CECELIA G. MORRIS, CHIEF UNITED STATES BANKRUPTCY JUDGE.
Before the Court is Plaintiff Linda Romano's motion for summary judgment, seeking a determination that certain debts of Defendant James Romano are non-dischargeable domestic support obligations under 11 U.S.C. § 523(a)(5), and non-dischargeable debts incurred for willful and malicious injury under 11 U.S.C. § 523(a)(6). See Mem. Law Supp. Pl.'s Mot. Summ. J. 6, Mar. 1, 2016, ECF No. 14 ("Pl.'s Mot.").
This Court has subject matter jurisdiction pursuant to 28 U.S.C. § 1334(a), 28 U.S.C. § 157(a) and the Standing Order of Reference signed by Chief Judge Loretta A. Preska dated January 31, 2012. This is a "core proceeding" under 28 U.S.C. § 157(b)(2)(I).
James Romano ("Debtor" or "Defendant") filed his chapter 13 bankruptcy petition on May 11, 2010 and has completed his chapter 13 plan. See Petition, In re Romano, No. 10-36381 (Bankr.S.D.N.Y.
Plaintiff's complaint alleges the Settlement Agreement requires the Defendant to continue to pay the monthly mortgage payments, real property taxes, insurance, and a substantial amount of the utilities. Id. Plaintiff asserts Defendant was to pay her $100 a week in spousal maintenance payments. Id. at ¶ 23. Plaintiff claims that around August 2011, Defendant stopped making these payments. Id. at ¶ 24. Plaintiff seeks to have the court declare these payments to be domestic support obligations and to find them to be non-dischargeable debts of the Defendant. Id. at ¶¶ 22-26. Plaintiff also seeks a declaration that the debts are non-dischargeable under § 523(a)(6), claiming Defendant willfully and maliciously refused to pay her the above amounts under the Settlement Agreement. Id. at ¶¶ 27-30.
On November 18, 2015, Defendant filed an answer. See Answer, Nov. 18, 2015, ECF No. 6. Defendant denies all of Plaintiff's allegations. See id. at ¶ 2. Defendant also counterclaims that Plaintiff filed this claim as a general unsecured claim after the date to object to discharge had already passed. See id. at ¶¶ 4-5.
Plaintiff filed a motion for summary judgment on March 1, 2016. See Pl.'s Mot. Plaintiff claims Defendant owes her ongoing domestic support obligations, including weekly $100 maintenance payments, the mortgage payments, and other bills related to the marital property. Id. at 12-16. Plaintiff argues these are non-dischargeable under § 523(a)(5). Id. Plaintiff also alleges Defendant is in arrears on his maintenance payments and other support obligations. Pl.'s Statement of Undisputed Material Facts ¶ 18, Mar. 1, 2016, ECF No. 14 ("Pl.'s SMF"). Plaintiff asserts Defendant did not make the $100 weekly maintenance payments from August 1, 2011 through January 1, 2015. Id. ¶ 21. Plaintiff claims Defendant has not made any post-petition mortgage payments since September 1, 2011, nor has he paid the oil, propane, electric, or water bills since August 1, 2011. Id. ¶¶ 19-20.
Plaintiff claims equitable considerations require tolling of the time to file an objection to discharge per Federal Rule of Bankruptcy Procedure 4007(c). Pl.'s Mot. 7. Plaintiff claims she was omitted from Debtor's voluntary petition and was not given notice of the 11 U.S.C. § 341 meeting of creditors, and that Debtor filed a late proof of claim on her behalf, which incorrectly classifies the debt as a general unsecured claim. Id. Plaintiff is legally blind and 100% disabled and claims she did not become aware of Defendant's default in certain domestic support and maintenance obligations until the parties' mortgagee, Fannie Mae, commenced judicial foreclosure proceedings against the marital residence in the Supreme Court of the State of New York. See Pl.'s SMF ¶ 10. Plaintiff claims she did not have notice of any of the bankruptcy proceedings. Id. ¶ 13. Plaintiff only became aware of Debtor's bankruptcy filing and Chapter 13 plan
Plaintiff claims that in drafting the terms of the Settlement Agreement, the parties intended to create a debt necessary for Plaintiff's support. Pl.'s Mot. 9-10. Plaintiff urges this Court to interpret the Settlement Agreement as a matter of law on summary judgment. Id.
