Torres et al v. Martinez

OCR transcription for search; preserved printed pages are authoritative

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U.S. GOVERN
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FILED .

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UNITED STATES BANKRUPTCY COURT
CENTRAL DISTRICT OF CALIFORNIA

Case No. RS 07-12037 DN
Adv. No. RS 07-01140 DN

In re

Martinez aka Hugo Carlos
Martinez,

Defendant.

)
)
HUGO MARTINEZ, )
) Chapter 7
Debtor. }
) MEMORANDUM OF DECISION
:
JUAN TORRES and j
NORMA TORRES, }
)
Plaintiffs. )
Vv. }
)
HUGO MARTINEZ, aka Carlos H. )
}
)
)
}
}

Plaintiffs, Juan and Norma Torres, filed a complaint
against the debtor, Hugo Martinez, to determine the
dischargeability of a debt pursuant to 11 U.S.C. § 523 (a) (2) (A)
and § 523(a)(6).1 Trial was held on February 6 and 7, 2008. The
Court has considered the documentary evidence, testimony of
witnesses, including an assessment of the credibility of the

witnesses, arguments and supplemental briefing by counsel and

1 unless otherwise indicated all Code, chapter and section
references are to the Bankruptcy Code, 11 U.S.C. $$ 101-1330.

|

Cd

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1 || makes the following findings and conclusions pursuant to Fed. R.
2\|Civ. P. 52 as incorporated by Fed. R. Bank.P. Rule 7052:

3 I. Findings of Fact

4] 1. Mr. Martinez and Mr. and Mrs. Torres entered into a Contract
5 on October 15, 2005, whereby the parties agreed that, in

6 exchange for $100,000, Mr. Martinez would construct an

7 addition to the Torres’ residence located in Whittier,

8 California (the “Property”), and the construction would

9 conform to the drawings as specified in the blueprints (the
10 *“Project”).

11 2 Conflicting testimony was presented by Mrs. Torres and Mr.
12 Martinez as to whether Mr. Martinez represented that he was
13 a licensed contractor. Mrs. Torres testified that, prior
14 to executing the Contract, she inquired of Mr. Martinez as
15 to whether he was a licensed contractor and he responded in
16 the affirmative. When asked for his license, he stated

17 that he did not have it with him. Mr. Martinez denied that
18 he made the representation that he was a licensed

19 contractor. I find the testimony of Mrs. Torres to he
20 credible on this issue and find that, prior to the time
21 the Contract was executed, Mr. Martinez represented to Mr.
22 and Mrs. Torres that he was a licensed contractor. I do

23 not find the testimony of Mr. Martinez to be credible.

24 || 3 I find that Mr. Martinez knew he was not a licensed
25 contractor at the time he represented otherwise and did
26 so with the intent to deceive for the purpose of

27 fraudulently inducing Mr. and Mr. Martinez to enter into the
28 Contract so that he could cbtain payment. The Contract
2

ERE EE.

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1 was handwritten in Spanish by Mr. Martinez who signed the
2 contract as “C. Hugo Martinez.” He testified that Carlos
3 Martinez was the name of his cousin, an alias which he used
4 in 1988 and for a period of six years thereafter. He denied
5 that he continues to use the alias or used it in 2005, yet
6 failed to explain why he executed the Contract as C. Hugo
7 Martinez. He further testified that he continues to do
8 business with Grove Lumber under the name of Carlos
9 Martinez and has not attempted to correct the records
10 because he deals in cash. The document on which the
11 Contract was written is a form entitled “Contractor's
12 Invoice.” Mr. Martinez placed his driver’s license number
13 on the Contract under the place designated on the form as
14 “your Work Order No.” I find that this act was in
15 furtherance of the fraudulent representation that he was a
16 licensed contractor. Mr. and Mr. Torres had no prior
17 experience with home improvement contracts and justifiably
18 relied upon Mr. Martinez’s representation that he was a
19 licensed contractor in agreeing to enter into the Contract
20 and pay him the Contract price of $100,000 to complete the
21 addition to their Property.
22 || 4 Mr. and Mrs. Torres, in the company of Mr. Martinez,
23 obtained various permits as the owners/builders on the
24 Project.
25 || 5 The Contract does not contain a date of completion, nor
26 does it contain a provision stating that the work will be
27 performed in a substantial workmanlike manner. The
28 testimony of the parties reflects that Mr. and Mrs. Torres
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sought to modify the Contract by sending Mr. Martinez a
certified letter and inserting a date of completion. Mr.
Martinez intentionally did not receive the letter, and the
letter reflects that neither party signed the document .
Accordingly, any attempt at modification failed, and I do
not find that Mr. Martinez made any express representation
to Mr. and Mrs. Torres that he would complete the Project in
a substantial workmanlike manner nor that he would complete
the Project by the summer of 2006.

