Para v. Para

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UNITED STATES BANKRUPTCY COURT
NORTHERN DISTRICT OF CALIFORNIA
In re 	No. 05-46300 TK
Chapter 7
CAREY SANCHEZ PARA,
Debtor.
___________________________/
DR. DANIEL PARA, 	A.P. No. 06-4018 AT
Plaintiff,
vs.
CAREY SANCHEZ PARA,
Defendant.
___________________________/
MEMORANDUM OF DECISION
Prior to the commencement of this bankruptcy case, in connection
with 	the 	divorce 	proceeding 	of 	the 	plaintiff 	(the 	“Plaintiff”) 	and
defendant 	(the 	“Debtor”) 	in 	this 	adversary 	proceeding, 	the 	Alameda
County 	Superior 	Court 	(the 	“family 	law 	court”) 	imposed 	two
obligations 	on 	the 	Debtor: 	i.e., 	for 	$36,185 	and 	$31,500,
respectively 	(the 	“Equalizing 	Payment 	Obligations”). 	These
obligations were imposed on the Debtor to compensate for property or
Signed: September 26, 2006
________________________________________
LESLIE TCHAIKOVSKY
U.S. Bankruptcy Judge
________________________________________
Entered on Docket
September 27, 2006
GLORIA L. FRANKLIN, CLERK
U.S BANKRUPTCY COURT
NORTHERN DISTRICT OF CALIFORNIA
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debt awards made by the family law court that favored the Debtor. 	In
this 	adversary 	proceeding, 	the 	Plaintiff 	seeks 	a 	judgment 	of
nondischargeability as to the Equalizing Payment Obligations pursuant
to 11 U.S.C. § 523(a)(15). 	The parties have filed cross-motions for
summary judgment with respect to this claim. 	The motions were heard
and taken under submission. 	Having considered the undisputed facts,
based 	on 	the 	admissible 	evidence 	presented 	by 	the 	parties, 	and 	the
applicable 	law, 	for 	the 	reasons 	stated 	below, 	the 	Debtor’s 	motion
will be granted, and the Plaintiff’s motion will be denied.
APPLICABLE LAW
A. 	SECTION 523(a)(15)
As applicable here, 11 U.S.C. § 523(a)(15) provides as follows:
(a) 	A 	discharge 	under 	section 	727...of 	this
title 	does 	not 	discharge 	an 	individual 	debtor
from any debt–
---
(15) 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;
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1Section 523(a)(5) provides that all domestic support
obligations are nondischargeable. As applied to all cases filed on
or after October 17, 2005, 11 U.S.C. § 523(a)(15) provides that all
domestic nonsupport obligations are also nondischargeable.
However, the Debtor commenced this case prior to October 17, 2005.
Therefore, the form of 11 U.S.C. § 523(a)(15) quoted above governs
the dispute in this adversary proceeding.
3
11 U.S.C. § 523(a)(15). 1
The 	plaintiff 	has 	the 	burden 	of 	proving 	that 	the 	debt 	is 	a
nonsupport debt incurred by the debtor in the course of a divorce or
separation. 	The burden of proof then shifts to the debtor. 	To avoid
a 	determination 	of 	nondischargeability, 	the 	debtor 	must 	prove 	that
she is either unable to pay the debt or that requiring her to repay
the debt would be more of a hardship than discharging the debt would
be 	to 	her 	former 	spouse. 	See 	In 	re 	Jodoin, 	209 	B.R. 	132, 	138-41
(Bankr. 	9 th 	Cir. 	1997). 	These 	“defenses” 	need 	not 	be 	applied 	on 	an
all-or-nothing 	basis. 	If 	the 	evidence 	presented 	at 	trial 	warrants
it, the Court may grant a partial discharge. 	See In re Myrvang, 232
F.3d 1116, 1122-24 (9 th Cir. 2000).
