Rael v. GonzalesRael v. Gonzales
Case Information
*1 UNITED STATES BANKRUPTCY COURT DISTRICT OF NEW MEXICO
In re: GEORGE P. GONZALES, No. 23-10519-j7
Debtor.
DANIEL RAEL and GERALDINE RAEL,
Plaintiffs, v. Adversary No. 23-1041-j GEORGE GONZALES,
Defendant.
MEMORANDUM OPINION
Before the Court is Plaintiffs’ latest attempt to obtain summary judgment in their favor determining that a debt resulting from a prior State Court judgment entered in favor of Plaintiffs and against Defendant is non-dischargeable under 11 U.S.C. § 523(a)(2)(A) and/or (a)(6) based on the preclusive effect of the State Court’s judgment and related findings and conclusions. See Plaintiff’s [sic.] Renewed Motion for Summary Judgment (“Renewed Motion” – Doc. 55) and Plaintiff’s [sic.] Supplement to the Renewed Motion for Summary Judgment (“Supplement” – Doc. 65). The Defendant did not respond to the Renewed Motion for summary judgment or to the Supplement. The Renewed Motion and Supplement remain defective in form in several *2 respects. [3] Nevertheless, because Plaintiffs have attached certified copies of 1) the State Court’s Findings of Fact and Conclusions of Law (“FFCL”), [4] 2) the Final Judgment entered in the State Court, [5] 3) the Transcript of Proceedings from the hearing held March 28, 2022, in the State Court (“First Transcript”), [6] and 4) the Transcript of Proceedings from the bench trial held in the State Court on June 22, 2022 (“Second Transcript”), [7] and because the Court is satisfied that the State Court’s FFCL and Final Judgment are entitled to preclusive effect establishing the non- dischargeable nature and amount of the debt, the Court will grant summary judgment in favor of Plaintiffs determining that a portion of the debt awarded in the Final Judgment attributable to Defendant’s non-dischargeable conduct is non-dischargeable.
BACKGROUND AND PROCEDURAL HISTORY
Defendant George Gonzales filed a voluntary petition under chapter 7 of the Bankruptcy Code on July 7, 2023. Pre-petition, Plaintiffs Daniel Rael and Geraldine Rael obtained a judgment against Mr. Gonzales in the amount of $454,613.04 entered in an action styled, Daniel Rael and Geraldine Rael v. George Gonzales, Casaundra Luckey, and Wells Fargo Bank, N.A. , Case No. D-1333-CV-2019-00078, filed in the Thirteenth Judicial District Court, County of Cibola, State of New Mexico (the “State Court Action”). [8] Plaintiffs initiated this adversary *3 proceeding on October 2, 2023, by filing a Complaint Objecting to Discharge of Debt Pursuant to 11 U.S.C. § 523(a)(2)(A), 11 U.S.C. § 523(a)(4) and 11 U.S.C. § 523(a)(6). [9]
Plaintiffs filed the Renewed Motion on September 24, 2024. [10] The Court noted certain deficiencies in the Renewwed Motion and fixed a deadline of December 2, 2024, for Plaintiffs to supplement the Renewed Motion if they wished to do so. [11] Plaintiffs obtained an extension of the deadline to supplement the Renewed Motion fixed in the Court’s Order and filed the Supplement on December 16, 2024. [12] Plaintiffs also filed and served on Defendant a notice of deadline to object to the Renewed Motion, fixing a 21-day deadline to object to the Renewed Motion and Supplement. [13] Defendant has not timely or untimely filed an objection or other response in opposition to the Renewed Motion and Supplement.
