Monge v. Rojas (In Re Monge)
826 F.3d 250
| 5th Cir. | 2016Background
- Jayme held title to the Thoroughbred Property but lost it in a 2005 foreclosure; he retained a one‑month statutory right of redemption.
- In Feb 2006 Jayme (seller) and the Monges (buyers) closed a $775,000 sale; Rojas, a mortgage broker and attorney, arranged financing and Rojas/Jayme executed a leaseback with an option to repurchase.
- Jayme redeemed the property from the foreclosing lender using sale proceeds; recording events and a later quitclaim from Citibank produced some ambiguity about cash equity delivered to Jayme and Rojas.
- Rojas and Jayme failed to make most lease payments, paid no rent after April 2008, and the Monges later defaulted and filed Chapter 11 in 2009; the Monges sued Rojas and Jayme in an adversary proceeding.
- The bankruptcy court submitted proposed findings; the district court reviewed de novo, adopted many findings, entered judgment for defendants, and the Monges appealed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Unopposed objections to proposed findings (Rule 9033) | Monges: Unopposed objections must be sustained; lack of response waives defense and requires court to accept objections | Rojas/Jayme: Failure to respond waives appeal rights but does not prevent district court from ruling on merits | Court: District court may consider and reject unopposed objections; waiver of appeal rights does not compel sustaining objections |
| Knowledge of no equity at closing | Monges: They were entitled to find equity existed for Rojas/Jayme | Defendants: HUD‑1 forms showed no cash to sellers; Monges should have known by closing | Court: Not clearly erroneous to find Monges knew or should have known no equity existed |
| Fictitious leases and signature/forgery | Monges: Leases attached to loan apps were fictitious and Monges did not sign them | Defendants: Evidence ambiguous; no expert forgery proof | Court: District court properly declined to find Monges didn’t sign; lack of expert proof and ambiguous evidence preclude finding of forgery |
| Punitive damages for willful stay violation and breach | Monges: Rojas/Jayme willfully violated automatic stay and acted with culpable state justifying punitive damages | Defendants: Conduct not egregious; believed they had possessory right; actions ambiguous | Court: No punitive damages — no egregious willful stay violation proved; breach was at most foolish/optimistic, not culpable mental state under NM law |
| Fraud and nondisclosure (title, foreclosure, bankruptcy) | Monges: Rojas/Jayme misrepresented title/earnings and concealed foreclosure/bankruptcy | Defendants: Either no actionable misrepresentation; facts were discoverable via title search; no intent to deceive | Court: Fraud fails — plaintiff did not prove intent to deceive; nondisclosure fails because duty to disclose absent where facts were discoverable |
| Duty of good faith and fair dealing | Monges: Defendants used contract to harm Monges and lacked intent to honor lease | Defendants: Paid some rent; did not intend to live rent‑free | Court: No bad faith shown; payments during lease defeat claim of no intent to perform |
Key Cases Cited
- First Nat’l Bank v. Crescent Elec. Supply Co. (In re Renaissance Hosp. Grand Prairie Inc.), 713 F.3d 285 (5th Cir. 2013) (standard for reviewing bankruptcy findings adopted by district court)
- In re Gerhardt, 348 F.3d 89 (5th Cir. 2003) (appellate review standards for bankruptcy matters)
- Young v. Repine (In re Repine), 536 F.3d 512 (5th Cir. 2008) (punitive damages for willful stay violations require egregious conduct)
- Unser v. Unser, 526 P.2d 790 (N.M. 1974) (elements of fraud under New Mexico law)
- Constr. Contracting & Mgmt., Inc. v. McConnell, 815 P.2d 1161 (N.M. 1991) (punitive damages available for contract breach only upon culpable mental state or overreaching)
- Cont’l Potash, Inc. v. Freeport‑McMoran, Inc., 858 P.2d 66 (N.M. 1993) (bad faith standard for duty of good faith and fair dealing in New Mexico)