Appeal from the United States Bankruptcy Court for the District of Arizona Honorable Redfield T. Baum, Sr., Bankruptcy Judge, Presiding Bk. No. 10-06316-RTBP Adv. Pro. No. 10-01163-RTBP
SUSAN M SPRAUL, CLERK U.S. BKCY. APP. PANEL OF THE NINTH CIRCUIT
Argued and Submitted on February 24, 2012 at Phoenix, Arizona
Before: DUNN, JURY and PAPPAS, Bankruptcy Judges.
Although it may be cited for whatever persuasive value it may have, FRAP 32.1, it has no precedential value. See 9th Cir. BAP Rule 8013-1.
The debtors, Brenda and Ty Narada (the "Naradas"), appeal the summary judgment order in favor of the United States on behalf of the Commissioner of Social Security ("SSA") excepting a debt of Brenda Narada ("Brenda") from discharge pursuant to 11 U.S.C. §§ 523(a)(2) and (a)(6) and the bankruptcy court's subsequent denial of the Naradas' motion for relief from judgment.*fn2 We VACATE and REMAND to the bankruptcy court for further proceedings.
The Naradas filed a chapter 7 bankruptcy petition on March 10, 2010, in the District of Arizona.
On June 25, 2010, the SSA timely filed an adversary proceeding ("Adversary Proceeding") complaint ("Complaint") against Brenda to except a debt from discharge pursuant to §§ 523(a)(2)(A) and (a)(6). Specifically, the SSA alleged in the Complaint that through misrepresentations and material omissions, Brenda had obtained a total of $24,575 in Supplemental Security Income disability benefits payments for which she was ineligible.
The SSA's claims arose from Brenda's alleged receipt of an ownership interest in a motel property located in Ash Fork, Arizona ("Motel Property") on or about August 1999. The SSA's records apparently showed that Brenda had repaid $1,467.30, leaving a balance owing of $23,107.70 that the SSA sought to except from Brenda's discharge.
Ty Narada ("Ty"), who is not an attorney, filed a response ("Response") to the Complaint in behalf of Brenda by letter on July 21, 2010.*fn3 In the Response, Ty denied that Brenda had acquired any ownership interest in the Motel Property. He also denied that Brenda had "defrauded the system." He further alleged that "Brenda was threatened with imprisonment if she did not sign the 'Statement of Claimant or Other Person' being submitted by SSA as evidence against her." (Emphasis in original.) He further alleged that Brenda was a "special needs individual incapable of defending herself."
1. Filing of Summary Judgment Motion and Supporting Documents
On or about December 1, 2010, the SSA filed a motion for summary judgment ("Summary Judgment Motion") in the Adversary Proceeding. The Summary Judgment Motion was supported by a Statement of Facts that, in turn, relied upon 1) a memorandum and report of the Office of the Inspector General of the SSA, dated September 27, 2004 ("Investigation Report"), and 2) Statements of Claimant or Other Person signed by Brenda and her then husband, George Bannister ("George"), agreeing to repay overpayments of supplemental Social Security income benefits, each dated September 22, 2004. The Investigation Report and the referenced statements are attached as exhibits to the statement of facts but are not authenticated by affidavit or declaration.
1 In the Investigation Report, the SSA's Office of the 2 Inspector General, Office of Investigations ("OI") reported the 3 following: In 1992, George and Brenda applied for and 4 subsequently began receiving Social Security income benefits.
5 The addresses used by George and Brenda were a street address and 6 post office address, both of which were for the "Copperstate 7 Motel." In February 1998, the Yavapai County Police Department 8 received an anonymous tip that George and Brenda owned and 9 operated the Copperstate Motel, which triggered the OI 10 investigation.
11 Following a preliminary investigation as to the ownership of 12 the Copperstate Motel, on March 13, 1998, the OI sent an SSI 13 Notice of Appointment to George and Brenda advising them that 14 they were scheduled for a "review" regarding their SSI 15 eligibility, which would entail a telephone interview(s).
On 16 March 26, 1998, SSA Claims Representative Donna Learned called 17 the telephone number provided by George, and when George 18 answered, conducted the interview. George advised that he and 19 Brenda lived in a house and paid rent to his sister, Vicky Davis.
20 He further stated that neither he nor Brenda worked or received 21 any income other than their SSI benefits. He confirmed that 22 neither he nor Brenda "had their names on any deeds or mortgages, 23 nor did they have any interest in any life estates or any un- 24 probated estates." Based on the interview, there were no 25 indications that George was ineligible for SSI income benefits.
26 Approximately fifteen minutes later, Ms. Learned called the 27 same telephone number with a follow-up question. Brenda answered 28 the telephone and said "Copperstate." The follow-up question was 1 whether their daughter, Tammy Bannister ("Tammy"), contributed to 2 the household. Brenda responded that Tammy worked but did not 3 contribute to the household because she was attending school.
4 Ms. Learned then inquired of Brenda why she answered the 5 telephone "Copperstate?" Brenda stated that "it was a motel 6 where she and George ...