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In re Rivera

United States Bankruptcy Appellate Panel of the Ninth Circuit

June 4, 2014

In re: MARIA G. RIVERA, Debtor. MARIA G. RIVERA, Appellant,
v.
ORANGE COUNTY PROBATION DEPARTMENT, Appellee

Argued and Submitted at Pasadena, California May 15, 2014

Page 644

Appeal from the United States Bankruptcy Court for the Central District of California. Hon. Theodor C. Albert, U.S. Bankruptcy Judge, Presiding. Bk. No. SA 11-22793-TA.

Leigh E. Ferrin, Esq. of Public Law Center for appellant Maria G. Rivera.

Adam C. Clanton, Esq. of Orange County Counsel for appellee Orange County Probation Department.

Before: PAPPAS, KIRSCHER, and LATHAM,[1] Bankruptcy Judges.

OPINION

Page 645

PAPPAS, Bankruptcy Judge:

Appellant, chapter 7[2] debtor Maria Rivera (" Debtor" ) appeals the order of the bankruptcy court determining that Appellee, Orange County Probation Department (" Orange County" ), did not violate the discharge injunction in Debtor's case when it attempted to collect from her after bankruptcy because the debt she owed to Orange County was excepted from discharge under § 523(a)(5) as a " domestic support obligation." The issue presented in this appeal is a novel one in this Circuit, and we AFFIRM.

FACTS

Prebankruptcy Events

Debtor's minor son was incarcerated in Orange County from 2008 to 2010, for a total of 593 days. California law provides that " [t]he father [or] mother . . . of a minor . . . shall be liable for the reasonable costs of support of the minor while the minor is . . . detained in . . . any institution or other place . . . pursuant to an order of the juvenile court." Cal. Welf. & Inst. Code § 903(a). The law endeavors, however, " to ensure that liability is imposed only on persons with the ability to pay." Cal. Welf. & Inst. Code § 903(c). Moreover, the " costs of support" a parent is required to pay are not the total costs of confinement, but " only [the] actual costs incurred by the county for food and food preparation, clothing, personal supplies, and medical expenses, not to exceed . . . a maximum of thirty dollars ($30) per day . . . ." Id. In addition to costs of support, California law provides that " [t]he father [or] mother . . . of a minor . . . shall be liable for the costs to the county or the court . . . of legal services rendered to the minor by an attorney pursuant to an order of the juvenile court." Cal. Welf. & Inst. Code § 903.1(a).[3]

According to Orange County, the total cost to incarcerate Debtor's son amounted to approximately $420 a day. However, in obedience to the limitation in the statute, it sought to collect only $23.90 a day from Debtor, which represented the expense for her son's " food and food preparation, clothing, personal supplies, and medical expenses" while he was incarcerated. In addition to these expenses, Orange County

Page 646

sought $2,199 from Debtor for her son's legal representation while in custody.

As was its practice, Orange County provided several statements to Debtor itemizing the expenses of her son's incarceration, along with the amount of the legal fees incurred for his representation; it also sent Debtor a copy of court orders requiring her to meet with a financial officer to determine her ability to pay these costs pursuant to Cal. Welf. & Inst. Code § § 903(c), 903.1, and 903.45. Debtor did not respond to any of these communications.[4]

On May 10, 2010, $9,508.60 was paid to Orange County on Debtor's account,[5] although this payment did not satisfy the full outstanding balance of the costs. After Orange County sent several more notices to Debtor about the remaining amount due, a final notice was sent requiring her to appear for a court hearing to determine her ability to pay. When Debtor failed to appear at the hearing, on July 20, 2011, a judgment was entered by the juvenile court requiring Debtor to pay to Orange County the remaining support costs and legal expenses incurred while her son was in custody, which amounted to $9,905.40.[6]

Bankruptcy Proceedings

Debtor filed a chapter 7 petition on September 12, 2011. Debtor listed Orange County as a priority, unsecured creditor in her schedules, and Orange County received notice of the bankruptcy filing. The chapter 7 trustee appointed in the case determined there were no assets to administer, Debtor received a discharge on January 4, 2012, and the bankruptcy case was closed January 10, 2012.

After the case closed, assuming that the debt was excepted from discharge as a domestic support obligation under § 523(a)(5), Orange County resumed its efforts to collect the debt from Debtor by continuing to send her statements of the amount due, and a representative of the creditor telephoned Debtor to persuade her to pay the debt.

Debtor sought counsel concerning Orange County's collection activities, who corresponded with the Orange County's attorney, expressing the view that the debt had been discharged. When Orange County would not relent, on April 18, 2013, Debtor filed a motion to reopen the bankruptcy case, along with a motion for an order directing Orange County to show cause (" OSC" ) why it should not be held in contempt for violation of the discharge injunction. The bankruptcy court reopened the case, entered the OSC, scheduled a hearing, and requested briefing from the parties, in particular asking them to address the changes to § § 523(a)(5) and

Page 647

101(14A) made in 2005 by the Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA).

