Duff et al v. Ayala et al

UNITED STATES BANKRUPTCY COURT
DISTRICT OF NEW MEXICO
In re:
RICHARD A. AYALA and 	No. 7-13-13033 TA
JUDIE A. AYALA,
Debtors.
CHARLES B. DUFF and
JAMES B. CARVER,
Plaintiffs,
v. 	Adv. No. 13-1105 T
RICHARD A. AYALA and
JUDIE A. AYALA,
Defendants.
MEMORANDUM OPINION
Plaintiffs brought this adversary proceeding to except from discharge Defendants’ debt to
them arising from damage to Plaintiffs’ property. 	The matter before the Court is Plaintiffs’
motion for summary judgment,1 based on a state court judgment entered against Defendants. For
the reasons set forth below, the Court will deny the Motion.
I. 	UNDISPUTED FACTS2
Defendants own real property in San Juan County, New Mexico, described as Lots 24
and 25 of the San Juan River Estates No. 2 (the “Defendants’ Property”). 	The Defendants’
Property is near the San Juan river.
1 Motion for Summary Judgment, filed April 21, 2014, doc. 12 (the “Motion”).
2 Except to the extent of issue preclusion, discussed below, the findings set forth in this opinion
relate to summary judgment only, and are not intended to establish facts in the case. Fed. R. Civ.
Pro. 56(g).
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Plaintiffs purchased about .37 acres between Defendants’ Property and the San Juan
River (the “Riverfront Property”). 	The Defendants’ Property never touches the river; the
Riverfront Property is always between the two.
Defendants built a fishing lodge on the Defendants’ Property in 2008. In the summer of
2008 Defendant began building a boat ramp on the Riverfront Property, and began removing the
native vegetation. None of this work was authorized by Plaintiffs or their predecessors in title.
Plaintiff took title to the Riverfront Property on August 22, 2008. 	By then Plaintiff had
completed most of the unauthorized work on the Riverfront Property.
On August 23, 2008, Plaintiffs visited the Riverfront Property and saw Defendants
working on it, including scraping the native vegetation with heavy equipment. 	Plaintiffs asked
Defendants to stop the work but Defendants refused.
Plaintiffs 	sued 	Defendants 	in 	New 	Mexico’s 	Eleventh 	Judicial 	District 	Court,
commencing Charles D. Duff and James B. Carver v. Dennis M. Ayala, et. al., no. D-1116-CV-
2009-01510-4 (the “State Court Action”). The case was assigned to Judge John Dean, Jr.
On April 15, 2013, after a trial on the merits, Judge Dean entered a Judgment for
Liability Damages Against Defendants Dennis M. Ayala, Michael L. Ayala, Richard A. Ayala,
and Judie A. Ayala, (the “Judgment”), and Findings of Fact and Conclusions of Law (the
“Findings”) in the State Court Action.
Judge Dean found that the Defendants were guilty of a criminal trespass under § 30-14-1
NMSA 1978, and that they damaged the Riverfront Property by scraping and removing the
natural vegetation and building a boat ramp.
Judge Dean found that the total damages Defendants caused to the Riverfront Property
was $97,838.17. 	Judge Dean further found that the portion of such amount owed to Plaintiffs,
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based on the date they became owners of the Riverfront Property, was $7,625, or about 7.8% of
the total damages.
Pursuant to § 30-14-1 NMSA 1978, Judge Dean doubled the actual damages, so
Plaintiffs’ final judgment against Defendants in the State Court Action was $15,250, plus pre-
and post-judgment interest and court costs.
II. 	SUMMARY JUDGMENT STANDARDS
Summary 	judgment 	is 	appropriate 	if 	the 	pleadings, 	depositions, 	answers 	to
interrogatories, and admissions on file, together with the affidavits, if any, show that there is no
genuine issue as to any material fact and that the moving party is entitled to judgment as a matter
of law. 56 Fed.R.Civ.P. 	“[A] party seeking summary judgment always bears the initial
responsibility of informing the district court of the basis for its motion, and … [must]
demonstrate the absence of a genuine issue of material fact.” Celotex Corp. v. Catrett, 477 U.S.
317, 323 (1986). 	In determining whether summary judgment should be granted, the Court will
view the record in the light most favorable to the party opposing summary judgment. Harris v.
