Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-azb-4_09-ap-00903/USCOURTS-azb-4_09-ap-00903-0/pdf.json

Parties Involved:
THE HUNTINGTON NATIONAL BANK
Plaintiff
ALBERTO GONZALEZ MARRUFO
Defendant
BETTY MARTINEZ MARRUFO
Defendant

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IN THE UNITED STATES BANKRUPTCY COURT

FOR THE DISTRICT OF ARIZONA

In re: )

)

ALBERTO GONZALEZ MARRUFO ) Chapter 7

and BETTY MARTINEZ MARRUFO, )

) Case No. 4:09-bk-08677-EWH

Debtors. )

 )

)

THE HUNTINGTON NATIONAL BANK, ) Adv. No. 4:09-ap-00903-EWH

)

Plaintiff, )

v. ) MEMORANDUM DECISION

)

ALBERTO GONZALEZ MARRUFO )

and BETTY MARTINEZ MARRUFO, )

)

Defendants. )

 )

I. INTRODUCTION

Joint debtors, husband and wife, incurred a contractual community obligation to a

creditor when they leased a vehicle. After several months of making payments, the

husband tendered a check to the creditor which released its lien on the vehicle before

the creditor learned that the check was a fake. For the reasons explained below, the

ORDERED.

Dated: May 11, 2010

________________________________________

EILEEN W. HOLLOWELL

U.S. Bankruptcy Judge

________________________________________

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1

 Unless otherwise indicated, all chapter, section, and rule references are to the

Bankruptcy Code, 11 U.S.C. § 101-1532, and to the Federal Rules of Bankruptcy Procedure,

Rules 1001-9037.

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creditor is entitled to a nondischargeable judgment against the husband but not against

the community property of the debtors nor against the wife’s sole and separate property.

II. STATEMENT OF JURISDICTION

The court has jurisdiction under 28 U.S.C. § 1334(a) and § 157(b)(2)(I).

III. PROCEDURAL HISTORY

Alberto Gonzalez Marrufo (“Mr. Marrufo”) and his wife, Betty Martinez Marrufo

(“Mrs. Marrufo”) (collectively ““Debtors”), filed a pro se Chapter 7 petition on April 28,

2009. On August 6, 2009, an order was entered granting the Chapter 7 Trustee’s

request to delay the entry of the Debtors’ discharge and to extend the time for the

Trustee to file an 11 U.S.C. § 727 complaint objecting to the discharge until the Trustee

notified the court that the Debtors had fully complied with all of the Trustee’s requests or

until the Trustee filed a report of no distribution. As of the date of this decision, the

Trustee has not filed either notice, so the Debtors have not received a discharge.

On August 7, 2009, The Huntington National Bank (“Huntington”) filed a

nondischargeability complaint (“Complaint”) seeking to deny the Debtors’ discharge

under 11 U.S.C. §§ 523(a)(2), (a)(4), and (a)(6).1

 On September 22, 2009, the Debtors

filed a Motion to Dismiss the Complaint (“MTD”) alleging that Huntington lacked

standing to sue the Debtors because it had not demonstrated that there was a note from

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2

 All discovery was to be completed thirty days before trial; disclosure of witnesses and

exhibits was to be disclosed no later than fourteen days before trial; and joint pretrial statement

was to be filed five days before trial.

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the Debtors to Huntington. Debtors also alleged, generally, that Huntington and its law

firm were engaged in a “debt collection racket.”

On October 2, 2009, Huntington filed a response to the MTD and a motion for

summary judgment (“MSJ”). At a November 10, 2009, hearing, both the MTD and MSJ

were denied. On that same date, a pretrial scheduling conference was held trial was

set for January 25, 2010. During the pretrial scheduling conference, the Debtors were

informed that they would have to comply with all of the rules of civil procedure in

defending against the Complaint. On November 13, 2009, the court issued its standard

pretrial scheduling order, setting specific deadlines for disclosures and the filing of

witnesses and exhibits lists.2

Huntington served discovery on the Debtors, including thirty one requests for

admissions. Debtors’ responses were due on or before December 19, 2009. Instead of

responding to the requests for admissions, the Debtors stamped “paid in full” on each

page of the requests and returned them to Huntington. On December 1, 2009,

Huntington filed a Motion to Compel proper responses. Debtors did not respond to the

Motion to Compel. On December 11, 2009, an order was entered requiring the Debtors

to respond to all outstanding discovery requests by December 19, 2009. The Debtors

did not respond. On December 28, 2009, Huntington filed a Motion for Order that

Matters be Deemed Admitted (“Admissions Motion”).