In 	determining 	the 	debtor’s 	ability 	to 	pay, 	the 	“disposable
income” 	test 	set 	forth 	in 	11 	U.S.C. 	§ 	1325(b) 	is 	the 	appropriate
starting point. 	However, in the context of 11 U.S.C. § 523(a)(15),
given the possibility that a spouse may manipulate his or her budget
to 	gain 	an 	advantage 	in 	the 	litigation, 	the 	test 	should 	utilize
prospective 	income, 	not 	just 	actual 	current 	income, 	as 	well 	as
reasonable 	expenses. 	Jodoin, 	207 	B.R. 	at 	142. 	In 	balancing 	the
hardships, the Court must exercise its discretion, and its decision
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in 	this 	regard 	is 	reviewed 	for 	abuse 	of 	discretion. 	Myrvang, 	232
F.3d at 1120.
B. 	SUMMARY JUDGMENT STANDARDS
Summary judgment motions are governed by Rule 56 of the Federal
Rules of Civil Procedure (“FRCP”), made applicable to this adversary
proceeding by Rule 7056 of the Federal Rules of Bankruptcy Procedure
(hereinafter 	“FRBP”). 	FRCP 	56(c) 	provides 	that 	summary 	judgment
should be rendered if the evidence presented shows that “there is no
genuine 	issue 	as 	to 	any 	material 	fact” 	and 	if 	the 	“moving 	party 	is
entitled to a judgment as a matter of law.” 	The moving party has the
initial 	responsibility 	to 	inform 	the 	court 	of 	the 	basis 	for 	the
motion. 	Celotex 	Corp. 	v. 	Catrett, 	477 	U.S. 	317, 	323 	(1986). 	The
burden then shifts to the opposing party to establish that a genuine
issue 	exists 	as 	to 	a 	material 	fact. 	Matsushita 	Elec. 	Indus. 	Co.,
Ltd. v. Zenith Radio Corp., 475 U.S. 574, 586 (1986). 	In determining
whether summary judgment should be granted, the evidence presented by
the opposing party, and all reasonable inferences that may be drawn
from 	that 	evidence, 	must 	be 	accepted 	as 	true. 	Anderson 	v. 	Liberty
Lobby, Inc., 477 U.S. 242, 255 (1986); Matsushita, 475 U.S. at 587.
DISCUSSION
A. 	UNDISPUTED FACTS
The Debtor and Plaintiff were married in 1987. 	They separated
in 	1997 	and 	subsequently 	divorced. 	Plaintiff 	is 	a 	doctor. 	The
Debtor 	is 	a 	graduate 	of 	Stanford 	University. 	During 	the 	marriage,
the 	Debtor 	worked 	to 	assist 	the 	Plaintiff 	in 	obtaining 	his 	medical
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degree. 	The couple had a daughter, Maya, in 1997. 	When the couple
divorced, the Debtor was awarded primary custody of Maya. 	Maya has
some health problems that require more than normal parental care.
As part of the divorce proceeding, Plaintiff paid to enable the
Debtor to obtain an MBA. 	Since she obtained that degree, for several
years, 	Plaintiff 	has 	been 	under 	family 	law 	court 	order 	to 	search
diligently for a job commensurate with her abilities and educational
degree. 	To date, she has failed to find such a position.
Instead, 	the 	Debtor 	does 	work 	part-time 	for 	the 	City 	of
Pleasanton 	and 	does 	some 	consulting 	on 	her 	own. 	She 	earns 	only
$1,700 	per 	month 	and 	has 	no 	benefits 	through 	her 	employment. 	Her
expenses 	are 	over 	$4,000 	per 	month. 	Her 	total 	income 	in 	2005 	was
less than $14,000. 	She also has student loan debt and pays $100 per
week 	for 	child 	care 	during 	the 	summer. 	The 	Debtor 	lives 	with 	her
daughter and her disabled parents in a rental house in Castro Valley,
California. 	The Debtor pays half the rent. 	Other 	than 	by 	sharing
expenses, 	the 	Debtor’s 	parents 	do 	not 	contribute 	to 	the 	Debtor’s
support.
