Hundt v. Ventrone (In re Ventrone)

648 B.R. 30

IN RE Michael T. VENTRONE, Debtor.

Ashley Hundt, Plaintiff,

Trust Under Will of Sheila W. Hundt for the Benefit of Ashley Hundt, Plaintiff,

v.Michael T. Ventrone, Defendant.

Bankruptcy No. 21-11643-AMC

Adv. Proc. No. 22-00005-AMC

Adv. Proc. No. 22-00026-AMC

United States Bankruptcy Court, E.D. Pennsylvania.

Signed January 31, 2023

John A. Gagliardi, Wetzel Gagliardi Fetter & Lavin LLC, West Chester, PA, for Plaintiffs Trust under Will of Sheila W. Hundt for the Benefit of Ashley Hundt, Ashley Hundt.

Roger V. Ashodian, Regional Bankruptcy Center of SE PA, Havertown, PA, for Defendant Michael T. Ventrone.

Ashely M. Chan, United States Bankruptcy Judge

I. INTRODUCTION

In this adversary proceeding, Ashley Hundt ("Plaintiff" or "Hundt") and the Trust under Will of Sheila W. Hundt for the Benefit of Ashley Hundt ("Trust," collectively with Hundt, "Plaintiffs") move for summary judgment, arguing that certain undisputed material facts establish that the obligation of Hundt's ex-husband, Michael T. Ventrone ("Debtor"), to repay the Trust, of which Hundt is the beneficiary, pursuant to a property settlement agreement executed in connection with their divorce, is non-dischargeable pursuant to one or more subsections of 11 U.S.C. § 523(a), including § 523(a)(5) (" Section 523(a)(5)"), which renders certain debts for "domestic support obligations" non-dischargeable. Debtor disputes Plaintiffs’ characterization of this debt as a domestic support obligation and argues that, because the debt is payable to the Trust rather than to Hundt directly, the debt cannot be a domestic support obligation pursuant to Section 523(a)(5).

Ultimately, as explained below, the Court agrees with Plaintiffs that the undisputed material facts reflect that this debt constitutes a domestic support obligation under Section 523(a)(5). Therefore, the Court finds that the debt is non-dischargeable as a domestic support obligation pursuant to Section 523(a)(5) in the amount of $118,413.28 plus any additional attorneys’ fees which may be awarded in connection with a support and enforcement action brought by Plaintiff against Debtor which has been held in abeyance during the pendency of this bankruptcy, and grants Plaintiffs’ motion for summary judgment in part as to Count V.

II. FACTUAL AND PROCEDURAL BACKGROUND

On May 25, 2002, Debtor and Plaintiff married. ECF Case No. 22-00005, ECF Case No. 22-00026 ("Adv. ECF")¹ 25, 41 Motion for Summary Judgment of Ashley Hundt and Trust under Will of Sheila W. Hundt ("Mot. for Summ. J.") ¶ 3. On August 9, 2013, Debtor and Plaintiff entered into a post-nuptial agreement ("Post-Nuptial Agreement") to secure sufficient funds for the purchase of their marital residence located at 202 Rivercrest Drive, Phoenixville, PA 19460 ("Property"). See Mot. for Summ. J. ¶ 3. The Post-Nuptial Agreement, in relevant part, provides that:

[Plaintiff] and [Debtor] intend to purchase the real property located at 202 Rivercrest Drive, Phoenixville, PA 19460 (herein the "Property"). [Plaintiff] intends to provide a down payment for the purchase of the Property with a distribution in the amount of Four Hundred Fifteen Thousand Dollars ($415,000) to be distributed to [Plaintiff] individually from the Trust ... [Plaintiff] and [Debtor] intend to purchase the remainder of the Property with proceeds from one or more mortgages against the Property.

In the event of a separation, divorce, annulment, or dissolution of marriage for any reason, the original Distribution invested in the Property of $415,000, along with ½ of any and all future income derived from the Distribution invested in the Property, ½ of any investments, exchanges, and/or increase in value of the Distribution invested in the Property, shall be returned to the Trust at the time of sale, free and clear from any and all claims by [Debtor]. In the event of a separation, divorce, annulment, or dissolution of marriage for any reason, [Debtor] agrees to execute any and all documents, including any Deeds or ancillary transfer documents, necessary to effectuate the transfer of Distribution invested in the Property to the Trust.

See Mot. for Summ. J., Ex. A ("Post-Nuptial Agreement") ¶¶ 2–3.

Pursuant to the Post-Nuptial Agreement, Plaintiff used a $415,000 distribution (hereinafter referred to as "Distribution") from the Trust as a down payment to purchase the Property. See Mot. for Summ. J. ¶ 3. See also Post-Nuptial Agreement ¶ 2. The financial disclosures attached to the Post-Nuptial Agreement indicate that Debtor and Plaintiff held most of their marital assets and liabilities jointly. Separately, Debtor held a GSK Pension, CHE 401K, Apollo 401K, Apollo ESP, and a student loan;² however, Plaintiff personally had no assets or liabilities. See Post-Nuptial Agreement ¶¶ 5–9.

