Peery v. Escobar (In re Peery)

In re: DOUGLAS E. PEERY, Debtor.

DOUGLAS E. PEERY, Plaintiff, v. MEGAN ESCOBAR, Defendant.

Case No. 4:17-bk-13595-BMW

Adversary Case No. 4:18-ap-00064-BMW

UNITED STATES BANKRUPTCY COURT DISTRICT OF ARIZONA

November 1, 2018

Chapter 11 Proceeding

RULING AND ORDER REGARDING MOTIONS FOR SUMMARY JUDGMENT AND REQUESTS FOR ATTORNEYS' FEES

This matter is before the Court pursuant to the Motion for Summary Judgment and Request for Attorney Fees (the "MSJ") filed on May 24, 2018, by Megan Escobar (the "Defendant" and/or "Ms. Escobar"), the Motion for Partial Summary Judgment to Determine Dischargeability of Debt Pursuant to 11 U.S.C. §§ 101(14)(A) and 523(a)(5) ("the Motion for PSJ") filed on June 18, 2018, by Douglas Peery (the "Debtor" and/or "Plaintiff"), and all related responsive pleadings thereto.

In her MSJ, Ms. Escobar asks the Court to determine that certain debt is non-dischargeable pursuant to § 523(a)(15). In his Motion for PSJ the Plaintiff asks the Court to find that the debt is dischargeable pursuant to § 523(a)(5). Both parties have requested attorneys' fees.

Oral argument was presented at a hearing held on October 30, 2018. Upon consideration of the entire record in this matter, the Court issues the following ruling.

Jurisdiction

This Court has jurisdiction in this matter pursuant to 28 U.S.C. § 157(b) and 28 U.S.C. § 1334(b).

Summary Judgment Standard

Pursuant to Federal Rule of Civil Procedure 56(a), which is incorporated by Bankruptcy Rule 7056, "[t]he court shall grant summary judgment if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." A dispute is genuine "if the evidence is such that a reasonable jury could return a verdict for the nonmoving party." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S. Ct. 2505, 2510, 91 L. Ed. 2d 202 (1986). A fact is material if it "might affect the outcome of the suit under the governing law." Id.

The facts submitted are viewed most favorably to the non-moving party. Tolan v. Cotton, 572 U.S. 650, 134 S. Ct. 1861, 1866, 188 L. Ed. 2d 895 (2014) (quoting Adickes v. S.H. Kress & Co., 398 U.S. 144, 157, 90 S. Ct. 1598, 26 L. Ed. 2d 142 (1970)). "Summary judgment is inappropriate if reasonable jurors, drawing all inferences in favor of the nonmoving party, could return a verdict in the nonmoving party's favor." Diaz v. Eagle Produce Ltd. P'ship, 521 F.3d 1201, 1207 (9th Cir. 2008). At the summary judgment stage, the court's role is to determine whether there is a genuine issue for trial. Anderson, 477 U.S. at 249, 106 S. Ct. at 2511, 91 L. Ed. 2d 202.

Local Rule 9013-1(g) provides as follows:

Any motion for summary judgment must set forth separately from the memorandum of law the specific facts on which the moving party relies. The specific facts must be set forth in serial fashion, not in narrative form. For each fact, the statement must refer to a specific part of the record where the fact may be found (e.g., affidavit, deposition, discovery responses, etc.). A failure to submita separate statement of facts in this form may constitute grounds for the denial of the motion.

1) Any party opposing summary judgment must comply with the foregoing in setting forth the specific facts relied on in opposing the motion or that otherwise establish that a genuine issue of material fact exists that precludes summary judgment.

2) In the alternative, if the parties agree that no genuine issue of material fact exists, they must jointly file a statement of stipulated facts. For stipulated facts, the parties may state that their stipulations are entered into only for the purposes of the motion for summary judgment and are not to be otherwise binding.

3) Unless ordered otherwise, the party opposing or responding to a motion for summary judgment will have thirty (30) days after service within which to serve and file a response and the moving party will have fourteen (14) days after service of the response to serve and file a reply.

The version of Rule 9013-1(g) in effect when the parties filed their motions for summary judgment is substantially similar to the rule currently in effect, though it did not explicitly state that a party's failure to submit a separate statement of facts in the proper format may constitute grounds for denial of the party's motion.

Ms. Escobar's MSJ was not accompanied by a separate statement of facts. Counsel for Ms. Escobar did, however, include the facts in her MSJ and supplemented her MSJ with the relevant documents. (See Dkt. 18).

The Debtor's Motion for PSJ largely complies with Local Rule 9013-1(g), though some of his facts are not accompanied by a reference to the record where such facts may be found.

Given the foregoing, the Court does not find it necessary to deny either the MSJ, or the Motion for PSJ, for failure to fully comply with Local Rule 9013-1(g). The Court, however, cautions counsel for Ms. Escobar to more carefully follow the rules in the future.

Further, it appears that although the parties did not file a joint statement of stipulated facts pursuant to Local Rule 9013-1(g)(2), the parties do not dispute any material facts. Instead, the parties disagree about how the law applies to the facts.

