In Re the Marriage of Escobar & Peery

IN THE ARIZONA COURT OF APPEALS DIVISION TWO IN RE THE MARRIAGE OF MEGAN ANNE ESCOBAR, Appellee, and DOUGLAS PEERY, Appellant. No. 2 CA-CV 2025-0287-FC Filed October 2, 2026 Appeal from the Superior Court in Pima County No. D20143900 The Honorable John J. Assini, Judge Pro Tempore The Honorable Dawn R. Walton, Judge Pro Tempore The Honorable Nicholas A. Knauer, Judge Pro Tempore AFFIRMED IN PART; REVERSED IN PART COUNSEL Wyland Law P.C., Tucson By Dawn Wyland Counsel for Appellee Berkshire Law Office PLLC, Tempe By Keith Berkshire, Alexandra Sandlin, Elizabeth Nañez, and Alicia Derr Counsel for Appellant  IN RE MARRIAGE OF ESCOBAR & PEERY Opinion of the Court OPINION Judge Sklar authored the opinion of the Court, in which Presiding Judge Kelly and Judge Brearcliffe concurred. S K L A R, Judge: ¶1 This case involves the intersection of bankruptcy and divorce. At issue is whether a debt that was memorialized in a marital settlement agreement and merged into a dissolution decree constituted “support.” The issue matters because “domestic support obligation[s]” may not be discharged in bankruptcy. See 11 U.S.C. § 523(a)(5). Douglas Peery owes the debt at issue to his former wife, Megan Escobar. He has twice attempted to discharge it. His first attempt, under Chapter 7, was unsuccessful. His second attempt, under Chapter 13, led the Bankruptcy Court to ask the family court whether the debt was support. The family court found that it was. ¶2 Peery challenges that finding here, arguing that the family court applied an improper test. We agree. Consistent with our supreme court’s opinion in In re Marriage of Zale, 193 Ariz. 246, ¶¶ 9-10 (1999), because the agreement was merged into the decree, it must be interpreted without extrinsic evidence. The court instead focused on the parties’ intent. Applying the proper test, we conclude that the debt was not support. The decree’s plain language compels that conclusion. We therefore reverse the court’s ruling. However, we do not agree with Peery that our conclusion requires us to vacate subsequent rulings concerning enforcement of the note and Peery’s child-support obligations. We affirm them. BACKGROUND I. Before the parties marry, Peery agrees to pay Escobar under a promissory note ¶3 This case’s history begins in 2011, when Escobar held shares in a company called Ventura-Pacific Development. Peery v. Escobar (In re Peery), No. 4:17-bk-13595-BMW, 2018 WL 5779845, at *2 (Bankr. D. Ariz. 2018). Peery was Ventura-Pacific’s president and CEO. Id. The company entered into a Stock Redemption Agreement with Escobar, which Peery signed on the company’s behalf. Id. It agreed to purchase her shares for $351,000, pursuant to a promissory note. Id. 2  IN RE MARRIAGE OF ESCOBAR & PEERY Opinion of the Court ¶4 In April 2012, Peery and Escobar married. They later executed an addendum to the Stock Redemption Agreement. In it, Peery agreed to assume Ventura-Pacific’s obligations to Escobar under the promissory note. Id. ¶5 Escobar petitioned for legal separation, and the parties entered into a marital settlement agreement in May 2016. The family court approved the agreement and merged it into a consent decree of dissolution. The agreement affirmed Peery’s personal obligation to Escobar on the promissory note. The agreement also provided that neither party would be entitled to spousal maintenance and that child support could be modified as provided by law. It further stated “that the Note is not a domestic support order.” II. Chapter 7 Bankruptcy Proceedings ¶6 In November 2017, Escobar petitioned for contempt because Peery had not made payments on the note. Peery moved to dismiss the petition, as he had filed for Chapter 7 bankruptcy, which resulted in an automatic stay. See 11 U.S.C. § 362. ¶7 In the bankruptcy case, Peery filed an adversary complaint, alleging that his debt to Escobar was dischargeable. Escobar moved for summary judgment, arguing that it was nondischargeable. The Bankruptcy Court granted her motion. Peery, 2018 WL 5779845, at *8. The Ninth Circuit Bankruptcy Appellate Panel affirmed. See Peery v. Escobar (In re Peery), No. AZ-18-1311-FLB, 2019 WL 3545827 (B.A.P. 9th Cir. 2019). III. Contempt Proceedings and Chapter 13 Bankruptcy ¶8 No further relevant proceedings occurred until January 2023, when Escobar filed a petition to enforce the promissory note, for contempt, and to modify child support. She again alleged that Peery had not made payments on the note. The proceedings were not resolved by