeking a determination that any obligation to pay the Credit
 6   Card Debts under the Judgment was not excepted from his discharge
 7   under § 523(a)(15).   Wallace answered the adversary proceeding
 8   complaint, requesting that Francis’ obligations under the
 9   Judgment “be deemed non-dischargeable and that [Wallace] be
10   awarded the costs of defending this action, attorney’s fees and
11   such other relief as this Court determines is just and proper.”
12   Wallace subsequently filed a motion for summary judgment (“SJ
13   Motion”), arguing that Francis’ obligation to pay the Credit Card
14   Debts under the Judgment, along with any attorneys fees and costs
15   incurred to enforce the Judgment, was excepted from his discharge
16   under § 523(a)(15).   Francis opposed the SJ Motion, arguing that
17   the “hold harmless” language of the Judgment did not support a
18   nondischargeable debt to Wallace under § 523(a)(15) because there
19   was no explicit obligation to “indemnify” her for purposes of
20   California law.
21        The bankruptcy court heard argument on the SJ Motion on
22   May 24, 2013 and took the matter under submission.    It entered
23   its Memorandum on Motion for Summary Judgment (“Memorandum”)
24   granting Wallace’s SJ Motion on May 30, 2013.   The summary
25   judgment order and a judgment in favor of Wallace in the
26   adversary proceeding were entered on June 12, 2013.
27        Francis filed a timely notice of appeal.
28   //

                                      -4-
 1                                 II.    JURISDICTION
 2        The bankruptcy court had jurisdiction under 28 U.S.C.
 3   §§ 1334 and 157(b)(1) and (b)(2)(I).             We have jurisdiction under
 4   28 U.S.C. § 158.
 5                                       III.     ISSUE
 6        As stated by Francis, the sole issue in this appeal is, “Did
 7   the Bankruptcy Court err by failing to apply California law in
 8   granting the Appellee’s Motion for Summary Judgment?”
 9                           IV.    STANDARDS OF REVIEW
10        We review a bankruptcy court’s legal conclusions, including
11   its interpretation of provisions of the Bankruptcy Code, de novo.
12   Roberts v. Erhard (In re Roberts), 331 B.R. 876, 880 (9th Cir.
13   BAP 2005), aff’d, 241 F. App’x 420 (9th Cir. 2007).             We also
14   review de novo a bankruptcy court’s decision to grant a motion
15   for summary judgment.     Marciano v. Fahs (In re Marciano), 459
16 B.R. 27, 35 (9th Cir. BAP 2011), aff’d, 708 F.3d 1123 (9th Cir.
17   2013).   De novo review requires that we consider a matter anew,
18   as if no decision had been made previously.            United States v.
19   Silverman, 861 F.2d 571, 576 (9th Cir. 1988); B-Real, LLC v.
20   Chaussee (In re Chaussee), 399 B.R. 225, 229 (9th Cir. BAP 2008).
21        We may affirm the decision of the bankruptcy court on any
22   basis supported by the record.             Shanks v. Dressel, 540 F.3d 1082,
23   1086 (9th Cir. 2008).
24                      V.   SUMMARY JUDGMENT STANDARDS
25        Summary judgment is appropriately granted where review of
26   the relevant record establishes that there is no genuine issue as
27   to any material fact, and the moving party is entitled to
28   judgment as a matter of law.          Civil Rule 56(a), applicable in