The Contract terms indicated that payment would be made as
the work progressed. From October of 2005 through the
spring of 2006, Mr. Martinez sought and obtained payments
from Mr. and Mr. Torres representing that the payments were
for materials and/or labor for the Project as it progressed.
A portion of the work was completed by October of 2006.
During the preceding months, Mr. Martinez could not be
located by Mr. and Mrs. Torres and the work had not
progressed much although Mr. Martinez had been paid large
amounts by Mr. and Mrs. Torres. Mr. Martinez testified that
during this time he began working for a company during the
daytime hours and assisted his father-in-law in at least one
other project on the evenings and weekends. Mr. Martinez
would only appear at the Property for the purpose of
collecting payment stating that the payment was for labor
and materials for the Project. Mr. and Mr. Torres continued
to make the progress payments to Mr. Martinez in the hope
that he would complete the Project. Frustrated in their

attempts to locate Mr. Martinez, and when his promises to

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complete the Project failed to materialize, Mr. and Mrs.
Torres became dissatisfied.

Mr. and Mrs. Torres obtained loans in the approximate
amount of $100,000 for the purpose of completing the

work on the Project. In October of 2006, they took over
work on the Project because they believed that Mr. Martinez
had abandoned the job. During this time, Ricky Martinez,
brother and co-worker of Mr. Martinez, installed windows at
the Property and collected an additional payment from Mr.
and Mrs. Torres, unbeknownst to Mr. Martinez. Mr. and Mrs.
Torres filed a lawsuit in state court against Mr. Hugo
Martinez for breach of contract, fraud and conversion
arising from the Project (“State Court Action”). Default
was entered against Mr. Martinez in the State Court Action
in January 2007, and Mr. Martinez filed a petition under
Chapter 7 on April 16, 2007.

Mr. Martinez produced receipts at trial for the purchase of
materials for other jobs not associated with the Project,
which included receipts that pre-dated the commencement of
the Project. I find that Mr. Martinez produced these
receipts in an effort to falsely represent that they were
receipts of expenditures for the Project; Mr. and Mrs.
Torres proved otherwise at trial. Mr. Martinez testified
that he had several employees working on the Project, who
were paid cash from the funds received from Mr. and Mrs.
Torres, yet Mr. Martinez failed to provide any documentation
or witnesses to substantiate this claim for such

expenditures associated with the Project. I find that no

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credible evidence was presented by Mr. Martinez to prove
that he paid any person for performing work on the Project
that benefitted Mr. and Mrs. Torres. Accordingly, about
$88,000 was diverted by Mr. Martinez and the use and/or
whereabouts of the funds are unknown.

