Andrews v. Baros

1 All statutory references will be to title 11 of the United States Code unless otherwise
indicated.
1
UNITED STATES BANKRUPTCY COURT
DISTRICT OF NEW MEXICO
In re: RENAE D. BAROS, 	No. 7-05-19110 ML
Debtor.
____________________________________________________________________________
EDDIE R. ANDREWS,
Plaintiff,
v. 	Adv. No. 05-1275 M
RENAE D. BAROS,
Defendant.
MEMORANDUM OPINION
THIS MATTER is before the Court after trial on the merits of Plaintiff’s Complaint
seeking to declare non-dischargeable a debt pursuant to 11 U.S.C. §§ 523(a)(4), (a)(6) and
(a)(15).1 Having reviewed the evidence, arguments of counsel, and the applicable principles of
law, and being otherwise sufficiently informed, the Court determines that it will grant the relief
requested. In connection with this conclusion, the Court finds:
1. Defendant, Renae D. Baros, filed a voluntary petition under Chapter 7 of the
Bankruptcy Code on October 7, 2005.
2. Plaintiff alleges that he is owed a debt in the amount of $58,390.00 arising from
Defendant’s misappropriation of several items of Plaintiff’s personal property, which were left at
the residence occupied by Plaintiff and Defendant before their divorce in 2003. Plaintiff
Case 05-01275-m Doc 31 Filed 03/01/07 Entered 03/01/07 14:30:42 Page 1 of 12

2 Though the prayer for relief contained in the Complaint contained a request for denial
of the Defendant’s discharge pursuant to 11 U.S.C. § 727, none of the allegations in the body of
the Complaint appear to state a cause of action for denial of the Defendant’s discharge under 11
U.S.C. § 727. Counsel for Plaintiff had confirmed that Plaintiff only seeks a determination of
non-dischargeability as to the debt to Plaintiff and is not seeking a denial of the Defendant’s
discharge.
Plaintiff conceded at trial that he could not prove the elements necessary to show that the
debt is non-dischargeable under § 523(a)(15); therefore, the Court will not consider whether the
debt is non-dischargeable under this section.
2
contends that the value of the misappropriated property represents a debt that is non-
dischargeable because it arose from either larceny or willful and malicious injury committed by
Defendant.2
3. In her original Schedule F, Defendant listed a debt to Plaintiff in the amount of
$59,000.00 without indicating that it was disputed, contingent or unliquidated. Doc. 1; No. 05-
19110.
4. On February 7, 2007, one day before the trial of this adversary proceeding, Defendant
filed an Amended Schedule F stating that the debt to Plaintiff in the amount of $59,000.00 was
disputed. Doc. 35; No. 05-19110.
5. In the summer of 2001, Plaintiff was required to leave the marital residence shared
with his then wife, Defendant Renae Baros. Plaintiff left most of his personal property in the
marital residence located in El Paso, Texas.
6. Defendant filed a dissolution of marriage proceeding in 2002 in El Paso, Texas. See In
the Matter of Marriage of Renae Dolores Andrews a/k/a Renae Dolores Baros and Eddie Ray
Andrews, and The Interest of Cherilynn Andrews, a Child, Cause No. 2001-CM5417, 65th
Judicial District Court, El Paso County, Texas (the “Texas court”). Because of the contentious
nature of the proceedings and pursuant to an order from the Texas court, an inventory of
Case 05-01275-m Doc 31 Filed 03/01/07 Entered 03/01/07 14:30:42 Page 2 of 12

