Opinion
Case No. 02-12093-BKC-AJC.
October 26, 2009
MEMORANDUM ORDER GRANTING DEBTOR'S MOTION TO AVOID JUDICIAL LIENS ON HOMESTEAD PROPERTY
THIS MATTER came before the Court for hearing on Wednesday, July 29, 2009, on the Motion of Scott Spence ("Debtor"), seeking to avoid judicial liens held by Debtor's former spouse, Patricia Spence, and her divorce attorney, Brian Hersh (collectively, "Creditors"), stemming from sanctions imposed in state-court divorce proceedings. Having reviewed the motion and having considered the representations and arguments of counsel, the Court renders the following decision.
UNDISPUTED FACTS
On January 4, 2000, Circuit Judge Judith Kreeger of the 11th Judicial Circuit Court in and for Miami-Dade County, Florida issued a Final Judgment Dissolving Marriage between Debtor and Creditor/former spouse. In re Marriage of Spence, No. 99-27618 FC (17) (Fla. 11th Cir. Ct. January 4, 2000) (hereafter, "Spence"). Following the dissolution, the family court judge found that Debtor had, inter alia, substantially violated mediation privilege, warranting sanctions. Spence, Order and Judgment Approving Master's Report ("Sanctions Order I") at 2. Upon the recommendation of the assigned General Master, the court imposed sanctions against Debtor in the amount of $5,814.00, plus interest, as attorney's fees to be paid to Creditors. Id. (A copy of the Order and Judgment was recorded in Official Records Book 19799, Page 345 of the Public Records of Miami-Dade County, Florida, and a certified copy of the Judgment was re-recorded in Official Records Book 20009, Page 1703 of the Public Records of Miami-Dade County, Florida.) Pursuant to a subsequent General Master's report, the court thereafter entered a supplemental order adding another $2,113.00, plus interest, in fees as additional sanctions. Spence, Supplemental Judgment Approving Master's Report ("Sanctions Order II") at 1. (A copy of the Supplemental Judgment was recorded in Official Records Book 20044, Page 3406 of the Public Records of Miami-Dade County Florida, and a certified copy of the Judgment was re-recorded in Official Records Book 20949, Page 2468 of the Public Records of Miami-Dade County, Florida.)
The initial General Master's report cited Debtor's mediation violations as the sole basis for the sanctions. Spence, General Master's Report ("Master Report I") at 1. In summarily approving the Master Report I, Judge Kreeger cited Tiedman v. City of Miami, 529 So.2d 1266 (Fla. 3rd DCA 1988), a case wherein the court upheld attorney's fees for frivolous court filings. Spence, Sanctions Order I at 1. The supplemental order merely approved the General Master's recalculation of the sanctions, adding fees accordingly. Sanctions Order II at 2. The aforementioned reports and orders provide no reason, other than Debtor's litigation misconduct, for imposing the fees.
On March 7, 2002, Debtor filed a voluntary petition pursuant to Chapter 7 of the Bankruptcy Code. The Court issued Debtor a discharge on August 5, 2002. Debtor now claims that the judgment liens stemming from the sanctions awarded in the divorce proceedings have prevented him from refinancing his home mortgage. Accordingly, in June, 2009, Debtor moved this Court to avoid the liens. Creditors objected. Following a hearing held July 29, 2009, Creditors and Debtor submitted proposed orders to the Court for consideration and entry.
ANALYSIS
The parties' dispute presents the issue of whether Debtor may avoid judicial liens stemming from sanctions entered against him, in the form of attorney's fees payable to his former spouse and her attorney due to Debtor's breach of mediation confidentiality during divorce proceedings, or whether, to the contrary, the liens constitute unavoidable domestic support obligations. For the reasons stated below, the Court holds that Debtor can avoid the liens.
A. To Constitute an Unavoidable Domestic Support Obligation, Such Obligation Must Be "in the Nature of Alimony, Maintenance, or Support"
The current Bankruptcy Code, as amended by BAPCPA, provides that a debtor may not avoid the fixing of a judicial lien on property if the lien is "of a kind that is specified in Section 523(a)(5)," i.e., a debt "for a domestic support obligation." 11 U.S.C. § 522(f)(1) (2008). However, Debtor notes that the current provisions of 11 U.S.C. §§ 522(f)(1) and 523(a)(5) were not adopted until 2005, subsequent to the imposition of the judicial liens and to the filing of Debtor's bankruptcy petition. Debtor thus argues that this Court should apply the former language of 11 U.S.C. § 522(f)(1), which does not incorporate a reference to Section 523(a)(5), to decide the issue at bar. While the Court agrees with Debtor as to the application of the law, both the new and old provisions of the lien avoidance statute would yield the same conclusion, because the language is substantially the same.
