in re: stephanie a. diener, 9th cir. bap (2012)

7/25/2019 In re: Stephanie A. Diener, 9th Cir. BAP (2012)

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281 Hon. Char l es D. Novack, Uni t ed St at es Bankrupt cy J udge f or

t he Nor t her n Di st r i ct of Cal i f or ni a, si t t i ng by desi gnat i on.

UNITED STATES BANKRUPTCY APPELLATE PANEL

OF THE NINTH CIRCUIT

I n r e: ) BAP No. CC- 12- 1093- Ki NoPa)

STEPHANI E A. DI ENER, ) Bk. No. 10- 10042- RR)

Debt or . ))

))

STEPHANI E A. DI ENER, ))

Appel l ant , )) O P I N I O N

v. ))SANDRA K. MCBETH, Chapt er 7 )Tr ust ee, )

)Appel l ee. )

______________________________)

Ar gued and Submi t t ed on Sept ember 20, 2012at Pasadena, Cal i f or ni a

Fi l ed - November 21, 2012

Appeal f r om t he Uni t ed St at es Bankrupt cy Cour tf or t he Cent r al Di str i ct of Cal i f or ni a

Honor abl e Robi n Ri bl et , Bankrupt cy J udge, Pr esi di ng

Appear ances: J anet Audr ey Lawson, Esq. appear ed f orappel l ant , St ephani e A. Di ener ; Davi d Y. Far mer ,Esq. of Far mer & Ready appear ed f or appel l ee,Sandr a K. McBeth, Chapt er 7 Trust ee.

Bef or e: KI RSCHER, NOVACK, 1 and PAPPAS, Bankr upt cy J udges.

FILEDNOV 21 2012

SUSAN M SPRAUL, CLERU.S. BKCY. APP. PANELOF THE NINTH CIRCUIT


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2 Unl ess speci f i ed ot her wi se, al l chapt er , code, and r ul er ef er ences ar e t o t he Bankrupt cy Code, 11 U. S. C. 101- 1532, andt he Federal Rul es of Bankr upt cy Procedur e, Rul es 1001- 9037. TheFeder al Rul es of Ci vi l Pr ocedur e ar e r ef er r ed t o as Ci vi l Rul es.

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KI RSCHER, Bankr upt cy J udge:

Appel l ant , chapt er 72 debt or St ephani e Di ener ( Di ener ) ,

appeal s an or der f r om t he bankrupt cy cour t di sal l owi ng her cl ai med

exempt i on f or r et i r ement f unds she assert ed const i t ut ed spousal

support under CAL. CODE CI V. PROC. ( CCP) 703. 140( b) ( 10) ( D) .

Al t hough t he bankrupt cy cour t appl i ed an i ncor r ect st andar d of

l aw, such er r or was harml ess, and we AFFI RM.

I. FACTUAL BACKGROUND AND PROCEDURAL HISTORY

Di ener and her f ormer spouse, Davi d Di ener ( Davi d) , were

mar r i ed i n 1979. Af t er t went y- ei ght year s of mar r i age, t he coupl eseparated and ceased l i vi ng t ogether as husband and wi f e i n 2007.

Davi d f i l ed f or di vor ce t hat same year .

Dur i ng t he par t i es pr ot r act ed di ssol ut i on pr oceedi ng, Di ener

f i l ed a chapt er 7 bankrupt cy case on J anuar y 6, 2010. Di ener s

Schedul e I r ef l ect ed t hat her onl y i ncome was t he mont hl y support

payment f r omDavi d of $2, 338. 00. At t he t i me of t he exempt i on

hear i ng, Di ener was st i l l unempl oyed.

Appr oxi mat el y one year af t er Di ener f i l ed f or bankrupt cy, t he

st at e cour t ent er ed a J udgment of Di ssol ut i on of Mar r i age on

J anuar y 26, 2011. I ncor por at ed i nto t he J udgment was a Mar i t al

Set t l ement Agr eement ( col l ect i vel y t he MSA) between Di ener and

Davi d. Both par t i es had been r epr esent ed by counsel t hr oughout

t he negot i at i ons l eadi ng t o t he MSA. Among ot her asset s, Di ener

was t o r ecei ve al l i nt er est i n a Met Li f e Non- Qual i f i ed Ret i r ement


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3 CCP 704. 115( b) pr ovi des: Al l amount s hel d, cont r ol l ed,or i n pr ocess of di st r i but i on by a pr i vat e r et i r ement pl an, f ort he payment of benef i t s as an annui t y, pensi on, r et i r emental l owance, di sabi l i t y payment , or deat h benef i t f r om a pr i vat er et i r ement pl an are exempt .

4 Trust ee has never obj ected t o t he over $600, 000 Di enerr ecei ved f r om Davi d s 401( k) account , so that r et i r ement accounti s not at i ssue i n t hi s appeal .

5 CCP 703. 140( b) ( 10) ( D) pr ovi des that a debt or may exempt :Al i mony, suppor t , or separ at e mai nt enance, t o t he extentr easonabl y necessar y f or t he suppor t of t he debt or and anydependent of t he debt or .

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401( k) account and cl ai mi ng t hemas exempt r et i r ement account s

under CCP 704. 115(b) . 3 Appel l ee, chapt er 7 t r ust ee Sandr a K.

McBet h ( Trust ee) , obj ect ed to t he cl ai med exempt i on f or t he Met

Li f e Account , cont endi ng that : ( 1) t he amended schedul es wer e

f i l ed i n bad f ai t h due t o Di ener s pr evi ous conceal ment of t he

asset ; ( 2) t he Met Li f e Account was not an exempt i bl e ret i r ement

account ; and ( 3) t he f unds wer e not necessar y f or Di ener s

suppor t . 4 Di ener opposed Tr ust ee s obj ect i on, denyi ng any bad

f ai t h. I n her decl ar at i on i n suppor t f i l ed on J une 20, 2011,

Di ener st ated t hat her spousal suppor t had ended on May 1, 2011,

and t hat t he Met Li f e Account was supposed t o repl ace [ her]spousal suppor t and she had no access t o t he f unds because t hey

wer e t i ed up i n t he di sput e. Af t er a hear i ng on J une 29, 2011,

t he bankrupt cy cour t ent er ed an or der on J ul y 7, 2011, di sal l owi ng

Di ener s exempt i on of t he Met Li f e Account under CCP 704. 115( b) .

