Penix v. Parra (In re Parra)

• Decision Date: 18 September 2012
• Docket Number: Bankruptcy No. 7–11–14171 JA.,Adversary No. 11–1232 J.
• Citation: Penix v. Parra (In re Parra), 483 B.R. 752 (Bankr. N.M. 2012)
• Parties: In re Ruben PARRA and Cynthia Parra, Debtors. Sonny Penix, Plaintiff, v. Ruben Parra and Cynthia Parra, Defendants.
• Court: U.S. Bankruptcy Court — District of New Mexico

483 B.R. 752

In re Ruben PARRA and Cynthia Parra, Debtors.Sonny Penix, Plaintiff,

v.Ruben Parra and Cynthia Parra, Defendants.

Bankruptcy No. 7–11–14171 JA.

Adversary No. 11–1232 J.

United States Bankruptcy Court, D. New Mexico.

Sept. 18, 2012.

Stephen P. Curtis, Stephen P. Curtis, Attorney at Law, P.C., Albuquerque, NM, for Plaintiff.

Gregory Abelicio Baca, Baca, Findlay, & Dziak, LLC, Albuquerque, NM, for Defendants.

MEMORANDUM OPINION

ROBERT H. JACOBVITZ, Bankruptcy Judge.

THIS MATTER is before the Court following a trial on the merits of this adversary proceeding to determine the dischargeability of certain debt owing to Plaintiff Sonny Penix (“Plaintiff” or Mr. Penix) that arose during the course of an oral agreement between Defendant Ruben Parra (“Defendant” or Mr. Parra) and Mr. Penix regarding the sale of used vehicles on consignment. Plaintiff was represented by Stephen M. Curtis. Defendants Ruben Parra and Cynthia Parra were represented by Gregory Baca. As a preliminary matter, Defendants moved to dismiss all claims against Defendant Cynthia Parra on grounds that the Plaintiff has not alleged that Ms. Parra participated in any actions relating to the debt that Plaintiff asserts is nondischargeable. With the parties' agreement, the Court granted the motion to dismiss Ms. Parra from this adversary proceeding, provided that any determination that the debt is a nondischargeable community debt will be binding as to Ms. Parra. At trial Defendant Ruben Parra invoked his Fifth Amendment privilege against self-incrimination and declined to answer most of the questions asked of him by Plaintiff's counsel on direct examination.

After consideration of the evidence and testimony admitted at trial, and being otherwise sufficiently informed, the Court finds that a portion of the debt is non-dischargeable under 11 U.S.C. § 523(a)(2)(A) or 11 U.S.C. § 523(a)(6). The nondischargeable debt falls into two categories: first, where Mr. Parra sold a vehicle under a duplicate title; and second, where Mr. Parra provided Mr. Penix with a title for a car that already had been sold as a substitute title. The remainder of the debt at issue in this adversary proceeding is dischargeable.

FACTS

Defendant Ruben Parra is a car salesmen who operated a retail used car sales business under the name Horizon Car Sales. Initially, Mr. Parra ran his business from a location on Juan Tabo Boulevard in Albuquerque, New Mexico. Later Mr. Parra moved his business to a location on Lomas Boulevard in Albuquerque, New Mexico.

Plaintiff Sonny Penix has been in the car business since 1977. He has operated both wholesale and retail used car sales businesses. Mr. Penix operated his retail and wholesale car businesses under the name Car Corporation. After Mr. Penix stopped selling cars at retail, he continued to operate a wholesale car sales business located on Wyoming Boulevard in Albuquerque, New Mexico.

Mr. Parra first met Mr. Penix approximately ten or twelve years ago when Mr. Parra came to Mr. Penix's wholesale used car sales operation on Wyoming Boulevard. Mr. Parra began purchasing some cars from Mr. Penix for sale at Mr. Parra's retail used car sales operation on Juan Tabo. Later, after Mr. Parra moved his business to Lomas Boulevard, Mr. Parra and Mr. Penix significantly increased their business dealings. From 2002 through 2007 Mr. Parra and Mr. Penix enjoyed a mutually beneficial business relationship and Mr. Penix considered Mr. Parra a friend. In approximately 2008, Mr. Parra's business suffered a decline due in large part to the ailing economy. He eventually closed his business. He now just buys and sells an average of two vehicles a month as a private citizen without a license.

Defendants filed their voluntary petition under Chapter 7 of the Bankruptcy Code on September 21, 2011. Mr. Parra listed Mr. Penix as a creditor in his bankruptcy case as holding a claim of $75,000.00. SeeCase No. 7–11–14171 JA, Schedule F–Docket No. 1 Mr. Penix filed this adversary proceeding on December 21, 2011.

