Rodriguez v. Siverio (In re Siverio)

253 F.Supp.3d 418

IN RE Sheida Rivera SIVERIO, Debtor.

Miguelina Delgado Rodriguez, Appellant/Plaintiff,

v.Sheida Rivera Siverio, Appellee/Defendant.

C.A. No. 15-2065 S Bankruptcy Petition No. 13-6438-BKT Adversary Case No. 13-218-BKT.

United States District Court, D. Puerto Rico.

Signed May 30, 2017

Alberto J. Torrado–Delgado, Torrado Law Firm, Hatillo, PR, for Appellant/Plaintiff.

Armando Lamourt, Mayaguez, PR, for Appellee/Defendant.

OPINION AND ORDER

WILLIAM E. SMITH, Chief Judge.¹

Before the Court is Plaintiff's appeal from the Bankruptcy Court's Judgment that granted in part, and denied in part, her motion for summary judgment in her adversary proceeding against Defendant–Debtor. The Judgment decreed that the debt owed to Plaintiff by Defendant–Debtor was nondischargeable as a matter of law pursuant to 11 U.S.C. § 523(a)(6), but that the debt was not nondischargeable pursuant to 11 U.S.C. § 523(a)(2)(A). (J. 1, ECF No. 1–3.² ) The Judgment also denied Defendant–Debtor's motion for summary judgment in its entirety. (Id. ) For the reasons that follow, the Court AFFIRMS IN PART and REVERSES IN PART the Bankruptcy Court's Judgment.

I. Background

The factual underpinnings of the debt owed to Plaintiff are as follows.³ In 1997, Monserrate Rivera Roman loaned $30,000 to her grandson, Eduardo Rivera Pares. Rivera Roman wanted some form of security for the repayment of the loan and Rivera Pares' wife, Plaintiff Miguelina Delgado Rodriguez, consented to transfer the title of real property she owned to her grandmother-in-law. (Pl.'s Statement of Uncontested Material Facts ("Pl.'s SUMF") ¶¶ 12–17, Appellant R. on Appeal 101, ECF No. 3–2.) Plaintiff executed some form of a "deed of sale," purporting to sell the property to her grandmother-in-law. (Pl.'s SUMF ¶¶ 15–18.) The deed listed the sale price of the property as $12,000, but the grandmother did not deliver this money (the $30,000 loan had been delivered 10 days earlier) and both parties understood that the grandmother was not going to deliver the $12,000. (Pl.'s SUMF ¶ 22.) The agreement between Plaintiff and her grandmother-in-law was that, once the $30,000 had been paid back, the latter would execute a "deed of sale" to return title of the property to Plaintiff. (Pl.'s SUMF ¶ 23.)

Over the next few years, Plaintiff's husband repaid only $15,000 of the loan to his grandmother. In 2000, the grandmother purported to sell the real property to another granddaughter, Defendant–Debtor Sheida Rivera Siverio, for $15,000. (Pl.'s SUMF ¶¶ 30, 32.) The value of the property was actually $60,000. (Pl.'s SUMF ¶ 42.) Defendant–Debtor registered the title with the local land records office. (Pl.'s SUMF ¶ 41.) In 2001, Plaintiff initiated a civil action in state court against Defendant–Debtor, Defendant–Debtor's husband, and her grandmother-in-law seeking a declaratory judgment that the "deed of sale" signed by Plaintiff was simulated, and therefore null and void. (Pl.'s SUMF ¶ 43; Certified English Translation of PRSC Opinion ("PRSC Opinion") 3, ECF No. 40–1.) In 2002, Defendant–Debtor secured a mortgage and executed a promissory note in the amount of $50,000, registering the mortgage at the local land records office. (Pl.'s SUMF ¶¶ 44–45, 49.) Also in 2002, Defendant–Debtor and her husband sold the title to the property to a third party for $60,000. (Pl.'s SUMF ¶ 51.) In 2005, the Court of First Instance entered judgment in Plaintiff's favor and awarded her $45,000 plus interest and costs. (Pl.'s SUMF ¶¶ 6–7; PRSC Opinion 4.)

The Puerto Rico Court of Appeals reversed the judgment of the trial court. (PRSC Opinion 5.) The Supreme Court of Puerto Rico subsequently reversed the Court of Appeals and reinstated the trial court's judgment, holding that Plaintiff and her grandmother-in-law had a simulated contract. (PRSC Opinion 16, 22.) The executed "deed of sale" was deemed to be a personal security agreement rather than a sales agreement, with the property serving as collateral. (PRSC Opinion 16–17.) The grandmother-in-law therefore became a creditor to Plaintiff, and not the owner of the real property in question. (PRSC Opinion 18.) Even though the grandmother-in-law was not repaid the full sum of money she had loaned to her grandson, she did not have the legal authority to transfer title of the property to Defendant–Debtor and her husband. (Id. )

The Supreme Court also held that Defendant–Debtor and her husband were not bona fide purchasers of the real property because they were aware of the nature of the agreement between Plaintiff and their grandmother and that Plaintiff remained the true owner of the property. (PRSC Opinion 21.) The Supreme Court deemed the executed "deed of sale"—as well as Defendant–Debtor's title—null and void. (Id. )

II. Bankruptcy Proceedings

The Supreme Court's opinion reinstating the trial court judgment means that Defendant–Debtor, her husband, and her grandmother were jointly liable to Plaintiff for $45,000 plus interest from May 25, 2005 until the judgment is paid.⁴ (Pl.'s SUMF ¶¶ 7, 9.) In August 2013, Defendant–Debtor filed for chapter 7 bankruptcy. (Bankr. Pet. 13–6438–BKT, ECF No. 1.) In March 2014, Defendant–Debtor requested conversion to chapter 13 bankruptcy; her motion was granted on May 19, 2014. (Bankr. Pet. 13–6438–BKT, ECF Nos. 16, 30.)

