Peters v. Wise - Case Law

F I L E D
United States Court of Appeals
Tenth Circuit
PUBLISH
OCT 10 2003
UNITED STATES COURT OF APPEALS
PATRICK FISHER
Clerk
TENTH CIRCUIT

In re: DARLENE JILL WISE,

Debtor.

_______________________________ No. 02-1482

M. STEPHEN PETERS, Chapter 7
Trustee,

Appellant,

DARLENE JILL WISE,

Appellee.

APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLORADO
(D.C. No. 01-WM-1506 (MJW))

Submitted on the briefs:

M. Stephen Peters, Trustee, Wheat Ridge, Colorado, for Appellant.

R. Scott Schofield, Colorado Springs, Colorado, for Appellee.

Before MURPHY and PORFILIO , Circuit Judges, and BRORBY , Senior Circuit
Judge.
BRORBY , Senior Circuit Judge.

In this appeal we decide whether the spousal maintenance payments paid to

debtor Darlene Jill Wise by her ex-husband within 180 days after the filing of her

Chapter 7 bankruptcy petition are property of the bankruptcy estate under

11 U.S.C. § 541(a)(5)(B) and therefore must be turned over to the Chapter 7

Trustee, M. Stephen Peters. Both the bankruptcy court and the district court held

these post-petition maintenance payments were not property of the bankruptcy

estate under § 541(a)(5)(B). We affirm. 1

The facts in this case are straightforward and undisputed. On July 12,

1991, the El Paso County, Colorado, District Court granted Ms. Wise and her

husband a divorce. Although the divorce decree incorporated the property

settlement agreement, it made no mention of spousal maintenance. Subsequently,

the court granted Ms. Wise’s motion for maintenance. The court ordered

Ms. Wise’s ex-husband to make monthly support payments of $500 until the

earlier of her death or remarriage. At all times, he has made the payments.

1
After examining the briefs and appellate record, this panel has determined
unanimously that oral argument would not materially assist the determination of
this appeal. See Fed. R. App. P. 34(a)(2); 10th Cir. R. 34.1(G). The case is
therefore ordered submitted without oral argument.

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On January 18, 2001, Ms. Wise filed a Chapter 7 bankruptcy petition. The

Chapter 7 Trustee filed a motion for the turnover of property, asserting the

spousal maintenance payments paid to Ms. Wise within the 180-day period

following the filing of her bankruptcy petition should be included in the

bankruptcy estate under § 541(a)(5)(B). The bankruptcy court denied the motion,

holding that these payments were not property of the bankruptcy estate under

§ 541(a)(5)(B). See In re Wise , 264 B.R. 701, 704 (Bankr. D. Colo. 2001). The

court based its holding on two independent reasons: (1) under state law, the

maintenance payments were personal rights and not property rights of Ms. Wise

and (2) § 541(a)(5)(B) applies only to property settlements and not to spousal

maintenance awards. In re Wise , 264 B.R. at 704-07. The district court affirmed

for substantially the same reasons stated by the bankruptcy court. See Peters v.

Wise (In re Wise) , 285 B.R. 8, 10 (D. Colo. 2002). The Trustee now appeals to

this court.

Because the facts in this case are undisputed, our review is limited to the

narrow legal issue presented. Thus, we review de novo the bankruptcy court’s

and district court’s legal determinations that the post-petition spousal

maintenance payments were not property of the bankruptcy estate under

§ 541(a)(5)(B). See Phillips v. White (In re White) , 25 F.3d 931, 933 (10th Cir.

1994).

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A bankruptcy estate is created by the filing of a bankruptcy petition. See

11 U.S.C. § 541(a). Generally, property the debtor acquires post-petition does not

become property of the bankruptcy estate. See 5 Collier on Bankruptcy, ¶ 541.03

(Alan N. Resnick, et al. eds., 15th ed. rev. 2003). One exception to this general

rule is found in § 541(a)(5)(B), which provides that the bankruptcy estate includes

(5) Any interest in property that would have been property of
the estate if such interest had been an interest of the debtor on the
date of the filing of the petition, and that the debtor acquires or
becomes entitled to acquire within 180 days after such date--

...

(B) as a result of a property settlement agreement with the
debtor’s spouse, or of an interlocutory or final divorce degree[.]

The Trustee argues that, under this statutory language, any property,

including personal property, the debtor is entitled to under a divorce decree

should be included as property of the bankruptcy estate if the entitlement arose

within 180 days after the filing of the bankruptcy petition. Also, the Trustee

argues the statutory language should not be limited to only property received from

a property settlement agreement, because the statutory language includes both

property received as part of a property settlement agreement between the debtor

and the debtor’s former spouse and any property received as a result of a divorce

decree.

