Otero Federal Credit Union v. Herrera

UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF NEW MEXICO
In re:
TERESA PAULINE HERRERA,
Debtor. 	No. 7-07-12844 SR
OTERO FEDERAL CREDIT UNION,
Plaintiff,
v. 	Adv. No. 08-1032 S
TERESA PAULINE HERRERA,
Defendant.
MEMORANDUM OPINION ON DEFENDANT’S
MOTION FOR SUMMARY JUDGMENT
This matter is before the Court on Defendant’s Motion for
Summary Judgment (“Motion”)(doc 7) and Plaintiff’s Response (doc
9). 	No reply was filed. 	This is a core proceeding to determine
the dischargeability of a debt. 	28 U.S.C. § 157(b)(2)(I). 	For
the reasons set forth below, the Court finds that the Motion
should be denied.
Summary judgment is governed by Fed.R.Civ.P. 56,
Fed.R.Bankr.P. 7056, and NM LBR 7056-1. 	The local rule provides:
The moving party shall file with the motion a written
memorandum containing a short, concise statement In
support of the motion with a list of authorities relied
upon. 	A motion for summary judgment filed without the
required written memorandum may be summarily denied. 	A
party opposing the motion shall, within 20 days after
service of the motion, file a written memorandum
containing a short, concise statement in opposition to
the motion with authorities. 	If no such responsive
pleading is filed, the court may grant the motion for
summary judgment. 	The moving party may, within ten
days after the service of such memorandum, file a
written reply memorandum.
The memorandum in support of the motion shall set out
as its opening a concise statement of all of the
material facts as to which movant contends no genuine
issue exists. 	The facts shall be numbered and shall
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1 As discussed below, two of the proposed facts are material
and contradictory and lead to a denial of the Motion for Summary
Judgment.
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refer with particularity to those portions of the
record upon which movant relies.
A memorandum in opposition to the motion shall contain
a concise statement of the material facts as to which
the party contends a genuine issue does exist. 	Each
fact in dispute shall be numbered, shall refer with
particularity to those portions of the record upon
which the opposing party relies, and shall state the
number of the movant's fact that is disputed. 	All
material facts set forth in the statement of the movant
shall be deemed admitted unless specifically
controverted.
NM LBR 7056-1. 	The Motion sets out nine undisputed facts.
Plaintiff’s reply does not specifically controvert any of the
nine undisputed facts so they are deemed admitted. 	Additionally,
Defendant filed an answer (doc 5) to the complaint (doc 1) which
contains admissions that the Court may consider. 	The following
are therefore the proposed 1 facts:
1. 	Defendant and Marchall S. Prudencio, a non-filing co-debtor,
had a line of credit with Plaintiff.
2. 	Mr. Prudencio and Defendant shared this line of credit while
living together.
3. 	In 2007, when Mr. Prudencio and Defendant were no longer
living together, the two of them agreed that Mr. Prudencio
would be responsible for paying this line of credit.
4. 	On October 15, 2007, Mr. Prudencio decided to make a draw on
the line of credit in the amount of $5,800.00.
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5. 	At that time, they agreed that he would also make a draw of
$500 to give to Defendant.
6. 	They also agreed that Mr. Prudencio would be responsible for
making the required payments on the line of credit and that
he would be responsible for the whole debt.
7. 	At the time that the draws were made, neither Mr. Prudencio
nor Defendant had any intention of defrauding the bank. 	The
intention of Mr. Prudencio and Defendant was that the loan
would be repaid by Mr. Prudencio.
9. 	Since that time, Mr. Prudencio has continued to pay the loan
and all the payments are current.
10. 	Debtor, together with Mr. Prudencio, applied for and
obtained an unsecured line of credit from Plaintiff on May
12, 2004. 	A copy of the printout of the online application
is attached to the complaint as Exhibit “A.”
11. 	The line of credit authorized was $12,000.00.
12. 	Draws on this line of credit constituted “consumer” debt
pursuant to § 103 of the Truth in Lending Act, 15 U.S.C.
§1602 as incorporated by the United States Bankruptcy Code
at 11 U.S.C. §523(a)(2)(C)(ii)(I).
