Carter v. Carter

447 S.E.2d 522, 18 Va. App. 787, 11 Va. Law Rep. 119, 1994 Va. App. LEXIS 544

• Court: Court of Appeals of Virginia
• Decided: August 16, 1994
• Docket: Record No. 0171-93-2
• Status: Published

Opinions

Opinion

WILLIS, J.

On December 14, 1990, Timothy and Theresa Carter entered into a property settlement agreement requiring Timothy to pay certain sums to Theresa as part of the resolution of their marital property and obligations. The agreement provided, in Section 24(a):

Both parties acknowledge that the terms of this agreement are intended to be in full and final settlement of all rights each may have under Virginia Code Section 20-107.3, commonly referred to as the “Equitable Distribution Act.”

The agreement further provided, in Section 22(a):

If either party fails in the due performance of any of his or her obligations hereunder, the other shall have the right to sue for damages for a breach hereof, or to rescind this Agreement, or seek such other remedies as may be available. Nothing herein shall be construed to restrict or impair the right to exercise this election. The breaching party will indemnify and hold the other harmless from any legal costs and attorney’s fees incurred to enforce this Agreement.

On January 6, 1992, Timothy filed a voluntary petition in bankruptcy under Chapter 7. He scheduled Theresa as a creditor, identifying his obligation to her under the property settlement agreement. The bankruptcy court issued a general stay of enforcement of Timothy’s scheduled debts. On October 16, 1992, the bankruptcy court discharged Timothy from his debts, including his debt to Theresa under the property settlement agreement.

On February 25, 1992, Theresa filed in the trial court a bill for divorce on the ground that the parties had lived separate and apart without cohabitation or interruption for more than one year. By decree entered December 22, 1992, the trial court granted the divorce, rescinded the property settlement agreement on Theresa’s motion, ordered the sale of the jointly owned marital home with equal division of the net proceeds, ordered Timothy to pay Theresa a $3,000 monetary award pursuant to Code § 20-107.3(D), and ordered Timothy to pay Theresa $500 on account of her attorney’s fees.

On appeal, Timothy contends that he was entitled to the benefit of the separation agreement, which insulated him from obligation to Theresa beyond its specified terms. He argues that he was discharged in bankruptcy from obligation under the agreement, and that the trial court erred in imposing on him any further indebtedness to Theresa. We find no error and affirm the judgment of the trial court.

We first consider whether Timothy’s obligation to Theresa under the separation agreement was a dischargeable debt. See Douglas v. Douglas, 17 Va. App. 380, 437 S.E.2d 244 (1993). We find that it was. 11 U.S.C. § 523 provides, in pertinent part:

(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 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, determination made in accordance with State or territorial law by a government unit, or property settlement agreement, but not to the extent that—

(B) such debt includes a liability designated as alimony, maintenance, or support, unless such liability is actually in the nature of alimony, maintenance, or support;

Timothy’s obligation to Theresa under the property settlement agreement was a debt arising out of the resolution of property rights and obligations. It was not in the nature of alimony, maintenance, or support. Therefore, it was a debt dischargeable in bankruptcy and was discharged by the October 16, 1992 bankruptcy order.

Timothy argues that although he sought and obtained discharge from his debt to Theresa under the separation agreement, he may nonetheless enjoy the immunity from further obligation afforded him by the agreement. We disagree. By seeking and accepting discharge from his obligation under the agreement, Timothy repudiated the agreement. He thereby failed in the due performance of his obligation thereunder, giving Theresa the right to seek rescission pursuant to paragraph 22(a). See Andrews v. Sams, 233 Va. 55, 59, 353 S.E.2d 735, 738 (1987). The trial court did not err in granting that relief.

Finally, Timothy argues that the trial court erred in ordering the sale of the marital home with equal division of the net proceeds, in ordering him to pay a monetary award pursuant to Code § 20-107.3(D), and in ordering him to pay attorney’s fees. He does not contest the arithmetic computations of those decisions, but argues that the stay in bankruptcy denied the trial court authority to make any order respecting his property or imposing an economic obligation on him. This argument overlooks the timing of the matter.

The October 16, 1992 discharge order terminated the bankruptcy proceeding. See 11 U.S.C. § 350(a). It released Timothy and his remaining property from further administration by the bankruptcy court. In considering the provisions of its December 22, 1992 decree, the trial court had before it the parties in their current economic posture. It did not have before it for consideration any of Timothy’s property that had been consumed in the bankruptcy or any of his debts that had been discharged. The marital home, being jointly titled, remained in the ownership of the parties. The trial court acted properly in considering this and Timothy’s other resources in determining the application of Code § 20-107.3 and in determining whether to award attorney’s fees.

The judgment of the trial court is affirmed.

Affirmed.

Koontz, J., concurred.