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In re Spong

September 25, 1981

IN RE THEODORE W. SPONG, DEBTOR , RAYMOND J. PAULEY, PLAINTIFF-APPELLANT ,
v.
THEODORE W. SPONG, DEFENDANT-APPELLEE .



Appeal from a judgment entered in the United States District Court for the Western District of New York (Burke, J.) affirming an order of the United States Bankruptcy Court for the Western District of New York. The bankruptcy court discharged defendant from a debt for counsel fees incurred by his former spouse in divorce proceedings between them. Reversed and remanded.

Author: Van Graafeiland

Before:

MANSFIELD, VAN GRAAFEILAND and LUMBARD, Circuit Judges .

VAN GRAAFEILAND, Circuit Judge :

Section 523(a)(5) of the new Bankruptcy Act provides that a discharge in bankruptcy does not discharge a debtor from debts "for alimony to, maintenance for, or support of" a former spouse in connection with a divorce decree. 11 U.S.C. § 523(a)(5). This case presents the question whether a debt for legal services rendered to a debtor's former spouse in connection with a divorce proceeding falls within the above exception. The bankruptcy court ruled, and the district court agreed, that, even though under existing State law and section 17a(7) of the former Bankruptcy Act such debts were considered alimony and therefore nondischargeable, Congress, in amending the statute, intended to make them dischargeable. For the reasons set forth below, we reverse.

In July 1979, in the midst of a contested divorce proceeding in New York State Supreme Court, defendant and his former spouse entered into a stipulation of settlement. Defendant stipulated, among other things, that his wife's reasonable counsel fees were $10,000, and he agreed to pay $4,000 of this amount in monthly installments of $200 plus $514.40 for costs and disbursements. The installments were to be paid to plaintiff who represented defendant's wife throughout the divorce proceedings. The stipulation was subsequently incorporated in a final judgment of divorce entered on November 7, 1979.

On October 16, 1979, defendant filed a voluntary petition in bankruptcy under the new Bankruptcy Act, which had become effective sixteen days earlier, and listed his obligation to plaintiff as an unsecured claim. In this suit, brought by plaintiff to determine the propriety of discharge, the bankruptcy court held that the debt was dischargeable. In re Spong, 3 B.R. 619, 622 (W.D.N.Y. 1980). The district court affirmed on the reasoning and authorities set forth in the bankruptcy court's decision and this appeal followed.

Although the Bankruptcy Act of 1898, ch. 541, 30 Stat. 544, did not expressly except from discharge debts for alimony, maintenance or support of the bankrupt's wife or children, the Supreme Court held that debts arising out of the husband's natural and legal duty to support his wife were not dischargeable under the Act. Audubon v. Shufeldt, 181 U.S. 575, 577-80 (1901). Congress codified this construction of the Act in 1903 by providing that a discharge would not release a bankrupt from his liability "for alimony due or to become due, or for maintenance or support of wife or child." Act of Feb. 5, 1903, ch. 487, 32 Stat. 798. Under this provision, counsel fees that were awarded pursuant to a husband's support obligations generally were held to be nondischargeable, regardless of whether the fees were payable directly to the attorney. See, e.g., DuBroff v. Steingesser, 602 F.2d 36, 38 (2d Cir. 1979); Schiller v. Cornish, 529 F.2d 1363, 1365 (7th Cir. 1976).

In 1978 Congress enacted Pub. L. No. 95-598, 92 Stat. 2549, sometimes referred to as the "Bankruptcy Reform Act of 1978", which provided that a discharge under the Act would 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 property settlement agreement, but not to the extent that --

(A) such debt is assigned to another entity, voluntarily, by operation of law, or otherwise; or

(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.

11 U.S.C.§ 523(a)(5).

Defendant contends that the language and legislative history of the 1978 Act evidence an intent by Congress to overrule the prior holdings concerning counsel fees. Specifically, defendant asserts that his debt is not alimony within the meaning of the statute nor is it payable to his former spouse. Although the bankruptcy court's opinion is somewhat lacking in decisiveness, it apparently holds that defendant's undertaking to pay his wife's counsel fees was in the nature of "alimony, maintenance, or support". 3 B.R. 622. The court concluded, however, that the ...


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