13. 	The line of credit was subject to the terms and conditions
set forth in the Loanliner Open-End Plan agreement that the
Debtor and Mr. Prudencio executed on March 18, 2004. 	A copy
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of this Loanliner Open-End Plan agreement is attached to the
complaint as Exhibit “B.”
14. 	On October 15, 2007, two draws were made on the line. 	One
draw was paid out in a cashier’s check made payable to
“Teresa Herrera” in the amount of $500.00 and the second
draw was paid out in a cashier’s check made payable to
Marchall Prudencio in the amount of $5,800.00. 	Copies of
these checks are attached to the complaint as Exhibit “C.”
15. 	Debtor had consulted with a bankruptcy attorney a number of
months prior to taking the draw on October 15, 2007.
SUMMARY JUDGMENT
The Court must grant a motion for summary judgment if the
pleadings and supporting documents, viewed in the light most
favorable to the nonmoving party, “show that there is no genuine
issue as to any material fact and that the moving party is
entitled to judgment as a matter of law.” 	Fed.R.Civ.P. 56(c).
See also Celotex Corp. v. Catrett, 477 U.S. 317, 322-23 (1986).
Substantive law determines which facts are material. 	Anderson v.
Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). 	“Only disputes
over facts that might affect the outcome of the suit under the
governing law will properly preclude the entry of summary
judgment.” 	Id. 	The dispute must also be genuine; the evidence
must be “such that a reasonable jury could return a verdict for
the nonmoving party.” 	Id. 	In reviewing a summary judgment
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motion, credibility judgments and weighing of the evidence is
prohibited. 	Rather, the evidence should be viewed in the light
most favorable to the non-moving party. 	Id. at 255. 	See also
Matushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574,
587 (1986)(Facts and inferences drawn therefrom must be viewed in
the light most favorable to the non-movant.)
It is an error for the trial court to resolve credibility
issues against the nonmovant: “In effect, any direct evidence
offered by the plaintiff in response to a summary judgment motion
must be accepted as true. 	The district court errs by granting
summary judgment for the defendant where issues of credibility
are determinative of the case.” 	Centra, Inc. v. Estrin, 538 F.3d
402, 412 (6 th Cir. 2008)(quoting Ctr. for Bio-Ethical Reform,
Inc. v. City of Springboro, 477 F.3d 807, 820 (6 th Cir. 2007)
(internal quotation marks and citation omitted)). 	And, summary
judgment is generally inappropriate where the inferences which
the parties seek to have drawn deal with questions of motive,
intent and subjective feelings and reactions. 	Cross v. United
States, 336 F.2d 431, 433 (2 nd Cir. 1964).
DISCUSSION
The Court finds that there is a genuine issue of material
fact created by Facts 7 and 15. 	Defendant’s affidavit states
that she had no fraudulent intent when incurring the debt. 	She
admits, however, visiting a bankruptcy attorney before incurring
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2 That the loans are being repaid on time, at least so far,
weighs in favor of a finding of no intent to defraud, but is not
determinative.
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the debt. 	One logical inference from the visit to the bankruptcy
attorney is that Defendant knew she was in financial trouble and
was intending to file bankruptcy without her or anyone else
repaying the debt. 	This inference would favor Plaintiff.
Another inference is that Defendant was fully (and even
justifiably) confident that the loans would be repaid on time and
in full. 	This inference would favor Defendant. 2 	The Court
cannot weigh evidence at this stage, but only can determine if
there is a genuine issue of fact that may be outcome
determinative.
When determining the dischargeability of a debt allegedly
incurred through fraud, “the demeanor and credibility of the
debtors is so important to determining intent....” 	Chevy Chase
Bank, FSB v. Kukuk (In re Kukuk), 225 B.R. 778, 789 (10 th Cir.
B.A.P. 1998). 	Therefore, the Court cannot find that Debtor’s
affidavit is sufficient to overcome the presumption established
by 11 U.S.C. § 523(a)(3).
The Court finds that trial in this case is necessary to
evaluate the Defendant’s credibility and to hear evidence of the
circumstances surrounding the creation of the debt. 	A separate
order will enter denying the Motion.
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Honorable James S. Starzynski
United States Bankruptcy Judge
Date Entered on Docket: 	October 8, 2008
copies to:
John D Wheeler
PO Box 1810
Alamogordo, NM 88311-0600
Clarke C Coll
PO Box 550
Roswell, NM 88202-0550
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