November 2023 when Peery filed for Chapter 13 bankruptcy, and another automatic stay came into effect. ¶9 Escobar then asked the Bankruptcy Court to let her continue enforcement proceedings on the promissory note in the family court. She argued that the automatic stay did not apply because the note payment was a “domestic support obligation[].” See 11 U.S.C. § 362(b)(2)(A)(ii) (filing of bankruptcy petition does not operate as stay on proceedings regarding “the establishment or modification of an order for domestic support 3  IN RE MARRIAGE OF ESCOBAR & PEERY Opinion of the Court obligations”). Alternatively, she asked the Bankruptcy Court to lift the stay for cause so the family court could “decide the nature and amount of [Peery’s] obligations” to her. ¶10 In March 2024, the Bankruptcy Court granted Escobar’s motion. It found that the automatic stay was in place but that “cause exist[ed] to grant relief” from it. The court also allowed Escobar to “seek clarification and/or determination [from the family court] whether amounts she is owed by [Peery] are in the nature of support obligations.” The debt’s classification matters because debts arising out of “domestic support obligation[s]” are nondischargeable in bankruptcy under 11 U.S.C. § 523(a)(5). By contrast, a debt that is not a domestic support obligation can be discharged in a Chapter 13 bankruptcy if it is owed to a “former spouse” and “incurred by the debtor in the course of a divorce or separation or in connection with a separation agreement, divorce decree or other order of a court of record.” 11 U.S.C. §§ 523(a)(15), 1328(a)(2). ¶11 The Bankruptcy Court’s order led to the ruling at issue here. The family court ruled in June 2024 that the promissory note “was a form of support as intended by the parties in their agreement.” (Emphasis omitted.) This ruling echoed a November 2023 temporary child-support order. There, the court had found that the promissory note “was to be a form of support,” consistent with “the parties’ intentions at the time . . . the Decree was entered.” IV. Subsequent rulings ¶12 In August 2024, Peery petitioned to modify child support. Alternatively, he moved for relief from the judgment, asking the family court to overturn the June 2024 order and designate the promissory note a form of property division “enforceable in contract only.” In October, the family court, now with a new judge presiding, affirmed the June order. ¶13 In April 2025, the Bankruptcy Court dismissed Peery’s Chapter 13 bankruptcy. With the automatic stay dissolved, the family court ordered Peery to make monthly payments of $3,750 on the promissory note. After Peery did not make payments, Escobar filed a contempt motion. ¶14 In July 2025, after a hearing, the family court issued a final order denying Peery’s motion for relief from judgment. It found that Peery had “failed to comply with the terms of [the promissory note], only making inconsistent payments over the years.” It ordered that “[p]ayment on the Note shall continue until full satisfaction of the Note.” The order also set 4  IN RE MARRIAGE OF ESCOBAR & PEERY Opinion of the Court child support—which had previously been modified several times—and denied Escobar’s contempt motion. Escobar filed a petition to amend the judgment, which was denied. Peery appealed this order, as well as “all prior related rulings.” INTERPRETATION OF DISSOLUTION DECREE ¶15 Peery argues that the family court erred by using extrinsic evidence concerning the parties’ intent to interpret his obligations to Escobar under the promissory note, as merged into the decree via the marital settlement agreement. We review the interpretation of a dissolution decree de novo. Palmer v. Palmer, 217 Ariz. 67, ¶ 7 (App. 2007). I. Interpretation of a dissolution decree requires courts to analyze only the text of the decree itself ¶16 When the terms of a marital settlement agreement are “set forth or incorporated by reference in” a dissolution decree, it is merged and becomes enforceable as a judgment rather than a contract. In re Marriage of Rojas, 255 Ariz. 277, ¶ 14 (App. 2023) (quoting LaPrade v. LaPrade, 189 Ariz. 243, 247 n.1 (1997)). The merged provisions become “enforceable by all remedies available for enforcement of a judgment, including contempt.” Id. (quoting A.R.S. § 25-317(E)). ¶17 Our supreme court explained in Zale that merged decrees are treated as judgments not just for enforcement purposes but for interpretive purposes too. 193 Ariz. 246, ¶¶ 9-10. Thus, the parol evidence rule, which allows