On July 15, 2016, Debtor filed for divorce from Plaintiff in the Court of Common Pleas of Montgomery County ("Family Court"). See Mot. for Summ. J. ¶ 5. On December 22, 2016, the parties voluntarily entered into a property settlement agreement ("PSA") as part of their divorce action, see id. , which substantively incorporated the Post-Nuptial Agreement under Paragraph 12(B). Mot. for Summ J., Ex. B ("PSA") ¶ 1. The parties’ divorce decree, entered March 24, 2017 ("Divorce Decree"), substantively incorporated the PSA. See Mot. for Summ. J., Ex. C ("Divorce Decree"). The PSA, in relevant part, provides:

Section 12. ASSETS AND LIABILITIES

A. 202 RIVERCREST DRIVE, PHOENIXVILLE PENNSYLVANIA.

The parties acquired 202 Rivercrest Drive, Phoenixville, Pennsylvania in August 2013. The parties utilized the funds distributed to them from [Plaintiff's] [T]rust along with a mortgage to acquire the [P]roperty. There is also a line of credit associated with the [P]roperty. The total debt, at or around the time of the Execution Date, secured by the Marital Residence is $893,901.60, allocated as the mortgage ($404,659.30); line of credit ($74,242.30), and; the distribution from the Trust ($415,000.00).

See PSA ¶ 7.

Upon the sale of the Marital Residence, $415,000.00 of any net proceeds ("net proceeds" are defined as the gross sale proceeds less real estate taxes and commissions, less the mortgage, less the line of credit, and less any standard fees and costs associated with settlement) less [Debtor's] $1,000.00 per month cash payment timely payments of the mortgage shall be immediately distributed to the Trust [ ... ] in conformity with the terms of the parties’ August 9, 2013 Post-Nuptial Agreement, plus, if applicable, 50% of "any future income derived from the Distribution invested in the Property, ½ of any investments, exchanges, and/or increase in value of the Distribution invested in the Property, shall be returned to the Trust at the time of sale, free and clear from any and all claims by" [Debtor].

See PSA ¶ 8.

The Trust shall be identified on the HUD-1 settlement sheet and the parties shall instruct the title agent or realtor to have check issued in the amount of $415,000.00 directly to the Trust. The parties further recognize that the $415,000.00 is a marital debt to the Trust for which [Plaintiff] is a beneficiary. In the event the net sale proceeds are not at least $415,000.00 the Trust shall receive 100% of the net sale proceeds with the balance between $415,000.00 and the net sale proceeds being addressed as a marital debt as set forth in detail below.

See PSA ¶¶ 8–9.

Neither party shall act in any way to individually or jointly encumber the Marital Residence. To the extent that the debt on the Marital Residence (i.e. the line of credit) decreases pending the sale of the Marital Residence, neither party shall utilize the line of credit in excess of a $75,000 balance which existed as of the date of filing of the divorce complaint. Either party utilizing the line of credit, shall notify the other of the expense being paid. Neither party shall encumber or leverage any available equity in the Marital Residence.

See PSA ¶ 9.

B. POST-NUPTIAL AGREEMENT DEBT OBLIGATION TO TRUST.

The parties executed a Post-Nuptial Agreement on August 9, 2013, whereby they received a $415,000.00 distribution from the Trust Under Will of Sheila W. Hundt ("Trust") for which [Plaintiff] is a beneficiary. The parties acknowledge and agree that by accepting these funds they created a marital debt to the Trust which is subject to equitable distribution. The parties further acknowledge that as a beneficiary of the Trust, the repayment of the funds will be applied toward [Plaintiff's] support in the future.

The distribution of these funds was contingent upon the return to the Trust of $415,000.00 upon separation/divorce plus fifty percent (50%) of any income, increase in value, investments or exchanges in excess of $415,000.00. The terms of the Post-Nuptial Agreement are incorporated herein as though set forth at length and the Agreement is attached hereto as Exhibit "B."

See PSA ¶ 10.

The parties agree that in the event that the sale of the Marital Residence does not satisfy their $415,000.00 obligation to the Trust, that they shall divide the deficiency between the net sale proceeds returned to the Trust and the $415,000.00 liability with [Debtor] being responsible for 37.5% of the deficiency and [Plaintiff] being responsible for 62.5% of the deficiency.

See PSA ¶ 10.

In the event of a deficiency, as set forth above, [Debtor] agrees he shall pay his portion of any deficiency directly to the Trust in the amount of not less than $1,225.00 per month for consecutive months until his portion is satisfied.

See PSA ¶ 10.

Thus, Paragraph (B) of Section 12 created Debtor's obligation to repay a portion of the Distribution ("Marital Obligation") if the sale of the Property did not yield sufficient proceeds to repay the entirety of the Distribution at settlement. See id.

The PSA also addresses alimony and child support as follows:

13. ALIMONY/ALIMONY PENDENTE LITE /SPOUSAL SUPPORT

Except as otherwise set forth in Paragraph 14 addressing the payment of household expenses, the

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