UNITED STATES BANKRUPTCY COURT
EASTERN DISTRICT OF KENTUCKY
PRISCILLA S. BUDDEN
CASE NO. 97-10699
HARRY E. BUDDEN, JR.
VS. ADV. NO. 98-1001
PRISCILLA S. BUDDEN
This matter has come before the Court for determination of the dischargeability of an obligation contained in the parties Agreement as to Property Rights, Maintenance, Custody and Support (the Agreement) to pay half the college education costs for their child. In a departure from the more common scenario, the spouse who had been ordered to pay maintenance and support is the plaintiff herein, seeking to have these costs declared nondischargeable as being in the nature of support. This Court has jurisdiction of this matter pursuant to 28 U.S.C. §1334(b); it is a core proceeding pursuant to 28 U.S.C. §157(b)(2)(I).
The Court has agreed to take this matter under submission on the record, and in that regard the parties have tendered Joint Stipulations (Doc. #14) which set out the following:
1. The parties are the parents of Priscilla Jean Budden, dob 8/9/79 and were divorced by order of the Bourbon Circuit Court entered April 22, 1983, Civil Action No. 83-CI-003.
2. On June 2, 1983 the parties entered into an agreement entitled, Agreement as to Property Rights, Maintenance, Custody and Support. This document was adopted by the Bourbon Circuit Court by order entered June 20, 1983.
3. Paragraph 3 of said agreement is designated as Custody.
4. Subparagraph A of Paragraph 3 states: Each party shall pay one-half of the reasonable expenses of a post-secondary education for the parties child, including but not limited to, room, board, tuition, books and fees at a state-supported university, college, vocational or professional school selected by agreement between said child and the parties.
5. On January 23, 1985, an agreed order was entered by the parties whereby the parties changed physical possession of their child for the academic years from the mother to the father. The order stated the parties readopted and reaffirmed the provisions of paragraph 3A of their agreement. The order specifically stated that both parties recognize and agree that this agreement could not be modified except by order of the court.
6. On January 31, 1985 the Court entered an order adopting the parties supplemental agreement and order that no provision of the agreement could be modified, changed, or altered except by written agreement of the parties and accepted by the Court.
7. The parties child entered the University of Kentucky for the 1996-1998 school year by agreement of all parties.
8. The father paid all of the expenses of the parties child at the University of Kentucky and include:
$ 100.00 Deposit for university housing
$ 465.00 Books and supplies - 1st semester
$3662.00 Tuition, fees, room and board - 1st
$ 154.00 Residence Hall linens
$ 223.00 Student health insurance - 1st semester
$ 215.00 Supplies - 2nd semester
$3752.00 Tuition, fees, room and board - 2nd semester
$ 223.00 Health insurance - 2nd semester
$ 179.00 Supplies - 2nd semester
$ 25.00 Final university charges - 2nd semester
9. Demand has been made on the mother for payment of her one-half of the above expenses and she has refused. The Debtor lists this obligation in Schedule G as an executory contract stating - Divorce Settlement Agreement, whereby debtor agreed to pay one-half of the college expenses of the parties child. Debtor list nothing in item 4 of her statement of financial affairs, nothing in Schedule E and nothing in Schedule F concerning the obligation.
10. The parties stipulate the Court has the authority to determine if the agreement of the debtor, adopted in the orders of the Bourbon Circuit Court, is dischargeable in bankruptcy.
The record further shows that the defendant filed her Chapter 7 petition in this Court on December 22, 1997. Copies of the Agreement as to Property Rights, Maintenance, Custody and Support dated June 2, 1983, the Supplemental Decree entered June 20, 1983, the Supplemental Agreement filed January 23, 1985, and the Agreed Supplemental Decree entered January 30, 1985 have been filed.
The sole issue before the Court is whether a court-ordered agreement to be responsible for one-half the college education expenses for the parties child is nondischargeable pursuant to 11 U.S.C. §523(a)(5) as a support obligation. Such obligations have been held to be in the nature of support. In Matter of Bush, 154 B.R. 69 (Bkrtcy.S.D.Ohio 1993), the court held that
pursuant to 11 U.S.C. 523(a)(5)(B) and the applicable test set out in In re Calhoun, 715 F.2d 1103, 1109-1111(6th Cir. 1983), the payments for college assistance are in the nature of support and not of unreasonable amount and therefore they are nondischargeable in this case.
At 70-71. The court explained that the four-part test set out in In re Calhoun is to be employed in determining whether an obligation is in the nature of support. The facts of each case must therefore be examined
in light of the following:
1. whether the intent of the state court or the parties was to create a support obligation;
2. whether the support provision has the actual effect of providing necessary support;
3. whether the amount of support is so excessive as to be unreasonable under traditional concepts of support; and
4. if the amount of support is unreasonable, how much of it should be characterized as nondischargeable for the purposes of federal bankruptcy law.
Id., at 71.
In this proceeding, the plaintiff argues that it is apparent from the Agreement that the provision in issue was intended as support. He points out that he and his former wife would otherwise have had no legal obligation to support their daughter after she reached the age of eighteen, and that their agreeing to provide equally for her post-secondary education evidences their desire to continue supporting her. The defendants only response to this argument is that the provision is found in the Agreement under the heading Custody. The nature of an obligation is not necessarily determined by a label, but, under the Calhoun standard articulated above, by the parties intent. Other courts have agreed. See In re Seixas, 239 B.R. 398, 402 (9th Cir.BAP 1999); In re Crosby, 229 B.R. 679, 681 (Bkrtcy.E.D.Va. 1998).
This Court agrees with the plaintiff that the provision was intended as support. The next consideration is whether the provision had the actual effect of providing support. It has been stipulated that the parties child attended the University of Kentucky for at least two semesters, and that the plaintiff made all the payments in that regard. Those payments therefore had the effect of providing support, satisfying the second element of the Calhoun test.
The question of the reasonableness of the amount of support seems relatively easy to resolve. In fact, the defendant does not argue that her share of the cost of one year at the University of Kentucky was unreasonable. She states in her brief that she did not agree to have the parties child enrolled at the University; however, the Joint Stipulations contradict that statement at ¶7. Further, the Agreement shows that the defendant was represented by counsel at the time she entered into it, and this Court must assume that she did not consider the obligation she was undertaking to be unreasonable. The defendant offers no evidence as to any change in her financial condition. She merely states that her former husband makes more money than she does. This is not enough to convince the Court that she should be relieved of the obligation she undertook in the Agreement. The facts before the Court and the case law support the holding that this debt is nondischargeable as support pursuant to 11 U.S.C. §523(a)(5).
An order in conformity with this opinion will be entered separately.
By the Court -
Judge William S. Howard
Harry E. Budden Jr., Esq.
Rodney S. Justice, Esq.