Cozart v. Wilson (In re Wilson)

608 B.R. 514

IN RE: Victor R. WILSON, Debtor.

Bruce Cozart, Plaintiff,

v.Victor R. Wilson, Defendant.

Case No. 4:18-bk-09042-BMW

Adv. Case No. 4:18-ap-00495-BMW

United States Bankruptcy Court, D. Arizona.

Signed November 13, 2019

Eric Ollason, Tucson, AZ, for Plaintiff.

Jody A. Corrales, Deconcini McDonald Yetwin & Lacy P.C., Tucson, AZ, for Defendant.

RULING AND ORDER REGARDING DEBTOR/DEFENDANT'S MOTION FOR SUMMARY JUDGMENT

Brenda Moody Whinery, Chief Bankruptcy Judge This matter came before the Court pursuant to the Motion to Dismiss Adversary Proceeding (the "Motion") (Dkt. 6) filed by Victor R. Wilson ("Mr. Wilson" and/or the "Defendant") on December 20, 2018; the Response to Motion to Dismiss Adversary Proceeding (the "Response") (Dkt. 9) filed by Bruce Cozart ("Mr. Cozart" and/or the "Plaintiff") on January 18, 2019; the Reply in Support of Motion to Dismiss Adversary Proceeding (the "Reply") (Dkt. 10) filed by Mr. Wilson on February 1, 2019; the Sur-Reply and Motion for Leave to File Limited Sur-Reply (the "Sur-Reply") (Dkt. 13) filed by Mr. Cozart on April 4, 2019; and all pleadings related thereto.

On April 4, 2019, the Court held a status hearing at which time the Court converted the Motion into a motion for summary judgment pursuant to Federal Rule of Civil Procedure 12(d), as incorporated by Federal Rule of Bankruptcy Procedure 7012. The Court ordered Mr. Wilson to file a separate statement of facts and invited Mr. Cozart to file any additional briefing as well as a controverting statement of facts before his statutory deadline to do so.

On April 22, 2019, Mr. Wilson timely filed the Defendant's Statement of Facts in Support of Motion to Dismiss Adversary Proceeding / Motion for Summary Judgment (the "SOF") (Dkt. 18). On October 28, 2019, approximately five months after his deadline to do so, Mr. Cozart filed the Plaintiff's Statement of Facts in Support of Complaint and Response to Motion to Dismiss Adversary Proceeding/Motion for Summary Judgment (the "Controverting SOF") (Dkt. 27), which Mr. Wilson has moved the Court to strike. (Dkt. 28). Mr. Cozart did not file a cross-motion for summary judgment.

Based upon the untimeliness of the filing of the Controverting SOF, the Court hereby grants the Motion to Strike Plaintiff's Statement of Facts (Dkt. 28) and the Court will not consider the Controverting SOF.

The Court deems this matter suitable for disposition without further argument or briefing. Based upon the pleadings and record before the Court, the Court now issues its ruling.

I. Jurisdiction

This is a core proceeding to determine the dischargeability of debt over which the Court has jurisdiction pursuant to 28 U.S.C. §§ 157(b) and 1334(b).

The parties are deemed to voluntarily consent to the authority of this Court to enter final orders and/or judgments pursuant to Rules 7008-1 and 7012-1 of the Local Rules of Bankruptcy Procedure for the District of Arizona.

II. Facts & Procedural Posture

The following facts are taken from Mr. Wilson's SOF, which was not timely controverted, as well as the documents attached thereto, and will be accepted by the Court for purposes of disposition of this summary judgment proceeding.

Mr. Wilson married Maureen Wilson ("Ms. Wilson") in 1988. (SOF at ¶ 2). In 1995, Ms. Wilson filed a dissolution action in California Superior Court ("State Court"). (SOF at ¶ 4).

In May 1996, Ms. Wilson hired Mr. Cozart to represent her in the dissolution proceeding. (SOF at ¶ 9; SOF, Ex. E at 2). The dissolution case was litigated over the next seven years. (SOF, Ex. E at 2).

As part of the Judgment for Dissolution of Marriage (SOF, Ex. B), the State Court found that Mr. Wilson had the ability to earn at least four times as much as Ms. Wilson. (See SOF, Ex. B at 3-4). The State Court ordered Mr. Wilson to pay child support and spousal support to Ms. Wilson. (SOF, Ex. B at 4-5). Additionally, the State Court ordered Mr. Wilson "to contribute $10,000 in attorney fees and costs to [Mr. Cozart] as and for non-taxable spousal support." (SOF, Ex. B at 5).

On January 8, 1999, Mr. Wilson was ordered to pay Mr. Cozart an additional $13,900 in fees as non-taxable spousal support. (SOF, Ex. E at 2). Thus, the total attorneys' fees owed by Mr. Wilson to Mr. Cozart as of January 8, 1999 totaled $23,900. (SOF, Ex. E at 2). These fees were payable at $500 per month beginning February 1, 1999, and Mr. Wilson's failure to make two consecutive installment payments would trigger an acceleration clause that would render the entire amount due immediately. (SOF, Ex. E at 2).

