Opinion
ORDER DISMISSING ADVERSARY PROCEEDING FOR LACK OF STANDING AND DENYING MOTION FOR SUMMARY JUDGMENT AS MOOT DC No. FF-2
Introduction
This matter was initially before the court on a motion for summary judgment filed by defendant Jeremy Paul Duterte. Plaintiff Rich, Fuidge, Morris and Lane, Inc., opposed defendant's motion. Defendant replied to plaintiff's opposition.
The court held an hearing on defendant's motion for summary judgment on November 3, 2015. That hearing was continued to December 1, 2015, to allow additional briefing on the plaintiff's standing under 11 U.S.C. § 523(a) (15). Section 523(a) (15) excepts from discharge non-support divorce debt owed to a spouse, former spouse, or dependant of the debtor incurred by the debtor in the course of a divorce, separation, in a separation agreement, or in a divorce decree. Having now considered the parties' additional points and authorities, the court concludes that plaintiff lacks standing under § 523(a) (15). Therefore, for the reasons explained below, this adversary proceeding will be dismissed with prejudice and defendant's motion for summary judgment will be denied.as moot. This disposition also renders the continued hearing on December 1, 2015, unnecessary.
Section 523(a) (15) makes non-dischargeable a debt owed -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).
Jurisdiction and Venue
Federal subject-matter jurisdiction is founded on 28 U.S.C. § 1334. This matter is a core proceeding that a bankruptcy judge may hear and determine. 28 U.S.C. §§ 157(b)(2)(A), (I), and (0). To the extent it may ever be determined to be a matter that a bankruptcy judge may not hear and determine without Consent, the parties nevertheless consent to such determination by a bankruptcy judge. 28 U.S.C. § 157(c) (2). Venue is proper under 28 U.S.C. § 1409.
Background
Plaintiff is a law firm located in Yuba County, California. Defendant is the debtor in the underlying chapter 7 case. Plaintiff represented defendant in a pre-petition divorce proceeding in Sutter County Superior Court, No. CVFL13-0608. Defendant incurred attorney's fees in that proceeding which are owed to plaintiff. Defendant's ex-wife was required in the divorce proceeding to pay the defendant's attorney's fees owed to plaintiff.
Defendant and his ex-wife entered into a marriage settlement agreement in their divorce proceeding. The Sutter County Superior Court approved that marital settlement agreement and entered it as a judgment. That judgment allocated 100% of a 2013 joint tax return due the defendant and his ex-wife to defendant for retroactive child and spousal support, required defendant to use a portion of that tax return to satisfy defendant's ex-wife's debt to plaintiff for defendant's attorney's fees in the divorce case, and required defendant to turn over the joint tax return to plaintiff. Stated another way, the marital settlement agreement entered as a judgment of the Sutter County Superior Court required defendant to pay his ex-wife's debt to plaintiff with proceeds from the 2013 joint tax return due defendant and his ex-wife .
Defendant received the 2013 joint tax return. Defendant did not turn over the joint tax return to plaintiff and, thus, failed to pay his ex-wife's debt to plaintiff as the state court ordered him to do. Instead, because defendant's ex-wife was the "breadwinner" during the marriage and defendant was unable to make ends meet after the divorce, defendant used the 2013 tax return for living expenses. Defendant's bankruptcy and this adversary proceeding followed.
Discussion
The complaint alleges three claims for relief: (1) a quiet title claim related to the turn over of the 2013 joint tax return in the First Claim for Relief; (2) a declaratory relief claim also related to the turn over of the 2013 joint tax return in the Second Claim for Relief; and (3) a claim for non-dischargeability under § 523(a) (15) based on the defendant's failure to turn over the 2013 joint tax return in payment of the debt that his ex-wife owed plaintiff in the Third Claim for Relief. Inasmuch as the first two claims for relief seek to impose personal liability on the defendant and are derivative of the Third Claim for Relief, they survive only if the defendant's obligation under the Third Claim for Relief is excepted from discharge under § 523(a) (15).
