Court Opinion

ID: 3023942
Source: CourtListenerOpinion
Date Created: 2015-10-13 22:30:04.618204+00
Date Added: 2024-06-11T11:47:39.010088
License: Public Domain

United States Bankruptcy Appellate Panel
                            FOR THE EIGHTH CIRCUIT

                                  No. 99-6045WM
                                  No. 99-6047WM

In re: John Richard Kemp, Jr.           *
                                        *
      Debtor.                           *
                                        *
Melinda Williams                        *      APPEAL FROM THE UNITED
                                        *      STATES BANKRUPTCY
      Appellee/Cross-Appellant,         *      COURT FOR THE
                                        *      WESTERN DISTRICT OF MISSOURI
      v.                                *
                                        *
John Richard Kemp, Jr.                  *
                                        *
      Appellant/Cross-Appellee.         *

                           Submitted: November 10, 1999
                             Filed: December 16, 1999

Before WILLIAM A. HILL, DREHER, and SCOTT, Bankruptcy Judges

SCOTT, Bankruptcy Judge
                                                 I

       Melinda Williams incurred nearly $10,000 in medical expenses associated with the
birth of her son. After the child was born, she obtained a paternity judgment against the
debtor, John Kemp. As part of the judgment Williams was awarded $4,821 to cover the
debtor’s share of hospital and medical costs associated with the child’s birth. Ultimately,
Williams was required to turn to her parents for assistance in paying the hospital bills. The
debtor has paid no part of the expenses for his child’s birth.

       Upon the filing of his chapter 7 bankruptcy case, the debtor asserted that the debt
owed to Williams was dischargeable because the person to whom it is owed was not “a
spouse, former spouse or child of the debtor.” The bankruptcy court determined that the debt
was not dischargeable, but that Williams was not entitled to post judgment interest on the
claim or attorney’s fees for the prosecution of the dischargeability action. The debtor
appeals the nondischargeability determination and Williams appeals the failure to award post
judgment interest and attorney’s fees, and also requests sanctions for a frivolous appeal. We
affirm as to the dischargeability determination, and denial of attorney’s fees, but reverse as
to the award of interest on the state court judgment. The request for sanctions for a
frivolous appeal is denied.

                                           II.
                              Nondischargeability of Debt
       Under the Bankruptcy Code, debts in the nature of support are not dischargeable in
bankruptcy.1 11 U.S.C. § 523(a)(5). See Williams v. Williams (In re Williams), 703 F.2d
1055, 1056 (8th Cir. 1983). The Bankruptcy Code provides in pertinent part:
             (a) A discharge under section 727...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

       1
        The parties do not dispute that the debt is the nature of support.

                                                 2
                      other order of a court or record, determination
                      made in accordance with State or territorial law
                      by a governmental unit, or property settlement
                      agreement****

11 U.S.C. § 523(a)(5).

        While exceptions to discharge are generally to be construed narrowly in order to give
effect to the goal of the fresh start, the exceptions from discharge for spousal and child
support are given a more liberal construction, and the policy considerations underlying
section 523(a)(5) favor enforcement of support obligations over debtor’s fresh start.
Holiday v. Kline (In re Kline), 65 F.3d 749, 750-51 (8th Cir. 1995). It is well settled that
birthing expenses are in the nature of support, see e.g., Madsen v. Kimbrell (In re Kimbrell),
201 B.R. 521 (Bankr. E.D. Ark. 1996); Coleman v. McCord (In re McCord, 151 B.R. 915
(Bankr. E.D. Mo. 1993), and have been determined to be an obligation owed to the child, see
Matter of Seibert, 914 F.2d 102, 106 (7th Cir. 1990). Indeed, in the support context, the
nature of the debt is more important than the identity of the payee. See Kline, 65 F.3d at
751 (attorney’s fees are in the nature of support and nondischargeable even if payable
directly to the attorney rather than to the child or former spouse); Beaupied v. Chang (In re
Chang), 163 F.3d 1138, 1141-42 (9th Cir. 1998)(guardian ad litem expenses nondischargeable
even though not payable to the child); Hudson v. Raggio & Raggio, Inc. (In re Hudson), 107
F.3d 355, 357 (5th Cir. 1997); Miller v. Gentry (In re Miller), 55 F.3d 1487, 1490 (10th Cir.
1995); Pauley v. Spong (In re Spong), 661 F.2d 6, 11 (2d Cir. 1981).

