In re: Matthew Banks Ashworth

CourtUnited States Bankruptcy Appellate Panel for the Ninth Circuit
DecidedDecember 16, 2013
DocketCC-12-1591-TaDPa
StatusUnpublished

This text of In re: Matthew Banks Ashworth (In re: Matthew Banks Ashworth) is published on Counsel Stack Legal Research, covering United States Bankruptcy Appellate Panel for the Ninth Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
In re: Matthew Banks Ashworth, (bap9 2013).

Opinion

FILED DEC 16 2013 1 SUSAN M. SPRAUL, CLERK 2 U.S. BKCY. APP. PANEL OF THE NINTH CIRCUIT

3 UNITED STATES BANKRUPTCY APPELLATE PANEL 4 OF THE NINTH CIRCUIT 5 In re: ) BAP No. CC-12-1591-TaDPa ) 6 MATTHEW BANKS ASHWORTH, ) Bk. No. 11-10946-RK ) 7 Debtor. ) ______________________________) 8 ) MATTHEW BANKS ASHWORTH, ) 9 ) Appellant, ) 10 ) v. ) MEMORANDUM* 11 ) KATHRYN EHRGOTT; AMRANE COHEN,) 12 Chapter 13 Trustee, ) ) 13 Appellees. ) ______________________________) 14 Argued and Submitted on November 22, 2013 15 at Pasadena, California 16 Filed - December 16, 2013 17 Appeal from the United States Bankruptcy Court for the Central District of California 18 Honorable Robert N. Kwan, Bankruptcy Judge, Presiding 19 ________________________________ 20 Appearances: Richard G. Heston of Heston & Heston for Appellant Matthew Banks Ashworth; Scott H. Talkov of Reid & 21 Hellyer, APC for Appellee Kathryn Ehrgott. __________________________________ 22 Before: TAYLOR, DUNN, and PAPPAS, Bankruptcy Judges. 23 24 25 26 * This disposition is not appropriate for publication. 27 Although it may be cited for whatever persuasive value it may have (see Fed. R. App. P. 32.1), it has no precedential value. 28 See 9th Cir. BAP Rule 8013-1. 1 INTRODUCTION 2 Chapter 131 debtor Matthew Ashworth appeals from the 3 bankruptcy court’s order overruling Ashworth’s objection to the 4 proof of claim for domestic support obligations filed by his 5 ex-spouse, Kathryn Ehrgott. Ashworth objected, not to the 6 amount, but to § 507(a)(1)(A) priority classification of the 7 claim, asserting that the claim is, instead, a general unsecured 8 claim based on a pre-petition settlement of a civil action that 9 Ehrgott filed against him for personal injury. He argued that 10 the parties settled the civil action concurrently and in 11 conjunction with their divorce settlement and that they did not 12 intend any of the obligation to be for domestic support. 13 The bankruptcy court held a trial at which it considered 14 testimony and evidence regarding what the parties intended at the 15 time they agreed to the settlement terms. The bankruptcy court 16 followed the controlling Ninth Circuit authority established in 17 Friedkin v. Sternberg (In re Sternberg), 85 F.3d 1400 (9th Cir. 18 1996) and determined that Ehrgott proved by a preponderance of 19 the evidence that, at the time of the parties’ stipulated 20 agreement, they intended the entire obligation to be for 21 Ehrgott’s support. We conclude that the bankruptcy court 22 committed no error and AFFIRM. 23 24 25 26 1 Unless specified otherwise, all chapter and section 27 references are to the Bankruptcy Code, 11 U.S.C. §§ 101-1532, and all “Rule” references are to the Federal Rules of Bankruptcy 28 Procedure, Rules 1001-9037.

