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Judge Berger

13-06115 Bernritter v. Bernritter (Doc. # 12)

Bernritter v. Bernritter, 13-06115 (Bankr. D. Kan. Jun. 11, 2014) Doc. # 12

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The relief described hereinbelow is SO ORDERED.
SIGNED this 10th day of June, 2014.


IN THE UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF KANSAS


In re:

JOHN VON BERNRITTER and Case No. 13-22505-7
SUZANNE ELIZABETH BERNRITTER,
Debtors.

BARBARA J. BERNRITTER,
Plaintiff,

v. Adv. No. 13-6115
JOHN VON BERNRITTER,
Defendant.

ORDER DENYING DEFENDANT’S MOTION TO DISMISS

This matter is before the Court on Debtor/Defendant John Von Bernritter’s motion to
dismiss1 the adversary complaint filed against him by Plaintiff Barbara J. Bernritter. The
adversary complaint seeks the denial of discharge of a $140,547.64 debt to Plaintiff under

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11 U.S.C. § 523(a)(15),2 which excepts from an individual’s chapter 7 discharge any debt to a
former spouse that is not a “domestic support obligation”3 and “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.” Defendant has moved to dismiss the complaint under
Federal Rule of Civil Procedure 12(b)(6), arguing that the allegations made fail to support a §
523(a)(15) claim because they do not connect the debt owed to the parties’ separation agreement.

 Plaintiff Barbara J. Bernritter appears by her attorney, Alan B. Gallas of Gallas & Schultz,
Kansas City, Missouri; Debtor/Defendant John Von Bernritter appears by his attorney, Neil S.
Sader of The Sader Law Firm, LLC, Kansas City, Missouri.

The Court finds that Plaintiff’s complaint states a legally cognizable claim under
§ 523(a)(15), and the Court therefore denies Defendant’s motion to dismiss.

I. Background and Findings of Fact
The following allegations are made in Plaintiff’s complaint or in the attachments
incorporated thereto. Plaintiff and Defendant were previously married, but dissolved their
marriage on August 1, 1994, in the Circuit Court of Jackson County, Missouri. As part of the
proceeding to dissolve their marriage, Plaintiff and Defendant entered into a separation
agreement and a “general real estate partnership” agreement. Through these documents, the
assets of Plaintiff and Defendant were divided, and part of the real estate owned by the parties
was placed into a partnership. The partnership was to be managed by Defendant and was to
continue until all partnership assets were liquidated. Upon sale of the partnership assets, the net
proceeds were to be distributed equally between Plaintiff and Defendant.

Years later, on October 27, 2000, Defendant executed and delivered a promissory note to
Plaintiff in the amount of $90,555. This amount represented Plaintiff’s equitable interest in the

2 All future statutory references are to title 11 of the United States Code, unlessotherwise specified.

3 See § 101(14A) for the definition of a “domestic support obligation.”

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real estate transferred to the partnership at the time the parties’ marriage was dissolved. Debtor
made sporadic payments on the promissory note over the years, and on June 18, 2009, Plaintiff
filed suit in Platte County, Missouri, against Defendant, seeking to collect the money owed on
the note. Shortly thereafter, on November 6, 2009, judgment was entered against Defendant in
favor of Plaintiff for $140,547.64 plus interest, costs, and attorneys’ fees.

John Bernritter filed a chapter 7 bankruptcy petition on September 24, 2013. Plaintiff
then filed her adversary complaint, claiming the obligation owed to her by Defendant should be
excepted from discharge under § 523(a)(15). Plaintiff’s complaint then alleges: “The obligation
owed to [Plaintiff] was incurred by [Defendant] in the course of or in connection with a ‘divorce
or separation agreement.’” Plaintiff also seeks attorneys’ fees incurred by her in relation to this
proceeding.

II. Analysis
A. Legal Standard for Assessing Motion to Dismiss
An adversary proceeding to determine the dischargeability of particular debts is a core
proceeding under 28 U.S.C. § 157(b)(2)(I), over which this Court may exercise subject matter
jurisdiction.4

Defendant’s motion to dismiss is filed under Federal Rule of Civil Procedure 12(b)(6),
which permits a motion for “failure to state a claim upon which relief can be granted.”5 The
requirements for a legally sufficient claim stem from Rule 8(a), which requires “a short and plain
statement of the claim showing that the pleader is entitled to relief.”6 To survive a motion to
dismiss, a complaint must present factual allegations that, when assumed to be true, “raise a right

4 28 U.S.C. § 157(b)(1) and § 1334(b).