Plaintiff also claims that the Defendant's liability on the mortgage, as well the missed payments, are non-dischargeable obligations pursuant to § 523(a)(6), as a debt incurred by willful and malicious injury. Id. at 17. Plaintiff claims Defendant has refused to participate in the sale of the residence and the foreclosure action. Id. at 19. Plaintiff states that should the residence be sold, Defendant is entitled to the equity in the residence. Id. at 13. Plaintiff claims Defendant willfully and maliciously disregarded his obligation to pay Plaintiff's support and maintenance, and that a discharge of his liability on the mortgage would be a willful and malicious disregard of those obligations in the future. Id. at 18-20.
On March 2, 2016, Defendant filed a cross-motion for summary judgment. See Def.'s Mot. Defendant argues that Plaintiff's claims for non-dischargeability under § 523(a)(6) must be denied as they were not timely filed pursuant to Federal Rule of Bankruptcy Procedure 4007(c). Id. at 2-5. Defendant further argues that Plaintiff cannot prove the debt was incurred willfully or maliciously. Id. at 5-9.
Defendant claims that Plaintiff is bound by her treatment under Defendant's confirmed chapter 13 plan as an unsecured claim. Id. at 9. Defendant argues that a claim, even a claim filed by the debtor, is presumed valid unless a party in interest objects. Id. at 10. Defendant argues Plaintiff received timely notice of the case and the plan. Id. at 11. Defendant also asserts that the confirmation order is res judicata and that such a late objection to claim should not be allowed here, even if the debt is non-dischargeable. Id. at 15-17.
Defendant further claims that the debt is not a domestic support obligation and is instead a debt to a spouse incurred in connection with a divorce or separation under § 523(a)(15), which is dischargeable under § 1328(a). Id. at 11-12. Defendant claims the debt to Plaintiff did not end on death or remarriage, and instead ended with a sale of the property. Id. at 14. Further, Defendant claims the language of the Settlement Agreement evidences an intent to create a property settlement, not a domestic support obligation. Id. at 14-15.
Both parties filed opposition papers to the other's motion for summary judgment. See Pl.'s Aff. in Opp'n to Def.'s Summ. J., Mar. 16, 2016, ECF No. 16; Mem. Law in Reply to Pl.'s Mot. Summ. J., Mar. 16, 2016, ECF No. 20. The Court notes the opposition papers and has taken them into consideration. Further, the parties' cross-motions argue the same issues. As such, the Court will resolve the cross-motions on an issue-by-issue basis.
There are two types of discharge provided for in a chapter 13 under 11 U.S.C. § 1328. Under § 1328(a), if the debtor makes all required plan payments the debtor is eligible for a full compliance discharge. See 11 U.S.C. § 1328(a); Ambassadors Travel Servs. v. Liescheidt (In re Liescheidt), 404 B.R. 499, 503 (Bankr. C.D.Ill.2009). Where the debtor is unable to make all plan payments, the debtor may apply for a hardship discharge under § 1328(b). See, e.g., In re Lizzi, 2015 WL 1576513, at *3 (Bankr.N.D.N.Y. Apr. 3, 2015). The debtor may receive a hardship
Although a discharge under § 1328(a) is broader, a full compliance discharge does not discharge the debtor for any debts "of the kind specified in section 507(a)(8)(C) or in paragraph (1)(B), (1)(C), (2), (3), (4), (5), (8), or (9) of section 523(a)[.]" 11 U.S.C. § 1328(a)(2). The debts excepted from a full compliance discharge do not include § 523(a)(6), debts for "willful and malicious injury." A debtor who makes all plan payments and receives a full compliance discharge "is discharged from debts arising from willful and malicious conduct, since paragraph (a)(6) of Section 523 is not a stated exception. . . ." Ambassadors Travel Servs., 404 B.R. at 504; see also Handeen v. LeMaire (In re LeMaire), 898 F.2d 1346, 1348 (8th Cir. 1990); Graves v. Myrvang (In re Myrvang), 232 F.3d 1116, 1122 (9th Cir.2000); Solomon v. Cosby (In re Solomon), 67 F.3d 1128, 1131 (4th Cir.1995). In a case where the debtor is on track to receive a full compliance discharge, "there is no reason to litigate the issue of whether the [disputed] debt is, in fact, one for a willful and malicious injury. Whether it is or isn't doesn't matter, since it will be discharged either way if the debtor receives a full compliance discharge." Ambassadors Travel Servs., 404 B.R. at 504.
