MV Indus. Inc. v. Hernandez (In re Hernandez)
| Decision Date | 01 September 2011 |
| Docket Number | Adv. No. 10-1152 S,No. 7-10-12982 SS,7-10-12982 SS |
| Parties | In re: CHRISTOPHER C. HERNANDEZ and ANGELICA A. HERNANDEZ, Debtors. MV INDUSTRIES, INC., A New Mexico Corporation, and MICHAEL VIGIL, Plaintiffs, v. CHRISTOPHER C. HERNANDEZ and ANGELICA A. HERNANDEZ, Defendants. |
| Court | U.S. Bankruptcy Court — District of New Mexico |
In re: CHRISTOPHER C. HERNANDEZ and ANGELICA A. HERNANDEZ, Debtors.
MV INDUSTRIES, INC., A New Mexico Corporation,
and MICHAEL VIGIL, Plaintiffs,
v.
CHRISTOPHER C. HERNANDEZ and ANGELICA A. HERNANDEZ, Defendants.
No. 7-10-12982 SS
Adv. No. 10-1152 S
UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF NEW MEXICO
Date Entered on Docket: September 1, 2011
In this adversary proceeding, Plaintiffs ("MVI") seek to hold a debt non-dischargeable under 11 U.S.C. §§ 523(a)(2)(A), (a)(4) and/or (a)(6). Defendants have filed a Motion to Dismiss (doc 4) and then a Motion to Dismiss or Alternatively for Judgment on the Pleadings or Alternatively for Summary Judgment (doc 19 - "Motion"). For the reasons set forth below, the Court will grant Defendants' Motion for Summary Judgment.1
BACKGROUND
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MVI2 filed this adversary proceeding on September 20, 2010 (doc 1). The adversary proceeding relates to a contract under which MVI, a licensed contractor, was to build a project known as the National Atomic History Museum in Albuquerque, New Mexico. (Doc 1, ¶ 22). The complaint contains the following "general allegations3 ", most of which were denied by the Defendants: MVI issued subcontracts to HDR4 , Chris Hernandez (the Debtor), Steve Aragon d/b/a Diversified Masonry, Angelica Romero and Shaun Schmidt. (The last three are apparently third parties unrelated to this litigation) (Id.; Id. at ¶ 6). There is pending in the United States District Court for the District of New Mexico a lawsuit filed in 2009 captioned United States of America, For the Use of HDR Enterprises, LLC, ... Christopher Hernandez ... et al., v. MV Industries, Inc. ... et al.. Debtors filed their
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Chapter 7 case on June 14, 2010 and listed a claim against MVI for $400,000 on Schedule B and claimed a portion exempt on Schedule C. (Id. ¶¶ 1, 2). Schedule B listed no ownership interest in HDR. (Id. ¶ 12).
Paragraph 15 alleges: "For purposes of reference, MVI makes its allegations against Christopher Hernandez and HDR collectively, unless the context requires otherwise." The complaint also generally alleges that HDR and Hernandez failed to perform their work (Id. ¶ 27); and that HDR failed to pay suppliers for materials provided to the project despite the fact that MVI paid HDR for materials, and that HDR assigned a portion of its subcontract to another contractor in violation of the contract and without notice to MVI and then failed to pay that subcontractor (Id. ¶¶ 29, 30, 31); HDR invoiced MVI for the work performed (Id. ¶ 32).
The rest of the complaint, ¶¶ 33-55, contains a single count called "Conversion, fraud, misrepresentation." Paragraphs 34 and 35 allege that HDR and Hernandez received payment of all invoices and did not pay all of the suppliers as required under the terms of the subcontract. Paragraph 36 cites In re Romero, 535 F.2d 618 (10th Cir. 1976) and quotes three paragraphs from the opinion.5 Paragraph 37 claims that the failure of HDR and
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Hernandez to pay suppliers was intentional and willful. Paragraph 38 claims that under In re Romero, Hernandez's debt should be nondischargeable. Paragraph 39 alleges that the failure to pay suppliers was not based on any lawful defense to the contract. Paragraph 40 states that HDR and Hernandez did not complete the work "it/they" were paid for in a manner consistent with what was required. Paragraphs 41-43 allege only shortcomings of HDR and makes reference to an unidentified counterclaim, perhaps in the District Court litigation. Paragraph 44 states that MVI suffered $186,115.14 in damages. Paragraphs 45 and 46 allege that "HDR and Hernandez" failed to pay subcontractors for work they did, and that MVI had to pay them. Paragraphs 47 and 48 allege that Hernandez represented to Plaintiffs that "he would handle the lack of payment(s)" and that MVI relied on Hernandez's written6 and verbal misrepresentations. Paragraph 49 claims damages to MVI's business reputation by the willful, wanton and malicious acts of HDR and Hernandez. Paragraph 52 and 53 allege that the contract breaches and omissions were willful, wanton, intentional and deliberate and
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but for them, MVI and Vigil would not have suffered damages. Paragraph 54 alleges that HDR and Hernandez' failure to pay is evidence of fraud, conversion and intentional misrepresentation. Paragraph 55 asserts that Angelica Hernandez has the same culpability as her spouse due to her active knowledge of the commissions and omissions cited herein.
