Ashton v. Dollaga (In Re Dollaga)

260 B.R. 493, 2001 Daily Journal DAR 3449, 45 Collier Bankr. Cas. 2d 1537, 2001 Cal. Daily Op. Serv. 2741, 2001 Bankr. LEXIS 289, 2001 WL 336842
CourtUnited States Bankruptcy Appellate Panel for the Ninth Circuit
DecidedMarch 23, 2001
DocketBAP No. NC-00-1147-RRyB. Bankruptcy No. 98-45855 N. Adversary No. 98-4735 AN
StatusPublished
Cited by9 cases

This text of 260 B.R. 493 (Ashton v. Dollaga (In Re Dollaga)) is published on Counsel Stack Legal Research, covering United States Bankruptcy Appellate Panel for the Ninth Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Ashton v. Dollaga (In Re Dollaga), 260 B.R. 493, 2001 Daily Journal DAR 3449, 45 Collier Bankr. Cas. 2d 1537, 2001 Cal. Daily Op. Serv. 2741, 2001 Bankr. LEXIS 289, 2001 WL 336842 (bap9 2001).

Opinions

OPINION

RUSSELL, Bankruptcy Judge.

Pursuant to § 523(a)(15),1 the appellant sought a determination of nondischarge-ability for the appellee’s unpaid balance for prepetition legal services rendered in marital dissolution proceedings. The bankruptcy court ruled against her, finding that she lacked standing to sue under that section. This appeal followed. We AFFIRM.

I. FACTS

In July 1997, after eight years of marriage, appellees Leo and Glorie Dollaga separated. Leo Dollaga petitioned for dissolution and the parties ultimately stipulated to judgment at a March 1998 state court hearing. Mr. Dollaga was represented by appellant Juliet Ashton in the dissolution proceedings.

Notwithstanding their initial agreement, the Dollagas were unable to solidify the details of the judgment. While it remained pending, they filed their chapter 7 petition. Subsequently, in July 1998, judgment of dissolution was entered. The judgment preserved an earlier-issued order providing for joint legal custody of the couple’s three minor children.

In September 1998, Ashton filed a complaint against the Dollagas by which she sought a determination of nondischarge-ability, under § 523(a)(15), for Mr. Dolla-ga’s unpaid balance of $5,774 for her legal services.2 Amending her complaint three times, she alleged that ninety percent of her services pertained to the custody of the children and support for Mr. Dollaga. She also alleged that Mr. Dollaga had the ability to pay “over and above having the ability to pay sums reasonably necessary for the maintenance and support of himself and his children.” The Dollagas did not answer Ashton’s complaint.

A trial was held in February 1999. Based on In re Smith, 205 B.R. 612 (Bankr.E.D.Cal.1997), the bankruptcy court tentatively concluded that the debt owed to Ashton was outside the purview of § 523(a)(15) and that Ashton lacked standing to sue under that section. The court allowed Ashton a response to its tentative ruling and she filed one. Citing legislative [495]*495history, she urged that § 523(a)(15), which excepts from discharge debts arising out of a divorce decree or separation agreement that are not in the nature of alimony, maintenance, or support, should apply to the type of debt she held.

The court was not persuaded and finalized its earlier ruling. It stated:

I have reviewed the plaintiffs response to my tentative ruling, but remain convinced that the Smith decision correctly interprets the statute. What little can be gleaned from the House and Senate reports regarding the Bankruptcy Reform Act of 1994 supports the conclusion that the purpose [of]
§ 523(a)(15) was to provide some protection to the debtor’s children and spouse in cases where § 523(a)(5) would not be applicable. It was not intended to cover any creditor holding any debt arising out of a family law proceeding.
More importantly, the actual language of the statute, taken as a whole, supports this conclusion. Plaintiffs position would require the court to ignore § 523(a)(15)(B), which balances the harm to the debtor versus the harm to a child or former spouse of discharging the debt in question.