Beneficial Oklahoma, Inc. (In re Harris), 209 B.R. 990, 995 (10th Cir. BAP 1997). 	To deny a
motion for summary judgment, genuine factual issues must exist that “can be resolved only by a
finder of fact because they may reasonably be resolved in favor of either party.” 	Anderson v.
Liberty Lobby, Inc., 477 U.S. 242, 250 (1986). 	A mere “scintilla” of evidence will not avoid
summary judgment. Vitkus v. Beatrice Co., 11 F.3d 1535, 1539 (10th Cir. 1993). Rather, there
must be sufficient evidence on which the fact finder could reasonably find for the nonmoving
party. See Anderson, 477 U.S. at 251; Vitkus, 11 F.3d at 1539.
In this case the Defendants’ response to the Motion was very weak. Defendants did not
specifically address any of Plaintiffs’ 12 alleged undisputed facts, as required by F.R.C.P. 56(e)
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and Local Rule 7056-1(c). The only alleged fact Defendants’ provided was a declaration of Mr.
Richard Ayala that Defendants did not maliciously and intentionally injure plaintiffs’ property.3
Nonetheless, the Court must determine if judgment is appropriate. See, e.g., U.S. v. One
Piece of Real Prop. Located at 5800 SW 74th Avenue, Miami, Fla., 363 F.3d 1099, 1101 (11th
Cir. 2004) (court cannot base summary judgment on mere fact that the motion is unopposed, but
must consider the merits of the motion); D.H. Blair & Co. Inc. v. Gottdiener, 462 F.3d 95, 110
(2d Cir. 2006) (citing and following 5800 SW 74th Street). 	In making this determination, the
Court must review the evidence submitted in support of the Motion and determine if Plaintiffs
have met their burden of proof. D.H. Blair, 462 F.3d at 110; John v. State of La. (Bd. of Trustees
for State Coll. and Univ.), 757 F.2d 698, 708 (5 th Cir. 1985).
III. 	523(a)(6); WILLFUL AND MALICIOUS INJURY TO PROPERTY
Plaintiffs’ claim is brought under § 523(a)(6), which provides:
A discharge . . . 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 . . . .
This section requires proof that there be: (i) an injury to person or property; (ii) by the
debtor; (iii) that was willful; and (iv) that was malicious. 	Section 523(a)(6); Fletcher v.
Deerman (In re Deerman), 482 B.R. 344, 369 (Bankr. D.N.M. 2012). 	Penix v. Parra (In re
Parra), 	483 	B.R. 	752 	(Bankr. 	D.N.M. 	2012), 	discussed 	the 	“willful” 	and 	“malicious”
requirements:
[N]on-dischargeability under [§ 523(a)(6)] requires that the debtor’s actions be
both willful and malicious. The ‘willful’ element requires both an intentional act
and an intended harm; an intentional act that leads to harm is not sufficient . . .
Whether the debtor had the requisite intent to harm is evaluated under a subjective
3 Mr. Ayala cannot testify about his wife’s state of mind because he cannot know his wife’s
intent. 	Even if Ms. Ayala had told Mr. Ayala of her intent, it would have been inadmissible
hearsay.
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standard that focuses on the debtor’s state of mind . . . [B]ecause the Tenth Circuit
directs that willful and malicious are separate, distinct requirements, ‘malicious’
must be defined so that it is distinguishable from ‘willful.’ This Court concludes
that the ‘malicious’ component of 11 U.S.C. § 523(a)(6) requires an intentional,
wrongful act, done without justification or excuse.
Id. at 771-73 (citations omitted). The holding in Parra synthesizes the Tenth Circuit’s ruling in
Panalis v. Moore (In re Moore), 357 F.3d 1125 (10th Cir. 2004),4 with the Supreme Court’s
holding in Kawaauhau v. Geiger, 523 U.S. 57 (1998).5 The Court adopts Parra’s reasoning and
holds that, in order to be nondischargeable under § 523(a)(6), the debt must, inter alia, be the
result of an intentional act and intended harm (willful), and also the result of an intentional,
wrongful act, done without justification or excuse (malicious).
IV. 	ISSUE PRECLUSION
Under the Full Faith and Credit Act, 28 U.S.C. § 1738,6 this Court must “give the same
preclusive effect to a state-court judgment that the judgment would be given in the courts of the
state in which the judgment was rendered.” 	Jarrett v. Gramling, 841 F.2d 354, 356 (10 th Cir.
