Gilman v. Golio et al

UNITED STATES BANKRUPTCY COURT 	FOR PUBLICATION
EASTERN DISTRICT OF NEW YORK
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In re:
Case No.: 807-72782-478
Anthony L Golio a/k/a Anthony Leonard
Golio, Sr. a/k/a Antonio L. Golio,
Chapter 7
Debtor.
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Patricia Gilman f/k/a Patricia Golio,
Adv. Pro. No.: 807-8302-478
Plaintiff,
- against -
Anthony L Golio a/k/a Anthony Leonard
Golio, Sr. a/k/a Antonio L. Golio,
Defendant.
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MEMORANDUM DECISION
Appearances:
Daniele D. De Voe, Esq.
Attorney for Plaintiff
Weinstein, Kaplan & Cohen, P.C.
1325 Franklin Avenue, Suite 210
Garden City, New York 11530
Dennis Houdek, Esq.
Attorney for Defendant
305 Broadway, Seventh Floor
New York, New York 10007
Hon. Dorothy Eisenberg, United States Bankruptcy Judge
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Before the Court is the Plaintiff’s request for a determination that two state court
judgments rendered in favor of the Plaintiff against the Debtor Defendant are nondischargeable
domestic support obligations under 11 U.S.C. § 523(a)(5), or nondischargeable indebtedness
owed to a former spouse that was incurred by the Debtor in connection with a separation
agreement, divorce decree or other order of a court of record under 11 U.S.C. § 523(a)(15). The
Court has jurisdiction of this matter pursuant to 28 U.S.C. § 1334. This contested matter is a
core proceeding under 28 U.S.C. § 157(b)(A), (I), and (O), and 11 U.S.C. §§ 523(a)(5) and
(a)(15). Based on the facts and law in this case, the Plaintiff’s request will be granted. The
following constitutes the Court’s findings of fact and conclusions of law as mandated by Rule
7052 of the Federal Rules of Bankruptcy Procedure.
FACTS
The Plaintiff and the Defendant were married in 1972. Their son was born the following
year and their daughter was born in 1975. Prior to the parties’ marriage, the Plaintiff worked
part-time as a key punch operator. Shortly before their first child was born, the Plaintiff ceased
working to take care of their children. The parties separated in 1987 due to irreconcilable
differences and entered into a Stipulation of Settlement, dated November 30, 1987 (“Stipulation
of Settlement”). The Judgment of Absolute Divorce which incorporated the terms of the
Stipulation of Settlement was entered and filed with the Nassau County Clerk’s office on July
25, 1988 (the “Divorce Judgment”).
Pursuant to the Stipulation of Settlement and Divorce Judgment, the Plaintiff was granted
sole custody of the children and exclusive occupancy of the marital residence. The Defendant
was allowed to reside in the marital residence until September 1, 1988. Should the Defendant
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fail to vacate the marital residence when required for any reason, the Defendant agreed to pay
the Plaintiff $150 per day he occupies the marital residence. Notwithstanding such payment, the
Plaintiff could commence legal proceedings to remove the Defendant from the marital residence
and the Defendant agreed to reimburse the Plaintiff for all of the expenses incurred as a result,
including reasonable attorney’s fees and costs. In addition, the Defendant agreed to execute and
deliver to the Plaintiff a bargain and sale deed transferring all of his right, title and interest in the
marital residence to Plaintiff so that she would own 70% of the marital residence and hold the
remaining 30% for the children as trustee. The Plaintiff and Defendant also agreed to indemnify
and hold the non-defaulting party harmless for any and all expenses and/or damage, including
reasonable attorneys fees and litigation expenses, as a result of his or her breach of the
Stipulation of Settlement.
The Defendant was required to make child support payments, including the children’s
medical and dental expenses that were not covered by the children’s health insurance pursuant to
the terms of the Stipulation of Settlement and the Divorce Judgment. In return, Plaintiff did not
make any claim for maintenance or alimony and gave up any interest or claim that she had in the
Defendant’s interest in numerous real properties in Pennsylvania, New Jersey, and Marco Island,
Florida; ten or more gas stations in which the Defendant had an equity interest; and the
Defendant’s investments in two oil exploration companies.
