Richardson, Theodore v. Edwards, Yvonne ( 1997 )

United States Court of Appeals
FOR THE DISTRICT OF COLUMBIA CIRCUIT
Argued September 2, 1997 Decided October 28, 1997
No. 95-7302
Theodore Carlton Richardson,
Appellant
v.
Yvonne Edwards,
Appellee
Appeal from the United States District Court
for the District of Columbia
(95cv01455)
T. Carlton Richardson, appearing pro se, argued the cause
and filed the brief for appellant.
June White Dillard argued the cause and filed the brief for
appellee.
Before: Edwards, Chief Judge, Sentelle and Randolph,
Circuit Judges.
Opinion for the Court filed by Circuit Judge Randolph.
Randolph, Circuit Judge: T. Carlton Richardson filed a
petition for voluntary bankruptcy in 1994. Among the debts
he sought to discharge were two resulting from his 1990
Maryland divorce. The divorce decree incorporated portions
of a Voluntary Separation and Property Settlement Agree-
ment between Richardson and Yvonne Edwards, to whom he
had been married for 20 years. The parties reached their
settlement after trial and after the state court orally issued
its opinion, but before judgment was entered. The divorce
decree (1) ordered Richardson to pay Edwards $750 per
month for child support until the year 2000; and (2) incorpo-
rated the terms of the Settlement Agreement requiring Rich-
ardson to assume the second mortgage on the family home,
holding Edwards harmless in the event he defaulted.
Edwards filed a complaint in the bankruptcy court seeking
a determination that both of Richardson's obligations--the
child support and the second mortgage assumption--were
nondischargeable debts "in the nature of alimony, mainte-
nance or support," 11 U.S.C. s 523(a)(5)(B). The bankruptcy
court agreed with Edwards and the district court affirmed.
Edwards v. Richardson (In re Richardson), Ch. 7 Case No.
94-00324, Adv. No. 94-0083 (Bankr. D.D.C. June 6, 1995);
Richardson v. Edwards, No. 95-1455 (D.D.C. Nov. 17, 1995).
Richardson then brought this appeal.
I
Richardson offers two grounds for overturning the decision
regarding his $750 monthly child support payments. Both
grounds rely on the fact that Richardson's and Edwards'
youngest child became eighteen years old, the age of majority
in Maryland, see Corry v. O'Neill, 658 A.2d 1155, 1157-58
(1995); Md. Ann. Code art. I, s 24 (1996), on October 20, 1993.
Richardson's first point is that when children reach the age
of majority, only they may contest the dischargeability of
child support obligations; they are the intended beneficiaries
of the payments and, given their age, there is no longer any
custodial parent. Hence, Richardson's former wife has no
"standing." There is nothing to this. The divorce decree
designates Edwards as the recipient of Richardson's child
support payments, including payments to be made after the
children reach the age of majority. Edwards would therefore
suffer injury from the discharge of Richardson's debt, and
her injury is capable of being redressed through a ruling that
the support payments are nondischargeable. Edwards thus
fulfills the constitutional requirements for standing to sue.
See Bennett v. Spear, 117 S. Ct. 1154, 1160 (1997). In
contending otherwise, Richardson has confused "standing"
with the requirement that suits be prosecuted in the name of
the "real party in interest," see Fed. R. Bankr. P. 7017
(incorporating Fed. R. Civ. P. 17(a)), an objection we will not
entertain because Richardson failed to raise it in the bank-
ruptcy court. See Whelan v. Abell, 953 F.2d 663, 672 (D.C.
Cir. 1992). Whether asserted in a motion to dismiss for
failure to state a cause of action, or as an affirmative defense,
see 6A Charles Alan Wright et al., Federal Practice and
Procedure s 1554, at 405-09 (2d ed. 1990), see also Fed. R.
Bankr. P. 7008 (incorporating Fed. R. Civ. P. 8); Fed. R.
Bankr. P. 7012(b) (incorporating Fed. R. Civ. P. 12(b)), a "real
party in interest" objection must be made "with reasonable
promptness." 6A Wright, supra, s 1554, at 407. To wait
until the case reaches the court of appeals is to waive the
objection.
Richardson's second point is that his obligation to pay
Edwards $750 per month until the year 2000 cannot be
considered child "support" within the meaning of s 523(a)(5).
According to him, these payments resulted from the property
settlement between him and Edwards. Besides, under Mary-
land law he had no legal duty to provide child support after
his youngest child reached majority in 1993. See Corry, 658
A.2d at 1157-58. There are more than a few problems with
this line of thinking.