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The deadline for the parties to file their pretrial statements was January 20, 2010,

and the deadline for the parties to file their list of witnesses and exhibits was

January 11, 2010. Huntington timely filed its list of witnesses and exhibits, amended it

on January 14, 2010, and then filed a unilateral pretrial statement on January 19, 2010,

alleging that Huntington’s counsel had been unable to work with the Debtors to file a

joint pretrial statement. On January 15, 2010, the Debtors filed a Notice of Filing Initial

Disclosure Statement and Counterclaim (“Counterclaim”). The Counterclaim alleged

that Huntington and its counsel had falsely alleged that Debtors have a contract with

Huntington and falsely alleged that Debtors owed Huntington money. Debtors sought

damages in the amount of $139,926. The Counterclaim included requests for

admission from Huntington and a request for production of documents.

A January 20, 2010, hearing was held on the Admissions Motion. At that

hearing, Mr. Marrufo asserted that Huntington was not the “real party in interest,” had no

standing, and that Mr. Marrufo generally “object[ed] to everything up to this point.” At

the conclusion of the hearing, the court granted the Admissions Motion. An order to that

effect was entered on January 21, 2010. Also, on January 21, 2010, Huntington filed a

motion to strike the Counterclaim.

Trial was conducted on January 25, 2010. Because the Debtors had not timely

disclosed any witnesses or exhibits, they were not permitted to put on evidence. Their

Counterclaim and accompanying discovery requests were also dismissed as having

been untimely filed. Mr. Marrufo was, however, permitted to make argument and crossexamine all of Huntington’s witnesses. At the conclusion of the trial, the court requested

briefing from Huntington on the liability of Mrs. Marrufo and the Marrufos’ community

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property for Mr. Marrufo’s action. On February 4, 2010, Huntington filed its brief

asserting that it was not seeking a nondischargeability judgement against

Mrs. Marrufo’s sole and separate property; instead, it was seeking a determination that

it was entitled to a nondischargeability judgment against Mr. Marrufo’s sole and

separate property as well as Debtors’ marital community. The matter is now ready for

decision.

IV. FACTS

In April 2007, Mr. Marrufo leased a 2007 Toyota Tundra pick up truck (“Toyota”)

from Desert Toyota in Tucson (“Desert Toyota”). The monthly lease payment was

$681. Desert Toyota assigned the contract to Huntington which financed the acquisition

and obtained a purchase money security interest in the Toyota. The Debtors made

regular monthly lease payments to Huntington until January 2008 when Mr. Marrufo

requested a payoff figure from Huntington. Huntington provided Mr. Marrufo with a

payoff figure of $45,181.98.

On February 27, 2008, Mr. Marrufo sent Huntington a letter and enclosed a

check dated January 30, 2008, made payableto HBN Auto Exchange in the amount of

$45,181.98 (the “Check”). The Check was drawn on “TOCS, P.O. Box 1686,

Birmingham, AL 35201.” On or about February 14, 2008, Huntington and Mr. Marrufo

executed a Bill of Sale, Release and Receipt (“Bill of Sale Exhibit") pursuant to which

the Toyota was sold to Mr. Marrufo for $45,181.98. On February 14, 2008, before the

Check had cleared, Huntington released its lien on the Toyota and acknowledged in

writing that its loan had been paid in full. As part of the payoff transaction, Huntington

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3

 All exhibit references are to exhibits admitted into evidence at the trial.

