In re Diaz
| Decision Date | 06 April 2001 |
| Docket Number | CIV. No. 00-1105(JP). |
| Parties | In re Vinicio Medrano DIAZ, Debtor. John A. Zerbe, Trustee, Appellant, v. Teresa Vazquez Botet, Appellee. |
| Court | U.S. District Court — District of Puerto Rico |
Genaro Rodriguez Gerena, Luquillo, PR, for Debtor.
Ramon Torres Rodriguez, San Juan, PR, for Appellant.
Eli B. Arroyo, San Juan, PR, for Appellee.
Nancy Pujals, Office of U.S. Trustee, Assistant U.S. Trustee, San Juan, PR, for U.S. Trustee.
The Court has before it an appeal pursuant to 28 U.S.C. § 158(a) from the October 26, 1999 ruling entered by the Hon. Sara de Jesús, of the United States Bankruptcy Court for the District of Puerto Rico, allowing Teresa Vázquez Botet's ("Appellee") claim for $46,000.00 ("Claim No. 21") against John A. Zerbe's ("Appellant") objection, and awarding the same. The parties disagree as to the scope of issues presented for review. Appellant lists eleven issues and argues that they deal with mixed questions of law and fact. In contrast, Appellee asserts that the ultimate issue on appeal is one of fact which concerns the credibility of the Debtor and the Appellee who testified before the bankruptcy court regarding Claim No. 21. After a careful review of the record and the arguments presented, the decision of the bankruptcy court is hereby AFFIRMED.
The following summary of facts is drawn from the March 10, 1998 Opinion and Order in which the bankruptcy court made certain findings of fact and denied summary judgment, and the transcript of the bankruptcy court's October 26, 1999 ruling on the merits. Since 1991, Vinicio Medrano Díaz ("Debtor") was the president and sole shareholder of a real estate corporation known as Better Family Homes Inc. ("BFH"). During April of 1991, Appellee began working for the BFH as a realtor and sales person. In May of 1991, Appellee agreed to loan BFH $85,000.00 ("the loan"), in order to provide the corporation with badly needed capital, and to allow for the termination of certain legal actions brought against BFH. In exchange for the loan, Debtor made Appellee president and Chief Executive Officer of BFH.
BFH eventually sold its office and used $40,000.00 of the proceeds of the sale to pay back a portion of the loan to Appellee. In the meantime, Debtor and Appellee bought a winning lottery ticket, were married and later divorced. In 1992, Debtor filed for Chapter 13 bankruptcy. The case was eventually converted to Chapter 7, and Mr. John Zerbe was appointed the Chapter 7 Trustee.
On December 28, 1995, Appellee timely filed a Proof of Claim, in which she claimed the amount of $46,000.00 as principal owing on the loan, and $16,241.22 for accrued interest.1 Claim 21 also included Appellee's claim that Debtor assumed the loan pursuant to a stipulation that Debtor and Appellee had entered into in a divorce proceeding pending before the local court. Appellant Chapter 7 Trustee objected to Claim 21 stating that the claim was not Debtor's responsibility. He asserted that it was BFH's corporate debt that was not assumed by Debtor. Moreover, Appellant argued that the divorce proceeding stipulation upon which Appellee relies was not executed, and was therefore not binding. Thereafter, Appellee offered a second document ("the 1991 stipulation"), a photocopy of a note purported to have been executed between Debtor and Appellee in 1991 before Debtor and Appellee were married, as evidence that the Debtor had agreed to assume BFH's debt.
Appellant and Debtor challenged the authenticity of the 1991 stipulation as having an improper date. Debtor admitted to having executed the document but contends that he did so on April 15, 1992 after he and Appellee were married, and without valuable consideration for the same, and alleges that it is therefore null and void under Article 1286 of the Civil code of Puerto Rico, 31 L.P.R.A. § 3588 and Article 1347 of the Civil Code of Puerto Rico, 31 L.P.R.A. § 3772.2 Further, Debtor contended that he was inebriated when he signed the document and was unaware of its content. The bankruptcy judge heard testimony to the same before reaching the following conclusions: 1) that Appellee obtained some assurance of repayment from Debtor before she loaned him the $85,000.00 loan; and 2) Debtor agreed to assume the loan of BFH in the event that the corporation became unable to repay the same. Based on the evidence before it, the bankruptcy court awarded Appellee's Claim 21 for the total amount of $46,000.00.
