In Re: Peter Simon Luna And Kristel Rose Luna

In re: PETER SIMON LUNA and KRISTEL ROSE LUNA, Debtors.DARYL MARCOTT, Plaintiff,

v.PETER SIMON LUNA and KRISTEL ROSE LUNA, Defendants.

No. 7-08-11422 SA

Adv. No. 08-1084 S

UNITED STATES BANKRUPTCY COURT DISTRICT OF NEW MEXICO

Date Entered on Docket: January 18, 2011

MEMORANDUM OPINION ON

CROSS MOTIONS FOR SUMMARY JUDGMENT

This matter is before the Court on cross motions for summary judgment. Plaintiff appears through his attorney Wallin and Briones Law Firm LLC (Brandon Huss and Thomas R. Briones). Defendants appear through their attorney Michael K. Daniels. This is a core proceeding to determine dischargeability of a debt. 28 U.S.C. § 157(b)(2)(I). For the reasons set forth below, Plaintiff's complaint will be dismissed with prejudice¹.

Plaintiff filed a First Amended Complaint to determine dischargeability under 11 U.S.C. § 523(a)(2) on October 27, 2008. Doc 10. Defendants answered on November 3, 2008. Doc 12. After several pretrial conferences, discovery was set to close in December, 2009. On December 15, 2009, Plaintiff filed a Motion for Summary Judgment with accompanying Memorandum Brief andexhibits². Docs 45, 45-1. Defendants filed a Response to Plaintiff's Motion for Summary Judgment and a Cross Motion for Summary Judgment on December 18, 200 9. Doc 46. In their Response, Defendants asked for an award of costs and fees under Section 523(d)³. On December 18, 2009, Defendants also filed a Motion for Summary Judgment⁴ with exhibits⁵. Doc 47. Again, Defendants asked for an award of costs and fees under Section 523(d). Plaintiff filed a Reply and then an Amended Reply in Support of his Motion for Summary Judgment on February 17, 2010. Doc 55. Plaintiff also filed a Response and then an Amended Response to Defendants' Motion for Summary Judgment on February 17, 2010. Doc 56. Defendants elected to not file a reply to Plaintiff's response.

Summary Judgment

Summary judgment is proper when there is no genuine issue as to any material fact and the moving party is entitled to a judgment as a matter of law. Bankruptcy Rule 7056(c)⁶. Indetermining the facts for summary judgment purposes, the Court may rely on affidavits made with personal knowledge that set forth specific facts otherwise admissible in evidence and sworn or certified copies of papers attached to the affidavits. Fed.R.Civ.P. 56(e). When a motion for summary judgment is made and supported by affidavits or other evidence, an adverse party may not rest upon mere allegations or denials. Id. Rather, "Rule 56(e)... requires the nonmoving party to go beyond thepleadings and by her own affidavits, or by the 'depositions, answers to interrogatories, and admissions on file, ' designate 'specific facts showing that there is a genuine issue for trial.'" Celotex Corp. v. Catrett, 477 U.S. 317, 324 (1986). "Rule 56(e) permits a proper summary judgment motion to be opposed by any of the kinds of evidentiary materials listed in Rule 56(c), except the mere pleadings themselves." Id. The court does not try the case on competing affidavits or depositions; the court's function is only to determine if there is a genuine issue for trial. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249 (1986).

In ruling on a motion for summary judgment, the trial court views the evidence and draws reasonable inferences therefrom in the light most favorable to the nonmoving party. Mountain Highlands, LLC v. Hendricks, 616 F.3d 1167, 1169-70 (10th Cir. 2010)(citing Garrison v. Gambro, Inc., 428 F.3d 933, 935 (10th Cir. 2005)). On those issues for which it bears the burden of proof at trial, the nonmovant "must go beyond the pleadings and designate specific facts so as to make a showing sufficient to establish the existence of an element essential to [its] case in order to survive summary judgment." Id. at 1170 (quoting Cardoso v. Calbone, 490 F.3d 1194, 1197 (10th Cir. 2007)) (internal quotation marks omitted). "[F]ailure of proof of an essential element renders all other facts immaterial." Id. (quoting Koch v. Koch Indus., Inc., 203 F.3d 1202, 1212 (10th Cir.), cert.denied, 531 U.S. 926 (2000)).

New Mexico LBR 7056-1⁷ governs summary judgment motions. It provides, in part:

The memorandum in support of the motion shall set out as its opening a concise statement of all of the material facts as to which movant contends no genuine issue exists. The facts shall be numbered and shall refer with particularity to those portions of the record upon which movant relies.

A memorandum in opposition to the motion shall contain a concise statement of the material facts as to which the party contends a genuine issue does exist. Each fact in dispute shall be numbered, shall refer with particularity to those portions of the record upon which the opposing party relies, and shall state the number of the movant's fact that is disputed. All material facts set forth in the statement of the movant shall be deemed admitted unless specifically controverted.

