Gila Reg'l Med. Ctr. v. Lobera (In re Lobera)

• Decision Date: 18 February 2014
• Docket Number: Adversary No. 11-1112 J,No. 7-10-13203 SA,7-10-13203 SA
• Parties: In re: ALEX LOBERA, Debtor. GILA REGIONAL MEDICAL CENTER, Plaintiff, v. ALEX LOBERA, Defendant.
• Court: United States Bankruptcy Courts. Tenth Circuit. U.S. Bankruptcy Court — District of New Mexico

In re: ALEX LOBERA, Debtor.GILA REGIONAL MEDICAL CENTER, Plaintiff, v. ALEX LOBERA, Defendant.

No. 7-10-13203 SA

Adversary No. 11-1112 J

UNITED STATES BANKRUPTCY COURT DISTRICT OF NEW MEXICO

Date entered on docket: February 18, 2014

MEMORANDUM OPINION

After unsuccessfully seeking to dismiss Alex Lobera's bankruptcy case pursuant to 11 U.S.C. § 707(a) based in part on Alex Lobera's alleged lack of good faith in seeking bankruptcy relief, Gila Regional Medical Center ("GRMC") filed this adversary proceeding seeking to deny Alex Lobera's discharge under 11 U.S.C. § 727(a)(2)(A), (a)(3), (a)(4), (a)(5), and (a)(7), and seeking a non-dischargeability determination under 11 U.S.C. § 523(a)(2)(A).¹ Most, if not all, of the factual grounds upon which GRMC bases its claims objecting to discharge in this adversary proceeding were also raised at the final evidentiary hearing on GRMC's motion to dismiss held in Alex Lobera's bankruptcy case. Judge Starzynski denied GRMC's motion to dismiss under § 707(a) in a lengthy memorandum opinion (the "707(a) Opinion"), concluding that there is no good faith requirement for filing a non-consumer chapter 7 bankruptcy case, and, even if there were, there was insufficient evidence to demonstrate that Alex Lobera (Lobera) filed his Chapter 7 bankruptcy petition in bad faith. See In re Lobera, 454 B.R. 824, 853 (Bankr.D.N.M. 2011).

GRMC now seeks summary judgment on its § 727(a) claims, asserting that facts not subject to genuine dispute establish all required elements to Alex Lobera's discharge. See Plaintiff's Motion for Partial Summary Judgment and Memorandum in Support ("Motion for Partial Summary Judgment") - Docket No. 37. In response, Lobera asserts that Judge Starzynski's 707(a) Opinion denying GRMC's motion to dismiss Lobera's chapter 7 bankruptcy case bars GRMC from litigating its claims objecting to discharge under the doctrines of collateral estoppel, res judicata, and law of the case. See Defendant Alex Lobera's Response and Memorandum in Support of Response to Plaintiff's Motion for Summary Judgment ("Response") - Docket No. 38. Alternatively, Lobera asserts that genuine issues of material fact preclude the entry of summary judgment in favor of GRMC. After considering the Motion for Partial Summary Judgment, Lobera's Response, and GRMC's reply,² the Court finds that genuine issues of material fact preclude the entry of summary judgment on GRMC's § 727(a) claims.

DISCUSSION

Summary Judgment Standards

It is appropriate to grant a motion for summary judgment when the pleadings and other materials in the record, together with supporting affidavits, if any, demonstrate that there is no genuine dispute with respect to any material fact and the moving party is entitled to judgment as a matter of law. Fed.R.Civ.P. 56, made applicable to adversary proceedings by Fed.R.Bankr.P. 7056. The party requesting summary judgment "always bears the initial responsibility of informing the . . . court of the basis for its motion, and . . . [must] demonstrate the absence of agenuine issue of material fact." Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986).

When considering a motion for summary judgment, the Court views the record in the light most favorable to the party opposing summary judgment. See, Deepwater Invs., Ltd. v. Jackson Hole Ski Corp., 938 F.2d 1105, 1110 (10^th Cir. 1991)(the court "must view the record in a light most favorable to the parties opposing the motion for summary judgment.")(citation omitted)); Harris v. Beneficial Oklahoma, Inc., (In re Harris), 209 B.R. 990, 995 (10^th Cir. BAP 1997)(same). Denial of summary judgment requires the existence of genuine factual issues that "can be resolved only by a finder of fact because they may reasonably be resolved in favor of either party." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 250, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). No genuine issue of fact exists if a rational fact finder, when viewing the record as a whole, could not find for the party opposing summary judgment. See Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 587, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986)("Where the record taken as a whole could not lead a rational trier of fact to find for the non-moving party, there is no genuine issue for trial.")(internal quotation marks and citation omitted)). "[T]he nonmoving party may not rest on its pleadings but must set forth specific facts showing that there is a genuine issue for trial as to those dispositive matters for which it carries the burden of proof." Vitkus v. Beatrice Co., 11 F.3d 1535, 1539 (10^th Cir. 1993)(internal quotation marks and citation omitted)).