1988). 	See also Strickland v. City of Albuquerque, 130 F.3d 1408, 1411 (10 th Cir. 1997) citing
Kremer v. Chem. Constr. Corp., 456 U.S. 461, 466 (1982) (federal courts give the same
preclusive effect to state court judgments as those judgments are given by the state court). The
Court will apply New Mexico law.
4 “Without proof of both [willful and malicious] an objection to discharge under [§ 523(a)(6)]
must fail.” Id. at 1129 (emphasis in original).
5 “The word ‘willful’ in (a)(6) modifies the word ‘injury’ indicating that nondischargeability
takes a deliberate or intentional injury, not merely a deliberate or intentional act that leads to
injury.” 523 U.S. at 61.
6 “Such Acts, records and judicial proceedings or copies thereof, so authenticated, shall have the
same full faith and credit in every court within the United States and its Territories and
Possessions as they have by law or usage in the courts of such State, Territory or Possession
from which they are taken.”
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In New Mexico both issue preclusion and claim preclusion are accepted.7 See Myers v.
Olson, 676 P.2d 822, 824 (N.M. 1984) (applying claim preclusion), and Ideal v. Burlington Res.
Oil & Gas Co. LP, 233 P.3d 362, 365 (N.M. 2010) (applying issue preclusion).
Claim preclusion is not applicable because the claim litigated in the State Court Action is
not the same as the § 523(a)(6) proceeding now before the Court. 	Further, in general claim
preclusion “does not preclude the subsequent litigation of a nondischargeability action in
bankruptcy court because issues of non-dischargeability fall within the exclusive jurisdiction of
the bankruptcy court.” 	Hanover Packard Grp. v. Blackwell (In re Blackwell), 2010 WL
3037583, at *4 (Bankr. D.N.M. 2010). 	The Blackwell court relied on the Supreme Court’s
decision in Brown v. Felson, 442 U.S. 127 (1979), which held, under the Bankruptcy Act, that
only a bankruptcy court could expressly rule on the dischargeability of a debt.
Plaintiffs invoke issue preclusion, arguing that the issues determined in the State Court
Action are binding and require judgment in their favor. 	Issue preclusion bars relitigation “of
ultimate facts or issues actually and necessarily decided in a prior suit.” 	Adams v. United
Steelworkers of Am., AFL-CIO, 640 P.2d 475, 479 (N.M. 1982). In New Mexico, to apply issue
preclusion the party seeking its application must meet four elements:
(1) the party to be estopped was a party to the prior proceeding, (2) the cause of
action in the case presently before the court is different from the cause of action in
the prior adjudication, (3) the issue was actually litigated in the prior adjudication,
and (4) the issue was necessarily determined in the prior litigation.
7 There is some confusion as to the terminology. “The preclusive effects of former adjudication
are discussed in varying and, at times, seemingly conflicting terminology.” Clark v. Zwanziger
(In re Zwanziger), 467 B.R. 475, 480, n. 8 (10 th Cir. BAP 2012) rev’d 741 F.3d 74 (10 th Cir.
2014) quoting Migra v. Warren City Sch. Dist. Bd of Educ., 465 U.S. 75, 77 (1984). “At times,
the term ‘res judicata’ is used to encompass both claim and issue preclusion. In other instances,
‘res judicata’ is used more narrowly as referring only to claim preclusion.” 	Id. 	New Mexico
courts seem to equate “res judicata” and “claim preclusion.” 	See Blea v. Sandoval, 761 P.2d
432, 435 (N.M. Ct. App. 1988). 	To avoid confusion, the Court will use the terms “claim
preclusion” and “issue preclusion.”
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Shovelin v. Cent. N.M. Elec. Co-op., Inc., 850 P.2d 996, 1000 (N.M. 1993).
The Court finds that the four elements are satisfied in this case, and that the Judgment
and Findings are entitled to issue preclusive effect
V. 	ANALYSIS
The question in this case is whether the issues determined in the State Court Action are
sufficient to grant summary judgment in Plaintiffs’ favor in this adversary proceeding. 	The
elements of a § 523(a)(6) claim are set forth above. 	The elements will be compared to the
findings in the State Court Action.
