Sunset Corner Props., LC v. Mayoros (In re Mayoros)

569 B.R. 352

IN RE: James MAYOROS, Debtor.

Sunset Corner Properties, LC ; and United States Trustee, Plaintiffs

v.James Mayoros, Defendant.

Bankruptcy No. 15–20259

Adversary Case No. 15–02184

United States Bankruptcy Court, D. Utah.

Signed June 30, 2017

Timothy O. Hemming, Elijah L. Milne, Bryan J. Pattison, Durham Jones & Pinegar, P.C., St. George, UT, Peter J. Kuhn, US Trustees Office, Salt Lake City, UT, for Plaintiff.

Nicholas I Chamberlain, Chamberlain Law, for Defendant.

MEMORANDUM DECISION

WILLIAM T. THURMAN, U.S. Bankruptcy Judge

Before the Court is the Motion for Judgment on the Pleadings (the "Motion") filed May 31, 2017, by Plaintiffs, Sunset Corner Properties, LC ("Sunset Corner") and the United States Trustee, (the "USTR" and together with Sunset Corner, the "Plaintiffs"), in the above-styled adversary proceeding.¹ This Motion arises in connection with the complaints of Plaintiffs objecting to the discharge of Debtor, James Mayoros ("Mayoros" or "Debtor") under 11 U.S.C. § 727.²

This is a core proceeding under 28 U.S.C. § 157(b)(2)(J), over which the Court has jurisdiction pursuant to 28 U.S.C. §§ 157(a), 1334. Notice of the hearing on the Motion is found to be appropriate in all respects.

On June 29, 2017, the Court held a hearing on the Motion (the "Hearing"). At the Hearing, Timothy O. Hemming appeared on behalf of Sunset Corner, Peter Kuhn appeared on behalf of the USTR, Nicholas Chamberlain appeared on behalf of Mayoros, and any other appearances were noted on the record. After the Hearing, the Court took the matter under advisement.

Having reviewed and considered the Motion, the notice of hearing filed in connection with the Motion,³ the objection to the Motion filed by Mayoros (the "Objection"),⁴ Plaintiffs' reply to the Objection,⁵ evidence in support of the aforesaid documents, and other relevant matters of record in this case including oral argument at the Hearing, the Court is prepared to rule.⁶

A. DISCUSSION

1) Standard of Review

The Motion is brought under Fed.R.Civ.P. 12(c), which is applicable to this adversary proceeding under Fed.R.Bankr.P. 7012. Rule 12(c) provides: "After the pleadings are closed- but early enough not to delay trial- a party may move for judgment on the pleadings."⁷

In support of the Motion, Plaintiffs primarily rely on the uncontroverted facts in the Court's pretrial order at docket no. 32 (the "Pretrial Order"). The Court is aware of the procedural quandary presented by the Motion and its sole reliance on the facts in the Pretrial Order. Plaintiffs argue that a Rule 12(c) motion may be based on the "pleadings" and "supplemented by any facts of which the Court should take proper judicial notice."⁸ The Court is persuaded by Plaintiffs' argument. However, Rule 12(d), made applicable to this adversary proceeding by Fed.R.Bankr.P. 7012(b), states "[i]f, on a motion under Rule 12(b)(6) or 12(c), matters outside the pleadings are presented to and not excluded by the court, the motion must be treated as one for summary judgment under Rule 56."⁹ Because the parties rely on the Pretrial Order, which is not included in the type of "pleading" set forth in Rule 7,¹⁰ made applicable to this adversary proceeding by Fed.R.Bankr.P. 7007, the Motion will be treated as one for summary judgment under Rule 56.¹¹

In Becker v. Bateman , the United States Court of Appeals of the Tenth Circuit stated:

Summary judgment is appropriate when "the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(a). "An issue is ‘genuine’ if there is sufficient evidence on each side so that a rational trier of fact could resolve the issue either way." Adler v. Wal–Mart Stores, Inc., 144 F.3d 664, 670 (10th Cir. 1998). "An issue of fact is ‘material’ if under the substantive law it is essential to the proper disposition of the claim." Id. Put differently, "[t]he question ... is whether the evidence presents a sufficient disagreement to require submission to a jury or whether it is so one-sided that one party must prevail as a matter of law." Shero v. City of Grove, 510 F.3d 1196, 1200 (10th Cir. 2007) (quotation omitted). "On summary judgment the inferences to be drawn from the underlying facts must be viewed in the light most favorable to the party opposing the motion." Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986) (quotation omitted).¹²

With these guiding principles in mind, the Court turns to the Motion.

