In re: Cornelius Leroy Lilly

• Court: United States Bankruptcy Appellate Panel for the Ninth Circuit
• Decided: January 31, 2012
• Docket: AZ-11-1185-KiClJu
• Status: Unpublished

Opinion

FILED JAN 31 2012 1 SUSAN M SPRAUL, CLERK U.S. BKCY. APP. PANEL 2 OF THE NINTH CIRCUIT

3 UNITED STATES BANKRUPTCY APPELLATE PANEL 4 OF THE NINTH CIRCUIT 5 In re: ) BAP No. AZ-11-1185-KiClJu ) 6 CORNELIUS LEROY LILLY, ) Bk. No. 10-26590 ) 7 Debtor. ) Adv. No. 10-2006 ______________________________) 8 ) CORNELIUS LEROY LILLY, ) 9 ) Appellant, ) 10 ) v. ) M E M O R A N D U M1 11 ) SHELLY SMITHSON, ) 12 ) Appellee. ) 13 ______________________________) 14 Submitted Without Oral Argument on January 18, 20122 15 Filed - January 31, 2012 16 Appeal from the United States Bankruptcy Court 17 for the District of Arizona 18 Honorable George B. Nielsen, Bankruptcy Judge, Presiding 19 Appearances: Appellant Cornelius Leroy Lilly pro se on brief; 20 David W. Elston and Todd M. Akin of Jennings, Strouss & Salmon, PLC on brief for Appellee Shelly 21 Smithson. 22 23 24 25 1 This disposition is not appropriate for publication. Although it may be cited for whatever persuasive value it may 26 have (see Fed. R. App. P. 32.1), it has no precedential value. See 9th Cir. BAP Rule 8013-1. 27 2 On January 5, 2012, the Panel entered an order granting 28 appellee’s motion to submit on the briefs and appellate record. 1 Before: KIRSCHER, CLARKSON,3 and JURY, Bankruptcy Judges. 2 Appellant, chapter 74 debtor Cornelius Leroy Lilly 3 (“Lilly”), appeals a bankruptcy court judgment determining that 4 debts owed by Lilly to his former spouse, appellee Shelly 5 Smithson (“Smithson”), were nondischargeable under either 6 § 523(a)(5) or § 523(a)(15). We AFFIRM.5 7 8 9 3 Hon. Scott C. Clarkson, United States Bankruptcy Judge for 10 the Central District of California, sitting by designation. 4 11 Unless otherwise indicated, all chapter, section and rule references are to the Bankruptcy Code, 11 U.S.C. §§ 101-1532, and 12 to the Federal Rules of Bankruptcy Procedure, Rules 1001-9037. 5 13 Tabs 2 through 5 in Lilly’s record contain items not presented before the bankruptcy court. The items consist of 14 Lilly’s mortgage payment history, foreclosure related documents, Lilly’s 2010 W-2, and Lilly’s weekly pay stubs from February 2011 15 through July 2011. In her response brief, Smithson moved to strike Tabs 2 through 5. On August 15, 2011, Lilly filed a 16 “Motion to Admit Evidence,” requesting that Tabs 2 through 5 be allowed in the record. The clerk’s office issued an order 17 allowing Lilly to file a response specifying when and at what docket entry number these items were filed, or what filed entry 18 they may have been attached to, in either the adversary proceeding or main case. The motion and any response were to be 19 forwarded to the merits panel for consideration. Lilly filed a response to the clerk’s order on November 10, 20 2011. He failed to specify when or at what docket entry any of the documents in Tabs 2 through 5 had been filed. However, Lilly 21 proceeded to attach four entirely different documents to the response, claiming that these documents had been “attached to the 22 original bankruptcy filing,” and requested that the Panel consider them. These documents include: one page of Lilly’s 23 Schedule F, a certificate of notice, a mailing matrix, and a copy of Lilly’s discharge. 24 We will not consider Tabs 2 through 5 of Lilly’s record because these documents were not presented before the bankruptcy 25 court, and they are irrelevant in any event. Kirshner v. Uniden Corp. of Am., 842 F.2d 1074, 1077 (9th Cir. BAP 1997)(panel 26 cannot consider items not presented to the bankruptcy court when making its decision). As for the four “new” documents Lilly 27 attached to his response, while they were filed in the bankruptcy court, they too are irrelevant to this appeal, and we need not 28 consider them. - 2 - 1 I. FACTUAL BACKGROUND AND PROCEDURAL HISTORY 2 A. The Divorce Decree and Related Judgments. 