Richardson's initial error is in supposing that child "sup-
port" cannot stem from a "property settlement." The law is
precisely the opposite. Section 523(a) states:
(a) A discharge under Section 727, 1141, 1228(a),
1228(b), or 1328(b) of this title does not discharge an
individual debtor from any debt--
* * *
(5) to a spouse, former spouse, or child of the debt-
or, for alimony to, maintenance for, or support of such
spouse or child, in connection with a separation agree-
ment, divorce decree or other order of a court of
record, determination made in accordance with State
or territorial law by a governmental unit, or property
settlement agreement, but not to the extent that--
(A) such debt is assigned to another entity, volun-
tarily, by operation of law, or otherwise (other than
debts assigned pursuant to section 402(a)(26) of the
Social Security Act, or any such debt which has been
assigned to the Federal Government or to a State or
any political subdivision of such State); or
(B) such debt includes a liability designated as
alimony, maintenance, or support, unless such liabili-
ty is actually in the nature of alimony, maintenance,
or support.
To simplify, a debt shall not be discharged if it is "to a
spouse, former spouse, or child of the debtor" for "support of
such spouse or child, in connection with" a "property settle-
ment agreement." Even by Richardson's lights, that is what
occurred here--the child support was "in connection" with a
property settlement.
At any rate, Richardson's legal obligation to make the
monthly payments derived not simply from the parties' agree-
ment, but from the Maryland court's judgment for absolute
divorce. Without referring to the agreement, the court or-
dered "that the Defendant pay to the Plaintiff as for child
support and maintenance the sum of seven hundred and fifty
dollars ($750.00) monthly, payable semi-monthly effective as
of May 1, 1990 through April 30, 2000 without modifica-
tion...." And so, on the face of the judgment, Richardson's
child support obligation was--in the language of s 523(a)(5)--
"in connection" with a divorce decree. True, this part of the
judgment reflected the parties' "Voluntary Separation and
Property Settlement Agreement." But the portion of the
agreement dealing with child support was not even in the
"Marital Property" section, which divided the parties' jointly-
held property. It was set out in a separate section entitled
"Custody, Visitation, and Support," a placement inconsistent
with Richardson's claim that the monthly payments repre-
sented a property settlement rather than child support.
As to Maryland law, the fact that the legal duty to pay
child support ends when the child reaches majority is not
determinative. Federal bankruptcy law, not state law, con-
trols whether an obligation is a nondischargeable support
obligation under s 523(a)(5). See H.R. Rep. No. 95-595, at
364 (1977), reprinted in 1978 U.S.C.C.A.N. 5963, 6320; Brody
v. Brody (In re Brody), 3 F.3d 35, 39 (2d Cir. 1993); Samp-
son v. Sampson (In re Sampson), 997 F.2d 717, 721 (10th Cir.
1993); Gianakas v. Gianakas (In re Gianakas ), 917 F.2d
759, 762 (3d Cir. 1990); Sylvester v. Sylvester, 865 F.2d 1164,
1166 (10th Cir. 1989) (per curiam); Harrell v. Sharp (In re
Harrell), 754 F.2d 902, 905 (11th Cir. 1985); Long v. Calhoun
(In re Calhoun), 715 F.2d 1103, 1107 (6th Cir. 1983). Section
523(a)(5) speaks of "child" support, not support of a "minor
child," and there is no doubt that Richardson's monthly
payments were for the benefit of his children regardless of
their ages. In the Settlement Agreement, Richardson prom-
ised to pay a total of $90,000 "for the support and mainte-
nance of the children of the parties." The monthly payment
schedule, negotiated by the parties and ordered by the court,
spread Richardson's debt over a period extending beyond his
youngest child's 18th birthday. This did not convert the
nature of Richardson's obligation into something other than
"child" support for the purpose of federal law. Here, we
follow Judge Learned Hand, speaking for the court in In re
Adams: the "fact that the parties chose to spread their
payments over a period which might ... pass beyond the
time when any such duty [of support] would exist" did not
cause the payments to lose their "character as ... support."
25 F.2d 640, 642 (2d Cir. 1928) (quotations omitted).
Richardson meant the payments to be for child support;
the parties characterized the payments that way; the Mary-
land court treated the payments as child support; and any
reasonable person viewing the settlement agreement and the
divorce decree would come to the same conclusion, as did the
bankruptcy judge and the district court. We therefore join
Harrell, 754 F.2d at 905, and Boyle v. Donovan, 724 F.2d 681,
683 (8th Cir. 1984), in holding that a debtor's obligation under
a court order, and pursuant to a settlement agreement, to pay
post-majority child support is nondischargeable under
s 523(a)(5) even if the obligation exceeds the requirements of
state law.
