Sergejev v. Alderman (In re Alderman)

In re: JIM M. ALDERMAN and DON ALDERMAN, Debtors.

IVAN P. SERGEJEV, Plaintiff, v. JIM M. ALDERMAN and DON M. ALDERMAN, Defendants

No. 19-12626-j7

Adversary No. 20-1003-j

UNITED STATES BANKRUPTCY COURT DISTRICT OF NEW MEXICO

March 8, 2021

MEMORANDUM OPINION AND ORDER

The matter is before the Court on Plaintiff's Motion for Summary Judgment, filed August 17, 2020. Doc. 8. Plaintiff requests the Court to grant summary judgment on his non-dischargeability claims under 11 U.S.C. §§ 523(a)(2)(A) and (a)(6)¹ based in part on a state court judgment Plaintiff obtained against the Defendants after Defendants failed to appear at trial. Defendant Jim Alderman opposes the motion,² asserting that the judgment cannot be given preclusive effect because it was entered by default.³ The Court has determined that the state court judgment has preclusive effect because it was entered after fifteen months of active litigation,Plaintiff presented sufficient evidence to the state court at trial to carry his burden of proof, and Defendants offered no reason, justification, or excuse for their decision not to appear at trial. Findings made by the state court judgment together with evidence proffered in support of the Motion for Summary Judgment are sufficient to establish that Plaintiff is entitled summary judgment on his non-dischargeability claim under § 523(a)(6) as to liability and certain of his claimed damages.

SUMMARY JUDGMENT STANDARDS

The Court will grant summary judgment when the movant demonstrates that there is no genuine issue of material fact and that the movant is entitled to judgment as a matter of law. See Fed.R.Civ.P. 56(a), made applicable to adversary proceedings by Rule 7056, Fed.R.Bankr.P. "[A] party seeking summary judgment always bears the initial responsibility of informing the . . . 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). A motion for summary judgment must be supported by admissible evidence. See Fed.R.Civ.P. 56(c). Certified copies of documents filed of record in a court proceeding are admissible evidence and may be relied upon in support of summary judgment. Fed.R.Evid. 902(4) (certified copies of public records are self-authenticating); Gentry v. Szymczyk (In re Szymczyk), No. 18-11703-j7, 2019 WL 451227, at *2 (Bankr. D.N.M. Feb. 4, 2019). When considering a motion for summary judgment the Court must "examine the factual record and reasonable inferences therefrom in the light most favorable to the party opposing summary judgment." Wolf v. Prudential Ins. Co. of America, 50 F.3d 793, 796 (10th Cir. 1995) (quoting Applied Genetics Int'l, Inc. v. First Affiliated Sec., Inc., 912 F.2d 1238, 1241 (10th Cir. 1990)).

FACTS NOT SUBJECT TO MATERIAL DISPUTE

Plaintiff has demonstrated that there is no genuine issue with respect to the following facts, which are established for purposes of the Motion for Summary Judgment.

1. On August 31, 2016, Plaintiff filed a lawsuit against Defendants in the Eleventh Judicial District Court, San Juan County, New Mexico (the "State Court") as Case No. D-1116-CV-2015-01115 (the "State Court Action"). Complaint to Recover Money Damages and for Determination Excepting Debt from Discharge ("Complaint"), ¶ 7; Answer to Complaint to Recover Money Damages and for Determination Excepting Debt from Discharge and Counterclaim ("Answer"), 1; Certified copy of Docket from State Court Action.

2. Plaintiff asserted claims against Defendants in the State Court Action based on an alleged breach of a residential lease agreement. Complaint, ¶¶ 7 and 8; Answer, ¶ 1.

3. Defendants answered the amended complaint filed in the State Court Action. Complaint, ¶ 9; Answer, ¶ 1.

4. Defendants filed a counterclaim in the State Court Action. Complaint, ¶ 9; Answer, ¶ 1.

5. The State Court allowed Defendants' attorney to withdraw from the State Court Action on March 15, 2017. Complaint, ¶ 10; Answer, ¶ 1.

6. The State Court allowed Defendant's second attorney in the State Court Action to withdraw from representing the Defendants in the State Court Action on February 13, 2018. Complaint, ¶ 11; Answer, ¶ 1.

7. The State Court held a trial in the State Court Action on April 19, 2018. Complaint, ¶ 13; Answer, ¶ 5 (admitting that a trial was held).

8. Defendants did not appear at the trial in the State Court Action. Complaint, ¶ 15; Answer, ¶ 6.

9. Defendants had proper advance notice of the trial in the State Court Action. Certified copy of Transcript from Hearing ("Transcript"), 8:44:43 a.m.

10. The State Court conducted a trial on the merits lasting over two and half hours, at which the Defendants did not appear, took evidence on both liability and damages in the form of live testimony and exhibits, and made detailed findings of fact on the record that included:

(a) Defendants did not act in a manner that is consistent with good faith and acted in bad faith in misleading the Plaintiff in believing they were going to purchase the home and then engaging in various behaviors that I find inexplicable. Transcript, 11:10:39 a.m.

