In re Dorland
| Decision Date | 23 March 2007 |
| Docket Number | Adversary No. 05-01861-SBB.,Adversary No. 05-01862-SBB.,Bankruptcy No. 05-28508-SBB.,Bankruptcy No. 05-28506-SBB. |
| Citation | 374 B.R. 765 |
| Parties | In re David Allan DORLAND, f/o/d/s Ben Do Volt Construction, LLC, Debtor. Bemas Construction, Inc., Plaintiff, v. David Allan Dorland, f/o/d/s Ben Do Volt Construction, LLC, Defendant. In re Matthew. Lloyd Varholdt, f/o/d/s Ben Do Volt Construction, LLC, o/d/s Clear Creek Civil, Inc., Debtor. Bemas Construction, Inc., Plaintiff, Matthew Lloyd Varholdt, f/o/d/s Ben Do Volt Construction, LLC, o/d/s Clear Creek Civil, Inc. |
| Court | U.S. Bankruptcy Court — District of Colorado |
Jonathan L. Madison, Wolf & Slatkin, P.C., Denver, CO, for Bemas Construction, Inc.
Stephen E. Berken, Denver, CO, for David Dorland and Matthew Lloyd Varholdt.
THIS MATTER came before the Court for a trial regarding the Complaint filed by Bemas Construction ("Plaintiff") against David Allan Dorland, f/o/d/s Ben Do Volt Construction, LLC ("Defendant Dorland") and Matthew Lloyd Varholdt, f/o/d/s Ben Do Volt Construction, LLC, o/d/s Clear Creek Civil, Inc. ("Defendant Varholdt") (together Defendant Dorland and Defendant Varholdt shall be referred to as "Defendants"). The trial was conducted on August 11, 2006. The Court, having reviewed the pleading, heard testimony, received exhibits, and reviewed the Court's file in this matter, makes the following findings of fact, conclusions of law and Order.
This is a case in which the Plaintiff, a creditor and general contractor, seeks a judgment against its former subcontractor, the Defendants/Debtors. Specifically, this matter was brought by a general contractor, Plaintiff against the owners of two companies, Defendant Varholdt and Defendant Dorland, who subcontracted on a construction project. The Plaintiff is seeking this Court's determination that the Defendants violated COLO.REV.STAT. § 38-26-109 (the "Public Works Contractors' Trust Fund Statute"). The Plaintiff further seeks treble damages against Defendants in accord with the Colorado Criminal Code, COLO.REV.STAT. § 14-4-401 et seq. ("Colorado Criminal Code"), , COLO.REV.STAT. § 18-4-405, and a determination that the debts arising therefrom are nondischargeable under 523(a)(4).
For the reasons set forth below, the Court concludes that Defendant Varholdt, only, violated the Public Works Contractors' Trust Fund Statute. The Court, however, declines to award treble damages under the Public Works Contractors' Trust Fund Statute. Consequently, judgment shall enter in favor of Plaintiff and against Defendant Varholdt, only, in the amount of $134,287.32, together with post-judgment interest on that amount at the statutory rate of 8% per annum from the date of the judgment until paid. The Court further finds and concludes that the judgment entered herein is nondischargeable under 11 U.S.C. § 523(a)(4).
The Court makes the following findings of fact based upon those facts stipulated to by the parties and from those matters adduced during the trial of this matter.
Plaintiff is involved in the general construction business and entered into a public works contract with CH2MHill to perform certain work at the Jefferson County Airport ("Project").
On August 25, 2004, Bemas entered into a subcontract ("Subcontract") with BenDoVolt Construction, LLC ("BDV") for a portion of the work to be performed at the Project.1
In the fall of 2004, Defendant Varholdt advised Bemas, through Bemas's project manager, Mike Bussey, that BDV desired to assign the Subcontract to a new company owned and operated by substantially the same owners of BDV. On or about December 13, 2004, Bemas and Clear Creek Civil, Inc. ("Clear Creek") entered into an Assignment of Standard Subcontract Agreement ("Assignment") in which Clear Creek, as assignee, accepted all of the terms and conditions of the Subcontract.2
BDV and Clear Creek were owned and operated by the same individuals. Based on the evidence before the Court, this Court concludes that Defendant Varholdt controlled all financial, administrative and operational decisions involving Clear Creek.3
All of the work to be completed by Clear Creek, and for which Clear Creek's suppliers supplied material and equipment, related only to what was known as Schedule I and Schedule II of the Project.