        The state court judgment was awarded to Melinda Williams, the mother of debtor’s
child. Since she is not, however, a “spouse, former spouse, or child of the debtor,” the debtor
asserts that the debt is dischargeable.2 The Eighth Circuit Court of Appeals addressed a

       2
        There is a small body of case authority which addresses the issue of whether such
expenses are a debt to the child or a debt to the mother. Compare In re Brown, 43 B.R. 613
(Bankr. M.D. Tenn. 1984)(birthing expenses are support for the mother) with In re Wilson, 109
B.R. 283 (Bankr. S.D. Ohio 1989)(medical expenses for birthing are child support). See
generally Matter of Seibert, 914 F.2d 102, 105-106 (7th Cir. 1990)(discussing cases and
determining that debt is owed to the child such that it is nondischargeable). Since Holliday v.

                                                3
virtually identical issue in Holliday v. Kline (In re Kline), 65 F.3d 749 (8th Cir. 1995). In
Kline, the state court entered an order obligating the debtor to pay his former spouse’s
attorney’s fees. The order made the obligation directly owing to the attorney rather than to
the former spouse. The Eighth Circuit determined that since the fee award was in the nature
of maintenance or support, it was nondischargeable under section 523(a)(5) even though it
was payable directly to the attorney. Although the debtor attempts to distinguish Kline on
the basis that a former spouse was in the picture, i.e., the debt was in reality in the nature of
support for the former spouse, Kline is not so limited and is thus controlling. The issue
directly before the court in Kline, as well as this court, is whether section 523(a)(5) may
apply if the person to whom the court order imposing the obligation is not “a spouse, former
spouse, or child of the debtor.” Since Kline specifically holds that the debt, although not
payable directly to a spouse, former spouse, or child of the debtor, was in the nature of
support and thus nondischargeable, the debt owed by the debtor to Williams in this case is
similarly nondischargeable.

                                              III.
                           Award of Interest and Attorney’s Fees
        Although the state court judgment awarded judgment in favor of Williams, it stated
nothing with regard to interest. Williams therefore also requested that the bankruptcy court
enter judgment for statutory interest and attorney’s fees. The bankruptcy court determined
that attorney’s fees were not merited and that the failure of the state court to award interest
required the bankruptcy court to also deny interest.

       Missouri law provides that interest accrues on judgments at a rate of nine percent:
             Interest shall be allowed on all money due upon any judgment
             or order of any court from the day of rendering the same until
             satisfaction be made by payment, accord or sale of property; all
             such judgments and orders for money upon contracts bearing
             more than nine percent interest shall bear the same interest

Kline (In re Kline), 65 F.3d 749 (8th Cir. 1995) controls the outcome in this case, we need not
specifically decide this narrower issue. In any event, as a matter of policy as well as statutory
construction, the better view would appear to be that formulated by Seibert -- the debt is one to
the child.

                                                 4
               borne by such contracts, and all other judgments and orders for
               money shall bear nine percent per annum until satisfaction made
               as aforesaid.

Mo. Rev. Stat. § 408.040.1. In this case, the judgment is silent as to interest, neither
specifically awarding nor disallowing interest.