Al t hough we do not have a t r anscr i pt f r om t he J une 29 hear i ng, t he

or der does not make any r ef er ence t o bad f ai t h as a basi s f or

denyi ng t he exempt i on. Di ener di d not appeal t hat or der .

On J une 29, 2011, Di ener f i l ed another amended Schedul e C,

t hi s t i me exempt i ng t he Met Li f e Account as spousal suppor t

under CCP 703. 140( b) ( 10) ( D) . 5 Tr ust ee agai n obj ect ed,


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- 5-

cont endi ng t hat based on t he pl ai n l anguage of t he MSA and St out

v. Pr ussel , 691 F. 2d 859 ( 9t h Ci r . 1982) , or t he f act or s set f or t h

i n Leppal uoto v. Combs ( I n r e Combs) , 101 B. R. 609 ( 9t h Ci r . BAP

1989) , i f t he bankrupt cy cour t shoul d f i nd t he MSA ambi guous, t he

Met Li f e Account was par t of Di ener s pr oper t y set t l ement and was

not spousal suppor t . Di ener opposed Tr ust ee s obj ect i on. The

bankrupt cy cour t set an evi dent i ar y hear i ng on t he mat t er f or

J anuar y 20, 2012.

Bot h par t i es f i l ed t r i al br i ef s. Tr ust ee r e- r ai sed her

pr evi ous ar gument s, cont endi ng t hat t he Met Li f e Account was not

spousal support under t he MSA. Di ener cont ended t hat onl y t woi ssues wer e pr esent i n t hi s mat t er : ( 1) whet her or not t he Met

Li f e Account was spousal suppor t despi t e bei ng r ef er r ed to as

r et i r ement or a di vi si on of pr oper t y i n t he MSA; and ( 2) i f i t

was spousal suppor t , was t he sum r easonabl y necessar y f or her

suppor t gi ven her exempt award of appr oxi matel y $600, 000 f r om

Davi d s 401( k) account . Di ener cont ended t hat under Shaver v.

Shaver , 736 F. 2d 1314 ( 9t h Ci r . 1984) and I n r e Combs, supr a, t he

cour t must l ook beyond the l abel s pr ovi ded i n the MSA and

determi ne whether t he Met Li f e Account was i nt ended t o be spousal

support , whi ch Di ener argued she cl ear l y needed gi ven her

ci r cumst ances. Di ener asser t ed t hat she and her di vor ce counsel ,

Debr a Ann Per ki ns ( Per ki ns) , woul d t est i f y t hat t he Met Li f e

Account was a buy- out of Di ener s spousal suppor t , whi ch she

f avored because she want ed nothi ng f ur t her t o do wi t h Davi d and

because Davi d s suppor t checks wer e of t en l at e and occasi onal l y

bounced. Fi nal l y, Di ener cont ended t hat her exper t wi t ness,

Lawr ence Mi t chel l ( Mi t chel l ) , woul d t est i f y t hat t he Met Li f e


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6 Di ener r ef er s t o t he mot i on as one f or a di r ect ed ver di ct .Mot i ons f or di r ected ver di ct s are now cal l ed mot i ons f or j udgmentas a mat t er of l aw and ar e gover ned by Ci vi l Rul e 50. Thi s r ul eappl i es i n bankrupt cy cases onl y i f t he mat t er i s t r i ed bef or e aj ury. See Rul e 9015( c) . Because t hi s was a bench t r i al , Di ener smot i on was a mot i on f or a j udgment on part i al f i ndi ngs under Rul e7052( c) , whi ch i ncor por at es Ci vi l Rul e 52( c) . We shal l t r eat i tas such f or pur poses of appeal .

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Account was r easonabl y necessar y f or her suppor t .

The evi dent i ar y hear i ng went f or war d on J anuar y 20, 2012.

Tr ust ee s onl y wi t ness f or her case i n chi ef was Di ener . Di ener

t est i f i ed t hat she r ecogni zed Tr ust ee s exhi bi t of t he MSA, t hat

she had si gned i t , and t hat she was r epr esent ed by counsel at t he

t i me she ent er ed i nt o i t . Tr ust ee t hen r est ed.

For her case i n chi ef , Di ener s counsel cal l ed Per ki ns,

Di ener , and Mi t chel l . When asked about t he spousal support

pr ovi si on i n t he MSA, Per ki ns t est i f i ed t hat Di ener s or i gi nal

i nt ent was t o wai ve spousal suppor t compl et el y, but Di ener

event ual l y request ed a f ew mont hs of spousal support t o cover t heper i od of t i me between ent r y of t he di vor ce decr ee and when she

woul d r ecei ve t he r et i r ement account s and ot her asset s. Per ki ns

f ur t her t est i f i ed t hat t he i nt ent of t he MSA was t o buy out

Di ener s spousal suppor t , and t hat Di ener r ecei ved mor e than t he

usual 50/ 50 spl i t of asset s because she was wai vi ng spousal

suppor t . On cr oss- exami nat i on, Per ki ns t est i f i ed t hat al t hough

Di ener had want ed a l ump sum of spousal suppor t , because t he

f ami l y l aw cour t coul d not or der Davi d t o pay suppor t i n a l ump

sum, Per ki ns advi sed Di ener t o take a l ar ger shar e of t he

communi t y pr oper t y t o compensat e f or her wai ver of suppor t .

Per ki ns t est i f i ed t hat she di scussed each of t he pr ovi si ons of t he

MSA wi t h Di ener bef or e she si gned i t .

