DAVID T. THUMA, Bankruptcy Judge.
Before the Court
The Court finds the following facts:
Baldwin and Phillips were married on May 8, 1994. They have two children. They were divorced effective September 8, 2004, as set out in a Final Decree of Dissolution of Marriage ("Divorce Decree") entered by the New Mexico Second Judicial District Court, no. DM-2003-478 (the "Divorce Case"). At that time Phillips was granted custody of both children and had a gross monthly income of $600, while Baldwin had a gross monthly income of $1,239, and was required to pay $339 in child support.
Custody, visitation, and child support rights were hotly contested in the Divorce Case. One issue was the right to claim the children as dependents on the parties' income tax returns. The Divorce Decree provided that each party could claim one child on his or her income tax return, beginning with the 2004 tax year. This arrangement was confirmed in a June 23, 2005 order issued by the state court, which clarified that the tax claims were "for all purposes," including the dependency deduction and the earned income credit."
On November 18, 2005, the state court entered another order (the "2005 Order") sanctioning Phillips a total of $850. $500 of this amount was because Phillips had not amended her 2004 income tax return as required. The remaining $350 was for Phillips's refusal to allow an inventory of personal property.
On June 15, 2006, the state court entered an order (the "2006 Order"), giving Phillips the right to claim the EIC for their son if Baldwin did not do so.
On July 27, 2009, the state court entered an order (the "2009 Order") finding, inter alia, that Phillips owed Baldwin $860 for her share of the children's medical expenses Baldwin had paid. The court ordered Phillips to pay this amount over time, which she did.
On April 16, 2010, the state court entered a $500 judgment in favor of Baldwin
Finally, in an order entered September 1, 2010 (the "2010 Order"), the state court entered a judgment against Phillips and in favor of Baldwin for $9,997.40. Most of this judgment resulted from Phillips's wrongful use of the son's social security number on her 2008 and 2009 tax returns, which prevented Baldwin from claiming their son as a dependent in those years. The resulting loss was $9,108.40. The remaining $889.00 was Phillips's share of the children's uninsured medical expenses Baldwin had paid.
To collect the amounts due under the orders described above, Baldwin filed Lien # 3-5 below, encumbering Phillips' house. The parties have stipulated that all amounts secured by Lien # 4 (the $860 from the 2009 Order) have been paid in full, and that $889 of the amount secured by Lien # 3 has been paid. That leaves $9,109.40 of Lien # 3 and all $500 of Lien # 5 in dispute.
Latta represented Phillips in the divorce. In May, 2009 Latta asserted Phillips owed her $7,267.04, plus interest.
Phillips only real estate is her house, located at 2713 Morris NE, Albuquerque, NM 87112 (the "House"). According to Phillips' bankruptcy schedules, the House has a fair market value of $141,000. Neither Latta nor Baldwin disputed this figure or introduced evidence of a different value.
The House currently is encumbered by the following claimed liens and mortgages:
------------------------------------------------------------------------------- Lien # Creditor Encumbrance Amount Date Filed -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- 1 Metlife Home Loans First mortgage $134,000 10/2008 -------------------------------------------------------------------------------- 2 Latta Second Notice of Lien $7,267.04 05/2009 -------------------------------------------------------------------------------- 3 Baldwin Transcript of Judgment $9,997 01/2012 --------------------------------------------------------------------------------- 4 Baldwin Transcript of Judgment $860 02/2012 --------------------------------------------------------------------------------- 5 Baldwin Transcript of Judgment $500 02/2012 ---------------------------------------------------------------------------------
Phillips elected to use the federal exemptions under § 522(b) and claimed a homestead exemption of $14,000, per § 522(d)(1).
Phillips' house is worth $141,000. Subtracting the first mortgage leaves "equity" of $7,000. Each of the liens at issue, therefore, impairs Phillips' $14,000 homestead exemption.
1. Liens Securing Domestic Support Obligations Cannot be Avoided Under § 522(f). Section 522(f)(1)(A) provides that a debtor may avoid a lien securing a debt of the kind specified in § 523(a)(5). Section 523(a)(5) excepts from the general discharge debts for a "domestic support obligation." This term is defined in § 101(14A):
2. Determining Whether a Debt is a Domestic Support Obligation. Whether a given debt is in the nature of alimony, maintenance, or support is an issue of federal law. Young v. Young (In re Young), 35 F.3d 499, 500 (10th Cir.1994). Although federal law controls, state law "provide[s] guidance in determining whether the obligation should be considered `support' under § 523(a)(5)." Cummings v. Cummings, 244 F.3d 1263 (11th Cir.2001), citing In re Strickland, 90 F.3d 444, 446 (11th Cir.1996).
"In determining whether an obligation is in the nature of support, the Court must not rely on labels the parties or the state court give to an obligation." Brown v. Brown (In re Brown), 2013 WL 5376541, *5 (Bankr.D.N.M.2013). Instead, courts should undertake a two-pronged analysis "into both the parties' intent and the substance of the obligation." Crum v. Howe (In re Howe), 2007 WL 2509021
Sampson, 997 F.2d at 722-23 (citations omitted).