FACTS NOT SUBJECT TO GENUINE DISPUTE
The preclusive effect of the State Court’s FFCL and Final Judgment, and the State Court record before this Court, establish that the following facts are not subject to genuine dispute: [14]
1. Defendant entered into a purchase agreement for the sale of certain severely fire- damaged property (the “Property”) to Plaintiffs. [15]
2. Plaintiffs paid Defendant the entire $15,000 required by the purchase agreement for the purcase of the Property. [16]
*4 3. Plaintiffs spent $99,550.95 for labor and materials to renovate the Propeerty. The reonovation was performed by Plaintiff Mr. Rael’s contruction company. [17]
4. The market value of the renovations was $124,436.69, which closely matched the estimate Mr. Rael gave Defendant, prior to Defendant’s sale of the Property to Plaintiffs, for Mr. Rael’s construction company to perform the renovations. [18]
5. After Plaintiffs made the last installment of the $15,000 purchase price to Defendant on May 15, 2025, Plaintiffs rented the Property to Casaundra Luckey on July 1, 2015, for $850.00 per month. [19]
6. Ms. Luckey made rental payments to Plaintiffs from July 1, 2015, to October 9,
2018. [20]
7. Defendant knew that Casaundra Luckey was renting the Property from Plaintiffs. [21]
8. On January 18, 2019, Defendant signed a warranty deed conveying the Property to Casaundra Luckey for $90,000.00 even though she was willing to pay $125,000 for the Property. [22]
9. When he secretly sold the Property to Cassundra Luckey, Defendant knew that Plaintiffs had paid him the full $15,000 purchase price for the Property, that he was obligated to convey the Property to Plaintiffs, that Plaintiffs had invested a signficant amount renovating the *5 Property that substantially increased its value, and that Plaintiffs were renting the Property to Casaundra Luckey. [23]
10. Defendant intentionally interfered with the lease agreement between Ms. Luckey
and Plaintiffs. [24]
11. Defendant never contacted Plaintiffs about the dispute over ownership of the Property and never told Plaintiffs that he planned to sell the Property to Ms. Luckey. [25]
12. Defendant knew that the higher price he obtained in the second sale was attributable to the Plaintiffs’ renovations to the Property, but he never reimbursed Plaintiffs for their work. [26]
13. Defendant’s conduct was willful, malicious, and in bad faith. [27] 14. Plaintiffs filed a complaint initiating the State Court Action on March 8, 2019. [28] 15. At a hearing held in the State Court Action on March 28, 2022, the State Court
determined that it would consider Defendant’s evidence regarding liability at the trial on damages. [29]
16. The State Court held a final evidentiary hearing in the State Court Action on June
22, 2022, at which Defendant appeared and presented evidence. [30]
*6 17. The State Court considered both the merits of liability and damages at the final
evidentiary hearing held June 22, 2022, in the State Court Action. [31]
18. At the end of the hearing held June 22, 2022, the State Court stated that it would
“determine who wins and how much is owed.” [32]
19. When pressed by the State Court at the hearing held June 22, 2022, Defendant had
no explanation for his conduct. [33]
20. The State Court entered its FFCL on September 27, 2022. [34] 21. The State Court enterd a Final Judgment on November 1, 2022, in favor of
Plaintiffs and against Defendant in the amount of $454,613.04, consiting of $177,686.69 in compensatory damages ($15,000 as compensation for Plaintiffs’ purchchase price for the Property, $124,436.69 as compensation for unjust enrichment, and $38,250 for lost rents), $250,000 in punitive damages, and $26,926.35 to reimburse Plaintiffs for their legal fees and costs. [35]
DISCUSSION
A. Summary Judgment Standards and the Defendant’s Version of the Events Underlying Plaintiffs’ Claims
Defendant did not file an objection or response to the Renewed Motion. Nevertheless, “a
party’s failure to file a response to a motion for summary judgment is not, by itself, a sufficient
basis on which to enter judgment against the party.”
