Beverage v. Noriega (In re Noriega)

In re: CHARLES EDWARD NORIEGA, Debtor.PAULA A. BEVERAGE, Plaintiff,

v.CHARLES EDWARD NORIEGA and PATTY GRADY NORIEGA, Defendants.

No. 7-10-13981 JR

Adversary No. 11-1005 J

UNITED STATES BANKRUPTCY COURT DISTRICT OF NEW MEXICO

Dated: March 9, 2012

MEMORANDUM OPINION

THIS MATTER is before the Court following a trial on the merits of this adversary proceeding. The Court conducted a two-day evidentiary trial in Roswell, New Mexico, and took the matter under advisement.¹ All parties appeared pro se. Plaintiff, Paula Beverage, asserts that Charles Noriega's discharge should be denied pursuant to 11 U.S.C. § 727(a)(2), (a)(3), and (a)(4) based on allegations that the Defendants 1) transferred vehicles to be crushed for recycling within one year prior the filing of Mr. Noriega's bankruptcy case with the intent tohinder, delay, or defraud creditors and continued to own and operate the recycling/salvage business while making it appear that he transferred his business to another person, all with intent to hinder, delay or defraud creditors; 2) failed to keep or preserve records of a recycling/salvage business that Mr. Noriega continues to own and operate; and 3) failed to disclose in his Statement of Financial Affairs and Schedules the recycling/salvage business, the assets of that business, and other assets, including a home, personal vehicles, salvageable automobiles fixed for re-sale, and salvaged junk sold for profit as part of a recycling business. Plaintiff further contends that Mr. Noriega continues to operate a profitable business that he has failed to disclose in connection with his bankruptcy case. Plaintiff also seeks a determination of non-dischargeability under 11 U.S.C. § 523(a)(6), premised on her assertion that Defendants wrongfully converted copper and metal that belonged to Plaintiff. Patty Grady Noriega is Defendant Charles Noriega's non-filing spouse. Consequently, to the extent the discharge of Defendant Charles Noriega's obligations in his Chapter 7 bankruptcy case would discharge the community debt of Defendant Patty Grady Noriega, Plaintiff seeks to deny the community discharge.

After consideration of the testimony and evidence presented at trial, and being otherwise sufficiently informed, the Court finds that Plaintiff has failed to satisfy her burden of proving, by a preponderance of the evidence, that the Defendant Charles Noriega's discharge should be denied. Nor has the Plaintiff proved, by a preponderance of the evidence, that the debt Defendant Charles Noriega owes Plaintiff is non-dischargeable under 11 U.S.C. § 523(a)(6) as a debt arising from a willful and malicious injury to Plaintiff.

FACTS, BACKGROUND, AND PROCEDURAL HISTORY

Defendant Charles Noriega is a convicted felon who was released from prison in August of 2003. See Defendants' Exhibit K. In 2004, the Secretary, New Mexico Taxation and Revenue Department initiated proceedings against Charles Noriega d/b/a Bumper to Bumber Auto Repair as Case No. D-0504-CV-2004-784 ("State Court Injunction Action"). See Exhibit H. As part of the State Court Injunction Action, Charles Noriega entered into a Stipulated Injunction entered December 29, 2004 whereby he was enjoined from engaging in the business of a motor vehicle dismantler unless he becomes properly licensed to do so. See Exhibit 411 - 412. On August 1, 2007, an Injunction from Engaging in Business ("Injunction") was entered in the State Court Injunction Action that enjoined Defendant Charles Noriega from "engaging in the business of motor vehicle dismantler (recycler) or any similar business within the State of New Mexico" See Exhibit 365 - 366. The Injunction also sealed the Defendant Charles Noriega's business premises at all known locations and prohibited Defendant Charles Noriega's access to those locations except as authorized by the state court. Id. Defendant Charles Noriega sought to reconsider the Injunction entered in the State Court Injunction Action. See Exhibit No. 367 - 369. In 2008, an Order Modifying Sealing Order ("Modification Order") was entered in the State Court Injunction Action, which, among other things: 1) confirmed that the Stipulated Injunction and the Injunction remain in effect, and that Defendant Charles Noriega is prohibited from engaging in the business of an auto recycler unless and until he obtains a license to do so from the state of New Mexico; 2) permitted Defendant Charles Noriega to access two business locations for the purpose of moving certain vehicles from property located at 407 Husky Road to property located at 6217 Devonian Road under supervision and with approval of a law enforcement officer employed by the New Mexico State Police; and 3) permitted DefendantCharles Noriega to access the property located at 407 Husky Road to conduct his automotive repair business. See Exhibits 420 - 422. The Modification Order included a list of nineteen vehicles designated as Charles Noriega's "personal vehicles." See Exhibit 423. The State Court Injunction Action remained pending as of August 2010, with the Secretary of New Mexico State Taxation and Revenue Department seeking to hold Defendant Charles Noriega in contempt for failing to comply with the prior orders entered in the State Court Injunction Action, including the Modification Order. See Exhibits 429 - 445.²

