In re Stuteville

• Decision Date: 27 November 2019
• Docket Number: No. 19-11085-j13,19-11085-j13
• Citation: 611 B.R. 886
• Parties: IN RE: Jimmy Thad STUTEVILLE, Debtor.
• Court: U.S. Bankruptcy Court — District of New Mexico

611 B.R. 886

IN RE: Jimmy Thad STUTEVILLE, Debtor.

No. 19-11085-j13

United States Bankruptcy Court, D. New Mexico.

Signed November 27, 2019

Ronald E. Holmes, Davis Miles McGuire Gardner, PLLC, Albuquerque, NM, for Debtor.

MEMORANDUM OPINION AND ORDER ALLOWING CLAIM OF JUDITH HOLCOMB, IN PART, AS AN UNSECURED PRIORITY CLAIM FOR A DOMESTIC SUPPORT OBLIGATION, AND ALLOWING THE REMAINDER OF THE CLAIM AS AN UNSECURED NON-PRIORITY CLAIM

ROBERT H. JACOBVITZ, United States Bankruptcy Judge

THIS MATTER is before the Court on Creditor Judith Holcomb and Debtor's Joint Motion for Summary Judgment on Debtor's Objection to Claim No. 10 and Creditor's Response Thereto ("Motion for Court to Determine Objection to Claim on Stipulated Facts"). See Docket No. 50. Judith Holcomb, the Debtor's former spouse, filed a proof of claim for $11,000 as a priority claim for a domestic support obligation ("DSO") arising from guardian ad litem fees the Debtor was ordered to pay in connection with the parties' dissolution of marriage proceeding.¹ Ms. Holcomb paid the guardian ad litem fees in full and obtained an assignment of the fees from the guardian ad litem. The Debtor asserts that the assignment negates the claim's status as a priority DSO claim under § 507(a)(1)(B).² See Objection to Proof of Claim #10 of Judith Holcomb ("Objection to Claim") – Docket No. 29. Judith Holcomb filed a response. See Docket No. 33. The parties filed stipulated facts³ and requested the Court to determine the Objection to Claim based solely on the stipulated facts. For the reasons explained below, the Court will overrule the Objection to Claim, in part, and allow Judith Holcomb's Claim No. 10 in the amount of $10,000 as a priority DSO claim. The Court will allow the remainder of Judith Holcomb's Claim No. 10 in the amount of $1,000 as a non-priority unsecured claim.

STIPULATED FACTS

For purposes of adjudicating Judith Holcomb's claim, the parties stipulated to the following facts:

1. On May 6, 2019, Debtor filed a voluntary petition under chapter 13 of the Bankruptcy Code.

2. Judith Holcomb is the Debtor's ex-wife, the mother of the parties' minor child, and a creditor in this bankruptcy case.

3. Ms. Holcomb filed a proof of claim on July 15, 2019, as Claim No. 10-1. She filed an amended claim, No. 10-2 also on July 15, 2019.

4. Ms. Holcomb's Claim No. 10-2 is filed as an unsecured priority claim for $11,000 for the payment of Guardian ad litem fees (the "Claim").

5. On August 27, 2019, the Debtor filed a timely objection to the Claim.

6. On September 20, Holcomb filed a timely Response to Debtor's objection to the Claim.

7. In his Objection, Debtor asserts that the Claim fails because it was assigned to her by Laura Cass, the former Guardian ad litem (the "GAL").

8. The Claim was not assigned to Ms. Holcomb for the purpose of collecting on behalf of the GAL.

9. The Claim arises from a family court proceeding and Orders issued by Judge Gerard J. Lavelle in the New Mexico Family Court, in Judy Stuteville nka Judy Holcomb v. Jimmie Thad Stuteville , Case No. D-725 2014-100, filed in the Seventh Judicial Court, Socorro County (the "Family Court Proceeding").

10. On July 18, 2016, Judge Lavelle entered an Order Appointing Guardian Ad Litem to represent the parties' children in the Family Court Proceeding. Laura Cass was appointed as the GAL. Both parties were ordered to pay $5,000 each in retainer fees to the GAL. The Order further provided that when the GAL fees exceeded the retainer, Petitioner (Ms. Holcomb) and Respondent (Debtor) shall each pay 50% of the additional fees.

11. On November 9, 2016, Judge Lavelle entered an Order (the "November 2016 Order") that stated:

Both parties shall pay the GAL fees ½ each. Respondent [Debtor] shall pay the GAL $1500 within one week from today's date and each party shall pay the GAL $2,500 on or before December 9, 2016.

12. On June 21, 2017, Judge Lavelle entered a Minute Order and Judgment (the "June 2017 Judgment") in which he stated:

the GAL is awarded a judgment jointly and severally, against both Petitioner [Ms. Holcomb] and Respondent [Debtor] in the amount of $10,000. The GAL shall have a methods/remedies available in law to execute against this judgment.

13 The June 2017 Judgment also imposed a sanction on Respondent (Debtor) as follows:

As a sanction for his contempt, Petitioner [Ms. Holcomb] is awarded judgment against Respondent [Debtor] for attorney fees in the amount of $2,500; the GAL is awarded judgment against Respondent [Debtor] for GAL fees in the amount of $1,000.