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also refunded to Mr. Marrufo the sum of $681 for excess payments. When Huntington

submitted Debtors’ Check for payment, it was returned to them as invalid (Exhibit 10).3

Following the release of the Toyota to Mr. Marrufo, he sold it to a third party and

used some or all of the proceeds to purchase a Harley-Davidson motorcycle and a 1979

pick up truck. Both of those vehicles were subsequently seized and forfeited to the

Pima County and Tucson City police departments as part of a criminal investigation

(Exhibit 2). On the trial date, Huntington had not recovered the Toyota or the

$45,181.98. 

V. ISSUES

1. Did Mr. Marrufo’s tender of the check to Huntington deprive it of the

Purchase Price and security interest in the Toyota and create a

nondischargeable debt under §§ 523(a)(2), (4) and (6)?

2. If so, is Huntington’s debt excepted from Mr. Marrufo’s discharge and from

those protections that § 524(a)(3) provides to after acquired community

property?

VI. DISCUSSION

A. The Check was Counterfeit

This case centers on the Check that was returned to Huntington as an “invalid

instrument.” This is not, therefore, a “bad check” case where a debtor writes a check

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4

 According to Black’s Law Dictionary, counterfeit means to “unlawfully forge, copy or

imitate an item, especially money or a negotiable instrument . . . or other officially issued items

of value . . . with the intent to deceive or defraud by presenting the item as genuine.” BLACK’S

LAW DICTIONARY 376 (8th ed. 2004). Forgery is defined in Black’s Law Dictionary as the act of

fraudulently making a false document to be used as if its genuine. Id. at 677.

5

 Because the Admissions Motion was granted, Mr. Marrufo is deemed to have admitted

that he signed the Check. However, the court is mindful of the fact that Mr. Marrufo was

unrepresented by counsel throughout this adversary proceeding and, therefore, has relied on

Mr. Marrufo’s statements at trial in deciding if Mr. Marrufo signed the Check.

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but there are insufficient funds to pay it. In this case, the Check was a false document

created to make it appear that the Debtor had a bank account and funds, which he did

not, in fact, have. The Check, therefore, was counterfeit.4

At trial, Mr. Marrufo denied that he had signed the Check.5 Mr. Marrufo further

argued under Federal Rule of Evidence 1003 that a duplicate of the Check should not

have been admitted into evidence because the Check was “a masterful forgery.”

(Transcript p. 67, ln 9).

In closing argument, Mr. Marrufo acknowledged that he had tendered a check to

Huntington, but argued that the Check admitted into evidence was not the check he

tendered because it had been altered by two stamps on the back (Transcript p. 77,

lns 3-22). Those stamps consisted of a deposit stamp by Huntington and a stamp from

Wachovia, which is where Huntington’s business representative testified that Huntington

maintains an account (Transcript p. 31, lns 14-19). Therefore, Mr. Marrufo’s arguments

that the Check was not the one that he tendered is not credible. Accordingly, the court

finds that Mr. Marrufo did sign the Check, which was counterfeit, in order to obtain title

to the Toyota free and clear of Huntington’s lien.

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6

 In Field v. Mans, the Supreme Court ruled that a creditor needed only to prove that it

justifiably relied on a representation, not that the creditor’s reliance on that representation was

objectively reasonable. 116 U.S. 59, 70-73 (1995). Under Justice Souter’s explanation of

justifiable reliance for example, a buyer may be justified when he or she relies on a seller’s

statement that land is free of encumbrances “even if he could have ‘walk[ed] across the street to

the office of the register of deeds in the courthouse’ and easily have learned of an unsatisfied

mortgage.” Id. quoting RESTATEMENT (SECOND) OF TORTS § 540, cmt. b, illus. 1 (1976).

8

Having made that factual finding, the court now turns to Huntington’s request to

have its debt declared nondischargeable pursuant to § 523(a)(2), (a)(4) and (a)(6). 

Huntington must prove that its claim is nondischargeable by a preponderance of the

evidence under all three sections of the statute. Grogan v. Garner, 498 U.S. 279, 291

(1991).