Judgment, Mar. 1, 2000, p. 2. The court rendered judgment in favor of the Dolla-gas and Ashton timely appealed.

II.ISSUE

Whether Ashton had standing to bring a nondischargeability complaint under § 523(a)(15).

III.STANDARD OF REVIEW

This appeal raises a legal issue. We review such issues under the de novo standard. See In re Black, 222 B.R. 896, 899 (9th Cir. BAP 1998) (citing In re Kirsh, 973 F.2d 1454, 1456 (9th Cir.1992)).

IV.DISCUSSION

Ashton argues on appeal that she indeed had standing to bring a nondischargeability complaint under § 523(a)(15). We disagree.

Added to the Code by the Bankruptcy Reform Act of 1994, Section 523(a)(15) excepts from discharge any debt—

not of the kind described in paragraph (5) that is incurred by the debtor in the course of a divorce or separation or in connection with a separation agreement, divorce decree or other order of a court of record, a determination made in accordance with State or territorial law by a governmental unit unless—
(A) the debtor does not have the ability to pay such debt from income or property of the debtor not reasonably necessary to be expended for the maintenance or support of the debtor or a dependent of the debtor and, if the debtor is engaged in a business, for the payment of expenditures necessary for the continuation, preservation, and operation of such business; or
(B) discharging such debt would result in a benefit to the debtor that outweighs the detrimental consequences to a spouse, former spouse, or child of the debtor[.]

In short, § 523(a)(15) is the provision governing nonsupport divorce debt.

The broad question presented by this appeal mirrors that which was presented in In re Smith, 205 B.R. 612 (Bankr. E.D.Cal.1997), on which the bankruptcy court relied. That question is the following: whether a person who is not a spouse, former spouse, or dependent of a debtor may sue for nondischargeability under § 523(a)(15). The Smith court answered in the negative. In Smith, a debtor’s former attorney sought nondischargeability under § 523(a)(15) for her prepetition debt [496]*496for legal services rendered in marital dissolution proceedings. Smith, 205 B.R. at 613-14. The debtor filed a motion to dismiss, which the court granted. Id. at 614.

The court held that professionals who represent a debtor in prepetition marital dissolution proceedings could not have standing under § 523(a)(15). Id. at 617. Following the lead of In re Beach, 203 B.R. 676 (Bankr.N.D.Ill.1997), which limited the availability of § 523(a)(15) to a spouse, former spouse, or dependent of a debtor, the court examined the plain language and legislative history of § 523(a)(15). Smith, 205 B.R. at 616-17. It focused on the two above-quoted sub-paragraphs containing exceptions to dis-chargeability, noting that the second exception effectively limited standing to a debtor’s spouse, former spouse, or child. Id. at 616. The court reasoned:

If a debt is owed to someone other than a spouse, former spouse, or child of the debtor, discharge of the debt will always result in a benefit to a debtor that is greater than the detriment to his or her spouse, former spouse, or child. This is true because, in this circumstance, the benefit to a debtor is necessarily positive, and the detriment to the spouse, former spouse, or child is necessarily zero.

Id.

The court also echoed the analysis in Beach:

If a third party brought a complaint under Section 523(a)(15) seeking to discharge a debt in which the former spouse has no liability, the debtor could always raise the affirmative defense set forth in Section 523(a)(15)(B). The debtor would succeed because the former spouse suffers no detrimental consequences when the debt is discharged.

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Ashton v. Dollaga (In Re Dollaga)
260 B.R. 493 (Ninth Circuit, 2001)

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260 B.R. 493, 2001 Daily Journal DAR 3449, 45 Collier Bankr. Cas. 2d 1537, 2001 Cal. Daily Op. Serv. 2741, 2001 Bankr. LEXIS 289, 2001 WL 336842, Counsel Stack Legal Research, https://law.counselstack.com/opinion/ashton-v-dollaga-in-re-dollaga-bap9-2001.