3
personal property was performed (the “2002 Inventory”). Def’s Ex. C.
7. The 2002 Inventory listed all personal property located at several sites: the marital
residence, a rental house, Plaintiff’s apartment, an airport hangar, and a self-storage unit. It is
undisputed that Plaintiff maintained control of the property at the airport hangar and the self-
storage unit.
8. On May 21, 2003 the Texas court made an oral ruling which stated in pertinent part
the following: 1) the divorce was effective on May 8, 2003, 2) Defendant had committed
constructive fraud regarding a putative adoption of Defendant’s child by Plaintiff; and 3)
Defendant was to reimburse Plaintiff for child support paid to her.
9. With regard to property, the Texas court stated the following:
Concerning the property, the property listed in [the 2002 Inventory] that is at a hanger
[sic] or some storage facility, all that belongs to Mr. Andrews and all the items currently
in his possession.
Mrs. Andrews gets everything in her possession, except for firearms, military and
Customs memorabilia, power tools, and the Jenn Aire refrigerator if it is still in
existence.. . .
Def’s Ex. K, Transcript of proceedings, 65 th Judicial District Court, El Paso, Texas (emphasis
added)
10. On September 9, 2003 a Final Decree of Divorce (the “Final Decree”) was entered
dissolving the marriage of Plaintiff and Defendant. Ex. A. In the Final Decree, the Texas court
listed the specific personal property awarded to Plaintiff as his separate property, which included
the property in bold print above.
11. On June 8, 2004 , after an appeal of the Final Decree, the Texas court granted
Plaintiff’s motion for judgment nunc pro tunc (the “judgment nunc pro tunc”) stating that a
previous order by the adoption court requiring Plaintiff to pay child support to Defendant, was
Case 05-01275-m Doc 31 Filed 03/01/07 Entered 03/01/07 14:30:42 Page 3 of 12

3 Plaintiff testified that on appeal, the language regarding Defendant’s fraudulent
representations to the adoption court was expunged. Thus, the judgment nunc pro tunc contained
no finding of fraud in connection with the putative adoption.
4
no longer in force and that Defendant requested that no child support be paid to her by Plaintiff.
In the judgment nunc pro tunc, the language awarding Plaintiff his separate personal property
remained unchanged.3
12. On September 2, 2004, Plaintiff filed a Petition for Enforcement of Contempt
(“Enforcement Petition”) in the State Court alleging that Defendant had failed to turn over all of
the property in her possession belonging to Plaintiff as required by the Divorce Decree. The
Enforcement Petition asked the State Court to order Defendant to turn over the property; or, in
the alternative, pay the fair market value of the property in the amount of $58,390.00. Plf. Ex. C.
13. The Enforcement Petition lists the specific property sought by Plaintiff in Exhibits A,
B and C, which includes the following 1) Firearms; 2) the Jenn Aire refrigerator; 3) U.S.
Customs equipment and military memorabilia; and 4) family photos. Exhibits A-C of the
Enforcement Petition are the same list of property attached to the Final Decree, except that
several items were crossed off of the list. Plaintiff testified that these items were crossed off
because he had those items in his possession. See Plf’s Ex. C.
14. A hearing on the Enforcement Petition was set on October 7, 2005, but was stayed
by the filing of Defendant’s bankruptcy on October 10, 2005.
15. In her Answer filed in this adversary proceeding Defendant generally denies that she
failed to turn over the property. Doc. 7; Adv. No. 05-1275. Defendant’s Answer also denies that
the debt claimed by Plaintiff “in the amount claimed in Defendant’s Bankruptcy Petition would
be a debt based on Defendant’s larceny or willful injury.” Answer ¶ 2 (Doc. No. 7; Adv. No. 05-
Case 05-01275-m Doc 31 Filed 03/01/07 Entered 03/01/07 14:30:42 Page 4 of 12

4 See Order Denying Motion to Remand Or In The Alternative For Abstention (Doc. 24;
Adv. No. 05-1275).
5
1275).
16. At trial of this matter, all exhibits were admitted by stipulation of the parties.
Discussion
The Debt
Plaintiff asks this Court to declare the debt in the amount of $58,390.00 non-
dischargeable under §§ 523(a)(4) or (a)(6). As a preliminary matter, Plaintiff argues that the
amount of the debt has been established because Defendant listed a debt to Plaintiff in the
amount of “$59,000.00" in her Original Schedule F and did not indicate that it was disputed,
contingent or unliquidated. Plaintiff argues that this admission was not effectively countered by
the last-minute filing of Amended Schedule F, the day before trial, in which Defendant listed the
debt in the amount of $59,000.00, but indicated that the debt was disputed. Regardless of the
effect of the admission in her schedules, Defendant has placed the amount of debt at issue,
although in-artfully, in her Answer stating that the debt “in the amount claimed in Defendant’s
Bankruptcy Petition” is not based on larceny or willful and malicious injury. Moreover, the
Court has already ruled that both dischargeability and the amount of the debt are at issue in this
proceeding in a previous order denying remand or abstention.4
To except a debt from discharge under § 523(a)(4), Plaintiff must prove two elements.
The first element is whether Defendant committed larceny or embezzlement by misappropriating
with intent to deprive Plaintiff of his separate personal property. The second element is the
amount of damages that should be awarded to Plaintiff to compensate for the loss of the
Case 05-01275-m Doc 31 Filed 03/01/07 Entered 03/01/07 14:30:42 Page 5 of 12

