Chaves v. Ruhland (In re Ruhland)
| Decision Date | 14 March 2013 |
| Docket Number | Case No. 11-19510-JNF,Adv. P. No. 11-1322 |
| Parties | In re KARL H. RUHLAND AND KATRINA T. RUHLAND, Debtors FELIPE CHAVES, a/k/a FELICIO VIEGAS de OLIVEIRA, Plaintiff v. KARL H. RUHLAND, Defendant |
| Court | U.S. Bankruptcy Court — District of Massachusetts |
The matter before the Court is the Amended Complaint filed by Felipe Chaves ("Chaves" or the "Plaintiff") against Karl Ruhland (the "Defendant" or the "Debtor"). Through his Complaint, Chaves seeks to except from discharge a debt in an unspecified amount pursuant to 11 U.S.C. § 523(a)(2)(A) and (a)(6). The debt arises out of a judgment the Plaintiff obtained against the Debtor for unpaid wages.
The Debtor filed a voluntary Chapter 7 petition on October 5, 2011. He listed the Plaintiff as the holder of an unsecured, nonpriority claim on Schedule F in the amount of $40,000. The Chapter 7 Trustee filed a Report of No Distribution on December 9, 2011. The Plaintiff timely filed a complaint to except his debt from discharge on November 6, 2011.
Following a series of discovery disputes, the parties filed a Joint Pretrial Memorandum in which they agreed to a number of undisputed facts, which the Court repeats below.
The Debtor had a painting business and employed seasonal workers to complete exterior and interior painting jobs. In or about January of 2006, the Attorney General for the Commonwealth of Massachusetts began an investigation of the Defendant for failure to pay his employees for work performed, failure to pay overtime, and failure to provide employees with proper pay stubs. In or about September of 2006, the Defendant entered into an Agreement with the Attorney General to pay $16,733.50 in back wages to eight of his employees. As part of that Agreement, the Defendant agreed to comply with Massachusetts wage and hour laws, including those requiring payment of workers in a timely manner.
In or about November of 2006, after the execution of the Agreement, the Plaintiff and the Defendant entered into an employment agreement. The Plaintiff promised toperform painting services in exchange for the Defendant's promise to pay him an hourly rate of pay. The Defendant intended that the Plaintiff would rely upon his promise to pay an agreed upon rate for the Plaintiff's painting services. At the time the parties made their agreement, the Plaintiff's wife worked for the Defendant and his then spouse as a house cleaner.
The Plaintiff proceeded to perform painting services for the Defendant pursuant to the parties' agreement. He painted interiors and exteriors of houses for the Defendant, but the Defendant did not pay him on a regular weekly basis.
On multiple occasions, the Plaintiff asked for his pay and the Defendant told the Plaintiff "money soon," which was a representation that he intended to pay the Plaintiff in full. In or about March of 2007, the Plaintiff stopped working for the Defendant. Two months later, the Plaintiff went back to work for the Defendant as a result of the Defendant's promise to pay everything he owed the Plaintiff, and the parties agreed upon a wage rate that the Defendant would pay the Plaintiff.
In November of 2007, the Plaintiff again quit working for the Defendant. On multiple occasions after the Plaintiff stopped working for the Defendant, the Plaintiff called the Defendant to try to obtain the amounts due for his services to no avail.
In January of 2008, the Attorney General began another investigation of the Defendant for non-payment of wages. In November of 2008, the Attorney General issued a civil citation against the Defendant for failing to pay six employees, including the Plaintiff. The Attorney General ordered the Defendant to pay $19,402.00 in restitution tohis workers, as well as a $10,000.00 penalty to the Commonwealth of Massachusetts. The Defendant did not pay the amounts ordered by the Attorney General in November of 2008 or thereafter.
The Defendant initially obtained the Plaintiff's services by promising to pay for them. The Defendant intended that the Plaintiff would rely upon his promise to pay for the Plaintiff's services. As a result of reliance upon the Defendant's promises, the Plaintiff suffered damages in the form of uncompensated time and labor.
On or about October 27, 2010, the Plaintiff filed a civil action against the Defendant in the Malden District Court (Civil Action 2010-50-CV-1928). On or about January 26, 2011, the Malden District Court allowed the Plaintiff's motion to assess damages of $37,020.00, litigation costs of $195.00, and attorney's fees of $1,080.00. The court also entered a default judgment in favor of the Plaintiff. On or about February 8, 2011, the Malden District Court issued an execution in the Plaintiff's favor, in the amount of $38,934.89. Under Massachusetts law, the Judgment has continued to accrue interest, at the annual rate of twelve per cent.