In general, the same standard of review that governs appellate courts that hear appeals from district courts governs bankruptcy appeals before district courts. When issues on review are "heavily dependent upon the lower court's firsthand knowledge of the case and its nuances," a deferential appellate review is appropriate. See Navarro-Ayala v. Nunez, 968 F.2d 1421, 1425 (1st Cir.1992). A lower court's determination of witness credibility is also afforded this level of review. In this way, a bankruptcy judge's ascertainment of a witness's credibility should be upheld absent a showing of "clear error". See Fed. Bankr.R. 8013; see also In re Tully, 818 F.2d 106, 109-110 (1st Cir.1987).
A bankruptcy court's findings of fact are reviewed under a "clearly erroneous" standard, and its conclusions of law are reviewed de novo. See T I Fed. Credit Union v. DelBonis, 72 F.3d 921, 928 (1st Cir.1995); Matter of Rosa, 196 B.R. 231, 234 (D.Puerto Rico 1996) (Pieras, J.). This Circuit has stated that "the more fact-dominated the question, the more likely it is that the trier's resolution of it will be accepted unless shown to be clearly erroneous." In re Extradition of Howard, 996 F.2d 1320, 1328 (1st Cir.1993). "A finding of fact is `clearly erroneous' when the reviewing court is left with the definite and firm conviction that a mistake has been made." Mitchell v. United States, 141 F.3d 8, 17 (1st Cir.1998). The standard is so exacting that where two views of the evidence are plausible, the trial court's preference cannot be deemed to be clearly erroneous, and may not be disturbed even where the appellate court would have held otherwise. Williams v. Poulos, 11 F.3d 271, 278 (1st Cir.1993).
Bankruptcy judges have wide discretion when dealing with fact-intensive matters, and district courts hearing bankruptcy appeals give considerable deference to a bankruptcy judge's factual determinations and discretionary judgments. In re Pedro Abich Inc., 165 B.R. 5, 7 (D.Puerto Rico 1994), citing In re Martin, 817 F.2d 175, 182 (1st Cir.1987); and Boston and Maine Corp. v. Moore, 776 F.2d 2, 6 (1st Cir.1985). Of course, as the First Circuit has made clear, trial courts may not insulate their findings from review by simply labeling them credibility determinations because various factors contribute to the believability of a witness' testimony. When documents or objective evidence contradict a witness' story or when the story itself is so internally inconsistent or implausible on its face that a reasonable fact-finder would not credit it, the appellate court may find clear error even when a finding of the trial judge was purportedly based on credibility determinations. "But when a trial judge's finding is based on his decision to credit the testimony of one of two or more witnesses, each of whom has told a coherent and facially plausible story that is not contradicted by extrinsic evidence, that finding, if not internally inconsistent, can virtually never be clear error." Anderson v. City of Bessemer City, N.C., 470 U.S. 564, 575, 105 S.Ct. 1504, 1512, 84 L.Ed.2d 518 (1985); Palmacci v. Umpierrez, 121 F.3d 781, 785 (1st Cir.1997). It is with this frame work in mind that the Court now turns to the appeal before it.
The issues which Appellant lists in his appeal are as follows: 1) whether the evidence presented by Mrs. Teresa Vázquez Botet is sufficient to prove that Mr. Vinicio Medrano Díaz assumed an obligation of a corporation in favor of Mrs. Teresa Vázquez Botet; 2) whether Debtor and his former wife made a transaction between themselves; 3) whether in accordance with the laws of the Commonwealth of Puerto Rico, a husband may make a transaction with his wife assuming a debt from a third party in favor of his wife as a creditor; 4) whether the assumption of a debt by Debtor without any valuable consideration, in favor of claimant constitutes a donation; 5) whether in accordance with the laws of the Commonwealth of Puerto Rico a husband may make a donation to his wife; 6) whether a document submitted by Mrs. Teresa Vázquez Botet dated 1991 should have been admitted as evidence when it was timely objected to by the Trustee and impeached by the unrebutted testimony of an expert witness; 7) whether essential findings of fact are supported by evidence or are clearly erroneous, essentially the fact that Claimant would not loan the amount of $85,000.00 without any assurance of repayment; 8) whether the evidence submitted by Claimant proved that there was the intention...
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