Di ener t hen moved f or a di r ect ed ver di ct , 6 whi ch the


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bankrupt cy cour t pr ompt l y deni ed wi t hout expl anat i on. Fol l owi ng

t hat r ul i ng, Di ener cont i nued wi t h her case i n chi ef . Af t er

cal l i ng exper t wi t ness Mi t chel l , Di ener r e- cal l ed Per ki ns t o t he

st and t o t est i f y about set t l ement negot i at i on l et t er s ci r cul at ed

bet ween Di ener s and Davi d s di vor ce counsel j ust pr i or t o t he

MSA. On cr oss- exami nat i on about t he l et t er s, Per ki ns t est i f i ed

t hat Davi d was not i ni t i al l y wi l l i ng t o gi ve Di ener as much

pr oper t y as she was seeki ng t o compensat e her f or wai vi ng spousal

suppor t , so Di ener s subsequent of f er s gave her l ess pr oper t y but

i ncl uded spousal suppor t . Accor di ng t o Per ki ns, Di ener event ual l y

agr eed t o wai ve spousal suppor t because Davi d agr eed t o gi ve her al arger shar e of t he communi t y pr oper t y, whi ch i ncl uded t he Met

Li f e Account and t he 401( k) account .

Di ener t est i f i ed t hat t he Met Li f e Account was i nt ended t o be

a buy- out of her permanent spousal suppor t , whi ch she want ed

because Davi d s support payment s were arr i vi ng l ate, some of t he

checks were bounci ng, and because she want ed no contact wi t h hi m.

Dur i ng Di ener s cl osi ng ar gument , t he bankrupt cy cour t asked

counsel t o ci t e a case wher e a cour t al l owed a speci f i c,

nonmodi f i abl e spousal suppor t pr ovi si on i n a di vor ce decr ee to be

t r umped by another pr ovi si on t hat t he pr oponent argued was al so a

spousal suppor t pr ovi si on. Counsel , whi l e ci t i ng sever al cases,

sever al of whi ch wer e unpubl i shed, coul d not ci t e a case so

hol di ng.

Af t er a br i ef r ecess t o r evi ew some of t he cases Di ener s

counsel ci t ed at t he hear i ng and i n her br i ef , t he bankrupt cy

cour t ent er ed i t s or al r ul i ng i n f avor of Trust ee. The cour t

i ni t i al l y not ed t hat near l y al l cases r egar di ng whet her an awar d


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i s i n t he nat ur e of spousal suppor t ar e i n t he cont ext of

nondi schar geabi l i t y under 523( a) ( 5) , as opposed t o an exempt i on,

whi ch was a di f f er ent si t uat i on. Hr g Tr . ( J an. 20, 2012) 88: 2.

Never t hel ess, t he cour t pr oceeded t o di scuss I n r e Combs, a

nondi schar geabi l i t y case, and t he f act or s a cour t can consi der i n

det er mi ni ng whet her an awar d i n a di vor ce decr ee i s i n t he nat ur e

of spousal suppor t or a pr oper t y set t l ement . I n consi der i ng t he

Combs f actors, t he cour t concl uded t hat t he Met Li f e Account was

not spousal suppor t ; i t was a di vi si on of pr oper t y, and t her ef or e

not exempt under CCP 703. 140( b) ( 10) ( D) . The cour t f ur t her noted

t hat t he MSA s expr ess provi si on f or spousal suppor t whi ch, underSt out , coul d be consi dered i n determi ni ng whether an award i n a

di vor ce decr ee i s suppor t or pr oper t y di vi si on, was an i mpor t ant

f act or i n i t s deci si on t o di sal l ow t he exempt i on.

The bankrupt cy cour t ent er ed an or der sust ai ni ng Tr ust ee s

obj ect i on and di sal l owi ng Di ener s exempt i on of t he Met Li f e

Account as spousal support under CCP 703. 140( b) ( 10) ( D) on

Febr uar y 10, 2012. Di ener t i mel y appeal ed.

II. JURISDICTION

The bankrupt cy cour t had j ur i sdi ct i on under 28 U. S. C. 1334

and 157( b) ( 2) ( B) . We have j ur i sdi ct i on under 28 U. S. C. 158.

III. ISSUES

1. Di d t he bankr upt cy cour t cl ear l y er r i n det er mi ni ng t hat t he

Met Li f e Account was not exempt spousal suppor t under CCP

703. 140( b) ( 10) ( D) ?

2. Di d t he bankr upt cy cour t abuse i t s di scr et i on i n denyi ng


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per mi t s a debt or t o exempt f r om pr oper t y of t he est at e ei t her t he

pr oper t y set f or t h i n sect i on 522( d) or , al t er nat i vel y, any

pr oper t y that i s exempt under st at e l aw t hat i s appl i cabl e on t he

dat e of t he f i l i ng of t he pet i t i on. Cal i f or ni a has el ected t o

opt out of t he f eder al exempt i on scheme, so Cal i f or ni a r esi dent s

f i l i ng f or bankrupt cy ar e l i mi t ed t o t he exempt i ons af f or ded under

st at e l aw. I n r e Rol l and, 317 B. R. 402, 412 ( Bankr. C. D. Cal .

2004) ( ci t i ng Wol f v. Sal ven ( I n r e Wol f ) , 248 B. R. 365, 367 ( 9t h

Ci r . BAP 2000) and I n r e Rost l er , 169 B. R. 408, 411 ( Bankr . C. D.

Cal . 1994) ) . Ther ef or e, subst ant i ve i ssues r egar di ng t he

al l owance or di sal l owance of t he cl ai med exempt i on at i ssue ar egover ned by Cal i f or ni a l aw.

Under CCP 703. 140( b) ( 10) ( D) , a Cal i f orni a debt or may exempt

Al i mony, suppor t , or separ at e mai nt enance, t o t he extent

r easonabl y necessar y f or t he suppor t of t he debt or and any

dependent of t he debt or . Cal i f or ni a exempt i on st at ut es ar e t o be

l i ber al l y const r ued, as t hei r mani f est pur pose i s t o sav[ e]

debt or s and t hei r f ami l i es f r om want by r eason of mi sf or t une or

i mpr ovi dence. Tur ner v. Mar shack ( I n r e Tur ner ) , 186 B. R. 108,

113 ( 9t h Ci r . BAP 1995) ( quot i ng I n r e Cr osby s Est at e, 41 P. 2d

928, 930 ( Cal . 1935) ) .

