POLITZ, Circuit Judge:
These cases were consolidated on appeal because both concern, inter alia, the constitutionality of § 17(a)(7) of the Bankruptcy Act of 1898, codified in 11 U.S.C. § 35(a)(7), which was modified and replaced subsequent to this suit by the Bankruptcy Reform Act of 1978, 11 U.S.C. § 523(a)(5). In each case the district court affirmed findings by the bankruptcy judge that the debts involved were non-dischargeable alimony obligations. For the reasons assigned, we affirm the decision of the district court in each case.
A. The Pinkertons
Betty Jane and Frederick H. Pinkerton were married in Miami, Florida in 1948 and had three children prior to being divorced there in 1969. The Florida divorce decree incorporated two agreements. The first, dated March 1, 1968, required the husband to provide the wife with periodic support and maintenance payments which were subject to increase if the husband's income increased and were to terminate upon the wife's remarriage. This agreement also contained provisions for support of the parties' three children. The second accord, executed on July 11, 1969, reaffirmed the first agreement and provided for a payment of $35,000 in cash as "full and final settlement and division of property between husband and wife." Frederick Pinkerton paid the $35,000, moved to Georgia and later remarried. Subsequently, Betty Jane Pinkerton filed suit in Georgia alleging that her former husband had fallen into arrears, totalling $13,000, under the alimony and child support provisions of the March 1968 accord. That litigation was settled on May 21, 1975, by a compromise agreement which expressly superseded all prior agreements. The compromise provided for the lump sum payment of $10,000 for the alimony and child support arrearage, and the delivery of a promissory note for $30,000 payable in 36 monthly installments of $833.33. The note provided penalties for default, specifically acceleration of the unpaid balance, 8% interest and attorney's fees. The 1975 settlement agreement further provided:
In June 1975, the Florida court approved the compromise settlement, amended the Pinkertons' divorce decree to include the new accord, and adopted a stipulation of the parties which declared, in pertinent part:
Frederick Pinkerton initially complied with the 1975 agreement by making the $10,000 payment and four monthly payments. He thereafter defaulted and filed a voluntary petition in bankruptcy, listing as a debt, for which he sought a discharge, the balance on the $30,000 note. Betty Jane Pinkerton was granted a summary judgment accelerating the principal balance due, plus interest, but was denied attorney's fees, without prejudice, pending final disposition of the debt-discharge issue. The bankruptcy judge opined that § 17(a)(7) precluded a discharge of the alimony obligation; the district court affirmed this conclusion.
On appeal, Frederick Pinkerton poses two alternative theories in support of his claim of entitlement to a discharge. First, he insists that the non-discharge provisions of § 17(a)(7) are inapplicable to his situation because the May 1975 agreement involved a property settlement and not alimony. Second, he asserts that § 17(a)(7) creates an impermissible gender-based classification which is violative of the due process clause of the Fifth Amendment. We discuss these contentions in Parts I, II and III below.
B. The Crists
Jane S. and James F. Crist were granted a divorce by a Georgia court on March 4, 1977. The parties executed a separation agreement, incorporated into the divorce decree, providing that the husband would pay the wife $30,000 in a lump sum upon the sale of their house, or in installments which were to be completed by March 1978. James Crist further agreed to pay Jane Crist: as alimony, the sum of $350 per month until the aforementioned $30,000 was paid in full; $5,000 for attorney's fees she had incurred; and $350 per month for the support of their minor daughter. Both the $30,000 and $5,000 obligations were evidenced by promissory notes. Crist secured these obligations by executing a deed to the house which transferred a security interest to his former wife. He also agreed to transfer certain personal effects, including home furnishings and an automobile.
James Crist paid $7,500 in March 1977, $2,500 of which was in payment on the $5,000 attorney fee commitment with the remainder applicable to the $30,000 note. In April 1977, he paid $2,500 on the $30,000 note. During the months of April and May, 1977, he paid the monthly alimony stipends of $350.