3 Lilly and Smithson were married in 1996. During the 4 marriage, they had two children, both of whom are still minors. 5 Lilly filed a petition for dissolution of marriage with the 6 Superior Court of Arizona, Maricopa County, (“State Court”) in 7 July 2009. On February 1, 2010, the State Court signed a minute 8 entry dated January 22, 2010, constituting the formal order for 9 the dissolution of marriage, division of community property, 10 child custody, and related matters (“Divorce Decree”). The 11 Divorce Decree was entered on February 2, 2010. 12 The State Court held a further evidentiary hearing regarding 13 the Divorce Decree on May 26, 2010, to address certain 14 outstanding issues, including custodial arrangements and 15 Smithson’s attorney’s fee request under A.R.S. § 25-324.6 In an 16 order dated May 26, 2010, and entered on June 2, 2010, the State 17 Court awarded Smithson, inter alia, $575 per month for spousal 18 maintenance and a judgment of $4,079.83 comprised of the 19 20 6 In the case of dissolution, A.R.S. § 25-324 provides in 21 relevant part: 22 The court . . . after considering the financial resources of both parties and the reasonableness of the positions each 23 party has taken throughout the proceedings, may order a party to pay a reasonable amount to the other party for the 24 costs and expenses of maintaining or defending any proceeding under this chapter . . . . On request of a party 25 . . . the court shall make specific findings concerning the portions of any award of fees and expenses that are based on 26 consideration of financial resources and that are based on consideration of reasonableness of positions. The court may 27 make these findings before, during or after the issuance of a fee award. 28 - 3 - 1 following: $546.50 for debt equalization; $500.00 for Smithson’s 2 share of a rental security deposit refund; $3,000.00 for 3 Smithson’s personal property lost or destroyed by Lilly; and 4 $33.33 for reimbursement for their daughter’s medical bill. 5 (“May 26, 2010 Order”). The State Court took the matter of 6 Smithson’s attorney’s fees under advisement and ordered her to 7 file a China Doll Affidavit setting forth the amount of her fees 8 to date. The May 26, 2010 Order stated that such fees, whatever 9 they turned out to be, would not be entered as a support order. 10 Smithson later submitted a China Doll Affidavit for her 11 attorney’s fees. Lilly filed no objection. On July 12, 2010, 12 the State Court entered a judgment in favor of Smithson and her 13 attorney, Charna Johnson, for “attorney’s fees and costs incurred 14 in the Dissolution of Marriage action in the sum of $10,000,” 15 plus interest (the “Attorney’s Fee Award”). 16 B. The Adversary Proceeding. 17 Lilly filed a chapter 7 bankruptcy petition on August 23, 18 2010. He did not list any domestic support obligations in his 19 Schedule E, but in his Schedule F he listed a debt in the amount 20 of $10,000 to Charna Johnson for “attorney’s fees (ex-wife’s),” 21 and a debt in the amount of $4,000 to Smithson for “judgment.” 22 Smithson filed a nondischargeability complaint against Lilly 23 on November 10, 2010, seeking to except from discharge Lilly’s 24 debts from the Divorce Decree, the May 26, 2010 Order, and the 25 Attorney’s Fee Award as support obligations under § 523(a)(5) or, 26 27 alternatively, as debts incurred in the course of the dissolution