1. Tender of the Check Constitutes Grounds for Denial of Discharge Under

§ 523(a)(2)(A)

In order to prevail under a § 523(a)(2)(A) claim for false representation,

Huntington must demonstrate that: (1) Mr. Marrufo “obtained money through a material

misrepresentation” that he knew was false, (2) that he intended to deceive Huntington,

(3) that Huntington justifiably relied on the false representation; and (4) that

Huntington’s reliance was the proximate cause of its loss. All four elements have been

met here. The evidence demonstrates that Mr. Marrufo knowingly tendered the fake

Check with the intent of receiving title to the Toyota free and clear of Huntington’s lien. 

Huntington justifiably relied on the Check, which appeared to be a normal check with

normal routing numbers and other indicia of an ordinary check (Transcript p. 53, lns 6-

12).6

 As a result of Huntington’s reliance, it lost its security interest in the Toyota. In the

alternative, tender of the Check to deprive Huntington of $45,181.98 constituted actual

fraud, which is broader than misrepresentation. In re Corder, 299 B.R. 462, 465 (Bankr.

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S.D. Ohio 2003) citing Mellon Bank, N.A. v. Vitanovich (In re Vitanovich), 259 B.R. 873,

877 (6th Cir. B.A.P. 2001); Citibank v. Eashai, 87 F.3d 1082, 1086 (9th Cir. 1996). 

Indeed, as noted earlier the definitions of counterfeit and forgery encompass an intent to

defraud. State v. Thompson, 981 P.2d 595, 597 (Ariz. Ct. App. 1999). Similarly, forgery

is defined as the act of fraudulently making a false document. Id. at 596. Huntington

has, therefore, satisfied the requirements of § 523(a)(2)(A).

2. Section 523(a)(4)

Huntington argues that presentation of the Check constituted larceny under

applicable Arizona law. However, a bankruptcy court in applying § 523(a)(4) is “not

bound by the state law definition of larceny but, rather may follow federal common law,

which defines larceny as a felonious taking of another’s personal property with intent to

convert it or deprive the owner of the same.” Ormsby v. First Am. Title Co., 591 F.3d

1199, 1205 (9th Cir. 2010). The Ormsby court defined the term felonious as

“proceeding from an evil heart or purpose; malicious, villainous . . . wrongful; done

without excuse of color or right.” Mr. Marrufo’s tender of the false Check falls within the

federal common law definition of larceny and, accordingly, Huntington is entitled to relief

pursuant to § 523(a)(4).

3. Section 523(a)(6)

In order to prevail under § 523(a)(6), Huntington must prove both willful and

malicious injury. See Carrillo v. Su (In re Su), 290 F.3d 1140, 1146-47 (9th Cir. 2002). 

Willful injury requires either subjective motive to inflict injury or belief that injury is

substantially certain to result from the conduct. Id. at 1142. The conversion of a

property subject to a creditor’s security interest has been found to constitute a willful

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injury under § 523(a)(6). See In re Riso, 978 F.2d 1151, 1154 (9th Cir. 1992). 

Huntington has, therefore, demonstrated that Mr. Marrufo’s scheme to deprive

Huntington its security interest was willful.

Malicious injury: (1) requires a wrongful act; (2) done intentionally; (3) which

necessarily causes injury; and (4) is done without just cause or excuse. Petralia v.

Jercich, 238 F.3d 1202, 1209 (9th Cir. 2001). Here, Mr. Marrufo tendered the Check

intentionally knowing that it would necessarily cause injury (the loss of Huntington’s

money and its security interest in the Toyota), and was done without just cause or

excuse. Accordingly, Huntington is entitled to a determination that the debt is

nondischargeable pursuant to § 523(a)(6).

