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In re Burnett

July 7, 2009

IN RE: CLARENCE LEE BURNETT AND FRANCES ELLEN BURNETT, DEBTORS.
NANCY JO BURNETT, CREDITOR - APPELLANT,
v.
CLARENCE LEE BURNETT, DEBTOR - APPELLEE.



Appeal from the United States Bankruptcy Court for the Western District of Arkansas.

The opinion of the court was delivered by: Saladino, Bankruptcy Judge

Submitted: June 24, 2009

Before SCHERMER, MAHONEY, and SALADINO, Bankruptcy Judges.

Nancy Jo Burnett appeals from an order of the Bankruptcy Court*fn1 filed January 15, 2009, finding that the confirmed Chapter 13 plan in this case prevented her from collecting more than $300.00 per month post-discharge in connection with domestic support obligations owed by Clarence Lee Burnett, Debtor. She also appeals the Bankruptcy Court's order of March 10, 2009, denying her motion to reconsider. Ms. Burnett believes that her right to collect post-petition spousal support and accrued interest on her support arrearage claim was not limited by the confirmed plan. For the reasons stated below, we reverse.

FACTS AND PROCEDURAL HISTORY

Nancy Jo Burnett and Debtor, Clarence Lee Burnett, were married in 1969. Debtor and Ms. Burnett had a child who was born on May 24, 1971. Court proceedings with respect to dissolution of their marital relationship began in 1982 with the filing by Ms. Burnett of a petition for separate maintenance in the Circuit Court of Boone County, West Virginia. On November 12, 1983, the parties entered into a written separation agreement under the terms of which Debtor agreed to pay support to Ms. Burnett. Specifically, Debtor agreed to pay Ms. Burnett the sum of "$750.00 per month for child support and alimony until the child reaches the age of eighteen."*fn2 That support agreement was subsequently incorporated into a decree of separate maintenance entered in West Virginia on December 19, 1983.

After that date, state court cases were filed in West Virginia and Arkansas with respect to the dissolution of the marriage and enforcement of support. Divorce decrees and orders regarding support enforcement were entered in each state. On December 8, 2000, in connection with a proceeding to enforce the payment of support, the West Virginia Supreme Court of Appeals determined that many of the prior court decisions in West Virginia and Arkansas had jurisdictional defects, and only the decree of separate maintenance entered in Boone County Circuit Court of West Virginia incorporating the 1983 written separation agreement contained an enforceable support order that remained effective. Accordingly, the West Virginia Supreme Court of Appeals remanded the collection proceedings to the Boone County Circuit Court. On August 29, 2001, the Circuit Court of Boone County, West Virginia, entered its order finding that Debtor was in arrears in the payment of support in the principal sum of $57,402.70*fn3 and that further proceedings would be needed to determine the amount of interest due to Ms. Burnett.

Before further state court proceedings could occur, Debtor and his current spouse filed the underlying Chapter 13 proceeding on December 13, 2001. The parties spent the next three years litigating the support issue in the Bankruptcy Court. On June 2, 2004, the Bankruptcy Court entered an order which stated:

The parties have reached an agreement as follows: Debtor will modify his plan to provide for payment of $300.00 per month for the allowed claim of $57,402.70 over the life of the plan. Once the plan is concluded and the bankruptcy action is terminated, Debtor will continue to pay the sum of $300.00 per month toward the balance of the allowed claim until the debt is satisfied in full. Creditor reserves the right to return to the Boone County Circuit Court in West Virginia after this bankruptcy action is concluded to litigate the issue of accrued interest on the support arrears; Debtor reserves the right to assert defenses regarding the issue of accrued interest on the support arrears.

Debtor's Chapter 13 plan was confirmed on November 15, 2004. The plan incorporated the language from the June 2, 2004, order, although the language was slightly modified to include the word "child" in front of each place where the word "support" appeared.

Upon completion of payments under their confirmed Chapter 13 plan, Debtor and his spouse were discharged on November 13, 2007. The Bankruptcy Court issued an order finding that Debtor had paid $20,100.00 during the pendency of the bankruptcy proceeding toward the claim of Ms. Burnett in the amount of $57,402.70.

Upon completion of the bankruptcy case, Ms. Burnett returned to the Family Court of Boone County, West Virginia, to litigate the issue of arrearages and interest thereon. Debtor failed to appear and defend himself in that proceeding. Ms Burnett appeared as did an attorney for the West Virginia Bureau of Child Support Enforcement ("BCSE").*fn4 BCSE presented spreadsheets showing the calculation of the arrearages for child support and alimony/spousal support dating back to 1983.*fn5 Without explanation, the entire $750.00 monthly obligation was allocated to child support until May of 1989 (when the child reached age 18). After that date, an ongoing obligation of $375.00 per month for spousal support was factored into the calculations.*fn6 Based on those calculations, on March 7, 2008, the Family Court entered its order and judgment finding that Debtor was in arrears on child support in the principal amount of $11,348.45 plus interest accrued on the child support arrearage in the amount of $76,956.53. The court also found Debtor owed an arrearage of $51,215.13 to Ms. Burnett for spousal support plus $55,452.50 for interest on past-due spousal support. The court further ordered that payments begin immediately by income withholding. Debtor did not appeal that order and income withholding from Debtor's government pension commenced.

Rather than appeal the order of the Family Court of Boone County, Debtor filed a motion to reopen his Chapter 13 bankruptcy case for purposes of filing a motion for contempt against the State of West Virginia/BCSE and Ms. Burnett. The motion to reopen was granted and, on October 13, 2008, Debtor filed a motion for contempt asserting that BCSE and Ms. Burnett had violated the terms of the confirmed plan by collecting an amount in excess of $300.00 per month.

On January 15, 2009, the United States Bankruptcy Court for the Western District of Arkansas granted the motion for contempt, finding that the confirmed plan provided for a payment of $300.00 per month after discharge and did not contain any language indicating that Debtor would be under any separate payment obligation for accrued interest or spousal support. The court further found that Debtor's only payment obligation towards child support, spousal support, or interest thereon would be $300.00 per month. Debtor's request for punitive damages and attorney fees was denied because the court found that Ms. Burnett and BCSE's interpretation of the plan was reasonable. Ms. Burnett and the State of West Virginia were ordered to discontinue ...


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