Prior to the 2005 amendment, Section 522(f)(1) stated that a debtor may not avoid the fixing of a judicial lien on property if the obligation giving rise to the lien is owed "to a spouse, former spouse, or child of the debtor, for alimony to, maintenance for, or support of such spouse or child, in connection with a separation agreement, divorce decree or other order of a court of record, . . . to the extent that such debt . . . includes a liability designated as alimony, maintenance, or support, unless such liability is actually in the nature of alimony, maintenance or support." 11 U.S.C. § 522(f)(1)(A)(I), (ii)(I) (1994), superseded by 11 U.S.C. 522(f)(1)(A) (2005). As of 2005, Section 522(f)(1) omits the entirety of the above-quoted language, and instead excludes from avoidance "a judicial lien that secures a debt of a kind that is specified in section 523(a)(5). . . ." The term "domestic support obligation" is now defined under Section 101(14) of the Code as a debt "to a . . . former spouse . . . in the nature of alimony, maintenance, or support of such . . . former spouse . . . without regard to whether such debt is expressly so designated. . . ." 11 U.S.C. § 101(14) (2008). The Court believes the analysis under both provisions is essentially the same; Congress did not materially alter the definition of which judicial liens were not avoidable, it merely removed the definition of the type of judicial lien that is not avoidable from Section 522(f)(1) of the Code and referred readers instead to essentially the same definition which is now contained in Section 101(14). The statutory definition of "domestic support obligations" which includes obligations that are "in the nature of alimony, maintenance, or support" still applies here.
B. Debtor's Obligations are Not "Actually in the Nature of Alimony, Maintenance, or Support" of Creditors.
The Eleventh Circuit Court of Appeals has determined that constructs of federal law control whether a debt constitutes a "domestic support obligation." Strickland v. Shannon, 90 F.3d 444, 446 (11th Cir. 1996). While state law "does not control," it does, however, "provide guidance in determining whether the obligation should be considered `in the nature of support'." Id. at 446 (citing In re Jones, 9 F.3d 878, 880 (10th Cir. 1993)); accord, Smallwood v. Finlayson, 217 B.R. 666 (Bankr. S.D.Fla. 1998). The law in the Eleventh Circuit is that a domestic support obligation may be deemed in the nature of support under 11 U.S.C. § 523(a)(5), even though it may not be classified as support under state law. In re Harrell, 754 F.2d 902, 905 (11th Cir. 1985). As the court in Harrell summarized,
The language used by Congress in § 523(a)(5) requires bankruptcy courts to determine nothing more than whether the support label accurately reflects that the obligation at issue is "actually in the nature of alimony, maintenance, or support." The statutory language suggests a simple inquiry as to whether the obligation can be characterized as support, that is, whether it is in the nature of support.
Id. at 906 (emphasis in original).
Courts have recognized that "not every obligation created in connection with, or arising out of, a domestic matter, ipso facto, qualifies as a domestic support obligation." In re Lopez, 405 B.R. 382, 384 (Bankr. S.D.Fla. 2009); accord, Simon v. Gentilini, 365 B.R. 251 (Bankr. S.D.Fla. 2007) and Manz v. Palomino, 355 B.R. 349 (Bankr. S.D.Fla. 2006). Most notably, in Lopez, a case with facts similar to this case, Judge Isicoff dismissed a creditor's assertions that the attorney's fees owed to him were in the nature of support because they were "related to a custody, parentage, or visitation matter." Lopez, 405 B.R. at 384. The $65,000.00 awarded as attorney's fees in Lopez, like the fees in the instant case, resulted from the "bad-faith litigation misconduct" of the former spouse during divorce proceedings. 405 B.R. at 385. Significantly, the family court in Lopez specifically stated that imposition of the fees was "not based upon the respective wages or ability of the parties to pay." Id. (emphasis added). In holding that the fees did not constitute a domestic support obligation within the meaning of the Code, Judge Isicoff noted that the "plain language" of the State Court Order emphasized that misconduct, and not financial need, spurred the award of fees, contradicting the creditor's assertion that the award was for "support." Id. The result would not change, the opinion states, regardless of "whether this Court looks at the state law definition of support or the federal law definition of support." Id.