NONDISCHARGEABILITY

This adversary seeks to declare a debt nondischargeable under Section 523(a)(2)(A), which provides:

A discharge under section 727... of this title does not discharge an individual debtor from any debt--

....

(2) for money, property, services, or an extension, renewal, or refinancing of credit, to the extent obtained by--(A) false pretenses, a false representation, or actual fraud, other than a statement respecting the debtor's or an insider's financial condition[.]

Section 523(a)(2)(A) makes certain common-law torts nondischargeable in bankruptcy. Field v. Mans, 516 U.S. 59, 69 (1995). "The operative terms in § 523(a)(2)(A),... 'false pretenses, a false representation, or actual fraud, ' carry the acquired meaning of terms of art. They are common-law terms, and,... in the case of 'actual fraud, '... they imply elements that the common law has defined them to include." Id.

Therefore, the bankruptcy court should look to the common law of torts for the elements of fraud. The Field court stated that the most widely accepted distillation of the common law of torts was the Restatement (Second) or Torts (1976). ("Restatement"). Id.at 70.

The Restatement § 525 provides:

§ 525. Liability For Fraudulent Misrepresentation. One who fraudulently makes a misrepresentation of fact, opinion, intention or law for the purpose of inducing another to act or to refrain from action in reliance upon it, is subject to liability to the other in deceit for pecuniary loss caused to him by his justifiable reliance upon the misrepresentation.

The Court of Appeals for the Tenth Circuit recently stated what a plaintiff must prove to succeed under Section 523(a)(2)(A) in the Restatement § 525 context:

In order to establish a non-dischargeable claim under this subsection, a creditor must prove the following elements by a preponderance of the evidence: "The debtor made a false representation; the debtormade the representation with the intent to deceive the creditor; the creditor relied on the representation; the creditor's reliance was reasonable; and the debtor's representation caused the creditor to sustain a loss." Fowler Bros. v. Young (In re Young), 91 F.3d 1367, 1373 (10th Cir. 1996).⁸

Johnson v. Riebesell (In re Riebesell), 586 F.3d 782, 789 (10th Cir. 2009). In other words, the creditor must prove:

• a false representation,

• made with the intent to deceive,

• on which the creditor actually and justifiable relied, and

• the representation caused the creditor to sustain a loss.

STATEMENT OF FACTS

The Court has reviewed the answer to the complaint and the parties' responses to the various statements of undisputed facts. Before launching into a listing of the facts, the Court reminds the parties of Fed.R.Civ.P. 56(e)(2):

(2) Opposing Party's Obligation to Respond. When a motion for summary judgment is properly made and supported, an opposing party may not rely merely on allegations or denials in its own pleading; rather, its response must--by affidavits or as otherwise provided in this rule--set out specific facts showing a genuine issue for trial. If the opposing party does not so respond, summary judgment should, if appropriate, be entered against that party.

Fed.R.Civ.P. 56(e)(2) (2009)(amended 12/1/2010). See also NM LBR 7056-1 (Facts disputed by nonmovant must cite to record todemonstrate dispute. Movant's facts are deemed admitted unless specifically controverted.) In determining the undisputed facts in these motions, the Court enforced these rules strictly.

FACTS DERIVED FROM ANSWERS TO FIRST AMENDED COMPLAINT

Defendants admitted (doc 12) these allegations in Plaintiff's First Amended Complaint (doc 10):

1⁹. This Court has jurisdiction over the subject matter of this Complaint as a core proceeding pursuant to the provisions of 28 U.S.C. §§1334 and 157(b)(2)(I) and 11 U.S.C. §523 because this is a proceeding to determine the dischargeability of a particular debt. 2. Peter Simon Luna and Kristel Rose Luna (the "Defendants") filed a Voluntary Petition for Relief under Chapter 7 of Title 11 of the United State Code (the "Code") in this Court on May 6, 2008.

4. The last day for filing dischargeability complaints has been set at August 5, 2008. This Complaint has been timely filed.

5. Plaintiff, Daryl Marcott, of 7405 Fairmont Ave El Cerrito, CA 94530, is a creditor of the above-named debtor and is the holder of an unsecured claim in the amount of $18,750.

6. Defendant, Peter Simon Luna, of 1004 Tierra Viva Ct NW Albuquerque, NM 87107, is the debtor in the above-captioned proceedings.

7. Defendant, Kristel Rose Luna, of 1004 Tierra Viva Ct NW Albuquerque, NM 87107, is the debtor in the above-captioned proceedings.

8. On December 22, 2006, Plaintiff entered into a transaction with defendant Peter Luna whereby Plaintiff loaned defendant $12,300 in return for which, defendant gave Plaintiff a promissory note for the sum of $15,000 and $3,750 in interest for the first ninety days.

12. On July 09, 2007, defendant executed a Real Estate Mortgage Note in the sum of $16,300 in

...