IN RE: RALPH J. ANGELUCCI, JR. CASE NO. 93-50897
UNITED STATES BANKRUPTCY COURT
EASTERN DISTRICT OF KENTUCKY
RALPH J. ANGELUCCI, JR.
DEBTOR CASE NO. 93-50897
RALPH J. ANGELUCCI, JR. PLAINTIFF
V. ADV. NO. 93-5101
CAROLYN FISTER ANGELUCCI DEFENDANT
This matter is before the court on the complaint of the debtor seeking a determination of the dischargeability of certain debts owed by him to his former spouse, and her attorney, pursuant to an order of the Fayette Circuit Court in marriage dissolution proceedings. 11 U.S.C. § 523(a)(5). Four debts are at issue: a debt of $5,000 to be paid to the former spouse; a second mortgage debt on the marital residence to be paid to the bank holding the mortgage; a debt of $1,200 to be paid to the former spouse's attorney toward payment of his fee in the divorce action; and a debt of $1,500 apparently to be paid to the former spouse toward payment of the fee of an appraiser used by her as an expert witness in the divorce action. The plaintiff debtor argues that these debts are not in the nature of alimony, maintenance or support and thus are dischargeable. The defendant former spouse argues the debts are in the nature of alimony, maintenance or support and thus are nondischargeable.
FINDINGS OF FACT:
A Decree of Dissolution was entered by the Fayette Circuit Court in In re The Marriage of Ralph Angelucci, Jr. and Carolyn Fister Angelucci, Civil Action No. 87-CI-1418, on August 10, 1989. In that Decree the state court adopted the findings of fact and conclusions of law as recommended by its Domestic Relations Commissioner in her initial and supplemental findings entered March 1, 1989 and August 10, 1989, respectively. In the Decree the court ordered:
3. That the marital property of the parties shall be divided among the parties according to and in the manner set out in the original and supplemental findings of fact and conclusions of law which are filed of record herein. In addition thereto, the Petitioner [husband] shall pay to the Respondent [wife] the sum of $5,000.00 in order to effect an equal division of the marital assets of the parties.
Custody of the three minor children of the parties was awarded to Ms. Angelucci. The debtor was ordered to pay the sum of $1,500 per month "as permanent child support." He was ordered to pay "as permanent maintenance" the sum of $1,000 per month for an initial period of 60 months and thereafter $500.00 per month for an additional period of 60 months.
As part of the division of the marital assets and liabilities, Ms. Angelucci was awarded sole ownership of the marital residence, valued at $195,000. The debtor's combined marital and non-marital interests in the residence were determined to be $95,998.67; Ms. Angelucci's marital interest was determined to be $56,329.81. The first mortgage indebtedness to First Federal Savings and Loan Association became an obligation of Ms. Angelucci. As of the date of the divorce hearing the payoff on the first mortgage indebtedness was $42,671.51. In accordance with the decree the debtor deeded the property to Ms. Angelucci. In that deed she assumed the first mortgage on the marital residence.
The debtor was awarded sole ownership of his 10% interest in Ralph Angelucci Homes, Inc. ("Angelucci Homes"), a corporation formed by the debtor and his parents which operated from the early 1970's until 1989 for the purpose of building and selling "speculative houses." His 10% ownership interest in that business was valued at $140,801. The marital interest of the husband and wife in this asset was fixed at $70,400.50 each. Mr. Angelucci was designated as liable for a debt to Bank One, Lexington, NA (formerly First Security National Bank and Trust Co.) on a business line of credit for Angelucci Homes. This debt, which the court determined in August of 1989 to be approximately $62,000, was secured by a second mortgage on the marital residence and was personally guaranteed by Mr. and Ms. Angelucci. A foreclosure action on this debt has since been instituted in the state court by the second mortgage holder against Mr. and Ms. Angelucci. At the time of the hearing before this court the amount of this debt had increased to approximately $93,000 because of accrued interest.
The costs of the divorce action, including attorney fees and expert witness fees, were ordered paid in accordance with the original findings and conclusions of the court. Specifically, in Paragraph 9 of its conclusions of law filed March 1, 1989, the court stated:
Petitioner [husband] shall pay up to $1500 toward the expert witness fees of the Respondent [wife]. This award is made because of the great disparity in the income of the parties and the fact that the Court has taken $1,200.00 of marital property from Respondent [wife] and required that sum be applied toward her attorney fees. These facts warrant the expert fee allowance and attorney fee award.
In Paragraph 10 the court ordered the debtor to pay to Ms. Angelucci's attorney the sum of $1,200 toward her attorney fees.
Ralph Angelucci filed a petition for relief under chapter 7 of the Bankruptcy Code on June 8, 1993. The corporation Angelucci Homes did not file for protection under the Code. Many of the debts listed by Ralph Angelucci were related to the business of Angelucci Homes.
