In re Ehmke

Chapter 13

Chapter 11, Subchapter V

MEMORANDUM OPINION AFTER TRIAL ON CLAIMS OBJECTIONS

THOMAS B. MCNAMARA, UNITED STATES BANKRUPTCY JUDGE

I. Introduction.

Ashley L. Ehmke ("Ms. Ehmke") filed for protection under Chapter 13 of the Bankruptcy Code.^[1] Ms. Ehmke also caused her wholly-owned interior design company, Ashley Campbell, Inc. ("ACI"), to file a bankruptcy petition under Chapter 11 of the Bankruptcy Code. So, there are two Debtors in two separate bankruptcy proceedings under two different Chapters of the Bankruptcy Code.

Ms. Ehmke's father, Larry Homuth ("Mr. Homuth"), asserts that he loaned Ms. Ehmke and ACI $379,100.64 pursuant to a promissory note dated August 1, 2009. He contends that $315,505.76 is still owing. And, he wants the money back. Mr. Homuth sued his daughter and ACI in State Court for breach of contract. Before trial, Ms. Ehmke and ACI started their two bankruptcy cases. So, the contract dispute remained unresolved. Mr. Homuth filed a proof of claim against Ms. Ehmke in her individual case and a virtually identical proof of claim against ACI in its corporate restructuring, both asserting breach of contract.

Ms. Ehmke and ACI objected to Mr. Homuth's proofs of claim in the two bankruptcy cases on substantially similar grounds: an accord and satisfaction defense. Mr. Homuth responded and claims that he is owed the full amount stated in the proofs of claim. At the joint request of Ms. Ehmke, ACI, and Mr. Homuth, the Court joined the

two contested claims objections in the two separate bankruptcy cases together for a joint trial.

Having conducted the trial, the Court must decide whether to allow or disallow Mr. Homuth's proofs of claim against Ms. Ehmke and ACI. After considering the evidence (both testimonial and documentary), the Court decides, for the reasons explained in more detail below, that Mr. Homuth's claims must be disallowed in their entirety.

II. Jurisdiction and Venue.

Pursuant to 28 U.S.C. § 1334, this Court has subject matter jurisdiction to adjudicate the objections to Mr. Homuth's claims. Such issues are core proceedings per 28 U.S.C. §§157(b)(2)(A)(matters concerning administration of the estate), (b)(2)(B)(allowance or disallowance of claims against the estate), and (b)(2)(O)(other proceedings affecting the liquidation of the assets of the estate or the adjustment of the debtor-creditor relationship). Further, venue is proper in this Court under 28 U.S.C. §§ 1408 and 1409.

III. Procedural Background.^[2]

A. The Ehmke Bankruptcy Case.^[3]

1. General Background Concerning the Ehmke Bankruptcy Case.

Ms. Ehmke filed a Petition for protection under Chapter 13 of the Bankruptcy Code on August 18, 2022 in the case captioned: In re Ashley L Ehmke, Case No. 22-13092 (Bankr. D. Colo.) (the "Ehmke Case").^[4] Thereafter, she filed a series of Chapter 13 plans culminating in an "Amended Chapter 13 Plan," dated December 21, 2022 (the "Ehmke Plan").^[5] Under the Ehmke Plan, Ms. Ehmke committed to make 4 monthly payments of $5,000 and 56 monthly payments of $6,250 (for an aggregate of $370,000) to the Chapter 13 trustee for the benefit of creditors. On March 8, 2023, the Court confirmed the Ehmke Plan.^[6]

2. The Homuth-Ehmke Claim and Ehmke Objection.

On her Schedule E/F filed along with her Petition, Ms. Ehmke identified Mr. Homuth as a non-priority unsecured creditor holding a contingent, unliquidated, and disputed claim for $0 based on a contract.^[7] On October 23, 2022, Mr. Homuth filed Proof of Claim No. 10-1 in the Ehmke Case (the "Homuth-Ehmke Claim").^[8] In the Homuth-Ehmke Claim, Mr. Homuth asserted a $315,505.76 debt allegedly secured by "business assets" pursuant to a "UCC-1." The Homuth-Ehmke Claim is one of the largest claims asserted in the Ehmke Case. Mr. Homuth identified the basis of the debt as "money loaned" as evidenced by an attached promissory note. Furthermore, Mr. Homuth attached a written explanation and the following summary of "Homuth Note Balance and Payment Details" (the "Homuth Claim Summary"):

