SHON HASTINGS, Bankruptcy Judge.
Creditor/Plaintiff Cecil Schriner (Schriner) initiated this adversary proceeding by Complaint filed on February 23, 2017. In his Complaint, Schriner seeks a determination denying Debtor/Defendant Sara Schriner (Debtor) a discharge under 11 U.S.C. §§ 727(a)(2), (a)(4), and/or (a)(5). He also seeks a finding that Debtor's debts to Schriner are excepted from discharge pursuant to 11 U.S.C. § 523(a)(5) and (a)(15). Debtor filed an Answer on April 4, 2017.
On May 24, 2017, Schriner filed a Motion for Partial Summary Judgment, arguing that the child support and attorney fees outlined in Counts IV and V of his Complaint should be excepted from discharge under 11 U.S.C. § 523(a)(5) or § 523(a)(15) as a matter of law because there is no genuine issue as to any material fact germane to these counts. Debtor filed a Brief in Opposition to Motion for Summary Judgment and an Affidavit on June 22, 2017. In her Brief, Debtor does not dispute that child support is excepted from discharge under section 523(a)(5) and (a)(15). She asserts that the sole issue in this proceeding is whether the two awards of attorney fees are excepted from discharge under section 523(a)(5). Debtor argues that a district court order dated August 25, 2016, awarding $7,500 in attorney fees to Schriner was punitive and not in the nature of support. She maintains this award may not be excepted from discharge under section 523(a)(5). She notes that the appellate order assessing $5,000 in costs arising from attorney fees speaks for itself and makes no argument related to this order. In her affidavit, she asserts that this cost assessment is not in the nature of support. Doc. 22.
On July 26, 2017, the Court held oral argument on Schriner's Motion for Partial Summary Judgment. During the hearing, the Court advised the parties that a question of fact would prevent judgment on Counts IV and V. The parties agreed to submit the matter to the Court for a determination on the merits of the claims Schriner alleged in Counts IV and V. They offered the same exhibits on the merits of their claims and defenses as they submitted on motion for partial summary judgment. At the hearing, the Court received the following evidence which comprises the record for trial of the claims alleged in Counts IV and V of the Complaint: Claim 3-1 in Bankruptcy Case 16-41602, Documents 16, 12, 13, 14, 21 and 22 in Adversary Proceeding 17-4006. The parties stipulated that Debtor filed a voluntary petition under Chapter 7 of the Bankruptcy Code on October 24, 2016.
Schriner and Debtor are former spouses. They divorced in February 2014. The Decree of Dissolution entered on February 3, 2014, in the District Court, Franklin County, Nebraska, granted legal and physical custody of their minor children to Schriner and visitation rights to Debtor. Doc. 13 at 1. In the decree, the court ordered Debtor to pay child support in the amount of $617 per month.
On June 16, 2014, while the appeal of the divorce decree was pending, Debtor filed a Complaint to Modify the Decree. The court held a hearing on her request to modify the divorce decree on August 12, 2014. On November 18, 2014, the district court entered a Journal Entry and Order modifying the child support amount to $335 per month from February 1, 2014, to June 1, 2014. In the Order, the district court also increased the child support to $406 per month effective July 1, 2014, based on Debtor's increased earnings. Debtor appealed (Appeal No. A-15-055). The Nebraska Court of Appeals discovered that Appeal No. A-14-371 was still pending and found that the district court lacked jurisdiction to enter the Journal Entry and Order dated November 18, 2014. The Nebraska Court of Appeals dismissed Appeal No. A-15-055 on October 5, 2015, and the district court treated the Journal Entry and Order of November 18, 2014 as a nullity.
The Nebraska Court of Appeals ruled on the support issues in Appeal No. A-14-371 and issued a mandate dated October 29, 2015, affirming the portion of the divorce decree that awarded custody to Schriner and reversing the part of the Decree that set the child support in the sum of $617 per month.
On November 23, 2015, the district court entered an Order on Mandate, reducing Debtor's child support payments to $321 per month for two children and $239 per month for the support of one child, commencing February 1, 2014. In this Order on Mandate, the district court also ordered that judgment be entered in favor of Schriner and against Debtor in the sum of $5,000 with interest at 2.107% per annum "on account of the Attorney Fees awarded as costs to the Appellee/Plaintiff by the Court of Appeals." Doc. 13 at 3.
On December 3, 2014, before the divorce decree was affirmed on custody issues, Debtor filed for modification of custody time in the divorce decree. Doc. 14 at 2. In her request for modification, Debtor sought more parenting time, demanded the right to be present at all medical/dental appointments and requested that Schriner notify her of all such medical/dental and dermatology appointments and any school/church extracurricular activities. She also requested notification of all day care providers. Schriner filed an Answer and Cross-Complaint on January 26, 2015.
The Nebraska Court of Appeals affirmed the district court's divorce decree on custody and parenting time issues and entered a Mandate on May 23, 2015.
Schriner filed an Amended-Cross Complaint on June 22, 2015, requesting a modification to standard visitation, a reduction of parenting exchanges and a reduction in Debtor's participation in the children's medical care and extracurricular activities. Schriner also requested attorney fees and parameters on co-parenting.
In an August 23, 2016, Journal Entry and Order, the district court denied most of Debtor's requests for modification and granted most of Schriner's requests in his cross-complaint. Doc. 14 at 5. In reaching this conclusion, it found that Debtor "has been disruptive, controlling and rude," and "she is not acting in the best interests of the children in promoting their emotional growth." Doc. 14 at 6.