Plaintiff Paula Beverage obtained a judgment by default against Charles Noriega in 2009 in connection with an action filed by Paula Beverage against Charles Noriega in the Fifth Judicial District Court, as Case No. CV-08-1052 ("State Court Action"). See Exhibit No. 542. The judgment entered in the State Court Action recites that the Defendant Charles Noriega did not appear at the trial on the merits held in the State Court Action on August 29, 2009, that the Mr. Noriega executed a written promissory note in favor of Plaintiff in the amount of $100,000 on August 16, 2008, and that Mr. Noriega failed to make any payments on the note. Id. The judgment awarded Plaintiff $100,000 plus interest from August 16, 2008 until paid. Id.

Defendant Charles Noriega filed a voluntary petition under Chapter 7 of the Bankruptcy Code on August 6, 2010. Defendant Patty Noriega Grady is Mr. Noriega's non-filing spouse.

Additional Documentary Evidence Before the Court:

Plaintiff submitted hundreds of receipts from the year 2006 that appear to relate to a mechanic business, and four receipts dated January 10, 2008. See Plaintiff's Exhibits 1 - 119,³ 121 through 126,⁴ 130 through 132, and Exhibits 133 - 136. Except for Exhibits 130 - 132, that identify B & B Auto, and Exhibit 133, a Receiving Record dated January 10, 2008 for $550.00 to "cut lot with Brush Hog and Pick up Trash and Haul off" that reflects the name of Charles Noriega, none of the receipts admitted into evidence identify Charles Noriega or a business name.

Plaintiff's Exhibits 137 - 169, admitted at trial, are advertisements from the Shopper from January 2008 through July 2011. The header from the Shopper includes the following statement: "15 Word Ad for 4 Weeks for $4.20." Exhibit 137, dated January 21, 2008, includes the following advertisement:

FREE JUNK CAR REMOVAL

Will pay top dollar for most. No titles needed

626-5623 625-0598

The phone number reflected in the advertisement, 626-5623, is Gloria Noriega's phone number. Gloria Noriega is Charles Noriega's mother. Exhibits 138 - 140, dated June 25, 2008, September 3, 2008, and December 17, 2008, include the identical advertisement. Exhibit 141, dated July 1, 2009, contains the identical advertisement, but lists only 626-5623 as the telephone number. Exhibit 142, dated August 5, 2009 contains an advertisement for "FREE JUNK CAR REMOVAL" that is identical to Exhibit 140. Exhibit 143, dated September 30, 2009, contains the same advertisement, but lists different telephone numbers, including 623-1451. The telephone number, 623-1451, is Defendant Patty Grady Noriega's telephone number.

Advertisements for "FREE JUNK CAR REMOVAL" placed in the Shopper for from October 2009 through July 2011 reflect this same telephone number.⁵ Some of the advertisements from 2010 and 2011 also solicit "any scrap metal" (See, e.g., Exhibit 146 - 150), state that "we hauloff the property site" (See, e.g., Exhibit 152 - 153), and solicit "Old farm equipment, 18 wheelers (See, e.g., Exhibit 156 - 157).

Advertisements placed in the American Classifieds from 2010 and 2011 advertise for "Free Car and Truck Removal" (See, e.g., Exhibit 171), solicit "junk cars, trucks, farm equipment, diesel trucks" (See, e.g., Exhibit 173, 175) using Patty Grady Noriega's telephone number.

Little documentary evidence was presented that would establish that Bumper to Bumper is (or was) Charle Noriega's business after 2004. There are many exhibits that show that auto parts were sold to Bumper to Bumper in 2006, 2008, 2009, but none of these receipts identify Charles Noriega as the owner/operator of Bumper to Bumper. See, e.g, Exhbits 228, 229, 230, 231 and Exhibit 562. Exhibit 251 - 252 reflects Charles Noriega (dba Bumper to Bumper), but is dated in 2004. Similarly, a Form W-9 lists Charlie Noriega with a business name, Bumper to Bumper, but is undated. See Exhibit 286. Receipts from Names and Numbers from 2008 and 2009 are directed to Bumper to Bumper Auto Center, Attn: Charles Noriega. See Exhibit559. However, a letter dated September 19, 2011 from Names and Numbers to Charles Noriega indicates that Names and Numbers "inadvertently r[a]n a listing for your old business in the last three editions of Names and Number phonebook." See Exhibit J.

Handwritten lists of vehicles and vehicle identification numbers were also admitted into evidence. See Exhibit 262 - 280, 283 and 284. None of the lists include dates, have any indication of who prepared them, or for what purpose.

Photographs and property profiles for the following properties were also entered into evidence: 405 Huskey Road (See, Exhibits 300, 301, 320 - 325); 407 Huskey Road (See, ...