A cl ai med exempt i on i s pr esumpt i vel y val i d. Tyner v.

Ni chol son ( I n r e Ni chol son) , 435 B. R. 622, 630 ( 9t h Ci r . BAP

2010) ( ci t i ng Car t er v. Ander son ( I n r e Car t er ) , 182 F. 3d 1027,

1029 n. 3 ( 9t h Ci r . 1999) ) . [ I ] f a par t y i n i nt er est t i mel y

obj ect s, t he obj ect i ng par t y has t he bur den of pr ovi ng t hat t he

exempt i ons ar e not pr oper l y cl ai med. I d. ( quot i ng Rul e

4003( c) ) . I ni t i al l y, t hi s means that t he obj ect i ng par t y has the


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28 8 Sect i on 523( a) ( 5) except s f r om di schar ge any debt f or adomest i c suppor t obl i gat i on.

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bur den of pr oduct i on and t he bur den of per suasi on. I n r e Car t er ,

182 F. 3d at 1029 n. 3. The obj ect i ng part y must pr oduce evi dence

t o r ebut t he pr esumpt i vel y val i d exempt i on. I d. Once r ebut t ed,

t he bur den of pr oduct i on t hen shi f t s t o t he debt or t o come f or war d

wi t h unequi vocal evi dence t hat t he exempt i on i s pr oper . I d. The

bur den of per suasi on, however , al ways r emai ns wi t h t he obj ect i ng

part y. I d.

2. Applicable test for determining whether an award in adivorce decree is in the nature of support for purposesof exemption.

For pur poses of determi ni ng whether an except i on t o di schar ge

appl i es t o an obl i gat i on under 523( a) ( 5) ,8

a bankrupt cy cour t i snot bound by t he char act er i zat i on gi ven t o an obl i gat i on by a

st at e cour t . I n det er mi ni ng whet her an obl i gat i on i s i nt ended f or

spousal support , t he bankr upt cy cour t must l ook beyond t he

l anguage of t he di ssol ut i on j udgment t o the i nt ent of t he par t i es

and t o t he subst ance of t he obl i gat i on. I n r e Shaver , 736 F. 2d at

1316 ( ci t at i ons omi t t ed) ; I n r e Combs, 101 B. R. at 615 ( cour t

shoul d l ook to subst ance of t he obl i gat i on i n t he set t l ement

agr eement and gener al l y di sr egar d l abel s and t i t l es) .

However , t o determi ne whether a spousal suppor t exempt i on

appl i es, some di sagr eement exi st s over whether a bankr upt cy cour t

has t he aut hor i t y to l ook behi nd t he l abel appl i ed t o an awar d by

t he st at e cour t i n t he di ssol ut i on j udgment . Compar e I n r e

Lahndor f , 2006 WL 2662704, at *3 ( Bankr . N. D. I owa 2006) ( exempt i on

under I owa l aw; l ooki ng behi nd st at e cour t s l anguage i n di vor ce

decr ee woul d be an i mper mi ssi bl e col l at er al at t ack) and I n r e


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Bent l ey, 245 B. R. 684, 686- 87 ( Bankr . D. Kan. 2000) ( appl yi ng

Kansas exempt i on l aw and determi ni ng t hat al i mony l i en l abel ed as

such by di vor ce decree was ent i t l ed t o exempt i on because st ate

cour t deci si on was ent i t l ed t o f ul l f ai t h and credi t ) , wi t h I n r e

Mi l l er , 424 B. R. 171, 177 ( Bankr . M. D. Pa. 2010) ( appl yi ng same

cr i t er i a t o mat t er s under 523( a) ( 5) and 522( d) ( 10) ( D) ) ; I n r e

Roger s, 349 B. R. 667, 670- 71 ( Bankr . D. I daho 2005) ( ci t i ng Shaver

and concl udi ng t hat t he cr i t er i a appl i ed i n di schar ge except i on

cases under 523( a) ( 5) appl i es i n cases of exempt i on) ; I n r e

El l er t son, 252 B. R. 831, 833 ( Bankr . S. D. Fl a. 2000) ( f or pur poses

of bot h di schar geabi l i t y and exempt i ons, a bankrupt cy cour t mayl ook behi nd a l abel appl i ed by a st at e cour t t o ascer t ai n t he t r ue

nat ur e of an awar d) ; I n r e Shef f i el d, 212 B. R. 1019, 1020- 21

( Bankr . M. D. Fl a. 1997) ( [ l ] ogi c di ct at es t hat what const i t ut es

al i mony f or pur poses of 523( a) ( 5) , and what const i t ut es al i mony

f or pur poses of 522( d) ( 10) ( D) , shoul d i nvol ve t he same

cr i t er i a) and I n r e J oseph, 157 B. R. 514, 517- 18 ( Bankr . D. Conn.

1993) ( not i ng t he dear t h of case l aw on t he i ssue and concl udi ng

t hat no r eadi l y appar ent r eason exi st s f or why a bankrupt cy cour t

shoul d use di f f er ent st andar ds i n r evi ewi ng al i mony awar ds i n t he

nondi schar geabi l i t y i nst ance and i n t he exempt i on i nst ance) .

Not abl y, i n al l of t he cases hol di ng t hat t he same cr i t er i a shoul d

appl y t o bot h ci r cumst ances, wi t h t he except i on of I n r e Roger s,

t he exempt i on at i ssue was f or spousal suppor t under f eder al l aw -

522( d) ( 10) ( D) - not st at e l aw, whi ch cont r ol s her e.

Her e, t he bankrupt cy cour t quest i oned whet her t he cr i t er i a

set f or t h i n di schar ge except i on cases under 523( a) ( 5) t o

det er mi ne i f an awar d i s i n t he nat ur e of suppor t shoul d appl y i n


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t he cont ext of an exempt i on under 522. Few publ i shed deci si ons

exi st on t hi s i ssue, and nei t her t he Ni nt h Ci r cui t nor t he BAP

have wei ghed i n on i t . However , t he Fi f t h Ci r cui t anal yzed t hi s

i ssue i n dept h i n Mi l l i gan v. Ever t ( I n r e Ever t ) , 342 F. 3d 358

( 5t h Ci r . 2003) .