(b) [Defendants' actions] seem[ ] intentional want[on] and destruction to the home. Transcript, 11:11:21 a.m.

(c) The Defendants did extensive property damage to this home and had to be done intentionally and had to take extreme amount of effort and nobody accidentally knocks rocks out of a cement wall without trying and done numerous times. Transcript, 11:11:38 a.m.

(d) [Defendants] lied and had pets and did extensive damages and cleaning attempts were unsuccessful[.] The damage the pets did could not have occurred at a one-time incident or without somebody noticing. Transcript, 11:12:26 a.m.

(e) I don't know how you can get feces and urine all over a house like this. Transcript, 11:13:19 a.m.

(f) If there was another count in this that would allow me to assess exemplar damages I would've been happy to do it because I think a case like this warrants it[.] This was intentional. Transcript, 11:17:54 a.m.

(g) I haven't seen anything like this before and seems to be a goal of theirs to be destructive. Transcript, 11:19:26 a.m.

(h) This was done on purpose as far as I can see; Transcript, 11:22:01 a.m., completely intentional; Transcript, 11:22:14 a.m. This is one of those cases of intentional act. Transcript, 11:22:22 a.m.

10. The State Court entered a Judgment for Damages against Defendants in the State Court Action on July 11, 2018. Complaint, ¶ 16; Answer, ¶ 7 (admitting that a judgment was entered in the State Court Action by default).

11. The Judgment for Damages includes the following additional findings of fact:

(a) Defendants acted in inexplicable ways damaging Plaintiff's property.

(b) Defendants did extensive damage to Plaintiff's property.

(c) [T]he amount of damage shown in the evidence showed extreme, almost targeted, damage to the property as alleged in Plaintiff's First Amended Complaint.

(d) [T]here was damage from Defendants' pets.

(e) [T]he damage from the pets consisted of pet feces and urine that was in effectively every room of the house.

(f) Defendants damaged the house by painting it in inexplicable colors without contractual basis or permission from Plaintiff.

(h) [T]he photographic evidence was clear.

(i) [T]he witness testimony was credible and convincing.

(j) [S]ubstantial repairs were necessary to make the premises safe to be leased again and Plaintiff incurred $12,924.83 in repair expenses for parts, supplies, labor, etc.

(k) Defendant [sic] incurred $490.99 in costs prosecuting this action.

(l) Defendant [sic] had to travel from Washington State to repair the premises and handle Defendant's breaches and incurred $1,150.00 in necessary travel expenses.

(m) Plaintiff was damaged through lost rental value under the Contract in the amount of $9,900.00 after offsets, from re-letting after repairs, are applied.

Certified copy of Judgment for Damages, ¶¶ 7, 8, 9, 10, 11, 12, 13, 14, 15, 18, 19, and 25.

12. The Judgment for Damages included the following conclusions of law:

(a) Defendants' actions constituted intentional and wanton destruction of Plaintiff's property.

(b) Defendants breached the Contract through substantial and intentional damaging acts/omissions and failures to pay.

Certified copy of Judgment for Damages, conclusions of law ¶¶ 24 and 27.

13. The Judgment for Damages awarded the following damages against Defendants and in favor of Plaintiff:

(a) $9,900 for lost rent, and

(b) $12,924.83 for property damages, and

(c) $1,150.00 for travel costs, and

(d) $490.[99]⁴ for legal costs, and

(e) $2,500 for statutory damages, and

(f) Attorney's fees in an amount to [be] submitted by affidavit.

Certified copy of Judgment for Damages, decretal ¶¶ 1 through 6.

14. The State Court entered a Judgment for Attorney Fees against Defendants in the State Court Action on December 20, 2018. Complaint, ¶ 18; Answer, ¶ 8 (admitting that a judgment for attorney fees was entered against Defendants by default).⁵

15. Defendants filed a voluntary petition under chapter 7 of the Bankruptcy Code on November 18, 2019. Complaint, ¶ 4; Answer, ¶ 1,

DISCUSSION

Plaintiff requests summary judgment in this non-dischargeability proceeding under the doctrine of issue preclusion based on the Judgment for Damages entered in the State Court Action. The Court will address whether the Judgment for Damage is entitled to issue preclusiveeffect, and, if the Judgment for Damages has preclusive effect, whether the Judgment for Damage establishes Defendants' debt to Plaintiff is non-dischargeable and, if so, in what amount.

A. The Judgment for Damages has Issue Preclusion Effect

Issue preclusion,⁶ also known as collateral estoppel, prevents a party from litigating in a subsequent action the same factual issues decided by a final judgment entered in an earlier action. Hill v. Putvin (In re Putvin), 332 B.R. 619, 624 (10th Cir. BAP 2005) ("Collateral estoppel or issue preclusion is a doctrine that prohibits the...