Susan Cummings v. Lawrence B. Cummings , 244 F.3d 1263 ( 2001 )

[PUBLISH]
IN THE UNITED STATES COURT OF APPEALS
\
FOR THE ELEVENTH CIRCUIT
______________________ FILED
U.S. COURT OF APPEALS
No. 99-14609 ELEVENTH CIRCUIT
______________________ MAR 20 2001
THOMAS K. KAHN
CLERK
D.C. No. 99-08526 CV-KLR
SUSAN CUMMINGS,
Plaintiff-Appellant,
versus
LAWRENCE B. CUMMINGS,
Defendant-Appellee,
__________________________
Appeal from the United States District Court
for the Southern District of Florida
__________________________
(March 20, 2001)
Before WILSON, KRAVITCH and COX, Circuit Judges.
KRAVITCH, Circuit Judge:
The appeal of this bankruptcy case requires us to decide whether the debt
owed to Plaintiff-Appellee Susan Cummings by her ex-husband Defendant-
Appellant Lawrence Cummings is “in the nature of support” and therefore
nondischargeable under 11 U.S.C. § 523(a)(5). For the reasons stated below, we
remand the case for a determination regarding which portion–if any–of the
equitable distribution at issue was intended as support.
I. Background and Procedural History
The parties divorced in 1996. As part of its Final Judgment of Dissolution
of Marriage (“the Divorce Judgment”), the divorce court ordered Lawrence
Cummings to pay $5,150.00 per month in child support and fifteen months of
rehabilitative alimony to Susan Cummings. The divorce court denied Susan
Cummings’s request for permanent alimony. The court instead ordered Lawrence
Cummings to pay her $6.3 million as an equitable distribution in the form of three
lump sum payments of $2.1 million.
Shortly before the first payment came due, Lawrence Cummings filed for
bankruptcy and sought discharge of the debt. Susan Cummings began an
adversary proceeding, asking the bankruptcy court to declare the obligation
nondischargeable under 11 U.S.C. § 523(a)(5) because the obligation is in “the
nature of support.” The bankruptcy court concluded that the debt was a property
settlement, and therefore was not in the nature of support. The court went on to
find the obligation dischargeable under 11 U.S.C. § 523(a)(15) because Lawrence
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Cummings was unable to pay the debt, and the benefit to him of discharging it
outweighed the corresponding burden to Susan Cummings. The district court
affirmed.
II. Discussion
We review the bankruptcy court’s factual findings for clear error and its
legal conclusions de novo. In re St. Laurent, 991 F.2d 672, 675 (11th Cir. 1993).
A debtor may obtain a general discharge under Chapter 7 of the Bankruptcy
Code from “all debts that arose before the date of the order for relief.” 11 U.S.C. §
727(b). The Code, however, does not allow discharge of any debt
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, . . . but not to the extent that–
....
(B) such a debt includes a liability designated as alimony,
maintenance, or support, unless such liability is actually in the nature
of alimony, maintenance, or support.
11 U.S.C. § 523(a)(5).
Pursuant to § 523(a)(5), “a given domestic obligation is not dischargeable if
it is ‘actually in the nature of’ alimony, maintenance, or support.” In re Harrell,
754 F.2d 902, 904 (11th Cir. 1985). Whether a given debt is in the nature of
support is an issue of federal law. In re Strickland, 90 F.3d 444, 446 (11th Cir.
1996). Although federal law controls, state law does “provide guidance in
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determining whether the obligation should be considered ‘support’ under §
523(a)(5).” Id. To make this determination a bankruptcy court should undertake
“a simple inquiry as to whether the obligation can legitimately be characterized as
support, that is, whether it is in the nature of support.” In re Harrell, 754 F.2d at
906.
In conducting this inquiry, a court cannot rely solely on the label used by the
parties. As other courts have recognized, “‘it is likely that neither the parties nor
the divorce court contemplated the effect of a subsequent bankruptcy when the
obligation arose.’” In re Gianakas, 917 F.2d 759, 762 (3rd. Cir. 1990) (citation
omitted). The court must therefore look beyond the label to examine whether the
debt actually is in the nature of support or alimony. Id. A debt is in the nature of
support or alimony if at the time of its creation the parties intended the obligation
to function as support or alimony. See In re Brody, 3 F.3d 35, 38 (2nd. Cir. 1993);
In re Sampson, 997 F.2d 717, 723-24 (10th Cir. 1993); In re Davidson, 947 F.2d
1294, 1296-97 (5th Cir. 1991); In re Gianakas, 917 F.2d at 762; Tilley v. Jessee,
789 F.2d 1074, 1077 (4th Cir. 1986); Shaver v. Shaver, 736 F.2d 1314, 1316 (9th
Cir. 1984); Williams v. Williams, 703 F.2d 1055, 1057-58 (8th Cir. 1983). Thus,
“the party seeking to hold the debt nondischargeable has the burden of proving by
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a preponderance of the evidence that the parties intended the obligation as support .
. . .” In re Sampson, 997 F.2d at 723.
The bankruptcy court concluded that the equitable distribution was not in the
nature of support under § 523(a). The court listed several characteristics that the
equitable distribution shared with a property settlement and which distinguished it
from a support obligation: (1) the obligation is not subject to death or remarriage;
(2) it is payable in three lump sums rather than installments; (3) it is non-
modifiable; (4) it is not enforceable through contempt proceedings;1 (5) the divorce
court derived it by equally dividing the assets and liabilities of the couple; (6) the
minor children were separately awarded support of $5,150 a month; and (7) the
divorce court separately awarded rehabilitative alimony.
