In re Tarango
| Decision Date | 07 January 2010 |
| Docket Number | Adversary No. 08-1027 J.,Bankruptcy No. 7-07-12829 JL. |
| Citation | 424 B.R. 479 |
| Parties | In re Joseph TARANGO, Debtor. Southwest Financial Services of Las Cruces, Inc., Plaintiff, v. Joseph Tarango, Defendant. |
| Court | U.S. Bankruptcy Court — District of New Mexico |
James A. Askew, Albuquerque, NM, for Southwest Financial Services of Las Cruces, Inc.
R. Trey Arvizu, III, Las Cruces, NM, for Joseph Tarango.
THIS MATTER is before the Court on cross motions for summary judgment.1 Plaintiff Southwest Financial Services of Las Cruces, Inc. ("Southwest Financial") filed a complaint against Defendant Joseph Tarango asserting that the outstanding balance due under a loan Defendant obtained from Southwest Financial constitutes a non-dischargeable debt under 11 U.S.C. § 523(a)(2)(A) and (a)(6) based on the fact that the loan in question was part of a sham loan scheme perpetuated by Southwest Financial's former president, Joseph Valdez. Southwest Financial asserts that summary judgment should be granted on its claim for non-dischargeability of debt under 11 U.S.C. § 523(a)(2)(A) based on evidence that Mr. Tarango did not intend to repay the loan at the time he executed the loan agreement and knew or should have known that his actions would deceive Southwest Financial. Mr. Tarango requests summary judgment based on his affirmative defense that he was an intended third-party beneficiary of a settlement agreement between Southwest Financial and Mr. Valdez concerning the improper loans.
After consideration of the motions, the responses thereto, and Southwest Financial's reply, the Court finds that fact issues concerning Mr. Tarango's intent preclude summary judgment on Southwest Financial's claim for non-dischargeability under 11 U.S.C. § 523(a)(2)(A). Based on the terms of the Settlement Agreement, the Affidavit of Gene Lee, and the position advocated by Southwest Financial in its Response to Defendant's Motion for Summary Judgment ("Response")(Docket # 37), the Court finds that there are sufficient facts from which the Court could conclude that Mr. Tarango is an intended third-party beneficiary of the Settlement Agreement. Furthermore, fact issues remain as to whether there is a material breach under the Settlement Agreement. Because issues of material fact remain, the Court will also deny Mr. Tarango's motion for summary judgment.
It is appropriate for the Court to grant summary judgment when the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(c), made applicable to adversary proceedings by Fed.R.Bankr.P. 7056. In considering a motion for summary judgment, the Court must "`examine the factual record and reasonable inferences therefrom in the light most favorable to the party opposing summary judgment.'" Wolf v. Prudential Inc. Co. of America, 50 F.3d 793, 796 (10th Cir.1995)(quoting Applied Genetics Int'l, Inc. v. First Affiliated Sec., Inc., 912 F.2d 1238, 1241 (10th Cir.1990)). Cross motions for summary judgment raise an inference that summary judgment may be appropriate. In re Baines, 337 B.R. 392, 396 (Bankr.D.N.M.2006). Nevertheless, before a Court may grant summary judgment, the Court must satisfy itself that the requesting party has independently satisfied the requirements of Fed.R.Civ.P. 56(c). Harris v. Beneficial Oklahoma, Inc., (In re Harris), 209 B.R. 990, 998 (10th Cir.BAP1997) (citation omitted). See also, In re Cox, 408 B.R. 407, (Bankr.D.Kan.2009)( that "cross motions are to be considered independently, and summary judgment is not appropriate if disputes remain as to any material fact.")(citing Atlantic Richfield Co. v. Farm Credit Bank of Wichita, 226 F.3d 1138, 1148 (10th Cir.2000)). "[A] party opposing a properly supported motion for summary judgment may not rest on mere allegation or denials of his pleading, but must set forth specific facts showing that there is a genuine issue for trial" through affidavits or other supporting evidence. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 256, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986).
The following facts relating to the parties' claims are not in dispute:
1. Joseph Tarango executed a Promissory Note ("Note") in favor of Southwest Financial dated February 28, 2002 in the original principal amount of $6,637.41.
2. At the time Mr. Tarango executed the Note, Joseph Valdez was president of Southwest Financial.
3. At the time Mr. Tarango executed the Note, he had an agreement with Mr. Valdez to give the proceeds of the Note to Mr. Valdez who would then make the payments due under the Note.
4. When Mr. Tarango received a check for the proceeds of the loan represented by the Note, he cashed it and gave all of the money to Mr. Valdez.