II
This brings us to the second mortgage. The Settlement
Agreement provided that Richardson would convey all his
interest in the family home to Edwards, that he would pay
the existing second trust on the home and take out a life
insurance policy to pay off the second trust in the case of his
death, and that Edwards would hold him harmless for any
default on the first trust. In return, Edwards agreed to
convey her interest in another property to Richardson. In
the divorce decree, the Maryland court simply ordered "that
all property settlement matters are resolved pursuant to the
[Settlement Agreement] and incorporated but not merged
into this Order...."
The bankruptcy judge found the Settlement Agreement "at
least ambiguous regarding whether the obligation to pay the
second deed of trust was intended to be in the nature of
support." Edwards, slip op. at 15. The judge then looked to
extrinsic evidence of the parties' intentions, id. at 17-18,
including their proposals and counter-proposals during nego-
tiations, and concluded that the second mortgage payment
was intended to provide "support" rather than serve as a
means of dividing property. Id. at 1, 18. The district court
affirmed on the ground that the bankruptcy judge's decision
was not "clearly erroneous." See Richardson, No. 95-1455.
Before we start assessing the merits, we must say a few
words about the standard of review we apply here (and have
followed in the previous section). We do not agree that the
standard is of the "clearly erroneous" variety, although some
other courts have so assumed without discussion. See, e.g.,
Brody, 3 F.3d at 38; Sampson, 997 F.2d at 721; Boyle, 724
F.2d at 683. A divorce decree incorporating a settlement
agreement is simply a consent decree. There is no reason for
treating divorce decrees differently than other consent de-
crees in terms of the scope of appellate review. We custom-
arily review decisions interpreting consent decrees and the
agreements underlying them de novo, in the same manner as
we review decisions interpreting contracts. See, e.g., United
States v. ITT Continental Baking Co., 420 U.S. 223, 236
(1975); Alliance to End Repression v. Chicago, 119 F.3d 472,
474 (7th Cir. 1997); Beckett v. Air Line Pilots Ass'n, 995 F.2d
280, 284, 286 (D.C. Cir. 1993); United States v. Western Elec.
Co., 846 F.2d 1422, 1427 (D.C. Cir. 1988). We do so because a
consent decree is a form of contract. See id. It is approved
on its face by a court presumably not privy to the details of
negotiation, or the parties' subjective intentions; it is then
incorporated in a judicial order; and it is ultimately backed
up by the court's power of contempt. The Supreme Court
has warned against searching "for the 'purpose' of a consent
decree" and then construing it in that light. ITT Continental
Baking, 420 U.S. at 235. The decree must be construed "as it
is written." Id. at 238. Ordinary "aids of construction," such
as the circumstances surrounding the formation of the con-
sent order, may be consulted. Id. at 238 & n.11. But
ultimately the question for the lower court, when it interprets
a consent decree incorporating a settlement agreement, is
what a reasonable person in the position of the parties would
have thought the language meant. See, e.g., Colfax Envelope
Corp. v. Local No. 458-3M, Chicago Graphic Communica-
tions Int'l Union, 20 F.3d 750, 754 (7th Cir. 1994); Quadran-
gle Dev. Corp. v. Antonelli, 935 F.2d 1337, 1340 (D.C. Cir.
1991); Lee v. Flintkote Co., 593 F.2d 1275, 1281 n.30 (D.C.
Cir. 1979); see also E. Allan Farnsworth, Contracts s 7.14
(2d. ed. 1990). That too is the question on appeal and it is a
question of law, which is why review is de novo.
As to the merits, we find the Settlement Agreement neither
vague nor obscure. To be sure, the bankruptcy court found
otherwise after careful and thorough consideration. But it
appears to us, in light of the Agreement's language and
structure, that there is no hidden meaning, no lurking ambi-
guity. The Agreement states that Richardson will assume
the second mortgage as part of the division of marital proper-
ty. Nothing suggests that the parties were using the second
mortgage assumption as a means of providing alimony or
child support.
The Settlement Agreement is divided into six sections, only
two of which are relevant. The section headed "Custody,
Visitation, and Support" describes custody arrangements and
Richardson's child support obligations. The section headed
"Marital Property" divides up the parties' marital property
and includes the provision obligating Richardson to pay the
second mortgage. This in itself is a strong indication that
Richardson's second mortgage obligation was exactly what it
purported to be, a means of allocating the parties' property.
