CAGO, Inc. v. Slade

UNITED STATES BANKRUPTCY COURT
DISTRICT OF NEW MEXICO
In re:
RAYMOND C. SLADE,
Case. No. 08-10927 JA
Debtor.
___________________________________________________________________________
CAGO, INC.,
Plaintiff,
vs. 	Adversary No. 08-1065 J
RAYMOND CURTIS SLADE,
Defendant.
MEMORANDUM OPINION
This matter is before the Court on Plaintiff Cago, Inc.’s Motion for Summary Judgment
and Memorandum in Support of Plaintiff’s Motion for Summary Judgment (“Motion for
Summary Judgment”) filed January 30, 2010. (Docket No. 20). 	The Motion for Summary
Judgment seeks judgment on all claims.
A. 	BACKROUND
On May 15, 2008, Cago, Inc. (“Cago”) commenced this adversary proceeding by filing
complaint against Raymond Curtis Slade objecting to discharge under 11 U.S.C. §§ 727(a)(2),
(a)(3) and (a)(4) and objecting to dischargeabilty of debts under § 523(a)(2). 	The Complaint
also contains a count under 11 U.S.C. §§ 554 and 725.1
1 Section 554 governs abandonment of property of the estate. Section 725 concerns the trustee’s disposition of
“Property in which an entity other than the estate has an interest,” which property is not otherwise disposed of
under another section of the Code. 11 U.S.C. § 725.
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In connection with its objection to dischargeablity under 11 U.S.C. § 523(a)(2), Cago
alleges that Mr. Slade entered into an equipment lease with no intent of making lease payments
or returning the equipment; failed to make any of the lease payments; and fraudulently issued
bad checks for lease payments. 	Cago also alleges that the parties entered into a settlement
agreement requiring Mr. Slade 1) to make installment payments to Cago; and 2) to sell the
leased equipment and remit the sale proceeds to Cago or return the equipment. 	Cago asserts
that Mr. Slade breached the agreement by failing to remit payments and by either converting
the equipment or knowingly allowing it to be stolen. 	In connection with its objections to
discharge under 11 U.S.C. §§ 727(a)(2), (a)(3) and (a)(4), Cago alleges that Mr. Slade 1)
knowingly disposed of estate assets in violation of the Bankruptcy Code and a temporary
restraining order; 2) made a false oath at the first meeting of creditors; 3) fraudulently
transferred assets to or for the benefit of family members and fraudulently acquired exempt
property; 4) converted trusts funds in the form of royalties paid to Slade’s alter ego, The
Stoneworks LLC (“Stoneworks”), to his own use and benefit; 5) used Stoneworks to perpetrate
a fraud on creditors; and 6) failed to list assets in his bankruptcy schedules as required. 	In
connection with its claim under 11 U.S.C. §§ 554 and 725, Cago alleges that Stoneworks is
Slade’s alter ego, and that Slade is using Stoneworks to perpetrate a fraud on his creditors.
B. 	SUMMARY JUDGMENT STANDARD
It is appropriate for the Court to grant summary judgment if the pleadings, discovery
materials, and any affidavits before the Court show that there is no genuine issue as to any
material fact and that the movant is entitled to judgment as a matter of law. See Fed.R.Civ.P.
56(c) made applicable to adversary proceedings by Fed. R. Bankr.P 7056. “[A] party seeking
summary judgment always bears the initial responsibility of informing the . . . court of the basis
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for its motion, and . . . [must] demonstrate the absence of a genuine issue of material fact.”
Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). Courts
must review the evidentiary materials submitted in support of a motion for summary judgment
to ensure that the motion is supported by evidence. If the evidence submitted in support of the
summary judgment motion does not meet the movant’s burden, then summary judgment must
be denied. Hearsay evidence cannot be considered on a motion for summary judgment. Wiley v.
United States, 20 F.3d 222, 226 (6th Cir. 1994). Any documentary evidence submitted in
support of summary judgment must either be properly authenticated or self authenticating
under the Federal Rules of Evidence. Goguen v. Textron, Inc., 234 F.R.D. 13, 16 (D. Mass.