Homuth Note Balance i and Payment Details
Amount of Payments	Additional Information	Balance of Loan
Balance of Loan as of 12/31/15	$155,994.60	Balance from Defendants' Supplemental Disclosures (CAM 001570)
payments made by ACI in 2016	$ 15,600 00	$ 140,394.60
4% interest 2016	$ 5,615.78	$ 146.010.60
payments made by ACI in 2017	$ 6,000.00	$ 140,010.60
4% interest 2017	$ 5,600.42	$ 145,610.60
payments made by ACI in 2018	$ 9,000.00	$ 136,610.60
4%interest 2018	$ 5,464.24	$ 142,075.02
payments made by ACI in 2019	$ 8,250.00	$ 133,825.02
4% interest 2019:	$ 5353.00	$ 139,178.02
payments made by ACI in 2020	$ 6.750.00	$ 132,428.02
12% interest 2020 (amount of interest pursuant to Note due to: breach)	$ 15.891.36	$ 148,319.38
12% interest 2021 (amount of interest pursuant to Note due to: breach)	$ 17,798.33	$ 166,117.71
2022 interest (through 08/2022 -PRE PETITION ONLY)	5 13.289.42	$ 179,407.13
rescinded gift 2012 (due to breach)	$ 13,000.00	$ 192,407.13
rescinded gift 2013 (due to breach)	$ 14,000.00	$ 206,407.13
rescinded gift 2014 (due to breach)	$ 14,000.00	$ 220,407.13
rescinded gift 2015 (due to breach)	$ 14,000.00	Total amount due (without reasonable attorney fees/costs)	$ 234,407.13
Reasonable Attorney Fees & Costs: (estimated)	$ 81,098.63	Total Due WITH Reasonable Attorney Fees/Costs	$ 315,505.76

Thereafter, on October 25, 2022, Ms. Ehmke submitted an "Objection to Claim No. 10-1 filed by Larry Homuth" (the "Ehmke Objection").^[9] Mr. Homuth countered with his "Response" (the "Homuth-Ehmke Response") to the Ehmke Objection.^[10] A few months later, Ms. Ehmke filed a "Motion for Summary Judgment" (the "Ehmke MSJ") on the Ehmke Objection.^[11] Mr. Homuth opposed the Ehmke MSJ.^[12] Thereafter, the Court denied the Ehmke MSJ and set the dispute for trial.^[13] The day after denial of the Ehmke MSJ, Ms. Ehmke submitted an "Amended Objection to Claim No. 10-1 filed by Larry Homuth" (the "Ehmke Amended Objection").^[14] As set forth below, the Homuth-Ehmke Claim, Ehmke Objection, and Ehmke Amended Objection later were joined for trial along with a related contested matter.

B. The ACI Bankruptcy Case.

1. General Background Concerning the ACI Bankruptcy Case.

A few days after Ms. Ehmke filed the Ehmke Case, Ms. Ehmke caused her wholly-owned interior decoration business, ACI, to file a Petition for protection under Subchapter V of Chapter 11 of the Bankruptcy Code on August 24, 2022 in the case captioned: In re Ashley Campbell, Inc., Case No. 22-13187 (Bankr. D. Colo.) (the "ACI Case").^[15] Joli A. Lofstedt was appointed as the Subchapter V Trustee in the ACI Case.^[16] The ACI Case is closely related to the Ehmke Case because Ms. Ehmke owns, controls, and operates ACI and also because of significant overlapping debt.

Thereafter, ACI submitted a series of Chapter 11 plans culminating in a "Subchapter V Plan of Reorganization Dated March 6, 2023" (the "ACI Plan").^[17] The ACI Plan proposes that ACI will continue in its interior design operations and pay creditors through income generated by ACI's business activities. The ACI Plan has not been confirmed by the Court.

2. The Homuth-ACI Claim and ACI Objection.

On its Schedule E/F filed along with its Petition, ACI identified Mr. Homuth as a non-priority unsecured creditor holding a contingent, unliquidated, and disputed claim for $0 based on a contract.^[18] On October 23, 2022, Mr. Homuth filed Proof of Claim No. 1-1 in the ACI Case (the "Homuth-ACI Claim").^[19] In the Homuth-ACI Claim, Mr. Homuth asserted a $315,505.76 debt allegedly secured by "business assets" pursuant to a

"UCC-1." The Homuth-ACI Claim is one of the largest claims asserted in the ACI Case. Mr. Homuth identified the basis of the debt as "money loaned" as evidenced by an attached promissory note. Furthermore, Mr. Homuth attached a written explanation and the exact same Homuth Claim Summary submitted with the Homuth-Ehmke Claim. In fact, the Homuth-Ehmke Claim and the Homuth-ACI Claim are virtually identical.

Thereafter, on November 18, 2022, ACI submitted an "Objection to Claim No. 1-1 filed by Larry Homuth" (the "ACI Objection").^[20] Mr. Homuth countered with his "Response" (the "Homuth-ACI Response") to the ACI Objection.^[21] As set forth below, the disputed matter of the Homuth-ACI Claim and ACI Objection later were joined for trial along with a related contested matter.

C. Joinder of Contested Matters and Pretrial Proceedings.

Given the similarity of the contested matters concerning the Homuth-Ehmke Claim, Ehmke Objection, and Ehmke Amended Objection on the one hand and the Homuth-ACI Claim and ACI Objection on the other hand, Ms. Homuth and ACI requested that the contested matters be consolidated for pretrial and trial proceedings.^[22] Mr. Homuth concurred.^[23] Accordingly, the Court established joint pre-trial procedures and scheduled a joint trial on the Homuth-Ehmke Claim, Ehmke Objection, Ehmke Amended Objection, Homuth-ACI Claim, and ACI Objection.^[24]

D. Trial.

The Court conducted a joint trial on the Homuth-Ehmke Claim, Ehmke Objection, Ehmke Amended Objection, Homuth-ACI Claim, and ACI Objection on March 3, 2023.^[25]At the trial, the...