Mr. and Mrs. Torres, along with various contractors, family
and friends completed the Project, which included obtaining
approval from the City of Whittier for permits, and in

some instances, re-doing work which had been completed by
Mr. Martinez in a manner which failed to comply with
municipal building codes. Mr. Martinez contends that the
fact that Mr. and Mrs. Torres hired certain contractors, who
were also unlicensed, following his abandonment of the
Project, demonstrates that, even if he did represent that he
was a licensed contractor, Mr. and Mrs. Torres did not rely
upon the representation as it was their practice to hire
persons to perform work in the most cost effective manner,
i.e., an unlicensed contractor as opposed to one who is
licensed. I reject this assertion. Mrs. Torres testified
that after Mr. Martinez had abandoned the Project, left the
Property in shambles, and taken their money, they had
minimal funds available to complete the work and were
forced to do much of the work themselves. They were
assisted by family and friends, including persons and
tradesmen who worked for companies but who were not
licensed. The conduct of the Torres’ following the
abandonment by Mr. Martinez does not vitiate the fact

that they justifiably relied on his false representation,

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which he knew was false and the fact that he intended to
deceive them; and the loss and damage suffered by Mr. and
Mrs. Torres was the proximate result of the representation
made by Mr. Martinez. Mr. and Mrs. Torres did not solicit
a licensed contractor to complete the work, which is
understandable because they had already been defrauded by
one person who claimed to be a licensed contractor.
Further, their new approach was different in that the
plumbing and other relatively minor parts of the project
that they had completed were different in scope from the
full Contract addition.

The homeowners were damaged by the misrepresentation
because a licensed contractor would comply with the
requirements that a project be paid for and expenditures
be applicable for that project. Here, Mr. Martinez did
not maintain a separate account for the Project.

When Mr. Martinez took a new full-time job and other
projects, he continued to extract money from Mr. and

Mrs. Torres for the fallacious progress on the Project. It
is a reasonable inference from his later conduct in (a)
diverting his time and attention to other interests, and
(b) continuing to take payments from Mr. and Mrs. Torres
that his intent from the beginning was to defraud them.

An honest person faced with the inability to complete this
ambitious Project as contracted would not attempt to
disappear, as he did, and would try to work out a
cancellation and refund arrangement, neither of which

course was his approach.

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11. I find that Mr. Martinez acted willfully and maliciously by
representing himself as a licensed contractor for the
purpose and with the intent to induce Mr. and Mrs. Torres to
execute the Contract so that he could collect payment from
them. The Contract was no more than a fraudulent sham, and
Mr. Martinez had no intention of performing the Contract as
agreed upon.

Tl. Conclusions of Law

(A) Section 523 (a) (2) {A)

Section 523(a) (2) (A) provides, in relevant part, that a
discharge under § 727 does not discharge an individual debtor
from any debt “for money [or] property...to the extent obtained
by false pretenses, a false representation, or actual fraud...”
Section 523(a) (2) (A). To prove that a debt is nondischargeable
pursuant to § 523 (a) (2) (A), a creditor must prove by a
preponderance of the evidence that “(1)the debtor made the
representations, (2) that at the time he knew they were false,
(3) that he made them with the intention and purpose of
deceiving the creditor, (4) that the creditor relied on such
representations, and (5) the creditor sustained the alleged loss
and damage as the proximate result of the representations

having been made.” Britton v. Price, (In re Britton), 950 F.2d

602, 604 (9th Cir. 1991).

(1) The Debtor Made the Representations

Contractors are required to be licensed pursuant to the
requirements as set forth in Cal. Bus. & Prof, Code § 7000 et
seq., known as the Contractors’ State License Law. Cal. Bus. &

Prof. Code § 7026 defines “Contractor” in relevant part, as “any

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person who undertakes to or offers to undertake to, or submits a
bid to, or does himself...construct, alter, repair, add to,
subtract from, improve, move, wreck or demolish any building...or
other structure...” Cal. Bus. & Prof. Code § 7026 (2007). This
section includes the addition to any structure. Mr. Martinez was
a contractor within the meaning of Cal. Bus. & Prof. Code § 7026,
who failed to comply with the licensing requirement.