6
property. Both parties recognize that due to the bankruptcy filing, the Texas court did not have
the opportunity to hear the merits of the Enforcement Petition and determine whether Defendant
violated the Divorce Decree by not turning over Plaintiff’s personal property. In addition, the
Texas court did not have the opportunity to determine the value of the property, if any, that
Defendant failed to turn over. Each of those issues are now before this Court in the context of
this non-dischargeability proceeding.
Section 523(a)(4)
Section 523(a)(4) provides that a discharge under § 727 does not discharge an individual
debtor from any debt, “for fraud or defalcation while acting in a fiduciary capacity,
embezzlement, or larceny; . . .” 11 U.S.C. § 523(a)(4). Plaintiff seeks to prove by a
preponderance of the evidence that Defendant committed larceny or embezzlement by
misappropriating Plaintiff’s separate property.
Federal law and not state law controls the meaning of “larceny” and “embezzlement” for
§ 523(a)(4) purposes. Smith v. Hayden (In re Hayden), 248 B.R. 519, 525 (Bankr. N.D. Tex.
2000); Zanetti-Gierke, 212 B.R. 375, 381 (Bankr. D. Kan. 1997). Under federal common law, a
debtor commits “larceny ” when he takes another's personal property with intent to convert it or
deprive the owner of the property. Bryant v. Lynch (In re Lynch), 315 B.R. 173, 179 (Bankr. D.
Colo. 2004), remanded on other grounds, 2006 W.L. 2839587 (D. Colo. 2006) (bankruptcy court
is not bound by the state law definition of larceny, but, rather, should follow the federal common
law definition which requires intent to steal); Bennett v. Wright (In re Wright), 282 B.R. 510,
516 (Bankr. M.D. Ga. 1999)(“For non-dischargeability purposes, "larceny" requires a taking of
property belonging to another with the intent to convert it or to permanently deprive the owner of
Case 05-01275-m Doc 31 Filed 03/01/07 Entered 03/01/07 14:30:42 Page 6 of 12

7
it.”); In re Neumann, 13 B.R. 128, 131 (Bankr. Wis. 1981) (“Larceny requires a showing that the
taking was accompanied by specific intent to deprive the owner of his property.”).
Embezzlement, for purposes of § 523(a)(4), is the fraudulent misappropriation of
property by a person to whom such property has lawfully come. Miller v. J.D. Abrams, Inc. (In
re Miller), 156 F.3d 598, 602 (5th Cir. 1998) (citing, 3 Collier on Bankruptcy ¶ 523.14(3),
523-106 (15th ed.1981)). A finding of embezzlement requires proof of the following three
elements: 1) property owned by another is rightfully in the possession of a person; 2) the person
appropriates such property to a use other than the use for which the property was entrusted to the
person; and 3) circumstances indicating fraud. WebMD v. Sedlacek (In re Sedlacek), 327 B.R.
872, 880 (Bankr. E.D. Tenn. 2005). Whether a misappropriation of property is “larceny” and
“embezzlement” depends on whether the debtor possesses the property lawfully. Bryant v. Tilley
(In re Tilley), 286 B.R. 782, 789-90 (Bankr. D. Colo. 2002) (citations omitted). Both
embezzlement and larceny require fraudulent intent. Wright, 282 B.R. at 516. Both the intent
and the actual misappropriation necessary to prove embezzlement or larceny may be shown by
circumstantial evidence. Sedlacek, 327 B.R. at 880; see also In re Cook, 141 B.R.777, 784
(Bankr. M.D. Ga. 1992) (finding that seller of jewelry who failed to remit proceeds to consignor
and who admitted to lying to consignor about what happened to the proceeds established
fraudulent intent for embezzlement under § 523(a)(4)).
At the time that Plaintiff vacated the marital residence, but before the Final Decree
adjudicating which property was his separate property, Defendant had lawful possession of
Plaintiff’s property at the marital residence. Therefore, fraudulent misappropriation of Plaintiff’s
property during this time would constitute embezzlement. After the property was adjudicated as
Case 05-01275-m Doc 31 Filed 03/01/07 Entered 03/01/07 14:30:42 Page 7 of 12