The Defendant had significantly greater assets than his former spouse, the Plaintiff
herein. The Defendant, however, refused to honor the Stipulation of Settlement and Divorce
Judgment. The Defendant never transferred his 50% interest in the marital residence to Plaintiff
and thus a portion of that interest never went to the trust that was intended for the children. The
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Defendant not only failed to pay for medical and dental expenses of the children but he also
failed to turn over to the Plaintiff the checks issued by the health insurance company for
reimbursement of the children’s medical expenses that the Plaintiff paid out-of-pocket.
After her divorce, the Plaintiff worked full time as a bookkeeper for an advertising
company earning approximately $18,000 to $20,000 per year in gross income and had difficulty
supporting herself and her children on her income alone. When the Defendant failed to leave the
marital residence, the Plaintiff sought to have the Stipulation of Settlement and Divorce
Judgment enforced. The Plaintiff eventually had the Defendant evicted from the marital
residence in June of 1989. Pursuant to an order dated May 30, 1990 and entered on June 4, 1990
(“June 4, 1990 Order”), the state court awarded Plaintiff $22,500 for the 150 days that the
Defendant had remained at the marital residence prior to his eviction in addition to $5,992.59 of
medical expenses for which the Defendant had failed to reimburse the Plaintiff. The Defendant
never paid the Plaintiff the 28,422.50 awarded by the June 4, 1990 Order.
After the Defendant’s eviction, the Defendant failed to pay the real estate taxes on the
marital residence as required pursuant to the Divorce Judgment. Accordingly, the Town of
Hempstead entered a tax lien against the martial residence and sent notices to the Plaintiff that it
was going to foreclose on the tax lien. Even though Plaintiff informed the Defendant of the
foreclosure notices, the Defendant refused to pay the real estate tax lien. In anticipation of losing
the marital residence due to foreclosure and being evicted, the Plaintiff moved to Florida with
their daughter in November of 1990 in order to live with or near her parents. The parties’ son
had moved out of the marital residence earlier due to a dispute with the Plaintiff and decided not
to accompany his mother and sister to Florida. The Plaintiff did not compel her son to
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accompany her as he was five months shy of his eighteenth birthday and the age of
emancipation.
On the same date that the Plaintiff moved to Florida, the son moved back to the marital
residence. The Defendant moved back into the marital residence in December of 1990 without
the Plaintiff’s consent and eventually satisfied all the liens against the marital residence and
continued to live at the marital residence for more than 13 years when he moved out in March of
2004. From time to time, the Defendant rented the marital residence to multiple boarders who
would pay the Defendant rent without obtaining Plaintiff’s consent.
The Plaintiff sought to enforce the Stipulation of Settlement and Divorce Judgment on
various occasions but her efforts ceased whenever she ran out of funds to pursue the litigation.
In January of 2003, the Plaintiff again sought to enforce the Stipulation of Settlement and
Divorce Judgment in state court and the matter was referred to Special Referee Marston C.D.
Gibson (“Referee Gibson”). Referee Gibson issued a report dated May 21, 2004 (the “May 21,
2004 Report”) finding, inter alia, that the Plaintiff was entitled to payment of the $28,422.50
plus statutory interest awarded by the June 4, 1990 Order and $115,200 of additional child
support from the date the Divorce Judgment was entered to the date of the daughter’s
emancipation, plus interest. Although the Plaintiff sought to enforce the Defendant’s obligation
to transfer his 50% interest in the marital residence, Referee Gibson found that the 6-year statute
of limitations under N.Y. C.P.L.R. 213 for bringing an action to enforce the transfer of the
Defendant’s interest in the residence pursuant to the Stipulation of Settlement and Divorce
Judgment had passed and the Plaintiff could not obtain specific performance of that provision of
the Stipulation of Settlement or Divorce Judgment. However, Referee Gibson also found that
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because the Defendant re-entered and occupied the marital residence in December of 1990
without the Plaintiff’s consent and in violation of the Divorce Judgment, the Plaintiff was
entitled to an award of $150 per day the Defendant remained at the marital residence. Even
though the Defendant had remained at the marital residence for more than 13 years, Referee
Gibson limited the $150 a day award to 6 years from when the Defendant wrongfully re-entered
the property for a total of $328,650, plus interest, because of the expiration of the 6-year statute
of limitations. Lastly, Referee Gibson found in the May 21, 2004 Report that the Plaintiff was
also entitled to attorneys’ fees incurred because of Defendant’s wilful default of the state court
judgment and orders relating to the divorce.