5 Rule 12 is made applicable to adversary proceedings via Federal Rule of BankruptcyProcedure 7012(b).

6 Rule 8 is made applicable to adversary proceedings via Federal Rule of BankruptcyProcedure 7008(a).

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to relief above the speculative level.”7 The complaint must contain “enough facts to state a claim
to relief that is plausible on its face.”8 “[T]he complaint must give the court reason to believe that
this plaintiff has a reasonable likelihood of mustering factual support for these claims.”9

The plausibility standard does not require a showing of probability that a defendant has
acted unlawfully, but requires more than “a sheer possibility.”10 “[M]ere ‘labels and
conclusions,’ and ‘a formulaic recitation of the elements of a cause of action’ will not suffice; a
plaintiff must offer specific factual allegations to support each claim.”11 Finally, the Court must
accept the nonmoving party’s factual allegations as true and may not dismiss on the ground that
it appears unlikely the allegations can be proven.12

B. Legal Sufficiency of Plaintiff’s § 523(a)(15) Claim
“One of Congress’s overarching themes in enacting BAPCPA was to redefine and
reinforce the ability of non-debtor former spouses to recover both support and property
settlement obligations from debtors in bankruptcy.”13 To that end, under § 523(a), an individual
debtor filing a Chapter 7 bankruptcy is not discharged from any debt:

(5) for a domestic support obligation; [or]
. . .
(15) to a spouse, former spouse, or child of the debtor and not of thekind described in paragraph (5) that is incurred by the debtor in the
7 Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007).

8 Id. at 570.

9 Ridge at Red Hawk, L.L.C. v. Schneider, 493 F.3d 1174, 1177 (10th Cir. 2007) (italics

in original).

10 Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009).

11 Kan. Penn Gaming, LLC v. Collins, 656 F.3d 1210, 1214 (10th Cir. 2011) (quoting

Twombly, 550 U.S. at 555).

12 Iqbal, 556 U.S. at 678 (citing Twombly, 550 U.S. at 556).

13 Wodark v. Wodark (In re Wodark), 425 B.R. 834, 838 (B.A.P. 10th Cir. 2010).

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course of a divorce or separation or in connection with a separationagreement, divorce decree or other order of a court of record, or adetermination made in accordance with State or territorial law by agovernmental unit[.]

Plaintiff’s claim under § 523(a)(15) alleges a debt to a former spouse that was incurred by
Defendant “in connection with a separation agreement.” Creditors, like Plaintiff, bear the burden
of proof by a preponderance of evidence with respect to dischargeability actions.14 Although
most § 523(a) exceptions to discharge are strictly construed in favor of the debtor,15 “exceptions
to discharge under § 523(a)(15) are construed more liberally than other provisions of § 523.”16

To state a claim under § 523(a)(15), a plaintiff must allege sufficient facts that could
show that the debt in question is: (1) to a “former spouse;” (2) is not (a)(5) support; and (3) is
incurred “in connection with a separation agreement, divorce decree or other order of a court of
record.”17 Defendant does not dispute that the facts alleged support the first and second prongs of
a § 523(a)(15) claim;18 he only argues that the allegations made in Plaintiff’s complaint are
insufficient to tie the debt owed to Plaintiff on the promissory note to the parties’ separation
agreement.

In response to Defendant’s motion to dismiss, Plaintiff cites Kush v. Kush (In re Kush)19
in support of her claim. In the Kush bankruptcy case, the husband and wife divorced and the

14 Grogan v. Garner, 498 U.S. 279, 283, 291 (1991).

15 Mantooth v. Jones (In re Jones), 9 F.3d 878, 880 (10th Cir. 1993).

16 Taylor v. Taylor (In re Taylor), 478 B.R. 419, 427 (B.A.P. 10th Cir. 2012). The TaylorBAP decision was appealed to the Tenth Circuit where the Tenth Circuit also affirmed thebankruptcy court’s determination that the debt at issue was a § 523(a)(15) obligation. See Taylor

v. Taylor (In re Taylor), 737 F.3d 670 (10th Cir. 2013).
17 See Taylor, 478 B.R. at 427-28 (listing elements) (internal quotation marks omitted).
18 As a result, this Court will likewise not address the “former spouse” and “not (a)(5)
support” portions of the claim.
19 Adversary Case No. 06-225, Bankruptcy Case No. 05-24972, 2006 WL 3096681(Bankr. D. Ariz. Oct. 30, 2006).
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parties’ divorce decree awarded the marital home to the ex-wife and all property related to the
ex-husband’s landscaping business to the ex-husband.20 The decree also required each party to be
responsible for the taxes on all property awarded to that party in the divorce decree.21 The
ex-husband/debtor owed old taxes stemming from his landscaping business, and when he failed
to pay the taxes, the IRS issued notices of intent to levy on the ex-wife’s home.22 The parties
then co-signed a second lien on the home in order for the ex-husband to pay the tax debt, and the
ex-husband agreed to solely make the second mortgage payments.23 Eventually, because the ex-
wife sought to refinance her home, the parties executed a promissory note for the ex-husband to
pay the ex-wife for the payment of the second lien.24 After the ex-husband filed bankruptcy, the
ex-wife sought to have the debt on the promissory note determined nondischargeable under
§ 523(a)(15).25 The bankruptcy court determined that the debt on the promissory note was
incurred in connection with the parties’ divorce and was nondischargeable.26 The court reasoned
that although the original obligation arose from the indemnification for the payment of income
taxes and was transformed into an obligation to make payments on the promissory note, the ex-
wife was “clearly able to trace the obligation.”27 The bankruptcy court found that the “essential
nature of the obligation” remained the same and that it arose out of the divorce decree.28 Thus,