Reed v. Bennett
,
From prior filings in this adversary proceeding, the Court understands Defendant’s position with respect to Plaintiffs’ claims. Defendant maintains that Plaintiffs only paid him $2,500.00 as a downpayment, but did not pay him the full amount of the agreed upon purchase price for the Property. [36] He also disagrees that he knew Ms. Luckey was renting the Property from Plaintiffs, contending that he was made aware that Plaintiffs were renting the Property to Ms. Luckey only after Ms. Luckey asked him to sell her the Property because Plaintiffs informed her that they did not own the Property. [37] Defendant disagrees with the judgment amount, contending that Plaintiffs only spent $40,000 renovating the Property (not $96,000 as was reported to the State Court), and that punitive damages should not have been awarded because Plaintiffs failed to pay him for the Property. He also disagrees that his sale of the Property to *8 Ms. Luckey was willful and malicious, since he still owned the Property at the time of sale, and Plaintiffs did not pay him. Finally, Defendant complains that he did not receive a fair trial in the State Court Action because he did not have an attorney, and that the documentation Plaintiffs submitted to the State Court to establish that Plaintiffs paid the entire purchase price was false because it did not reflect Defendant’s signature on the receipts.
Defendant has been resolute in this adversary proceeding in stating his version of events
surrounding the sale of the Property to Plaintiffs, Plaintiffs’ renovation of the Property, and
Defendant’s later sale of the Property to Ms. Luckey. Unfortunately for Defendant, the State
Court found otherwise after an evidentairy trial on both liablity and damages at which Defendant
had a fair opportuinty to present evidence. Based on its evaluatoin of the evidence, the State
Court entered a Final Judgment against Defendant. If Defendant believes the State Court erred,
his recourse was to appeal the State Court’s Final Judgment to the New Mexico Court of Appeals
and/or to file a motion under New Mexico Rules of Civil Procedure for the Distrct Courts 1-059
and/or 1-060 asking the State Court to alter or amend the judgment or seeking relief from the
judgment. This Court cannot revisit the State Court’s findings or conclusions, but instead can
only determine whether such findings and conclusions should be given preclusive effect in this
later proceeding.
See In re Miller
,
B. New Mexico issue preclusion standards
Whether Plaintiffs are entitled to summary judgment on their non-dischargeability claims
depends on whether the FFCL and Final Judgment can be given preclusive effect under the
doctrine of issue preclusion to establish the non-dischargeable nature and amount of the debt.
Issue preclusion, also known as collateral estoppel, prevents a party who lost on an issue decided
in a prior lawsuit from relitigating the same issue in a subsequent suit.
Melnor, Inc. v. Corey (In
re Corey)
,
Issue preclusion under New Mexico law requires satisfaction of the following elements: 1) the parties in the first suit must be the same or in privity with the parties in the second suit;
2) the second suit asserts a different cause of action than the first suit; *10 3) the issue or fact was actually litigated in the first suit; and 4) the issue was necessarily determined in the first suit.
Blea v. Sandoval,
If the party seeking to apply issue preclusion satisfies these four elements, and it is put at
issue, the Court must determine whether the party against whom issue preclusion is asserted had
a full and fair opportunity to litigate the issue in the prior proceeding.
Shovelin v. Cent. New
Mexico Elec. Co-op, Inc.,
The first two elements necessary to apply issue preclusion are easily satisfied. Both
Plaintiffs and Defendant were parties to the State Court Action and are parties in this adversary
proceeding, and the non-dischargeability claims asserted in this adversary proceeding are
different than the claims asserted in the State Court Action.
See Monge v. Jayme (In re Jayme)
,
Adv. No. 15-1079-t,
The third and fourth elements necessary to apply issue preclusion are whether the issues
to be precluded in this adversary proceeding were actually litigated and necessarily determined
See also Shovelin v. Cent. New Mexico Elec. Coop., Inc.,
in the Final Judgment. The third and fourth elements are satisfied. The State Court considered both the merits of liability and damages at the final evidentiary hearing it held on June 22, 2022, at which Defendant appeared and presented evidence. The State Court’s findings were necessary to its decision.
C. Whether Defendant had a full and fair opportunity to present his defenses in the State Court Action
Defendant has complained about the State Court trial, raising the issue of whether Defendant had a full and fair opportunity to litigate the issues of liability and damages at the evidentiary hearing held on June 22, 2022. The First Transcript and the Second Transcript establish that Defendant was afforded a full and fair opportunity to present his defenses in the State Court Action. At the hearing held March 28, 2022, the State Court stated on the record that it would consider whatever evidence and defenses Defendant wished to present at the damages hearing. The FFCL entered “following the hearing on damages” were based on the evidence and testimony presented at the trial on damages. Such evidence included evidence supporting the merits of Plaintiffs’ claims as well as Defendant’s testimony. Consequently the issues determined in the State Court Action resulting in a determination of both liabilitly and damages were actually litigated at the “damages” trial. Defendant has not presented anything to this Court *12 suggesting that he did not have a full and fair opportunity to present his defenses in the State Court Action.
All of the elements under New Mexcico law thus have been satisfied to give the State Court Judgmnet and the State Court findings and conclusions issue preclusive effect.
D. Whether the State Court’s FFCL and Final Judgment preclusively establish Plaintiffs’ non-dischargeability claims
The Court must determine whether the State Court’s findings and conclusions resulting in the entry of its Final Judgment sufficiently satisfy the non-dischargeability elements under § 523(a)(2)(A) and/or (a)(6). In addition, if the findings and conclusions are entitled to issue preclusive effect, the Court must determine whether the Final Judgment fixes the amount of the non-dischargeable debt.
A party requesting a non-dischargeable judgment under any of the subsections of § 523
must prove all of the required elements by a preponderance of the evidence.
Grogan v. Garner
,
1. Actual fraud under § 523(a)(2)(A) Debts “for money, property, [or] services, . . . to the extent obtained by . . . false pretenses, a false representation, or actual fraud,” are non-dischargeable under § 523(a)(2)(A). Plaintiffs assert that Defendant committed actual fraud by selling the Property to Ms. Luckey when he knew that Plaintiffs had paid him the full purchase price and knew that he was obligated to convey the Property to Plaintiffs.
Actual fraud under § 523(a)(2)(A) “denotes any fraud that ‘involv[es] moral turpitude or
intentional wrong.’”
Husky Int’l Elecs., Inc. v. Ritz
,
The FFCL upon which Plaintiffs rely to establish their claim under § 523(a)(2)(A) do not include a specific finding of fraud. Yet, it is clear from the State Court’s fact findings that Defendant engaged in an intentional scheme to deprive Plaintiffs of their legal right to obtain the Property upon their payment of the purchase price in full.
The FFCL include findings that Plaintiffs paid Defendant the entire $15,000 for the Property as required under the Purchase Agreement, [44] that Defendant secretly sold the Property a second time to Ms. Luckey for $90,000 when he knew that he had been fully paid by Plaintiffs and was obligated to convey the Property to Plaintiffs, [45] that Defendant knew that the higher price for the sale of the Property to Ms. Luckey was due to Plaintiffs’ renovations to the Property, but he never reimbursed Plaintiffs for their work, [46] that Defendant intentionally interfered with the Plaintiffs’ lease with Ms. Luckey, [47] and that Defendant’s conduct was willful, malicious, and in bad faith. [48] These fact findings show that Defendant Defendant intentionally and wrongfully circumvented his obligation to convey the Property to Plaintiffs and cheated Plaintiffs of their legal right to the Property. By selling the renovated Property to Ms. Luckey for a higher price, as a result of his fraudlent conduct, he obtained the benefit of Plaintiffs’ renovations to the Property without paying for them. Further, the FFCL establish Defendant’s deceitful course of conduct and subjective wrongful intent in selling the Property a second time to Ms. Luckey.
In addition, the FFCL and Final Judgment include an award of punitive damages based
on the State Court’s conclusion that Defendant “had a culpable state of mind” and that “his
conduct was willful, malicious, and in bad faith.” The Court may infer fraud based on a State
Court’s award of punitive damages, provided such award necessarily requires a finding of all
non-dischargeabilty elements.
See In re Cantrell
,
New Mexico law “does not require a finding of fraud in the classical sense to support a
punitive damage award.”
Jones v. Auge
,
The State Court awarded punitive damages based on its conclusion that Defendant had “a
culpable mental state” and that Defendant’s conduct was “willful, malicious, and in bad faith.”
Under New Mexico law, “[c]ircumstances which could make punitive damages appropriate in a
breach of contract case include . . . an intentional breach accompanied by fraud.”
Bogle v.
Summit Inv. Co.
,
Thus, even though the FFCL do not include a specific fraud finding, the State Court’s
award of punitive damages based on Defendant’s “culpable state of mind,” “willful and
malicious” conduct, and “bad faith,” taken in the context of the State Court’s underlying fact
findings describing Defendant’s actions in selling the Property to Ms. Luckey, further establish
the required elements of Plaintiffs’ actual fraud claim under § 523(a)(2)(A).
See Beard Research,
Inc. v. Kates (In re Kates)
,
2.
Willful and malicious injury under § 523(a)(6)
Section 523(a)(6) excepts from discharge debts resulting from a debtor’s “willful and
malicious injury to another entity or to the property of another.” Non-dischargeability under
§ 523(a)(6) requires proof that the injury is both willful
and
malicious.
Panalis v. Moore (In re
Moore)
,
A willful injury is “malicious” when it is undertaken “without justification or excuse.” “To determine whether an injury is malicious, the court must review all the surrounding circumstances, including any justification or excuse offered by the debtor . . . .” Bloom , 634 B.R. at 597.
Ordinarily, breach of contract, even an intentional breach of contract, will not establish a
non-dischargeability claim under § 523(a)(6).
Lockerby v. Sierra
,
The same facts that preclusively establish Plaintiffs’ actual fraud claim also satisfy the non-dischargeability elements under § 523(a)(6). In particular, the State Court found that Defendant “knew that he had been fully paid and was obligated to convey the Property to Plaintiffs when he instead secretly sold [the Property] a second time to Ms. Luckey.” The State Court also found that Defendant knew that he obtained a higher sales price for the Property from Ms. Luckey because of Plaintiffs’ renovations to the Property, but never reimbursed Plaintiffs for the renovation costs. These fact findings establish that Defendant’s secret sale of the Property to Ms. Luckey was willful, meaning that Defendant acted intentionally knowing that his sale of *19 the Property to Ms. Luckey was substantially certain to cause Plaintiffs’ harm. It was not merely a deliberate or intentional act that lead to injury.
Next, the State Court’s fact finding that “when pressed, Defendant had no explanation for his conduct” establishes that Defendant’s actions causing willful injury to Plaintiffs were without justification or excuse.
Finally, the State Court’s FFCL included a specific finding that Defendant’s actions were
willful and malicious, and awarded punitive damages based on Defendant’s willful, malicious,
bad faith conduct. Under New Mexico law, malicious conduct necessary to support an award of
punitive damages “is the intentional doing of a wrongful act with knowledge that the act was
wrongful.”
Bogle
,
*20 E. Whether the Final Judgment establishes the total amount of the non-dischargeable debt
Before giving preclusive effect to a damage award, the Court must exercise care “to
ensure that all damages arise solely from the prohibited § 523(a) conduct.”
Murphy v. Spencer
(In re Spencer)
, Adv. No. 15-1052t,
The FFCL enumerated the following damages:
$15,000 based on the purchase price of the Property $124,436.69 based on the value of the renovations as compensation for Defendant’s unjust enrichment $38,250.00 based on lost rents had Defendant not interfered with Plaintiffs’ lease of the Property to Ms. Luckey $250,000.00 punitive damages
$26,926.35 attorney’s fees and costs *21 Based on these figures, the State Court entered a total judgment in the amount of $454,613.04, comprised of $177,686.60 in compensatory damages, $250,000.00 in punitive damages, and $26,926.35 in attorney’s fees and costs.
Consistent with
Cohen
, the Court concludes that, except for the $15,000 awarded to
compensate Plaintiffs for the purchase price of the Property, the total judgment amount arises
from Defendant’s non-dischargeable conduct and fixes the amount of the non-dischargeable debt.
