Tobias v. Alvarado (In re Alvarado)

• Decision Date: 27 November 2019
• Docket Number: Case No. 18-11961-JDL,Adv. No. 18-01071-JDL
• Citation: 608 B.R. 877
• Parties: IN RE: Rosalba ALVARADO, Debtor. Esmeralda Avalos Tobias, Plaintiff, v. Rosalba Alvarado, Defendant.
• Court: U.S. Bankruptcy Court — Western District of Oklahoma

608 B.R. 877

IN RE: Rosalba ALVARADO, Debtor.Esmeralda Avalos Tobias, Plaintiff,

v.Rosalba Alvarado, Defendant.

Case No. 18-11961-JDL

Adv. No. 18-01071-JDL

United States Bankruptcy Court, W.D. Oklahoma.

Signed November 27, 2019

Mark B. Toffoli, Gooding Law Firm, Oklahoma City, OK, for Plaintiff.

Timothy L. Wallace, Wallace Law Firm, P.C., Oklahoma City, OK, for Defendant.

OPINION AND ORDER DETERMINING DEBT NON-DISCHARGEABLE

Janice D. Loyd, U.S. Bankruptcy Judge

I. Introduction

This adversary proceeding is before the Court for decision after a trial conducted on July 31, 2019,¹ and the post-trial submission by both parties of Proposed Findings of Fact and Conclusions of Law. Plaintiff, Esmeralda Tobias ("Tobias"), commenced this adversary proceeding seeking to have the debt owed her by Defendant/Debtor, Rosalba Alvarado ("Alvarado"), determined non-dischargeable under 11 U.S.C. § 523(a)(2)(A)² as having been incurred by false pretenses, misrepresentation or actual fraud.³

After hearing the arguments of counsel, considering all the documentary and testimonial evidence and weighing the credibility of the witnesses, the Court makes the following Findings of Fact and Conclusions of Law pursuant to Rule 52 of the Fed.R.Civ.P., made applicable by Fed.R.Bankr.P. Rule 7052.⁴ For the reasons set forth herein, the Court finds that Tobias has met her burden of proof that the debt owed her by Alvarado is non-dischargeable. A separate judgment will be entered pursuant to Rule 9021.

II. Jurisdiction

The Court has jurisdiction over this matter under 28 U.S.C. §§ 1334(a) and (b) and 157(a) and (b). This is a core proceeding under 28 U.S.C. § 157(b)(2)(I) as it concerns a determination as to the dischargeability of a particular debt.

III. Factual Findings

1. Alvarado filed her voluntary petition for relief under Chapter 13 of the Bankruptcy Code, 11 U.S.C. §§ 101, et seq. , on May 10, 2018.

2. The last day for filing objections to discharge was August 20, 2018. On that date, Tobias filed her Amended Adversary Complaint alleging that the debt owed her by Alvarado was obtained by fraud and thus non-dischargeable pursuant to 11 U.S.C. § 523 (a)(2)(A).

3. Prior to the taking of any testimony at trial, counsel for both Tobias and Alvarado announced that they had stipulated as to certain facts regarding the debt owed by Alvarado to Tobias: (a) on May 19, 2017, Tobias loaned Alvarado $20,000; (b) on August 1, 2017, Tobias loaned Alvarado $30,000; (c) on November 30, 2017, Tobias loaned Alvarado $40,000; (d) on December 5, 2017, Tobias loaned Alvarado $5,000; and (e) on August 1, 2017, Tobias made a loan to Alvarado. While the parties did stipulate to the date of the August 1, 2017 loan, Tobias asserted that the same was $15,000 while Alvarado claimed it was $5,000. [Doc. 59, Tr. 7-9].⁵

4. Tobias and Alvarado became acquainted while they were co-workers for approximately eight years at Lopez Foods, a meat packing company in Oklahoma City. [Doc. 59, Tr. 13-14].

5. In 2017, approximately three years after Alvarado had left working at Lopez, she called Tobias and asked if she could come meet with her at Tobias's home. She told Tobias that she had borrowed money from a woman who was pressuring her to repay the loan. [Doc. 59, Tr. 15 & 73]. Alvarado and Tobias never previously had a business relationship. On May 19, 2017, Tobias loaned Alvarado $20,000 in cash. As assurance for repayment, Alvarado gave Tobias a $50,000 check but asked her not to cash it. [Doc. 59, Tr. 18]. Alvarado later got the check back from Tobias. [Id. ]

6. On June 6, 2017, Tobias loaned Alvarado $25,000 cash which Tobias had borrowed from her brother. At that time, Alvarado told Tobias that she had issued checks on her brother's account with which to pay Tobias, but the checks had been stolen and she thus didn't have the money to pay Tobias. [Doc. 59, Tr. 19]. That was the reason she borrowed the additional $25,000. [Id. ]

7. On June 13, 2017, Alvarado told Tobias that someone in her family or a friend had been arrested and she, Alvarado, needed to borrow another $20,000.⁶ [Doc. 59, Tr. 21]. Alvarado told Tobias that she was going to be able to repay Tobias for all the loans with the proceeds of a job which she and her brother, with whom she was in business, were expecting in the amount of $200,000. [Doc. 59, Tr. 22 - 23].

8. Tobias testified that on August 1, 2017, Alvarado borrowed another $45,000 in cash from Tobias. [Doc. 59, Tr. 24]. Again, Tobias didn't have those funds, and so she borrowed cash from her father to make the loan. [Doc. 59, Tr. 25]. To secure payment of the loan, an English-speaking notary and friend of Alvarado drew up an agreement which provided that Tobias would take ownership of Alvarado's home in the event that Alvarado failed to pay Tobias the $45,000 by September 1, 2017. [Doc. 59, Tr. 24-25]. Tobias claimed that the document, as written in English, did not represent her understanding of the agreement. [Doc. 59, Tr. 25].