The complaint is not exactly a model of clarity. In fact, it is somewhat misleading, inconsistent, and an example of careless drafting. For example, ¶ 25 states: "The asset in question was ordered transferred to the PLAINTIFF in discharge of DEBTOR'S spouses [sic] attorney fees and costs owed to PLAINTIFF." As written, that creates the impression that it is the ex-spouse's attorney's fees and costs that are owed to the plaintiff when it is the defendant's attorney's fees and costs that the ex-spouse was obligated to pay which are owed to plaintiff. That understanding only comes after re-reading the complaint several times, reading ¶ 3 of the prayer, and reading other documents in the docket, i.e., plaintiff's pre-trial statement and opposition to the defendant's summary judgment motion.
The supplemental points and authorities that plaintiff filed on November 13, 2015, states that "11 U.S.C. §523(a)(15) DOES NOT APPLY." [Dkt. 40: 4-10]. Inasmuch as the only basis for non-dischargeability alleged in the complaint is § 523(a) (15), plaintiff's statement that § 523(a)(15) does not apply in this adversary proceeding is, at best, disingenuous and borders on the frivolous.
Before reaching the merits of defendant's summary judgment motion, and before this adversary proceeding may proceed, the court must first determine if plaintiff has standing under § 523(a) (15). The court has the power and duty to examine a party's standing. Bernhardt v. Cnty. of Los Angeles, 279 F.3d 862, 868 (9th Cir. 2002). In fact, federal courts have an independent obligation to examine their own jurisdiction, and standing "is perhaps the most important of [the jurisdictional] doctrines." FW/PBS, Inc. v. City of Dallas, 493 U.S. 215, 231 (1990) (quotation omitted); D'Lil v. Best W. Encina Lodge & Suites, 538 F.3d 1031, 1035 (9th Cir. 2008). The court must dismiss an action if it determines at any time that it lacks subject matter jurisdiction. See Fed.R.Civ.P. 12(h) (3); Fiedler v. Clark, 714 F.2d 77, 78 (9th Cir. 1983).
To be non-dischargeable under § 523(a) (15), an obligation must, in the first instance, be payable to or recoverable by a spouse, former spouse, or child of the debtor. McFadden v. Putnam (In re Putnam), 2011 WL 10653863 at *2 (Bankr. E.D. Cal. 2011). There is no requirement that the obligation be payable directly to a debtor's spouse, former spouse, or dependant. Id. (citing In re Montgomery, 310 B.R. 169 (Bankr. CD. Cal. 2004)). Thus, a debtor's obligation to satisfy an ex-spouse's non-support debt, or to otherwise hold an ex-spouse harmless from such a debt, imposed or agreed to under a divorce decree or in a marital settlement agreement, or ordered by a state court in a divorce or dissolution proceeding, falls under the broad application of § 523(a) (15). Francis v. Wallace (In re Francis), 505 B.R. 914, 919-20 (9th Cir. BAP 2014).
In this case, defendant's ex-wife owed plaintiff a debt in the form of the attorney's fees that defendant incurred in the dissolution proceeding involving his ex-wife. The state court ordered the defendant to pay that debt with the 2013 joint tax return which plaintiff was also ordered to provide plaintiff. Although defendant's ex-wife would undoubtedly have standing to enforce defendant's court-ordered obligation to hold her harmless from the attorney's fees debt she owes plaintiff, as a third-party creditor plaintiff does not. In other words, standing to bring an action to have a debt excepted from discharge under § 523(a)(15) is limited to the parties specifically enumerated in the statute, i.e., a debtor's spouse, ex-spouse, or child. Woodruff, O'Hair & Posner, Inc. v. Smith (In re Smith), 205 B.R. 612, 617 (Bankr. E.D. Cal. 1997); McFadden, 2011 WL 10653863 at * 3 (quoting Montgomery, 310 B.R. at 178 n.7); see also Ashton v. Dollaaa (In re Dollaaa), 260 B.R. 493, 497 (9th Cir. BAP 2001). As a California law firm, plaintiff is not, and cannot be considered, to be any of the statutory parties with standing under § 523 (a) (15) .
Therefore, based on the foregoing, IT IS ORDERED that this adversary proceeding is DISMISSED with prejudice for lack of jurisdiction based on the plaintiff's lack of standing under § 523(a)(15).
IT IS FURTHER ORDERED that defendant's motion for summary judgment is DENIED as moot.