The $15,000 is not traceable to Defendant’s non-dischargeable conduct, since Plaintiffs would
have been required to pay that price to obtain the Property even in the absence of Defendant’s
fraud. The FFCL do not establish that Defendant never intended to transfer the Property to
Plaintiffs when the parties first entered into the purchase agreement for the Property. As for the
remainder of the damages, including the attorney’s fees and costs awarded by the State Court,
those damages result from Defendant’s non-dischargeable conduct, including his willful and
malicious breach of the contract and his fraudulent scheme to deprive Plaintiffs’ of the Property
by selling the Property a second time to Ms. Luckey. In other words, Defendant’s “single course
of related conduct,” caused Plaintiffs’ injuries; consequently, all but the $15,000 awarded in the
Final Judgment is properly included in the non-dischargeable debt.
Kates
,
Plaintiffs also request the Court to award attorneys’ fees in bringing this non-
dischargeability action. Under the “American Rule” applied in federal litigation, including
bankruptcy litigation, with two major exceptions, a prevailing party is not ordinarily entitled to
collect attorney's fees from his opponent.
Busch v. Hancock (In re Busch)
,
CONCLUSION
Based on the foregoing, the Court will grant the Renewed Motion, in part, determining that all but $15,000 of the debt embodied in the Final Judgment is non-dischargeable under § 523(a)(2)(A) and (a)(6). The Court otherwise will deny the relief requested in the Renewed Motion. The Court will enter a separate judgment consistent with this Memorandum Opinion.
____________________________ ROBERT H. JACOBVITZ United States Bankruptcy Judge Date entered on docket: January 23, 2025
COPY TO:
Dennis A Banning
Attorney for Plaintiffs
New Mexico Financial Law
320 Gold Ave, SW #1401
Albuquerque, NM 87102-3299
George P Gonzales
1736 Cedar Drive
Grants, NM 87020
Notes
[1] Plaintiffs filed two motions for summary judgment (Doc. 8 and Doc. 55), a motion to reconsider the denial of Plaintiffs’ motion for summary judgment (Doc. 46 and Doc. 48), and three supplements to existing motions for summary judgment (Doc. 30, Doc. 42, and Doc. 65).
[2] All future statutory references are to title 11 of the United States Code. The complaint initiating this adversary proceeding included a non-dischargeability claim under § 523(a)(4) based on fraud or defalcation while acting in a fiduciary capacity. See Doc. 1. The Renewed Motion does not seek summary judgment on Plaintiffs’ non-dischargeability claim under § 523(a)(4).
[3] For example, instead of stating as a fact not subject to genuine dispute that Defendant’s conduct was willful and malicious, the Renewed Motion identifies as a numbered fact not subject to genuine dispute that the state court, “[m]ade a specific Finding of Fact (No. 37) that Defendant’s conduct was ‘willful, malicious, and in bad faith.’” Such a statement of “fact” simply identifies what the State Court found without stating as a fact not in genuine dispute that Defendant acted willfully and maliciously. Many of the numbered facts in the Renewed Motion suffer from this defect. Similarly, two of the numbered facts not subject to genuine dispute merely state that a copy of a transcript from the State Court proceedings is attached as an exhibit. See Motion, ¶¶ 31 and 32.
[4] See Supplement (Doc. 65), Exhibit 4 (Doc. 65-4).
[5] See Supplement (Doc. 65), Exhibit 5 (Doc. 65-5).
[6] See Supplement (Doc. 65), Exhibit 6 (Doc. 65-6).
[7] See Supplement (Doc. 65), Exhibit 7 (Doc. 65-7).
[8] See Final Judgment.
[9] Doc. 1.
[10] Doc. 55.
[11] See Order Regarding Plaintiff’s Renewed Motion for Summary Judgment (“Order” – Doc. 58).
[12] See Doc. 63 and Doc. 65.
[13] See Doc. 66. NM LBR 7056-1(c) fixes a response deadline of 21 days from the date of service of a motion for summary judgment.
[14] Some of the facts identified in this Memorandum Opinion as facts not subject to genuine dispute are supported by facts and mixed questions of fact and law labeled as “Conclusions” in the State Court’s FFCL. Such fact findings may appropriately be given preclusive effect even though they are identified as “Conclusions” in the FFCL.