Plaintiff 	is 	a 	surgeon 	in 	Lake 	Havasu, 	Arizona. 	He 	has
remarried and has four children under the age of seven. 	His income
in 2004 was $225,939 and in 2005 $147,146. 	His income has continued
to decrease in 2006. 	He believes that his decreased income is caused
by 	defamatory 	statements 	made 	about 	him 	by 	a 	colleague 	whom 	he 	is
suing 	as 	a 	result. 	He 	has 	substantial 	secured 	and 	unsecured 	debts
and 	monthly expenses of approximately $29,000. 	He has recently been
compelled 	to 	borrow 	approximately 	$70,000 	to 	pay 	his 	malpractice
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insurance, 	among 	other 	things. 	He 	owns 	a 	2001 	Ebbtide 	boat 	and 	is
making payments on two late model cars.
In addition, Plaintiff pays approximately $1,000 per month for
membership 	in 	a 	golf 	club 	and 	approximately 	$200 	per 	month 	for
private 	school 	tuition. 	He 	dines 	out 	frequently 	and 	spends
substantial sums for luxury items, such as $653 for cigars and $1,284
to mount a game fish.
The family law court ordered Plaintiff to pay the Debtor child
and 	spousal 	support. 	He 	is 	currently 	in 	arrears 	in 	making 	these
payments 	in 	the 	approximate 	amount 	of 	$75,000, 	including 	accrued
interest.
B. EVIDENTIARY OBJECTIONS
With 	her 	reply, 	the 	Debtor 	filed 	evidentiary 	objections 	to
portions of Plaintiff’s opposition and cross-motion.
1. 	She objected to consideration of a three page document which
appears to represent a decision by the family law court on or about
September 	6, 	2005 	(the 	“2005 	Decision”) 	on 	the 	ground 	that 	the
document has not been properly authenticated. 	She also objected to
consideration 	of 	a 	nine 	page 	document 	which 	appears 	to 	represent 	a
decision 	by 	the 	family 	law 	court 	on 	or 	about 	November 	9, 	2004 	(the
“2004 Decision”) on the same ground.
Authentication as a pre-condition to admissibility is governed
by Rules 901 and 902 of the Federal Rules of Evidence. 	Rule 902(4)
provides that a certified copy of a publicly filed document is self-
authenticating. 	The copies of the decisions offered by Plaintiff are
not certified. 	However, Rule 901(7) states that an a public record
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2Her objection to this paragraph and to a portion of
Plaintiff’s response on the ground that it is incomplete and/or out
of context is overruled as not constituting a proper evidentiary
objection.
7
may be authenticated by providing “evidence that a writing authorized
by law to be...filed and in fact...filed in a public office...is from
the 	public 	office 	where 	items 	of 	this 	nature 	are 	kept.” 	The 	Court
concludes that the reference to the 2004 Decision in paragraph 4 of
Plaintiff’s 	declaration 	is 	sufficient 	to 	meet 	this 	requirement.
Thus, 	with 	respect 	to 	the 	2004 	Decision, 	the 	Debtor’s 	objection 	is
overruled.
Plaintiff’s declaration neither refers to nor attaches the 2005
Decision. 	A 	copy 	of 	the 	2005 	Decision 	is 	merely 	attached 	to
Plaintiff’s memorandum of points and authorities and subsequently to
a 	notice 	filed 	with 	the 	Court 	by 	Plaintiff. 	Thus, 	with 	respect 	to
the 2005 Decision, the objection is sustained, and the 2005 Decision
will not be admitted.
2. 	The 	Debtor 	objected 	to 	paragraph 	4 	of 	Plaintiff’s
declaration 	on 	the 	ground 	that 	it 	is 	hearsay. 2 	In 	this 	paragraph,
Plaintiff purports to quote from a family law decision. 	The Debtor
is 	correct 	that 	the 	quoted 	portion 	of 	this 	paragraph 	constitutes
hearsay. 	Plaintiff has not cited any exception to the hearsay rule
that would permit this statement to be considered. 	Consequently, the
quoted portion of this paragraph will be stricken. 	The reference to
the attached 2004 Decision as a copy of Judge Grimmer’s decision will
not be stricken.
