Vista Manufactured Home Cmty., L.P. v. Rodriguez (In re Rodriguez)

525 B.R. 485

In re: Francisco L. Rodriguez, Debtor.Vista Manufactured Home Community, L.P., Plaintiff,

v.Francisco L. Rodriguez, Defendant.

No. 7–14–11243 JA

Adversary No. 14–1078 J

United States Bankruptcy Court, D. New Mexico.

Signed February 4, 2015

Michael K. Daniels, Attorney for Plaintiff, PO Box 1640, Albuquerque, NM 87103–1640.

Francisco L. Rodriguez, Albuquerque, Pro Se, for Defendant.

FINDINGS OF FACT AND CONCLUSIONS OF LAW

ROBERT H. JACOBVITZ, United States Bankruptcy Judge

The Court held a trial on the merits of this adversary proceeding on January 29, 2015 and took the matter under advisement. Plaintiff, Vista Manufactured Home Community, L.P. (“Vista”) was represented by Michael K. Daniels. Defendant, Francisco L. Rodriguez, represented himself, pro se. Vista claims that a debt owed under a judgment it obtained against Mr. Rodriguez in state court is non-dischargeable under 11 U.S.C. § 523(a)(3)(A).¹ Mr. Rodriguez is an experienced landscaper but is not a licensed contractor. He performed and was fully paid for a landscaping project at Vista's manufactured home park that was never completed to Vista's satisfaction. Vista asserts that 1) Mr. Rodriguez made a false representation to Vista that he was the owner of Gonzales Landscaping ², 2) Mr. Rodriguez knew this representation was false when he made it; 3) Mr. Rodriguez made the false representation with intent to deceive Vista; 4) Vista justifiably relied on this false representation in awarding him the contract; 5) Mr. Rodriguez's false representation was both the actual cause in fact and proximate cause of Vista's damages because the project was incompetently performed. For the reasons explained below, the Court has determined that Vista failed to establish all the required elements of its non-dischargeability claim. The debt at issue is, therefore, dischargeable.

FINDINGS OF FACT

Francisco Rodriguez has more than twenty-five years of experience doing landscaping work. He is not, however, a licensed landscaper. Though never formally married, Francisco Rodriguez and Guadalupe Gonzales have lived together in a relationship tantamount to marriage for twenty-four years. Ms. Gonzales does business as Gonzales Landscaping. Ms. Gonzales generally prepares all of the paperwork for the business, and Mr. Rodriguez does the landscaping work. Mr. Rodriguez works for Gonzales Landscaping as a side job as a way to earn additional income.

Francisco Rodriguez's sister, Claudia Rodriquez, worked for Vista as park manager of its manufactured home park. Guadalupe Gonzales prepared a proposal for a landscaping project to be completed at the park. See Exhibit C. The proposal is dated March 30, 2012. Id. The proposal contains the following handwritten comments: 1) drought resistant; 2) will insure all sprinklers Rainbird, heads Rainbird with half-moon heads and a few adjustable heads; and 3) identify sod—70%, 10%, 20%. Id. The header on the proposal identifies Gonzales Landscaping, 409 Dorado Ct. SE. The proposal states that it was submitted by Francisco Rodriguez owner of Gonzales Landscaping, and that checks are to be made payable to Francisco Rodriguez. The proposal states further that the cost for the project is $7,500, with $3,750 to be paid to start, and the balance due upon job completion.

Karen Smith is a project manager for the company that manages Vista. She oversees five Vista properties including the manufactured home park where Mr. Rodriguez performed the landscaping project. When Vista decides to undertake a project for one of its managed properties, Ms. Smith would request comparison bids. The on-site managers would then send raw contracts to Ms. Smith for her review and comment. Vista has a policy not to award contracts to unlicensed contractors. Vista also required a certificate of insurance naming Vista as an additional insured and a W–9 to be provided to it before starting a job. The landscaping project awarded to Gonzales Landscaping required the removal of all existing grass, evaluation of the existing sprinkler system, preparation of the soil, replacement of sprinklers to make sure all sprinklers were of the same brand, repair of the existing sprinkler system to insure that the sprinkler system was operational, and re-sodding approximately 7500 square feet. Ms. Smith looked at approximately fifteen proposals, and from those, she decided on three bids. She rejected many of the proposals because the landscaper failed to identify the materials to be used, or because of a lack of insurance.

Guadalupe Gonzales, Claudia Rodriguez, and the maintenance supervisor for the park together prepared the contract between Vista and Guadalupe Landscaping (the “Contract”)(Exhibit A/Exhibit 1). Claudia Rodriguez then submitted the Contract to Karen Smith. Ms. Gonzales and Ms. Smith never spoke to each other. Ms. Gonzales does not know whether Claudia Rodriguez ever told Karen Smith that Francisco Rodriguez is Claudia Rodriguez's brother. Francisco Rodriguez was not involved in negotiating or preparing the Contract. Claudia Rodriguez indicated that she had been getting estimates for the landscaping project from other landscapers but that they were too expensive.