2006). Furthermore, New Mexico Local Bankruptcy Rule 7056-1 provides that the movant
shall file with the motion for summary judgment a written memorandum containing a short,
concise statement in support of the motion with a list of authorities relied upon, and that the
movant’s 	statement of material facts as to which the movant contends no genuine fact exists
must “refer with particularity to those portions of the record upon which the movant relies.”
NM LBR 7056-1.
C. 	DISCUSSION
The 	Motion 	for 	Summary 	Judgment 	is 	defective 	in 	two 	respects. 	First, 	the
Memorandum in support of the Motion does not contain a “list of authorities relied upon” as
required by NM LBR 7056-1. 	Second, the Memorandum is not properly supported by
admissible evidence.
The 	Memorandum 	contains 	a 	Statement 	of 	Undisputed 	Facts 	listing 	thirty-two
numbered paragraphs of facts, followed by a conclusion asserting that there is no genuine issue
of material fact and that Plaintiff is entitled to summary judgment as a matter of law. The only
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authorities cited in the Memorandum are sections of the Bankruptcy Code, with no discussion
of these sections. 	Plaintiff’s failure to include a list of cited authorities or to discuss the
application 	of 	the 	Code 	sections 	to 	the 	undisputed 	facts 	is 	insufficient 	to 	satisfy 	the
requirements of NM LBR 7056-1.
In addition, possibly because of its contention that Mr. Slade admitted all material facts
set forth in Plaintiff’s First Request for Admissions by failing to properly answer the requests,
Cago has not supported a substantial portion of its statement of undisputed facts with
admissible evidence.2 On July 27, 2010, the Court entered its Order Granting Rule 36(B)
Motion and Requiring That Signed Answers to the Requests for Admissions be Served and
Filed. Such Answers were served and filed on August 9, 2010. (See Docket No. 41). Thus, no
deemed admissions have established. Apart from its reliance on the alleged deemed admissions
of Mr. Slade, Cago relies on an Affidavit of Robert Bourk in support of paragraphs 3, 4, 6, 7, 8,
9, 11, 12, 13, 14, 15, 17, 18, 20, 21, 23, 24, 25, 26, 29, 31 and 32 of its Statement of Facts.
Cago also relies in part on the Affidavit of Robert Bourk in support of paragraphs 6, 16, 22, and
28. Cago makes no citation to the record in support of paragraph 27.
When an affiant is not testifying as an expert, and evidence is not otherwise admitted as
an admission by a party opponent or as an exception to the hearsay rule, affidavit testimony
that is not based on personal knowledge is inadmissible in connection with a motion for
summary judgment. 	See Rule 56(e)(1), Fed.R.Civ.Proc.3 See also, Argo v. Blue Cross and
2 Plaintiff’s Statement of Material Facts does not cite to any admissions on the part of Mr. Slade as a basis for the
facts being deemed established. 	However, the Conclusion in the Memorandum asserts that Mr. Slade has
“admitted to all of the foregoing due to his neglect to properly file answers to Plaintiff’s First Request for
Admissions.” Memorandum, p. 5 (Docket No. 20).
3 Rule 56, Fed.R.Civ.Proc., is applicable to this adversary proceeding pursuant to Rule 7056, Fed.R.Bankr.Proc.
Rule 56(e)(1) provides:
A supporting or opposing affidavit must be made on personal knowledge, set out facts that
would be admissible in evidence, and show that the affiant is competent to testify on the matters
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Blue Shield of Kansas, Inc., 452 F.3d 1193, 1200 (10 th Cir. 2006)(acknowledging that Rule
56(e) requires that affidavits must be made on personal knowledge). 	Accord United States v.