After considering the parties' briefing, and shortly before the scheduled hearing, the bankruptcy court issued a lengthy, thoughtful tentative ruling (the " First Tentative" ). In it, the court concluded that Orange County had violated the discharge injunction because the debt it sought to collect from Debtor after entry of the discharge order was not excepted from discharge under § 523(a)(5). The First Tentative noted the paucity of case law and legislative history concerning the scope of § 523(a)(5) in relation to debts such as those held by Orange County after BAPCPA. However, the court agreed with the conclusion reached by the bankruptcy court in In re Rosen, 11-07651-BHL-7, 2012 WL 1565617, at *2 (Bankr. S.D. Ind. May 2, 2012), a case with facts similar to those in this case, that " an involuntary detention in a juvenile facility hardly seems to fit within the purpose and spirit [of § § 523(a)(5) and 101(14A)]." The bankruptcy court also discussed pre-BAPCPA cases that came to the same conclusion.

In addition, in the First Tentative, the bankruptcy court cited In re Jerald C., 36 Cal.3d 1, 201 Cal.Rptr. 342, 678 P.2d 917 (Cal. 1984), a California Supreme Court decision, for the proposition that the types of expenses specified in Cal. Welf. & Inst. Code § 903 were costs " incurred primarily in protecting society from miscreant minors . . . . " Based upon this conclusion, and noting it must construe exceptions to discharge narrowly, the bankruptcy court concluded that the costs were not in the nature of support for purposes of § 523(a)(5).

At the OSC hearing on June 25, 2013, Orange County argued that the First Tentative should not be adopted as the bankruptcy court's final ruling because, among other reasons, In re Rosen had been incorrectly decided, and the California Supreme Court, in Cnty. of San Mateo v. Dell J., 46 Cal.3d 1236, 252 Cal.Rptr. 478, 762 P.2d 1202 (Cal. 1988), had significantly modified In re Jerald C. After listening to the parties' arguments, the bankruptcy court determined it would benefit from further briefing on the issues, and it ordered the parties to address the impact of Cnty. of San Mateo on whether a minor's expenses, as limited in Cal. Welf. & Inst. Code § 903, constitute support obligations of the minor's parents. In addition, the court noted it needed further evidence of the amount of Debtor's damages if it were to finally decide that Orange County had violated the discharge injunction. The court continued the OSC hearing.

Before the continued hearing, the bankruptcy court issued another tentative ruling (the " Second Tentative" ) in which it reversed course and decided that the debt owed to Orange County was excepted from discharge in Debtor's bankruptcy case under § 523(a)(5) and, therefore, Orange County had not violated the discharge injunction. In the Second Tentative, the bankruptcy court again noted that In re Rosen was the only decisional law it could locate discussing this issue post-BAPCPA; however, upon further review of that opinion, the court agreed with Orange County that In re Rosen had been incorrectly decided because that bankruptcy court had primarily relied on a pre-BAPCPA case law, and the court had not adequately analyzed the significant changes to § § 523(a)(5) and 101(14A) made by Congress in BAPCPA. Instead, the bankruptcy court concluded that the plain language of the Code provisions, as amended by BAPCPA, compelled the conclusion that the debt was excepted from discharge as a domestic support obligation owed to a governmental

Page 648

unit. The bankruptcy court also reasoned that, in Cnty. of San Mateo, the California Supreme Court had reviewed the amended Cal. Welf. & Inst. Code § 903 and determined that the expenses provided in the statute are in the nature of support. For these reasons, the bankruptcy court's conclusion in the Second Tentative was to deny Debtor's motion to hold Orange County in contempt.

At the continued hearing on August 27, 2013, after again considering the parties' arguments, the bankruptcy court announced that it would deny Debtor's motion because the debt at issue was excepted from discharge pursuant to § 523(a)(5). In its comments, the court largely restated the substance of the Second Tentative; however, it did not expressly adopt the Second Tentative in making its oral ruling.

The bankruptcy court requested that counsel for Orange County prepare an order for entry by the court consistent with the oral ruling. Orange County's counsel thereafter lodged a proposed order, but Debtor objected to its form and submitted an alternative proposed order. Debtor's objection took issue with the language included in the title and content of the proposed order, and in particular, pointed out that the court had not expressly adopted the Second Tentative in making its oral ruling at the continued hearing.

Without mentioning Debtor's objection, on September 16, 2013, the bankruptcy court entered the order proposed by Orange County. That order purported to adopt the Second Tentative, provided that Debtor's debt to Orange County was excepted from discharge as a domestic support obligation, and declined to find that Orange County was in contempt.

Debtor filed a timely notice ...


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