James Crist made no payments after the May 1977 alimony installment. He filed a bankruptcy petition in July 1977. The issue of the dischargeability of the obligations due Jane Crist was presented to the bankruptcy court, which ruled that none of the above listed obligations were dischargeable. The bankruptcy court found a balance of $22,500 due on the $30,000 note, $2,500 due on the $5,000 attorney's fee note and an accrued arrearage on the $350 monthly alimony payments, through February 1978, of $3,150, and concluded that § 17(a)(7) proscribed a discharge of any of these debts as all were alimentary obligations. The bankruptcy court rejected the contention that § 17(a)(7) created a gender classification inconsistent with the Fifth Amendment and the contention that the obligations at issue constituted a voidable preference under § 60 of the Bankruptcy Act, 11 U.S.C. § 96. The district court, 460 F.Supp. 891, affirmed.
On appeal, James Crist asserts the same Fifth Amendment and voidable preference arguments that were presented to the bankruptcy court. We discuss these contentions in Parts III and IV below.
Part I: Alimony or Property Settlement
Two tribunals, the bankruptcy court and the district court, have classified the Pinkertons' May 1975 agreement as an alimony accord. Under the relevant standard of review, findings of fact are not to
Resolution of this issue requires a determination of the intention of the parties, as reflected by the substance of the agreement, viewed in the crucible of surrounding circumstances as illuminated by applicable state law. In re Nunnally, 506 F.2d 1024, 1027 (5th Cir. 1975); In re Smith, 436 F.Supp. 469, 476 (N.D.Ga.1977); Golden v. Golden, 411 F.Supp. 1076, 1078 (S.D.N.Y.), aff'd, 535 F.2d 213 (2d Cir. 1976).
Several facts convince us that the Pinkertons intended the May 1975 compromise to constitute an amended alimony agreement rather than a property settlement. The July 1969 agreement stated that "the husband agrees to pay the wife as full and final settlement and division of property between the husband and the wife, the sum of Thirty-Five Thousand ($35,000.00) Dollars cash." (Emphasis added.) Upon payment of this amount, the property settlement was complete. Before addressing the substantive alimony provisions, including the terms of the $30,000 note, the May 1975 agreement declared that "the parties are desirous of reforming and revising said Agreements and wish to modify same as provided for in paragraph 15 of said Agreement of March 1, 1968." Moreover, the stipulation between the Pinkertons attested to the fact that the May 1975 accord was "executed pursuant to paragraph 15 of their original Agreement of March 1, 1968."
The March 1968 agreement involved alimony and child support. The July 1969 instrument related to the property settlement, was concluded and no longer executory when, in May 1975, the alimony arrearage litigation was compromised and settled. The evidence is overwhelming that the $30,000 note Frederick Pinkerton signed and delivered to Betty Jane Pinkerton related to his alimony obligation and was not a part of a property partition.
Reference to Florida law, as appropriately made by the district court, confirms this analysis and characterization of the $30,000 note. When disposition of a federal question requires reference to state law, federal courts are not bound by the forum state's choice of law rules, but are free to apply the law considered relevant to the pending controversy. 1A Moore's Federal Practice ¶ 0.325 (2d ed. 1979). Numerous factors support the reference to Florida law. The Pinkertons were married in Florida, resided in Florida and were divorced in Florida. The 1968, 1969 and 1975 agreements were all submitted to the Florida court for approval and inclusion in the Florida divorce decree. The 1975 compromise arose out of litigation looking to the declaration and collection of an arrearage in alimony and child support accruing under the 1968 court-approved alimony and support agreement.
In the context of divorce decree modification disputes, Florida courts "are concerned with the substance and not the form of the payments." Fagan v. Lewis, 374 So.2d 18, 20 (Fla.App.1979). Accord, White v. White, 338 So.2d 883 (Fla.App.1976). That the parties may designate payments "alimony" does not necessarily make the payments alimony from a legal standpoint. The opposite must necessarily follow: that one or both parties might label a payment something other than alimony will not change its character if indeed from the substance of the payment it is clearly alimony. The $30,000 note is evidence of Frederick Pinkerton's obligation to pay alimony to Betty
Part II: Interest and Attorney's Fees
The May 1975 note contained the following provision:
When Frederick Pinkerton defaulted on his payment schedule, Betty Jane Pinkerton sent a letter demanding payment within seven days, "or the entire unpaid balance of the note will be accelerated."
