Boydstun v. Galey

UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF NEW MEXICO
In re:
TIMOTHY WARREN BOYDSTUN,
Debtor. No. 7-11-12456 TR
TIMOTHY WARREN BOYDSTUN,
Plaintiff,
v. Adv. No. 12-1193 T
JOY GALEY,
Defendant.
JOY GALEY,
Plaintiff,
v. Adv. No. 12-1298 T
TIMOTHY WARREN BOYDSTUN,
Defendant.
MEMORANDUM OPINION
The above-captioned adversary proceedings involve the same parties and were tried
together on August 23, 2013. Galey seeks to have Boydstun’s debt declared nondischargeable
under 11 U.S.C. § 523(a) and to revoke his discharge under 11 U.S.C. § 727(d)(1). Boydstun
seeks damages for Galey’s alleged violation of the automatic stay. This is a core matter. For the
reasons set forth below, the Court will deny all requested relief.
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I. FACTS
The Court finds the following facts:
1. Galey and Boydstun have a long-standing, unhappy relationship. They had a son
together in 1974 and lost touch sometime thereafter.
2. In 2001, Galey purchased a home in Yermo, CA (the “California House”). She
obtained a loan to purchase the home, which she paid off in 2003.
3. Galey contacted Boydstun through a mutual acquaintance in 2005 or 2006, and the
couple reconciled.
4. On April 4, 2007, Galey conveyed her interest in the California House to herself and
Boydstun as joint tenants.
5. A few months later, Boydstun obtained a loan for approximately $65,000, secured by
a mortgage on the California House.
6. In October, 2007, Boydstun obtained a second loan from Vandyk Mortgage
Corporation for $95,400, secured by a mortgage on the California House.
7. Galey was aware of and consented to the loans. Boydstun and Galey planned to use
the proceeds to purchase a house in New Mexico and start a business.
8. Escrow closed on the second loan on November 8, 2007. Most of the proceeds were
used to pay off the first loan. The net proceeds (about $20,850) were deposited into the couple’s
joint account at 1st National Bank. Boydstun and/or Galey then transferred $31,000 to
Boydstun’s separate account at Bank of America.
9. Around the same time, Boydstun purchased a mobile home and lot in Lovington, New
Mexico (the “Lovington House”) for approximately $39,500. Boydstun used the funds from the
joint account ($31,000), along with about $8,500 of his own money, to buy the house.
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10. Galey helped Boydstun complete the paperwork required by the U.S. Department of
Housing and Urban Development (“HUD”).
11. Galey and Boydstun moved into the Lovington House shortly after the sale closed.
12. Around that time, Boydstun and Galey attempted to buy an RV park in Lovington.
Galey applied for a tax identification number from New Mexico Taxation and Revenue
Department (“NMTRD”) for a business called “T & J RV Park.” The purchase never occurred,
and their other efforts to buy or start a business failed.
13. Boydstun conveyed his interest in the Lovington House to himself and Galey as joint
tenants on February 11, 2008.
14. Boydstun and Galey conveyed their interest in the Lovington House back to
Boydstun on November 22, 2008. Galey signed the deed featured in Exhibit 1 (the “Quitclaim
Deed”) in the presence of her daughter, Kelli Marquez, a Notary Public (Robert Perez), and
Boydstun.
15. Because of her poor credit, Galey signed the Quitclaim Deed so Boydstun could get a
loan secured by the Lovington House.
16. In March or May, 2009, Boydstun obtained a loan from New Day Financial, LLC for
approximately $56,000, secured by a mortgage on the Lovington House.
17. Boydstun and Galey used the loan proceeds to pay personal expenses.
18. Boydstun also purchased a vehicle for Marquez, who was unable to obtain financing.
19. In 2010, the relationship between Galey and Boydston began to sour.
20. Galey moved back to California in May, 2010. She or Marquez took various
financial documents belonging to Boydstun back to the California House.
21. On April 20, 2011, Boydstun conveyed his interest in the California House to Galey.
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22. Boydstun filed the above-captioned bankruptcy case on May 26, 2011 (the “Petition
Date”).
23. Galey learned about Boydstun’s bankruptcy case in late May or early June, 2011.
She then contacted the Bankruptcy Court and determined she was not listed as a creditor.
24. Galey filed a lawsuit against Boydstun in California on June 20, 2011.
25. The Chapter 7 Trustee (the “Trustee”) conducted the first meeting of creditors on
July 19, 2011.