14. On June 21, 2017, Judge Lavelle entered a Supplemental Minute Order and Judgment ("Supplemental Judgment") which clarified that interest on the judgment awarded in the Minute Order and Judgment accrued at 8.75% interest.

15. Paragraph 3 of the Supplemental Judgment provides:

[t]he $10,000 joint and several liability judgment represents the amount Respondent [Debtor] owes the GAL for his 50% of the GAL fees. If the GAL executes this Judgment against Petitioner [Ms. Holcomb] (or if Petitioner [Ms. Holcomb] pays this Judgment voluntarily) then Petitioner [Ms. Holcomb] would take judgment against Respondent [Debtor] in an amount equal to the executed or voluntarily paid judgment.

16. Ms. Holcomb paid the fees awarded to the GAL in the Supplemental Judgment in full.

17. On July 28, 2017, the GAL filed an Assignment of Judgment ("Assignment") in which she stated that in exchange for payment of $11,000 by Ms. Holcomb, the GAL was assigning her judgment against the Respondent [Debtor] to Ms. Holcomb.⁴

18. The Assignment includes the following provision:

As further consideration of this assignment, I will apply the $1000 Jimmie Stuteville sanction referred to able to the monies owed to me by Judith Holcomb, formerly known as Judy Stuteville in this matter.

19. The Supplemental Judgment grants Ms. Holcomb a judgment against Debtor if she pays the GAL, whether voluntarily or involuntarily.

DISCUSSION

The Bankruptcy Code defines a DSO as follows:

The term ‘domestic support obligation’ means a debt that accrues before, on, or after the date of the order for relief in a case under this title, including interest that accrues on that debt as provided under applicable nonbankruptcy law notwithstanding any other provision of this title, that is—

(A) owed to or recoverable by—

(i) a spouse, former spouse, or child of the debtor or such child's parent, legal guardian, or responsible relative; or (ii) a governmental unit;

(B) in the nature of alimony, maintenance, or support (including assistance provided by a governmental unit) of such spouse, former spouse, or child of the debtor or such child's parent, without regard to whether such debt is expressly so designated;

(C) established or subject to establishment before, on, or after the date of the order for relief in a case under this title, by reason of applicable provisions of—

(i) a separation agreement, divorce decree, or property settlement agreement;

(ii) an order of a court of record; or

(iii) a determination made in accordance with applicable nonbankruptcy law by a governmental unit; and

(D) not assigned to a nongovernmental entity, unless that obligation is assigned voluntarily by the spouse, former spouse, child of the debtor, or such child's parent, legal guardian, or responsible relative for the purpose of collecting the debt.

11 U.S.C. § 101(14A).

The party asserting a DSO priority claim must satisfy the four statutory requirements enumerated in subsections (A), (B), (C), and (D) of § 101(14A). See In re Webber , 579 B.R. 374, 378 (Bankr. W.D. Va. 2016) ("The claimant, as the party seeking priority treatment, has the burden of persuading this Court that her obligation satisfies the requirements of 11 U.S.C. § 101(14A).") (citations omitted). See also In re Taylor , 737 F.3d 670, 678 (10th Cir. 2013) (" Section 101(14A)(A) defines a debt as a ‘domestic support obligation’ when four requirements are satisfied.").

The Debtor concedes that the debt represented by the Supplemental Judgment entered in the Family Court Proceeding would otherwise meet the requirements for a DSO, but for the GAL's Assignment to Ms. Holcomb. See Objection to Claim, ¶ 9 ("Debtor does not dispute had Cass [the GAL] retained the judgment she would be entitled to DSO classification."). Debtor contends that the debt lost its status as a priority DSO claim when the GAL assigned her interest in the judgments to Ms. Holcomb. Debtor bases his argument on § 507(a)(1)(B), which grants priority status to DSO claims assigned to governmental units and to DSO claims voluntarily assigned for the purposes of collecting the debt. That Bankruptcy Code section provides, in relevant part:

The following expenses and claims have priority in the following order:

(1) First:

....

(B) Subject to claims under subparagraph (A), allowed unsecured claims for domestic support obligations that, as of the date of the filing of the petition are assigned by a spouse, former spouse, child of the debtor, or such child's parent, legal guardian, or responsible relative to a governmental unit (unless such obligation is assigned voluntarily by the spouse, former spouse, child, parent, legal guardian, or responsible relative of the child for the purpose of collecting the debt) or are owed directly to or recoverable by a governmental unit under applicable nonbankruptcy law, on the condition that funds received under this paragraph by a governmental unit under this title after the date of the filing of the petition be applied and distributed in accordance with applicable nonbankruptcy law.

11 U.S.C. § 507(a)(1)(B).

First, the Debtor points out that the GAL assigned the fee claim to Ms. Holcomb, who is not a governmental unit, and the statute does not grant priority status to claims assigned to private, non-governmental units. Second, the Debtor reasons that because the original holder of the Claim is the GAL, not Ms. Holcomb, the original claimholder did not benefit from the Assignment; consequently,...