Facts not Subject to Genuine Material Dispute

GRMC identifies ninety-four numbered facts it asserts are not subject to genuine dispute. See Motion for Partial Summary Judgment, pp. 2 - 15. Lobera agrees that GRMC's facts 1 through 18 are not subject to genuine dispute, but disputes facts 19 through 94 based on the707(a) Opinion. See Response, pp. 2 - 9.³ Lobera's Response includes a statement of facts not subject to genuine dispute; those facts are similarly based on the findings of fact Lobera asserts are embodied in the 707(a) Opinion. See Response, pp. 9 - 11. Specifically, Lobera relies on the following statements contained in the 707(a) Opinion:

1) The Court had no sense that the Debtor, or for that matter Ms. Quiroz [Lobera's live-in companion] had attempted to hide assets from the Court or creditors, or had attempted to hide transactions that would result in recoveries by a trustee. Both seemed completely honest. The Court also finds that Debtor appeared, and actually admitted, that the financial matters over the last year have caused him great stress and embarrassment, and this may have impeded his ability to be more effective in the preparation of his bankruptcy. It is also apparent that he relied on his counsel, perhaps more than he should have, but in a way which was not unreasonable under the circumstances. In sum, the Court found Debtor to be an honest debtor deserving bankruptcy relief. 707(a) Opinion, pp. 20 - 21.

2) The Court finds that there is not a good faith requirement for a non-consumer business debtor to file a Chapter 7 case. Even if there were such a requirement, GRMC and Barton [the other moving creditor] have failed to prove by a preponderance of the evidence that Debtor initiated this Chapter 7 case in bad faith. To the extent only an honest and deserving debtor is eligible to file a Chapter 7 petition, the Court finds that the Debtor is eligible. The facts elucidated and arguments made by GRMC and Barton are addressable by less drastic remedies than dismissal. For example, to the extent they established facts which could suggest that a trustee could recover preferences or fraudulent transfers, the case trustee is fully competent to investigate those transfers and recover them if proper. The Court therefore finds that the transactions alleged do not constitute cause. Finally, the Court finds Debtor's testimony regarding omitted items credible, and finds no evidence that Debtor attempted to hide assets or hinder their discovery. 707(a) Opinion, p. 60.

Essentially, Lobera contends that Judge Starzynski's findings made as part of the 707(a) Opinion negate the elements necessary to GRMC's claims objecting to discharge.

Preclusion Doctrines

Lobera previously raised its collateral estoppel and res judicata arguments through a separate motion for summary judgment filed in this adversary proceeding. See Defendant's Motion for Summary Judgment and Memorandum in Support Thereof on Objection to Discharge under 11 U.S.C. § 727(a) and on Jurisdiction of this Court to enter a Monetary Judgment following Stern v. Marshall ("Lobera's Motion for Summary Judgment") - Docket No. 8. In Lobera's Motion for Summary Judgment, Lobera asserted that the 707(a) Opinion precludes GRMC from subsequently asserting claims against him objecting to discharge. Judge Starzynski denied Lobera's Motion for Summary Judgment, finding that neither res judicata nor collateral estoppel bar GRMC from asserting claims objecting to discharge under 11 U.S.C. § 727. See Memorandum Opinion on Defendant/Debtor's Motion for Summary Judgment on Objection to Discharge Under 11 U.S.C. § 727(a) and on Jurisdiction to Enter a Money Judgment on § 523 Claim ("Memorandum Opinion on Lobera's Preclusion Arguments") - Docket No. 17. GRMC asserts that neither collateral estoppel nor res judicata doctrines bar its claims objecting to discharge, and that the law of the case doctrine should be applied to the Memorandum Opinion on Lobera's Preclusion Arguments to prevent Lobera from again asserting collateral estoppel and res judicata arguments in defense of GRMC's Motion for Partial Summary Judgment.

Because the 707(a) Opinion and the Memorandum Opinion on Lobera's Preclusion Arguments were both issued by a federal bankruptcy court, federal preclusion doctrines apply. See Murdock v. Ute Indian Tribe of Uintah and Ouray Reservation, 975 F.2d 683, 686-687 (10^th Cir. 1992)(federal collateral estoppel and res judicata doctrines are applied to judgments by a federal court)(citations omitted). The doctrine of collateral estoppel, also known as issuepreclusion,⁴ is based on "the principle that 'when an issue of ultimate fact has once been determined by a valid and final judgment, that issue cannot again be litigated between the same parties in any future lawsuit.'" United States v. Gallardo-Mendez, 150 F.3d 1240, 1242 (10^th Cir. 1998)(quoting Ashe v. Swenson, 397 U.S. 436, 443, 90 S.Ct. 1189, 25 L.Ed.2d 469 (1970)).

In ruling on the same collateral estoppel argument Lobera now makes, Judge Starzynski stated:

In fact, the Memorandum left open the issue of whether further actions might be pursued if the Chapter 7 case continued. The Court did state that, based on the evidence presented, it found no evidence that the Debtor attempted to hide assets or

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