the admission of extrinsic evidence to interpret an ambiguous agreement, does not apply. Id. Because a judgment is “an independent resolution by the court,” it “rightfully is regarded in that context and not according to the negotiated intent of the parties.” Id. ¶ 11; see also Palmer, 217 Ariz. 67, ¶¶ 20-21 (court precluded from considering extrinsic evidence to interpret decree). ¶18 In interpreting judgments such as divorce decrees, courts must “apply the general rules of construction for any written instrument.” Cohen v. Fray, 215 Ariz. 62, ¶ 11 (App. 2007). The first step is to determine if the meaning of the decree is ambiguous. Id. A decree is ambiguous when its language “can reasonably be construed to have more than one meaning.” Id. (quoting In re Estate of Lamparella, 210 Ariz. 246, ¶ 21 (App. 2005)). The meaning of a decree “is to be determined from the language used.” Id. (quoting Stine v. Stine, 179 Ariz. 385, 388 (App. 1994)). We construe the language in a decree “in a manner that would not render any other part 5  IN RE MARRIAGE OF ESCOBAR & PEERY Opinion of the Court meaningless” and “in the context of its related provisions.” In re Marriage of Johnson & Gravino, 231 Ariz. 228, ¶ 17 (App. 2012). ¶19 We recognize that approximately four years prior to Zale, this court in Steiner v. Steiner, 179 Ariz. 606, 610-12 (App. 1994), looked to the parties’ intent in determining whether a debt contained in a divorce decree was in the nature of support. But unlike this case, the Steiner court did so for purposes of determining whether that debt had been discharged in a prior bankruptcy. Id. at 607. Doing so required the court to analyze federal law of nondischargeability, which turns on “the parties’ and the court’s intent as to the character of the obligation sought to be discharged at the time it was created.” Id. at 612. ¶20 Here, by contrast, we need not address the federal-law question of whether the promissory note is nondischargeable, including under Section 523(a)(5). The Bankruptcy Court did not ask the family court to address that issue. See Birt v. Birt, 208 Ariz. 546, ¶ 30 (App. 2004) (scope of state court’s power to address dischargeability issue limited by language in stay-relief order). We disagree with Escobar’s assertion at oral argument that the Bankruptcy Court’s request for clarification can be read in this manner, as that request does not use the phrase “domestic support obligation” or reference subsection (a)(5). Rather, we understand our decision to simply be a possible factor in any future dischargeability determination by the Bankruptcy Court. See Gionis v. Wayne (In re Gionis), 170 B.R. 675, 682 (B.A.P. 9th Cir. 1994). It follows that Steiner’s intent-focused analysis is of little relevance here. II. The family court improperly considered extrinsic evidence in interpreting the dissolution decree ¶21 Turning to the facts at issue, we agree with Peery that because the marital settlement agreement was merged into the decree, the family court was precluded from interpreting it with extrinsic evidence. See Palmer, 217 Ariz. 67, ¶¶ 20-21. Nevertheless, during the hearing on whether the promissory note was in the nature of support, the court did just that. As to the decree’s provision that the note was not a “domestic support order,” the court found this to be “purely ‘legal language’ that protected [Peery] from possible contempt remedies.” It speculated that Peery’s former counsel had included that language to preclude Escobar’s enforcement ability. It also said it “was surprised that [Escobar’s former counsel] let that language in there. But he did.” It further found that Peery was “trying to define the payment of the note to his advantage” because he 6  IN RE MARRIAGE OF ESCOBAR & PEERY Opinion of the Court “allow[ed] the payment to be looked at as a form of support” in post-divorce proceedings but not in his bankruptcy case. ¶22 To the extent that the family court’s speculation about counsel’s intent and its reference to Peery’s post-decree conduct can be understood as evidence, it is extrinsic. It was thus prohibited by Zale. The court erred by relying on these factors. ¶23 In defending the family court’s decision, Escobar does not rely on the court’s stated rationale. Instead, she points to the court’s post-decree rulings on child support. She argues that because those rulings considered whether Peery was making payments on the promissory note, the “intent of the court was clear . . . [that the] income that the Note produced . . . was in