I n t he pr e- BAPCPA case of Ever t , t he Fi f t h Ci r cui t expl or ed

t he i ssue of whet her t he same appr oach f or determi ni ng what

const i t ut es al i mony, suppor t and mai nt enance i n t he di schar ge

except i on cont ext under 523( a) ( 5) shoul d appl y t o exempt i ons

under 522( d) ( 10) ( D) . Whi l e r ecogni zi ng t hat many of t he cour t s

t o addr ess t he i ssue had det er mi ned t hat t he same cr i t er i a shoul dappl y, t he Ever t cour t ar t i cul at ed sever al ar gument s agai nst doi ng

t hi s. I d. at 366- 67. Pr i mar i l y, t he cour t reasoned t hat t he

st at ut es di f f er ed i n t hei r under l yi ng pur pose:

A l i ber al or br oad i nt er pr et at i on of al i mony may bepar t i cul ar l y appr opr i at e under sect i on 523( a) ( 5) becauseof t he desi r e t o avoi d harmi ng someone who i s compl etel yi nnocent and depends on t hei r f or mer spouse f or t hei rsuppor t ( and of t en f or t hei r chi l dr en s suppor t as wel l )because of t he bankr upt cy of t hat f ormer spouse.Mor eover , t her e i s an i ncent i ve on t he par t of t he debt ori n t he di schar geabi l i t y cont ext t o t r y to char acter i zet he obl i gat i on as somet hi ng ot her t han suppor t so i t canbe di schar ged. I n cont r ast , i n t he sect i on 522( d) ( 10) ( D)cont ext , t he per son seeki ng t he exempt i on i s t hei ndi vi dual who has t aken bankrupt cy so t her e i s anar guabl e el ement of f aul t and t her e i s no i ncent i ve tohur t an i nnocent t hi r d par t y, except per haps t hecredi t or . I n t he sect i on 523( a) ( 5) cont ext , t he need t ol ook beyond t he l abel s may stem f r om t he f act t hat t heobl i gated part y has an i ncent i ve t o cr af t t he agr eementt o di sgui se suppor t as par t of a pr oper t y set t l ement soi t i s di schar geabl e. However , i n t he exempt i on cont ext of

sect i on 522( d) ( 10) ( D) , t he i ncent i ve woul d be wi t h t heobl i gee par t y r ecei vi ng what i s act ual l y a pr oper t yset t l ement t o di sgui se i t as suppor t so i t i s shel t er edi n bankrupt cy. We al so not e t hat i n t he sect i on 523( a) ( 5)cont ext t he i nt er est s of t he debt or and f or mer spouse i nt he pr oceedi ngs bef or e t he bankrupt cy cour t ar e vi r t ual l yal ways adver se, whi l e i n t he sect i on 522( d) ( 10) ( D)cont ext t hey ar e l i kel y t o be al i gned agai nst t he t hi r d


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9 For mer 523( a) ( 15) , i n ef f ect f r om 1994 t o 2005, pr ovi dedan except i on t o di schar ge f or obl i gat i ons:

( 15) not of t he ki nd descr i bed i n par agr aph ( 5) t hat i si ncur r ed by t he debt or i n t he cour se of a di vor ce or

separ at i on or i n connect i on wi t h a separ at i on agr eement ,di vor ce decr ee or ot her or der of a cour t of r ecor d, adet er mi nat i on made i n accor dance wi t h St at e or t er r i t or i all aw by a government al uni t unl ess-

( A) t he debt or does not have t he abi l i t y t o pay suchdebt f r om i ncome or pr opert y of t he debt or notr easonabl y necessary t o be expended f or t he mai nt enanceor support of t he debt or or a dependent of t he debt orand, i f t he debt or i s engaged i n a busi ness, f or t hepayment of expendi t ur es necessar y f or t he cont i nuat i on,pr eservat i on, and oper at i on of such busi ness; or

( B) di schar gi ng such debt woul d r esul t i n a benef i t t ot he debt or t hat out wei ghs t he det r i ment al consequencest o a spouse, f or mer spouse, or chi l d of t he debt or .

Al t hough 523( a) ( 15) was amended agai n i n 2005, t he f act t hat 522 l acked a par al l el amendment st i l l pr ovi des a compel l i ngargument agai nst appl yi ng t he same cr i t er i a i n determi ni ng whetheran award const i t ut es al i mony, suppor t and mai nt enance i n cases ofnondi schar geabi l i t y and exempt i on.

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par t y cr edi t or . Ther ef or e, i n t he l at t er cont ext i tbecomes more t han normal l y quest i onabl e to r el y on oralt est i mony of t he spouse and f ormer spouse as t o thei rpr i or subj ect i ve i nt ent wi t h r espect t o t he char act er oft he i ndebt edness where t hat t est i mony runs count er t o t hecl ear pur por t of t he r el evant document s, whi ch wer el i kel y al l t hat woul d have been avai l abl e t o a t hi r dpar t y ext endi ng cr edi t .

I d. at 367 ( emphasi s i n or i gi nal ) .

The Evert cour t f ur t her obser ved t hat when Congress amended

523 t o creat e 523( a) ( 15) 9 i n 1994, i t di d not pr ovi de a

paral l el amendment i n 522. The cour t r easoned t hat t he l ack of

a paral l el amendment t o 522 perhaps suggest ed a congr essi onal

i ntent not t o have a scheme of exempt i ons as broad as t he schemeof di schar ge di sal l owance i n r espect t o obl i gat i ons t o f or mer

spouses ar i si ng i n t he di vor ce cont ext . I d. at 368.