On August 4, 1993 on motion of the debtor's former spouse this court granted relief from the automatic stay to permit the Fayette Circuit Court to proceed with a hearing pertaining to the debtor's obligations of child support and maintenance. At a hearing on September 13, 1993 the state court judge stated:
Well, I believe the Commissioner's decision to reduce the child support and maintenance was to permit Mr. Angelucci to pay the bank with regard to the second mortgage money owed on the property. That has not been paid so let the maintenance and the support be the original figures to begin immediately. Let him have until this Friday to make any child support delinquency paid up to date.
I believe, Mr. Angelucci, that your intention is to require your wife to sell this piece of property. That may be the smartest thing she could do, but right now that's not her need to do so. She may have to do so in the future if the bank continues with its foreclosure action.
. . . .
The original maintenance and support, which was reduced by the Commissioner because of the problems at the time and in my opinion was solely for the purpose of permitting him to make the second mortgage payments, which were covered by the mortgage on the residence, and that's to go back to its original amount.
Transcript of hearing in Fayette Circuit Court Action No. 87-CI-1418, 9/13//93, pp. 47-48.
The state court entered an order on October 6, 1993 which stated that "the Court having found that the Petitioner's Maintenance and Child Support obligation had been reduced to enable the Petitioner to make certain bank payments to First Security (now Bank One), a corporate debt secured by the residence of the Respondent and the parties' minor children, and that the Petitioner had not made said payments, and that the Petitioner's intentions in not making said payments were to force the Respondent from her home," Ralph Angelucci is ordered to resume paying child support and maintenance in the total amount of $2,500 per month as originally required by the decree and to pay arrearages totalling $2,895.41.
A hearing on the dischargeability of the four debts at issue was conducted by this court on March 3, 1994.
CONCLUSIONS OF LAW:
The court concludes that the state court did intend to create a support obligation in requiring the debtor to pay the second mortgage indebtedness on the marital residence. Payment of that obligation would have the effect of providing the support necessary to satisfy the daily needs of Ms. Angelucci and the parties' three children. The amount of support represented by this obligation was not excessive or manifestly unreasonable under traditional concepts of support based on the facts considered by the state court. In re Calhoun, 715 F.2d 1103, 1109-10 (6th Cir. 1983); see also In re Fitzgerald, 9 F.3d 517 (6th Cir. 1993). To hold otherwise would reduce Ms. Angelucci's marital interest in the residence to zero. Using the figures available in 1989, at the time the decree was entered, if the amount of the first and second mortgage indebtedness ($42,671.51 + $62,000 = $104,671.51) is subtracted from the value of the residence ($195,000), most of the amount fixed by the Domestic Relations Commissioner as the debtor's non-marital and marital interest in the residence ($95,998.67) is accounted for ($195,000 - $104,671.51 = $90,328.49) but none of the wife's marital interest therein of $56,329.81 is accounted for. Moreover, the amount fixed as the debtor's marital and non-marital interest in the residence plus the amount fixed as Ms. Angelucci's marital interest therein and the amount due on the first mortgage when added equal the value fixed for the residence ($95,998.67 + $56,329.81 + $42,671.51 = $194,999.99). The court calculated Ms. Angelucci's marital interest in the residence as if the second mortgage did not exist.
Apparently the state court required Mr. Angelucci to pay the corporate debt owed to Bank One, secured by the second mortgage on the residence, believing Angelucci Homes would continue to be a viable company. When Angelucci Homes, Inc. ceased doing business, the bank commenced a foreclosure action on the marital residence. Hence, Ms. Angelucci's marital interest in the residence is at risk. This court finds the debt to Bank One to be "in the nature of alimony, maintenance, or support" and thus nondischargeable. 11 U.S.C. § 523(a)(5)(B).
An opposite conclusion is reached with regard to the $5,000 debt. The state court clearly identified that debt as part of its division of the parties' marital property. The $5,000 debt owed by the debtor to Ms. Angelucci is dischargeable. 11 U.S.C. § 523(a)(5).
In accordance with In re Perlin, No. 93-3705, 1994 WL 328553 (6th Cir. July 12, 1994), the court does not reach the issue of dischargeability of the $1,200 debt owed by the debtor to Ms. Angelucci's divorce counsel. That issue must be presented to the court by counsel to whom the debt is owed.
As for the $1,500 debt owed by the debtor to Ms. Angelucci toward payment of her expert witness' fee in the divorce action, the court finds that debt to be "in the nature of alimony, maintenance, or support" and thus nondischargeable pursuant to 11 U.S.C. § 523(a)(5)(B).
By the court --
Steven F. Vicroy
John C. Ryan
U. S. Trustee