Court Opinion

ID: 3034229
Source: CourtListenerOpinion
Date Created: 2015-10-13 22:50:44.836332+00
Date Added: 2024-06-11T11:40:49.138451
License: Public Domain

United States Bankruptcy Appellate Panel
                          FOR THE EIGHTH CIRCUIT
                                _____________
                                No. 04-6001WA
                                _____________

In re: Jerry Edward Portwood,          *
                                       *
      Debtor.                          *
                                       *
Jerry Edward Portwood,                 *        Appeal from the United States
                                       *        Bankruptcy Court for the
      Appellant.                       *        Western District of Arkansas
                                       *
            v.                         *
                                       *
Gwendolyn S. Young,                    *
a/k/a Gwendolyn Foskey,                *
                                       *
      Appellee.                        *

                                _____________

                           Submitted: April 13, 2004
                             Filed: April 30, 2004
                               _____________

Before KRESSEL, Chief Judge, FEDERMAN, and MAHONEY, Bankruptcy Judges.
                              _____________

FEDERMAN, Bankruptcy Judge.
                           _____________
       Debtor Jerry Portwood appeals an order of the bankruptcy court1 determining
that his obligation to his former spouse, Gwendolyn Foskey, was nondischargeable.
We affirm.

                           FACTUAL BACKGROUND

       Jerry and Gwendolyn married on May 12, 1975. On September 15, 1999, in the
Circuit Court for Taylor County, Florida, the Honorable Thomas J. Kennon, Jr.
dissolved the marriage by entering a Final Judgment of Dissolution of Marriage (the
Decree). Jerry and Gwendolyn had twelve children during the marriage. At the time
of the Decree, seven children were under the age of 18. Of those seven, six remained
with Gwendolyn in Florida, and one son, Darrin, chose to live with his father, who
lived in Arkansas at the time. Judge Kennon found that Gwendolyn was capable of
earning net income of approximately $1,654.60 per month and that Jerry was capable
of earning net income of approximately $1,441.73 per month. He, therefore, ordered
Jerry to pay child support in the amount of $796.00 per month, and he ordered
Gwendolyn to pay child support in the amount of $351.39. Judge Kennon also
ordered Jerry to pay Gwendolyn lump sum alimony in the amount of $42,000. Judge
Kennon found that Gwendolyn was entitled to lump sum alimony, but that Jerry did
not have the ability to pay it. He, therefore, ordered Jerry to pay Gwendolyn $350.00
per month for ten years.

       On April 9, 2003, Jerry filed a Chapter 7 bankruptcy petition in the Western
District of Arkansas. He listed the debt to Gwendolyn as an unsecured, non-priority
debt. On June 12, 2003, Jerry filed an adversary proceeding to obtain a determination
as to the dischargeability of the debt to Gwendolyn. Jerry claims the award of lump
sum alimony is not in the nature of support, and was in fact part of the parties’

      1
       The Honorable Richard D. Taylor, United States Bankruptcy Judge for the
Eastern and Western Districts of Arkansas.
                                         2
property settlement at the time of the Decree. Gwendolyn responded to the
Complaint, but on October 14, 2003, when the court held a trial, she failed to appear.
Jerry testified at the hearing and submitted the Decree. The court ruled that Judge
Kennon characterized the award as alimony, and that Jerry failed to prove that Judge
Kennon intended the award to be something other than in the nature of alimony. The
court, therefore, found that the debt was nondischargeable. Jerry appeals that Order.

                             STANDARD OF REVIEW

       A bankruptcy appellate panel shall not set aside findings of fact unless clearly
erroneous, giving due regard to the opportunity of the bankruptcy court to judge the
credibility of the witnesses.2 We review the legal conclusions of the bankruptcy court
de novo.3 A bankruptcy court’s finding that an award in a dissolution proceeding is
in the nature of alimony is a factual finding that we will not disturb unless such
finding is clearly erroneous.4

      2
       Gourley v. Usery (In re Usery), 123 F.3d 1089, 1093 (8th Cir. 1997); O'Neal
v. Southwest Mo. Bank (In re Broadview Lumber Co., Inc.), 118 F.3d 1246, 1250 (8th
Cir. 1997) (citing First Nat'l Bank of Olathe, Kansas v. Pontow, 111 F.3d 604, 609
(8th Cir.1997)). Fed. R. Bankr. P. 8013.
      3
       First Nat’l Bank of Olathe, Kansas v. Pontow (In re Pontow), 111 F.3d 604,
609 (8 Cir. 1997); Sholdan v. Dietz (In re Sholdan), 108 F.3d 886, 888 (8th Cir.
      th

1997).
      4
        Adams v. Zentz, 963 F.2d 197, 199 (8th Cir. 1992). See also Falk & Siemer,
L.L.P. v. Maddigan (In re Madigan), 312 F.3d 589, 595 (2nd Cir. 2002) (holding that
the reviewing court applies the clearly erroneous standard when an appellant appeals
the trial court’s determination that a debt is in the nature of support under 11 U.S.C.
§ 523(a)(5).
                                          3
                                    DISCUSSION

