Roosevelt County Electr. Cooperative Inc v. Morgan

UNITED STATES BANKRUPTCY COURT
DISTRICT OF NEW MEXICO
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06/10/06
Roosevelt County Electr. Cooperative Inc v. Jerry Don Morgan, et al.
04-01133
Order Granting [11-1] Motion For Summary Judgment by Roosevelt County Electr.
Cooperative Inc.
Received on: 2005-02-09 13:52:56.000
2005-02-09 00:00:00.000
2005-02-10 00:00:00.000
James Burke
Case 04-01133-s Doc 19 Filed 02/09/05 Entered 02/10/05 11:06:00 Page 1 of 11

UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF NEW MEXICO
In re:
JERRY DON MORGAN and
DONNA LYNN MORGAN,
Debtors. No. 7-04-13131 SR
ROOSEVELT COUNTY ELECTRIC COOPERATIVE, INC.,
Plaintiff,
v. Adv. No. 04-1133 S
JERRY DON MORGAN, et al.,
Defendants.
MEMORANDUM OPINION AND ORDER
GRANTING PLAINTIFF’S MOTION
FOR SUMMARY JUDGMENT AS TO JERRY DON MORGAN
AND ORDER DISMISSING DONNA LYNN MORGAN
This matter is before the Court on Plaintiff’s Motion for
Summary Judgment filed December 3, 2004 (doc. 11)(“Motion.”).
Plaintiff was represented by its attorney Eric Dixon.
Defendant was represented by Randall M. Harris. This is a
core proceeding to determine the dischargeability of a debt.
28 U.S.C. § 157(b)(2)(I). The Court had previously scheduled
a final pretrial conference for February 1, 2005. In
preparation for the pretrial conference, the Court reviewed
the file and determined that no response had been filed to the
Motion, and that it was therefore ripe for review. At the
pretrial conference, the Court ruled that it would grant the
Case 04-01133-s Doc 19 Filed 02/09/05 Entered 02/10/05 11:06:00 Page 2 of 11

1 At the pretrial conference, the Court was informed that
Defendant had recently filed a response to the motion. The
docket shows that the response was filed on January 31, 2005
and docketed on February 1, 2005 (after the hearing.) As
discussed below, our local rules require a response to a
motion for summary judgment within 20 days of service.
Defendant did not meet this deadline, and the Court did not
consider the response when deciding the motion.
Page -2-
Motion for summary judgment1. This memorandum is entered in
support of that ruling. Plaintiff announced at the pretrial
conference that it would pursue only Mr. Morgan on this debt.
The Court will therefore dismiss Donna Lynn Morgan from the
case.
Federal Rule of Civil Procedure 56(c) provides, in part,
“The judgment sought shall be rendered forthwith if the
pleadings, depositions, answers to interrogatories, and
admissions on file, together with the affidavits, if any, show
that there is no genuine issue as to any material fact and
that the moving party is entitled to a judgment as a matter of
law.”
NM LBR 7056-1 states, in part:
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.
...
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
Case 04-01133-s Doc 19 Filed 02/09/05 Entered 02/10/05 11:06:00 Page 3 of 11

2 There is a fact dispute about the actual amount due
Plaintiff. See Exhibit 2 to Motion for Summary Judgment,
Interrogatory No. 12 and the answer thereto. Therefore, the
Court will conduct a trial on this one fact issue.
Page -3-
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.
Because Defendant did not file a timely response to the Motion
the Court “may” grant the Motion. Furthermore, because no
material fact set forth in movant’s statement was specifically
controverted, all of those facts are deemed admitted.
Therefore, there are no genuine issues as to any material
fact2, and the Court’s only duty is to determine whether the
movant is entitled to judgment as a matter of law. See
Champion v. Artuz, 76 F.3d 483, 486 (2d Cir. 1996):
The fact that there has been no response to a summary
judgment motion does not, of course, mean that the
motion is to be granted automatically. Such a motion
may properly be granted only if the facts as to which
there is no genuine dispute “show that the moving
party is entitled to a judgment as a matter of law.”
Fed.R.Civ.P. 56(c).
See also Maldonado v. Ramirez, 757 F.2d 48, 50 (3rd Cir.
1985)(A response is not essential to defeat a motion that does
not satisfy movant’s initial burden. (Citing Adickes v. S.H.
Kress & Co., 398 U.S. 144, 160-61 (1970).); Griffith v. Realty
Case 04-01133-s Doc 19 Filed 02/09/05 Entered 02/10/05 11:06:00 Page 4 of 11

