KSB

Judge Berger

09-06101 Janes v. Lyons (Doc. # 54)

Janes v. Lyons, 09-06101 (Bankr. D. Kan. Jul. 29, 2011) Doc. # 54

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The relief described hereinbelow is SO ORDERED.

Signed July 28, 2011.

United States Bankruptcy Judge

IN THE UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF KANSAS


In re:

CORINE LYONS, Case No. 09-22773
Debtor. Chapter 13

__________________________________
ROBERT D. BERGER
RONALD JANES,
Plaintiff,

v. Adv. No. 09-06101
CORINE LYONS,
Defendant.

MEMORANDUM OPINION AND ORDER
GRANTING PLAINTIFF’S MOTION FOR SUMMARY JUDGMENT


Plaintiff’s Motion for Summary Judgment is granted.1 Plaintiff Ronald Janes seeks to
except from discharge pursuant to 11 U.S.C. §523(a)(2) and (6) approximately $54,000 he was
awarded in two state court judgments against Debtor. The state court found Debtor improperly

1

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took maintenance payments from Plaintiff which she was not entitled to under their divorce
decree. Debtor is collaterally estopped from relitigating the findings of fact found by the state
court.

Findings of Fact

Debtor filed for bankruptcy on August 26, 2009. Prior to filing, Debtor and Janes
litigated their divorce in state court and a decree of divorce was entered in May 2003. In
December 2007, the judge in their divorce case ruled, among other things: (1) Debtor’s
entitlement to maintenance payments under the decree of divorce was conditioned upon her
monthly income; (2) when Debtor earned more than $2,500.00 per month, her right to
maintenance payments from Janes automatically terminated; (3) Debtor reached the income
threshold and must have known she was abandoning her right to maintenance payments under
the divorce decree; (4) nevertheless, Debtor continued to take maintenance payments from Janes
without informing him of her income; and (5) Debtor was legally obligated to reimburse Janes
for all payments she received after Janes’s maintenance obligation terminated. The divorce case
judge did not determine the amount required to be reimbursed, so, for over a year, the parties
continued to litigate. On February 5, 2009, and on May 29, 2009, another state court judge
entered judgments against Debtor, finding Debtor improperly took maintenance payments for 22
months when she knew she was not entitled to them. The second judgment awarded Janes his
attorney’s fees under K.S.A. §60-1610(b)(4). The judgments find: (1) Debtor knew her right to
receive maintenance terminated in March 2005 when she began making more than $2,500 per
month; (2) Debtor had an obligation pursuant to the divorce decree to inform Janes of this fact
and to refund to him any maintenance payment made after March 2005; (3) Debtor did not

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inform Janes; (4) only Debtor had control over information pertaining to her income, and Janes
could not have known about Debtor’s salary increases unless she told him, which she did not
until December 2006; (5) Janes was entitled to restitution for the maintenance paid between
March 2005 and January 2007; and (6) Janes was entitled to his attorney’s fees because Debtor’s
protraction of the litigation was unwarranted. The state court judgments are a result of summary
judgment proceedings and include findings of fact and conclusions of law. The judgments are
final and have not been appealed or otherwise challenged.

Discussion

Collateral estoppel applies in §523(a) proceedings.2 Federal courts must give state court
judgments full faith and credit.3 The law of the state issuing the judgment applies.4 Under
Kansas law, collateral estoppel applies to a prior judgment entered on the merits which
determined the rights and liabilities of the same parties based upon the facts.5 The parties to a
prior judgment may not relitigate the facts.6

Section 523(a)(2)

Fraud by silence may constitute false pretenses under §523(a)(2)(A).7 Plaintiff must

2 Grogan v. Garner, 498 U.S. 279, 284 (1991).

3 28 U.S.C. §1738.

4 Marrese v. American Academy of Orthopaedic Surgeons, 470 U.S. 373 (1985).

5 Regency Park, LP, v. City of Topeka, 267 Kan. 465, 478 (1999).

6 In re Wallace, 840 F.2d 762, 764 (10th Cir. 1988).

7 Rescuecom Corp. v. Khafaga, 419 B.R. 539, 546 (Bankr. E.D.N.Y. 2009); see also HENRY J. SOMMER &
MARGARET DEE MCGARITY, COLLIER FAMILY LAW AND THE BANKRUPTCY CODE ¶ 6.08[3] at 6-115 through 6-117
(2010), discussing the following cases: In re Wendt, 381 B.R. 217 (Bankr. S.D. Tex. 2007), wherein the court found
that the debtor’s silence regarding a material fact to induce a former spouse to release her claim for alimony rendered
the debt nondischargeable under §523(a)(2); In re Lang, 293 B.R. 501 (B.A.P. 10th Cir. 2003), wherein debtor’s
fraudulent statements regarding the parentage of her child gave rise to a nondischargeable debt to her ex-husband in
the amount of paid child support; In re Capelli, 261 B.R. 81 (Bankr. D. Conn. 2001), wherein debtor’s failure to
inform his ex-wife of the receipt of settlement proceeds from which he promised to repay loans to her rendered the
debt nondischargeable under §523(a)(2).

