Mitsubishi Motor Sales of Caribbean v. Seda Ortiz

• Decision Date: 30 September 2009
• Docket Number: Civil No. 07-1643 (DRD).
• Citation: 418 B.R. 11
• Parties: MITSUBISHI MOTOR SALES OF CARIBBEAN, INC., Appellant, v. Norberto SEDA ORTIZ, Appellee.
• Court: U.S. District Court — District of Puerto Rico

418 B.R. 11

MITSUBISHI MOTOR SALES OF CARIBBEAN, INC., Appellant, v. Norberto SEDA ORTIZ, Appellee.

Civil No. 07-1643 (DRD).

United States District Court, D. Puerto Rico.

September 30, 2009.

COPYRIGHT MATERIAL OMITTED

COPYRIGHT MATERIAL OMITTED

Carlos E. Rodriguez-Quesada, Carlos E. Rodriguez Quesada Law Office, San Juan, PR, for Appellant.

Wigberto Lugo-Mender, Lugo Mender & Co., Guaynabo, PR, for Appellee.

OPINION AND ORDER DISMISSING APPEAL

DANIEL R. DOMINGUEZ, District Judge.

Pending before the Court is an appeal filed by Mitsubishi Motor Sales of Caribbean, Inc. ("Mitsubishi") against debtor Norberto Seda Ortiz ("Seda"), wherein Mitsubishi challenges several orders, `as well as a judgment entered by the Hon. Enrique S. Lamoutte, U.S. Bankruptcy Judge, U.S. Bankruptcy Court for the District of Puerto Rico, to wit: (a) Order of Discharge entered in Case No. 02-11182(ESL) (Docket No. 246); (b) Judgment entered on December 18, 2006, in Adversary Proceeding No. 03-0060(ESL) (Docket No. 82); and (c) Order entered in Adversary Proceeding No. 03-0060(ESL) (Docket No. 92). For the reasons set forth below, the instant appeal is dismissed, and the judgment entered by the bankruptcy court in Adversary Proceeding No. 03-0060 is affirmed.¹

Jurisdiction

This Court has jurisdiction to entertain bankruptcy appeals pursuant to 28 U.S.C. § 158(a)(1).

Standard of Review

On appeal, the district court reviews rulings of law de novo and findings of fact for clear error. Stornawaye Financial Corporation v. Hill (In re Hill), 562 F.3d 29, 32 (1st Cir.2009) ("[W]e concentrate on the bankruptcy court's decision, reviewing its findings of fact for clear error and its conclusions of law de novo"); Prebor v. Collins (In re I Don't Trust), 143 F.3d 1, 3 (1st Cir.1998); Jeffrey v. Desmond, 70 F.3d 183, 185 (1st Cir.1995). "Under an abuse of discretion standard, a reviewing court cannot reverse unless it has a `definite and firm conviction that the court below committed a clear error of judgment' in the conclusion it reached upon a weighing of the relevant factors." In re Hosseinpour-Esfahani, et al. (Taylor v. Hosseinpour-Esfahani), 198 B.R. 574, 577 (9th Cir. BAP 1996), citing Marchand v. Mercy Medical Ctr., 22 F.3d 933, 936 (9th Cir.1994). "Evidentiary rulings by the bankruptcy court are subject to the `abuse of discretion' standard." Williamson v. Busconi 87 F.3d 602, 603, n. 4 (1st Cir.1996), citing United States v. Cotto-Aponte, 30 F.3d 4, 6 (1st Cir.1994).

"The standard of review on this appeal requires that we respect, unless `clearly erroneous,' all findings of fact by the bankruptcy court, which includes any finding of actual reliance and any raw fact findings pertinent to the issue of justifiable reliance. Brandt v. Repco Printers & Lithographies, Inc., 132 F.3d 104, 107-08 (1st Cir.1997)." In re Spadoni, 316 F.3d 56, 58 (1st Cir.2003). "A court reviewing a decision of the bankruptcy court may not set aside findings of fact unless they are clearly erroneous, giving `due regard to the opportunity of the bankruptcy court to judge the credibility of the witnesses. (Citations omitted)." Palmacci v. Umpierrez, 121 F.3d 781, 785 (1st Cir.1997).

"A finding of fact is clearly erroneous, although there is evidence to support it, when the reviewing court, after carefully examining all the evidence, is `left with the definite and firm conviction that a mistake has been committed.'" Palmacci, 121 F.3d at 785, citing Anderson v. City of Bessemer City, 470 U.S. 564, 573, 105 S.Ct. 1504, 84 L.Ed.2d 518 (1985). "Deference to the bankruptcy court's factual findings is particularly appropriate on the intent issue `[b]ecause a determination concerning fraudulent intent depends largely upon an assessment of the credibility and demeanor of the debtor.'" Id., citing In re Burgess, 955 F.2d 134, 137 (1st Cir.1992). "Particular deference is also due to the trial court's findings that depend on the credibility of other witnesses and on the weight to be accorded to such testimony." Id., citing Fed.R.Bank.R. 8013; Keller v. United States, 38 F.3d 16, 25 (1st Or. 1994).

Moreover, when the parties do not contest the findings of fact made by the bankruptcy court, the appeals court will not disturb them. In re Joelson, 427 F.3d 700, 702 (10th Cir.2005) ("Because the parties do not specifically contest the bankruptcy court's findings of fact, the court will not disturb this ruling on appeal"), citing Jenkins v. Hodes (In re Hodes), 287 B.R. 561, 570 (D.Kan.2002), aff'd, 402 F.3d 1005 (10th Cir.2005).