On or about July 20, 2011, the Essex County Sheriff issued a check for $1,950.00 to the Plaintiff, towards payment of the Judgment after seizing and auctioning a vehicle belonging to the Defendant. Apart from the payment from the Essex County Sheriff, the Plaintiff has received no payments towards the Judgment. Apart from the Plaintiff, the Defendant did not list any of his former employees on the creditor matrix he filed in the Chapter 7 Proceeding. The Defendant also did not list the Attorney General on theCreditor Matrix. The Defendant received a general discharge in the Chapter 7 Proceeding on January 10, 2012. The Attorney General did not file a complaint objecting to the Defendant's discharge or seeking to except his obligation to the Commonwealth from discharge. Similarly, no creditors, except the Plaintiff, filed adversary proceedings against the Debtor.2
At trial, four witnesses testified and four exhibits were admitted into evidence. The Plaintiff, a Portuguese speaker, testified through an interpreter.
Lillian Hirales, an Assistant Attorney General with the Fair Labor Division, testified that in her capacity as an assistant attorney general she enforced "the Commonwealth['s] wage and hour laws including statutes that involve overtime, minimum wage, and the timely payment of wages." She stated that she also participated in civil administrative hearings before the Division of Administrative Law Appeals, as well as criminal prosecutions of employers in court. She testified that wage complaints generally are received by her office through the mail, but some are referred through community-based workers' rights organizations.
Ms. Hirales testified that she worked with Joseph Hyacinthe, an investigator involved in examining the Debtor's employment practices. She reviewed his findings andinterviewed the Plaintiff in 2008.
Ms. Hirales identified four documents which were subsequently admitted into evidence. The first was a 2006 Agreement between the Office of the Attorney General and the Debtor, doing business as Ruhland Painting, which was undated. The parties through their Agreement recognized that the Commonwealth, through the Office of the Attorney General, is charged with enforcement of "various Wage and Hours Laws, including but not limited to, the Commonwealth's Wage Payment Statute, G.L. c. 149, § 148, Overtime Law, G.L. c. 151, §§ 1A and1B and other related statutes and regulations." They also recognized that the Debtor was a statutory employer of Ruhland Painting's employees pursuant to G.L. c. 149 and c. 151. In addition, the three-page Agreement set forth the results of an investigation conducted by the Attorney General. Specifically, it provided:
Beginning in January 2006, in response to employee complaints, the Attorney General undertook an investigation of Karl Ruhland's employment and wage payment practices, during April 2005 through September 2006. As a result of the investigation, the Attorney General determined that Karl Ruhland failed to timely pay wages, failed to provide employees with a suitable pay stub, and failed to pay overtime pay at a rate of one and one half times the employees' regular hourly rate, in violation of G.L. c. 149, § 148 and c. 151, §§ 1A-1B, to certain employees identified in the attached "Exhibit A." Additionally, during August 2005, Karl Ruhland issued paychecks to employees which were returned for insufficient funds, and he did not provide the value of those checks to the affected employees at any time after receiving notice that the checks were dishonored, in violation of G.L. c. 266, § 37. The Attorney General further determined that Karl Rhuland failed to maintain workers compensation insurance coverage during April 2005 through September 2005, in violation of G.L. c. 152, § 25C.
In the Agreement, the Debtor represented that he wished "to resolve fully and finally any and all claims that may be brought by the Attorney General" and accordingly agreed "toremit a total of $16,733.50 in restitution, representing straight wages and overtime pay due to the employees identified in the attached 'Exhibit A,' through payments made in three installments." The three installment payments in the approximate amount of $5,600 were due, in the form of a certified check or money order, at the time of the execution of the Agreement, on or before August 16, 2007, and on or before September 17, 2007.
In addition to making payments, the Debtor agreed to waive the statute of limitations as a defense for the Overtime Law violations should he fail to fulfill his payment obligations. Furthermore, he agreed that, if he breached the Agreement, the Attorney General could "pursue any and all remedies available for violations occurring during the period of April 2005 through September 2006 relating to the wages earned by the employees identified in the attached 'Exhibit A,' including, but not limited to, instituting any civil or criminal enforcement, or any action to...
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