- 2 - 1 BACKGROUND FACTS2 2 Ashworth and Ehrgott3 married in Georgia in 1999. During 3 the marriage, Ashworth worked in the banking industry and 4 received multiple promotions with substantial increases in salary 5 and bonuses. Ehrgott worked as a school teacher for the first 6 three years of the marriage, but remained at home after the birth 7 of their first child. 8 In April 2005, the parties separated and Ehrgott filed for 9 divorce in Tennessee, where they resided at the time. In 10 December 2005, during the pendency of the divorce proceeding, 11 Ehrgott also filed a civil action against Ashworth in the 12 Chancery Court for Knox County, Tennessee (the “Civil Action”), 13 seeking $10 million in general and punitive damages for battery, 14 fraud, intentional and negligent infliction of emotional 15 distress, and negligence.4 Later that month, Ehrgott gave birth 16 to the parties’ second child. 17 The Tennessee divorce court issued several orders that 18 required Ashworth to pay child support and alimony to Ehrgott 19 during the pendency of the divorce. In 2006, Ashworth’s annual 20 salary was $150,000, while Ehrgott had no outside source of 21 income and cared for their two young children. 22 2 23 We base the background facts, which are not in dispute, on the Joint Pretrial Order entered by the bankruptcy court on 24 January 13, 2012 (“JPTO”). 25 3 Ehrgott is Ashworth’s ex-spouse’s current name, after remarriage. 26 4 In support of her claims in the Civil Action, Ehrgott 27 alleged that Ashworth contracted herpes simplex 1 as a result of an extramarital affair and transmitted it to her. Ashworth later 28 stipulated that he infected Ehrgott with the virus.

- 3 - 1 Eventually, the parties appeared in response to notices of 2 deposition in the Civil Action. At that time and with counsel 3 present, the parties discussed and then entered into a settlement 4 of all claims that arose in the divorce proceeding and the Civil 5 Action. The parties recited the settlement terms, which were 6 stenographically recorded, and then filed them in the form of a 7 Final Judgment in the divorce proceeding. 8 In the Final Judgment, the divorce court accepted the 9 agreement of the parties “for the settlement of property rights 10 and the equitable division of their marital property.” 11 Dkt. #24-1 at 2. As relevant here,5 Ashworth agreed and was 12 ordered to pay to Ehrgott the sum of $306,000 as alimony (the 13 “$306,000 Obligation”), payable in the amount of $1,500 per month 14 commencing November 1, 2006 and ending December 31, 2023 (a 15 period of over 17 years). For the period of time between 16 November 1, 2006 and May 31, 2008, however, Ashworth was required 17 to pay only $1,000 per month, accruing the balance of $500 per 18 month. The deferred alimony incurred interest at the rate of 8%, 19 with the unpaid total due on or before December 31, 2008. 20 The Final Judgment provides that Ashworth’s “alimony 21 obligation” is “not dischargeable in bankruptcy and terminates 22 only upon the death of [Ehrgott]” or upon full payment. 23 Dkt. #24-1 at 5. It further required Ashworth to obtain a life 24 insurance policy insuring the full amount, prohibited 25 modification of the amount, and provided that the paid amounts be 26 27 5 Parenting and child support issues were addressed separately in a Permanent Parenting Plan, but fully incorporated 28 into, and ordered and decreed by, the Final Judgment.

- 4 - 1 tax deductible by Ashworth and reportable as taxable income by 2 Ehrgott. 3 Three paragraphs of the Final Judgment directly or 4 indirectly refer to the resolution of the Civil Action. 5 Paragraph 17 assigns responsibility to Ashworth for any uninsured 6 expenses Ehrgott incurred related to medical treatment for 7 herpes, while requiring Ehrgott to make reasonable efforts to 8 maintain her own health insurance coverage. Paragraph 18 recites 9 Ehrgott’s agreement to sign a release and to dismiss the Civil 10 Action. And the final paragraph provides for Ashworth to pay all 11 costs associated with both the divorce and the Civil Action.6 12 As agreed, Ehrgott executed a written “Release” of the 13 claims asserted in the Civil Action. The Release provides that 14 Ehrgott executed it “in consideration of the payment to [her] of 15 the sum of One Dollar ($1.00), and other good and valuable 16 consideration, as set forth in a transcript of the Agreed 17 Settlement, dated September 29, 2006, and the Final Judgment 18 . . . .“ Dkt. #24-3 at 2. 19 Ehrgott remarried in August 2007 and not long thereafter she 20 relocated with the parties’ minor children to Indiana, with 21 permission of the Tennessee divorce court and over Ashworth’s 22 objection.

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