For the first prong (intent of the parties), if the operative document is a court order the bankruptcy courts should attempt to glean the intent of the state court. See Morel v. Morel (In re Morel), 983 F.2d 104, 105 n. 3 (8th Cir.1992) (in a contested divorce proceeding the bankruptcy court must examine the intent of the state court); In re Andrews, 434 B.R. 541, 549 (Bankr.W.D.Ark.2010) (the intent of the state court is a primary focus when the bankruptcy court examines whether a debt is a domestic support obligation).
For the second prong (substance of the obligation), courts have looked at a number of factors. Sampson identified four: (1) if, under the circumstances, the spouse needs support; (2) if there are minor children and an imbalance of income; (3) if payments are made directly to the recipient and in installments over a substantial period of time; and (4) if the obligation terminates on remarriage or death. Sampson, 997 F.2d at 722, citing In re Goin, 808 F.2d 1391, 1392-93 (10th Cir.1987).
Whether an obligation is in the nature of support is determined as of the time it arose, not later, regardless of the ex-spouse's current needs or circumstances. Young, 35 F.3d at 500.
3. Lien # 3 ($9,108.40) is Avoidable. Lien # 3 secures a debt to compensate Baldwin for Phillips wrongfully claiming both children as dependents in 2008 and 2009. The effect of Phillips' claims was to deprive Baldwin of the EIC for those years, resulting in a loss of $9,108.40.
a. Intent of the Parties/Court. When Phillips and Baldwin agreed in 2004 that each could claim one child as a dependent for all tax purposes, Phillips was the custodial parent of both children and had a gross monthly income of $600. In contrast, Baldwin did not have custody of the children, had a gross monthly income of $1,239, and was required to pay Phillips $339 a month in child support. There is no indication, in the Divorce Decree or any of the state court orders, that Phillips had to support Baldwin or that the agreement allowing Baldwin to claim one dependent was intended by anyone to be in the nature of domestic support. Rather, it appears that the allocation of tax rights and attributes was a form of property division.
b. Substance of the Obligation. The Court also concludes that the substance of the $9,108.40 debt is not in the nature of support. Applying the four Sampson factors, the Court finds that when the parties agreed on an allocation of tax attributes relating to their minor children, Baldwin was not in need of support; that there was no imbalance of income that needed to be addressed by giving Baldwin the right to claim one child as a dependent; that there were no payments to be made directly to Baldwin in installments over a substantial period of time; and that Baldwin's right to claim one child as a dependent did not terminate on remarriage or death. The additional factors identified in Colliers also indicate that the EIC agreement is not a domestic support obligation.
Analyzing the $9,108.40 obligation as set out in Sampson, the Court concludes that Baldwin's Lien # 3 does not secure a domestic support obligation.
c. Lien # 3 is a Judicial Liens. Finally, there is no question that Lien # 3 is a judicial lien. See, e.g., In re Vaughan, 311 B.R. 573, 583 (10th Cir. BAP 2004), affirmed, 241 Fed.Appx. 478 (10th Cir.2007) (lien obtained by recording a judgment is a judicial lien).
Lien # 3 is avoidable under § 522(f).
4. Lien #5 ($500) is Avoidable. Since the parties' agreement about claiming their children as dependents was not in the nature of support for Baldwin, it follows that the $500 sanction imposed on Phillips for breaching that agreement is not a domestic support obligation. As a result, Lien # 5 (Baldwin's $500 judgment lien) is avoidable under § 522(f).
1. Attorney Charging Liens are Not Judicial Liens. Case law makes clear that attorney charging liens, whether arising by statute or common law, are not "judicial liens" and therefore cannot be avoided under § 522(f).
2. Lien #2 is Not a Judicial Lien. Latta filed a Second Notice of Lien in the Bernalillo County real estate records, asserting a charging lien on Phillips'
Baldwin argues he should recover his attorney's fees incurred in the adversary proceeding and that those fees and costs should be declared nondischargeable either under § 523(a)(5) or (a)(15). The Court concludes that Baldwin is not entitled to a judgment for the attorney fees he incurred.
Where state law or a fee-shifting agreement so provides, the party in a § 523(a)(5) or a § 523(a)(15) action who succeeds in proving a debt nondischargeable may be awarded his or her attorney's fees by the bankruptcy court. See Busch v. Hancock (In re Busch), 369 B.R. 614, 624-27 (10th Cir. BAP 2007). No bankruptcy statute or rule awards fees to a creditor who successfully protects a debt from discharge. Taylor v. Taylor (In re Taylor), 478 B.R. 419, 429 (10 Cir. BAP 2012).
The Divorce Decree does not contain an attorney fee-shifting agreement. Rather, it states that Baldwin shall assume and timely pay and hold Phillips harmless from his attorney fees. Neither party has directed the Court to any state statute that would permit the award of attorney fees. Without a provision in the Divorce Decree or applicable state law to support the request for attorney fees, the Court cannot award fees to Baldwin.
Baldwin's liens should be avoided (## 3 and 5) or released because of payment (# 4).