Lastly, when the bankruptcy court's interpretation of the Bankruptcy Code is in question, then we have a question of law. "The application of the code to a particular case poses a mixed question of law and fact, which is subject to review for clear error unless the bankruptcy court's analysis was infected by legal error or based on a mistaken impression of applicable legal principles." (Emphasis ours). Miller v. Peterson (In re Independent Engineering Company, Inc.), 197 F.3d 13, 16 (1st Cir.1999), citing Williams v. Poulos, 11 F.3d 271, 278 (1st Cir.1993); see also Inwood Labs., Inc. v. Ives Labs., Inc., 456 U.S. 844, 855 n. 15, 102 S.Ct. 2182, 72 L.Ed.2d 606 (1982). "Mixed questions of law and fact are reviewed `along a degree-of-deference continuum, ranging from plenary review for law-dominated questions to clear-error review for fact-dominated questions.'" Adams Co-Operative Bank v. Greenberg (In re Greenberg), 229 B.R. 544, 546 (1st Cir. BAP 1999), citing Johnson v. Watts Regulator Co., 63 F.3d 1129, 1132 (1st Cir.1995); Accord Servicios Comerciales Andinos, S.A. v. General Electric Del Caribe, Inc., 145 F.3d 463, 469 (1st Cir.1998); Inmates of Suffolk County Jail v. Rouse, 129 F.3d 649, 661 (1st Cir.1997).

In the instant appeal, Mitsubishi contests only the bankruptcy court's Order declining to adopt certain proposed amended findings of fact, as well as the Judgment of non-dischargeability of the debt. See Appellant's Brief (Docket No. 4, page 4).

Issue

The questions before the Court are: (a) whether the bankruptcy court erred when it determined that Mitsubishi's debt is dischargeable; and (b) whether the bankruptcy court erred when it declined to adopt certain proposed additional findings of fact.

Factual and Procedural Background

On November 2, 2006, the bankruptcy court entered an Opinion and Order (Docket No. 79 of Adv. Proc. No. 03-0060) ("Docket No. 79"). Upon Mitsubishi's request, the bankruptcy court made additional findings of fact, but declined to adopt others proposed by Mitsubishi. See Order of March 30, 2007 (Docket No. 92 of Adv. Proc. No. 03-0060) ("Docket No. 92").

In the instant appeal, Mitsubishi is only contesting the Order of the bankruptcy court declining to adopt the proposed additional facts, and the reasons set forth therein (Docket No. 92). Hence, the Court will describe the factual background based upon the bankruptcy court's uncontested findings, which will not be disturbed on this appeal. See In re Joelson, 427 F.3d 700.

In a nutshell, Mr. Seda, is the President, majority stockholder and personal guarantor of Lunor, Inc. ("Lunor"), a corporation organized under the laws of the Commonwealth of Puerto Rico. Lunor is a corporation that was engaged in the direct sales of vehicles to consumers of the make Mitsubishi and Hyundai, as well as vehicles' parts and accessories. Mr. Seda and his wife "are stockholders of Lunor and personal guarantors of the debts acquired by Lunor in the purchase orders object of this [adversary] proceeding. As per the express terms and conditions of the credit and/or security agreements object of the instant adversary proceeding, each individual motor vehicle sold to the corporate entity, Lunor, Inc., pursuant to same, constituted part of the collateral of the ensued debt." Opinion and Order (Docket No. 79, ¶ 3). "Mitsubishi and Lunor executed a Servicing Dealer Agreement in which Mitsubishi appointed Lunor as a non-exclusive dealer for the sale of Mitsubishi vehicles, parts and accessories." Opinion and Order (Docket No. 79, ¶ 8). "Lunor and its stockholders represented to Mitsubishi that they had the means and intention to pay for all the units sold under the security agreements and that they would honor the guarantees, as agreed." Opinion and Order (Docket No. 79, ¶ 10). "Lunor was granted the possession of the vehicles for their sale for the benefit of secured grantor Mitsubishi," Opinion and Order (Docket No. 79, ¶ 12). Lunor is an inactive corporation, and close to be dissolved, at the time the bankruptcy court entered its Opinion and Order, ¶¶ 4, 5(Docket No. 79).

On October 21, 2002, Seda and his wife filed for voluntary relief under Chapter 11 of the Bankruptcy Code, after the business relationship between debtors and Mitsubishi turned sour due to several factors, such as, poor administration of the business; interoffice loans; the issuance of bad checks; and, Seda's sudden interest in the insurance business.

As of June 2001, Lunor's out of trust sales' debt was approximately $1.5 million. Mitsubishi tried to work out a repayment plan with the owners of Lunor to no avail, as the collaterals offered by Lunor had no equity. As of March 2006, the out of trust sales'² debt well exceeded the $2 million amount.

On April 16, 2003, an adversary proceeding was filed by Mitsubishi against debtors, Norberto Seda and Myrna Olmo-Velázquez, Adv. Proc. No. 03-0060, requesting that its debt in the amount of $2,006,660.97, be exempted from discharge, as provided by 11 U.S.C. § 523(a)(2)(A) for obtaining money or credit by false pretenses and representations; 523(a)(2)(B) for obtaining money or credit through a written statement that is materially false; 523(a)(4) for fraud, and 523(a)(6) for willful and malicious injury to Mitsubishi's property and security interest. Opinion and Order (Docket No. 79). Section 523 of the Bankruptcy Code governs the exceptions to discharge. Upon the...