Dill v. Mataya

UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF NEW MEXICO
In re:
INDIAN CAPITOL DISTRIBUTING, INC.
Debtor. No. 11-09-11558 SA
CRAIG H. DILL, Chapter 11 Trustee,
Plaintiff,
v. Adv. No. 09-1110 S
MICHAEL P. MATAYA,
Defendant.
MEMORANDUM OPINION AFTER
TRIAL ON THE MERITS
This matter came before the Court for trial on the merits of
Craig H. Dill’s (“Trustee” or “Plaintiff”) Complaint for
Turnover. For the reasons set forth below, the Court will issue
a Judgment in favor of Defendant.1
DISCUSSION
Bankruptcy Code section 542(a) sets out the conditions under
which a trustee may seek turnover of property:
[A]n entity, other than a custodian, in possession,
custody, or control, during the case, of property that
the trustee may use, sell, or lease under section 363
of this title, or that the debtor may exempt under
section 522 of this title, shall deliver to the
trustee, and account for, such property or the value of
This Court has subject matter jurisdiction and personal	1
jurisdiction under 28 U.S.C. §§ 157 and 1334. This is a core
proceeding. 28 U.S.C. § 157(b)(2)(E). See also McClatchey v.
Ohio Public Employees Deferred Compensation Program (In re
Matheney), 138 B.R. 541, 545 (Bankr. S.D. Ohio 1992)(Turnover is
a core proceeding because it is a substantive right created by
federal bankruptcy law and may be brought only by a trustee
appointed in a bankruptcy case or by a debtor-in-possession,
neither of which exists outside of bankruptcy.) This Memorandum
Opinion constitutes the Court’s findings of fact and conclusions
of law as required by Federal Rule of Bankruptcy Procedure 7052.
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such property, unless such property is of
inconsequential value or benefit to the estate.
11 U.S.C. § 542(a). This section establishes a general rule
that is self-operative and mandatory that requires any entity
with control of property of a bankruptcy estate to deliver that
property to the trustee. Boyer v. Davis (In re USA Diversified
Products, Inc.), 193 B.R. 868, 872 (Bankr. N.D. Ind. 1995),
aff’d., 196 B.R. 801 (N.D. Ind. 1996), aff’d. 100 F.3d 53 (7th
Cir. 1996)(citations omitted.). In any action to compel
compliance with this section, the burden of proof is on the
trustee. Id.; see also Evans v. Robbins (In re Robbins), 897
F.2d 966, 968 (8 Cir. 1990)(same). The trustee must prove: 1)	th
during the case; 2) an entity (other than a custodian); 3) was in
possession, custody or control; 4) of property that the trustee
could use, sell or lease; and 5) that such property is not of
inconsequential value or benefit to the estate. USA Diversified,
193 B.R. at 872. The defendant does not need to have current
possession, custody or control; the statute only requires that at
some time during the case the defendant had possession, custody
or control. Id. at 874-75. The defendant also does not need to
have any ownership or economic interest in the property; the
statute requires only mere possession, custody or control. Id.
at 874. If the defendant is in possession of the property, the
trustee may recover it. Id. at 879. If the defendant no longer
has possession of the property, the Court may inquire into the
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disposition of the property and enter a money judgment, if
appropriate, for the property’s value. Id. See also Boyer v.
Carlton, Fields, Ward, Emmanuel, Smith & Cutler, P.A. (In re USA
Diversified Products, Inc.), 100 F.3d 53, 56 (7 Cir. 1996):	th
But by the time the trustee got around to demanding the
money from the [defendant], the [defendant] no longer
had it, so how could it deliver it to the trustee? The
statute, however, requires the delivery of the property
or the value of the property. Otherwise, upon
receiving a demand from the trustee, the possessor of
property of the debtor could thwart the demand simply
by transferring the property to someone else. That is
not what the statute says, and can't be what it means.
(Posner, C.J.).
FACTS
In his answer, Defendant admits that that he is president of
Debtor and that Plaintiff is the Trustee in Indian Capitol
Distributing, Inc. Plaintiff alleges that Defendant is in
possession and control of the property listed in the following
table which belongs to the Debtor. Defendant answered that,
except as noted, he is not in possession or control of the
property listed in the table.
Asset Detail or VIN # Defendant’s answer
a. 2004 GMC C55 1GDE5E12X4F519723 no knowledge of
location.
b. 2002 GMC Sierra 1GTHK23142F209206 no knowledge of
location.