Citing § 63(a)(1) of the Bankruptcy Act, 11 U.S.C. § 103(a)(1),
376 U.S. at 360, 84 S.Ct. at 907. Accord, Hugh H. Eby Co. v. United States, 456 F.2d 923 (3d Cir. 1972); In re Romero, 535 F.2d 618 (10th Cir. 1976).
We hold that interest continues to accrue on the alimony obligation as an integral part of that obligation. We likewise hold
We reach the same conclusion with respect to the balance due for attorney's fees in the Crist case. Considering the totality of that situation, we find that the balance due on the note given in evidence of the agreement to reimburse Jane Crist's attorney's fees comes within the ambit of alimony.
Part III: Equal Protection Challenge
Both Pinkerton and Crist invoke the protections of the Fifth Amendment and claim that they should be absolved from paying alimony to their former wives because the non-discharge provision of § 17(a)(7) creates a gender classification which violates the equal protection aspect of the due process clause.
Over the past decade the Supreme Court has considered, in a long progression of cases, the vitality of statutes and regulations which classify individuals differently solely on the basis of sex. Frequently, when these laws are reviewed under the magnifying glass of the equal protection clause, their raison d'etre evaporates,
One type of statute containing a gender-based discrimination has passed constitutional muster. The Supreme Court has upheld statutes designed to alleviate "the disparity in economic condition between men and women caused by the long history of discrimination against women." Califano v. Webster, 430 U.S. 313, 317, 97 S.Ct. 1192, 51 L.Ed.2d 360 (1977). See also Schlesinger v. Ballard, 419 U.S. 498, 95 S.Ct. 572, 42 L.Ed.2d 610 (1975); Kahn v. Shevin, 416 U.S. 351, 94 S.Ct. 1734, 40 L.Ed.2d 189 (1974).
In Crist, the district court determined that § 17(a)(7) did create a gender-based distinction involving alimony, but concluded that this provision survived constitutional challenge under the shelter of Kahn. Both appellees before us urge a Kahn analysis in support of their positions. Recourse to a Kahn compensation rationale is helpful and
440 U.S. at 281-82, 99 S.Ct. at 1112-13.
It has also been suggested
We find an early expression of the perceived purpose of § 17(a)(7) in Wetmore v. Markoe, 196 U.S. 68, 25 S.Ct. 172, 49 L.Ed. 390 (1904), where the Court was considering the forerunner
196 U.S. at 77, 25 S.Ct. at 175. As Wetmore indicates, the underlying purpose of the non-discharge status for the support provision was specifically to aid wives and children by insuring that husbands could not disentangle themselves from their support obligations. Since the support provision was designed by Congress in 1903 to aid women, we have neither the authority nor the desire to act for Congress by transforming the term "wife" to "spouse" under the supposed marching orders of Bank of Marin. Moreover, in Westcott, Wiesenfeld and Goldfarb, supra, when faced with interpretative situations identical with that we now face, the Supreme Court declined to substitute the term "surviving spouse" for "widow." Instead, the Court applied an equal protection analysis in scrutinizing the statutes as written. We shall not follow the route suggested by the bankruptcy court in Pinkerton, for the Supreme Court has clearly marked that route as legally impassable.
We advance to the final theory tendered in support to § 17(a)(7) which was discussed by the district court in Pinkerton and submitted in the briefs and arguments of both appellees. This argument is premised on the thesis that § 17(a)(7) contains two discrete and independent provisions which are separated by a comma and the disjunctive "or." The critical language of § 17(a)(7) is: "alimony due or to become due, or for maintenance or support of wife or child." The alimony clause portion of the foregoing excerpt contains no reference to either sex and it is forcefully argued that it is gender neutral and therefore constitutional.
