Renella v. Decastro (In re Decastro)

In Re: Gregory M. DeCastro, Debtor.

Donna Renella, Plaintiff v. Gregory DeCastro, Defendant.

Case No.: 14-15597-ABA

Adv. No.: 14-01581-ABA

UNITED STATES BANKRUPTCY COURT DISTRICT OF NEW JERSEY

November 25, 2015

NOT FOR PUBLICATION

Chapter: 7

Judge: Andrew B. Altenburg, Jr.

MEMORANDUM DECISION

This matter is before the court by way of an adversary proceeding seeking a determination of nondischargeability of the Plaintiff's claim against the Defendant pursuant to section 523(a)(2)(A) and 523(a)(6) of the Bankruptcy Code. A discharge under section 727 of the Bankruptcy Code does not discharge an individual debtor from any debt for money obtained by false pretenses, a false representation, or actual fraud. 11 U.S.C. § 523(a)(2)(A). A discharge under section 727 of the Bankruptcy Code does not discharge an individual debtor from any debt for willful and malicious injury by the debtor to another entity or the property of another entity. 11 U.S.C. § 523(a)(6). The court concludes that the Plaintiff has not met her burden with regard to her claims and therefore the claims are dischargeable.

JURISDICTION AND VENUE

This matter before the court is a core proceeding pursuant to 28 U.S.C. § 157(b)(2)(I), and the court has jurisdiction pursuant to 28 U.S.C. § 1334, 28 U.S.C. § 157(a) and the Standing Order of Reference issued by the United States District Court for the District of New Jersey on July 23, 1984, as amended on September 18, 2012, referring all bankruptcy cases to the bankruptcy court. The following constitutes this court's findings of fact and conclusions of law as required by Federal Rule of Bankruptcy Procedure 7052.

PROCEDURAL HISTORY

The Complaint in this Adversary Proceeding (Doc. No. 1) was filed with the court on June 24, 2014 by Donna Renella (hereinafter "Ms. Renella" or "Plaintiff"), as Plaintiff, against Debtor Gregory DeCastro (hereinafter "Mr. DeCastro" or "Defendant"), as Defendant. Ms. Renella seeks a determination of nondischargeability of her claim against Mr. DeCastro pursuant to 11 U.S.C § 523(a)(2)(A). Alternatively, she seeks nondischargeability pursuant to 11 U.S.C. § 523(a)(6), arguing that Debtor's actions constituted conversion.¹ Mr. DeCastro timely filed his Answer to the Complaint on July 25, 2014 (Doc. No. 3). The trial was ultimately scheduled for June 3, 2015.

On June 3, 2015, Ms. Renella and her counsel appeared. Mr. DeCastro did not. The court allowed Ms. Renella to put her case on. During the trial, the court raised concerns about Ms. Renella's claim for conversion under section 523(a)(6) in her Complaint. The court advised counsel that it was not satisfied that there was a conversion. Counsel was given the opportunity to further convince the court that there was a conversion. See Doc. No. 15, transcript p. 74, l. 12 - p. 75, l. 23.

After the trial it came to the court's attention that Mr. DeCastro had accidently put the wrong trial date in his calendar thereby causing him to miss the trial. In addition, because the court had questions about some facts at trial, Ms. Renella submitted further evidence for the court to consider. In light of the apparent confusion as to the trial date, the questions raised and Mr. DeCastro's prior active participation in this case, the court, pursuant to Federal Rules of Civil Procedure Rule 59(a)(2) (made applicable to this proceeding through Fed. R. Bankr. P. 9023), section 105(a) of the Bankruptcy Code, and the Third Circuit's mandate in Hritz v. Woma Corp., 732 F.2d 1178, 1181 (3d Cir. 1984) ("our preference that cases be disposed of on the merits whenever practicable."), reopened the record to give Mr. DeCastro the opportunity to appear, present his case, and cross-examine the plaintiff's witnesses. The reopened trial took place on August 27, 2015.

Following the trial, the court took this matter under advisement and ordered post-trial submissions. The last post-trial submission, Defendant's "Exhibit X" regarding a $5,000 Loan, was filed on September 30, 2015. (Doc. No. 19). This matter is now ripe for disposition.

FINDINGS OF FACT²

The court was impressed by Ms. Renella. She is a strong and sophisticated business person. Ms. Renella earned her master's degree in quantitative economic analysis and owns a public relations and human resources consulting business.

During the relevant portions of 2004 through 2006, Mr. DeCastro was involved in a romantic relationship with Christine ("Chrissy") Renella (hereinafter "Chrissy"). Ms. Renella is Chrissy's loving aunt. Mr. DeCastro admits that Chrissy and Ms. Renella enjoy a very close relationship.

The $10,000 Loan

In December of 2004, Mr. DeCastro called Ms. Renella and requested that she accompany him to purchase an engagement ring for Chrissy at Chrissy's godfather's jewelry store on Long Island. This news did not come as a surprise to Ms. Renella, as Ms. Renella and Chrissy had previously discussed the anticipated engagement and looked at engagement rings at Tiffany's. Additionally, Mr. DeCastro had already asked Chrissy's father (Ms. Renella's brother), Damien Renella, for his daughter's hand in marriage. Mr. DeCastro and Chrissy also looked at engagement rings together.