In accordance with the Subcontract as assigned, Bemas paid Clear Creek the sum of $246,895.74 comprised of two checks, one check dated January 28, 2005, in the amount of $80,204.85 and another check dated February 18, 2005, in the amount of $166,690.89.4
After receiving the payments referenced above, Clear Creek did not pay several of its material and equipment suppliers on the Project, including Carder Concrete Products Co. ("Carder"), Rocky Mountain Ready Mix Company ("Rocky Mountain") and Power Motive Corporation ("Power Motive").
Clear Creek failed to complete the work on the Project. Defendant Varholdt testified that Clear Creek could not complete its work because it had run out of money and had no further operating capital. Bemas, as principal, and Travelers Casualty and Surety Company of America, as compensated surety, provided a payment bond, pursuant to COLO.REV.STAT. § 38-26-105, for the benefit of unpaid subcontractors, and material and rental equipment suppliers for the Project.5
On January 31, 2005, Clear Creek deposited a check it received from Bemas, in the amount of $80,204.85 into its account with First Bank.6 On February 17, 2005, Clear Creek deposited another check it received from Bemas, in the amount of $166,690.89, into its account with First Bank.7 During the time period from January 28, 2005 through August 3, 2005, Clear Creek made over 200 individual payments to various individuals and entities from the bank account where the Bemas trust funds were deposited. Of the over 200 payments made to various individuals and entities, only one payment was made to Power Motive in the amount of $8,000.00 and only one payment was made to Carder in the amount of $10,069.80.8
Carder was a material supplier to Clear Creek on the Project. Carder was not paid by Clear Creek for the materials it supplied on the Project. Carder submitted invoices to Clear Creek, which remained unpaid.9 Despite demands for payments being made, Clear Creek did not pay and, consequently, Carder informed Bemas of Clear Creek's failure to pay and provided Bemas with copies of the unpaid invoices. On April 4, 2005, Carder filed a Verified Statement of Claim with Jefferson County, Colorado, in accordance with COLO.REV.STAT. § 38-26-107, asserting that it was owed $90,196.00.10
In order to obtain the release of its retainage from Jefferson County and to forestall any claim on the payment bond, Bemas paid Carder $90,196.00.11 Carder released its Verified Statement of Claim with Jefferson County thereafter.12
Rocky Mountain was a material supplier to BDV and to Clear Creek. Rocky Mountain was not paid by. Clear Creek for the materials it supplied on the Project. Rocky Mountain submitted invoices to Clear Creek, which remained unpaid.13 Despite demands for payments being made, Clear Creek did not pay the sums that remained unpaid.14
On April 22, 2005, Rocky Mountain filed a Verified Statement of Claim with Jefferson County, Colorado in accordance with COLO.REV.STAT. § 38-26-107, asserting that it was owed $14,188.44. In order to obtain the release of its retainage from Jefferson County and to forestall any claim on the payment bond, Bemas negotiated with and paid Rocky Mountain $12,000.00 in full settlement of the Verified Claim and any possible bond claims.15
Power Motive was an equipment rental company that supplied Clear Creek with equipment for use on the Project. Power Motive was not paid by Clear Creek for the equipment it supplied on the Project. Power Motive submitted invoices to Clear Creek which remained unpaid.16 Despite demands for payments being made, Clear Creek did not pay the sums that remained unpaid.
On April 22, 2005, Power Motive filed a Verified Statement of Claim with Jefferson County, Colorado in accordance with COLO. REV.STAT. § 38-26-107, asserting that it was owed $40,333.88. In order to obtain the release of its retainage from Jefferson County and to forestall any claim on the payment bond, Bemas negotiated with and paid Power Motive $32,091.32 in full settlement of the Verified Claim and any possible bond claims.17 Power Motive released its Verified Statement of Claim and waived any right to file a bond claim on the Project.18
In reviewing the evidence and testimony at trial, very little evidence was produced by the Plaintiff as against Defendant Dorland. In fact, Plaintiff's written and filed Closing Argument (Docket # 55) does not mention Defendant Dorland and the prayer for relief contained therein only refers to Defendant Varholdt. It would seem that Plaintiff has, in effect, dropped its claim(s) against Defendant Dorland. Consequently, the focus of this opinion will relate to the conduct of Defendant Varholdt, only.