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Asset Detail or VIN # Defendant’s answer
c. 2007 GMC 4X4 1GTHK23687F544634 Defendant has
possession and makes
payments on it and
claims equitable
ownership. Value is
$21,000 and secured
claim is $21,000.
d. 2004 GMC Sierra 2GTEC19T941313414 no knowledge of
location.
e. 1995 Beal
Tanker
1BN1M2527SB003959 Debtor sold in 2007 to
Alford Solano.
f. 1962 Chevrolet
Impala
21847S170654 no knowledge of
location.
g. 1995 Peterbilt 1XP5LB9X2SD371972 no knowledge of
location.
h. 1999 GMC 1GDJ7H1B7XJ509601 no knowledge of
location.
i. 2001 Kenworth 1XKWD69X31R875558 Debtor sold in 2005 or
2006 to Power
Trucking.
j. 1990 Peterbilt 1XP5DB9X1LD291108 wrecked in 2004.
k. 1970 BLZZ D506701 no knowledge of
location.
l. 1997 Ford 1FTCR10A3VPB04353 Defendant turned over.
m. 1985 Fred 1H2V0482XFE007205 Defendant believes
this is a Freuhauf
van; axels were
removed in 1990s and
it is now a storage
shed at Travel Center.
Has no value.
n. 1982 Ford 1FDXR74N4CVA42029 Debtor sold to
Rodriquez Plumbing.
o. 1976 GMC TCE616V570902 no knowledge of
location.
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Asset Detail or VIN # Defendant’s answer
p. 1977
International
D0512GHB16186 Debtor sold to Doug
Bishop in 1995 and
believe later
scrapped.
q. 1994 Chevrolet 1GBFK16KXRJ390295 Debtor sold in 2003.
r. 1972 Beal
Trailer
DTS2375711 Debtor sold to Woody’s
Petroleum in 1990s.
s. 2005 Utility
Trailer
16HCB10195A013102 Debtor sold in 2006.
t. 1981 Fruehauf OMT009203 Debtor sold in 2007 to
Quality Trailers.
u. 1980 Chevrolet
(Actually, it
is a 1982
Chevrolet.)
1GCEK14HCF392362 Debtor scrapped in the
1980s.
The complaint actually lists other assets, but at trial
Plaintiff’s attorney represented that only these remained at
issue.
Defendant denies that demand was made on him for the
property or that he has refused to turnover the property. He
also denies that the property listed is property of the estate or
that the Trustee is entitled to possession and use of the
property. Finally, he denies that he should be ordered to turn
the property over to the Trustee.
The Court conducted a trial on the merits and took the
ruling under advisement. Before the Court ruled, Defendant filed
a Chapter 7 bankruptcy. The automatic stay in Defendant’s
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individual case was terminated, and the Court now issues its
decision.
This adversary was consolidated for trial only with two
other adversaries, one against Mr. Mataya and one against Mr.
Mataya’s revocable trust. There were two witnesses relevant to
this adversary: Plaintiff, Craig Dill, and Defendant, Michael
Mataya.
The Court found Mr. Dill to be completely credible. The
Court found Mr. Mataya to be an uncooperative witness that was
not credible at all. For each of the twenty-one vehicles listed,
Mr. Mataya claimed that for all of them he had no idea where they
were. For several, he could not recall the last time he saw	2
them. For several, he testified that he had never seen them and
was unaware that Debtor ever owned them. He could not explain
why some were still on the Debtor’s tax depreciation schedules
nor could he explain why some did not appear on the schedules.
Furthermore, he claimed he had never seen the tax depreciation
schedules, but admitted they were probably important documents if
his accountant thought they were. He could not explain why New
Mexico state records still showed the Debtor’s ownership of
various vehicles, nor could he explain why Debtor received in the
In his answer he stated that for ten of the vehicles they	2
had been sold (with Bank’s permission), wrecked, junked, or
scrapped. When asked about this contradiction, he claimed he did
not remember his answer.
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mail a registration form for the year 2010, due by February 19,
2010, on a 1990 Peterbilt that, in his answer, he claimed was
wrecked in 2004.
Despite the Court’s distrust of Defendant’s testimony, it
was consistent in two respects: 1) he claimed to have no idea
where the vehicles were and 2) he was very clear that they were
not in his possession. A fair analysis of all of the evidence is
that Plaintiff did a great job documenting what Defendant had or
should have had in his possession or control before the
bankruptcy case. However, there was nothing that showed he had
control or possession after the filing of the case. For example,
at the conclusion of his testimony, under cross examination, Mr.
Dill admitted he had no evidence that Mr. Mataya possessed any of
the vehicles. Therefore, the Court must enter judgment in favor
of Defendant and dismiss Plaintiff’s case with prejudice. A
separate Judgment will enter.
Honorable James S. Starzynski
United States Bankruptcy Judge
Date Entered on Docket: September 29, 2011
Copies to:
James A Askew
Arland & Associates, LLC
201 3rd ST NW, STE 505
Albuquerque, NM 87102-3331
William F. Davis
6709 Academy NE, Suite A
Albuquerque, NM 87109
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