Plaintiff initiated this adversary proceeding against Defendant–Debtor, requesting a determination from the Bankruptcy Court that Defendant–Debtor's debt to her (the Commonwealth's judgment) is nondischargeable pursuant to 11 U.S.C. § 523(a)(2)(A) (as a debt for property or money obtained by false pretenses, false representation, or actual fraud) and § 523(a)(6) (as a debt for willful and malicious injury by the debtor to another entity or to the property of another entity). (Second Am. Compl., Appellant R. on Appeal 31, ECF No. 3–2.) The parties both moved for summary judgment. The Bankruptcy Court denied Defendant–Debtor's motion for summary judgment, granted Plaintiff's motion for summary judgment regarding the nondischargeability of the debt pursuant to § 523(a)(6), and denied Plaintiff's motion for summary judgment regarding the nondischargeability of the debt pursuant to § 523(a)(2)(A). The Bankruptcy Court also concluded that "the parties are collaterally estopped from litigating again the cause of action or the material facts, already ruled upon in state court." (Op. and Order 5, ECF No. 1–2.)

Even though the Bankruptcy Court granted judgment as a matter of law to Plaintiff with respect to her claim that Defendant–Debtor's debt is nondischargeable pursuant to 11 U.S.C. § 523(a)(6) for willful and malicious injury, this particular exception to discharge does not prevent the discharge of a debt in a chapter 13 bankruptcy proceeding. See 11 U.S.C. § 1328(a). Plaintiff therefore appeals from the Bankruptcy Court's order denying summary judgment on her claim that the debt is nondischargeable pursuant to 11 U.S.C. § 523(a)(2)(A).⁵ Plaintiff elected to appeal to this Court from the Bankruptcy Court's judgment.⁶ (Notice of Appeal, ECF No. 1–1.)

III. Standard of Review

Pursuant to Rule 7056 of the Federal Rules of Bankruptcy Procedure, Rule 56 of the Federal Rules of Civil Procedure is applicable in an adversary proceeding within a bankruptcy case. In re Plaza Resort at Palmas, Inc., 741 F.3d 269, 274 (1st Cir. 2014) (citing Estate of Hevia v. Portrio Corp., 602 F.3d 34, 40 (1st Cir. 2010) ). This Court's task is to determine whether Plaintiff was entitled to judgment as a matter of law on her claim that the debt owed to her from Defendant–Debtor is nondischargeable pursuant to 11 U.S.C. § 523(a)(2)(A). This Court's review is de novo, viewing the arguments in the light most favorable to the Defendant–Debtor as the nonmoving party, and drawing all reasonable inferences in Defendant–Debtor's favor. See id. (citing Estate of Hevia, 602 F.3d at 40 ).

IV. Discussion

Section 523(a)(2)(A) states, in relevant part, that a bankruptcy discharge pursuant to § 1328(a)"does not discharge an individual debtor from any debt ... (2) for money ... 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." "[E]xceptions to discharge are narrowly construed in favor of the debtor in an effort to further the ‘fresh start’ policy underlying the Bankruptcy Code, [so] the creditor asserting an exception to discharge must show that its claim comes ‘squarely’ within an exception enumerated in § 523(a)." In re Zutrau, 563 B.R. 431, 444 (1st Cir. BAP 2017) (quoting Sharfarz v. Goguen (In re Goguen), 691 F.3d 62, 68 (1st Cir. 2012) (additional citations omitted)). When, as here, "there has been a prior state court judgment, the bankruptcy court's ultimate dischargeability determination will be governed by any factual issues that were actually and necessarily decided by the state court." In re Porcaro, 545 B.R. 384, 395 (1st Cir. BAP 2016) (quoting B.B. v. Bradley (In re Bradley), 466 B.R. 582, 586 (1st Cir. BAP 2012) ).

A. False Representation and False Pretenses

Plaintiff argues that she is entitled to a determination that the debt owed to her by Defendant–Debtor is nondischargeable pursuant to § 523(a)(2)(A) because Defendant–Debtor made several false statements on the documents involved in the purported transfers of the property and did so knowing that Plaintiff was the true owner of the property, not her grandmother. Defendant–Debtor responds that Plaintiff cannot meet the nondischargeability elements of § 523(a)(2)(A) because Plaintiff has no evidence that Defendant–Debtor either induced Plaintiff to rely on a false promise or that she justifiably relied on a false statement made by Defendant–Debtor. (Appellee's Opening Br. 3–4, ECF No. 16.) Defendant–Debtor asserts that she could not have intended to deceive Plaintiff because Plaintiff had an agreement with the grandmother, and Defendant–Debtor was not a party to the ...