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In re Ramirez

United States District Court, Fifth Circuit

December 13, 2013

In Re: ALONZO RAMIREZ, et al, Appellants,



This is an appeal from the United States Bankruptcy Court for the Southern District of Texas with respect to a claim brought by Larry Wilson (Wilson), a creditor, against Alonzo and Mary Ramirez (Debtors) for fraud and deceptive trade practices in connection with the sale of a residence. The Bankruptcy Court found in favor of the creditor, liquidated the claim, ordered that the claim was not dischargeable in bankruptcy, awarded damages including attorney's fees and expenses, denied exemplary damages, and imposed a constructive trust on a parcel of real estate and an annuity that the Debtors purchased with the proceeds of the sale to Wilson.

In two issues, the Debtors appeal the judgment, complaining of error in a partial summary judgment and in an award of allegedly excessive attorney's fees. The Court finds that oral argument would not provide any necessary benefit and the request for argument is DENIED. For the reasons set out below, the Bankruptcy Court's judgment is AFFIRMED.


As a preliminary matter, Wilson has filed Motions to Strike Exhibits (D.E. 14 and 18) seeking to strike exhibits that the Debtors have offered for the first time in this appeal. Each of the Exhibits (D.E. 13, 15, 16-1, and 16-2) purports to be a full or partial copy of the "One to Four Family Residential Contract (Resale)" (Contract) between the parties. This part of the contractual transaction was never offered as evidence during the Bankruptcy Court proceedings and therefore may not be considered by this Court. FED. R. BANKR. P. 8006; In re CPDC, Inc., 337 F.3d 436, 443 (5th Cir. 2003).

Nonetheless, Debtors assert that this Court may take judicial notice of the Contract as an "exemplar" and argue that it is an indispensable part of an action on the contract. D.E. 17. Nothing in Debtors' briefing supports their effort to expand the record. The Contract is not necessary to the fraud and deceptive trade practices act liability theories upon which judgment was rendered below, the Bankruptcy Court did not consider it, and Debtors have failed to provide any reason for their failure to offer it into the record during the summary judgment or trial proceedings in the Bankruptcy Court. The Court GRANTS the Motions to Strike (D.E. 14, 18) and STRIKES D.E. 13, 15, 16-1, and 16-2.


In 2006, Wilson agreed to purchase the Debtors' residence at 13538 Peseta Court, Corpus Christi, Texas (Peseta House). As part of the transaction, Mary Ramirez filled out and signed a "Seller's Disclosure Notice" (Condition Disclosure), representing that there had been no prior water penetration of the Peseta house, no previous repairs to the roof or to remediate environmental hazards, no room additions or alterations without proper permits, and there were no conditions materially affecting the health or safety of an occupant of the property. D.E. 3-5. These representations were not true, as there had been at least two insurance claims for water damage, with documented roof leaks, wood rot, and mold, none of which had been fully remediated with the insurance proceeds. D.E. 3-6, 3-7, 3-8, 3-9, 3-10.

While Wilson had hired his own inspector, the evidence showed that the Debtors had made cosmetic repairs to conceal the damage and made additional misrepresentations to the inspector so as to prevent a more detailed inspection. D.E. 3-4. In reliance upon the Debtors' false representations (uncontroverted by the inspection), Wilson purchased the property. D.E. 3-4. The Debtors used the proceeds of the sale to pay off the balance owed to Mr. Gauldin (who was selling the residence to Debtors on a contract for deed) and to purchase (1) a new residence at 3900 Arroyo Del Sol, Shertz, Texas (Arroyo House) and (2) a MetLife Annuity. D.E. 3-17, p. 48, para. 5.

Upon taking possession of the Peseta House, Wilson discovered that there was evidence of prior water penetration and unremediated moisture damage. He incurred substantial expense for repairs and filed a lawsuit in state court against Debtors and others for his damages. Debtors filed for relief under Chapter 7 of the United States Bankruptcy Code "to put an end" to Wilson's efforts. D.E. 3-4, p. 1. Wilson then filed an adversary proceeding in Debtors' bankruptcy case for the purpose of liquidating his claim, imposing a constructive trust on the assets that Debtors purchased with the proceeds of the transaction, and to prevent his claim from being discharged in bankruptcy. D.E. 3-18, pp. 1-15.

In that adversary proceeding, Wilson filed a Motion for Partial Summary Judgment. D.E. 3-4, pp. 10-32. With voluminous exhibits, Wilson sought summary judgment (1) that Debtors engaged in knowing and intentional violations of the Texas Deceptive Trade Practices Act (DTPA), (2) liquidating actual compensatory damages of not less than $260, 468.88, and (3) establishing entitlement to reasonable and necessary attorney's fees as a prevailing party. Reserved for trial were the issues of additional or exemplary damages, the amount of the attorney's fees and expenses, and whether a constructive trust could be imposed on the Arroyo House and the MetLife Annuity. D.E. 3-4, pp. 12.

Evidence included Wilson's affidavit detailing the transaction, his initial ignorance of the property's condition, that the Debtors had told him that there had been no prior water damage, and detailing the revelations gained by discovery, including Debtors' prior involvement in insurance claims for water damage to the Peseta House. Wilson Affidavit, D.E. 3-4, pp. 36-62, Debtors' Condition Disclosures, D.E. 3-5, State Farm Insurance Claim Files, D.E. 3-6, 3-7, 3-8, 3-9, 3-10 (photos). Wilson attached copies of Mary Ramirez' statement to the insurance company that paid on the water damage claim during her occupancy of the premises, as well as her deposition testimony. D.E. 3-11, pp. 4-11, 3-12, pp. 3-107. He also offered deposition testimony to show that no repairs were ever made other than cosmetic efforts to disguise the damage, and that Mary Ramirez had offered false testimony during the course of the case that the water damage had been repaired. Deposition of Mickey Garza, D.E. 3-12, pp. 119-66.

Wilson argued that the same evidence and a DTPA finding supported a finding of fraud and nondischargeability under 11 U.S.C. ยง 523(a)(2)(A). In particular, he sought judgment that Debtors, in bad faith, intentionally and knowingly made false representations with the purpose of deceiving Wilson and upon which Wilson relied to his detriment. D.E. 3-4, pp. 27-28.

In response to this motion for summary judgment, Debtors filed a verified Answer, containing a denial of the allegations; background regarding Wilson's state court litigation against them, their realtor, and Wilson's inspector (along with others); a suggestion that Wilson was simply experiencing buyer's remorse after the housing market "bubble bust" and was unfairly targeting them as a scapegoat; denying that there were any active water leaks at the time of the sale; and arguing that nothing in the evidence amounted to fraud. D.E. 3-19, pp. 1-3. Debtors did not submit any summary judgment evidence in opposition to Wilson's motion. Neither did they object to any of Wilson's evidence.

As a result, the Bankruptcy Court entered summary judgment in favor of Wilson as requested. D.E. 3-16, pp. 1-15. Upon trial of the remaining issues, Mary Ramirez filed a proffer of testimony seeking sympathy, denying any misrepresentations in the most conclusory of terms, complaining of Wilson's harassment and his attorney's tactics, blaming Wilson's inspector for not discovering the damage, claiming that they had been told that the mold was not hazardous, and suggesting that Wilson was simply greedy. D.E. 3-17, pp. 1-2. The Bankruptcy Court declined to award additional or exemplary damages and liquidated the attorney's fees and expenses. D.E. 3-17, pp. 47-49. Last, the Bankruptcy Court imposed a constructive trust on the Arroyo House and MetLife annuity, which Debtors admitted that they had ...

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