Ms. Renella agreed to accompany Mr. DeCastro to the jeweler on Long Island, but Mr. DeCastro then explained that he did not have the money for the ring. Mr. DeCastro asked to borrow $10,000 from Ms. Renella to purchase the engagement ring in anticipation of the Christmas holiday. Ms. Renella agreed because she wanted her niece to be happy with the ring for Christmas and thought she was going to go with him to purchase the ring. However, before the arranged trip to Long Island to see the jeweler, Mr. DeCastro relayed to Ms. Renella that he decided to get the ring from another jeweler. Ms. Renella was "really hesitant," but lent him the money anyway.

In early December 2004, Mr. DeCastro went to the bank with Ms. Renella and she gave him $10,000 in cash (the "$10,000 Loan"). Mr. DeCastro told her at that time that the purpose of the loan was to purchase the ring for Chrissy. Ultimately, Mr. DeCastro did not purchase a ring for Chrissy. Instead, Mr. DeCastro claims that he used a portion of the $10,000 Loan to pay rent and expenses, and once he was short on the ring purchase amount, he turned to gambling at the OTB race track in Philadelphia in an attempt to replace the funds. Mr. DeCastro admits that at all times relevant hereto, he had a gambling addiction. See Doc. No. 1, ¶ 10 and Doc. No. 3, ¶ 3 and Doc. 18, p. 2). No evidence of a gambling addiction or gambling track record was otherwise introduced. Mr. DeCastro stated that his intent always was to purchase an engagement ring, but by December 22^nd, the proceeds from the $10,000 Loan were gone.

Post $10,000 Loan Events

After Christmas, Mr. DeCastro and Chrissy's relationship became strained when Chrissy discovered that Mr. DeCastro had deposited checks into her account and then withdrew the money, essentially over drafting Chrissy's account.³ As a result of the overdrafts, Chrissy filed a criminal complaint or complaints against Mr. DeCastro. Ultimately, Mr. DeCastro was enrolled into the Pretrial Intervention Program, also known as "PTI." As the court understands it, Mr. DeCastro and Chrissy then separated.

But in April of 2005, Chrissy and Mr. DeCastro got back together. When Ms. Renella learned of this, she told Chrissy that she was "making a major mistake" and told Mr. DeCastro that she was "against it" and "wouldn't support it." However, Ms. Renella also testified that ultimately she feared that if she did not support the relationship, she was going to lose her niece.

The $1,900 Loan

On February 24, 2006, Mr. DeCastro requested to borrow $1,900 to "clear up his problem." (Plaintiff's Ex. A) and Ms. Renella complied. Mr. DeCastro testified, without challenge, that the $1,900 Loan was for fees associated with PTI and that he paid those fees. He testified that because of this payment, DeCastro was permitted to move to Florida. However, in March of 2007, Mr. DeCastro was involved in criminal activity again, which caused Mr. DeCastro to not successfully complete the PTI program.

Thereafter, on April 30, 2006, Mr. DeCastro sent an email to "Aunt Joanie and Uncle Michael" (Ms. Renella's sister) requesting a $15,000.00 loan to "get the ring, move to Florida with Chrissy in August as we planned, and be in a somewhat solid financial position." (Plaintiff's Ex. C). Mr. DeCastro claims that Joanie and Michael declined to loan him the money.

The $5,000 Loan

On May 23, 2006, Mr. DeCastro sent an email to Ms. Renella asking to borrow $7,500.00. (Plaintiff's Ex. B). Plaintiff's Exhibit B is actually a chain of emails starting on May 26, 2006 and ending on May 29, 2006. While Mr. DeCastro testified that he did not recall the purpose behind the request for the loan, a review of the entire email chain reveals that he had stated that the purpose of the loan was due to a "build up of bills" and "[l]astly, a good majority of the amount was indeed for Damien and Chrissy. The 5k to which I mentioned is for them."

Ms. Renella claims that she loaned Mr. DeCastro $5,000 in cash in response to his May of 2006 email request. Ms. Renella testified that she lent $5,000 to Mr. DeCastro because she was fearful that Mr. DeCastro's financial situation would put her niece in danger. In Mr. DeCastro's May 29, 2006 email to Ms. Renella, he assured her that "I am, however, in no trouble nor in danger of any prosecution of any kind," and "My debt is legitimate and I am certainly in no danger of being hurt." Plaintiff's Ex. B. More importantly, Mr. DeCastro claims that he did not receive the $5000 Loan from Ms. Renella. In response, Ms. Renella walked the court through her check book ledger detailing how the proceeds for $5,000 Loan were gathered to pay Mr. DeCastro in cash.

The Florida County Court Action

After having a private detective locate him, Ms. Renella sued Mr. DeCastro in the County Court for Broward County,...