California has strict statutory controls on contractor
licensing, designed in substantial part for consumer protection.
A discharge in bankruptcy is not the only goal of justice.
Compare the nondischargeable judgment beyond just compensatory

damages at issue in Cohen v. De La Cruz, 523 U.S. 213 (1998)

(treble damages and other sanctions for rent control violations).
Section 7031 of the Cal. Bus. & Prof. Code prohibits
unlicensed contractors from maintaining actions to recover
compensation and additionally permits a party who has utilized
the services of an unlicensed contractor to recover all
compensation paid to him, even where the person for whom the work

was performed knew that the contractor was unlicensed. Hydrotech

Sys., Ltd. v. Oasis Waterpark, 52 Cal. 3d 988, 007, BO3 P.2d 370,
376 (1991).

Unlike the unlicensed contractor debtor in In re Sabban,

___ *«B.R. ss (9th Cir. BAP 2008), BAP No. CC-07-1269-

MoPaD, filed February 20, 2008, and ordered published, Mr.
Martinez received funds from Mr. and Mrs. Torres but Mr. Martinez
did not apply those funds to the Project (except for an

insignificant amount).

Mr. Martinez made the false representation that he was a

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Licensed contractor at the initial meeting with Mr. and Mr.
Torres prior to the time that Mr. and Mr. Martinez executed the
Contract.

(2) At the Time the Representations Were Made
the Debtor Knew They Were False

The fact that Mr. Martinez is not a licensed contractor is
not a disputed issue of fact. Mr. Martinez admits that he is not
a licensed contractor; he contends that he never represented
otherwise. I afford no weight to the testimony of Mr. Martinez
and believe that he held himself out as a licensed contractor.

(3) The Debtor Made the Representations With

the Intention and Purpose to Deceive the
Creditor

When asked for his license, Mr. Martinez indicated that he
did not have it with him. I conclude that Mr. Martinez
represented that he was a licensed contractor with the intent and
purpose to convey to Mr. and Mrs. Torres that false impression
because they would be more likely to hire Mr. Martinez for the
Project if he were a licensed contractor as opposed to an
unlicensed contractor.

Mr. and Mrs. Torres believed that Mr. Martinez was a
licensed contractor and, as a result, they were fraudulently
deceived and induced to enter into the Contract. The fact that
Mr. Martinez was not a licensed contractor placed them, as
consumers, outside of the protections afforded to persons who
contract with licensed contractors.

Cal. Bus. & Prof. Code § 7028 provides that it is a
misdemeanor for any person to engage in the business or act in

the capacity of a contractor in this state without having a

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license, with certain exceptions which are inapplicable here.
Mr. Martinez was operating outside of the laws of the State of
California that have been enacted to regulate the construction
trade and deter unlicensed contractors from acting as a
contractors. I conclude that Mr. Martinez acted with the intent
to deceive Mr. and Mrs. Torres.

Although Mr. Martinez did not represent that he was a “home
improvement contractor” as defined in Cal. Bus. & Prof. Code
§ 7150.1, if he had been a licensed contractor, the Contract
would have been subject to the requirements of Cal. Bus. § Prof.
Code § 7159, which sets forth the requirements that a “Licensed”
home improvement contractor must provide in a home improvement
contract, including (1) mechanic’s lien information, (2) change
orders, (3) right to payment and performance bonds, (4) name,
business address and license number of the contractor, (5)
description of project, (6) limitation of down payment not to
exceed $1,000 or 10 percent of the contract price, whichever is
less, (7) schedule of progress payments stated in dollars and
cents with reference to a description of work to be performed and
materials to be supplied, (8) prohibition to collect payment for
work not yet completed or materials not yet delivered in 12-point
bold-face type, (9) notice regarding liability insurance, (10)
notice regarding workers’ compensation insurance, (11) 3 and/or 7
day notice of right to cancel, and (12) a notice in at least 12-
point typeface regarding a prohibition against using unlicensed
contractors and contact information for the California
Contractors’ State License Board.

The foregoing represents the intent of the legislature

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to regulate and control home improvement contracts, similar to
the Contract procured by Mr. Martinez, to protect the consumer
and provide certain remedies to a consumer when doing business
with a licensed home improvement contractor.

