Although the divorce was
granted in Virginia, where Louis lived, Marguerite had gotten a DC Court
to grant her $250 a month in alimony payments in a totally separate
action.
The Virginia divorce decree
specifically said that there were no property issues to be resolved.
Three years went by and Louis
hadn't paid a dime of the alimony. Marguerite sued in New Hampshire (where
she now lived) to get the money.
The Trial Court ordered Louis
to pay $12k in back-alimony.
In response, Louis declared
bankruptcy.
In order to stop Louis from
weaseling out of his debts, Marguerite filed a complaint in Federal
Bankruptcy Court to have the support obligation declared nondischargeable
under 11 U.S.C. §523(a)(5).
§523(a)(5) excepted from discharge any debt "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 property
settlement agreement."
The Bankruptcy Court found for
Louis. Marguerite appealed to the Federal District Court.
The Bankruptcy Court found
that the debt was not dischargeable because it "relates to the oral
separation agreement between the parties."
However, on reconsideration,
they changed their mind and found that the debt was dischargeable because
it was not created by a "separation agreement which itself embodies
an agreed arrangement between the parties for the obligation to make support
payments."
Basically, the Court was
saying that the separate judgment Marguerite had from the DC Court
wasn't part of the divorce settlement and so was not covered by §523(a)(5).
The District Court reversed.
Louis appealed.
The Appellate Court found that
the debt was not dischargeable because "to allow the defendant's
debt to be discharged would be contrary to Congressional intent and
public policy."
The Appellate Court affirmed
and found that the alimony payments were not dischargeable.
The Appellate Court looked
to precedent and found that some courts found the debt dischargeable and
used different reasoning:
Some have looked primarily
to the plain language of the
Statute.
Some have been guided by
the general rule that exceptions to discharge in bankruptcy should be
narrowly construed against the creditor and in favor of the bankrupt.
Others have found in the legislative
history of §523(a)(5)
an intent that Congress meant to
exclude from protection support debts not specifically originating in a
formal separation agreement or divorce decree.
The Court looked to case law
and found that other courts found the debt not dischargeable and used
different reasoning:
Some courts relied upon the
legislative historyof
§523(a)(5), finding a basic intent upon the part of Congress
to except spousal and child support debts from discharge and no specific
intent to exclude from that protection support debts arising outside of
divorce or formal separation.
Other courts have found the
requisite "connection" in a variety of circumstances in which
the obligation derived from a source other than the main divorce decree
or separation agreement.
The Court looked to the case
law about the 1903 Amendments to §17
of the 1898 Bankruptcy Act.
In those cases, the court had traditionally found that it was the substance
rather than the formal designation
of the payments that determined if they counted as alimony or not.
That would imply that it
didn't matter that Marguerite had a separate agreement, it should still
count as 'alimony'.
The original 1898 Act had
no exception for spouses. The US Supreme Court then proclaimed that
spousal support was 'a duty not a debt' and so was nondischargeable.
Then Congress came back in 1903 and added that exception to the Statute.
The Court then looked at the
1978 Amendments and found that it was intended to broaden the spousal
exception. That would imply that Marguerite's claim was
nondischargeable.
The Court looked to the legislative
history and found that the final
wording of §523(a)(5) was a combination of words of the
House and Senate versions and if narrowly construed would convey a
meaning not intended by either chamber.
Basically, if the Court
construed the plain language of
the Statute, it would reverse a long standing precedent and leave Marguerite
out of luck, and that was contrary to public policy.
There was no evidence in
the legislative history to imply
that Congress intended to reverse a long standing precedent.
It is possible that there
was a drafting error between the different versions of the bill. The
Court felt that if there was a drafting error then the plain language of the Statute shouldn't be taken literally.
Is it really the court's
job to fix drafting errors and determine what Congress intended? Even
if the end result in unjust, shouldn't the court rule according to the
law and let Congress fix their own mistakes?
Compare to Smith v.
United States (508 U.S. 223
(1993)), in which the court came to the opposite conclusion and
enforced the unjust decision.