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10 Ever t set f or t h t he f ol l owi ng cri t er i a f or cour t s t o appl yi n cases of exempt i on f or spousal suppor t or ot her domest i csuppor t obl i gat i ons:

We hol d onl y t hat , at l east f or pur poses of sect i on522( d) ( 10) ( D) , wher e i n t he agr eed di vor ce decr ee t her e i s 1)al so a meani ngf ul separ at e al i mony pr ovi si on, 2) t heobl i gat i on i n quest i on i s descr i bed as bei ng par t of t hepr oper t y di vi si on, 3) t he l abel gi ven t o t he obl i gat i on i nquest i on i s mat ched by i t s act ual char act er i st i cs, and 4) t heevi dence does not suggest t he par t i es conspi r ed t o di sgui set he t r ue nat ur e of t he obl i gat i on i n or der t o subver t t hebankrupt cy or t ax l aws, t her e i s no ambi gui t y necessi t at i ngt he use of t he Nunnal l y f act or s t o essent i al l y wor k backwar dst o det er mi ne t he nat ur e of t he obl i gat i on.

I d. at 368.

Al t hough t he Ever t cour t sai d i t was not deci di ng t he i ssueof whet her t he same cr i t er i a shoul d be appl i ed i n cases ofnondi schar geabi l i t y and exempt i on, by rej ect i ng t he Nunnal l yf act or s ( Nunnal l y v. Nunnal l y ( I n r e Nunnal l y) , 506 F. 2d 1024,1026- 27 ( 5t h Ci r . 1975) ) , whi ch ar e not unl i ke t he Combs f act or s,we bel i eve t he cour t essent i al l y di d deci de t he i ssue ( i n t henegat i ve) by i t s r ej ect i on of t he not i on t hat t he same t est shoul dappl y i n bot h ci r cumst ances.

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Ul t i mat el y, t he Ever t cour t di d not deci de whet her t he same

cri t er i a shoul d be appl i ed t o bot h st at ut es. I nst ead, i t

ar t i cul at ed i t s own cr i t er i a f or det er mi ni ng whet her al i mony or

other domest i c support obl i gat i ons ar e exempt under

522( d) ( 10) ( D) . I d. at 368. 10 The bankrupt cy cour t i n I n r e

Kor wi n, 379 B. R. 80, 85 (Bankr . W. D. Pa. 2007) , adopt ed the Ever t

f act or s, and concl uded t hat i t di d not need t o l ook beyond t he

l abel of pr oper t y di vi si on i n a st at e cour t di vor ce decr ee

because t he order was not ambi guous and cl ear l y ref l ected t he

i nt ent of t he par t i es. The mar i t al set t l ement agr eement at i ssue

i n Kor wi n al so cont ai ned a separ at e pr ovi si on f or al i mony. We f i nd per suasi ve t he ar gument s r ai sed i n Ever t f or

appl yi ng di f f er ent cr i t er i a i n det er mi ni ng what const i t ut es

al i mony, support and mai nt enance i n t he di schar ge except i on


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cont ext as opposed t o t he exempt i on cont ext . Nonethel ess, we

decl i ne to adopt t he f our f act or s set f or t h i n Ever t because we

bel i eve Cal i f or ni a l aw, whi ch gover ns her e, di ct at es t hat we appl y

t he st at e s st at ut or y rul es of cont r act s t o t he MSA.

3. Analysis

Mar i t al set t l ement agr eement s i ncor por at ed i nt o a

di ssol ut i on j udgment ar e const r ued under t he st at ut or y rul es

gover ni ng t he i nt er pr et at i ons of cont r act s gener al l y. I n r e

Mar r i age of Si mundza, 18 Cal . Rpt r . 3d 377, 380 ( Cal . Ct . App.

2004) ( quot i ng I n r e Mar r i age of I ber t i , 64 Cal . Rpt r . 2d 766, 769

( Cal . Ct . App. 1997) ) ; I n r e Mar r i age of Benj ami ns, 31 Cal . Rpt r .2d 313, 315 ( Cal . Ct . App. 1994) . When a cont r act i s r educed t o

wr i t i ng, t he i nt ent i on of t he par t i es i s t o be ascer t ai ned f r om

t he wr i t i ng al one, i f possi bl e. CAL. CI V. CODE 1639; I n r e

Mar r i age of Si mundza, 18 Cal . Rpt r . 3d at 380. The obj ect i ve

i nt ent , as evi denced by t he wor ds of t he cont r act , r at her t han

subj ecti ve i nt ent of one of par t i es, cont r ol s i nt er pr et at i on.

Foundi ng Member s of t he Newpor t Beach Count r y Cl ub v. Newpor t

Beach Count r y Cl ub, I nc. , 135 Cal . Rpt r . 2d 505, 514 ( Cal . Ct .

App. 2003) . The par t i es undi scl osed i nt ent or under st andi ng i s

i r r el evant to cont r act i nt er pr et at i on. I d. ( ci t at i ons omi t t ed) .

Any ambi gui t y i n t he l anguage of [ a mar t i al set t l ement

agr eement ] must be const r ued i n f avor of t he r i ght t o spousal

suppor t . I n r e Mar r i age of I ber t i , 64 Cal . Rpt r . 2d at 769

( ci t i ng I n r e Marr i age of Vomacka, 683 P. 2d 248, 254 ( Cal . 1984) ;

I n r e Mar r i age of Oust er man, 54 Cal . Rpt r . 2d 403, 406 ( Cal . Ct .

App. 1996) ; and I n r e Mar r i age of Br own, 41 Cal . Rpt r . 2d 506, 509

( Cal . Ct . App. 1995) ) . A t er m of t he agr eement i s ambi guous i f


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i t i s suscept i bl e of mor e t han one r easonabl e i nt er pr et at i on.

I d. ( ci t i ng Tahoe Nat l Bank v. Phi l l i ps, 480 P. 2d 320, 335 ( Cal .

1971) ; Hayt er Tr ucki ng, I nc. v. Shel l W. E & P, I nc. , 22 Cal .

Rpt r . 2d 229 ( Cal . Ct . App. 1993) ; I n r e Mar r i age of Paul , 219

Cal . Rpt r . 318, 320 ( Cal . Ct . App. 1985) ) . Ext r i nsi c evi dence i s

admi ssi bl e t o pr ove t he par t i es i nt ent as t o ambi guous t er ms i n a

mar i t al set t l ement agr eement . I d. ( ci t i ng CCP 1856( g) ; Gar ci a

v. Tr uck I ns. Exch. , 682 P. 2d 1100 ( Cal . 1984) ; Cont l Baki ng Co.

v. Kat z, 439 P. 2d 889, 895 ( Cal . 1968) ; Roddenber r y v.

