Fortier v. Dona Anna Plaza Partners

Decision Date17 December 1984
Docket Number83-2250,Nos. 83-1750,s. 83-1750
Citation747 F.2d 1324
Parties17 Fed. R. Evid. Serv. 612 John N. FORTIER and Linda M. Fortier, et al., Plaintiffs-Appellees, v. DONA ANNA PLAZA PARTNERS, James A. Peterson, Peterson Properties, Inc., et al., Defendants-Appellants.
CourtU.S. Court of Appeals — Tenth Circuit

Alan Konrad, Miller, Stratvert, Torgerson & Brandt, Albuquerque, N.M. (Ranne B. Miller and Michael H. Hoses, Miller, Stratvert, Torgerson & Brandt, Albuquerque, N.M., with him on brief), for defendants-appellants.

Victor E. Carlin, Moses, Dunn, Beckley, Espinosa & Tuthill, Albuquerque, N.M. (Joseph L. Werntz, Moses, Dunn, Beckley, Espinosa & Tuthill, Albuquerque, N.M., with him on brief), for plaintiffs-appellees.

Before McWILLIAMS, DOYLE and McKAY, Circuit Judges.

WILLIAM E. DOYLE, Circuit Judge.

This an appeal from an action brought by plaintiffs-appellees, the Fortiers, against defendants-appellants, James A. Peterson, Peterson Properties, Inc. and Dona Anna Plaza Partners (collectively referred to as "Peterson") and other defendants who do not appear here in this appeal.

The lawsuit was to seek both compensatory and punitive damages in connection with the development, construction, and sale of the Dona Anna Plaza Shopping Center (herein referred to as "Dona Anna Plaza") in Raton, New Mexico.

The Fortiers first were plaintiffs in the original suit for their damages against all defendants on a negligence theory, and they sued Peterson for damages based upon three theories of liability:

(1) negligence;

(2) breach of contract; and

(3) fraud.

Colony Foods, Inc. (hereinafter "Colony"), operates a restaurant in the Dona Anna Plaza, and also intervened in this action seeking compensatory and punitive damages against Peterson. Both the Fortiers and Colony Foods prevailed on their claims, and defendant Peterson brings the appeal.

Mr. Peterson was the owner and developer of Dona Anna Plaza. He sold the shopping center to the Fortiers on June 30, 1978. During the negotiations, the Fortiers noticed problems with the parking lot. Peterson agreed to repair and warrant the parking lot as part of the final "Punch List." After the Fortiers bought the shopping center, serious problems with the parking lot arose, and the Fortiers had to repave the entire lot. The Fortiers brought suit in the United States District Court for the District of New Mexico against Peterson and the various contractors who performed the original work on the shopping center parking lot. The Fortiers alleged that Peterson was negligent in supervising the design and construction of the parking lot; in instructing his architect, Armstrong, to ignore the parking lot design recommendations set forth in a 1976 San Juan Testing Laboratory report having to do with soil conditions; further, in directing the general contractor, Bellamah, to construct the parking lot in accordance with plans and specifications of Armstrong despite warnings from both Bellamah and Lincoln-DeVore Testing Laboratory that the plans and specifications were inadequate; and also in failing to repair the parking lot during the one-year period Peterson served as property manager for the Fortiers after the sale.

The Fortiers alleged that Peterson was liable for breach of contract because he failed to repair the parking lot in accordance with the final Punch List. Furthermore, the Fortiers sought recovery against Peterson under three theories of fraud in connection with the sale of the property. They alleged fraudulent misrepresentation, negligent misrepresentation, and constructive fraud.

A complication arose when Armstrong (the architect), filed for bankruptcy in the United States Bankruptcy Court for the Southern District of California, on January 26, 1983, five days before the trial was to begin. All pending proceedings against Armstrong were automatically stayed pursuant to 11 U.S.C. Sec. 362. This particular damage action was removed at once by the Fortiers to the United States Bankruptcy Court for the District of New Mexico pursuant to 28 U.S.C. Sec. 1478 and local Bankruptcy Rule 1-118. The day after that, the Fortiers filed a Complaint seeking relief from the automatic stay that became effective in the New Mexico Bankruptcy Court. On January 31, 1983, the New Mexico Bankruptcy Court judge entered an order purporting to lift the stay and allowing this case to proceed as planned. The case was transferred back to the New Mexico District Court, which scheduled the trial for February 2.