In lieu of an answer, Defendants filed a Motion to Dismiss (doc 4). Defendants (gratuitously) admitted, for the purpose of the motion only7 , that HDR is a New Mexico corporation (¶ 9 of complaint), that Christopher Hernandez is an officer of HDR (¶ 11), that HDR is a licensed New Mexico contractor (¶ 19), that the dispute involves a subcontract (¶ 22), and that MVI entered into a subcontract with HDR on July 29, 2008 which required HDR to complete work within the scope of the contract (¶¶ 25, 26). Defendants argue that there is no allegation that Christopher Hernandez signed the contract in either a representative or individual capacity, and that there is no allegation that Christopher Hernandez had any obligation to perform under the
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contract. They also argue that there is no allegation that Christopher Hernandez misused or ignored the corporate structure of HDR, or committed any act sufficient to ignore the corporate existence of HDR. Defendants claim that even if all allegations in the complaint were true, all that it does is establish a claim against HDR, not them. Because the complaint fails to establish a claim against Hernandez, there is no nondischargeable claim, they assert.
Plaintiffs responded. (Doc 13). First, Plaintiffs refer to paragraphs 13 and 14 of the complaint which state that Hernandez had the ability to bind HDR to contracts, and the ability to make payment decisions, and that he acted in both his corporate and individual capacities. They also refer to paragraph 35 which alleges that HDR and Hernandez did not pay the suppliers. Finally, they claim that under In re Romero persons other than the licensed general contractor risk individual liability.
Second, Plaintiffs dispute that the complaint does not allege sufficient acts to disregard the corporate existence of HDR. They claim that: the fact that Hernandez was an officer, that he had actual and apparent authority, that he made false representations, that Plaintiffs dealt with him in both his representative and individual capacities, and that they relied on statements and representations, and were harmed as a result of his individual acts and omissions, is enough.
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The Court heard arguments on the motion to dismiss and denied it without prejudice and ordered that Defendants had until June 15, 2011 to re-file the Motion to Dismiss and/or a Motion for Summary Judgment that specifically addressed issues raised in Plaintiffs' response. (Order, doc 17).
Defendants filed an Answer (doc 18) and timely filed the Motion to Dismiss or Alternatively for Judgment on the Pleadings or Alternatively for Summary Judgment ("Motion")(doc 19), which is the subject of this Memorandum. Plaintiffs did not file a response.
SUMMARY JUDGMENT
Summary judgment is proper when there is no genuine issue as to any material fact and the moving party is entitled to a judgment as a matter of law. Bankruptcy Rule 7056(a)8 . In
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determining the facts for summary judgment purposes, the Court may rely on affidavits made with personal knowledge that set forth specific facts otherwise admissible in evidence and sworn or certified copies of papers attached to the affidavits. Fed.R.Civ.P. 56(c)(1). When a motion for summary judgment is
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made and supported by affidavits or other evidence, an adverse party may not rest upon mere allegations or denials. Id. Rather, "Rule 56(e) ... requires the nonmoving party to go beyond the pleadings and by her own affidavits, or by the 'depositions, answers to interrogatories, and admissions on file,' designate 'specific facts showing that there is a genuine issue for trial.'" Celotex Corp. v. Catrett, 477 U.S. 317, 324 (1986). "Rule 56(e) permits a proper summary judgment motion to be opposed by any of the kinds of evidentiary materials listed in Rule 56(c), except the mere pleadings themselves." Id. The court does not try the case on competing affidavits or depositions; the court's function is only to determine if there is a genuine issue for trial. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249 (1986).
In ruling on a motion for summary judgment, the trial court views the evidence and draws reasonable inferences therefrom in the light most favorable to the nonmoving party. Mountain Highlands, LLC v. Hendricks, 616 F.3d 1167, 1169-70 (10th Cir. 2010)(citing Garrison v. Gambro, Inc., 428 F.3d 933, 935 (10th Cir. 2005)). On those issues for which it bears the burden of proof at trial, the nonmovant "must go beyond the pleadings and...
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