(4) The Creditor Relied on Such Representations

Section 523(a){2) (A) requires justifiable reliance. Field
vy. Mans, 516 U.S. 59, 71, 116 S. Ct. 437, 133 L. Ed. 2d 351
(1995). “Justification is a matter of the qualities and
characteristics of the particular plaintiff, and circumstances of
the particular case rather than of the application of the
community standard of conduct to all cases.” Field, 516 U.S. at
71 citing Restatement (Second) of Torts § 540 (1976). “A person
is justified in relying on a representation of fact ‘although he
might have ascertained the falsity of the representation had he
made an investigation.’” Id. at 70. The example as set forth in
the Restatement is that of a seller of land who represents that
the land is free of encumbrances. The Restatement notes that the
buyer is justifiable in relying upon the representation
notwithstanding that he could have merely walked across the
street to the courthouse and discovered that the land was
encumbered by a mortgage. Id.

Mr. and Mrs. Torres justifiably relied upon the
representation that Mr. Martinez was a licensed contractor when
he met with them at their home prior to entering into the
Contract. Mr. Martinez had been recommended to Mr. and Mrs.
Torres by a co-worker of Mr. Torres, who was pleased with work
that Mr. Martinez had performed with respect to an addition to

her home. Mr. and Mrs. Torres had not previously contracted for

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home improvement work and were justified in accepting his
representation that he was a licensed contractor as true.

Whether a reasonable person would rely upon the
representation of a contractor who states that he is a licensed
contractor and who produces no contractor’s license or proof
thereof is not the inquiry before the Court. Whether it is
reasonable for a consumer to accept the representation, or
whether it is reasonable for a consumer to initiate an
investigation, 1i.e., check the website of the State Contractors’
License Board, is not the standard; the test is a lesser
standard, a subjective standard, of whether the reliance was
justifiable under the particular facts and circumstances.

Applying the standard of justifiable reliance to the facts
of this particular case, I conclude that Mr. and Mrs. Torres were
not required to undertake an investigation to determine whether
Mr. Martinez was a licensed contractor following his
representation.

(5) The Creditor Sustained the Alleged Loss

and Damage as the Proximate Result of the
Representations Having Been Made

As stated by the Ninth Circuit in In re Britton:

Proximate cause is sometimes said to depend

on whether the conduct has been so significant

and important a cause that the defendant should

be legally responsible. But both significance

and importance turn upon conclusions in terms

of legal policy so that they depend on whether

the policy of the law will extend the responsibility
for the conduct to the consequences which have in
fact occurred.

Britton, 950 F.2d at 604 quoting W. Page Keeton et. al.,
Prosser and Keeton on the Law of Torts § 42 at 273 (5th ed.
1984).

In Britton, the fraud was perpetrated by an office

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manager who held himself out as a physician; “Britton’s
misrepresentation of himself as a physician constituted fraud
within the meaning of § 523(a) (2) (A).” Id. Similarly, in this
case, Mr. Martinez held himself out as a licensed contractor, and
his misrepresentation that he was a licensed contractor satisfies
the requirement of fraud pursuant to § 523(a) (2) (A).

The loss and damages incurred by Mr. and Mrs. Torres are a
foreseeable consequence of being defrauded by Mr. Martinez, an
unlicensed contractor who was operating outside the scope of the
laws of the State of California for the licensing of contractors,
which are provided to protect consumers. Cal. Bus. & Prof. Code
§ 7028 provides that it is a misdemeanor to act in the capacity
of a contractor without a license. “The purpose of [the]
statutory contractor's licensing requirement is to protect the
public from perils incident to contracting with incompetent or

untrustworthy contractors.” Davis Co. v. Superior Court of San

Diego County, 1 Cal. App.3d 156, 158, 81 Cal. Rptr. 453 (1969).

There is no policy reason to limit the damages sustained by Mr.
and Mrs. Torres as a proximate result of Mr. Martinez’ fraud.
Accordingly, I find the debt nondischargeable pursuant to

§ 523 (a) (2) (A).

