Montoya v. Arenivar

1Statutory and Rule references are to the Bankruptcy Code as
it existed before the effective date of the Bankruptcy Abuse
Prevention and Consumer Protection Act of 2005.
UNITED STATES BANKRUPTCY COURT
DISTRICT OF NEW MEXICO
In re:
DARLA C. ARENIVAR,
Debtor. 	No. 7-05-10686 SL
PHILIP J. MONTOYA, TRUSTEE,
Plaintiff,
v.
JAMES P. ARENIVAR,
Defendant. 	Adv. No. 05-1252 S
FINDINGS OF FACT AND CONCLUSIONS
OF LAW ON PLAINTIFF’S COMPLAINT
This matter came before the Court for trial on the merits of
Plaintiff’s Complaint to Avoid Transfer, to Determine Validity of
Ownership Interest, or, in the Alternative, to Sell Estate’s
Interest and Interest of Co-Owner in Real Property, or,
Alternatively, to Obtain Authority to Partition Real Property
(“Complaint”). 	Plaintiff appeared through his attorney Moore,
Berkson & Gandarilla, P.C. 	Defendant appeared through his
attorney R. Trey Arvizu. 	This is a core proceeding. 	28 U.S.C. §
157(b)(2)(E). 1
FACTS
1. 	Debtor Darla Arenivar filed a voluntary petition under
Chapter 7 of the Bankruptcy Code on February 1, 2005 (“Petition
Date”).
2. 	Plaintiff is the Chapter 7 trustee in the bankruptcy case.
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2Sic. 	There are no paragraphs 7 or 8.
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3. 	Defendant is Debtor’s ex-husband.
4. 	The real property that is the subject matter of the
Complaint is located at 4900 Garnet, Las Cruces, New Mexico 88011
in Dona Ana County, New Mexico (“Property”).
5. 	On June 3, 1999, Defendant and Debtor were divorced by the
entry of a Final Decree of Dissolution in cause number D-307-DM-
9900045, entitled Darla C. Arenivar v. James P. Arenivar, filed
in the Third Judicial District Court, Dona Ana County, New Mexico
(the “Divorce Proceeding”).
6. 	The parties filed a marital settlement agreement (“MSA”) in
the Divorce Proceeding on January 21, 1999 that provided, in
part:
5. 	Petitioner [Debtor] shall assume the remaining
principal balance of the first mortgage on the
home at 4900 Garnet, Las Cruces, New Mexico 88011,
awarded to her under this agreement. 	Respondent
[Defendant] will execute a Quit Claim Deed to
Petitioner to transfer his interest in the home to
her.
6. 	Upon execution of this agreement by both parties,
neither shall have any interest in the items
transferred to the other, and each shall hold the
property transferred to him/her as his/her sole
and separate property.
9. 2 	The parties agree they have divided the debts as
follows ...
10. 	That the above-described items of personal
property and the above-described debts constitute
all of the community property and all of the
community debts of the parties hereto as of this
date.
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3Sic. 	There is no paragraph 11.
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12. 3 	That each party acknowledges and agrees that the
above-division of the community assets is fair and
equitable.
...
15. 	The parties agree they will execute the documents
necessary to carry out the terms and conditions of
this agreement. 	Should either party fail to or
refuse to execute any such documents in a timely
fashion, then in that event, that party agrees to
pay reasonable attorneys’ fees and costs incurred
in the enforcement of the provisions of this
agreement.
...
18. 	The parties agree that if they agree to change a
provision to this settlement agreement, it will be
valid and enforceable provided they make the
agreement in writing signed before a notary.
7. 	The divorce decree incorporated the MSA.
8. 	Defendant did not execute a deed to the Property to Debtor.
9. 	Instead, on October 29, 1992, Defendant executed a Warranty
Deed (“Deed”) transferring the Property to himself and Debtor as
joint tenants. 	The Deed was filed for record on October 29,
1992.
10. 	On or about October 29, 1992, Defendant and Debtor executed
a mortgage on the Property to a third party, paying off a first
and second mortgage and two other debts and receiving some cash.
Defendant testified that he and Debtor were living together
again, and neither alone would have qualified for a mortgage.
Therefore, he executed the Deed to facilitate the refinancing.
11. 	Debtor moved from the premises in April, 2003.
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12. 	At the time Debtor left the Property, the parties had an
oral agreement that Defendant would pay the mortgage, taxes and
insurance on the Property and that he and the children of the
marriage could live there. In return she could walk away from the
situation.
13. 	In fact, Defendant has made all mortgage payments since the
refinance in 2002, plus paid all insurance and taxes on the
property.
14. 	Sometime in 2005 Debtor and Defendant signed a “letter” that
purported to give up any ownership interest Debtor had in the
property, effective April 1, 2003. 	This letter was not
introduced into evidence and the parties do not argue that the
letter is relevant to any issue under consideration. 	The Court
assumes that the letter was not executed in front of a notary nor
recorded in the land records of Dona Ana County.