The district judge in Pinkerton adroitly distinguished alimony and support. Because of our resolution of these disputes we do not reach that question, but note the persuasiveness of his reasoning.
We conclude that, by providing the benefit of non-dischargeability of debts for alimony and support owed to wives but not to husbands—or, to state it another way, by providing the benefit of dischargeability of such debts owed by wives but not those owed by husbands—§ 17(a)(7) violates the equal protection component of the due process clause of the Fifth Amendment. The remaining question is whether to declare the entire subsection a nullity and deny its benefits to both groups, or to extend its coverage and provide equal benefits to both groups. We opt for the latter, following the path blazed by the Supreme Court in, inter alia, Califano v. Westcott, supra, Califano v. Goldfarb, supra, Weinberger v. Wiesenfeld, supra, and Wengler v. Druggists Mut. Ins. Co., supra.
In Westcott, the Supreme Court held that § 407 of the Social Security Act, 42 U.S.C. § 607, which provides benefits for dependent children of unemployed fathers but not those of unemployed mothers, violated the due process clause of the Fifth Amendment because it discriminated on the basis of gender. The district court remedy for the constitutional deprivation was the extension of benefits to cover those not included. The Supreme Court affirmed.
In Goldfarb, the Court found that the different treatment of men and women mandated by 42 U.S.C. § 402(f)(1)(D) constituted invidious discrimination. The Court found that the provisions of the statute limiting benefits received by a widower to less than those received by a widow were unconstitutional. To correct the constitutional defect, the three-judge trial court ordered that the benefits provided to widows be extended to widowers. The Supreme Court affirmed.
In Wiesenfeld, the Court upheld a three-judge court finding that 42 U.S.C. § 402(g), which provided social security survivor's benefits to widows but not to widowers, was unconstitutional. The three-judge court enjoined the continued refusal to pay § 402(g) benefits to widowers solely on the basis of sex. The Supreme Court affirmed.
In Westcott, Goldfarb and Wiesenfeld the Court's remedy for the constitutional infirmity of the challenged federal statutes was to extend the benefits to the excluded class.
Finally, we note the decision in Wengler which involved a state workers' compensation statute found to violate the Equal Protection Clause of the Fourteenth Amendment. The statute granted a conclusive presumption of dependency to wives but did not grant that presumption to husbands. The Court remanded the case to the state court, noting:
446 U.S. at 152, 100 S.Ct. at 1547.
We conclude that the proper remedy in the cases at bar is to extend the benefits of § 17(a)(7) to the excluded class. Accordingly, either a husband or wife receiving alimony or maintenance or support may assert the non-dischargeability of the obligation under § 17(a)(7).
Part IV: Voidable Preference
James Crist alternatively contends that the alimony payments due his ex-wife constitute a voidable preference under § 60 of the Bankruptcy Act, 11 U.S.C. § 96. We find this argument totally devoid of merit.
The judgments of the district courts are affirmed insofar as they hold that the obligations involved are alimony and, as such, are not discharged by virtue of the bankruptcy adjudication. Both cases are remanded in order that the district courts may enter judgment for the principal, interest and, as appropriate, attorney's fees.
Each case is AFFIRMED and REMANDED for further proceedings not inconsistent herewith.
Further, alimony is defined in a gender neutral fashion by the laws of Georgia (Ga.Code Ann. § 30-201) and Florida (Fla.Stat.Ann. § 61.08).
Finally, there are other significant differences between alimony and maintenance and support. The maintenance and support clause is limited to a segment of the familial unit—wives and children. Alimony, derived from the Latin words "alimonia" and "alere", has long been recognized as including the sustenance, nourishment or support obligations provided by ascendants for descendants, descendants for ascendants, as well as spouses for each other. For example, see Louisiana Civil Code arts. 229, 230 and 231, which provide: