PREFERRED BuildERS v. GHAFFARI

• Decision Date: 31 March 2011
• Docket Number: NO. 29,326,29,326
• Parties: PREFERRED BUILDERS, S.W., INC., Plaintiff-Appellant, v. ALI M. GHAFFARI, SR., individually, BLUE AND RED BIRD CORPORATION, P.C., a New Mexico corporation, and RENAISSANCE LABOR MANAGEMENT, INC., a New Mexico corporation, Defendants-Appellees, RENAISSANCE LABOR MANAGEMENT, INC. and LINDA R. GHAFFARI, Third-Party Plaintiffs, v. PREFERRED BUILDERS, S.W., INC., ROCKY BENARD, SARAH BENARD, Third-Party Defendants, ALI M. GHAFFARI, SR., BLUE AND RED BIRD CORPORATION, P.C., and RENAISSANCE LABOR MANAGEMENT, INC., Plaintiffs, v. SCOTTSDALE INSURANCE COMPANY, Defendant.
• Court: Court of Appeals of New Mexico

PREFERRED BUILDERS, S.W., INC., Plaintiff-Appellant,

v.ALI M. GHAFFARI, SR., individually, BLUE AND RED BIRD CORPORATION, P.C.,

a New Mexico corporation, and RENAISSANCE LABOR MANAGEMENT, INC.,

a New Mexico corporation, Defendants-Appellees,

RENAISSANCE LABOR MANAGEMENT, INC.

and LINDA R. GHAFFARI, Third-Party Plaintiffs,

v.PREFERRED BUILDERS, S.W., INC., ROCKY BENARD,SARAH BENARD, Third-Party Defendants,ALI M. GHAFFARI, SR., BLUE AND RED BIRD CORPORATION, P.C.,and RENAISSANCE LABOR MANAGEMENT, INC., Plaintiffs,

v.SCOTTSDALE INSURANCE COMPANY, Defendant.

NO. 29,326

COURT OF APPEALS OF THE STATE OF NEW MEXICO

March 31, 2011

This memorandum opinion was not selected for publication in the New Mexico Reports. Please see Rule 12-405 NMRA for restrictions on the citation of unpublished memorandum opinions. Please also note that this electronic memorandum opinion may contain computer-generated errors or other deviations from the official paper version filed by the Court of Appeals and does not include the filing date.

APPEAL FROM THE DISTRICT COURT OF CURRY COUNTY

Teddy Lowe Hartley, District Judge

Attorney and Counselor at Law, P.A.

Eric D. Dixon

Portales, NM

for Appellant

Mark S. Sweetman

Clovis, NM

for Appellees Ali M. Ghaffari, Sr., Linda R. Ghaffari,

Blue and Red Bird Corporation, P.C.,

and Renaissance Labor Management, Inc.

MEMORANDUM OPINION

FRY, Judge.

Preferred Builders, S.W., Inc. filed a complaint in district court seeking $82,855.67 on an open account or, alternatively, damages in quantum meruit for mold remediation and construction work performed on a building located at 1501 West Seventh Street, Clovis, New Mexico. Renaissance Labor Management, Inc., Blue and Red Bird Corporation, P.C., Ali M. Ghaffari, Sr. and Linda R. Ghaffari (collectively, Defendants) filed a counter-complaint and third-party complaint against Preferred Builders (collectively, Plaintiff), Rocky Benard, and Sarah Benard seeking damages for the partial demolition of the building. Following a bench trial, the district court entered judgment in favor of Defendants and awarded compensatory damages in the amount of $146,249.10.

On appeal, Preferred Builders claims that (1) Preferred Painters, S.W., Inc., a duly-licensed and incorporated business entity, was doing business under the trade name Preferred Builders and, therefore, the district court improperly held that Rocky and Sarah Benard were personally liable for the amount of the judgment under NMSA 1978, Section 53-18-9 (1967) and that Preferred Builders was prohibited from maintaining an action for compensation under NMSA 1978, Section 60-13-30 (1977); (2) the district court lacked jurisdiction over Rocky and Sarah Benard because they were not served with a copy of the third-party complaint and summons; (3) Preferred Builders substantially complied with the requirements of the Construction Industries Licensing Act (CILA), NMSA 1978, Sections 60-13-1 to -59 (1967, as amended through 2008) and, therefore, was not barred from maintaining an action for compensation; (4) the district court improperly found that Preferred Builders' alleged damages in the amount of $82,855.67 were unsupported by the evidence and "misstated to the point of actual fraud"; (5) Defendants failed to establish the amount of their damages with reasonable certainty; (6) the award of damages should be offset by the settlement proceeds that Defendants received from their insurance company and adjuster; and (7) the district court improperly denied Preferred Builders' motion for a new trial because the award of damages was barred by the doctrine of collateral estoppel.

We conclude that Preferred Painters was doing business under the trade name Preferred Builders and, therefore, the district court improperly held that Rocky and Sarah Benard were jointly and severally liable for the amount of the judgment and that Section 60-13-30 prohibited an action for compensation. In light of our conclusion, we need not determine whether the district court properly exercised jurisdiction over Rocky and Sarah Benard, or whether Preferred Builders substantially complied with the licensing requirements of CILA. We reject Preferred Builders' claims regarding damages and conclude that the district court properly declined to offset the amount of the judgment by the settlement proceeds received by Defendants. Lastly, we hold that the district court properly denied Preferred Builders' motion for a new trial. Accordingly, we affirm in part and reverse in part.

I. BACKGROUND

Renaissance is the owner of a building located at 1501 West Seventh Street, Clovis, New Mexico. Linda Ghaffari and her daughter are the sole shareholders of Renaissance. The building previously had been used as a nursing home facility known as the Buena Vista Retirement Center but, in October 2005 Dr. Ghaffari conducted his medical practice, which was operated by Blue and Red Bird, in the west wing of the building. Linda Ghaffari and Dr. Ghaffari are the sole shareholders of Blue and Red Bird. The building was insured against damage or loss by Scottsdale Insurance Company (Scottsdale).

On October 5, 2005, a water pipe in the east wing of the building burst, saturating the carpets and the lower portions of the walls. Mold developed due to the continued presence of water. The damage was reported to Scottsdale, which dispatched Robert A. Farkas of Proclaims Adjustment Services to adjust the claim. Farkas requested an estimate for repairs from Preferred Builders, which is owned and operated by Rocky and Sarah Benard. On October 15, Preferred Builders submitted a bid in the amount of $82,855.67 for the restoration of the building.

Preferred Builders commenced work on the property and, on November 26 requested payment in the amount of $82,855.67. After no payment was received, Preferred Builders ceased work and filed a claim of lien on the property. Thereafter, Preferred Builders filed a civil complaint in district court against Renaissance, Blue and Red Bird, and Dr. Ghaffari, seeking to recover on an open account and requesting relief under the equitable doctrine of quantum meruit. In their answer to the complaint, Renaissance, Blue and Red Bird, and Dr. Ghaffari alleged that Preferred Builders was an unlicensed contractor, which was prohibited from collecting compensation under Section 61-13-30. Additionally, Renaissance and Linda Ghaffari filed a counter-complaint and third-party complaint against Plaintiffs, Scottsdale, and Farkas, seeking damages for the partial demolition of the east wing of the building.

Thereafter, the parties moved to consolidate the present action with Ali M. Ghaffari, Sr., Blue and Red Bird Corporation, P.C., and Renaissance Labor Management, Inc. versus Scottsdale Insurance Company, No. D-0905-CV-02006-0034, which "involve[d] issues of not only insurance coverage[,] but a claim by [Defendants] that an agent of [Scottsdale], [Farkas], authorized repair to [the] building." The district court granted the motion. The claims against Scottsdale and Farkas subsequently were settled for $112,500.¹

On August 25 and 26, 2008, the district court held a bench trial on the remaining claims. The district court held that Preferred Builders was prohibited from filing a claim of lien under Section 60-13-30 because it was not a licensed New Mexico contractor or an incorporated business entity. Although Preferred Builders alleged that it was operating under the contractor's license granted to Preferred Painters, a duly-licensed and incorporated business entity owned and operated by Rocky and Sarah Benard, the court determined that CILA prohibits such an arrangement.

Alternatively, the court found that Preferred Builders' claim of $82,855.67 lacked evidentiary support because "much of the work claimed could not be established. Proof was so lacking, and often misstated to the point of actual fraud." (Emphasis omitted.) The court found that the demolition "was unnecessary, unreasonable[,] and excessive" and was not authorized by Defendants, Scottsdale, or Farkas.

With respect to the counter-complaint and third-party complaint, the district court found that Defendants were entitled to $146,249.10 in damages. Because Rocky and Sarah Benard had "assumed to act as a corporation (Preferred Builders, S.W., Inc.) without authority to do so[,]" the court held that they were jointly and severally liable for the amount of the judgment under Section 53-18-9 ("All persons who assume to act as a corporation without authority to do so are jointly and severally liable for all debts and liabilities incurred or arising as a result thereof."). The court further held that, pursuant to McConal Aviation, Inc. v. Commercial Aviation Ins. Co., 110 N.M. 697, 700, 799 P.2d 133, 136 (1990), "[t]he benefits received from the settlement with [Scottsdale] and [Farkas] represent a recovery from a collateral source and may not be used to reduce the liability of [Preferred Builders], Sarah Benard[,] and Rocky Benard."

Preferred Builders moved for a new trial, arguing that "[t]he claimed damage to 'restore' the building in the amount of $146,249.10 is unreasonable and not supported by the . . . evidence." In support of its motion, Preferred Builders relied on the findings of fact in Montoya v. Buena Vista Retirement Center, No. D0905-CV-0200400202 (Sept. 23, 2004), in which the district court granted the Secretary of the Department of Health's motion to place the Buena Vista Retirement Home under receivership. In that case, the district court found, in pertinent part, that "the roof was leaking which resulted in toxic black mold throughout the facility," and "[t]here were numerous leaks in the roof throughout the facility." Preferred Builders alleged that Defendants had suffered no damages because "at the time that [Preferred Builders] first set foot in the building[,] the building was without any value and could not be used as a nursing home[,] or any other...