$92,203.00 in U.S. Currency, 537 F.3d 504, 508 (5th Cir. 2008)(same); Juarez v Menard, Inc.,
366 F.3d 479, 484 n. 4 (7 th Cir. 2004)(same). 	“Under the personal knowledge standard, an
affidavit is inadmissible if ‘the witness could not have actually perceived or observed that
which he testifies to.’” Argo, 452 F.3d at 1200 (quoting United States v. Sinclair, 109 F.3d
1527, 1536 (10th Cir. 1997)(quoting M.B.A.F.B. Fed. Credit Union v. Cumis Ins. Soc’y, Inc.,
681 F.2d 930, 932 (4th Cir. 1982)). 	A statement in an affidavit made upon belief is not a
statement made on personal knowledge and must be disregarded at the summary judgment
stage. Argo, 452 F.3d at 1200 (citing Tavery v. United States, 32 F.3d 1423, 1427 n.4 (10 th Cir.
1994)). 	Even if an affiant recites the he is personally familiar with matters in the affidavit,
matters should be excluded where the affiant was not in a position of having personal
knowledge of stated matters. Id.
Many of the statements contained in the Affidavit of Robert Bourk (Docket No. 20, Ex.
1) are inadmissible under Rule 602, Fed.R.Evid., because the affiant either lacks the required
personal knowledge or a proper foundation has not been laid to establish personal knowledge.
Mr. Bourk 	is president of Cago. 	(See Affidavit ¶ 1). 	His affidavit includes the following
averments:
1. 	Mr. Slade issued four fraudulent checks (Affidavit ¶ 9);
2. 	Mr. Slade sold or converted equipment to an unknown third party or knowingly
allowed the equipment to be stolen (Affidavit ¶ 13);
stated. If a paper or part of a paper is referred to in an affidavit, a sworn or certified copy must
be attached to or served with the affidavit. The court may permit an affidavit to be supplemented
or opposed by depositions, answers to interrogatories, or additional affidavits.
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3. 	Mr. Slade willfully disposed of assets in contravention of bankruptcy law and a
temporary restraining order (Affidavit ¶¶ 14 and 15);
4. 	The Stoneworks LLC was undercapitalized and kept no books or records (Affidavit
¶ 16);
5. 	Mr. Slade transferred assets to family members for the purpose of putting the asses
in exempt property rather than paying creditors (Affidavit ¶ 17);
6. 	Mr. Slade used Stoneworks for the purpose of perpetrating a fraud on his creditors
(Affidavit ¶ 18);
7. 	The assets of Stoneworks have been used for Slade’s personal benefit (Affidavit ¶
19);
8. 	Mr. Slade has converted substantial assets to other entities (Affidavit ¶ 20);
9. 	Mr. Slade has converted trust funds for his own use and benefit (Affidavit ¶ 21);
10. A third party took possession of the equipment and is now using it in its business
(Affidavit ¶ 23);
11. Mr. Slade obtained possession of the equipment with the intent of never paying for
its use or returning it (Affidavit ¶ 24); and
12. Mr. Slade converted estate assets (Affidavit ¶ 25).
Cago relies on these statements in an effort to establish that there is no genuine issue of
material fact. 	However, much of Mr. Bourk’s affidavit testimony relates to Mr. Slade’s state
of mind, including what Mr. Slade intended or what motivated his actions. Mr. Bourk is not in
a position to have personal knowledge of what goes on inside another person’s mind. 	Other
matters contained in Mr. Bourk’s affidavit are of a nature that they would not normally be
within the personal knowledge of the president of a non-insider creditor, and there is no
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foundation in the affidavit to establish how Mr. Bourk came to have personal knowledge of
such matters.
Based on the foregoing, the Court concludes that the Motion for Summary Judgment
must be denied. 	Cago has failed to discharge its initial burden to support its motion with
authorities, and has failed to support its statement of material facts with evidence. 	An order
consistent with this ruling will be entered.
_________________________
ROBERT H. JACOBVITZ
United States Bankruptcy Judge
Date entered on docket: 	August 13, 2010
COPY TO:
Jason C Bousliman
Attorney for Plaintiff
PO Box 2168
Albuquerque, NM 87103-2168
Russell C Lowe
Attorney for Defendant
PO Box 90536
Albuquerque, NM 87199-0536
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