                                                -5-
 1   adversary proceedings in bankruptcy under Rule 7056; Celotex
 2   Corp. v. Catrett, 477 U.S. 317, 322 (1986); Ilko v. Cal. State
 3   Bd. of Equalization (In re Ilko), 651 F.3d 1049, 1052 (9th Cir.
 4   2011).
 5                             VI.   DISCUSSION
 6   1.   Section 523(a)(15) – Its Interpretation and Application
 7         While our consideration of issues with respect to exceptions
 8   to discharge under § 523(a), and particularly § 523(a)(15), is
 9   informed by state law, our interpretation of § 523(a)(15) is
10   fundamentally a question of federal law.     See, e.g., Taylor v.
11   Taylor (In re Taylor), 737 F.3d 670, 676-77 (10th Cir. 2013):
12         The nature of the obligation is not restricted to the
           parties’ label in the settlement agreement and is a
13         question of federal law. Sylvester [v. Sylvester], 865
F.2d at 1166; see Young v. Young (In re Young), 35 F.3d
14         499, 500 (10th Cir. 1994) (finding that shared intent
           “is not limited to the words of the settlement
15         agreement, even if unambiguous” and stating that “the
           bankruptcy court is required to look behind the words
16         and labels of the agreement in resolving this issue.”).
           That said, state law may inform the nature of the
17         interest.
18   Jodoin v. Samayoa (In re Jodoin), 209 B.R. 132, 137-38 (9th Cir.
19   BAP 1997); Gionis v. Wayne (In re Gionis), 170 B.R. 675, 681 (9th
20   Cir. BAP 1994):
21         The ultimate issue on the merits, whether a state
           court’s award of $185,000 in connection with a marital
22         dissolution constitutes nondischargeable alimony,
           maintenance, or support, is a question of federal law
23         with respect to which the labels that were applied
           under state law are not binding.
24
25   Sweck v. Sweck (In re Sweck), 174 B.R. 532, 534 (Bankr. D.R.I.
26   1994) (The Bankruptcy Code requires that the bankruptcy court
27   “determine the nature of the debts, regardless of the labels
28   placed on them by the parties or the family court.”).

                                      -6-
 1        Section 523(a)(15) sets forth an exception to a chapter 7
 2   debtor’s discharge for a debt owed “to a spouse, former spouse,
 3   or child of the debtor and [not a support obligation] that is
 4   incurred by the debtor in the course of a divorce or separation
 5   or in connection with a separation agreement, divorce decree or
 6   other order of a court of record, . . . .”4   The legislative
 7   history of the 1994 amendments to the Bankruptcy Code, which
 8   added the initial version of § 523(a)(15), gives a strong
 9   indication of congressional intent in providing the additional
10   exception to discharge in § 523(a)(15):
11        Subsection (e) [of § 304 of H.R. 5116] adds a new
          exception to discharge for some debts arising out of a
12        divorce decree or separation agreement that are not in
          the nature of alimony, maintenance or support. In some
13        instances, divorcing spouses have agreed to make
          payments of marital debts, holding the other spouse
14        harmless from those debts, in exchange for a reduction
          in alimony payments. In other cases, spouses have
15        agreed to lower alimony based on a larger property
16
          4
17           § 523(a)(15), as originally adopted in the Bankruptcy
     Reform Act of 1994, was modified by two affirmative defenses or
18   “exceptions within the exception,” for situations where:
19
          (A) the debtor does not have the ability to pay such
20        debt from income or property of the debtor not
          reasonably necessary to be expended for the maintenance
21        or support of the debtor or a dependent of the debtor
22        and, if the debtor is engaged in a business, for the
          payment of expenditures necessary for the continuation,
23        preservation, and operation of such business; or
          (B) discharging such debt would result in a benefit to
24
          the debtor that outweighs the detrimental consequences
25        to a spouse, former spouse, or child of the debtor.

26   The two quoted defenses or exceptions to the application of
27   § 523(a)(15) were deleted by Congress in the amendments to the
     Bankruptcy Code included in the Bankruptcy Abuse Prevention and
28   Consumer Protection Act of 2005.