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“As in all statutory construction cases, we begin with the language of the

statute.” Barnhart v. Sigmon Coal Co. , 534 U.S. 438, 450 (2002). If the statutory

language is not ambiguous, and “the statutory scheme is coherent and consistent,”

further inquiry is unneeded. Id. (quotation marks omitted). “The plainness or

ambiguity of statutory language is determined by reference to the language itself,

the specific context in which that language is used, and the broader context of the

statute as a whole.” Robinson v. Shell Oil Co. , 519 U.S. 337, 341 (1997); see also

U.S. Nat’l Bank of Or. v. Indep. Ins. Agents of Am., Inc. , 508 U.S. 439, 455

(1993) (“Statutory construction is a holistic endeavor, and, at a minimum, must

account for a statute’s full text, language as well as punctuation, structure, and

subject matter.”) (quotation marks and citation omitted).

Like the bankruptcy court, we first consider whether Ms. Wise has an

“interest in property” in the spousal maintenance payments she acquired within

180 days after filing her Chapter 7 petition, such that the maintenance “would

have been property of the estate if such interest had been an interest of the debtor

on the date of the filing of the petition.” See 11 U.S.C. § 541(a)(5). Because

state law defines and creates property interests, Butner v. United States , 440 U.S.

48, 54-55 (1979); Stat-Tech Int’l Corp. v. Delutes (In re Stat-Tech Int’l Corp. ),

47 F.3d 1054, 1057 (10th Cir. 1995), we look to Colorado law to determine what

property interest, if any, she has in the spousal maintenance payments in order to

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decide if they are bankruptcy estate property. See In re Poffenbarger , 281 B.R.

379, 385 (Bankr. S.D. Ala. 2002); see also Pauley v. Spong (In re Spong),

661 F.2d 6, 9 (2d Cir. 1981) (deciding that, because federal courts have no

jurisdiction over divorces or alimony awards, Congress could not have intended

federal courts to form bankruptcy law regarding alimony without reference to

state law). Once property rights are determined under state law, however, the

federal bankruptcy law establishes the extent to which the property interest is

property of the bankruptcy estate. N.S. Garrott & Sons v. Union Planters Nat’l

Bank of Memphis (In re N.S. Garrott & Sons) , 772 F.2d 462, 466 (8th Cir. 1985).

The bankruptcy court found that the maintenance award to Ms. Wise was a

personal right. See In re Wise , 264 B.R. at 705. We agree with this

determination. In Colorado, the right to receive alimony or maintenance, as well

as the duty to pay it, are personal. See Greer v. Greer , 130 P.2d 1050, 1052

(Colo. 1942). See generally United States v. Davis , 370 U.S. 65, 70 (1962)

(recognizing obligation of post-divorce support is more personal liability of

husband than property interest of wife). Under Colo. Rev. Stat. § 14-10-114(3), a

court will award maintenance only if certain conditions are met. Thus, “any

award of maintenance to a spouse in Colorado is a personal statutory right and not

a property right.” In re Wise , 264 B.R. at 705.

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Like the bankruptcy court and district court, we reject the notion that a

personal right to future maintenance is an “interest in property.”

[The Trustee] attempts to convert the right to maintenance or alimony
into a property right, in effect convert a right to income into an
existing asset. If that were so then the Trustee could also claim the
discounted value of the future maintenance right as of the date of
filing. That is not the law. On the other hand, under Colorado law,
maintenance payments that are due and not paid become enforceable
judgments. See C.R.S. § 14-10-122(1)(c) (emphasis added). While
due and unpaid payments may constitute causes of action to be
included within a bankruptcy estate as property interests, here,
however, it is undisputed that the Debtor’s ex-husband paid all
alimony installments in a timely fashion. As such, those payments
never ripened into enforceable judgments; they are not interests in
property and therefore need not be turned over to the Trustee by
operation of § 541(a)(5)(B).

Peters , 285 B.R. at 10 (footnote omitted). Thus, Ms. Wise’s personal right to

future maintenance is not an “interest in property” under § 541(a)(5)(B).

The court in In re Jeter , 257 B.R. 907, 910 (B.A.P. 8th Cir. 2001),

considered whether alimony was included within the reach of § 541(a)(5)(B) and

held that “[o]n its face and by its plain language, § 541(a)(5)(B) does not reach

alimony awards.” See also In re Peterson , 280 B.R. 886, 892 (Bankr. S.D. Ala.

