Ashworth v. Ehrgott ( In re Ashworth)

Ashworth v. Ehrgott, et al. (In re Ashworth), B.A.P. No. CC-12-1591 (9th Cir. B.A.P., December 16, 2013) (Not for Publication)
In an unpublished decision, the Bankruptcy Appellate Panel for the Ninth Circuit affirmed the order of the Bankruptcy Court, overruling the Debtor's objection to the proof of claim filed by his ex-wife asserting a priority under Bankruptcy Code 507(a)(1)(A) as a "domestic support obligation", despite the fact that the $306,000 debt was based, in part, upon a pre-petition settlement of a personal injury action. The record supported the Bankruptcy Court's determination that, at the time of the settlement, the parties intended the debt to be for domestic support and, thus, the claim was entitled to priority.
Procedural context:
Appeal from the Bankruptcy Court for the Central District of California (J. Kwan), overruling the Debtor's objection to the asserted priority of Appellee's proof of claim under Bankruptcy Code Section 507(a)(1)(A), reviewed for clear error.
Matthew Ashworth, Appellant and Chapter 13 debtor ("Debtor"), objected to the $306,000 proof of claim ("Claim") filed by his ex-wife and Appellee, Kathryn Ehrgott ("Ehrgott"), for which priority was asserted under Bankruptcy Code Section 507(a)(1)(A) as a "domestic support obligation" stemming from a previous divorce settlement between the parties. The Debtor asserted that the Claim was not entitled to any priority--and was a general unsecured claim--because it was based on the concurrent settlement of a pre-petition civil action filed by Ehrgott against the Debtor, alleging personal injuries on account of her contraction of the Herpes virus from him during their marriage. Ehrgott had alleged that the Claim, which the Debtor had agreed to pay in monthly installments, was nevertheless intended to constitute spousal support as part of their divorce settlement. After an evidentiary hearing, the Court found that the preponderance of the evidence supported a finding that the underlying debt was intended by the parties to be in the nature of spousal support and that the Claim was entitled to priority. On appeal, the B.A.P. upheld the finding of the Bankruptcy Court as "well supported" by the record. Despite evidence that the dismissal of the personal injury action was part of the consideration for the settlement (in addition to the other components of the divorce settlement) and that the settlement provided that the obligation would survive a remarriage by Ehrgott (which is not usually an aspect of spousal support), there had been no reversible error by the Bankruptcy Court.
Taylor, Dunn, and Pappas, Bankruptcy Judges.

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