                                    -7-
 1        settlement. If such “hold harmless” and property
          settlement obligations are not found to be in the
 2        nature of alimony, maintenance, or support, they are
          dischargeable under current law. The nondebtor spouse
 3        may be saddled with substantial debt and little or no
          alimony or support. . . .
 4
 5   140 Cong. Rec. H 10770 (Oct. 4, 1994) (emphasis added).    We note
 6   that in Part B of the Judgment, titled “Spousal Support,” Francis
 7   and Wallace each waived and released “all right and claim to
 8   receive spousal support from the other at any time.”
 9        Decisions of Circuit Courts of Appeals interpreting
10   § 523(a)(15) have been consistent in recognizing its breadth.
11   See, e.g., Short v. Short (In re Short), 232 F.3d 1018, 1020 (9th
12   Cir. 2000) (“We conclude that the debt is nondischargeable
13   because it was incurred by the debtor as part of the division of
14   property in the course of a judgment of dissolution.”); In re
15   Crosswhite, 148 F.3d 879, 883 (7th Cir. 1998) (§ 523(a)(15) “sets
16   forth as nondischargeable any marital debt other than alimony,
17   maintenance or support that is incurred in connection with a
18   divorce or separation”); Gamble v. Gamble (In re Gamble), 143
19 F.3d 223, 225 (5th Cir. 1998) (“Section 523(a)(15) purports to
20   apply to ‘any debt . . . [not in the nature of alimony or child
21   support] that is incurred in the course of a divorce or
22   separation,’ and the bankruptcy court was clearly correct to give
23   this provision the full reach implicated by its plain
24   language.”); McCafferty v. McCafferty (In re McCafferty), 96 F.3d
25   192, 200 (6th Cir. 1996) (“Congress amended the Bankruptcy Code
26   in 1994 to allow exemptions from discharge for all obligations
27   incurred as a result of a divorce decree.”).   In In re Short, the
28   Ninth Circuit concluded that a debt incurred by the debtor to his

                                    -8-
 1   former spouse prior to their marriage but which he agreed to pay
 2   in their stipulated dissolution judgment was excepted from his
 3   discharge under § 523(a)(15).
 4        A nondebtor ex-spouse in a § 523(a)(15) action bears the
 5   burden of proof to establish by a preponderance of the evidence
 6   that the subject debt 1) is not a support obligation of the kind
 7   described in § 523(a)(5), and 2) was incurred by the debtor in a
 8   divorce or separation or under a separation agreement, divorce
 9   decree or marital dissolution judgment or order.   See, e.g.,
10   McFadden v. Putnam (In re Putnam), 2012 WL 8134423 at *18 (Bankr.
11   E.D. Cal. Aug. 30, 2012); Burckhalter v. Burckhalter (In re
12   Burckhalter), 389 B.R. 185, 188 (Bankr. D. Colo. 2008); Ruhlen v.
13   Montgomery (In re Montgomery), 310 B.R. 169, 175-76 (Bankr. C.D.
14 Cal. 2004).   Since, as noted above, the parties each waived
15   support in Part B of the Judgment, the first element is
16   undisputed.   There likewise can be no dispute that Francis’
17   obligation to pay and hold Wallace harmless from the Credit Card
18   Debts arises directly from his covenants in part C of the marital
19   dissolution Judgment.   There is no requirement in § 523(a)(15)
20   that a debt obligation incurred as part of a dissolution judgment
21   be payable directly to the ex-spouse in order to be excepted from
22   a debtor’s discharge.   In re Montgomery, 310 B.R. at 177-78;
23   Johnston v. Henson (In re Henson), 197 B.R. 299, 303 (Bankr. E.D.
24 Ark. 1996):
25        Section 523(a)(15) does not require that a court order
          the debt be paid directly to the spouse. The statute
26        provides that a debtor is not discharged from any debt
          incurred by the debtor in the course of a divorce or in
27        connection with a divorce decree. The statute does not
          impose a “direct pay” requirement.
28