Just as in Lopez, this Debtor's misconduct during divorce proceedings was the sole reason given in the "plain language of the State Court Order[s]" — Sanctions Orders I and II — for assessing fees as sanctions against Debtor. If behavior such as Debtor's in the divorce proceedings is permitted, "the mediation process would be totally undermined," Judge Keeger stated. Spence, Order on Petitioner's Motion to Strike Former Husband's Petition ("Strike Order") at 4. Debtor apparently also asserted frivolous, wholly unsupportable claims in the process of breaching mediation confidentiality, as is made evident by Judge Kreeger's citation to Tiedman v. City of Miami, which held that where a lawsuit presents no justiciable issue of law or fact, attorney's fees should be awarded. 529 So.2d 1266, 1267 (Fla. 3rd DCA 1988). Here, neither the Strike Order, nor the Master's Reports I or II, nor the Sanctions Orders I or II contain any language indicating that the assessment of fees was "based upon the respective wages or ability of the parties to pay," Lopez, 405 B.R. at 385, or that the award was in any other way meant to provide domestic "support" to Creditors. Rather, the documents indicate that the fees were assessed solely to punish Debtor's misconduct. When such is the case, as Judge Isicoff stated in Lopez, the award is clearly not "in the nature of alimony, maintenance, or support" of Creditors. Id..
The Court's determination is consistent with Eleventh Circuit cases wherein attorney's fees stemming from family court proceedings have been deemed to be "in support" of the creditor when they are awarded based on the relative financial need, not the divorce proceedings conduct, of the respective parties. See Strickland, 90 F.3d 444 (11th Cir. 1996) (attorney's fees award, as an obligation based on the parties' relative need and ability to pay, was meant to support dependent, and thus is nondischargable); Harrell, 754 F.2d at 906 (payments awarded in part to pay child support and educational expenses were "actually in the nature of alimony"); Manz, 355 B.R. at 351 (denying summary judgment to debtor seeking to avoid attorney's fees because facts alleged by plaintiff — that "original trial-court award of fees was based on the relative financial position of the parties" — would have, if proven, been sufficient to show that the fees were in the nature of support); Finlayson, 217 B.R. at 666 (attorney's fees award was in nature of support where family court order showed the award was based on the disparity in the parties' financial positions); In re Beardsley, 118 B.R. 120, 122 (Bankr. M.D.Fla. 1990) ("In light of the fact that the court orders regarding the parties' dissolution of marriage and subsequent related proceedings that are in this record all deal with the Debtor's obligation to pay child support, medical expenses, and attorney fees . . . the attorneys fees awarded to the Plaintiff are, in fact, intertwined with the child support and medical insurance obligations," and thus are in the nature of support.).
The family court in Lopez, in contrast, emphasized that its assessment of fees was "not based upon the respective wages or ability of the parties to pay." See Lopez, 405 B.R. at 385. Likewise, in the instant case, there are no facts before this Court indicating that the family court was trying to reconcile a financial disparity between Debtor and Creditors. In fact nothing in the record supports the Creditors' position that the family court's award of fees as sanctions was "in the nature of alimony, maintenance, or support" of Creditors.
Sanctions in the form of attorney's fees stemming from bad-faith litigation misconduct in a divorce proceeding are punishment for the wrongful actor, not a domestic obligation meant to support the other party, particularly where consideration of the parties' respective ability to pay legal fees is wholly absent from the record. Because such is the case here, the Court finds unpersuasive Creditors' argument that the judicial liens currently encumbering Debtor's property are unavoidable domestic support obligations. Accordingly, it is
ORDERED AND ADJUDGED that Debtor's Motion to Avoid Judicial Liens of Creditors Patricia Spence and Brian Hersh on Exempt Homestead Real Property is GRANTED, and pursuant to 11 U.S.C. § 522(f)(1), the liens of Judgment Creditors Patricia A. Spence and Brian R. Hersh, arising from the Judgments dated July 25, 2001 and November 29, 2001 in favor of Patricia A. Spence and Brian R. Hersh and entered in Miami-Dade County Circuit Court Case No. 99-27618 FC(17) and recorded, respectively, in Official Records Book 19799, Page 345, in Official Records Book 20009, Page 1703, in Official Records Book 20044, Page 3406, and in Official Records Book 20949, Page 2468 all of the Public Records of Miami-Dade County, Florida are AVOIDED AND OF NO FURTHER EFFECT upon the title of the Debtor's homestead real property which is legally described as:
Lot 30, Block 21 SOUTH CORAL HOMES, SECTION THREE, according to the Plat thereof, as recorded in Plat Book 57, Page 15, of the Public Records of Miami-Dade County, Florida.
The street address of the property is 9841 Martinique Drive, Cutler Bay, FL, 33189.