Griego v. Gonzales (In re Gonzales)

• Decision Date: 21 November 2012
• Docket Number: Bankruptcy No. 10–14412–j7.,Adversary No. 10–1163–j7.
• Citation: 483 B.R. 1
• Parties: In re Merejildo R. GONZALES, and Teresa K. Gonzales, Debtors. Michael Griego, as Guardian ad Litem for Abe Sanchez, Plaintiff v. Merejildo R. Gonzales, and Teresa K. Gonzales, Defendants.
• Court: U.S. Bankruptcy Court — District of New Mexico

483 B.R. 1

In re Merejildo R. GONZALES, and Teresa K. Gonzales, Debtors.Michael Griego, as Guardian ad Litem for Abe Sanchez, Plaintiff

v.Merejildo R. Gonzales, and Teresa K. Gonzales, Defendants.

Bankruptcy No. 10–14412–j7.

Adversary No. 10–1163–j7.

United States Bankruptcy Court, D. New Mexico.

Nov. 21, 2012.

Pedro G. Rael, Los Lunas, NM, for Plaintiff.

Jane Rocha de Gandara, Los Lunas, NM, for Defendants.

MEMORANDUM OPINION

ROBERT H. JACOBVITZ, Bankruptcy Judge.

This adversary proceeding came before the Court on May 29, 30 and 31 and June 7, 2012 for a trial on the merits. Pedro G. Rael appeared for the Plaintiff. Jane Rocha de Gandara appeared for the Defendants. After a lengthy briefing schedule requested by the parties, both parties submitted post-trial briefs.¹

This case is particularly sad. Teresa Gonzales and Merejildo Gonzales, the Defendants, provided a great deal of care for their father and father in-law, respectively, a man named Abe Sanchez, for a period of approximately seventeen years before Abe was rendered incompetent by dementia², an infirmity of age. Several years after being diagnosed with insidious dementia, in or around May 2008, Abe left the Gonzales home to move in with another daughter of his, Karen Wigley. In late 2009, Michael Griego, the Plaintiff, was appointed guardian ad litem of Abe Sanchez. Upon Mr. Griego's analysis of Abe's finances, which revealed a great deal of missing monies, Mr. Griego pursued Abe's three children and his son-in-law, Merejildo, for cash settlements. Karen admitted to having taken a substantial sum, and immediately settled. Potential claims against Abe's only son, Louis Sanchez, were abandoned. What is left is this case against Teresa and Merejildo, who filed a Chapter 7 bankruptcy case on August 30, 2010 and received their general discharge on April 18, 2011. Mr. Griego now seeks to have the missing monies declared non-dischargeable under various subsections of 11 U.S.C. § 523(a). ³

JURISDICTION AND VENUE

This Court has jurisdiction over this adversary proceeding pursuant to 28 U.S.C. § 1334(a) and (b). The parties have stipulated that this is a core proceeding pursuant to 28 U.S.C. 157(b)(2)(A) and (I). See Amended Pretrial Order, Docket No. 41. Pursuant to Fed.R.Civ.P. 52, made applicable by Fed.R.Bankr.P. 7052, the Court now states its findings of fact and conclusions of law.

FINDINGS OF FACTBackground: Abe Sanchez and His Three Children—Teresa, Karen, and Louis

Abe Sanchez spent 22 years in the Navy, retired, and then spent 11 years working for the U.S. Postal Service in Albuquerque before retiring for good. His sources of income thereafter were Navy retirement benefits and federal social security income. Prior to his retirement from the Navy, Abe's wife and the mother of his three children—Louis, Karen, and Teresa, who were all born about a year apart—committed suicide amidst serious family troubles. Those family troubles led Abe to be more generous to Karen than he was to his other two children. Karen and her children frequently requested monies from Abe, which he readily gave them. They sometimes took his money without asking. Abe bought a number of cars for Karen and her family. When Teresa would confront Abe about his profligacy towards Karen, he would tell Teresa to mind her own business. The generosity is noteworthy for, by all accounts, Abe was notoriously parsimonious.

Abe was also a fiercely independent and domineering man—he was described as a “my way or the highway” type of guy—that is, he was largely non-negotiating. He moved in with his daughter and son-in-law, Teresa and Merejildo Gonzales, in 1991. Merejildo, who has worked in construction since 1976 and as a general contractor since 1996, borrowed approximately $22,000 from Abe in 1992 in order to build Abe a small home on Teresa's and Merejildo's residential property (the “Meadow Lake Property”), which everyone in the family referred to as Abe's “Wigwam”. The Wigwam was built with its own garage, bathroom, heating system, and other amenities. Teresa did not enter the Wigwam, except upon Abe's request. Despite the facts that Teresa and Merejildo were experiencing financial difficulties at this time ⁴ and that the Wigwam was for Abe's sole use, Teresa and Merejildo paid these monies back to Abe. Abe did not pay for utilities.