                                     -9-
 1   (Emphasis in original.)   See also Wodark v. Wodark (In re
 2   Wodark), 425 B.R. 834, 838 (10th Cir. BAP 2010).
 3   2.   Section 101(12) and California Indemnity Law
 4         Francis’ sole argument in this appeal is that under
 5   California contract law, an obligation to “hold harmless” is not
 6   synonymous with an obligation to “indemnify,” and in order for
 7   Wallace to be able to enforce against Francis the third party
 8   liabilities allocated to Francis in the Judgment, clear
 9   “indemnification” language needed to be used in the Judgment.
10   Accordingly, Francis’ real argument is not so much with the
11   bankruptcy court’s interpretation of § 523(a)(15) but rather that
12   Francis’ obligation to “pay and hold [Wallace] harmless” from the
13   Credit Card Debts in the Judgment is not a “debt” in terms of
14   “liability on a claim” for purposes of § 101(12).    If Francis’
15   Judgment obligation is not an enforceable “debt,” it cannot be
16   excepted from Francis’ discharge under § 523(a)(15) and, in fact,
17   does not need to be discharged.
18         That argument was not specifically made at any point to the
19   bankruptcy court or in the briefs Francis filed in this appeal
20   and could be treated as waived.     See, e.g., United States v.
21   Carlson, 900 F.2d 1346, 1349 (9th Cir. 1990) (issues not raised
22   at the trial court ordinarily will not be considered for the
23   first time on appeal); Law Offices of Neil Vincent Wake v. Sedona
24   Inst. (In re Sedona Inst.), 220 B.R. 74, 76 (9th Cir. BAP 1998)
25   (arguments not specifically and distinctly made in appellant’s
26   opening brief are waived and ordinarily, will not be considered),
27   aff’d, 21 Fed. Appx. 723 (9th Cir. 2001).    However, since
28   Francis’ argument presents a question of law that has a

                                       -10-
 1   potentially important impact at the intersection of federal
 2   bankruptcy law and California law, we exercise our discretion to
 3   consider it.
 4        Francis cites California Civil Code (“CCC”) § 2772 for its
 5   definition of “indemnity” as “a contract by which one engages to
 6   save another from a legal consequence of the conduct of one of
 7   the parties, or of some other person” and argues, relying on
 8   authorities outside the family law area, that an obligation to
 9   indemnify is legally distinct from an obligation to hold
10   harmless.
11        Are the words “indemnify” and “hold harmless”
          synonymous? No. One is offensive and the other is
12        defensive – even though both contemplate third-party
          liability situations. “Indemnify” is an offensive
13        right – a sword – allowing an indemnitee to seek
          indemnification. “Hold harmless” is defensive: The
14        right not to be bothered by the other party itself
          seeking indemnification.
15
16   Queen Villas Homeowners Ass’n v. TCB Property Management, 149
17 Cal. App. 4th 1, 9 (2007) (explanatory dicta in a case where the
18   subject contract included obligations both to indemnify and hold
19   harmless).   See also Myers Building Indus., Ltd. v. Interface
20   Tech., Inc., 13 Cal. App. 4th 949, 969 (1993) (“Indemnity
21   agreements ordinarily relate to third party claims.”    Again, that
22   statement is dicta in a decision involving a contract that
23   included both indemnification and hold harmless provisions and
24   where the issue was whether an attorneys fee provision was
25   reciprocal in its application under CCC § 1717.).
26        Francis argues that even if he breached his obligation under
27   the Judgment to pay the Credit Card Debts, the third party
28   creditors are not pursuing him.     (At oral argument, Francis’