26. Galey obtained a recording of that meeting shortly thereafter.
27. Galey contacted the Chapter 7 Trustee several times between June and August, 2011
to complain that Boydstun lied on his schedules and at the § 341 meeting. Boydstun met with
the Trustee on four occasions to furnish additional documents. Neither the Trustee nor the
United States Trustee pursued the matter further.
28. On August 20, 2011, Galey sent a letter to the Court objecting to discharge/
dischargeability.
29. On September 8, 2011, the Court’s staff sent Galey a letter informing her that the
objection must be filed as a separate adversary proceeding. The letter highlighted the September
19, 2011 deadline for objecting to discharge/dischargeability.
30. Boydstun received a discharge on September 26, 2011.
31. On October 4, 2012, Galey filed a report with the Lovington Police Department
claiming that she did not sign the Quitclaim Deed. The police department sent the Quitclaim
Deed to the FBI for a handwriting analysis. Neither agency pursued an action against Boydstun.
32. Boydstun filed a complaint against Galey for violating the automatic stay on May 22,
2012.
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33. Galey filed a complaint objecting to discharge/dischargeability on October 12, 2012.
II. DISCUSSION
A. Revocation of discharge under § 727(d)(1).
11 U.S.C. § 727(d)(1) allows a court to revoke a discharge if it “was obtained through the
fraud of the debtor, and the requesting party did not know of such fraud until after the granting of
such discharge.” To prevail on a claim under § 727(d)(1), the movant must prove by a
preponderance of the evidence that: (1) the discharge was obtained through fraud; (2) the movant
did not discover the fraud until after the discharge was granted; and (3) the fraud, if known,
would have prevented the discharge under § 727(a). Lawrence National Bank v. Edmonds (In re
Edmonds), 924 F.2d 176, 180 (10th Cir. 1991) (“To revoke a discharge under § 727(d), the debtor
must have committed a fraud in fact which would have barred the discharge had the fraud been
known.”); In re Matos, 2008 WL 596744, at *3 (11th Cir. 2008) (identifying the required factors
under § 727(d)(1)). In general, “[r]evocation of a debtor’s discharge is an extraordinary
remedy.” Smith v. Jordan (In re Jordan), 521 F.3d 430, 433 (4th Cir. 2008). § 727(d) must
therefore be “construed strictly against the party seeking revocation and liberally in the debtor’s
favor.” Id.
As an initial matter, Galey’s complaint under § 727(d)(1) is untimely. Such actions must
be brought within one year after the discharge is granted. 11 U.S.C. § 727(e)(1); Zedan v.
Habash, 529 F.3d 398, 401 (7th Cir. 2008); Citibank N.A. v. Emery (In re Emery), 132 F.3d 892,
897 (2d Cir.1998). Boydstun received a discharge on September 26, 2011, and Galey filed her
complaint on October 12, 2012.
Further, Galey’s § 727(d)(1) claim fails on the merits. Galey alleges that Boydstun lied
on his schedules and during the § 341 meeting, in violation of §§ 727(a)(2) and (a)(4). There is
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some evidence that Boydstun’s schedules were incorrect. However, to the extent any fraud
existed, it is clear Galey knew about the fraud long before the discharge was granted. Galey was
intimately familiar with Boydstun’s financial condition when the case was filed. In the summer
of 2011, Galey reviewed Boydstun’s statements and schedules and repeatedly contacted the
Trustee to report his alleged fraudulent conduct. Galey therefore had the necessary information
to file a complaint under § 727(a) before the deadline. Instead of filing an adversary proceeding
by the deadline - which the Court’s staff advised her to do - Galey waited approximately 13
months to act. Consequently, Galey cannot maintain a claim under § 727(d)(1). See, e.g.,
AmBank v. Suelflow (In re Suelflow), 2009 WL 2913073, at *4 (Bankr. D.N.M. 2009) (declining
to revoke debtor’s discharge where movant “had reason to know of [debtor’s] fraud prior to …
discharge and failed to exercise reasonable diligence to investigate its claims”).
B. Nondischargeability under § 523(a)(6).
Debts arising from “willful and malicious injury by the debtor to another entity or to the
property of another entity” are excepted from the general discharge. 11 U.S.C. § 523(a)(6).
Claims under § 523(a)(6) require proof that the injury was both willful and malicious. Panalis v.