On the other hand, a hardship discharge does not discharge any of the debts in § 523(a). 11 U.S.C. § 1328(c). As a result, in a chapter 13, a determination of non-dischargeability pursuant to § 523(a)(6) is only relevant where the debtor receives a hardship discharge, which is not a regular occurrence. Lowry v. Nicodemus (In re Nicodemus), 497 B.R. 852, 857 n. 2 (6th Cir. BAP 2013) (quoting Ambassadors Travel Servs., 404 B.R. at 505). In other words, "unless and until Debtors seek a hardship discharge under § 1328(b), § 523(a)(6) is unavailable as a basis for nondischargeability." Toste v. Smedberg (In re Toste), 2014 WL 3908139, at *2, 2014 Bankr.LEXIS 3441, at *6 (9th Cir. BAP Aug. 12, 2014) (citations omitted).
Here, Defendant received a full compliance discharge on December 7, 2015. All debts incurred pursuant to § 523(a)(6) for willful and malicious injury were discharged as a matter of law. The non-dischargeability exception under § 523(a)(6) is inapplicable here, regardless of whether Plaintiff's objection to dischargeability was timely filed. Reference to the timing requirements of Federal Rule of Bankruptcy Procedure 4007(d) confirms that debts incurred pursuant to § 523(a)(6) are only non-dischargeable in a chapter 13 when there is a hardship discharge. See Fed. R. Bankr.P. 4007(d).
Except for the grounds specified in 11 U.S.C. § 523(c), not relevant here, a complaint objecting to discharge based on § 523, "may be filed at any time. A case may be reopened without payment of an additional filing fee for the purpose of filing a complaint to obtain a determination under this rule." Fed. R. Bankr.P.
Here, the confirmation order does not purport to discharge Defendant from any ongoing maintenance obligations to the Plaintiff. Pursuant to Federal Rule of Bankruptcy Procedure 3004, as Plaintiff did not "timely file a proof of claim under Rule 3002(c) or 3003(c)," Defendant filed a claim for Plaintiff on October 12, 2010 within 30 days of the claims bar date on September 14, 2010. Defendant subsequently filed his first amended plan on October 25, 2010, which, per the affidavit of service on the docket, was served on "Linda Romano, 216 Woodcock Mountain Road, Washingtonville, N.Y. 10992-1820." See Affidavit of Service of Amended Chapter 13 Plan, In re Romano, No. 10-36381, ECF No. 10-1. Section 5(a) of the Defendant's plan, dealing with priority, unsecured claims for "Unsecured Domestic Support Obligations," provides that "Debtor's maintenance obligation to his former spouse shall remain unaffected by his Chapter 13 Plan." Amended Chapter 13 Plan 7, In re Romano, No. 10-36381, ECF No. 10. Subsection (a) also distinguishes the maintenance obligation from certain joint credit card payment obligations, not in dispute here, stating that the credit card obligations will be discharged upon completion of the plan. Id.