The bankruptcy judge focused on one of the Agreement's
opening Recitals, which stated that "it is [the parties'] intent
to resolve all martial [sic] property rights," including "alimo-
ny." See Edwards, slip op. at 12, 14. We do not agree that
the reference to "alimony" casts doubt upon the nature of the
second mortgage provision. Edwards did not include a claim
for alimony in her Complaint for Absolute Divorce, and the
Maryland court never mentioned it in its oral opinion ren-
dered before the parties settled the case. That the parties
said they were resolving alimony, which was not an issue in
the divorce proceedings, scarcely means that the second
mortgage payments were alimony or something in the nature
of alimony.
The mortgage payments are not even structured in the
form of support payments. Richardson's responsibility for
the mortgage is not contingent upon changes in the parties'
financial circumstances, or the continued occupation of the
house by Edwards or the children,1 or the death or remar-
riage of Edwards, all of which would be expected if the
mortgage payments were alimony or support. Cf. Wright v.
Commissioner, 543 F.2d 593, 599 (7th Cir. 1976).2 Under the
Internal Revenue Code, which, like the Bankruptcy Code,
also requires federal courts to distinguish alimony payments
from property settlements, courts must look to the form of
the payment in drawing the distinction. See 26 U.S.C.
s 71(b)(1)(A-D) (to qualify as alimony, payments must be
received by a spouse under a divorce or separation agree-
ment, the payor and payee must not be members of the same
household, and payments must terminate upon payee's
death); see also H.R. Rep. No. 98-432, pt. 2, at 1496 (1984),
reprinted in 1984 U.S.C.C.A.N. 697, 1138 ("In order to pre-
vent the deduction of amounts which are in effect transfers of
property unrelated to the support needs of the recipient, the
bill provides that a payment qualifies as alimony only if the
payor ... has no liability to make any such payment for any
period following the death of the payee spouse."). The
unconditional form of the mortgage payments here, together
with their placement in the "Marital Property" section of the
Agreement, leads to the conclusion that the payments were
not in the nature of alimony or support.
Perhaps because of these considerations, Edwards does not
argue that the mortgage payments were intended to serve
specifically as child support or alimony. Instead, she con-
tends that under s 523(a)(5) any obligation incurred by the
debtor that serves to support the debtor's spouse--as did
Richardson's assumption of the second mortgage payments--
__________
1 In fact, the Agreement specifically contemplates the possibili-
ty that Edwards and the children would move. A provision of the
Agreement requires Edwards to inform Richardson of the chil-
dren's location should she change address.
2 According to Richardson's brief, he took out the second
mortgage in order to secure a business loan; when married, the
couple viewed the obligation not as a joint debt, but rather as a
business debt assumed by Richardson; and prior to their divorce,
Edwards paid the first mortgage out of her salary, while Richard-
son paid the second mortgage.
qualifies as a nondischargeable debt. We are uncertain
whether the bankruptcy judge embraced this proposition, but
we are certain that it proves too much. Money is fungible.
The divorcing couple is well aware that the basket of goods to
be divided among them is finite. The amount and duration of
support or alimony payments may well depend on the division
of property the couple settles upon. To some degree, all
property awards help to "support" the receiving spouse, yet
such awards are clearly not within s 523(a)(5)'s exemption.3
The statute distinguishes nondischargeable spousal and child
support payments from property settlements. It "makes
nondischargeable any debts ... in payment of alimony, main-
tenance, or support of the spouse, as determined under
bankruptcy law considerations as to whether a particular
agreement to pay money to a spouse is actually alimony or a
property settlement." S. Rep. No. 95-989, at 79 (1978),
reprinted in 1978 U.S.C.C.A.N. 5787, 5865.
Richardson's assumption of the second mortgage is neither
alimony, nor spousal or child support within the protection of
s 523(a)(5). It is exactly what it purported to be and what
the Maryland court must have construed it to be--namely, an
essential part of the parties' agreed-upon division of property,
and thus an obligation dischargeable in bankruptcy.
* * *
Richardson's child support obligations are nondischarge-
able under s 523(a)(5) of the Bankruptcy Code. His obli-
gation to pay the second mortgage on the Maryland home is
dischargeable.
Affirmed in part, reversed in part.
__________
3 Why, one might ask, should not property settlements also be
nondischargeable in bankruptcy? Congress recently asked itself
this question and answered by amending s 523 to provide that,
under certain conditions, property settlements are also nondis-
chargeable. See Bankruptcy Reform Act of 1994, Pub L. No. 103-
394, s 304(e), 108 Stat. 4106, 4133. Richardson filed his petition
before October 22, 1994, the effective date of the Act, and the
amendment therefore does not apply.