       This adversary proceeding is a bit unusual for two reasons. First, Jerry filed the
Complaint seeking a determination that the debt is dischargeable. Thus, he was a
plaintiff faced with the challenge of proving a negative, that the award was not
alimony. Second, Gwendolyn did not appear at the hearing, so the court had before
it only evidence submitted by Jerry. Jerry offered, and the court admitted, the Decree.
The court began with the language in the Decree, and so shall we. This was a
contested divorce, and Judge Kennon entered the Decree after a lengthy trial. He
stated in the Decree:

      The Wife did not offer a plan to rehabilitate herself and accordingly
      would not be entitled to rehabilitative alimony. The Husband does not
      have the ability to pay permanent periodic alimony. The Wife is entitled
      to lump sum alimony, however, the Husband is unable to pay lump sum
      alimony in one single payment. Accordingly, the Husband shall pay
      lump sum alimony in installments.5

Judge Kennon went through a very thorough analysis of marital assets and liabilities.6
He determined that Jerry would retain property with a net value of $8,342.46, and that
Gwendolyn would retain property with a net value of $32,298.54. Judge Kennon then
stated that the “parties shall sell the Grass Company property. From the proceeds of
the sale of the Grass Company property the Husband shall receive the first $23,956.00
to equalize the above equitable distribution.”7 Finally, under the heading SPOUSAL
SUPPORT, Judge Kennon ordered Jerry to pay directly to Gwendolyn “non-
modifiable lump sum alimony in the amount of $42,000.00 to be paid in installments

      5
      Appellant’s Appendix, Doc. # 1, Exhibit A (Final Judgment of Dissolution of
Marriage), ¶ E., pg. 3.
      6
          Id. at pg. 4-5.
      7
          Id. at pg. 6.
                                           4
of $350.00 per month beginning October 1, 1999, and continuing and including
October 1, 2009.”8

      The bankruptcy court found that debts categorized as alimony in a divorce
decree are generally excepted from discharge pursuant to section 523(a)(5) of the
Bankruptcy Code. Section 523(a)(5) provides that:

      (a) A discharge under section 727, 1141, 1228(a), 1228(b), or
      1328(b) of this title does not discharge an individual debtor from any
      debt—

                                              ...

                (5) to a spouse, former spouse, or child of the debtor, for
                alimony to, maintenance for, or support of such spouse or
                child, in connection with a separation agreement, divorce
                decree or other order of a court of record, determination
                made in accordance with State or territorial law by a
                governmental unit, or property settlement agreement, but
                not to the extent that—

                                              ...

                          (B) such debt includes a liability designated
                          as alimony, maintenance, or support, unless
                          such liability is actually in the nature of
                          alimony, maintenance, or support.9

The bankruptcy court held that Gwendolyn bore the initial burden, even as the
defendant in this case, to prove that the debt was in the nature of alimony, and that
it arose from a divorce. The court found that she sustained that burden when the court

      8
          Id. at pg. 8.
      9
          11 U.S.C. § 523(a)(5)(B).
                                               5
received the Decree offered into evidence by Jerry. Thus, the court found the burden
shifted to Jerry to prove the debt was not in the nature of alimony.

      The bankruptcy court then looked to the function the state court judge intended
the award to serve in determining whether the award was, indeed, alimony.10 The
bankruptcy court concluded that Judge Kennon labeled this award as alimony and
included an analysis of the three types of alimony available, thus, he intended the
award to serve as spousal support. We find no error in this conclusion.

       Jerry argues that the bankruptcy court erred in shifting the burden of proof to
him to prove the award was not alimony. He maintains Gwendolyn, as the party
wishing to except a debt from discharge, must prove the award was, in fact, alimony.
The burden of proof in establishing a section 523(a)(5) exception to discharge is on
the non-debtor spouse.11 Unlike other exceptions to discharge, which are strictly
construed against the objecting creditor, however, domestic relations exceptions are
liberally construed in favor of the objecting creditor.12 Gwendolyn had to show that
the obligation was alimony, then the burden of going forward and proving the
obligation was not in the nature of alimony shifted to Jerry.13 Section 523(a)(5) states
that a debt for alimony is excepted from discharge unless it is not actually in the
nature of support. Thus, there is a presumption of nondischargeability for an award
labeled as alimony, as this award was. Once the bankruptcy court received the
Decree, which labeled the award as alimony, Gwendolyn had sustained her burden.

      10
Will. v. Williams (In re Williams), 703 F.2d 1055, 1057 (8th Cir. 1983).
      11
           Edenfield v. Fussell (In re Fussell), 303 B.R. 539, 544 (Bankr. S.D. Ga.
2003).
      12
           Id.
      13
           Id.
                                            6
       Jerry also argues quite forcefully that an award for lump sum alimony does not
exist in Florida. The bankruptcy court is not the proper venue to make that argument.
If Jerry wished to contest the findings of Judge Kennon, he needed to appeal the
findings in the Decree at the time. The validity of a state court order, and which court
may make such a determination, is controlled by the Rooker-Feldman doctrine. The
Rooker-Feldman doctrine evolved from two United States Supreme Court cases.14 In
Feldman the Supreme Court held that lower federal courts possess no power
whatsoever to sit in direct review of state court decisions.15 In Rooker the Supreme
Court held that no court of the United States, other than the United States Supreme
Court could “entertain a proceeding to reverse or modify the judgment of a state
court.”16 The Eighth Circuit holds that the Rooker-Feldman doctrine “forecloses not
only straightforward appeals but also more indirect attempts by federal plaintiffs to
undermine state court decisions.”17 The Rooker-Feldman Doctrine, therefore,
prohibits us from reviewing the validity of the Judge Kennon’s decision.