The Parties' Agreement

Mr. Penix placed used vehicles on Mr. Parra's lot on consignment for sale by Mr. Parra to the public. Under the parties' oral agreement, Mr. Penix would purchase vehicles that Mr. Parra would agree to place on his retail car sales lot. Mr. Penix would hold the titles to those vehicles until Mr. Parra sold the vehicles and paid Mr. Penix an agreed amount (the “Agreed Amount”) for the vehicle plus a $500.00 fee (the Agreed Amount plus the $500.00 fee hereinafter is called the “Release Price.”). Mr. Penix would then release the title to Mr. Parra. The parties maintained a list of the vehicles sold on consignment, including the last four digits of the vehicle identification number, the make and model of the vehicle, and the Release Price which included the $500.00 fee. See Exhibit 24. Sometimes Mr. Parra would finance the sales of the vehicles himself, but most of the time Mr. Parra would sell the chattel paper to finance companies. Mr. Parra would pay Mr. Penix for vehicles that Mr. Parra sold from his lot with a check, and instruct Mr. Penix to hold the check for a period of time, typically seven to ten days, until Mr. Parra could sell the chattel paper. Upon sale of the chattel paper, Mr. Parra would tell Mr. Penix that he should deposit the checks.

The parties' business dealings were fairly relaxed and evolved over time. Towards the end of their business relationship, Mr. Parra and Mr. Penix would “swap title.” When Mr. Parra could not sell the chattel paper or otherwise pay Mr. Penix the Release Price for the vehicle, Mr. Parra would pay Mr. Penix the $500.00 fee, but swap a title by providing Mr. Penix with a substitute vehicle title to secure the Agreed Amount for the vehicle Mr. Parra sold.¹ Mr. Parra testified in his deposition that the vehicle titles that he “swapped” were “titles that Horizon had liens on, whether they would be customers that I sold them to and got them back in trade, or in some cases repos that I got back that I owned.” See Exhibit 25—Parra Deposition, p. 19, lines 6–9.

Sometime in February of 2009, Mr. Penix stopped by Mr. Parra's office to complain that he was “broke” since he knew that Mr. Parra owed him a significant amount under their oral agreement. Mr. Penix was not satisfied with the outcome of that meeting, so he went to Mr. Parra's car sales lot early one Sunday morning to look for the vehicles for which he believed he still held the titles; Mr. Penix was not able to locate any of the vehicles on the lot. The following day Mr. Penix consulted an attorney. Mr. Penix's attorney sent a demand letter to Mr. Parra seeking payment. Mr. Penix never sought to recover the vehicles at issue from Mr. Parra and did not ask Mr. Parra the whereabouts of those vehicles following Mr. Penix's visit to Mr. Parra's car sales lot in February of 2009. Mr. Penix conducted his own investigation using CarFax in an attempt to ascertain the status of the vehicles for which he believed he still held the title and for which Mr. Parra owed him the Agreed Amount or the Release Price. CarFax reports are commonly used in the car sales industry to obtain information about a vehicle's title history.

The Cars

Mr. Penix asserts that there are eighteen vehicles that he provided to Defendant Parra for which he did not receive payment of the Agreed Amount or in some cases the Release Price. In some instances Mr. Parra obtained a duplicate title for a vehicle, sold the vehicle using the duplicate title, did not obtain the title from Mr. Penix, and did not pay Mr. Penix for the vehicle or give him substitute collateral. In other instances, Mr. Parra provided Mr. Penix with a substitute vehicle title as security for another vehicle that Mr. Parra had sold on consignment, but the substitute title was for a vehicle that Mr. Parra had already sold. Consequently, the substitute title was no longer valid. On other occasions, Mr. Parra would provide Mr. Penix with a substitute title for a vehicle sold on consignment, and then sell the vehicle for which the substitute title was given without paying for or obtaining the title for that vehicle from Mr. Penix.

The evidence presented relating to each vehicle at issue in this adversary proceeding is summarized below:

1. 1999 Pontiac Grand Am

The certificate of title for this vehicle reflects that the vehicle was sold and assigned to Garcia Mitsubishi, and then reassigned by Garcia Mitsubishi to The Auto Exchange. See Exhibit 1. No evidence was presented that would indicate that Mr. Parra ever sold this vehicle. Although this vehicle appears on the list of Mr. Penix's vehicles consigned by Mr. Penix to Mr. Parra, the vehicle title in evidence does not reflect any interest in the vehicle by either Mr. Penix or Mr. Parra. Mr. Penix testified that the CarFax report for this vehicle reflected that there was no transfer of the vehicle since Mr. Penix purchased it. Mr. Penix did not see this vehicle on the car sales lot when he visited Mr. Parra's car sales lot in February 2009. The Release Price for this vehicle reflected on the parties' list is $3,200.00. See Exhibit 24. Mr. Penix acknowledged that this car “wasn't selling.” When questioned about this vehicle at is deposition, Mr. Parra testified that this car was still in stock, but that he had it moved to storage. See Exhibit 25—Parra Deposition, p. 31.

2. 1994 Ford Escort

The certificate of title for this vehicle reflects that title to this vehicle was assigned in blank by Lomas Auto Sales. See Exhibit 2. Mr. Penix testified that the CarFax report for this vehicle reflected that a new or duplicate title was issued for this vehicle after the time that Mr. Parra gave the title to this vehicle to Mr. Penix as security for another vehicle. The Release Price for this vehicle reflected on the parties' list is $2,600.00. See Exhibit 24. Mr. Penix did not see this vehicle on the car sales lot when he visited Mr. Parra's car sales lot in ...