28 proceedings under § 523(a)(15).

- 4 - 1 In his answer, Lilly acknowledged that the alleged debts 2 were incurred in the dissolution proceedings, but denied that 3 they were in the nature of a domestic support obligation. In 4 short, Lilly disputed the underlying merits of the dissolution 5 proceedings and the State Court’s related orders. Lilly did not 6 contest the monthly spousal maintenance and contended that he was 7 current on the payments. Attached to Lilly’s answer was a recent 8 pay stub from his current employer. 9 On December 27, 2010, Smithson moved for summary judgment. 10 Smithson contended that no genuine issue of material fact 11 prevented a ruling that the debts at issue were nondischargeable 12 under § 523(a)(15) because Lilly had admitted they were incurred 13 in the course of the dissolution proceedings. Alternatively, 14 Smithson contended that the spousal maintenance debt of $575 per 15 month was in the nature of a domestic support obligation 16 nondischargeable under § 523(a)(5), but the remaining debts were 17 18 otherwise nondischargeable under § 523(a)(15).

19 Lilly’s opposition to Smithson’s motion consisted of a copy

20 of his previously-filed answer to the complaint and five

21 exhibits. The five exhibits included: (1) a copy of Lilly’s pay

22 stub reflecting “support” payments; (2) a portion of the May 26,

23 2010 Order reflecting what Lilly said was “proof of paternity;” 24 (3) a daily school attendance record for the parties’ son; (4) a 25 copy of the son’s report card; and (5) a letter from the son’s 26 basketball coach praising the son’s performance. 27 The bankruptcy court held a hearing on Smithson’s motion on 28 - 5 - 1 April 12, 2011. Lilly contended that the debts at issue would 2 cause him an undue hardship and affect his ability to care for 3 his son, of whom he had custody, so they should be discharged 4 under a “narrow exception” to the rule. 5 After explaining to Lilly that his arguments were better 6 suited for the State Court, the bankruptcy court issued its oral 7 ruling granting Smithson’s motion for summary judgment. 8 Specifically, the court found that the spousal maintenance of 9 $575 per month was nondischargeable under § 523(a)(5), which 10 Lilly conceded. Carefully reviewing controlling authority and 11 the State Court’s findings in its May 26, 2010 Order, which 12 stated that Smithson’s attorney’s fees “shall not be entered as a 13 support order,” the bankruptcy court found that the Attorney’s 14 Fee Award was in the nature of support and nondischargeable under 15 § 523(a)(5). Alternatively, it determined that the fees were 16 nondischargeable as a divorced-related debt under § 523(a)(15). 17 18 As for the judgment of $4,079.83, the bankruptcy court found that

19 it was comprised of various debts created in the dissolution

20 proceedings, so it too was nondischargeable under § 523(a)(15).7

21 On April 15, 2011, the bankruptcy court entered a judgment

22 7 23 The bankruptcy court also found that any remaining debts incurred as a result of a hold harmless clause in the Divorce 24 Decree and May 26, 2010 Order were also nondischargeable under § 523(a)(15). Lilly never disputed such debts before the 25 bankruptcy court. In any event, he does not appear to contest this finding on appeal. Lilly also does not contest the 26 bankruptcy court’s finding regarding the nondischargeability of the monthly spousal maintenance under § 523(a)(5). Therefore, we 27 address only the debts Lilly disputed before the bankruptcy court and that he contests on appeal: the Attorney’s Fee Award and the 28 judgment for $4,079.83. - 6 - 1 consistent with its oral ruling.8 Lilly timely appealed. 2 II. JURISDICTION 3 The bankruptcy court had jurisdiction under 28 U.S.C. §§ 157 4 (b)(2)(I) and 1334. We have jurisdiction under 28 U.S.C. § 158. 5 III. ISSUE 6 Did the bankruptcy court err in granting Smithson summary 7 judgment determining that the debts at issue were 8 nondischargeable under § 523(a)(15)? 9 IV. STANDARDS OF REVIEW 10 The standard of review for legal questions is de novo and 11 clearly erroneous for factual questions. Beaupied v. Chang 12 (In re Chang), 163 F.3d 1138, 1140 (9th Cir. 1998). A finding is 13 clearly erroneous when it is illogical, implausible, or without 14 support in the record. United States v. Hinkson, 585 F.3d 1247, 15 1261-62 (9th Cir. 2009)(en banc). 16 Summary judgment determinations are reviewed de novo. Tobin 17 18 v. Sans Souci Ltd. P’ship (In re Tobin), 258 B.R. 199, 202 (9th

19 Cir. BAP 2001). Viewing the evidence in the light most favorable

20 to the nonmoving party, we must determine “whether there are any

21 genuine issues of material fact and whether the trial court

22 correctly applied relevant substantive law.” Id.

23 V. DISCUSSION 24 Lilly’s opening brief disputes the underlying merits of the 25 dissolution proceedings and related State Court orders and 26 8 27 Rather than issuing a separate order granting the motion, the court entered only a judgment which stated that the motion 28 was granted in its entirety. - 7 - provides details of his current financial situation.