the nature of support.” For example, she points to the November 2023 temporary child-support order that referenced the “property settlement payment which was to be a form of support.” We do not agree, however, that the court’s post-decree rulings are relevant to interpreting the decree. Rather, our case law requires that judgments be “ascertained by a construction of [their] terms.” Schlussel v. Gerlach, 240 Ariz. 29, ¶ 9 (App. 2016). III. The record reflects that the note is not in the nature of support ¶24 Having rejected the family court’s reasoning, we next analyze the text of the decree—including the merged agreement—to determine whether the promissory note is in the nature of support. Most important is the provision in which “both parties acknowledge that the Note is not a domestic support order.” The agreement also provides that the parties waived claims against each other for “support of any kind or nature.” To interpret the note as being in the nature of support would render these provisions meaningless at best, contradictory at worst. See Gravino, 231 Ariz. 228, ¶ 17. Thus, the agreement’s plain language unambiguously indicates that the promissory note is not in the nature of support. See Cohen, 215 Ariz. 62, ¶ 11. ¶25 The agreement’s structure and context reinforce this conclusion. See Gravino, 231 Ariz. 228, ¶ 17. Elsewhere, the agreement addresses the two forms of support recognized by Arizona law in the dissolution context—spousal maintenance and child support. See A.R.S. §§ 25-318 to 25-320; c.f. A.R.S. § 25-500(9) (“[s]upport” defined as “the provision of maintenance or subsistence”). The section titled “Spousal Maintenance” states that both parties “forever release, waive and 7  IN RE MARRIAGE OF ESCOBAR & PEERY Opinion of the Court discharge . . . any and all claims upon the other for spousal maintenance, alimony or support of any kind or nature.” ¶26 The section addressing child support provides that Peery shall pay Escobar monthly child support consistent with the family court’s orders, which would be “subject to modification as provided by law.” The note, by contrast, is not modifiable. Nor does the agreement provide that the payments are in lieu of child support. Finally, the agreement specifies that the obligation to satisfy the note does not terminate upon Escobar’s death. By contrast, death terminates support obligations. A.R.S. § 25-327(B) (maintenance or support obligations generally “terminate[] on the death of either party”). ¶27 To bolster her argument that the note is support, Escobar points to a provision that requires the family court to “address whether or not the Note income received by [Escobar] . . . shall be includable in her gross income for child support purposes, or if only the interest is includable.” But we can discern no relationship between whether the note payments are child-support income and whether they are support. See § 25-320 app. § II(A)(1)(b) (child-support income “includes income from any source”). Nor has Escobar meaningfully explained any such relationship. We thus conclude that the promissory note is not in the nature of support. IV. The subsequent rulings challenged by Peery need not be vacated ¶28 Peery also argues that we must vacate the July 2025 order directing Peery to make payments on the note, as well as the related child-support order. In his view, those orders are “predicated upon” the family court’s finding that the promissory note was in the nature of support. We disagree. Peery’s obligation to pay the note and the court’s child-support calculation do not depend on whether the promissory note is support. We see no error in those rulings, and we affirm them. Our resolution is not intended to preclude the parties from seeking, and the court from awarding, any modification authorized by law. ATTORNEY FEES ¶29 Both parties seek attorney fees and costs under A.R.S. § 25-324. In our discretion, we deny both parties’ requests. As the prevailing party, Peery is entitled to his costs upon compliance with Rule 21(b) of the Arizona Rules of Civil Appellate Procedure. 8  IN RE MARRIAGE OF ESCOBAR & PEERY Opinion of the Court DISPOSITION ¶30 For the foregoing reasons, we reverse the family court’s June 2024 order determining that the note is in the nature of support. We affirm its other orders. Given our resolution, we need not address Peery’s argument that Escobar is estopped from arguing that the debt is in the nature of support. Nor need we address Peery’s argument that the court deprived him of due process. 9