Moore (In re Moore), 357 F.3d 1125, 1129 (10th Cir.2004). To constitute a willful act under §
523(a)(6), the debtor must “desire ... [to cause] the consequences of his act or ... believe [that] the
consequences are substantially certain to result from it.” Moore, 357 F.3d at 1129 (citations and
internal quotations omitted). The “malicious” component of § 523(a)(6) requires an “intentional,
wrongful act, done without justification or excuse.” Fletcher v. Deerman (In re Deerman), 482
B.R. 344, 369 n.18 (Bankr. D.N.M. 2012) (collecting cases). The movant “bears the burden of
establishing nondischargeability by a preponderance of the evidence.” Id.
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Like her § 727(d)(1) claim, Galey’s nondischargeability claim is untimely. Where the
movant knows about the bankruptcy case, such claims must generally be brought within 60 days
of the first date set for the § 341 meeting. Maslar v. Martin (In re Martin), 468 B.R. 479, 486
(Bankr. D. Mass. 2012) (“Pursuant to Fed.R.Bankr.P. 4007(c), an objection to the
dischargeability … must be filed within 60 days after the first date set for the § 341 meeting.”);
Muir v. McWilliams (In re Muir), 2013 WL 4447027, at *2 (Bankr. S.D. Ind. 2013) (same). The
§ 341 meeting was originally set for July 19, 2011; Galey filed her complaint over a year later.
Nevertheless, the Court will address the merits of Galey’s claims.
1. The California House.
Galey points to various injuries under § 523(a)(6). First, she contends that Boydstun
encumbered the California House without her consent. Neither Boydstun nor Galey were
particularly credible on this issue. Based on the trial evidence, however, the Court believes that
Galey was aware of, and did not object to, the loans. At the time, the couple had a joint account
and shared expenses. Galey helped Boydstun complete the necessary HUD paperwork to buy
the Lovington House, which was purchased with the net loan proceeds secured by the California
House. Galey also applied for a tax identification number for a business bearing the pair’s
initials, “T & J RV Park.” Although Boydstun and Galey intended to use the loans for joint
ventures, their plans never materialized. Instead, it appears the funds were used to buy the
Lovington House and to supplement the couple’s income for several years. During this time,
Galey did not work, and Boydstun received government benefits. Galey’s son lived in the
California House rent-free. Galey and/or her son allowed the California House to fall into
significant disrepair. Unfortunate as events turned out, Boydstun’s conduct was not willful or
malicious as required by § 523(a)(6).
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2. The Quitclaim Deed.
Galey also asserts that Boydstun or an agent acting at his direction forged her signature
on the Quitclaim Deed to eliminate her interest in the Lovington House. The Court is not
convinced that occurred. Both Boydstun and the Notary Public, Robert Perez, testified that
Galey signed the deed. Perez checked Galey’s ID to confirm that she was the signatory. Aside
from transacting business on one or two occasions, Boydstun does not have any relationship with
Perez. Galey’s daughter - Kelli Marquez - told police that she witnessed Galey sign the
Quitclaim Deed. Although the police and the FBI investigated the matter, neither agency
pursued an action against Boydstun. Further, to an untrained eye the signature on the Quitclaim
Deed appears to match the signatures on Galey’s pleadings. In reality, Galey had bad credit, and
Boydstun took title to their joint property for the purpose of obtaining financing. In light of the
evidence, the Court finds that Galey signed the Quitclaim Deed. To the extent her § 523(a)(6)
claim is based on Boystun’s alleged forgery, Galey did not carry her burden of proof.
3. Boydstun’s Invective Behavior.
Next, Galey argues that Boydstun was abusive and gave her an incurable sexually
transmitted disease. There is no conclusive, admissible evidence that either party has the disease
in question. Even if there were, the Court cannot determine which party caused the alleged
injury. The parties have been dating intermittently for roughly 40 years, during which time they
could have encountered other infected partners. The Court therefore cannot award damages
based on this argument.
The Court is sensitive to the fact that Boydstun and Galey had a tumultuous - and by all
accounts, miserable - relationship. However, it is unclear whether, and to what extent, Boydstun
was abusive. The only evidence on that issue was Galey’s testimony, which unfortunately was
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not credible. Further, Galey failed to offer evidence regarding the amount of damages she
suffered as a result of the alleged abuse. Without such evidence, Galey cannot prevail on her
claim under § 523(a)(6). See, e.g., Zhao-Ding v. Lauzon (In re Lauzon), 2012 WL 1192800, *11
(Bankr. D. Mass. 2012) (declining to declare certain debts nondischargeable under § 523(a)(6)
where, though it appeared that the debtor engaged in misconduct, plaintiffs failed to offer
sufficient evidence regarding damages).