Providing Abe with the Wigwam was not an exception to Teresa's and Merejildo's generosity toward Abe. They readily provided Abe with a great deal of support. Abe was fed dinner most days that he lived with them, free of charge. Teresa in particular spent a great deal of time with Abe, assisting him in various ways when he so requested; they frequently played card games, too. Abe paid only for food that he purchased and kept in his Wigwam, knickknacks that he bought from the Publishers Clearing House company ⁵, transportation expenses, and monies that he gave to Karen and her family (but not to Louis ⁶ or Teresa's and Merejildo's family). Things continued in this vein for approximately fourteen years.

Abe's Condition Begins to Deteriorate and He Draws Down His Bank Accounts

In November 2005, Abe began to more severely experience the effects of old age. His memory weakened, and he basically forgot how to play cribbage, one of his favorite games. He would trip more frequently than before, as his eyesight began to fail. This led Teresa to take Abe to a Veterans Affairs (“V.A.”) medical center, where Dr. John Adair diagnosed Abe as having symptoms “most consistent with degenerative dementia (i.e. AD).” See Exhibit 7, the “2005 Report”. Abe was also diagnosed with macular degeneration around that time. It was clear that Abe was going to need an increasing amount of medical care. The 2005 Report provides a differential diagnosis of Abe, stating that he has “insidious ⁷ onset of language and memory dysfunction, now with evidence of impact on functional abilities.” The “Mental Status Summary” notes that Abe had “decreased attention” and reduced “category fluency” and that his “new learning” abilities were three standard deviations below the mean. The “History” section stated:

This is a 78 year-old man referred for evaluation of “memory loss”. History is obtained from patient and daughter [Defendant Teresa Gonzales] (with whom he's lived for 10+ years). Per both, some problems started insidiously about 9–10 years ago [...] course has been progressive deterioration with particular problems in past 3–6 months. [...]. [his daughter, Teresa Gonzales] needed to take over finances in past year b/c “mail order people took advantage of him”.

See the 2005 Report (quotations in original).

Ever frugal, Abe then made the ultimately fateful decision to draw down his bank accounts to below one-hundred thousand dollars and to cash his certificates of deposit. At the end of 2005, Abe had on deposit with Wells Fargo approximately $180,000.⁸ It was Abe's belief that, since the Department of Veterans Affairs is a non-for-profit government entity whose eponymous business is to serve veterans' needs, he would not (and should not) have to make medical “co-pays” if he had less than one-hundred thousand dollars in his bank accounts and certificates of deposit.⁹ It was on that basis that he made a decision that ultimately brought the parties before the Court: to draw down his bank accounts, cash in his certificates of deposit, and start keeping a large percentage of his wealth in cash in lockboxes in his Wigwam. Abe was the mastermind of this scheme. Abe was domineering, and insisted on his plan. His children complied.

Upon Abe's diagnosis and knowing of his plan to draw down his bank accounts, Teresa contacted her siblings, Louis and Karen, for the purpose of having a family meeting in order to discuss how to properly care for their father. Responsibilities were divided: Teresa would make sure Abe's medical needs were met, and Karen would help Abe maintain his finances. Louis would be available as needed. This meeting was held around the end of 2005 or the beginning of 2006. Teresa wanted to have these meetings while Abe was still competent, so that Abe could be the one who “called the shots.” It was probably a wise decision to hold that meeting so soon, as Abe steadily deteriorated as time went on, getting in a car accident in 2006 and being unable to recognize Louis by late 2008. In any case, Abe's children convinced him, at least initially, that keeping large amounts of cash in lockboxes at home was a foolish idea and that he should instead obtain a safe deposit box. Abe did so. A safe deposit box was opened at Wells Fargo Bank on January 20, 2006. Both Abe and Teresa were listed as the customers for that safe deposit box, and they each had one of the two existing keys. See Exhibit 16.

In January 2006, Abe, his children, Teresa and Karen and Louis, and his son-in-law, Merejildo, began to draw down Abe's accounts in what became family visits to the bank. On or about January 11, 2006, Abe cashed out two certificates of deposit for $40,268.65 and $36,996.73. See Exhibit 6. The proceeds of the two certificates of deposit were taken in cash and all or most of the cash was placed in the safe deposit box. Over the next five months, Abe wrote seven checks from his bank accounts, in the aggregate amount of $37,000, to Merejildo, Teresa, Karen and Louis, in order to draw his bank accounts further. See id. One of these checks was signed by Teresa; the rest were signed by Abe. Each check was converted to cash. Abe directed that each check be less than $10,000, to avoid what he perceived to be bank regulatory reporting requirements. Abe was still fully in control of his affairs at this time, though he was recalcitrant and would often request favors, even ones involving minimum effort, of Teresa. Both Teresa and Karen's names were already listed on Abe's bank accounts at that time.

There was also some discussion about Abe granting Teresa a power of attorney. Teresa testified that Abe...