15. 	Plaintiff offered no evidence that the letter was executed
with the intent to hinder, delay or defraud creditors, nor did
plaintiff offer evidence that Debtor was insolvent at the time
she executed the letter.
16. 	The Court has no credible evidence on the value of the
Property as of the Petition Date.
17. 	The Court has no evidence of the total amount paid by
Defendant from the date of refinance to the Petition Date for
mortgage payments, taxes or insurance.
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Page -5-
18. 	The Court has no evidence of the total amount paid by
Defendant from the Petition Date to the entry of this Opinion for
mortgage payments, taxes or insurance.
19. 	At trial, the Court dismissed Count 1 of the Complaint,
which sought to avoid an unperfected transfer of the Debtor’s
interest in the Property, for lack of proof. 	The remaining
counts for the Court’s consideration are Count 2: to Determine
the Extent, Validity and Priority of Liens, Claims and Interests
in the Subject Property and for Turnover under § 542; and Count
3: for an Order Allowing the Sale of the Undivided Subject
Property, including the Defendant’s Interest, or, alternatively,
for Partition.
CONCLUSIONS OF LAW
1. 	The MSA is a contract, governed by contract principles.
Herrera v. Herrera, 126 N.M. 705, 708, 974 P.2d 675, 678 (Ct.
App. 1999).
2. 	All contract rights and causes of action belonging to a
debtor become property of the bankruptcy estate under Section
541. 	11 U.S.C. § 541(a). 	See also, e.g., Schertz-Cibolo-
Universal City, Independent School District v. Wright (In re
Educators Group Health Trust), 25 F.3d 1281, 1283-84 (5 th Cir.
1994).
3. 	Under the MSA, Debtor was entitled to a deed to the
Property.
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4See N.M.Stat.Ann. 40-4-20 (1978)(Failure to distribute
property on entry of a divorce decree shall not affect any
property rights and either spouse may subsequently institute and
prosecute a suit for division and distribution.)
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4. 	On the Petition Date, Debtor had a contract right to file a
cause of action for specific performance of the MSA to obtain a
100% interest in the Property. 4 	Plaintiff has elected to do this
by filing count 2 of the Complaint which seeks turnover.
5. 	The parties never changed the MSA in writing as required by
both the MSA and N.M.Stat.Ann. § 40-2-4 (1978). 	See also
Herrera, 126 N.M. at 708, 974 P.2d at 678 (Marital settlement
agreements are subject to the statute of frauds.)
6. 	Debtor’s right to a deed to the full property became estate
property upon the filing of the petition. 	Cf. United States
Trustee v. Eppers (In re Eppers), 311 B.R. 826, 833 (Bankr. D.
N.M. 2004)(Omitting real property debtor is entitled to receive
under a marital settlement agreement from Schedule A is a
material misstatement.) 	See also Maiona v. Vassilowitch (In re
Vassilowitch), 72 B.R. 803, 806 (Bankr. D. Mass. 1987)(Divorce
court awarded 2/3rds of residence to ex-wife; ex-husband’s estate
was limited to 1/3rd of the residence although the property held
as joint tenants.)
7. 	Defendant should be ordered to execute a quit claim deed
conveying his joint tenancy interest to the bankruptcy estate.
Plaintiff should receive judgment on Count 2 of the Complaint.
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8. 	From October 29, 2002 to the Petition Date, Debtor and
Defendant were cotenants in the Property. 	Each was liable for
one-half the mortgage payments, interest and taxes. 	To the
extent Defendant paid more than one-half of the mortgage
payments, interest and taxes from October 29, 2002 to the
Petition Date, he has a claim for contribution against the
Debtor. 	Laura v. Christian, 88 N.M. 127, 129, 537 P.2d 1389,
1391 (1975). 	Defendant may file a non-priority unsecured proof
of claim for that amount.
9. 	From the Petition Date to the entry of this Opinion, all
amounts paid by Defendant for mortgage payments, insurance and
taxes were actual, necessary, reasonable costs and expenses of
preserving the estate. 	Defendant may file a request for payment
of administrative expense for that amount. 	See 11 U.S.C. §
503(b)(1)(A).
10. 	Count 3 of the Complaint is moot, given that the Court finds
that the estate owns 100% of the Property and that there are no
co-owners. 	Therefore, the Court need not determine the relative
benefit/detriment to the parties under 11 U.S.C. § 363(h)(3).
11. 	The Court will enter a judgment in conformity with these
findings and conclusions.
Honorable James S. Starzynski
United States Bankruptcy Judge
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copies to:
Bonnie Bassan Gandarilla
Moore, Berkson & Gandarilla, P.C.
PO Box 216
Albuquerque, NM 87103-0216
R Trey Arvizu, III
PO Box 1479
Las Cruces, NM 88004-1479
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