       Finally, Jerry argues that the bankruptcy court failed to properly apply the five
factors set out in Moeder v. Moeder (In re Moeder)18 in aid of its determination as to
whether the debt was in the nature of alimony. Moeder requires a court to consider

      14
       District of Columbia Court of Appeals v. Feldman, 460 U.S. 462, 103 S. Ct.
1303, 75 L. Ed. 2d 206 (1983); Rooker v. Fidelity Trust Co., 263 U.S. 413, 44 S. Ct.
149, 68 L. Ed. 362 (1923).
      15
           Feldman, 460 U.S. at 482, 103 S. Ct. at 1315.
      16
           Rooker, 263 U.S. at 416, 44 S. Ct. at 150.
      17
        Lemonds v. St. Louis County, Missouri, 222 F.3d 488, 492 (8th Cir. 2000),
Cert. Denied, Halbman v. St. Louis County, 531 U.S. 1183 , 121 S. Ct. 1168, 148 L.
Ed. 2d 1026 (2001); See also Snider v. City of Excelsior Springs, Missouri, 154 F.3d
809, 811 (8th Cir. 1998).
      18
           220 B.R. 52 (B.A.P. 8th Cir. 1998).
                                            7
the following: (1) the income and needs of the parties at the time of the decree; (2)
whether the obligation terminates on death or remarriage, (3) the number and
frequency of payments; (4) the tax treatment of the obligation; and (5) the label given
to the obligation in the decree.19 The bankruptcy court found that Jerry only made
reference to these factors by way of his counsel’s opening statement. Jerry claims the
award could not be alimony because it does not balance a disparity in income, and it
does not terminate on Gwendolyn’s death or remarriage. Jerry offered no other
evidence, and the bankruptcy court found that the characterization of the award as
alimony was, therefore, sufficient evidence of the state court judge’s intent.

       Jerry also claims the bankruptcy court should have analyzed whether the debt
is excepted from discharge as being a support obligation by, instead, considering the
Sturdivant factors. In Sturdivant v. Sturdivant (In re Sturdevant),20 the court
considered the following: (1) whether the obligation terminates on death or
remarriage; (2) the characterization of the payment in the decree and the context in
which the provision appears; (3) whether the payments are to balance disparity in
income; (4) whether the payments are to be made directly to the spouse or to a third
party; (5) whether the obligation is payable in a lump sum or in installments; (6)
whether the parties intended to create obligation of support; (7) whether assumption
of the debt has the effect of providing the support necessary to insure the daily needs
of the former spouse; and (8) whether assumption of the debt has the effect of
providing support necessary to insure a home for the spouse and minor children.21

      In Sturdivant the issue was whether debtor’s assumption of debt in a divorce
was in the nature of support, so the last two factors are not relevant to the issue here.

      19
           Id. at 55.
      20
           289 B.R. 392 (Bankr. W.D. Ark. 2003).
      21
           Id. at 397-98.
                                           8
Jerry assumed debt, but such debt was offset by an award of property. Moreover, this
was a contested divorce, so the intent of the parties is, likewise, not relevant. We
conclude that the other factors relied on by Jerry in this appeal weigh in favor of the
bankruptcy court’s determination that the award is alimony. The obligation is not
modifiable, and it does not terminate on Gwendolyn’s death or remarriage, however,
it was characterized as alimony in two sections of the Decree dealing with spousal
support. And Jerry’s contention that the award of lump-sum alimony is intended to
be a part of the property division is not sustainable, since Judge Kennon divided the
parties’ property, including their liabilities, in a separate part of the Decree.

       The award is payable in monthly installments, and the award is payable directly
to Gwendolyn, not to a third party. Judge Kennon did find Gwendolyn had a slightly
higher income earning potential than Jerry, however, that disparity is more than offset
by the fact that Gwendolyn was awarded residential custody of six children and Jerry
was awarded residential custody of one child. Jerry was ordered to pay Gwendolyn
child support in the amount of $796.00, to be offset by Gwendolyn’s payment of child
support to Jerry in the amount of $351.39. Thus, we conclude that the bankruptcy
court did not err in finding the state court judge intended this award to be alimony and
intended it to balance disparate income that resulted from Gwendolyn’s responsibility
for six children. Jerry did not present any evidence of the tax treatment of the award,
so we will not consider that factor.

      We, therefore, conclude that the bankruptcy court did not err when it found the
obligation for lump-sum alimony to be nondischargeable.

                                  ______________

                                           9