Keith Cunning signed the Contract on behalf of Cunning Management, Vista's general partner, on May 17, 2012. See Exhibit 1 and Exhibit A. The Contract identifies Gonzales Landscaping at the top and includes the following statements:

PAYMENT SCHEDULED AS FOLLOWS: $3,750 TO START AND THE BALNCE OF $3,750 UPON JOB COMPLETION

SUBMITTED BY: FRANCISCO RODRIGUEZ owner of GONZALES LANDSCAPING (CHECKS ARE TO BE MADE PAYABLE TO FRANCISCO RODRIGUEZ)

See Exhibit A and Exhibit 1.

Ms. Gonzales prepares the paperwork for Guadalupe Landscaping. Francisco Rodriguez is in charge of the landscaping work performed by the business.

Keith Cunning is the only person who signed the Contract. Karen Smith stamped a boilerplate provision on the Contract requiring proof of liability and workers compensation insurance and a W–9. The W–9, dated March 16, 2012, that Gonzales Landscaping submitted to Vista for the project names Guadalupe Gonzales as the person named on the tax return, with a business name of Gonzales Landscaping. See Exhibit 1, p. 2. The Certificate of Liability Insurance Gonzales Landscaping submitted to Vista for the project, also dated March 16, 2012, identifies “Gonzales Landscaping, Guadalupe Gonzales, dba” as the insured. See Exhibit 1, p. 3 and Exhibit B. “Vista Manufactured Home Community” is listed as the Certificate Holder. See Exhibit 1, p. 3.

Francisco Rodriguez never affirmatively represented to Vista that he was a licensed contractor. The first time Karen Smith met with Francisco Rodriguez was on June 12, 2012, after the Contract had already been awarded. There was a problem with the delivery of the sod, causing a two-week delay. Claudia Gonzales, on behalf of Vista, paid her bother Francisco Rodriguez the full amount of the Contract, and Mr. Rodriguez cashed the check. Mr. Rodriguez believes he completed the job in a professional manner. Vista was not satisfied with the work performed or the outcome of the project. The sod did not adhere to the soil and died.

Vista filed a lawsuit against Mr. Rodriguez in the Metropolitan Court, State of New Mexico, County of Bernalillo as Case No. T–4–CV–2012–010747 (the “State Court Case”). See Exhibit 2. The caption of the State Court Case is Vista Manufactured Home Community Limited Partnership v. Francisco Rodriguez doing business as Gonzales Landscaping, and Guadalupe Gonzales, doing business as Gonzales Landscaping. Id. Vista obtained a judgment against Mr. Rodriguez in the State Court Action (the “Judgment”). The Judgment includes the following findings of fact:

1. Defendant Francisco Rodriguez held himself out as the owner of the landscape business, when in fact Guadalupe Gonzales in the owner of Gonzales Landscaping;

2. The Defendants prepared the contract with states, “Francisco Rodriguez, owner of Gonzales Landscaping;”

3. Plaintiff[ ] entered into the contract with Defendants believing Defendant, Francisco Rodriguez, the brother of Plaintiff's park manger, was the owner.

Karen Smith testified that had she known that Francisco Rodriguez was not the owner of Gonzales Landscaping, Vista would not have awarded Gonzales Landscaping the Contract. She testified that she needs to know the identity of the true owner of Gonzales Landscaping to make sure the Contract correctly stated who was to be paid for the work, and so she could properly verify that insurance is in place. Ms. Smith verified the Certificate of Liability Insurance before Mr. Rodriguez started work on the landscaping project.

CONCLUSIONS OF LAW

A. The collateral estoppel effect of the state court judgment

Issue preclusion, also known as collateral estoppel, bars the same parties from re-litigating an ultimate fact or issue already determined in an earlier lawsuit. See 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 relitigation between the same parties of issues of ultimate fact that have been determined by a valid and final judgment.”) (citation and internal quotation marks omitted).³ A bankruptcy court will give preclusive effect to a state court judgment if all the required elements of collateral estoppel have been satisfied. SeeGrogan v. Garner, 498 U.S. 279, 284–85 n. 11, 111 S.Ct. 654, 112 L.Ed.2d 755 (1991)(clarifying that “collateral estoppel principles do indeed apply in discharge exception proceedings pursuant to § 523(a).”); Brown v. Brown (In re Brown), 2013 WL 5376541, *3 (Bankr.D.N.M. Sept. 25, 2013)(explaining that “[a] state court judgment can have collateral estoppel effect for purposes of establishing the non-dischargeability of a particular debt under 11 U.S.C. § 523 ...”) (citations omitted). To determine the preclusive effect of a judgment, the Court applies the law of ...