2001) (holding alimony payments that are not due and payable until after date of

filing are not property of bankruptcy estate). Also, the Jeter court found further

support for this conclusion in Nebraska law, which made clear that alimony

awards and property settlements serve different functions and are separate and

distinct. Id. at 911. Finally, as a policy matter, the court believed post-petition

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alimony should not be included in the bankruptcy estate, because including

alimony as estate property “would jeopardize the debtor spouse’s fresh start and

substantially interfere with, perhaps even undermine, the debtor spouse’s ability

to support . . . herself in the future.” Id. at 912.

We agree with the reasoning and holding in Jeter . Like the Nebraska law

considered in Jeter , Colorado law treats spousal maintenance and property

settlements differently. Compare Colo. Rev. Stat. § 14-10-113 (disposition of

property) with Colo. Rev. Stat. § 14-10-114 (maintenance). See generally Shreyer

v. Shreyer , 148 P.2d 1003, 1004 (Colo. 1944) (“This division of property is

essentially different from an award of alimony.”). A state court is required to

divide marital property according to Colo. Rev. Stat. § 14-10-113. In re Marriage

of Quay , 647 P.2d 693, 695 (Colo. Ct. App. 1982). Maintenance, however, may

be awarded only if the court decides the property is inadequate to meet the

reasonable needs of the party seeking maintenance and the party seeking

maintenance has insufficient earning capacity. In re Marriage of Jones , 627 P.2d

248, 252 (Colo. 1981) (en banc); see Colo. Rev. Stat. § 14-10-114. The property

division precedes the court’s consideration of maintenance. In re Marriage of

Jones , 627 P.2d at 252-53. If the parties’ circumstances change, “the property

division remains fixed and requisite adjustments to achieve fairness are . . . made

in the maintenance provisions of a decree.” Id. at 253 (citing Colo. Rev. Stat.

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§§ 14-10-122(1), 14-10-112(1), (6)); see also Magarrell v. Magarrell , 355 P.2d

946, 947 (Colo. 1960) (holding property settlement made as part of divorce decree

cannot later be modified).

Because there is a difference between property settlements and

maintenance, we assume Congress acted intentionally and purposefully in

excluding spousal maintenance or alimony from the statutory language. See

Barnhart , 534 U.S. at 452. “If Congress had intended for the provision to reach

maintenance awards, it would have specifically included language to that effect.”

In re Wise , 264 B.R. at 707.

We recognize that the bankruptcy court in In re Anders , 151 B.R. 543

(Bankr. D. Nev. 1993), reached a different result. That court held, after analyzing

Nevada law, that “any and all spousal support payments which accrued prior to

180 days following the date of the filing of Debtor’s petition are property of

Debtor’s estate.” Id. at 548 (emphasis in original). Although the court

recognized that alimony is a personal right and not a property right and that each

support payment only became enforceable after its accrual, the court decided that

any payment made or accrued within the 180-day period became a right to

payment. See id. at 547-48. We agree with the finding of the bankruptcy court in

the case before us that In re Anders was wrongly decided because it improperly

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expanded the bankruptcy estate to include personal rights of the debtor. See In re

Wise , 264 B.R. at 707. 2

Because the spousal maintenance was not an “interest in property” acquired

as a result of a property settlement agreement or final divorce decree, we

conclude the bankruptcy court and district court both correctly decided the

maintenance was not property of the bankruptcy estate under § 541(a)(5)(B).

Accordingly, we AFFIRM the judgment of the district court.

2
The Trustee argues that the legislative history proves Congress intended
§ 541(a)(5)(B) to include alimony. See Appellant’s Br., Attach. 2 (H.R. Rep. No.
95-595, at 176 (1977), reprinted in 1978 U.S.C.C.A.N. 5963, 6136) (noting bill
expanded categories of covered property to include “divorce or alimony
settlements”)). Other legislative history, however, indicates the bankruptcy estate
includes only the debtor’s interest in “a property settlement agreement with the
debtor’s spouse.” S. Rep. No. 95-989, at 83 (1978), reprinted in 1978
U.S.C.C.A.N. 5787, 5869; H.R. Rep. No. 95-595, at 368 (1977), reprinted in 1978
U.S.C.C.A.N. 5963, 6324. Thus, the legislative history the Trustee submits fails
to “clearly express[] legislative intent” “warrant[ing] a different construction”
than the one based on the plain language of the statute. Nat’l Org. for Women,
Inc. v. Scheidler , 510 U.S. 249, 261 (1994) (quotation marks omitted). In any
event, we need not refer to this legislative history, because the language of the
statute is unambiguous.

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