[15] FFCL, ¶ 3.
[16] FFCL, ¶ 10.
[17] FFCL, ¶¶ 13, 14, 16
[18] FFCL, ¶¶ 13, 18.
[19] FFCL, ¶¶ 9, 20
[20] FFCL, ¶ 22.
[21] FFCL, ¶ 28
[22] FFCL, ¶¶ 24, 29, 34.
[23] FFCL, ¶¶ 25, 26, 27, 28, 37.
[24] FFCL, ¶ H.
[25] FFCL, ¶ 39.
[26] FFCL, ¶ 37.
[27] FFCL, ¶ 37.
[28] See Supplement (Doc. 65), Exhibit 1 (Doc. 65- 1) – Complaint for Money Damages for Breach of Written Contract, Breach of the Covenant of Good Faith and Fair Dealing, Fraud, Fraudulent Misrepresentation, Unjust Enrichment, Tortious Interference with Contractual Relations, Intentional Infliction of Emotional Distress, and Quiet Title.
[29] See First Transcript, pp. 11 - 13.
[30] See Second Transcript.
[31] Id.
[32] Second Transcript, p. 51, l. 12.
[33] FFCL, ¶ 37.
[34] FFCL.
[35] Final Judgment; FFCL ¶¶ D, G, I, J, K, L.
[36] See Answer to Plaintiff Judgement (“Answer” – Doc. 41) , ¶¶ 1, 4, 6, 16, and p. 4.
[37] See Answer, ¶ 2.
[38] Answer, ¶¶ 15, 16.
[39] Answer, ¶ 17.
[40] Answer, p. 4 (¶¶ 18 -20).
[41] See Grogan v. Garner ,498 U.S. 279 , 285 n.11 (1991) (“[C]ollateral estoppel [issue preclusion] principles do indeed apply in discharge exception proceedings pursuant to § 523(a).”); Taylor v. Jasper (In re Jasper) ,356 B.R. 787 , No. NM-06-092,2007 WL 390287 , at *3 (10th Cir. BAP Feb. 5, 2007) (“Collateral estoppel [issue preclusion] may be applied in bankruptcy proceedings to determine dischargeability of a debt.”), aff’d ,312 F. App’x 97 (10th Cir. 2008).
[43] The Court: [S]o we need to set it for a trial on the damages. At that trial, if Mr. Gonzales has any merit to whatever claims he would raise as a defense to liability, I can consider it then and I can aways set it aside at a hearing, but I’m not going to do it just because someone said I’m not getting pleadings that are shown by counsel to be mailed or I couldn’t get there because my car doesn’t do well in snow, but Mr. Gonzales will have an opportunity, not just to defend against a damage amount, but to tell my why he thinks he should win. First Transcript, p. 11, lines 7–17. [W]e’ll give you a whole day for this trial on damages and that will allow Mr. Gonzales to bring whatever evidence he has to tell me why he thinks there shouldn’t be liability to begin with. First Transcript. p. 11, lines 24-25 and p. 12, lines 1-2.
[44] FFCL, ¶ 10.
[45] FFCL, ¶ 37.
[46] Id.
[47] FFCL, ¶ H.
[48] Id.
[49]
See In re Plyam
,
[50]
In re Marguilies,
[51] Id.
[52] Id. See also FFCL, ¶ 26 (“[Defendant] knew that the [Plaintiffs] had invested significant money renovating the Property.”); FFCL ¶ 27 (“[Defendant] knew that the renovations had significantly increased the value of the Property.”); FFCL ¶ 31 (“[Defendant] never reimbursed [Plaintiffs] for the value of the renovations.”).
[53] FFCL, ¶ 37.
[54] FFCL, ¶¶ 37 and K.
[55]
Cohen
nevertheless “requires the alleged fraud proximately caused the debt in order for it to be
excepted from discharge.”
Hernandez v. Musgrave (In re Musgrave)
, BAP Nos. CO-10-049, 08-
25165,
[56] Final Judgment.