(B) Section 523 (a} (6)

Section 523(a}(6) provides, in relevant part, that a
discharge under § 727 does not discharge an individual debtor
from any debt for willful and malicious injury by the debtor to
another entity or to the property of another entity. Section

523 (a) (6).

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Jercich at 1208 quoting In re Bammer, 131 F.3d 788, 791 (9th Cir.

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The willful requirement of § 523 (a) (6) ‘modifies the word
{njury, indicating that nondischargeability takes a deliberate
or intentional injury, not merely a deliberate or intentional

act that leads to injury.” Kawaauhau v. Geiger, 523 U.S. 57, 61,

118 $.ct. 974, 977, 140 L.Ed.2d 90, 95 (1398).

To satisfy the “willful injury” requirement of § 523 (a) (6)
a plaintiff must demonstrate that “the debtor had a subjective
motive to inflict the injury;” or “that the debtor believed the
injury was substantially certain to occur as a result of the

debtor's conduct.” Petralia v. Jercich, (In re Jercich), 238 F. 3d

1202, 1208 (9th Cir. 2001}.
The requirement of “malicious injury” is separate from the

requirement of “willful.” Carillo v. Su (In re Su}, 290 F.3d

1140, 1146 (9th Cir. 2002). “A malicious injury involves (1) a
wrongful act, (2} done intentionally, (3) which necessarily

causes injury, and (4) is done without just cause or excuse.”

1997) {en banc}.

Actual fraud, pursuant to Cal. Civ. Code § 1572, may be
committed by a party to the contract with intent to deceive
another party to the contract, or to induce the other party to
enter the contract. The acts may include “({1) [t]he
suggestion of a fact, of that which is not true by one who
believes it is not true;... (4) [a] promise made without any
intention of performing it;... {5) [o]r any other act fitted to
deceive.” Id.

I find that Mr. Martinez fraudulently induced Mr. and Mrs.

Torres to enter into a sham contract by stating that he was a

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licensed contractor when he knew that was not true, and he
believed that the injury to Mr. and Mrs. Torres was substantially
likely to occur based upon his actions. Mr. Martinez deceived
Mr. and Mrs. Torres into making progress payments by his
misrepresentations about the state of the Project, and although
he did so for his own gain rather than with intent to hurt them,
injury to Mr. and Mrs. Torres from the loss of their funds was a
substantial and foreseeable certainty. The malicious prong of
the test as set forth in Jercich is satisfied. Additionally, the
evidence supports a finding that Mr. Martinez had no intention to
perform to completion the contract as agreed upon, and that he
performed only a portion of the work on the Project. The
foregoing constitutes a willful and malicious injury pursuant to
§ 523 (a) (6).

Conversion of the property of another also constitutes a
“willful and malicious injury within the meaning of § 523(a) (6).

Del Bino v. Bailey (In re Bailey), 197 F. 3d 997, 1000 (9th Cir.

1997). Mendoza v. Continental Sales. Co., 140 Cal. App. 4th

1395, 45 Cal. Rptr.3d 525 (Cal. Ct. App. 2006) defined conversion

as follows:

Conversion is the wrongful exercise of dominion
over the property of another. The elements of a
conversion claim are: (1) the plaintiff's ownership
or right to possession of the property; (2) the
defendant’s conversion by a wrongful act or
disposition of property right; and damages.
Conversion is a strict liability tort. The
foundation of the action rests neither in the
knowledge or intent of the defendant.

Mendoza, 140 Cal. App. 4th at 1405 quoting Burlesci v. Peterson,
68 Cal. App 4th 1062, 1066, 90 Cal. Rptr. 2d 704 (1998).

Money is subject to a action for conversion “if a specific sum |

16

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capable of identification is involved.” Farmers Ins. Exchange v.

Zerin, 53 Cal. App. 4th 445, 451, 61 Cal. Rptr. 2d 707 (Cal. Ct.