                                       -11-
 1   counsel indicated that the Credit Card Debts had been paid by
 2   Wallace.)   His obligation to pay the Credit Card Debts was not a
 3   direct obligation to Wallace, and in the absence of clear
 4   indemnification language in the Judgment in her favor, Wallace
 5   cannot enforce that obligation.     Gotcha!
 6         Francis underlines that argument by citing California
 7   decisions for the proposition that indemnification language in a
 8   contract “must be particularly clear and explicit, and will be
 9   construed strictly against the indemnitee.”      Appellant’s Opening
10   Brief at 12, citing Prince v. Pac. Gas & Elec. Co., 45 Cal. 4th
11   1151, 1158 (2009); Crawford v. Weather Shield Mfg., Inc. 44 Cal.
12   4th 541, 552 (2008); and E.L White, Inc. v. City of Huntington
13   Beach, 21 Cal. 3d 497, 507 (1978).       Here, however, Francis
14   overreaches.   While it is true that those decisions stand for the
15   proposition that in order to enforce an express indemnity, the
16   contract language must be clear and specific, Francis ignores the
17   line of California authority discussed in some of the same
18   decisions that recognizes that implied indemnity obligations may
19   be enforced as a matter of equity.
20         The obligation of indemnity, which we have defined as
           “the obligation resting on one party to make good a
21         loss or damage another has incurred” (citations
           omitted) . . . may find its source in equitable
22         considerations brought into play either by contractual
           language not specifically dealing with indemnification
23         or by the equities of the particular case. (Citations
           omitted.)
24
25   E.L. White, Inc. v. City of Huntington Beach, 21 Cal. 3d at 506-
26   07.   See Prince v. Pac. Gas & Elec. Co., 45 Cal. 4th at 1157-59;
27   Garlock Sealing Tech., LLC v. Nak Sealing Tech. Corp., 148 Cal.
28   App. 4th 937, 967-72 (2007) (“As our review of the cases

                                       -12-
 1   demonstrates, a duty to indemnify has been implied from the
 2   obligation of the contracting parties to perform their promises,
 3   the reasoning being that a promise to perform includes an implied
 4   promise to perform properly.”).
 5         In this case, Francis “promised” in the Judgment to “pay and
 6   hold [Wallace] harmless” from the Credit Card Debts.   It is
 7   undisputed that he breached the promise to pay the subject debts.
 8   Wallace apparently paid them and was damaged as a result.   In
 9   these circumstances, in spite of the absence of specific
10   “indemnification” language in Francis’ covenants in the Judgment,
11   Wallace has an implied indemnification claim against Francis
12   under California law that constitutes a “debt” for purposes of
13   § 101(12).   See In re Putnam, 2012 WL 8134423 at *8; Garlock
14   Sealing Tech., LLC v Nak Sealing Tech Corp., 148 Cal. App. 4th at
15   973 (The conceptual basis for implied contractual indemnity “is
16   the idea of a contracting party’s fair responsibility for
17   foreseeable damages caused by its breach of the promises it made
18   in the contract.”).   By its terms, the Judgment provided that it
19   was to be “interpreted fairly, simply and not strictly for or
20   against either party.”
21   3.   Enforcing California Marital Dissolution Judgments
22         Beyond the dubious merits of Francis’ arguments in a pure
23   contract context, as discussed above, the undisputed fact in this
24   appeal is that the parties’ agreement was incorporated and merged
25   into the Judgment that the Sonoma County Superior Court entered
26   in their marital dissolution proceeding.   See Judgment, Part D,
27   Section 1.01; Flynn v. Flynn, 42 Cal. 2d 55, 59 (1954) (“It is
28   settled that a document may be incorporated either expressly or