9. Alvarado first testified, contrary to Tobias's testimony about her borrowing $45,000, that on August 1, 2017, she borrowed $10,000. She then testified that she did borrow $30,000 around August 1, 2017, and then borrowed $10,000 about "a day apart" or maybe together. [Doc. 59, Tr. 82]. She testified that the $10,000 was to repay her brother's business from which she had borrowed $11,000 with which she had repaid Tobias in two payments of $6,500 each [Doc. 59, Tr. 84] for interest due on the loans. [Doc. 59, Tr. 80-81]. These payments to Tobias were paid in cash at a gas station, the location of which Alvarado could not recall. No receipts were produced to collaborate these payments being made.

10. Alvarado did produce one check in the amount of $8,000 made payable to Esmeralda Tobias dated September 10, 2017 showing an endorsement by Tobias on September 15, 2017. [Doc. 59, Tr. 37-38]. Tobias, however, did not recall receiving this check, but does recall receiving cash in the amount of $1,500. [Doc. 59, Tr. 39]

11. On November 30, 2017, Alvarado borrowed another $40,000 from Tobias. Tobias testified that Alvarado told her that she needed the $40,000 to finish a construction job "and they had to go and pour the concrete or otherwise the whole job was going to be lost." [Doc. 59, Tr. 27]. Tobias further testified that Alvarado told her that "with that job she was going to pay everything off." [Id. ]. Tobias believed that Alvarado was going to "pay everything back to me based on that job." [Doc. 59, Tr. 28].

12. Alvarado testified that she borrowed the $40,000 for a friend of hers that was returning to Mexico to help her ailing mother who eventually passed away. [Doc. 59, Tr. 87-88]. She further testified that she didn't tell Tobias that she was borrowing the $40,000 to give to someone else because Tobias "never asked me." [Doc. 59, Tr. 90]. Alvarado admitted that "I know she (Tobias) thinks that the loan was for me, but the money was not for me", and "that money was for a person that is in Mexico." [Doc. 59, Tr. 87]. Alvarado testified that when she borrowed the $40,000 on November 30, 2017, her and her brother's concrete/pavement business was not operating and that she had no way to repay the loan. [Doc. 59, Tr. 105].

13. On December 5, 2017, Alvarado borrowed another $5,000 from Tobias. [Doc. 59, Tr. 91]. Alvarado testified that she needed the $5,000 to deposit in her bank account in order to qualify for a bank loan. [Doc. 59, Tr. 91-92]. She didn't get the bank loan, but she never repaid Tobias the $5,000 because while she could have "I had other plans for me to be able to pay her but it didn't work." [Doc. 59, Tr. 92]. To the contrary, Tobias testified that the $5,000 loan was made because Alvarado told her that "she had a license to be able to work in roofing" and "told me that she was going to Florida, that there was a lot of work over there, and she could get all the money very quickly." [Doc. 59, Tr. 31].

14. Tobias testified that she made another $5,000 loan on December 15, 2017, again based on Alvarado's representation that she needed the money to go to Florida for work. [Doc. 59, Tr. 31]. Alvarado testified that she did not borrow the $5,000 on December 15, 2007. [Doc. 59, Tr. 91]. There was no testimony that Alvarado ever went to Florida to do roofing jobs. Alvarado testified that she borrowed the money from Tobias in order to pay people from whom she had previously obtained loans and to replace funds in her and her brother's business which she had taken money from. [Doc. 59, Tr. 94].

IV. The Law

A. Exceptions to Discharge-General Considerations

A discharge of indebtedness in bankruptcy is reserved for the "honest but unfortunate debtor who surrenders for distribution the property which he owns at the time of the bankruptcy." Local Loan Co. v. Hunt , 292 U.S. 234, 244, 54 S.Ct. 695, 78 L.Ed. 1230 (1934) ; Grogan v. Garner , 498 U.S. 279, 286, 111 S.Ct. 654, 112 L.Ed.2d 755 (1991). In order to effectuate this "fresh start" policy of bankruptcy relief, exceptions to discharge are narrowly construed with all doubts resolved in the Defendant's favor. Bellco First Federal Credit Union v. Kaspar (In re Kaspar) , 125 F.3d 1358, 1361 (10th Cir. 1997) ; Chevy Chase Bank FSB v. Kukuk (In re Kukuk) , 225 B.R. 778, 782 (10th Cir. BAP 1998) ; Miller v. Gentry (In re Miller) , 55 F.3d 1487, 1489 (10th Cir.), cert. denied , 516 U.S. 916, 116 S.Ct. 305, 133 L.Ed.2d 210 (1995). The burden of proof for establishing an exception to discharge is a preponderance of the evidence. Grogan v. Garner , 498 U.S. 279, 286-87, 111 S.Ct. 654, 112 L.Ed.2d 755 (1991).

B. Section 523(a)(2)(A)

Section 523(a)(2)(A) is phrased in the disjunctive, meaning that false pretenses, false representation and actual fraud are three separate grounds for non-dischargeability, and these independent causes of action require proof of different elements. Bank of Cordell v. Sturgeon (In re Sturgeon) , 496 B.R. 215, 222-23 (10th Cir. BAP 2013) ; Houston v. Munoz, (In re Munoz) , 536...