1 Unfortunately, these arguments are irrelevant to the issue of the

2 nondischargeability judgment. The only argument Lilly raises

3 somewhat relevant to this appeal, is that the debts at issue 4 should be discharged because of the undue burden they will place 5 on him. However, this argument lacks merit as we discuss below. 6 Although Lilly does not articulate the actual issues on 7 appeal, we must construe pro se briefs liberally. Balistreri v. 8 Pacifica Police Dep't., 901 F.2d 696, 698-99 (9th Cir. 1990). 9 Therefore, we review the record to see if it supports the 10 bankruptcy court’s decision to grant Smithson summary judgment. 11 A. The bankruptcy court did not err in alternatively finding 12 that the Attorney’s Fee Award was nondischargeable under § 523(a)(15). 13 14 Section 523(a)(15) excepts from discharge a debt “to a

15 spouse, former spouse, or child of the debtor and not of the kind

16 described in paragraph (5) that is incurred by the debtor in the 17 course of a divorce or separation or in connection with a 18 separation agreement, divorce decree or other order of a court of 19 record . . . .” 20 Notably, Lilly never disputed that the Attorney’s Fee Award 21 was not nondischargeable under § 523(a)(15); he only disputed it 22 as a debt in the nature of support under § 523(a)(5). We 23 conclude that the debt is nondischargeable under § 523(a)(15) 24 because it was incurred by Lilly in the course of the divorce and 25 is subject to a judgment in connection with the Divorce Decree. 26 We reject Lilly’s argument for dischargeability of the fees 27 due to his inability to pay. The cases Lilly cites in support of 28 - 8 - his argument are no longer controlling law. A chapter 7 debtor’s

1 inability to pay was a defense to nondischargeability under

2 § 523(a)(15) prior to the Bankruptcy Abuse Protection and

3 Consumer Protection Act (“BAPCPA”) of 2005. Prior to 2005, 4 § 523(a)(15) provided that debts that are not support obligations 5 but which were incurred in the course of a divorce or separation 6 are nondischargeable unless either (1) the debtor lacks the 7 ability to pay the debt, or (2) discharging the debt would result 8 in a benefit to the debtor that outweighs the detrimental 9 consequences to the spouse, former spouse, or child of the 10 debtor. Former § 523(a)(15)(A), (B). However, BAPCPA eliminated 11 the balancing test provided in subsections (A) and (B) from the 12 statute. As a result, in individual cases under chapter 7 any 13 debts incurred in the course of a divorce or in connection with a 14 divorce decree that are not in the nature of support under § 15 523(a)(5) are still nondischargeable under § 523(a)(15). 16 Accordingly, even if the Attorney’s Fee Award was not in the 17 nature of support under § 523(a)(5), the bankruptcy court did not 18 err in alternatively finding that it was a nondischargeable 19 20 divorce-related debt under § 523(a)(15).9

21 B. The bankruptcy court did not err in finding that Smithson’s judgment for $4,079.83 was nondischargeable under 22 § 523(a)(15).

23 As part of the May 26, 2010 Order, the State Court awarded

24 Smithson a judgment for $4,079.83, which comprised of $546.50 for

25 debt equalization, $500.00 for Smithson’s share of a security

26 9 We are not saying that the bankruptcy court erred in 27 finding the Attorney’s Fee Award was in the nature of support. We are only stating that we need not reach that issue, since it 28 is otherwise nondischargeable. - 9 - deposit refund, $3,000.00 for her personal property lost or

1 destroyed by Lilly, and $33.33 for reimbursement for their

2 daughter’s medical bill. According to the order, Lilly agreed to

3 pay the $546.50 equalization debt and the $500.00 debt for the 4 security deposit. The State Court ordered Lilly to pay the 5 remaining two debts after the evidentiary hearing. 6 Although Lilly wishes to argue the underlying merits of the 7 State Court evidentiary hearing, we are not the proper forum for 8 such arguments, and they are not relevant to the determination of 9 the nondischargeability of this debt. We must also reject 10 Lilly’s argument of his inability to pay for the same reasons we 11 stated above. The judgment for $4,079.83 is nondischargeable 12 under § 523(a)(15) because it was incurred by Lilly in the course 13 of the divorce and is part of the Divorce Decree contained in the 14 May 26, 2010 Order. 15 Accordingly, the bankruptcy court did not err in finding 16 that Smithson’s judgment for $4,079.83 was a nondischargeable 17 divorce-related debt under § 523(a)(15). 18 VI. CONCLUSION 19 20 The bankruptcy court correctly applied the relevant

21 substantive law, and no genuine issues of material fact were in

22 dispute. Therefore, it did not err in granting Smithson summary

23 judgment. We AFFIRM.

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