The several claims here were tried to a jury. A verdict was returned in the form of special interrogatories, which found that the Fortiers had sustained damages amounting to $305,072.30, and also that the Fortiers had prevailed against Peterson on each of three separate theories of liability--negligence, breach of contract and constructive fraud. With regard to the Fortiers' negligence theory of liability, the jury found that the relative fault of Peterson was 70%, the relative fault of Armstrong (the architect) was 20% and the relative fault of the Fortiers was 10%.

Judgment was entered by the district court on March 9, 1983, in favor of the Fortiers against Peterson and Armstrong in the total amount of $305,072.30, together with costs. 1 The same judgment awarded Colony $205,322.00 compensatory and $500,000.00 punitive damages against Peterson.

On March 18, 1983, Peterson sought to amend the judgment to reduce the Fortiers' judgment against him. As against Colony, Peterson filed a Motion for judgment notwithstanding the verdict, remittitur or new trial. Peterson has never filed a motion for judgment n.o.v. new trial or remittitur as to the Fortiers.

On May 27, 1983, the trial court denied Peterson's motion for judgment n.o.v. against Colony, denied Peterson's motion for a new trial against Colony, but partially granted Peterson's motion for remittitur of the punitive damages awarded to Colony. The trial court also awarded attorneys fees and costs to the Fortiers.

Colony and Peterson reached a settlement while this appeal was pending, and the Colony recovery has been remanded to the district court. Peterson has appealed the judgment in favor of the Fortiers.

Peterson has raised five arguments on appeal and asks this court to reverse the judgment against him.

First, he claims that Armstrong's bankruptcy filing stayed the litigation against all parties and divested the district court of jurisdiction to hear this case.

Second, he argues that the trial court erroneously admitted seventeen exhibits under the business records exception to the rule against hearsay.

Third, Peterson maintains that the district court erroneously denied his motion for a directed verdict with respect to the negligence claims.

Fourth, Peterson claims that the amount of damages assessed against him by the district court was inconsistent with the jury verdict.

Fifth, Peterson challenges the trial judge's award of attorneys fees and expenses to the Fortiers. These contentions will be taken individually below.


Peterson argues that the Supreme Court's holding in Northern Pipeline Constr. Co. v. Marathon Pipeline Co., 458 U.S. 50, 102 S.Ct. 2858, 73 L.Ed.2d 598 (1982), invalidated the bankruptcy court system and that the referencing of cases from United States district courts to the bankruptcy courts pursuant to the Interim Rule, General Procedure Order No. 1983-1, also invalid and unconstitutional. Further, Peterson maintains that even if this case was properly removed from the district court to the bankruptcy court in New Mexico, the New Mexico bankruptcy court had no authority to lift the automatic stay. Peterson claims that relief from an automatic stay imposed by the statute, 11 U.S.C. Sec. 362, must be obtained from the court in which the debtor filed his or her bankruptcy petition which, in this case would be the Bankruptcy Court in California. Thus, Peterson's position is that the New Mexico Bankruptcy Court had no jurisdiction to lift the stay as to this litigation. He argues that the order lifting the stay had no effect, and that the trial therefore proceeded contrary to the stay. As a result he claims that the district court's activities were null and void.

He also says that, even if there was jurisdiction, he did not have an adequate opportunity to prepare for trial and that this was a deprivation of due process.

We have studied this and conclude that the jurisdictional argument does not fill the bill. Peterson assumes that an automatic stay under 11 U.S.C. Sec. 362 stays litigation as to co-defendants of the bankrupt. However, the Courts of Appeals have uniformly rejected such an interpretation of the automatic stay provisions of the Bankruptcy Act.

The Bankruptcy Act provides in pertinent part:

(a) [A] petition filed under section 301, 302, or 303 of this title ... operates as a stay, applicable to all entities, of--

(1) the commencement or continuation ... of a judicial ... proceeding against the debtor that was or could have been commenced before the commencement of the case under this title ... or to recover a claim against the debtor that arose before the commencement of the case under this title....

11 U.S.C. Sec. 362. The language of the statute extends stay proceedings only to actions "against the debtor." There is nothing in the statute which purports to extend the stay to causes of action against solvent co-defendants of the debtor. See Williford v. Armstrong World Indus., Inc., 715 F.2d 124 (4th Cir.1983); Wedgeworth v. Fibreboard, 706 F.2d 541 (5th Cir.1983); Pitts v. Unarco Indus., Inc., 698 F.2d 313 (7th Cir.1983). The language of the statute reflects the legislative purposes behind the automatic stay. This is to permit the debtor to organize his or her affairs without creditor harassment and to allow orderly resolution of all claims.

Congress has said:

The automatic stay is one of the...

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