3 These answers were sworn to by Jerry Partin, general
manager of Plaintiff, state that he is authorized to make the
verifications on the behalf of Plaintiff, state that he has
read and understand the answers and that the answers are true
and correct based on his own personal knowledge or belief.
4 These answers were sworn to by Jerry Don Morgan and
Donna Lynn Morgan, and state that they have read and
understand the answers and the facts and statements are true
and correct to the best of their knowledge, information and
belief.
5 This sworn statement of the general manager
authenticates the exhibits attached to the complaint and
states that they were filed with the Secretary of State on a
certain date, see Complaint ¶ 4, and Answer ¶ 2 (admitting
signing documents, but denying all other allegations in the
paragraph.), states an admission by Mr. Morgan (see
Fed.R.Evid. 801(d)(2)), and states that Mr. Morgan did not
have permission to use the secured funds.
6 Ms. Bryant is the office manager for Plaintiff. In her
sworn statement, she details specific conversations she had
with defendant Jerry Morgan.
Page -4-
Executives, Inc. (In re Griffith), 6 B.R. 750, 751 (Bankr. D.
N.M. 1980)(“In addition, the moving party has the burden of
showing that it is entitled to judgment as a matter of law.”)
Plaintiff’s Motion is in proper form and follows NM LBR
7056-1. It contains a statement of undisputed material facts,
with references to the record. In the record are: 1)
Plaintiff’s answers to Defendant’s First Set of
Interrogatories3; 2) Defendant’s Answers to Plaintiff’s First
Set of Interrogatories4; 3) Affidavit of Jerry Partin5, and 4)
Affidavit of Debbie Bryant6. The Motion seeks summary judgment
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Page -5-
both as to Sections 523(a)(2) and 523(a)(6). Because the Court
finds that Plaintiff should be awarded judgment under
523(a)(6), it will not address the Motion with respect to
523(a)(2).
Section 523 provides in relevant part:
(a) A discharge under section 727, 1141, 1228(a),
1228(b), or 1328(b) of this title does not discharge
an individual debtor from any debt–
...
(6) for willful and malicious injury by the debtor to
another entity or to the property of another entity.
“Conversion is defined as the unlawful exercise of
dominion and control over personal property belonging to
another in exclusion or defiance of the owner's rights, or acts
constituting an unauthorized and injurious use of another's
property, or a wrongful detention after demand has been made.”
Nosker v. Trinity Land Co., 107 N.M. 333, 337-38, 757 P.2d 803,
807-08 (Ct. App.), cert. denied, 107 N.M. 267, 757 P.2d 605
(1988). “Conversion can, under certain circumstances, give
rise to a nondischargeable debt pursuant to § 523(a)(6).”
Mitsubishi Motors Credit of America, Inc. v. Longley (In re
Longley), 235 B.R. 651, 657 (10th Cir. BAP 1999).
In light of [Kawaauhau v. Geiger, 523 U.S. 57 (1998)]
the standard for willful under § 523(a)(6) appears to
be the same for conversion as for any other injury;
to be willful, the debtor must intend that conversion
of the collateral injure the creditor or the
creditor's lien interest. However, Geiger does not
address the evidence by which intent to injure can be
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7 CIT Financial Services, Inc. v. Posta (In re Posta), 866
F.2d 364, 367 (10th Cir. 1989):
Under § 523(a)(6), the debtor's malicious intent can
be shown in two ways. In the rare instances in which
there is direct evidence that the debtor's conduct
was taken with the specific intent to harm the
creditor, the malice requirement is easily
established. More commonly, however, malicious
intent must be demonstrated by evidence that the
debtor had knowledge of the creditor's rights and
that, with that knowledge, proceeded to take action
in violation of those rights. Such knowledge can be
inferred from the debtor's experience in the
business, his concealment of the sale, or by his
admission that he has read and understood the
security agreement.
(Citations omitted.)
8 Dorr, Bentley & Pecha, CPA’s, P.C. v. Pasek (In re
Pasek), 983 F.2d 1524, 1527 (10th Cir. 1993):
[W]e believe the rule fully supported by our cases
is that willful and malicious injury occurs when the
debtor, without justification or excuse, and with
full knowledge of the specific consequences of his
conduct, acts notwithstanding, knowing full well
that his conduct will cause particularized injury.
...
[W]e also have recognized that secured creditors are
not restricted to direct evidence of specific intent
to injure in satisfying the requirements of §
523(a)(6); rather, the requisite malicious intent
may be demonstrated by evidence that the debtor had
knowledge of the creditor's rights and that, with