8
separate property and Defendant was ordered to turn over the property to Plaintiff, Defendant
had no right to possess the property. Fraudulent misappropriation of the property at this time
would constitute larceny. Regardless of the time, failure to turn over this property by keeping it
or disposing of it would constitute an unlawful misappropriation of the property. Whether the
misappropriation is accompanied by intent to deprive Plaintiff of the property, is a separate
requirement that would transform the misappropriation into larceny or embezzlement for
purposes of non-dischargeability. See Matter of Rose, 934 F.2d 901, 903 (7th Cir. 1991)
(upholding bankruptcy court’s holding inferring intent for larceny purposes where ex-wife
wrongfully took cash from safety deposit box ignoring instructions from ex-husband not to use
or take control of his money).
The Firearms
Plaintiff testified that the firearms that he claims are missing were stored in the garage of
the marital residence. According to the 2002 Inventory, six of the firearms were located in the
airport hangar, in Plaintiff’s possession. In the list of missing firearms attached to the
Enforcement Petition, these six firearms are crossed off. Plaintiff claims that these remaining
three firearms and one power scope were misappropriated by Defendant and that Defendant
should compensate Plaintiff for their value as a non-dischargeable debt. These items and their
values were listed in the Enforcement Petition as follows:
1. Knight Rifle Black Powder Stainless Steel-Composite Stock, 54 Caliber $700.00
2. Pre 1964 Winchester 30-30 Carbine $800.00
3. North American Arms 22 Caliber Magnum Revolving Derringer $200
4. 3 x 9 Power Scope Off of a 22 Caliber Rifle $200.00.
See Enforcement Petition, Plaintiff’s Ex. C.
The above values are the only evidence of value that was presented. These items are
Case 05-01275-m Doc 31 Filed 03/01/07 Entered 03/01/07 14:30:42 Page 8 of 12

9
listed on Exhibit B to the Final Decree (Plf’s Ex. A) as household goods, furniture, fixtures &
equipment. Plaintiff testified that these firearms were at the marital residence when he left the
residence in the summer of 2001, and they were still at the marital residence when he left again
in November 2001 after a brief attempt at reconciliation. He testified that he has not been in the
marital residence since that time. Plaintiff points to the 2002 Inventory of the marital residence,
which did not list these three firearms and the scope, as evidence that Defendant disposed of
those items, either by selling them, or by giving them away some time after Plaintiff left the
marital residence in 2001 and before the 2002 Inventory was prepared. Defendant testified that
at the time of the Final Decree, she did not have possession or control of these firearms and
scope; therefore, she could not turn them over to Plaintiff. Defendant also points to the 2002
Inventory, as proof that these items were not in her possession before the Final Decree. She
further testified that at the time of the 2002 Inventory, she did not live at the marital residence.
She maintains that all of the firearms were stored at the airport hangar, not at the marital
residence. Defendant contends that it was physically impossible to return items that were not in
her possession.
Based on the evidence, the Court finds that these three firearms and one scope, were
located at the marital residence at the time Plaintiff vacated the property in 2001. These items
were missing when the 2002 Inventory was prepared and Plaintiff was unable to retrieve his
property. The Court finds Defendant’s testimony that it was physically impossible to return
items that were not in her possession disingenuous. Moreover, the Court finds that Plaintiff’s
testimony is more credible. Because Defendant was living at the marital residence in 2001 when
Plaintiff vacated the marital residence, which contained these items, and the items were missing
Case 05-01275-m Doc 31 Filed 03/01/07 Entered 03/01/07 14:30:42 Page 9 of 12

