Rehearing and Rehearing En Banc Denied February 13, 1975.
GEE, Circuit Judge:
In October 1972, Roy Stewart Nunnally filed a voluntary petition in bankruptcy. His principal creditor and the one pursuing this appeal is his former wife, Mary Elizabeth Nunnally, whose claim stems from earlier divorce proceedings. In granting divorce, the court had divided the separate and community property between the spouses under the authority of Section 3.63 of the Texas Family Code, V.T.C.A. In addition to various items of personal property and title to real estate, Mary Elizabeth Nunnally was awarded 60% of certain life insurance policies, $46,779.41 representing an advance to the community from her separate estate, and $5,000 in attorney's fees incurred as a result of the divorce proceedings. The trial court granted Mrs. Nunnally a lien on Roy Nunnally's remaining interest in his Navy retirement benefits to secure the $46,779.41.
A few months later Nunnally's petition in bankruptcy presented Mrs. Nunnally with the possibility that parts of the divorce decree might be rendered of little worth. Those fears were reinforced by the bankruptcy referee's decision and the district court's affirmance. The referee found that the Navy retirement benefits becoming due after the filing of the voluntary petition in bankruptcy were not property passing to the trustee in bankruptcy. Further, he held that the $41,779.41 was a dischargeable debt, as was the award of attorney's fees. Mrs. Nunnally's application for a stay of the bankruptcy proceedings to permit her to proceed in state court to enforce her lien against the Navy retirement pension was denied. Mrs. Nunnally appeals these decisions, while Mr. Nunnally complains of the referee's finding that the life insurance policies were not exempt from creditors under Vernon's Tex.Rev.Civ.Stat.Ann. art. 3832a.
Under Section 70a(5) of the Bankruptcy Act, 11 U.S.C. § 110(a) (5), the trustee of the bankrupt's estate is vested on appointment with title to all property of the bankrupt which could have been transferred by the bankrupt or which could have been levied upon prior to the filing of the petition in bankruptcy. This provision is a broad one, covering vested rights in property, both of corporeal and incorporeal nature. 1A Collier Bankruptcy Manual ¶ 70.11 at 946 (2d ed. rev. I. Hall & R. D, Agostino 1974) [hereinafter cited as Collier]. It is too late in the day to find that vested interests in retirement pensions are not property rights. Texas divorce courts so regard them, Busby v. Busby, 457 S.W.2d 551 (Tex.1970), and by implication the federal government does also. For example, specific federal legislation exempts benefits due under laws administered by the Veterans' Administration from attachment, levy or seizure.
One argument remains for the bankrupt. Some interests, though "property," do not pass to the trustee for purposes of Section 70a(5). Lines v. Frederick, 400 U.S. 18, 91 S.Ct. 113, 27 L. Ed.2d 124 (1970). The pertinent considerations derive from the Bankruptcy Act itself. Section 70a(5) is defined to benefit creditors by transferring to the trustee everything the bankrupt has of value. Even if the interest is contingent or subject to postponed enjoyment, it may pass to the trustee. The interest must be "sufficiently rooted in the prebankruptcy past and so little entangled with the bankrupt's ability to make an unencumbered fresh start that it should be regarded as `property' under § 70a(5)." Kokoszka v. Belford, 417 U.S. 642, 94 S.Ct. 2431, 2434, 41 L.Ed.2d 374, 379 (1974); Segal v. Rochelle, 382 U.S. 375, 379-380, 86 S.Ct. 511, 15 L.Ed.2d 428 (1966). On the other hand, if the interest is "designed to function as a wage-substitute at some future period and, during that future period, to `support the basic requirements of life for'" [the debtor], Kokoszka, supra, 417 U.S. at 648, 94 S.Ct. at 2435, 41 L.Ed.2d at 380, and removal of the interest would hamper the bankrupt's efforts to make a new start, the property does not pass to the trustee. The pension payments here fall in the second category; they are periodic payments made during a time when the pensioner may well have no or few other sources of income.
Next, we treat the matter of whether the $41,779.41 awarded by the divorce court to Mrs. Nunnally was a dischargeable debt. All debts are dischargeable unless they are subject to the objections set out in Section 14c, 11 U. S.C. § 32(c) of the Act, 1 Collier ¶ 14.00, .02, or are exempt under Section 17, 11 U.S.C. § 35(a). 11 U.S.C. § 35(a) (7) provides:
Although there is no permanent alimony in Texas, Francis v. Francis, 412 S.W.2d 29, 32 (Tex.1967), the divorce court is authorized at the time of the divorce to divide the separate and community property between the spouses in whatever manner the court deems equitable and just. Tex. Family Code Ann. § 3.63. Factors which the Texas courts may take into account in making the division and award "include the disparity of the earning power of the parties, as well as their business opportunities, . . . the physical condition of the parties, probable future need for support, and educational background; . . . [t]he fault in breaking up the marriage and the benefits innocent spouse would have received from a continuation of the marriage . . .." Cooper v. Cooper, 513 S.W.2d 229, 233-234 (Tex.Civ.App.— Houston [1st Dist.] 1974, writ history
As for the attorney's fees awarded in the divorce proceedings, they are also protected from discharge. Courts have held attorney's fees nondischargeable when awarded under a state statute allowing such fees as "alimony."
As a final matter, bankrupt contends that his interest in the cash surrender value of six life insurance policies
Under Texas law interpreting the meaning of "family" for purposes of personal property and homestead exemptions, adult children other than unmarried daughters are not part of the family unit. Givens v. Hudson, 64 Tex. 471 (1885). In order for the mother to be regarded as a member of her adult son's family, there must be a legal or moral obligation to support on the part of one person, with corresponding dependency on the part of the other person. Stout v. Anthony, 254 S.W.2d 879 (Tex.Civ. App.—Amarillo, 1952, writ ref'd). Bankrupt has not shown himself legally or morally bound to support his mother. Likewise, he has not shown her dependence on him. Stout v. Anthony, supra. L. E. Whitham & Co. v. Briggs' Estate, 58 S.W.2d 49 (Tex.Comm'n App.1933, holding approved). Cf. Henry S. Miller Co. v. Shoaf, 434 S.W.2d 243 (Tex.Civ. App.—Eastland 1968, writ ref. n. r. e.). The fact that bankrupt's children are contingent beneficiaries on the policies does not change our holding that the cash surrender values of the policies are not exempt. The statute speaks in terms of beneficiaries, not contingent beneficiaries. Moreover, we decline to adopt an interpretation of the statute which would allow a bankrupt—by the device of making family members fourth or fifth contingency beneficiaries, for example—to insulate assets from creditors when there may be only a very slight chance that members of the family unit or dependents will ultimately benefit. This would not further the aims of the statute.
Affirmed in part, reversed in part.