4. Miscellaneous Fraud.
Finally, Galey points to several other alleged injuries caused by Boydstun’s fraudulent
conduct. Among other things, she contends that Boydstun: (1) defrauded CitiMortgage by
pretending to be an active duty military member; and (2) required Galey to pay for
weatherization work on the Lovington House without her consent. These arguments fail. Galey
participated in the alleged scheme to defraud CitiMortgage, and she ordered the weatherization
work herself. In any event, to prevail on a claim under § 523(a)(6), the movant must suffer the
injury. See, e.g., Davis v. Olson (In re Olson), 454 B.R. 466, 478 (Bankr. W.D. Mo. 2011) (Ҥ
523(a)(6) means that the debtor targeted the [movant] to suffer the harm resulting from the
debtor’s intentional, tortious act.”). Galey cannot bring an § 523(a) claim on behalf of third
parties.
Based on the foregoing, the Court declines to declare any of Boydstun’s debt
nondischargeable under § 523(a)(6).1
C. Willful Stay Violation - § 362(k).
A debtor injured by a “willful” violation of the automatic stay is entitled to recover
damages, including costs, fees, and if appropriate, punitive damages. 11 U.S.C. § 362(k)(1). To
1 It is difficult to tell whether Galey only intended to bring claims under § 523(a)(6). To the extent she
intended to bring claims under §§ 523(a)(2) or (a)(4), the Court concludes that she has not carried her
burden of proof under either of those subsections.
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prevail under § 362(k), the debtor must prove by a preponderance of the evidence that: “(1) a
violation occurred; (2) the violation was committed willfully; and (3) the violation caused actual
damages.” Kline v. Deutsche Bank Nat’l Trust Co. (In re Kline), 472 B.R. 98, 103 (10th Cir.
BAP 2012). A violation is willful “if the creditor knew of the automatic stay and intended the
actions that constituted the violation.” Kline, 472 B.R. at 103 (“The term ‘willful’ refers to the
deliberateness of the conduct, coupled with knowledge of the filing.”). Although a party’s
subjective understanding of the automatic stay may be relevant to damages, it is not relevant to
whether a willful violation actually occurred. Culley v. Castleberry (In re Culley), 2006 WL
2091199, at *4 (10th Cir. BAP 2006). If a party has knowledge of the pending bankruptcy case,
they are charged with knowledge of the automatic stay. In re Radcliffe, 563 F.3d 627, 631 (7th
Cir.2009) (“A willful violation does not require specific intent to violate the stay; it is sufficient
that the creditor takes questionable action despite the awareness of a pending bankruptcy
proceeding.”); KCH Services, Inc., v. Nordam Group, Inc., 345 B.R. 542, 548 n. 5 (W.D.N.C.
2006) (same); cf Zilog v. Corning (In re Zilog), 450 F.3d 996, 1008 (9th Cir. 2006).
Here, Galey knew about the bankruptcy case when she filed a lawsuit against Boydstun.
She did not believe the automatic stay applied to her because Boydstun did not list her as a
creditor. Despite this misunderstanding, her conduct likely rises to the level of “willful” for
purposes of § 362(k). See, e.g., Culley, 2006 WL 2091199, *5 (affirming a finding that the pro
se creditor willfully violated the discharge injunction where he did not fully understand the
nature of the injunction); In re Thompson, 426 B.R. 759, 764 (Bankr. N.D. Ill. 2010) (A “good
faith mistake of law … [does not] relieve a willful violator of the consequences of his act”).
Nevertheless, Boydstun cannot prevail under § 362(k) because he failed prove that the
violation caused actual damages. In his complaint, Boydstun sought $175,000 in damages. At
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trial, he testified that he sustained approximately $15,000 in actual damages. Boydstun,
however, did not offer sufficient testimony or other evidence to support this amount. The Court
therefore cannot award actual damages in this particular case. Further, as Galey did not
understand the nature of the automatic stay, punitive damages are not appropriate.
III. CONCLUSION
All requested relief is denied. This Memorandum Opinion shall constitute the Court’s
findings of fact and conclusions of law under Fed.R.Bankr.P. 7052. An appropriate judgment
will be entered in each case.
___________________________
Honorable David T. Thuma
United States Bankruptcy Judge
Entered on: September 13, 2013
Copies to:
Joy Galey
P.O. Box 101
Barstow, CA 92312-0101
Glen L. Houston
1304 W. Broadway Pl.
Hobbs, NM 88240-5508
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