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establish (a) defendant had knowledge of material facts which the plaintiff did not have and
could not have discovered in the exercise of reasonable diligence; (b) defendant was under an
obligation to communicate the material fact to the plaintiff; (c) defendant intentionally failed to
communicate the material fact to plaintiff; (d) plaintiff justifiably relied on defendant to
communicate the material fact; and (e) and the plaintiff was damaged.8 The facts must show the
defendant made a false representation or a material omission with an intent to deceive, and the
plaintiff justifiably relied upon it to his detriment.9

The state court findings of fact have determined all elements necessary to sustain a
§523(a)(2) objection to dischargeability. The first state court judgment finds:

[Debtor] must have, or should have known, that her right to receive maintenance

was terminated upon the receipt of her payment on March 26, 2005. She had an

obligation to inform [Plaintiff] of this fact and to refund to him any maintenance

payment he made to her after March 2005. [Debtor] did not do so. Between April

2005 and January 2007, inclusive, [Debtor] accepted from [Plaintiff] 22 monthly

payments to [Debtor]...for a total amount of Twenty-Eight Thousand Three

Hundred Two and 56/100 Dollars ($28,302.56).
The award of attorney’s fees finds Debtor unreasonably protracted unnecessary litigation. In this
case, the state court determined the precise month when Debtor should have disclosed her salary
information to Plaintiff. The judgments find Debtor had control over her salary information and
was under a duty to share the information with Plaintiff when she reached the court-ordered
threshold. The judgments find Debtor did not disclose the information she was obligated to
share with Plaintiff, but instead improperly accepted and retained maintenance payments to

8 Brennan v. Kunzle, 37 Kan. App. 2d 365 (2007).

9 Field v. Mans, 516 U.S. 59 (1995). Section 523(a)(2)(A) is “false pretenses, a false representation, or
actual fraud, other than a statement respecting the debtor’s or an insider’s financial condition.” In contrast,
§523(a)(2)(B) concerns a statement in writing pertinent to the debtor’s financial condition that is materially false.
Plaintiff does not make any allegations regarding a written misrepresentation.

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which she knew she was not entitled. The state court then assessed attorney’s fees against
Plaintiff for protracting the litigation instead of making restitution. All facets of the judgment
are not dischargeable, for the law provides “[i]f a debt is found nondischargeable under
[§523(a)(2)], all parts of the debt, including punitive damages and previously awarded attorney’s
fees are nondischargeable . . . .”10 The judgments were entered after contentious litigation
actively participated in by both parties and were not entered by default. Plaintiff has already
proven the facts necessary to sustain a §523(a)(2)(A) objection to discharge, and there are no
undecided material factual issues left for this Court.

Section 523(a)(6)

In order to establish a debt is nondischargeable under §523(a)(6), the plaintiff must show:

(a) debtor committed a wrongful and intentional act; (b) the act necessarily caused injury to
plaintiff; (c) the act was without just cause or excuse; and (d) debtor acted with the specific
intent to cause injury to the plaintiff or knew or believed injury to plaintiff was substantially
certain to occur as a result of her actions.11
Since this Court finds that Debtor’s obligation to Plaintiff is not dischargeable under
§523(a)(2), the Court need not make such determination under §523(a)(6). The Court notes that
there are family-related obligations that have been found nondischargeable under §523(a)(6),
such as a debtor’s failure to inform the ex-spouse of receipt of and failure to pay over retirement
pension funds, which acts constituted wrongful conversion and rendered a debtor’s obligation to
the spouse nondischargeable under §523(a)(6).12

10 SOMMER & MCGARITY, supra, ¶ 6.08[3] at 6-115 (2010), citing to Cohen v. De La Cruz, 523 U.S. 213

(1998).

11 In re Pasek, 983 F.2d 1524, 1527 (10th Cir. 1993); Kawaauhau v. Geiger, 523 U.S. 57 (1998).

12 See generally SOMMER & MCGARITY, supra, ¶ 6.08[6] at 6-123 through 6-127.

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Conclusion

Neither party raises whether Debtor’s obligations to Plaintiff as to the overpayment of
child support may represent a domestic support obligation under §523(a)(5) and hence
nondischargeable. Such an argument has found favor with some courts.13 Since this section was
not argued by either party, this Court makes no such determination, although concurrent
jurisdiction rests with the state court to determine the dischargeability of debts under
§523(a)(5).14 Additionally, plaintiff does not assert a claim for attorney’s fees associated with
the prosecution of this adversary proceeding. Regardless, this Court does not have jurisdiction
to entertain or grant such a request, although Plaintiff may look to the state court for the award of
such attorney’s fees.15 Although any claim for attorney’s fees by Plaintiff most likely constitutes
a post-petition claim and is not therefore subject to the discharge injunction under §524, to the
extent necessary, this Court grants relief from the discharge injunction for Plaintiff to make such
a claim with the state court of competent jurisdiction if Plaintiff so desires.

IT IS ORDERED Plaintiff’s motion for summary judgment is GRANTED.
###
ROBERT D. BERGER

U.S. BANKRUPTCY JUDGE
DISTRICT OF KANSAS
13 See SOMMER & MCGARITY, supra, ¶ 6.05[13] at 6-83 (2010).

14 Matter of the Marriage of Sailsbury, 13 Kan. App. 2d 740 (1989).

15 See In re Trump, 309 B.R. 585 (Bankr. D. Kan. 2004), cited at SOMMER & MCGARITY, supra, ¶ 6.05[1]
at 6-60 n.49 (2010); but see In re Busch, 294 B.R. 137 (B.A.P. 10th Cir. 2003), wherein the court found that a
bankruptcy court may award attorney’s fees attendant to dischargeability proceedings under §523(a)(5) if there is
provision under state law for attorney’s fees.

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