2) The Pretrial Order Sets out Uncontroverted Facts and all Other Material Facts Concerning Which There is No Genuine Issue

Relying on the Pretrial Order, Plaintiffs assert that there are no controverted material facts in this case. Mayoros agrees that there are no controverted materials facts in the Pretrial Order but also asserts contradictory factual arguments in his Objection to the Motion.¹³

Pursuant to Rule 16(d), well-established case law, and the Local Rules of this Court, the Pretrial Order and contents therein, although not a "pleading" under Rule 7, supersede prior pleadings and control the course of this case, unless modified by the Court.¹⁴ Mayoros has not sought to modify the Pretrial Order.¹⁵

The only issues of law the parties have presented in the Pretrial Order are whether the facts and evidence are sufficient to prove the allegations in Count I and II. The Court will address each count in turn to determine if Plaintiffs are entitled to summary judgment on Counts I and II.

3) Count I–11 U.S.C. § 727(a)(2)(A) and (B)¹⁶

Section 727(a)(2) provides:

(a) The court shall grant the debtor a discharge, unless

...

(2) the debtor, with intent to hinder, delay, or defraud a creditor or an officer of the estate charged with custody of property under this title, has transferred, removed, destroyed, mutilated, or concealed, or has permitted to be transferred, removed, destroyed, mutilated, or concealed—

(A) property of the debtor, within one year before the date of the filing of the petition; or

(B) property of the estate, after the date of the filing of the petition [.]¹⁷

To obtain a denial of discharge under § 727(a)(2)(A), the objecting party must prove the following elements: (1) the debtor transferred, removed, destroyed, mutilated or concealed property; (2) belonging to the debtor; (3) within one year of filing the petition; and (4) with the intent to hinder, delay or defraud a creditor of the estate.¹⁸ The elements of § 727(a)(2)(B) are largely the same except that the objecting party must prove that the debtor transferred or concealed property of the estate after the bankruptcy petition was filed.¹⁹ "As the statutory language makes clear, denial of discharge need not rest on a finding of intent to defraud. Intent to hinder or delay is sufficient."²⁰ An intent to improperly make it more difficult for creditors to reasonably collect on their debts is sufficient for a finding of "intent to hinder or delay."²¹

a. Findings of Facts

As established by the uncontroverted facts in the Pretrial Order, there is no genuine dispute as to the following material facts:

Well Fargo Bank Transfers

1. On April 12, 2012, the Fifth Judicial District Court in and for Washington County, State of Utah, entered a judgment against Mayoros in favor of Sunset Corner. The judgment was recorded in the Washington County Utah Recorder's office on May 11, 2012, as Doc ID 20120015772.²²

2. Allison Mayoros, had a separate bank account at Wells Fargo Bank, on which Mayoros was not a signer, which was set up when the state court litigation commenced with Sunset Corner to protect the funds from garnishment.²³

3. Any money Mayoros and his wife had would go into that account.²⁴

4. The Wells Fargo Bank Account remained open following the filing of the petition initiating the bankruptcy case. Regular cash deposits ranging from $3,000.00—$10,000.00 per month were deposited into that account within the one year period before the petition date, which was January 14, 2015.²⁵

Transfer of Funds to Black Beard

5. On Mayoros' statements and schedules he listed an interest in Pirate Island Pizza of St. George Inc. from December 20, 2006—February 22, 2010, and an interest in Pirate Island Trading Company from November 24, 2010—February 27, 2012.²⁶

6. The appointed Chapter 7 Trustee, Michael Thomson, learned that Mayoros may have had an interest in BlackBeard Foods, LLC ("Black Beard") the company operating Pirate Island Pizza.²⁷

7. On June 24, 2015, Mayoros appeared at a Bankruptcy Rule 2004 examination wherein he testified he had been involved in a business venture by the name of Black Beard. Mayoros testified he had an ownership interest in Black Beard. He further testified that he directed his spouse, Allison Mayoros, be added as an owner member of Black Beard rather than himself to specifically avoid the reach Sunset Corner's judgment against him.²⁸

8. Allison Mayoros was added as an owner member of Black Beard on January 28, 2014.²⁹ Allison Mayoros, in regards to the ownership of Black Beard, was the legal nominee of Mayoros in all respects as acknowledged by both Jim Mayoros and Allison Mayoros.³⁰

9. On December 19, 2013, Jim Mayoros and Allison Mayoros received $55,000.00 from their in-laws, Ron and Brenda Myers. These funds were deposited into Jim and Allison Mayoros' joint personal checking account at Cache Valley Bank.³¹

10. The $55,000.00 was supposed to fund Pirate Island Pizza.³² Of those funds, $14,000.00 was transferred to the Black Beard bank account at Cache Valley Bank.³³ The remaining $31,500.00 remained in the Mayoros' joint personal checking account at Cache Valley Bank.³⁴

11. Jim Mayoros was a signer on the Black Beard bank account at Cache Valley Bank.³⁵

12. Jim Mayoros did not disclose his interest in Black Beard or the Black Beard bank account at Cache Valley Bank in his statements and schedules or his amended statement of financial affairs.³⁶

13. Mayoros also executed documents...