That Defendant's chapter 13 plan provided for ongoing maintenance payments to Plaintiff does not change the nature of the disputed debt. In re Westerfield, 403 B.R. 545, 550 (Bankr.E.D.Tenn. 2009). The maintenance obligations are either dischargeable or non-dischargeable in Defendant's chapter 13. Defendant is not entitled to overrule the dischargeability of a debt that is excepted from discharge under § 1328(a)(2) by merely providing for payment of the claim in the plan.
A non-dischargeable domestic support obligation under § 523(a)(5) is defined by the Bankruptcy Code as a debt that is
The determination of what constitutes a domestic support obligation is to be based on principles of federal law. Forsdick v. Turgeon, 812 F.2d 801, 802 (2d Cir.1987). The bankruptcy court is not bound by how state law would categorize a particular obligation. Biggs v. Biggs (In re Biggs), 907 F.2d 503, 504 (5th Cir.1990). Despite the fact federal law controls, a bankruptcy court is not precluded from reference to state law on the matter of domestic support obligations. Pauley v. Spong (In re Spong), 661 F.2d 6, 9 (2d Cir.1981).
The party arguing that the debt is non-dischargeable has the burden of proof. See Fed. R. Bankr.P. 4005. "In determining whether or not an obligation is designed for the support of a former spouse, the court must look beyond the separation agreement to the intent of the parties and to the substance of the obligation." Freyer v. Freyer (In re Freyer), 71 B.R. 912, 916 (Bankr.S.D.N.Y.1987) (citing Long v. West (In re Long), 794 F.2d 928, 931 (4th Cir.1986); Tilley v. Jessee, 789 F.2d 1074, 1077 (4th Cir.1986); Shaver v. Shaver, 736 F.2d 1314, 1316 (9th Cir. 1984)). "Courts in the Second Circuit take a broad reading of the phrase `in the nature of support' in dischargeability disputes." In re Conte, 2012 WL 4739339, at *5, 2012 Bankr.LEXIS 4695, at *14 (Bankr. E.D.N.Y. Oct. 3, 2012) (quoting Peters v. Hennenhoeffer (In re Peters), 133 B.R. 291, 295 (Bankr.S.D.N.Y.1991)).
Courts have considered a variety of factors to assess whether the parties intended to create a non-dischargeable domestic support obligation, including
Vittorini v. Vittorini (In re Vittorini), 136 B.R. 632, 635 (Bankr.S.D.N.Y.1992) (citations omitted). Additionally, courts have also looked to the following:
Tsanos v. Bell (In re Bell), 47 B.R. 284, 287 (Bankr.E.D.N.Y.1985) (citations omitted). Although a variety of factors are helpful, the Second Circuit has held that any list of factors is not exclusive, and that "[a]ll evidence, direct or circumstantial, which tends to illuminate the parties' subjective intent is relevant." Brody v. Brody (In re Brody), 3 F.3d 35, 38 (2d Cir.1993) (citations omitted).
The Settlement Agreement's terms state that it will be "lawful for the parties hereto at all times to live separate and apart from each other. . . ." Pl.'s Mot. Ex. A, at 2. The Settlement Agreement makes provisions for the marital residence of the parties. Id. at 3-5. The proceeds of the sale were to be divided equally between the parties. Id. at 4. "Pending its sale, the wife will have exclusive possession of the marital residence. . . ." Id. at 3. The marital residence was to be put "on the market for sale on February 1, 2012." Id. Prior to sale,
Id. at 4. The Settlement Agreement indicates that at the time of closing, Defendant "will be entitled to a credit for the diminution of principal on the mortgage created by his mortgage payments between the date of this agreement and the sale of the property." Id. at 4-5.
The Settlement Agreement further provides for "Maintenance." The terms state that
Id. at 6-7. Under the Settlement Agreement, Defendant was required to pay Plaintiff $100 a week until their home was sold, unless Plaintiff became entitled to receive the Tier II portion of his pension before any sale took place. If the property sold and Plaintiff was not yet entitled to her portion of the pension, Defendant was still obligated to pay Plaintiff until his 62nd birthday.