The Debtors were found liable for criminal trespass under § 30-14-1 NMSA 1978, a state
statute that provides in part:
Criminal trespass consists of knowingly entering or remaining upon posted
private property without possessing written permission from the owner or person
in control of the land.
. . . .
Any person who enters upon the lands of another without prior permission and
injures, damages or destroys any part of the realty or its improvements, including
buildings, structures, trees, shrubs or other natural features, is guilty of a
misdemeanor, and he shall be liable to the owner, lessee or person in lawful
possession for civil damages in an amount equal to double the value of the
damage to the property injured or destroyed.
The New Mexico Supreme Court has also published uniform jury instructions for
criminal trespass actions. New Mexico’s Uniform Jury Instruction 14-1402 provides:
For you to find the defendant guilty of criminal trespass [as charged in Count
_______], the state must prove to your satisfaction beyond a reasonable doubt
each of the following elements of the crime:
1. The defendant entered or remained __________ (identify lands or structure
entered) without permission from the [owner] [occupant] [custodian] of that
property; [the least intrusion constitutes an entry;]
2. The defendant knew or should have known that permission to enter or remain
had been [denied] [withdrawn];
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3. This happened in New Mexico on or about the ___ day of _______, _____.
Additionally, in order to be guilty of criminal trespass an offender must have “general
criminal intent.” State v. McCormack, 682 P.2d 742, 745 (N.M. Ct. App. 1984). 	New Mexico
Uniform Jury Instruction 14-141 provides the New Mexico Supreme Court’s view on general
criminal intent:
In addition to the other elements of __________ (identify crime or crimes), the
state must prove to your satisfaction beyond a reasonable doubt that the defendant
acted intentionally when he committed the crime. A person acts intentionally
when he purposely does an act which the law declares to be a crime [, even
though he may not know that his act is unlawful]. Whether the defendant acted
intentionally may be inferred from all of the surrounding circumstances, such as
the manner in which he acts, the means used, [and] his conduct [and any
statements made by him].
The following table compares the elements of a § 523(a)(6) proceeding with the issues
determined in the State Court Action:
Element of Plaintiffs’
§ 523(a)(6) claim
Relevant State Court Findings 	Comment
1. Injury to property 	Defendants damaged
Plaintiffs’ property
This element has been
established and is entitled to
preclusive effect.
2. Injury by the debtor 	Defendants caused the damage 	This element has been
established and is entitled to
preclusive effect.
3. The injury was willful 	Defendants knowingly
trespassed; Defendants did not
stop work on 8/23/08 when
Plaintiffs approached them
and asked them to stop
damaging their property
This element was not
established in the State Court
Action; not clear why
Defendants refused to stop
work; not clear that
Defendants believed they were
damaging Plaintiffs’ property
4. The injury was malicious 	Defendants knowingly
trespassed; Defendants did not
stop work on 8/23/08 when
Plaintiffs approached them
and asked them to stop
damaging their property
This elements was not
established in the State Court
Action; not clear why
Defendants refused to stop
work; not clear that
Defendants believed they were
damaging Plaintiffs’ property
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The state court made no findings about whether Defendants intended to harm Plaintiffs,
only that they intended to trespass, did in fact damage Plaintiffs’ land, and did not stop work
when asked to do so. These findings fail to meet all the elements required to prove a willful and
malicious injury. Notwithstanding the lack of a sufficient response, the Court determines that the
Plaintiffs have not carried their burden. It would be more prudent, and grant the Defendants the
required due process, to take testimony on the issues of willful and malicious injury.
VI. 	CONCLUSION
The Court holds that issues 1 and 2 identified in the foregoing table have been established
and shall not be relitigated, but that issues 3 and 4 were not established in the State Court Action
and need to be determined by this Court at trial. In addition, the Court will deem established that
Defendants knowingly trespassed on the Riverfront Property and did not stop their unauthorized
work when Plaintiffs asked them to do so.
The Court will deny the Motion but limit trial issues as set forth above. A separate order
will be entered.
_____________________________________
Hon. David T. Thuma
United States Bankruptcy Judge
Entered: June 12, 2014.
Copies to:
Sophie S. Martin
1201 Lomas Blvd. NW, Suite C
Albuquerque, NM 87102
Gary Lakin
6727 Academy Rd. NE, Suite B
Albuquerque, NM 87109
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