Both parties requested attorney fees. The district court denied Debtor's request and granted Schriner's request for attorney fees. It explained:
Doc. 14 at 8.
The district court ordered Debtor to pay $7,500.00 of Schriner's attorney fees at the rate of $125.00 per month, effective October 1, 2016. Doc. 14 at 8.
On October 24, 2016, Debtor filed a voluntary petition under Chapter 7 of the Bankruptcy Code.
In general, the statutory exceptions to discharge in bankruptcy are narrowly construed to effectuate the fresh start policy of the Bankruptcy Code.
A creditor opposing discharge of a debt carries the burden of proving that the debt falls within an exception to discharge.
In Count IV, Schriner alleges that child support accruing at the rate of $321.00 per month, attorney fees in the sum of $4,669.68 plus interest assessed in connection with an appeal of the divorce decree, and $7,500 plus interest awarded by the district court on August 25, 2016 are excepted from discharge under section 523(a)(5).
Section 523(a)(5) provides that:
11 U.S.C. § 523(a)(5).
In determining whether a debt falls under section 523(a)(5), courts look to the definition of "domestic support obligation" found in section 101(14A) of the Bankruptcy Code.
Whether a particular debt is in the nature of support is a question of federal bankruptcy law, not state law.
When deciding whether a debt should be characterized as one for support, the crucial question is the function the award was intended to serve.
The definition of domestic support obligation includes debts that accrue before, on or after the petition date for the support of children. 11 U.S.C. § 101(14A). Debtor does not dispute that child support is a domestic support obligation. This debt is excepted from discharge under section 523(a)(5).
In her affidavit, Debtor claims that the $5,000 attorney fee award arising from her appeal of the divorce decree was not in the nature of support. Doc. 22. She offers no details in support of this testimony.
In support of his claim that this debt is excepted from discharge, Schriner offered a district court order referring to the appellate court cost assessment (Doc. 13) and the Nebraska Court of Appeals Mandate that assessed attorney fees as a cost (Doc. 12). Schriner did not offer the Nebraska Court of Appeals opinion.
In its opinion, the district court reviewed and implemented the appellate decision. Doc. 13. In doing so, it discussed the income and household debt obligation disparity between the parties: Debtor earns substantially less than Schriner and the district court found she was responsible for paying only 10.74% of the household obligations. Nothing in the opinion suggests that it would be difficult for Schriner to subsist without reimbursement for his attorney fees; there is no discussion about his needs or actual expenses. The opinion contains no information suggesting the attorney fee cost assessment was in the nature of support for Schriner. The district court simply recalculated the support amounts based on the Child Support Guidelines. Conversely, Debtor offered evidence suggesting that the $5,000 attorney fee award was not in the nature of support. The burden of proving an exception to discharge is on Schriner. He failed to meet the burden of proving the $5,000 attorney fee cost assessment is in the nature of support and thus excepted from discharge under section 523(a)(5).
Schriner also seeks a determination excepting the district court's August 25, 2017 award of $7,500 in attorney fees from discharge under section 523(a)(15). In its order, the district court did not discuss the financial condition of the parties, their employment histories, marital property or Schriner's reliance on the attorney fee award to subsist. The district court only discussed issues related to custody and visitation. Again, Schriner offered no evidence suggesting that it would be difficult for Schriner to subsist without reimbursement for his attorney fees; there is no discussion about his needs or actual expenses. There is no evidence from which this Court may conclude that the attorney fee award was in the nature of support.
Further, the reasons the district court awarded attorney fees to Schriner are clear. It ordered Debtor to pay Schriner's attorney's fees because Debtor prevailed on only one issue in their custody and visitation dispute, Debtor's case was frivolous and she acted in bad faith. Doc. 14 at 8. Since the $7,500 attorney fee cost assessment is not "in the nature of support" but rather a punitive measure, it is not a debt excepted from discharge under section 523(a)(5).
In Count V, Schriner requests that the Court determine Debtor's debts arising from attorney fee awards are excepted from discharge under section 523(a)(15).
Section 523(a)(15) provides that:
11 U.S.C. § 523(a)(15).
To be excepted from discharge under section 523(a)(15), the debt must (1) be owed to the debtor's spouse, former spouse, or child; (2) not be of the type described in section 523(a)(5) referring to domestic support obligations; and (3) have been incurred in the course of a divorce or separation or in connection with a separation agreement, divorce decree, or other court order
The debts at issue arise from attorney fee awards to Schriner. Thus, the debts are owed to debtor's former spouse, establishing the first element of this claim.
For the reasons stated above,
Count IV: Schriner's prayer for relief is granted in part and denied in part. Schriner's request for a determination that child support is excepted from discharge under 11 U.S.C. § 523(a)(5) is granted. Schriner's request for a determination that the attorney fees referenced in Count IV are excepted from discharge under 11 U.S.C. § 523(a)(5) is denied.
Count V: Schriner's pray for relief is granted.
Debts arising from the attorney fee award and cost assessment owed by Debtor to Schriner are excepted from discharge under 11 U.S.C. § 523(a)(15). Any debt owed by Debtor to Schriner for child support is excepted from discharge under 11 U.S.C. § 523(a)(5).
Schriner's motion for partial summary judgment is moot.
11 U.S.C. § 101(14A).