The issues before this Court are:
(1) Whether Plaintiff has standing to assert a claim under the Public Works Contractors' Trust Fund Statute.
(2) If the Plaintiff has standing to assert a claim under the Public Works Contractors' Trust Fund Statute, whether Defendant Varholdt violated the Statute.
(3) If Defendant Varholdt violated the Public Works Contractors' Trust Fund Statute, are treble damages to be awarded in accord with COLO.REV. STAT. § 18-4-405.
(4) Whether any monetary judgment in favor of the Plaintiff for violation of the Public Works Contractors' Trust Fund Sta...
To continue reading
Request your trial
-
Siry Investment, L.P. v. Farkhondehpour
...ante , fn. 8) appear to contain any such clarifying, limiting, or narrowing language.19 See, e.g., In re Dorland (Bankr. D.Colo. 2007) 374 B.R. 765, 780 (declining to award treble damages and attorney's fees under the Colorado statute (quoted ante , fn. 10) because the plaintiff failed to p......
- Siry Inv., L.P. v. Farkhondehpour
-
Data Mountain Solutions, Inc. v. Giordano (In re Giordano)
...re: Sims), 2009 WL 4255555 (Bankr.D.Kan.2009) (Debtor lacked standing to assert claim for setoff); Bemas Constr., Inc. v. Dorland (In re Dorland), 374 B.R. 765, 774 (Bankr.D.Colo.2007) (same). Accordingly, the Court will not allow a setoff of Mr. Giordano's non-dischargeable liability in th......
-
JK Transports, Inc. v. McGill (In re McGill)
...523(a)(4) claim. See Edwards v. Emberton (In re Emberton) , 501 B.R. 392, 399 (Bankr. D. Colo. 2013) ; Bemas Constr. v. Dorland (In re Dorland) , 374 B.R. 765, 781 (Bankr. D. Colo. 2007). As to the second element, the Debtor admits he owned and controlled Nomad, and made all of Nomad's fina......
-
Chapter 7 - § 7.3 THE TRUST FUND STATUTE
...re Regan, 311 B.R. 271 (Bankr. D. Colo. 2004).[31] Id. at 276.[32] Id. at 278.[33] In re Regan, 151 P.3d at 1282-83. [34] In re Dorland, 374 B.R. 765 (Bankr. D. Colo. 2007).[35] Stetson Ridge Assocs., Ltd. v. Walker (In re Walker), 315 B.R. 595 (Bankr. D. Colo. 2004), affd in part, rev'd in......
-
Juggling Hammers: Bankruptcy Issues and the Mechanic's Lien Trust Fund Statute
...the subcontractor in turn fails to pay its subcontractors or material suppliers. See Bemas Construction, Inc. v. Dorland (In re Dorland), 374 B.R. 765 (Bankr.D.Colo. 2007). 35. Siegfried, supra note 4 (recognizing that Colorado law holds that the "trust is imposed to protect subcontractors ......
-
Chapter 7 - § 7.3 • THE TRUST FUND STATUTE
...In re Regan, 311 B.R. 271 (Bankr. D. Colo. 2004).[31] Id. at 276.[32] Id. at 278.[33] In re Regan, 151 P.3d at 1282-83.[34] In re Dorland, 374 B.R. 765 (Bankr. D. Colo. 2007).[35] Stetson Ridge Assocs., Ltd. v. Walker (In re Walker), 315 B.R. 595 (Bankr. D. Colo. 2004), aff'd in part, rev'd......
-
Chapter 10 - § 10.5 TRUST FUND VIOLATIONS ON PUBLIC WORKS PROJECTS
...v. McGill.64 A detailed discussion is contained in § 7.3 of this book. --------Notes:[57] Bemas Constr., Inc. v. Dorland (In re Dorland), 374 B.R. 765 (Bankr. D. Colo. 2007).[58] Id.[59] C.R.S. § 38-26-109(4).[60] Bemas Constr., Inc., 374 B.R. 765.[61] Id. [62] Franklin Drilling & Blasting,......