10
at the time of the 2002 Inventory making it impossible for Plaintiff to retrieve his property, the
Court finds that Defendant misappropriated these items. Further, the Court finds that
Defendant’s failure to preserve possession of Plaintiff’s firearms and scope and concealing the
misappropriation of these items shows the requisite intent to deprive Plaintiff of possession of
this property thereby making any resulting debt non-dischargeable as arising from
embezzlement. The amount of this non-dischargeable debt has been established by the values
placed on each item in the Enforcement Petition, which was an exhibit admitted by stipulation at
trial. Without any other evidence of value, the Court finds that the damages from the
embezzlement of this property, and the non-dischargeable debt, is $ 1,900.00, the total of the
listed values.
Family Photos and Memorabilia
Plaintiff testified that several of his family photos were displayed at the marital residence
at the time he left in 2001. “Andrews Family Pictures” are listed among the household goods
awarded to Plaintiff in the Final Decree. Plf’s Ex. A. Plaintiff testified that when he returned to
the marital residence to retrieve the photos, they were gone. Defendant testified that she never
saw these photos in the marital residence and doubts that they exist.
Plaintiff testified that he had numerous government and military service memorabilia
items stored at the marital residence in drawers. These items include plaques, medals, citations,
Vietnam war memorabilia and Customs service memorabilia. Plaintiff testified that he had a
Texaco collectors airplane bank collection that he displayed on the television at the marital
residence, but these were also missing when he attempted to retrieve his property from the
marital residence. The 2002 Inventory makes no mention of this collection. Plaintiff testified
Case 05-01275-m Doc 31 Filed 03/01/07 Entered 03/01/07 14:30:42 Page 10 of 12

11
that he purchased 10 to 12 items of his Vietnam memorabilia and some badges from his federal
Customs service from junk stores and pawn shops. Plaintiff testified that he paid the $75.00
price as marked for each of the items recovered. 	Plaintiff did not testify as to the monetary
value of the other items of memorabilia, the collectors items, and photos. Plaintiff testified that
he could not value such items because they were a priceless part of his lifetime history and
memories.
Defendant testified that she never had possession of any of these items and that all of the
memorabilia items were in Plaintiff’s storage unit or in the airport hangar storage area under
Plaintiff’s control. In similar manner, Defendant argues that these items are not listed as being in
her possession on the 2002 Inventory; therefore, the Court should conclude that she never had
possession of those items.
The Court finds again that the more credible testimony comes from Plaintiff. Plaintiff
maintains that family photos, collectors items and memorabilia from Vietnam etc. were
displayed in or stored at the marital residence and that these items were missing when he
attempted to retrieve them. The Court finds that Defendant’s testimony that she never saw
family photos and doubts that they exist, implausible and lacking credibility. The Court also
notes that Defendant appealed certain findings in the Final Decree concerning a fraudulent
adoption, but failed to appeal the requirement that she turn over property that she now claims she
never had and doubts ever existed. It seems illogical that one finding would be appealed but not
another. Therefore, the Court finds that Defendant misappropriated these items of Plaintiff’s
personal property that were in the marital residence in Defendant’s possession when Plaintiff
vacated the residence. In addition, the evidence shows that Defendant disposed of at least 10
Case 05-01275-m Doc 31 Filed 03/01/07 Entered 03/01/07 14:30:42 Page 11 of 12

12
items in pawn shops or junk shops, which Plaintiff purchased back at $75.00 each. Defendant
did not effectively counter this testimony. Simple math yields an amount of $750.00 as the
amount of damages to compensate for the loss of these items. Therefore, the Court finds that the
damages from the embezzlement of this property, and the non-dischargeable debt, is $ 750.00.
When added to the $1,900.00 in damages for the firearms, the total non-dischargeable debt,
therefore, is $2,650.00.
Because the Court finds that the debt is non-dischargeable under § 523(a)(4), the Court
does not need to address the allegation that the same debt is non-dischargeable under §
523(a)(6). No evidence regarding denial of discharge under § 727 was presented and to the
extent this action was pled, judgment will be granted in favor of Defendant. An appropriate
judgment will be entered with this opinion.
MARK B. McFEELEY
UNITED STATES BANKRUPTCY JUDGE
Copies to:
Damian L. Martinez
Attorney for Plaintiff
PO Box 2699
Las Cruces, NM 88004-2699
R Trey Arvizu, III
Attorney for Defendant
PO Box 1479
Las Cruces, NM 88004-1479
Case 05-01275-m Doc 31 Filed 03/01/07 Entered 03/01/07 14:30:42 Page 12 of 12