Findings of Fact

The undisputed facts are as follows:

On September 2011, Ventura-Pacific Development, Inc. ("VPD") and Ms. Escobar entered into a Stock Redemption Agreement, wherein VPD agreed to purchase Ms. Escobar's shares in VPD for $351,000 pursuant to the terms set forth in a Promissory Note. (Dkt. 15 at Ex. B, ¶¶ 3.0, 4.0; Dkt. 18 at Ex. 2, ¶¶ 3.0, 4.0).

Pursuant to the Promissory Note, VPD was to pay Ms. Escobar the principal balance of $351,000 plus interest at an annual rate of 4.238%, or at a rate of 10% per annum in the event of a default, over a period of 10 years in 120 installments, beginning on October 1, 2011. (Dkt. 15 at Ex. C; Dkt. 18 at Ex. 2).

The Stock Redemption Agreement was signed by the Debtor as the President/CEO of VPD and Ms. Escobar in her individual capacity. (Dkt. 15 at Ex. B; Dkt. 18 at Ex. 2).

Ms. Escobar and the Debtor were married on April 7, 2012. (Dkt. 15 at Ex. F, ¶ A; Dkt. 18 at Ex. 1, ¶ A).

On December 31, 2012, the parties executed an Addendum to Stock Redemption and Promissory Note (the "Addendum"), pursuant to which the Debtor became the maker under the Stock Redemption Agreement and the Promissory Note, effective December 31, 2012. (Dkt. 15 at Ex. D; Dkt. 18 at Ex. 3).

Under the terms of the Addendum: (1) the Debtor assumed all responsibility and liability to fulfill the terms of the Stock Redemption Agreement and Promissory Note; (2) the value of the Promissory Note was reset to its original amount; (3) the parties agreed that all previous payments made by VPD would be considered a gift to Ms. Escobar; and (4) the parties agreed that the payment schedule would begin on January 15, 2013, with all subsequent payments to be due and payable by the 15^th of each month thereafter until paid in full. (Dkt. 15 at Ex. D; Dkt. 18 at Ex. 3).

The Addendum is signed by Ms. Escobar and the Debtor in their individual capacities. (Dkt. 15 at Ex. D; Dkt. 18 at Ex. 3).

On December 31, 2012, Ms. Escobar and the Debtor also entered into a (Post) NuptialAgreement. (Dkt. 18 at Ex. 4). Pursuant to the (Post) Nuptial Agreement, upon the filing of a petition for dissolution of marriage, VPD was to be awarded to the Debtor and the Debtor was to buy out Ms. Escobar's community interest therein pursuant to the terms of the (Post) Nuptial Agreement. (Dkt. 18, Ex. 4 at ¶ 3.h.ii). The (Post) Nuptial Agreement specifies that "[t]he promissory note due and owing to [Ms. Escobar] from [the Debtor] for her shares of Ventura Pacific Development, Inc., with a principal balance of $351,000" is Ms. Escobar's sole and separate property. (Dkt. 18, Ex. B to Ex. 4; see also Dkt. 18, Ex. 4 at ¶ 3.h.ii).

The parties separated sometime thereafter.

On May 17, 2016, the parties entered into a Marital Settlement Agreement. (Dkt. 15 at Ex. F; Dkt. 18 at Ex. 1). The Marital Settlement Agreement provides in relevant part:

1. DEBTS, LIABILITIES AND OBLIGATIONS.

. . . .

(b) DOUG'S OBLIGATIONS. Except as may otherwise be provided in this Agreement DOUG shall assume sole responsibility for payment of and shall pay all of the following obligations and shall indemnify, defend and hold MEGAN free and harmless therefrom and from any attorneys' fees costs and expenses incurred in connection within:

(1) All debts, liabilities and obligations he has personally incurred or are in his name, that remain unpaid as of the date of this Agreement, and for which no other provision is made in this Agreement.

(2) All debts, liabilities, obligations, encumbrances, liens, property taxes, taxes on gains, and indebtedness, of every kind and nature, in connection with or related in any way to all property awarded to him herein, to include, without limitation, all obligations owing with respect to all business entities owed by DOUG.

. . . .

2. PROPERTY.

. . . .

(i) PROMISSORY NOTE. DOUG affirms his personal obligation to MEGAN pursuant to the pre-marital Promissory Note ("Note"), DOUG acknowledges the importance of timely payments on the Note, however, both parties acknowledge that the Note is not adomestic support order. DOUG agrees to secure the Note with a life insurance policy, naming MEGAN as the beneficiary of any amount equal to the outstanding balance on the Note. DOUG may reduce the beneficiary amount on an annual basis to reflect the payments made on the Note during the prior year. In the event of DOUG'S death, any excess proceeds shall revert to DOUG'S contingent beneficiary, or in the event there is none, to DOUG'S estate. DOUG shall execute a release of information to MEGAN upon presentation of same to allow MEGAN to communicate directly with the insurance company to confirm the policy is current through the term of the Note. DOUG shall also provide MEGAN with a copy of the insurance policy.

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