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3. 	The 	Debtor 	objected 	to 	the 	second 	sentence 	of 	paragraph 	8
and to paragraph 11 of Plaintiff’s declaration on the ground that the
statements made therein are conclusory rather than factual.
a. 	In the second sentence of paragraph 8, Plaintiff states that
the 	downward 	trend 	in 	his 	income 	reflected 	by 	a 	comparison 	of 	his
income 	in 	2004 	with 	his 	income 	in 	2005 	has 	continued 	during 	2006.
The 	Court 	disagrees 	that 	this 	statement 	is 	conclusory 	rather 	than
factual. 	The objection is overruled.
b. 	In paragraph 11, Plaintiff states that staffing and billing
issues 	have 	caused 	his 	business 	income 	to 	decline 	during 	2006 	to
below what it was in 2004 and 2005. 	Again, the Court disagrees that
this statement is conclusory rather than factual. 	The objection is
overruled.
4. 	The 	Debtor 	objected 	to 	page 	7, 	lines 	6 	through 	10 	of
Plaintiff’s response and cross-motion filed on August 3, 2006 on the
basis that it is unsupported by any evidence and constitutes hearsay.
This objection is again directed to the same quotation from a family
law 	decision 	contained 	in 	Plaintiff’s 	declaration. 	For 	the 	same
reason, the Court will sustain the objection and strike the language
in question.
C. 	LEGAL ARGUMENT
1. 	Ability to Pay
It 	is 	undisputed 	that 	the 	Debtor’s 	current 	monthly 	income 	is
approximately $1,400 and her monthly expenses exceed $4,000. 	Even if
some of her expenses are nonessential, clearly, she has no disposable
income at present. 	However, as noted in Jodoin, in the context of 11
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3Not suprisingly, Plaintiff failed to cite In re Lonian, 226
B.R. 248, 253-57 (Bankr. W.D. Okla. 1998). 	In Lonian, the debtor
was a physician who had voluntarily closed his practice shortly
before the dischargeability trial. 	During the three years prior to
his bankruptcy filing, he had earned $330,000, $360,000, and
$181,000, respectively. 	Nevertheless, he had failed to pay his
income taxes and thus had substantial nondischargeable tax debt.
After closing his practice and seeking employment, he claimed that
the best job offer he had received was for $120,000. 	The Court
concluded that the debtor was capable of earning more than he
claimed and thus had the ability to pay his nonsupport debt to his
former spouse. 	It refused to reward him by discharging the debt to
his former spouse because he had failed to pay his tax debt at a
time when he was clearly able to do so. 	Given the reversal of
roles in the instant case, this case is not applicable to a
determination of the 11 U.S.C. § 523(a)(15)(A) prong. 	However, it
does inform the Court’s decision on the 11 U.S.C. § 523(a)(15)(B)
prong.
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U.S.C. § 523(a)(15), the debtor’s current disposable income is merely
the 	starting 	point 	in 	determining 	her 	ability 	to 	pay 	a 	nonsupport
divorce 	related 	obligation. 	Jodoin, 	209 	B.R. 	at 	49. 	Because 	a
bankruptcy discharge is forever, one must also consider the debtor’s
prospective disposable income.
As a graduate of Stanford University, and the recent recipient
of 	an 	MBA, 	the 	Debtor 	presumably 	has 	the 	ability 	to 	earn 	a 	greater
income than she does at present. 	Plaintiff contends that the Debtor
has intentionally kept her income low to gain a litigation advantage
in connection with her divorce proceeding and her bankruptcy case.
