Grove v. Beaver

UNITED STATES BANKRUPTCY COURT
DISTRICT OF NEW MEXICO
In re
JOHN DRYDEN BEAVER
d/b/a/ JOHN BEAVER CONSTRUCTION and
SUSAN JAYNE BEAVER,
Debtors. 	No. 7-10-11028 S
TED GROVE,
Plaintiff.
v. 	Adv. No. 10-1050 S
JOHN DRYDEN BEAVER, individually
and d/b/a/ JOHN BEAVER CONSTRUCTION,
Defendant.
MEMORANDUM OPINION ON
PLAINTIFF’S MOTION FOR SUMMARY JUDGMENT
This matter is before the Court on Plaintiff’s Motion for
Summary Judgment with supporting affidavit of Peter V. Culbert
(Plaintiff’s state court attorney) (doc 9) and Defendant’s
Response with supporting affidavit of Defendant (doc 10). 	This
is a core proceeding to determine dischargeability of a debt. 	28
U.S.C. § 157(b)(2)(I).
This adversary proceeding is Plaintiff’s attempt to have a
state court judgment declared nondischargeable in Defendant’s
Chapter 7 case. 	Therefore, the Court must first determine the
collateral estoppel impact of that judgment. 	Grogan v. Garner,
498 U.S. 279, 284 n. 11 (1991)(“We now clarify that collateral
estoppel principles do indeed apply in discharge exception
proceedings pursuant to § 523(a).”)
Case 10-01050-s Doc 16 Filed 10/05/10 Entered 10/05/10 10:39:19 Page 1 of 4

-2-
DISCUSSION
1. 	“The Full Faith and Credit Act, 28 U.S.C. § 1738 (1982),
requires a federal court to give the same preclusive effect to a
state-court judgment that the judgment would be given in the
courts of the state in which the judgment was rendered.” 	Jarrett
v. Gramling, 841 F.2d 354, 356 (10th Cir. 1988)(citing Kremer v.
Chemical Construction Corp., 456 U.S. 461 (1982). 	Therefore, the
Court turns to New Mexico law.
2. 	In Hyden v. Law Firm of McCormick, Forbes, Caraway & Tabor,
115 N.M. 159, 164, 848 P.2d 1086, 1091 (Ct. App.), cert. denied,
115 N.M. 60, 846 P.2d 1069 (1993) the New Mexico Court of Appeals
set out the elements a party must show to invoke collateral
estoppel:
To invoke collateral estoppel, then, the moving party
must show that (1) the subject matter or causes of
action in the two suits are different; (2) the ultimate
fact or issue was actually litigated; (3) the ultimate
fact or issue was necessarily determined; and (4) the
party to be bound by collateral estoppel had a full and
fair opportunity to litigate the issue in the prior
suit. 	Reeves v. Wimberly, 107 N.M. 231, 233, 755 P.2d
75, 77 (Ct. App. 1988).
3. 	In New Mexico, default judgments do not have preclusive
effect. 	Blea v. Sandoval, 107 N.M. 554, 558, 761 P.2d 432, 436
(Ct. App.), cert. denied, 107 N.M. 413, 759 P.2d 200 (1988) (“In
New Mexico, we recognize that default judgments do not have
collateral estoppel effect in future litigation, although they
may have res judicata effect.”)
Case 10-01050-s Doc 16 Filed 10/05/10 Entered 10/05/10 10:39:19 Page 2 of 4

-3-
4. 	The judgment entered in the state case was a default
judgment. 	See Complaint, doc 1, Exh. A ¶ 35 (“In this case
liability was established by a Default Judgment as to Liability
entered by the Court on June 18, 2008.”) Therefore, under Blea,
Plaintiff cannot claim that this judgment collaterally estops
Defendant from contesting liability in this adversary proceeding.
5. 	Plaintiff argues that although there was a default as to
liability, this defect was cured by the two day trial on damages
at which Defendant was represented by an attorney and the
evidence demonstrated misrepresentations, intent, bad faith, etc.
The Court has three responses. 	First, Plaintiff cites no law to
this effect. 	Second, it is not supported by the record. 	The
Culbert affidavit makes only a vague reference to this, but not
in a way that this Court could make any specific findings on the
issue. 	Finally, the fact remains that it was still a default
judgment and is not preclusive. 	The rules anticipate a damages
trial after default in some situations. 	See NMRA Rule 1-055(B):
If, in order to enable the court to enter judgment or
to carry it into effect, it is necessary to take an
account or to determine the amount of damages or to
establish the truth of any averment by evidence or to
make an investigation of any other matter, the court
may conduct such hearings or order such references as
it deems necessary and proper and shall accord a right
of trial by jury to the parties entitled thereto.
(Dealing with entry of judgment after default judgment.) 	This
rule does not suggest that if the Court has a damages trial it
Case 10-01050-s Doc 16 Filed 10/05/10 Entered 10/05/10 10:39:19 Page 3 of 4

1Negligence is a tort that is discharged despite section
523(a).
-4-
somehow converts the liability judgment into one on the merits
that would serve as the basis for estoppel.
6. 	In his brief, Defendant also argues that many of the
findings of the state court simply do not meet the required
elements of the causes of action pled in the adversary. 	For
example: the state court made no finding of willfulness as
required for section 523(a)(6); many findings stated that
Defendant either “tortiously 1” or “intentionally” or
“fraudulently” made representations. 	He also attacks the Culbert
affidavit’s statement regarding his state of mind, challenging
its foundation. 	Because the Court finds that collateral estoppel
does not apply in this case, it need not address or comment on
these other arguments.
The Court will enter an Order denying Plaintiff’s Motion for
Summary Judgment. 	The Court will also set a pretrial
conference.
Honorable James S. Starzynski
United States Bankruptcy Judge
Date Entered on Docket: 	October 5, 2010
Copies to:
John E Farrow
PO Box 35400
Albuquerque, NM 87176-5400
Michael K Daniels
PO Box 1640
Albuquerque, NM 87103-1640
Case 10-01050-s Doc 16 Filed 10/05/10 Entered 10/05/10 10:39:19 Page 4 of 4