The state court confirmed the May 21, 2004 Report and entered a judgment on July 29,
2005 in the sum of $861,924.94 in favor of the Plaintiff against the Defendant, which was
recorded on August 1, 2005 (the “$861,924.94 Judgment”). The $861,924.94 Judgment
consisted of an award of $275,793.84 for child support arrears and a distributive award of
$586,131.10 pursuant to the May 21, 2004 Report. Although the Defendant appealed the
$861,924.94 Judgment, the appeal was dismissed on August 19, 2006 due to the Defendant’s
failure to perfect the appeal timely.
Referee Gibson issued a second report, dated August 7, 2005 (the “August 7, 2005
Report”) which confirmed his findings in the May 21, 2004 Report and found that the Plaintiff
had incurred a total of $129,587.36 in legal fees and costs, of which she had already paid
$99,346.69 out-of-pocket, in seeking to enforce the Divorce Judgment and the June 4, 1990
Order and that the attorneys’ fees and costs were reasonable. The state court confirmed the
August 7, 2005 Report and entered a judgment on April 27, 2007 against the Defendant which
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awarded the Plaintiff attorneys’ fees and interest in the sum of $183,458.55 (the “$183,458.55
Judgment”). The $183,458.55 Judgment together with the $861,924.94 Judgment constitutes the
judgements at issue (the “Judgments”). 	Contrary to the Defendant’s allegation that the
attorneys’ fees were “tacked on” by the state court, the Court finds that the fees were clearly
awarded pursuant to the terms of the Divorce Judgment as a result of the Defendant’s wilful
failure to comply with the Divorce Judgment and other orders of the state court.
The Plaintiff also commenced a partition action with respect to the marital residence in
state court and a receiver was appointed. Soon after the receiver commenced eviction
proceedings against the Defendant, the Defendant filed for chapter 7 relief on July 23, 2007 (the
“Petition Date”).
The Plaintiff timely commenced this adversary proceeding against the Defendant on
October 19, 2007 seeking (1) a determination that the two Judgments are nondischargeable and
(2) an award of attorneys’ fees and costs for bringing this proceeding to enforce the two
Judgments. The Defendant concedes that $275,793.84 of the $861,924.94 Judgement relating to
child support arrears is nondischargeable pursuant to 11 U.S.C. § 523(a)(5). However, the
Defendant argues that the remainder of the $861,924.94 Judgment and the $183,458.55
Judgment for attorneys’ fees should be dischargeable because (1) the amounts assessed against
the Debtor for his occupancy of the marital residence were not support obligations but a
dischargeable penalty and (2) pursuant to N. Y. Domestic Relations Law § 237(c) awards of
attorney’s fees in New York matrimonial actions are required to be payable directly to the
attorney and not to the Plaintiff. The Defendant argues that even if the former spouse has
already paid the attorneys’ fees out of pocket, the proper procedure is for the payment to be
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made to the Plaintiff’s matrimonial attorneys. See Scheinkman, Practice Commentaries, 14
McKinney’s Cons. Laws of N.Y. Domestic Relations Law, Section 237, C237:7 at 26-27.
The Court conducted a trial on the matter on April 7, 2008 and June 2, 2008. Both
parties submitted separate Pre-Trial Memorandum of Law and Post-Trial Memorandum of Law.
DISCUSSION
Because this bankruptcy case was filed after the effective date of the Bankruptcy Abuse
Prevention and Consumer Protection Act of 2005 (“BAPCPA”), the BAPCPA amendments to 11
U.S.C. § 523 apply. Under Section 523(a)(5), a discharge under the Bankruptcy Code does not
discharge an individual debtor from any debt for a domestic support obligation.
For purposes of the Bankruptcy Code, a “domestic support obligation” means “a debt that
accrues before, on, or after the date of the order for relief in a case under this title, including
interest that accrues on that debt as provided under applicable nonbankruptcy law
notwithstanding any other provision of this title, that is --
(A) 	owed to or recoverable by --
(i) 	a spouse, former spouse, or child of the debtor or such child’s
parent, legal guardian, or responsible relative; or
(ii) 	a governmental unit;
(B) 	in the nature of alimony, maintenance, or support (including assistance
provided by a governmental unit) of such spouse, former spouse, or child
of the debtor or such child’s parent, without regard to whether such debt is
expressly so designated;
(C) 	established or subject to establishment before, on, or after the date of the
order for relief in a case under this title, by reason of applicable provisions
of --
(i) 	a separation agreement, divorce decree, or property settlement
agreement;
(ii) 	an order of a court of record; or
(iii) 	a determination made in accordance with applicable
nonbankruptcy law by a government unit; and
(D) 	not assigned to a nongovernmental entity, unless that obligation is
assigned voluntarily by the spouse, former spouse, child of the debtor, or
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such child’s parent, legal guardian, or responsible relative for the purpose
of collecting the debt.