20 Id. at *1.

21 Id.

22 Id.

23 Id.

24 Id. at *2.

25 Id. at *1.

26 Id. at *3.

27 Id. at *4.

28 Id.

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because the original obligation would be nondischargeable, so would the obligation on the
promissory note.29

Here, the facts are similar. The parties set up the general real estate partnership as a
method of distributing their jointly-held property at the time of the divorce. The general real
estate partnership agreement is incorporated into the parties’ separation agreement. Essentially,
the complaint alleges that the partnership agreement was executed to effectuate the divorce
property settlement. The parties’ subsequent promissory note was connected to Defendant John
Bernritter’s partnership obligations; Defendant was the managing partner and was to divide the
net sale proceeds of the partnership assets with Plaintiff. The parties’ promissory note indicates a
subsequent, different arrangement was made, but the arrangement is still one that grew out of the
partnership agreement, which itself grew out of the settlement agreement. The character of the
underlying debt remains.

The Tenth Circuit has indicated its willingness to hold a former spouse liable for marital
debt that has changed in form. In Robinson v. Robinson (In re Robinson), 30 the parties’ divorce
proceeding required the ex-husband to pay the second mortgage on the house awarded to the exwife.
31 The ex-wife later refinanced her home, but asserted in the ex-husband’s bankruptcy
proceeding that the ex-husband’s debt on the second mortgage was nondischargeable.32 The
Tenth Circuit concluded that the ex-wife’s act of refinancing the debt did not extinguish the ex


29 Id. See also Archer v. Warner, 538 U.S. 314, 320 (2003) (concluding that reducing afraud claim to a settlement does not change the nature of the debt for dischargeability purposes);
Burrell-Richardson v. Mass. Bd. of Higher Educ. (In re Burrell-Richardson), 356 B.R. 797, 804

(B.A.P. 1st Cir. 2006) (concluding that a debt did not lose its characteristic as a student loanobligation when the debt was reduced to a judgment); Moraes v. Adams (In re Adams), 761 F.2d
1422, 1427 (9th Cir. 1985) (addressing dischargeability of punitive damages under § 523(a)(6)
and concluding that “the exception to discharge turns upon the nature of the act which gave riseto the liability rather than upon the nature of the liability”).
30 921 F.2d 252 (10th Cir. 1990).

31 Id. at 253.

32 Id.

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husband’s obligation to pay the debt and affirmed the district court’s decision that the debt was
nondischargeable.33 The facts of Robinson are similar to the facts at hand—the allegations here
show that the parties’ actions transformed the debt from the form originally envisioned in the
marital settlement agreement and the partnership agreement, but did not extinguish Defendant’s
obligation to pay and did not alter the nature of the debt.

Although the determination of whether a particular debt is dischargeable is a question of
federal law,34 the federal courts are reluctant to interfere in family law matters.35 Ultimately,
Plaintiff’s complaint alleges sufficient facts to state a claim under the § 523(a)(15) exception to
discharge, a statutory directive that is construed more liberally than other provisions of § 523.36
Although the facts of this complaint will ultimately be resolved via an evidentiary hearing where
the specific dynamics will be ascertained, Plaintiff’s complaint states a sufficiently viable claim
to survive dismissal. Defendant’s motion to dismiss Plaintiff’s complaint is denied.

III. Conclusion
For the reasons set forth above, the Court finds that Plaintiff’s complaint states a legally
cognizable claim under § 523(a)(15), and Defendant’s motion to dismiss is denied.

It is, therefore, by the Court ordered that Defendant’s motion to dismiss is DENIED,
as stated more fully herein.

IT IS SO ORDERED.

33 Id.

34 See Sampson v. Sampson (In re Sampson), 997 F.2d 717, 721 (10th Cir. 1993) (statingthat nondischargeability under § 523(a)(5) “is a question of federal law”).

35 See Wise v. Bravo, 666 F.2d 1328, 1332 (10th Cir. 1981) (noting that the substantivelaw of domestic relations “is one uniquely within the province of the respective states”).

36 Taylor v. Taylor (In re Taylor), 478 B.R. 419, 427 (B.A.P. 10th Cir. 2012). Also, the
§ 523(a)(5) exception to discharge for domestic support obligations is not construed strictly infavor of the debtor. See 4 COLLIER ON BANKRUPTCY ¶ 523.05, at 523-1 (Alan N. Resnick &
Henry J. Sommer, eds., 16th ed. 2013); Mantooth v. Jones (In re Jones), 9 F.3d 878, 880 (10thCir. 1993).

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ROBERT D. BERGER

U.S. BANKRUPTCY JUDGE
DISTRICT OF KANSAS
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