On April 15, 1999, after receiving no payments from Mr. Wilson, Mr. Cozart returned to State Court. (SOF, Ex. E at 2-3). On April 21, 1999, the State Court ordered Mr. Wilson to pay Mr. Cozart $25,680.82, representing unpaid attorney's fees and interest. (SOF, Ex. E at 3).

On July 15, 1999, Mr. Cozart filed additional contempt proceedings against Mr. Wilson for his continued failure to pay the legal bill. (SOF, Ex. E at 3). Ultimately Mr. Wilson pled guilty to five counts of criminal contempt. (SOF, Ex. E at 3). "[Mr. Cozart] recited into the record the stipulated sentence, which included 25 custody-days, suspended, as long as [Mr. Wilson] paid ‘att[orne]y fees [at the] rate of $300.00 per month beginning 2/15/00 until paid in full and due the 15th of ea[ch] month.’ " (SOF, Ex. E at 3). In effect, the parties agreed to a payment plan. (SOF, Ex. E at 3).

"Due to the simple interest costs accruing from 1997 through the beginning of payments in February 2000, and the artificially low monthly installment agreed to by all parties, remittances made by [Mr. Wilson] from February 2000 until February 2003 serviced only the debt's interest ...." (SOF, Ex. E at 3).

Between February 2000 and October 2008, Mr. Wilson asserts that he made monthly installment payments to Mr. Cozart totaling $29,243.58. (SOF at ¶ 11; SOF, Ex. A at ¶ 12). During this period of time, Mr. Wilson asserts that Ms. Wilson also paid $12,500 in fees to Mr. Cozart. (SOF at ¶ 12).

Mr. Wilson stopped making payments on October 31, 2008. (SOF, Ex. E at 3). Approximately seven months later, Mr. Wilson went to Afghanistan as a civilian sub-contractor for the Army. (SOF, Ex. E at 3). Unable to reach Mr. Wilson to discuss his non-payment, Mr. Cozart returned to State Court to seek enforcement of his fees order. (SOF, Ex. E at 3).

On October 6, 2009, the State Court signed an earnings assignment order for spousal or partner support in favor of Mr. Cozart in the amount of $19,068.21, payable at $500.00 per month. (SOF, Ex. E at 3). $17,540.38 of this amount represented outstanding principal, and the remaining $1,527.83 represented interest. (SOF, Ex. E at 3-4). "For all intents and purposes this was a default entry since [Mr. Wilson] was not in court." (SOF, Ex. E at 4).

In November 2009, Mr. Wilson returned from Afghanistan. (SOF, Ex. E at 4). On December 29, 2009, he filed a motion in the State Court seeking a refund of overpaid attorneys' fees and sanctions against Mr. Cozart for allegedly collecting more than was ordered. (SOF, Ex. E at 4).

In October 2011, the State Court denied the refund motion. (SOF at Ex. E). Although Mr. Wilson argued that Mr. Cozart had received third-party payments that had not been credited to reduce the amount of the debt, the State Court found that it did not have sufficient evidence before it to modify the award of attorneys' fees. (SOF at Ex. E).

It is unknown whether Mr. Wilson made any additional payments to Mr. Cozart after the October 2011 ruling was entered, or whether either party sought additional relief from the State Court.

On July 30, 2018, Mr. Wilson filed a voluntary petition for relief under chapter 7 of the Bankruptcy Code.

On November 14, 2018, Mr. Cozart filed the complaint that initiated this adversary proceeding. In the complaint, Mr. Cozart asks the Court to find that the debt he is owed, which he alleges to be $23,900 plus 10% interest, falls within the exceptions to discharge in §§ 523(a)(5) and (a)(15).¹

On December 20, 2018, Mr. Wilson filed the Motion, in which he argues that any outstanding debt does not fall within the scope of § 523(a)(5) or § 523(a)(15) because any such debt is not owed to a spouse, former spouse, or child of Mr. Wilson, and because any such debt is not in the nature of support.

On January 18, 2019, Mr. Cozart filed the Response in which he maintains that the debt at issue represents spousal support that the State Court ordered be paid directly to Mr. Cozart, and therefore the debt falls within the parameters of §§ 523(a)(5) and (a)(15).

On February 1, 2019, Mr. Wilson filed the Reply in which he argues that the debt is not excepted from discharge pursuant to § 523(a)(5) or § 523(a)(15) because neither Mr. Wilson's former spouse nor his children would benefit from a determination that the debt is non-dischargeable given that Mr. Wilson's former spouse is no longer indebted to Mr. Cozart by virtue of an applicable statute of limitations and given that Mr. Cozart's garnishment efforts deprived Mr. Wilson's former spouse of child support payments for a period of time.

Mr. Cozart counters in the Sur-Reply² filed on April 4, 2019, that the Court must go back in time twenty years and look at the parties' circumstances at the time the debt was awarded in order to determine whether the debt is in the nature of support. It is his position that the parties' current financial circumstances are irrelevant.

Mr. Wilson argues for the first time in his Reply that he paid off the principal amount of the attorneys' fees awarded, which Mr. Cozart disputes in the Sur-Reply.

III. Law & Analysis

A. Summary Judgment Standard

Pursuant to Federal Rule of Civil Procedure 56(a), which is incorporated by Federal Rule of Bankruptcy Rule 7056, "[t]he court shall grant summary judgment if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law."

The facts submitted are viewed most...