       The case upon which the bankruptcy court relied, R.E.M. v. R.C.M, 804 S.W.2d 813
(Mo. App. 1991), is inapplicable for several reasons. First, the trial court in R.E.M.
specifically considered the issue and disallowed interest. In this case, the judgment is
markedly silent. Second, R.E.M. primarily addresses the issue of prejudgment interest, not
post judgment interest. Whether an award of prejudgment interest is appropriate is generally
determined as a discretionary factual issue. That is, for a party to recover prejudgment
interest, the elements of the statutory action must be ascertainable and the defendant should
lack a worthy defense. If these circumstances exist, a party may be entitled to prejudgment
interest on recovery because the party has been unjustly deprived of the use of the funds.
See generally Wickham Contracting Co. v. Local Union No. 3, 955 F.2d 831, 833-36 (2d Cir.
1992), cert. denied, 506 U.S. 946 (1992)(discussion of history and application of awards of
prejudgment interest). Prejudgment interest may be awarded to compensate a party for the
denial of the use of funds, West Virginia v. United States, 479 U.S. 305, 310 n.2 (1987), or
where the defendant could have ascertained the amount of the potential recovery without a
judicial determination, i.e, if the claim was liquidated, Bank of Mulberry v. Fireman’s Fund
Ins. Co., 720 F.2d 501, 503 (8th Cir. 1983); United States v. Dimarco Corp., 985 F.2d 954,
959 (8th Cir. 1993). Post judgment interest, on the other hand, is generally, as is the case
under Missouri law, a statutory right. Finally, to the extent R.E.M. addresses an award of
interest, it is clear that the trial court balanced a statutory obligation to consider the financial
circumstances of the party and appears to have incorporated considerations of interest into
the final award or judgment which ordered installments in the proportion of the expenses
already incurred.

                                                 5
        Although there is no Missouri case authority on this issue, as a general rule, courts
which have construed statutes providing for mandatory post judgment interest3 conclude that
money judgments recovered in civil cases automatically bear interest from the date of entry
of the judgment, regardless of whether the judgment itself awards interest. See, e.g., Wilson
v. United States, 756 F. Supp. 213, 214 (D. N.J. 1991)(construing 28 U.S.C. § 1961); White
v. Bloomberg, 360 F. Supp. 58, 63 (D. Md. 1973), aff’d, 501 F.2d 1379 (4th Cir.
1974)(same). We see no reason why the Missouri statute should be afforded different
treatment. The judgment being silent on the issue of interest, Williams is entitled to the
effect of the statute which mandates interest on the monetary award. Post judgment interest
begins to accrue from the date of the original state court judgment until paid in full.
Architectural Resources, Inc. v. Rakey, 956 S.W.2d 420, 422 (Mo. Ct. App. 1997); accord
In re Pester Refining Co., 964 F.2d 842, 849 & n.9 (8th Cir. 1992).

        Attorney’s fees are a separate issue, however, and in this factual situation, there is no
statutory or contractual entitlement to attorney’s fees. Indeed, as noted by the bankruptcy
court, an award of attorney’s fees in a dischargeability action is the exception rather than the
rule. See, e.g., Wisely v. Beattie (In re Beattie), 150 B.R. 699, 703 (Bankr. N.D. Ill. 1993).
We have reviewed the record and Williams’ argument and can find no error or abuse of
discretion in the determination of the bankruptcy court with regard to the denial of an award
of attorney’s fee.

                                              IV.
                                           Sanctions
       Rule 8020 permits an award of sanctions against a party who files a frivolous appeal.
The court has reviewed the record and while some of the debtor’s arguments may be
repugnant (i.e., that Congress did not intend to protect unwed mothers from discharge of
such debts), there is sufficient opinion in this circuit to provide a basis for arguing reversal
of existing law with regard to the core issue in the appeal. See, e.g., Holliday v. Kline (In re
Kline), 65 F.3d 749, 751-52 (8th Cir. 1995)(Morris Arnold, dissenting). Accordingly, the
request for sanctions is denied.

       3
         Courts interpreting a particular statute may properly look to interpretations of other,
similar statutes. Board v. Eurostyle, Inc., 998 S.W.2d 810, 814 (Mo. Ct. App. 1999).

                                                  6
A true copy.

      Attest:

                CLERK, U.S. BANKRUPTCY APPELLATE PANEL FOR THE
                EIGHTH CIRCUIT

                               7