11 U.S.C. § 101(14A). Therefore, all obligations of a debtor awarded to a former spouse or child
in relation to a state court judgment for domestic support are nondischargeable.
With respect to non-domestic support obligations, such as awards relating to equitable
distribution, 11 U.S.C. § 523(a)(15) now provides that a discharge under the Bankruptcy Code
does not discharge an individual debtor from any debt –
to a spouse, former spouse, or child of the debtor and 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, or a determination made in accordance with State or territorial law by a
governmental unit.
11 U.S.C. § 523(a)(15).
Prior to BAPCPA, 11 U.S.C. § 523(a)(15) provided a debtor with statutory defenses to a
former spouse’s objection to the discharge of non-support type obligations based upon (1)
whether the debtor has the ability to pay a debt relating to such obligation or (2) whether
discharging such debt would result in a benefit to the debtor that would outweigh the detrimental
consequences to the former spouse or child of the debtor.
As a result of BAPCPA, a property settlement obligation incurred pursuant to a divorce is
unqualifiedly also nondischargeable under section 523(a)(15). In individual Chapter 7 and
11cases, ‘the distinction between a domestic support obligation and other types of obligations
arising out of a marital relationship is of no practical consequence in determining the
dischargeability of the debt. ... The enactment of subsection 523(a)(15) and the increase in the
scope of the discharge exception effected by the 2005 amendments, expresses Congress’s
recognition that the economic protection of dependent spouses and children under state law is no
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longer accomplished solely through the traditional mechanism of support and alimony payments.
State courts do not always draw a sharp distinction between support and property division in
providing for the post-divorce economic security of dependent family members. Property
settlement arrangements are often “important components of the protection afforded individuals
who, during the marriage, depended on the debtor for their economic well-being.’” 4 L. King,
COLLIER ON BANKRUPTCY, ¶ 523.21 at 523-118 (15th ed. rev. 2008). Therefore, this Court
need not make a determination on whether the amounts awarded under the Judgments at issue
constitute domestic support obligations under 11 U.S.C. § 523(a)(5) if the Plaintiff can
demonstrate that the Judgments would be nondischargeable in any event under 11 U.S.C. §
523(a)(15) because each Judgment constitutes a debt (1) owed to or recoverable by “a spouse,
former spouse, or child of the debtor” and (2) “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”.
While the Defendant seeks to characterize the $150 a day amounts awarded under the
$861,924.94 Judgment as a penalty and not a support obligation, the Court finds this argument to
be irrelevant to the Court’s determination of dischargeability under 11 U.S.C. § 523. First,
Referee Gibson addressed the Defendant’s argument in his confirmed reports and found that the
$150 a day provision in the Divorce Judgment was not a penalty and the Divorce Judgment was
never appealed. Thus, it is res judicata and enforceable. In addition, this Court is required to
give full faith and credit to the state court Judgments under the Rooker-Feldman doctrine. “The
Rooker-Feldman doctrine provides that the lower federal courts lack subject matter jurisdiction
over a case if the exercise of jurisdiction over that case would result in the reversal or
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modification of a state court judgment. Such jurisdiction is lacking because within the federal
system, only the Supreme Court may review a state court judgment.” Hachamovitch v. DeBuono,
159 F.3d 687, 693 (2d Cir.1998). The validity and enforceability of the Judgments are not for
this Court to decide. In re Salem, 290 B.R. 479, 482 (S.D.N.Y. 2003). The only issue before
this Court is not whether the state court Judgments were correctly decided but whether they are
dischargeable in whole or in part under 11 U.S.C. §§ 523(a)(5) and/or (a)(15).
In this case, for purposes of 11 U.S.C. § 523(a)(15), the Judgments are clearly awarded
by the state court in connection with a divorce decree and to enforce prior orders of the state
court concerning the Plaintiff’s rights and remedies under the Divorce Judgment. The
Judgments were awarded to the Plaintiff due to her status as the Defendant’s former spouse.