Although the factors considered by the bankruptcy court are relevant to our
inquiry, the touchstone for dischargeability under § 523(a)(5) is the intent of the
parties. See In re Sampson, 997 F.2d at 723. In determining whether a particular
obligation is in the nature of support, “[a]ll evidence, direct or circumstantial,
1
Contrary to the bankruptcy court’s assertion, however, no state court has determined
whether the equitable distribution is enforceable through contempt proceedings. After Lawrence
Cummings failed to pay the first $2.3 million payment, Susan Cummings sought to have it
enforced through contempt proceedings. After spending 43 days in jail, the Fourth District Court
of Appeal for the State of Florida ordered Lawrence Cummings released pending a determination
by the divorce court regarding what portion of the equitable distribution was “necessary for
support.” Cummings v. Cummings, 685 So.2d 101, 101 (Fla. Dist. Ct. App. 1997). The record
does not indicate that any further state court proceedings have been held.
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which tends to illuminate the parties subjective intent is relevant.” In re Brody, 3
F.3d at 38. When the bankruptcy court determined that the equitable distribution
was not in the nature of support, it failed to take into account the intent of the
divorce court as reflected in the Divorce Judgment. Although the divorce court
labeled the $6.3 million an “equitable distribution,” the language used by the court
suggests that it intended at least some portion of the equitable distribution to
function as support.
The divorce court indicated several times that Susan Cummings would
depend on a portion of the equitable distribution to support herself and the
children. The court explained its denial of permanent alimony by stating that
“[t]he Wife will be able to support herself and the children . . . upon receipt of the
income-generating assets awarded her in the equitable distribution.” Thus, the
divorce court declined to award permanent alimony precisely because it believed
that Susan Cummings would be able to support herself and the children with the
proceeds of the equitable distribution. Similarly, the court indicated that Susan
Cummings would support herself with the rehabilitative alimony until she
“receive[d] and invest[ed] the funds awarded to her in equitable distribution.”
Finally, the court ordered Lawrence Cummings to pay half of Susan Cummings
attorneys’ fees and costs “so as not to deplete the equitable distribution awarded
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her, as she will be depending upon those assets to furnish a large share of the
support needed to maintain her reasonable monthly expenses.”
These statements suggest that the court intended at least some portion of the
equitable distribution to function as support. Because a property division often
achieves the same goal as a support obligation, state courts do not rigidly
distinguish between the two. See In re Gianakas, 917 F.2d at 763 (“[E]ven an
obligation designated as [a] property settlement may be related to support because
state courts often will adjust alimony awards depending on the nature and amount
of marital assets available for distribution.”) To the extent the court intended a
portion of the obligation to function as support, that debt is nondischargeable under
§ 523(a)(5).
This case is factually similar to In re Wright, 184 B.R. 318 (Bankr. N.D. Ill.
1995). In that case, the divorce court awarded the ex-wife $5,500 a month in
support. Id. at 319. This obligation terminated in the event or her death or
remarriage. Id. The court also awarded her $135,000 to be paid within five years.
Id. After considering the divorce court’s statement that the ex-wife would need a
portion of this amount to support herself and the children, the bankruptcy court
concluded that $40,800 of the $135,000 was nondischargeable. Id. at 322. In the
case at hand, the bankruptcy court should have examined the intent of the divorce
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court before making a determination that no portion of the equitable distribution
was in the nature of support.
The most recent decision of the Florida District Court of Appeal in this
matter instructed the divorce court to determine what portion of the equitable
distribution was for support. Cummings, 685 So. 2d at 101. State courts have
concurrent jurisdiction with the bankruptcy courts to determine whether an
obligation is in the nature of support for the purposes of § 523(a)(5). In re
Siragusa, 27 F.3d 406, 408 (9th Cir. 1994); In re Thaggard, 180 B.R. 659, 662
(Bankr. M.D. Ala. 1995). We previously have noted that “[i]t is appropriate for
bankruptcy courts to avoid incursions into family law matters out of consideration
of court economy, judicial restraint, and deference to our state court brethren and
their established expertise in such matters.” Carver v. Carver, 954 F.2d 1573, 1579
(11th Cir. 1992). Now that the case is being remanded to the bankruptcy court,
Susan Cummings may seek relief from the automatic stay under 11 U.S.C. §
362(d) to have the issue determined by the divorce court. See Id. (“When
requested, such relief should be liberally granted in situations involving alimony,
maintenance, or support in order to avoid entangling the federal court in family law
matters best left to state court.”). Therefore, on remand the bankruptcy court may
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choose to await clarification by the divorce court regarding what portion–if any–of
the equitable distribution is in the nature of support.
Accordingly, we VACATE the judgment with directions that the case be
REMANDED to the bankruptcy court for reconsideration in light of this opinion.2
All pending motions are DENIED.
2
In the Divorce Judgment, the divorce court ordered Lawrence Cummings to pay half of
Susan Cummings attorneys’ fees. For the first time in her reply brief, Susan Cummings argued
that this debt is nondischargeable. This court may decline to consider issues raised for the first
time in a reply brief. United States v. Martinez, 83 F.3d 371, 377 n.6 (11th Cir. 1996).
Accordingly, we do not reach the issue of attorneys’ fees, but we do note that neither the
bankruptcy court nor the district court explicitly ruled on the issue.
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