that knowledge, proceeded to take action in
violation of those rights.
(Citations and internal punctuation omitted.)
Page -6-
established. We believe that as to proof of intent to
injure in the context of conversion of secured
property, Posta7 and Pasek8 remain instructive.
Intent may be established by either direct or
indirect evidence. Posta, 866 F.2d at 367. Willful
injury may be established by direct evidence of
specific intent to harm a creditor or the creditor's
property. Id. Willful injury may also be
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9 Defendants’ Third Affirmative Defense raises an issue
that Mr. Morgan’s full legal name is not on the UCC Financing
Statement. This may have been relevant if the secured asset
still existed at the time of the bankruptcy and the Chapter 7
trustee sought to avoid the lien as unperfected under section
544. However, the asset was converted prepetition in
violation of the contract between Plaintiff and Defendants.
Defendants do not deny signing the documents.
Page -7-
established indirectly by evidence of both the
debtor's knowledge of the creditor's lien rights and
the debtor's knowledge that the conduct will cause
particularized injury. Pasek, 983 F.2d at 1527. See
also RESTATEMENT (SECOND) OF TORTS § 8A (1965) ("The
word 'intent' is used throughout the Restatement of
this Subject to denote that the actor desires to
cause consequences of his act, or that he believes
that the consequences are substantially certain to
result from it.").
Id.
FACTS
1. Defendants signed a Promissory Note in the amount of
$65,000 to Plaintiff.
2. Defendants pledged their peanut crop to Plaintiff, as is
indicated on the UCC Financing Statement attached to the
complaint.9
3. Defendants had previously pledged peanut crops to other
creditors, and knew that checks for proceeds were to be
paid to those creditors.
4. Defendants received proceeds from the Farm Services Agency
attributable to the pledged peanut crop on or about
January 13, 2004.
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Page -8-
5. Defendants did not turn over the proceeds to Plaintiff;
rather they spent the funds knowing that Plaintiff had a
lien on and claim to the proceeds.
6. At the time Debtors spent the money they were insolvent
and had substantial indebtedness.
7. When asked why Defendants did not turn the money over to
Plaintiff, they answered “We could have given a portion of
the money to the Coop, but others would have done without
and the family would have suffered even more than it did.”
8. On February 9, 2004, Mr. Morgan told Plaintiff that he had
received the checks. Debtors did not inform Plaintiff in
a prompt or timely manner that they received the checks.
9. Mr. Morgan did not have Plaintiff’s permission to use the
money.
10. Mr. Morgan used the proceeds from the peanut sale for his
own use and to the detriment of Plaintiff.
CONCLUSIONS OF LAW
1. Plaintiff had a lien on the peanut crop.
2. Mr. Morgan committed conversion by his unlawful exercise
of control over Plaintiff’s personal property (the peanut
crop proceeds) in exclusion of Plaintiff’s right to
possession.
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Page -9-
3. Mr. Morgan’s conversion was malicious, as evidenced by the
fact that he was aware of Plaintiff’s lien rights, and
with that knowledge, he took action in violation of those
rights. The malicious intent is further evidenced by 1)
his prior dealings in the business and knowledge that
proceeds were to be paid to the lien creditor; 2) his
concealment of the transactions; and 3) with his
insolvency and level of indebtedness, Mr. Morgan was aware
that his conduct would certainly lead to injury of
Plaintiff.
4. Mr. Morgan’s debt to Plaintiff, in an amount to be
determined at trial, is nondischargeable under 11 U.S.C. §
523(a)(6).
ORDER
IT IS ORDERED that this adversary proceeding against Donna
Lynn Morgan is dismissed with prejudice.
IT IS ORDERED that partial judgment as to liability is
granted for Plaintiff and against Jerry Don Morgan.
IT IS ORDERED that the Court will try the remaining
damages issue on February 23, 2005 at 1:30 p.m. in the Federal
Courthouse in Roswell, New Mexico, as per a Scheduling Order
being prepared by Plaintiff’s attorney.
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Page -10-
Honorable James S. Starzynski
United States Bankruptcy Judge
I hereby certify that on February 9, 2005, a true and correct
copy of the foregoing was electronically transmitted, faxed,
delivered, or mailed to the listed counsel and/or parties.
Eric D Dixon
309 S Ave A
Portales, NM 88130-6284
Randall M Harris
1112 Pile St
Clovis, NM 88101-5943
F Shaun Burns
PO Box 488
Clovis, NM 88102-0488
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