While the Defendant cannot dispute this, the Defendant does seek to recharacterize the nature of
the Defendant’s obligations under the Judgments by analogizing this case to other situations
where courts have found such obligations to be dischargeable. However, the Court finds the
cases relied upon by the Defendant to be inapposite, distinguishable and inappropriate to the case
at bar. With respect to the non-child support amounts awarded under the $861,924.94 Judgment,
there was no landlord-tenant or other type of relationship between the Defendant and the
Plaintiff that would render the amounts awarded outside the scope of the Divorce Judgment.
Rather, the state court awarded the Plaintiff the $150 per day amounts as agreed upon by the
parties in the Stipulation of Settlement and as set forth in the Divorce Judgment because the
Defendant occupied the marital residence without the Plaintiff’s consent in violation of the
Stipulation of Settlement and the Divorce Judgment.
The Defendant’s argument that the $183,458.55 Judgment for attorneys’ fees should be
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excepted from discharge simply because the payments should be made payable to the Plaintiff’s
matrimonial attorneys directly pursuant to N.Y. Domestic Relations Law § 237(c) and not the
Plaintiff improperly elevates form over substance. It is a “well-established principle of
bankruptcy law that dischargeability must be determined by the substance of the liability rather
than its form.” Pauley v. Spong (In re Spong), 661 F.2d 6, 9 (2d Cir. 1981). Indeed, if only a
former spouse’s counsel is entitled to attorney’s fees under N.Y. Domestic Relations Law §
237(c), then arguably attorney’s fees awarded in New York divorce cases may be rendered
dischargeable under a narrow interpretation of 11 U.S.C. § 523(a)(5) and (15) as those
provisions do not list obligations owing to a spouse’s counsel as being excepted from discharge.
While courts have differed as to whether attorney’s fees directly payable to counsel as opposed
to a former spouse are dischargeable under BAPCPA where the attorney seeks a determination
of dischargeability in bankruptcy court, the Court finds in this instance that the state court
specifically awarded the attorneys’ fees to the Plaintiff notwithstanding N.Y. Domestic Relations
Law § 237(c). The Plaintiff is the real party in interest seeking the determination of
nondischargeability of the fees and costs, especially when the Plaintiff has already paid out of
pocket most of the attorneys’ fees and costs she incurred for which the $129,587.36 Judgment
seeks to reimburse her. Moreover, to except such attorneys’ fees and costs from discharge in
light of the Defendant’s wilful failure to comply with the state court judgments and orders is
consistent with the legislative purpose of 11 U.S.C. §§ 523(a)(5) and (a)(15). In re Spong, 661
F.2d at 9.
Accordingly, the Plaintiff has satisfied the requirement under 11 U.S.C. § 523(a)(15) that
the obligations incurred by the Debtor to Plaintiff under the non-child support portion of the
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$861,924.94 Judgment and the $183,458.55 Judgment are owing to a former spouse and were
clearly incurred in connection with the parties’ divorce.
The Plaintiff’s request for attorney’s fees and costs incurred in bringing this adversary
proceeding is also granted because the Plaintiff is entitled to indemnification pursuant to the
terms of the Stipulation of Settlement and Divorce Judgment for bringing this action to enforce
the Judgments. The purpose of awarding support and enforcing the indemnification provisions
of the Stipulation of Settlement and Divorce Judgment would be undermined if the Defendant
can force his former spouse into the bankruptcy court and incur significant financial expense to
challenge the dischargeability of the Judgments without reimbursement of such fees and costs.
CONCLUSION
Based on the foregoing, the undisputed $281,716.43 portion of the $861,924.94
Judgment which represents child support arrears is a nondischargable domestic support
obligation incurred by the Debtor under 11 U.S.C. § 523(a)(5). The Debtor’s obligation to pay
the outstanding balance of the $861,924.94 Judgment and the $183,458.55 Judgment are
excepted from discharge under 11 U.S.C. § 523(a)(15). The Court shall schedule an evidentiary
hearing to determine the amount of attorney’s fees and costs incurred by the Plaintiff in
prosecuting this adversary proceeding.
Dated: Central Islip, New York
August 14, 2008
_s/Dorothy Eisenberg____________
Dorothy Eisenberg
United States Bankruptcy Judge
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