The Settlement Agreement evidences the intent that Plaintiff was to receive support either in the form of regular monthly payments from Defendant or from his pension. Plaintiff is legally blind and, other than Defendant's maintenance payments, depends on social security disability payments of $850 a month. Aff. of Pl. in Supp. Pl.'s SMF ¶ 31, Mar. 1, 2016, ECF No. 14. Plaintiff is unable to secure employment due to her health condition. Pl.'s Mot. 13. The maintenance was to be made in installment payments either weekly, if Plaintiff remained in the house, or monthly if the house was sold. The monetary assistance was intended to be ongoing.
The Court also finds that the parties intended for Defendant to support Plaintiff through his payment of the mortgage, taxes, and homeowners' insurance, as well as the oil, propane, electric and water bills. As Defendant admits in his Statement of Undisputed Facts in Response, "Defendant believed the residence would be sold in 3 to 6 months and thus [ ] agreed to pay the expenses, assuming it would not be a long term duty." See Def.'s Statement of Facts in Resp. to Pl.'s SMF ¶ 10, Mar. 16, 2016, ECF No. 19 ("Def.'s Resp. SMF"). That Defendant did not anticipate the house would not be sold within that time frame does not change the nature of the payments promised. Without the sale of the house, Plaintiff has no other source of equity, that the Court is aware of, to support herself. Until the house sold and the proceeds were divided up, Plaintiff depended on the support provided by Defendant to maintain her residence on the property. Even after the sale of the home, the maintenance payments continued until Plaintiff received an alternative source of income—Defendant's pension.
The Settlement Agreement does not provide a contingency plan in the event the parties failed to sell the home. Per the terms of the Settlement Agreement, Defendant promised to support Plaintiff during her exclusive occupancy of the house. If Defendant believes Plaintiff breached the Settlement Agreement and is no longer entitled to benefit from its terms, that is for a state court to decide. Both parties agree that the Settlement Agreement before this Court is the operative legal document to be construed. See, e.g., Def.'s Mot. 13-14; Def.'s Statement of Undisputed Facts ¶ 4, Mar. 2, 2016, ECF No. 15; Pl.'s SMF ¶¶ 4-5; Def.'s Resp. SMF ¶ 2. Its terms do not allow Defendant to cease making the mortgage payments, taxes, or homeowners' insurance, on the property, or to stop paying the oil, propane, electric and water bills in the event the house is not sold.
Further, Defendant's chapter 13 plan clearly states that the ongoing maintenance payments to Plaintiff were unaffected by his plan. See Amended Chapter 13 Plan 7, In re Romano, No. 10-36381, ECF No. 10. The plan did not even purport to discharge the maintenance obligations. The Court finds that the maintenance payments fall within the well-established parameters of a domestic support obligation as defined under the bankruptcy code and are non-dischargeable under § 523(a)(5).
In conclusion, the Settlement Agreement creates a non-dischargeable domestic support obligation under § 523(a)(5), which includes two sets of payments. "During the wife's exclusive occupancy [of the marital residence], the husband shall pay the mortgage, taxes and homeowner's insurance in the amount of $1,408.52 per month, the oil bill up to a cap of $2,000.00 per year, the propane up to a cap of $200.00 per year, the electric up to a cap of $60.00 per month, and the water bill up to a cap of $360.00 per year." Additionally, Defendant has a non-dischargeable domestic support obligation under § 523(a)(5) which requires him to pay "the sum of $100.00 per week . . . until such time as the marital home is sold." Regardless of whether the marital home is sold, "all maintenance will cease" upon Plaintiff's receipt of her share of Defendant's pension, with the latest date of that occurrence expected to be May 8, 2014.
For the foregoing reasons, Plaintiff's motion for summary judgment based on