Roddenber r y, 51 Cal . Rpt r . 2d 907 ( Cal . Ct . App. 1996) ; and I n r e

Mar r i age of Tr ear se, 241 Cal . Rpt r . 257 ( Cal . Ct . App. 1987) ) .When t he l anguage of t he j udgment i ncorporat i ng t he mar i t al

set t l ement agr eement i s cl ear , expl i ci t , and unequi vocal , and

t her e i s no ambi gui t y, t he cour t wi l l enf or ce t he expr ess

l anguage. I d. ( ci t i ng CAL. CI V. CODE 1638, whi ch pr ovi des: The

l anguage of a cont r act i s t o gover n i t s i nt er pr et at i on, i f t he

l anguage i s cl ear and expl i ci t , and does not i nvol ve an

absur di t y. ) ; Lucas v. El l i ot t , 4 Cal . Rpt r . 2d 746 ( Cal . Ct . App.

1992) ; I n r e Mar r i age of Zl at ni k, 243 Cal . Rpt r . 454 ( Cal . Ct .

App. 1988) ; Hogoboom & Ki ng, CAL. PRAC. GUI DE: Fami l y Law 9. 123,

pp. 9- 30 t o 9- 32 ( The Rut t er Gr oup 1997) ) . Ext r i nsi c evi dence of

t he par t i es i nt ent i ons i s i nadmi ssi bl e t o var y, al t er , or add t o

t he t erms of an unambi guous agr eement . I d. ( ci t i ng CCP 1856;

Tahoe Nat l Bank, 480 P. 2d at 331; Cont l Baki ng Co. , 439 P. 2d at

895; Fl ynn v. Fl ynn, 265 P. 2d 865 ( Cal . 1954) ; Fox v. Fox, 265

P. 2d 881 ( Cal . 1954) ; Barhamv. Barham, 202 P. 2d 289 ( Cal . 1949) ;

Hayt er Tr ucki ng, I nc. , 22 Cal . Rpt r . at 237; Est at e of But l er , 252

Cal . Rpt r . 210 ( Cal . Ct . App. 1988) ; and Hogoboom & Ki ng, CAL.


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PRAC. GUI DE: Fami l y Law at 9. 124- 9. 126, pp. 9- 32 t o 9- 32. 1) ) .

Tr ust ee ar gued t hroughout her case t hat t he l anguage of t he

MSA was not ambi guous, and t heref ore no ext r i nsi c evi dence was

necessar y t o det er mi ne t he par t i es i nt ent . I n ot her wor ds, t he

cour t di d not need t o appl y t he Combs f act or s t o det er mi ne i f t he

Met Li f e Account was i nt ended t o be spousal support . She

cont i nues t o ar gue t hi s poi nt on appeal . Despi t e or der i ng an

evi dent i ar y hear i ng on t he mat t er , at var i ous t i mes dur i ng t he

hear i ng t he bankr upt cy cour t al so i ndi cated t hat t he MSA was not

ambi guous:

MS LAWSON: Al l r i ght . How about t he case Combs?COURT: Oh, Combs. Ri ght . Ri ght here.

MS LAWSON: Yes.

COURT: Combs. Bankr upt cy Cour t s have empl oyed var i ousf act or s t o det er mi ne t he i nt ent of par t i es of anambi guous di vor ce decr ee. Some of t he f act ors i ncl ude- - and t hen i t di scusses ei ght f act or s t hat Mr . Far merwent t hr ough. What about t hi s di vor ce degr ee [ si c] i sambi guous?

. . . .

MS. LAWSON: I bel i eve i t mi sses t he mark when you say theMSA i s

COURT: Unambi guous.

Hr g Tr . ( J an. 20, 2012) 76: 12- 20; 86: 7- 9.

I n r evi ewi ng t he MSA, t he Met Li f e Account i s l i st ed i n t he

sect i on expr essl y deal i ng wi t h pr oper t y di vi si on and,

speci f i cal l y, t he di vi si on of r et i r ement account s under t he l abel s

Speci f i c Pr ovi si ons Regar di ng Ret i r ement Account s and Pr oper t y

Awarded and/ or Conf i r med t o Respondent . The MSA contai ns a

separ at e, expr ess provi si on l abel ed Spousal Suppor t , whi ch

pr ovi des f or mont hl y spousal suppor t of $2, 338, but does not


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ment i on t he Met Li f e Account . Di ener r ecei ved t he mont hl y support

payment s of $2, 338 f or t he f i ve mont hs as or der ed. Not abl y, t he

spousal suppor t pr ovi si on i n t he MSA expr essl y pr ohi bi t s a cour t

f r om awar di ng Di ener any spousal suppor t i n addi t i on to, beyond,

or di f f er ent f r om t he suppor t of t he $2, 338 per mont h she was t o

r ecei ve f or f i ve mont hs. The MSA f ur t her provi des that Di ener

expr essl y wai ved her r i ght t o seek or r ecei ve any spousal suppor t

f r om Davi d af t er May 1, 2011.

We concl ude that t he l anguage of t he MSA i s cl ear , expl i ci t ,

unequi vocal , and not r easonabl y suscept i bl e t o any ot her

i nt er pr et at i on. Based on t he obj ect i ve l anguage of t he MSA, t heMet Li f e Account was not hi ng mor e t han a di vi si on of pr oper t y.

Di ener s subj ect i ve i nt ent t hat i t was i nt ended t o be a buy- out of

her spousal suppor t appear s nowhere i n t he MSA. The f act Di ener

r ecei ved a l ar ger shar e of t he mar i t al est at e does not necessar i l y

r ender t he ter ms of t he MSA ambi guous, ent i t l i ng her t o t he

pr esumpt i on t hat t he award of t he Met Li f e Account was spousal

suppor t . See I n r e Mar r i age of I ber t i , 64 Cal . Rpt r . 2d at 769.