4. The Scope of the Nondischargeability Determination

At the conclusion of the trial, the court requested additional briefing from

Huntington about the scope of any nondischargeability judgment which might be

entered based upon the fact that the evidence demonstrated that all of the

representations and actions taken with respect to the tender of the Check were those of

Mr. Marrufo and were taken after the purchase of the Toyota. Huntington responded by

filing a brief acknowledging that it was not seeking a nondischargeable judgment

against Mrs. Marrufo’s sole and separate property, but that it was seeking a

nondischargeability judgment against Mr. Marrufo and the community property of Betty

and Alberto Marrufo. Huntington relied primarily upon the case of In re Rollinson,

322 B.R. 879, 880 (Bankr. D. Ariz. 2005) to support its claim that once a community

debt is determined to be nondischargeable as to one spouse, it is also

nondischargeable as to their community property. Huntington argues that because the

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original obligation to acquire the Toyota was a community debt and because the amount

that Huntington seeks to have declared nondischargeable is the balance due on that

community debt, that Huntington’s claim is a community claim excepted from discharge

and not subject to the injunction of § 524(a)(3).

As has been established above, the debt is nondischargeable under a number of

§ 523 provisions. The question for this court, then, is whether the debt was a

community debt. If it was, then under the rationale of Rollinson the debt should be

nondischargeable as to the entire community; if not, then it is only nondischargeable as

to Mr. Marrufo. 

Under Arizona community property law, the court should presume that a debt

entered into contractually is a community debt. E.g., Morgan v. Bruce, 259 P.2d 558,

560-61 (Ariz. 1953). As Mr. and Mrs. Marrufo have not submitted any evidence to rebut

the presumption, this court will presume that the contractual debt to pay for the Toyota

was a community debt. That contracted for debt, however, is not the debt which the

court has found to be nondischargeable. The nondischargeable debt is that debt

created by Mr. Marrufo’s tender of the counterfeit Check. 

In contrast to contracted-for debts, , there is no presumption that a debt incurred

through one spouse’s tort is a debt chargeable to the community under Arizona

community property law. E.g., Garret v. Shannon, 476 P.2d 538, 539-40 (Ariz. Ct. App.

1970). In order for this court to hold the community liable for Mr. Marrufo’s tortious acts,

Huntington must establish that Mr. Marrufo’s overall purpose in committing the tort was

to benefit the community, Hays v. Richardson, 386 P.2d 791, 792-93 (Ariz. 1963). 

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7

 Detective Baldwin of the Tucson Police Department. See Transcript at pages 11-12.

8 The amount of the judgment was calculated as follows: $45,181.98, which is the

presumptive value of the truck, plus interest at the federal judgment rate as specified by

28 U.S.C. § 1961 of 0.43%. Because the nondischargeable debt is based on Mr. Marrufo’s

tortious conduct, Huntington is not entitled to its contractual interest rate nor attorneys’ fees.

12

Huntington failed to do this. Indeed, the testimony of one of Huntington’s witnesses7

indicates that Mrs. Marrufo did not understand why Mr. Marrufo sold the Toyota and that

the overall community was not benefitted by Mr. Marrufo’s tender of the Check. In any

event, Huntington did not offer any evidence that Mrs. Marrufo participated in the

scheme or any other evidence that the community benefitted from Mr. Marrufo’s tort. As

such, the debt was not a community debt, and Rollinson’s holding is inapplicable. 

Accordingly, Huntington is entitled solely to a nondischargeable judgment against

Mr. Marrufo. 

VII. CONCLUSION

The foregoing constitutes the court’s findings of fact and conclusions of law

pursuant to Rule 7052. A judgment in the amount of $45,181.98 with interest to accrue

at the federal judgment rate will be effective this date.8

Dated and signed above.

Notice to be sent through the

Bankruptcy Noticing Center “BNC”

to the following:

Alberto Gonzalez Marrufo

Betty Martinez Marrufo

c/o 6502 East Calle Altair

Tucson, AZ 85710

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Albert Gonzalez Marrufo

Betty Martinez Marrufo

General Delivery

Tucson, AZ 85726

Gerard R. O’Meara

Matthew A. Goldstein

Gust Rosenfeld PLC

1 South Church Ave. #1900

Tucson, AZ 85701

Attorneys for The Huntington National Bank

Beth Lang

Chapter 7 Trustee

1955 West Grant Rd. #125

Tucson, AZ 85745

U.S. Trustee’s Office

230 North First Ave. #204

Phoenix, AZ 85003

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