5. Mr. Tarango made no payments on the Note with his own funds.
6. On separate occasions, both before executing the Note, and after, Mr. Tarango borrowed money from Southwest Financial and paid it back.
7. Gene Lee is the majority shareholder, secretary, and a director of Southwest Financial.
8. Mr. Valdez was president and manager of Southwest Financial in 2002.
9. In 2002, Mr. Lee became concerned about certain loan practices that had been occurring at Southwest Financial.
10. In 2002, Mr. Lee discovered through an examination of the records of Southwest Financial and copies of bank checks deposited into Southwest Financial's bank account that people other than the named borrower, including Mr. Valdez, were making payments on loans.
11. Mr. Lee eventually developed a list of questionable accounts to present to Mr. Valdez.
12. Mr. Valdez informed Mr. Lee that Mr. Valdez, and not the named borrower, actually received the money from several of the questionable accounts.
13. Among the questionable accounts that Mr. Lee identified was an account for Lainee Grubbs, and an account for Shelley Wolfe. See Plaintiff's Response to Defendant's Motion for Summary Judgment ("SW Response"), Exhibit 27 (letter dated October 28, 2002 from Mr. Lee to Mr. Valdez identifying Shelly Wolfe as one of "the accounts concerning which questions have arisen"); See Memorandum Brief in Support of Defendant's Motion for Summary Judgment ("Defendant's Brief"), Exhibit B, pages 53-54 ().
14. Following Mr. Valdez's confession, the parties continued to refine the terms of the separation of Mr. Valdez from Southwest Financial.
15. Ultimately, Mr. Lee, Southwest Financial and Mr. Valdez entered into a Settlement Agreement dated November 3, 2003 to terminate Mr. Valdez's relationship with Southwest Financial and address the questionable accounts.
16. The Settlement Agreement recites that
[d]uring the course of his employment with Southwest, Valdez made a number of loans to third parties, or in the name of third parties, the proceeds of which were intended for and in fact received by Valdez.
...
17. The Settlement Agreement further recites that Mr. Valdez's actions in making loans to third parties wherein the proceeds were intended for and received by Mr. Valdez "violated company policy and would not have been approved" by Southwest Financial. Settlement Agreement ¶ 5.
18. According to the Settlement Agreement, Exhibit A to the Settlement Agreement was to identify all loans that Mr. Valdez made during the course of his employment with Southwest Financial to third parties, or in the name of third parties, the proceeds of which were intended for and in fact received by Mr. Valdez. Such loans are identified in the Settlement Agreement as "Accounts".
19. The total amount of the loans identified in Exhibit A to the Settlement Agreement exceeds $100,000.00.
20. The loan to Mr. Tarango is identified on Exhibit A to the Settlement Agreement.
21. Paragraph 2 of the Settlement Agreement provides, in part:
Notwithstanding this remaining balance due Southwest and Gene Lee promise, while Valdez is not in default of this Agreement, to consider, for the proposes of this Agreement, the Accounts as paid in full. It is expressly agreed that Southwest will not report to any credit reporting agency that the Accounts have been charged off but neither will Southwest report the Accounts as settled or paid. Southwest will not provide any additional reports to any credit reporting agency regarding the Accounts.
22. Paragraph 3 of the Settlement Agreement provides, in part:
In consideration for the promise granted by Southwest in paragraph 2 immediately above, Valdez promises or affirms:
a) That the list of persons and loans shown in Exhibit A is complete and accurate;
b) That he has not at any time made any other loan for the same or similar reasons or under the same or similar circumstances as the reasons and circumstances relating to those customer loan accounts shown in Exhibit A;
c) That he has not at any time in any manner used or diverted Southwest's or its customers' assets for his own personal use, other than in the cases of the customer loan accounts shown in Exhibit A;
f) That as of the last day of his employment with Southwest (1) all company loan records contained complete and accurate information and that the borrowers or co-borrowers shown in company loan records are in fact the true borrowers and co-borrowers and are the intended and actual recipients of the entire proceeds of their respective loans; (2) that the loans shown on company records were made for valuable consideration and not constitute valid and legally enforceable obligations of...
To continue reading
Request your trial
-
Bestway Concrete Co. v. Berkey (In re Berkey)
...Mem'l Hosp. of Sheridan County, 850 F.2d 1384, 1394 n. 12 (10th Cir. 1988)). See also Southwest Financial Services of Las Cruces, Inc. v. Tarrango (In re Tarrango), 424 B.R. 479, 490 (Bankr. D. N.M. 2010) (citing Prochaska v. Marcoux, 632 F.2d 848, 851 (10th Cir. 1980; Compton v Herrman (In......