As a resul t , t he bankrupt cy cour t was r equi r ed t o enf or ce t he

MSA s expr ess l anguage and t r eat t he Met Li f e Account as t he

di vi s i on of pr oper t y. I d. ; CAL. CI V. CODE 1638. Whi l e i t may be

l ess money t han she hoped f or , our i nt erpr etat i on of t he MSA does

not l ead t o an absur d r esul t . Di ener s t i l l has over $600, 000 she

r ecei ved f r om Davi d s 401( k) account , whi ch i s f ul l y exempt .

Accor di ngl y, ext r i nsi c evi dence of t he par t i es i nt ent i ons

was not admi ssi bl e to var y, al t er , or add t o the ter ms of t he MSA.

I n r e Mar r i age of I ber t i , 64 Cal . Rpt r . 2d at 769; CCP 1856( g) .

Thus, t he bankrupt cy cour t er r ed when i t al l owed ext r i nsi c


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evi dence t o det er mi ne t he par t i es i nt ent . I t f ur t her er r ed i n

appl yi ng I n r e Combs, whi ch appl i es onl y i n cases of

nondi schar geabi l i t y, or , even i f i t wer e r el evant her e, appl i es

onl y i n cases where the di vor ce decree i s ambi guous as t o al i mony,

suppor t , or separat e mai nt enance. No ambi gui t y exi st s her e.

However , t he bankr upt cy cour t s er r or was harml ess because i t

ul t i matel y concl uded t hat Di ener coul d not overcome t he expr ess

t erms of t he MSA, and f ound t hat t he Met Li f e Account was not

spousal support exempt under CCP 703. 140( b) ( 10) ( D) . Thus, we

must r ej ect Di ener s argument s t hat t he bankrupt cy cour t f ai l ed t o

gi ve cr edence t o Di ener s and Per ki ns s t est i mony that t he MetLi f e Account was i nt ended t o be spousal suppor t , or t hat i t

i mpr oper l y r el i ed on St out .

The bankrupt cy cour t s f i ndi ng t hat t he Met Li f e Account was

not exempt spousal support under CCP 703. 140( b) ( 10) ( D) i s not

i l l ogi cal , i mpl ausi bl e, or wi t hout suppor t i n t he r ecor d. I n r e

Ret z, 606 F. 3d at 1196. Ther ef or e, t he cour t di d not cl ear l y er r

i n di sal l owi ng i t . As a r esul t , no det er mi nat i on as to whet her

t he Met Li f e Account was r easonabl y necessar y f or Di ener s

suppor t was r equi r ed.

B. The bankruptcy court did not abuse its discretion when itdenied Dieners motion under Civil Rule 52(c).

Accor di ng t o Di ener , Tr ust ee f ai l ed t o pr esent a pr i ma f aci e

case f or di sal l owi ng t he cl ai med exempt i on f or t he Met Li f e

Account by t he cl ose of her case i n chi ef . At t he evi dent i ar y

hear i ng, Tr ust ee r est ed i mmedi at el y af t er Di ener t est i f i ed t hat

she had si gned t he MSA, and t hat she was r epr esented by counsel at

t he t i me she ent er ed i nt o i t . Di ener cont ends t hat at t he t i me of


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her or al mot i on under Ci vi l Rul e 52( c) , t he evi dence cl ear l y

est abl i shed t hat t he l ump sumpayout of t he Met Li f e Account was

i n t he nat ur e of suppor t and t hat Tr ust ee had f ai l ed t o pr oduce

any evi dence to rebut t he pr esumpt i on of Di ener s val i d exempt i on.

Thus, cont ends Di ener , t he bankrupt cy cour t er r ed when i t deni ed

her mot i on.

Ci vi l Rul e 52( c) pr ovi des:

I f a par t y has been f ul l y hear d on an i ssue dur i ng anonj ur y t r i al and t he cour t f i nds agai nst t he par t y ont hat i ssue, t he cour t may ent er j udgment agai nst t hatpar t y on a cl ai m or def ense t hat , under t he cont r ol l i ngl aw, can be mai nt ai ned or def eat ed onl y wi t h a f avor abl ef i ndi ng on t hat i ssue. The cour t may, however , decl i ne

t o render any j udgment unt i l t he cl ose of t heevi dence . . . .

Al t hough we ar e not convi nced t hat an evi dent i ary hear i ng was

even necessar y, gi ven Ci vi l Rul e 52( c) s use of t he per mi ssi ve

may, t he bankrupt cy cour t had di scr et i on t o def er ent er i ng

j udgment unt i l i t had hear d al l t he evi dence. We cannot concl ude

t hat t he bankrupt cy cour t abused i t s di scr et i on i n denyi ng t he

mot i on, especi al l y i n l i ght of our af f i r mance of t he cour t s

f act ual f i ndi ng t hat t he Met Li f e Account was not spousal suppor t .

Fur t her mor e, i t i s undi sput ed t hat af t er t he cour t deni ed

Di ener s mot i on, she pr oceeded t o of f er evi dence on her own behal f

at t r i al . Wher e a par t y i nt r oduces evi dence on her own behal f

af t er she has moved f or r el i ef under Ci vi l Rul e 52( c) , she wai ves

her r i ght t o appeal f or r el i ef under Ci vi l Rul e 52( c) . See Fed.

I ns. Co. v. HPSC, I nc. , 480 F. 3d 26, 32 ( 1st Ci r . 2007) .

Accor di ngl y, we can onl y t r eat Di ener s argument as a chal l enge t o

t he f act ual and l egal suf f i ci ency of t he bankr upt cy cour t s

det er mi nat i ons based on al l t he evi dence. I d. We have al r eady


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done so, and concl ude t hat t he bankrupt cy cour t , whi l e i t appl i ed

an i ncor r ect st andar d of l aw, di d not cl ear l y er r i n i t s ul t i mat e

f actual determi nat i on t hat t he Met Li f e Account was not exempt

spousal suppor t under Cal i f or ni a l aw.

VI. CONCLUSION

For t he f or egoi ng r easons, we AFFI RM t he or der of t he

bankrupt cy cour t .

in re: stephanie a. diener, 9th cir. bap (2012)

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