                                       -13-
 1   by apt reference into a judgment or decree so as to make it an
 2   operative part of the order of the court.”).    In the two-page
 3   first part of the Judgment prepared and signed by the California
 4   Superior Court judge, the court expressly reserved jurisdiction
 5   “to make other orders necessary to carry out this [Judgment].”
 6        Under California law, parties have many avenues for
 7   enforcing judgment obligations.     In fact, California Family Code
 8   (“CFC”) § 290 provides that, “[a] judgment or order made or
 9   entered pursuant to [the CFC] may be enforced by the court by
10   execution, the appointment of a receiver, or contempt, or by any
11   other order as the court in its discretion determines from time
12   to time to be necessary.”   (Emphasis added.)    The Judgment
13   specifically references its satisfaction of the requirements of
14   CFC § 2105(c) and the parties’ compliance with CFC § 2104 and
15   indicates that the matter was heard pursuant to CFC § 2336.     See
16   Judgment at 1-2.   Accordingly, the record reflects the undisputed
17   fact that the Judgment was “made or entered” pursuant to the CFC.
18        CFC § 290 gives courts broad discretionary authority in
19   enforcing the dissolution judgments they enter.    That authority
20   includes the power to enforce a judgment party’s covenants to pay
21   and hold harmless his or her ex-spouse from debts to third
22   parties.   See, e.g., In re Putnam, 2012 WL 8134423 at *10; In re
23   Montgomery, 310 B.R. at 180; Fithian v. Fithian, 74 Cal. App. 3d
24   397, 402 (1977) (“That a court in a dissolution action has the
25   power to order a spouse to pay money or deliver property into the
26   hands of a third party cannot be doubted.”); Young v. Superior
27   Court, 105 Cal. App. 2d 65, 67 (1951):
28        If [a property settlement] agreement or any of its

                                       -14-
 1        provisions are actually incorporated in the [divorce]
          decree and the decree orders the performance of such
 2        agreement or such provision or provisions, then the
          agreement or the provision or provisions so
 3        incorporated are merged in the decree and may be
          enforced only as an order of the court.
 4
 5   (citing Shogren v. Superior Court, 93 Cal. App. 2d 356 (1949)).
 6        The Judgment obligated Francis to pay and hold Wallace
 7   harmless from the Credit Card Debts.   Wallace’s claim for
 8   Francis’ failure to pay and hold her harmless from the Credit
 9   Card Debts was an enforceable Judgment debt in California state
10   court.   Although it is not material to our determination of this
11   appeal, we note that Francis sought the protection of the
12   automatic stay in bankruptcy shortly after Wallace initiated
13   efforts in California state court to enforce the Judgment.    We
14   conclude that Francis’ arguments in this appeal are meritless,
15   and the bankruptcy court did not err in granting summary judgment
16   to Wallace on the § 523(a)(15) claim contested in the adversary
17   proceeding.
18                            VII.   CONCLUSION
19        For the foregoing reasons, we AFFIRM.
20
21
22
23                    Concurrence begins on next page.
24
25
26
27
28

                                     -15-
 1   JURY, Bankruptcy Judge, concurring:
 2
 3        I concur in the Opinion affirming the bankruptcy court’s
 4   judgment that a debt owed by Francis to Wallace is
 5   nondischargeable under § 523(a)(15).    I also do not quibble with
 6   the essence of the reasoning applied by the majority in reaching
 7   that conclusion.   I write separately, however, to emphasize that
 8   the existence of a “debt” owed by Francis to Wallace arises under
 9   application of California law and, to that extent, I disagree
10   with the majority’s statement “[w]hile our consideration of
11   issues with respect to exceptions to discharge under § 523(a),
12   and particularly § 523(a)(15), is informed by state law, our
13   interpretation of § 523(a)(15) is fundamentally a question of
14   federal law” (italicized emphasis added).    I feel compelled to
15   make this distinction since Francis has submitted that the sole
16   issue on appeal is that the bankruptcy court erred by not
17   applying California law.    I conclude that the bankruptcy court
18   did indeed apply California law to determine that Francis owes a
19   debt to Wallace.   Under federal law, this Opinion confirms that
20   debt is nondischargeable.
21        Section 523(a)(15) provides an exception to discharge “from
22   any debt” to a former spouse incurred by the debtor in connection
23   with a separation agreement which is not excepted under (a)(5).
24   The term “debt” is defined in § 101(12) as “liability on a
25   claim.”   The term “claim” is further defined in § 101(5) to mean:
26        (A) right to payment, whether or not such right is reduced
          to judgment, liquidated, unliquidated, fixed, contingent,
27        matured, unmatured, disputed, undisputed, secured, or
          unsecured; or
28