App. 1997) citing Weiss v. Marcus, 51 Cal. App.3d 590, 599, 124

Cal. Rptr. 297 (Cal. Ct. App. 1975).

In this case, the specific amount of funds which Mr. and
Mrs. Torres gave to Mr. Martinez is established as $93,000.
At the time Mr. Martinez obtained the funds and diverted them
to other uses, Mr. and Mrs. Torres had the right to possession
of those funds. Mr. Martinez converted the funds for his own
purposes and failed to use the funds for the Project. Mr. and
Mrs. Torres have satisfied the requirement of a willful and
malicious injury. Accordingly, I also find the debt
nondischargeable pursuant to § 523 a} (6}.

Damages

The “out of pocket” measure of damages results in an award

to a plaintiff of damages based upon what was paid due to fraud.

Henry v. Lehman Comm. Paper, Inc., 471 F.3d 977, 1001 (9th Cir.

2006). Mr. and Mrs. Torres paid Mr. Martinez $93,000. Mr
Martinez is entitled to a setoff of $3,000 for material
expenditures made in furtherance of the Project, and $2,000 for
the labor portion of work which was completed. Accordingly, the
debt in the amount of $88,000 is determined to be
nondischargeable pursuant to § 523(a) (2) (A) and alternatively
under § 523{a) (6).

An award of punitive damages is permitted in
nondischargeability cases under § 523(a) (6). Britton, 950 F.2d
at 606. Punitive damages may be awarded where fraud, oppression

or malice is proven by clear and convincing evidence. Cal. Civ.

17

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Code § 3294,

a defendant’s financial condition is a prerequisite to an

award of punitive damages, and that plaintiff bears the burden
of introducing such evidence.” Griffin v. Felton (In re Felton),
197 B.R. 881, 891 (9th Cir. 1996) citing Adams v. Murakami, 54
Cal. 3d.105, 284 Cal. Rptr. 318, 813 P.2d 1348 (1991). Mr. and
Mrs. Torres included a statement regarding punitive damages

in the joint proposed pretrial order, but failed to seek to
bifurcate the issues of liability and damages at trial. Because
no evidence was presented at trial on the issue of punitive
damages, including evidence of Mr. Martinez’s financial
condition, I will not consider an award of punitive damages.

Mr. Martinez filed bankruptcy in 2007; one can assume that the
abandonment of this prong of damages by the plaintiffs was a
prudent decision. The debt in the amount of $88,000 is
determined to be nondischargeable pursuant to § 523 (a) (2) (A) and

alternatively under § 523 (a) (6).

judgment in conformance with the foregoing Memorandum of

Decision.

98 Dei Hala

I ____ _ EO er:

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The California Supreme Court has decided that “evidence of

Counsel for the plaintiffs shall prepare and lodge a

David N. Naugle
Bankruptcy Judge

18

I

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In re Chapter 7

Hugo MARTINEZ Case No. RS 07-12037 DN
Debtor(s),

Juan and Norma TORRES Plaintiff(s),

Adv No: RS 07-1140 DN
vs.

Hugo MARTINEZ Defendant(s),

CERTIFICATE OF MAILING

TO ALL PARTIES IN INTEREST LISTED BELOW OR ON THE ATTACHED SERVICE LIST:

I hereby certify that I mailed a copy of this notice and a true copy of the
foregoing order to the persons and entities named below or on the attached service list on

{specify date): m2 98 9 2008

Dated: > 28 2008
JON D, CERETTO
Clerk of the Bankruptcy Court

By Harnett
_Jepaty Clerk °

Thomas J. Stolp, Esq.

Rogers, MacLeith & Stolp LLP

10061 Talbert Ave., Ste. 300
Fountain Valley, CA 92708

Stephen R. Wade, Esq,
400 N. Mountain Ave., Ste, 214B
Upland, CA 91786

Arturo Cisneros, Trustee
3403 Tenth St., Ste. 711
Riverside, Ca 92501

U.S. Trustee
3685 Main St., Ste. 300
Riverside, Ca 92501