In support of this contention, he cited In re Florio, 187 B.R. 654,
657-58 (Bankr. W.D. Mo. 1995) in which income was imputed to a debtor
for 	purposes 	of 	11 	U.S.C. 	§ 	523(a)(15)(A) 	who 	voluntarily 	left 	her
job as a surgical technician to work at a dog grooming business that
paid her no income. 3
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The Debtor has presented no evidence explaining her failure to
obtain 	more 	remunerative 	employment 	to 	date 	as 	a 	result 	of 	her 	job
search. 	Her 	statements 	concerning 	Maya’s 	health 	problems 	and 	her
need 	for 	her 	mother’s 	attention 	are 	too 	vague 	to 	excuse 	the 	Debtor
from 	obtaining 	more 	remunerative 	employment 	as 	a 	matter 	of 	law.
However, it is not insufficient to create a genuine issue of fact in
that regard. 	Thus, both the motion and cross-motion, to the extent
that they are based on the 11 U.S.C. § 523(a)(15)(A), are denied.
2. 	Balance of Hardships
Balancing 	the 	hardships 	under 	11 	U.S.C. 	§ 	523(a)(16) 	to 	some
extent requires a crystal ball. 	At present, the Debtor is clearly in
more straightened financial circumstances than Plaintiff. 	Plaintiff
may 	be 	subject 	to 	substantial 	debt 	and 	required 	to 	borrow 	to 	meet
certain 	critical 	current 	obligations. 	However, 	he 	lives 	the
lifestyle of an affluent person while the Debtor lives frugally.
However, 	it 	is 	possible, 	perhaps 	even 	likely, 	that, 	in 	the
future, the Debtor’s economic circumstances will improve. 	It is also
possible that Plaintiff’s economic circumstances will become worse.
The 	Court 	cannot 	determine 	the 	future 	with 	any 	certainty. 	It 	is
possible that additional evidence presented at trial could help the
Court 	in 	formulating 	a 	reasonable 	prediction. 	Thus, 	but 	for 	one
additional 	undisputed 	fact, 	the 	Court 	would 	also 	deny 	summary
judgment on both motions on this prong.
The additional fact is Plaintiff’s failure to pay court ordered
spousal 	and 	child 	support 	in 	an 	amount 	totaling 	at 	present, 	with
accrued 	interest, 	$75,000. 	Balancing 	hardships 	is 	an 	equitable
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endeavor. 	Parties 	who 	seek 	an 	equitable 	determination 	must 	behave
equitably. 	Failing to pay court ordered support to a former spouse
and 	one’s 	child 	in 	favor 	of 	paying 	dues 	to 	a 	country 	club, 	among
other 	things, 	does 	not 	satisfy 	generally 	accepted 	equitable
standards. 	Thus, 	the 	Court 	will 	grant 	the 	Debtor’s 	motion 	for
summary judgment under 11 U.S.C. § 523(a)(15)(B) and will 	discharge
the Equalizing Payment Obligations. 	The Court will deny Plaintiff’s
cross-motion for summary judgment.
CONCLUSION
The 	Equalizing 	Payment 	Obligations 	are 	nonsupport 	obligations
incurred in connection with a divorce and thus are nondischargeable
unless the Debtor meets her burden of proving a defense under either
11 	U.S.C. 	§ 	523(a)(15)(A) 	or 	(B). 	The 	Court 	concludes 	that 	the
neither the Debtor nor Plaintiff have established a right to summary
judgment with respect to the Debtor’s ability to pay under 11 U.S.C.
§ 	523(a)(15)(A). 	However, 	the 	Court 	concludes 	that, 	based 	on 	the
undisputed evidence, pursuant to 11 U.S.C. § 523(a)(15)(B), it would
be 	a 	greater 	hardship 	on 	the 	Debtor 	to 	fail 	to 	discharge 	the
Equalizing 	Payment 	Obligations 	than 	it 	would 	be 	a 	hardship 	on
Plaintiff to discharge them. 	Counsel for the Debtor is directed to
submit a proposed form of order and judgment in accordance with this
decision.
END OF DOCUMENT
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COURT SERVICE LIST
James F. Beiden
Law Offices of James F. Beiden
840 Hinckley Rd., #245
Burlingame, CA 94010
Robert M. Cook
Law Offices of Robert M. Cook
1430 E. Missouri
Phoenix, AZ 85014
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