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 1        (B) right to an equitable remedy for breach of performance
          if such breach gives rise to a right to payment, . . . .
 2
 3   It is subsection (B) of this definition which creates a debt —
 4   i.e. a right to payment — in this circumstance.   The Supreme
 5   Court has held that a “right to payment” is “nothing more nor
 6   less than an enforceable obligation.”   Johnson v. Home State
 7   Bank, 501 U.S. 78, 83 (1991).   Whether a right to payment exists
 8   in a bankruptcy case is generally determined by reference to
 9   state law.   Butner v. United States, 440 U.S. 48, 55 (1979).
10        Francis asserts that the nuances between the terms “hold
11   harmless” and “indemnification” compels the conclusion under
12   California law that no right to payment exists from Francis to
13   Wallace.   As recognized by the majority, this conclusion is
14   wrong.   An excellent discussion of the mechanism by which
15   California law creates this right to payment is found in an
16   unpublished opinion from a bankruptcy court, McFadden v. Putnam
17   (In re Putnam), 2012 WL 8134423, at *9-10 (Bankr. E.D. Cal.
18   2012), where the judge tussled with an argument similar to the
19   one made here by Francis.
20        In Putnam, the debtor had obligated himself under a Marital
21   Settlement Agreement (MSA) to make lease payments on his ex-
22   wife’s (McFadden’s) car and to make other payments to third-party
23   creditors.   After the debtor defaulted on these payments, and
24   therefore defaulted under the terms of the MSA, he filed
25   bankruptcy and sought to discharge the obligations because they
26   did not create a “right to payment” or debt which would be
27   nondischargeable under § 523(a)(15).    After noting that McFadden
28   might be entitled to specific performance of the MSA on those

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 1   terms, the judge recognized that was not enough under
 2   § 101(5)(B):
 3        That McFadden has a right to an equitable remedy is not
          quite enough. A right to an equitable remedy for
 4        breach of performance will only constitute a ‘claim’ if
          the breach of performance also ‘gives rise to a right
 5        to payment.’ At first, it appears on the face of the
          Dissolution Judgment that compelling specific
 6        performance of Putnam’s obligations under the judgment
          would result in payment to third-party creditors but
 7        not necessarily to McFadden. However, McFadden may
          have rights to payment as well, through the State
 8        Court’s use of its equitable power in enforcing the
          terms of the Dissolution Judgment. Id. at *10.
 9
10        The bankruptcy court then noted, as the majority here also
11   does, that although a MSA is interpreted as a contract under
12   California law, once it is incorporated into a dissolution
13   judgment, post judgment remedies supplied by the Cal. Fam. Code
14   become available for enforcement.     This analysis then leads to
15   the discussion of Cal. Fam. Code § 290 which provides the “right
16   to payment:”
17        Thus, to enforce her rights, McFadden may rely on
          California Family Code section 290, which generally
18        provides that ‘[a] judgment or order made or entered
          pursuant to [the California Family Code] may be
19        enforced by the court by execution, the appointment of
          a receiver, or contempt, or by any other order as the
20        court in its discretion determines from time to time to
          be necessary.’ This statute give the state court broad
21        discretion in fashioning orders enforcing family law
          judgments. As a result, a court has equitable power to
22        determine the manner in which an obligation under a
          dissolution judgment is to be paid or performed. And
23        this would include the ‘power to order a spouse to pay
          money or deliver property into the hands of a third
24        party.’ Id.
25        Consistent with this reasoning, the Putnam court concluded
26   that the state court could award monetary damages to McFadden
27   based on the debtor’s breach of the MSA.    Id.   That award of
28   monetary damages is a right to payment:    a debt owed to a former

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 1   spouse.
 2        Cal. Fam. Code § 290 applies equally here as in Putnam and
 3   the remedy available to Wallace is enforcement of a “right to
 4   payment” from Francis.    The bankruptcy court did not err by
 5   applying the wrong law.   The debt arose under California law,
 6   properly applied, a debt which is nondischargeable under
 7   § 523(a)(15).
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