Sanchez v. Lovato et al

UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF NEW MEXICO
In re:
RODOLFO LOVATO and
LISA LOVATO,
Debtors. 	No. 7-07-10287 SA
ALBERT SANCHEZ,
Plaintiff,
v. 	Adv. No. 07-1072 S
RODOLFO LOVATO and
LISA LOVATO,
Defendants.
MEMORANDUM OPINION ON PLAINTIFF’S MOTION
FOR SUMMARY JUDGMENT AGAINST RODOLFO LOVATO ONLY
This matter is before the Court on Plaintiff’s Motion for
Summary Judgment against Rodolfo Lovato Only (doc 7)(“Motion”),
Defendant Rodolfo Lovato’s Response (doc 8) and Plaintiff’s Reply
(doc 9). 	Plaintiff appears through his attorney Velarde & Pierce
(Chris W. Pierce). 	Defendant appears through his attorney
Schimmel Law Office (Jason Neal). 	This is a core proceeding. 	28
U.S.C. § 157(b)(2)(I). 	For the reasons set forth below, the
Court finds that the Motion is not well taken and should be
denied.
Plaintiff’s Motion is based on the collateral estoppel
effect of a judgment entered against Defendant in an action in
the Second Judicial District, Bernalillo County, New Mexico
(“Judgment”). 	One fact from the pleadings suggests the outcome
of this Motion: the first paragraph of the Judgment states that
Defendant did not appear at the trial.
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Federal courts must give the same preclusive effect to a New
Mexico state court judgment as would a New Mexico state court.
Fowler Brothers v. Young (In re Young), 91 F.3d 1367, 1374 (10 th
Cir. 1996). 	See also Corzin v. Fordu (In re Fordu), 201 F.3d
693, 703 (6 th Cir. 1999):
When a federal court is asked to give preclusive effect
to a state court judgment, the federal court must apply
the law of the state in which the prior judgment was
rendered in determining whether and to what extent the
prior judgment should be given preclusive effect in a
federal action. 	(Citations omitted.)
Therefore, this Court should look at the preclusive effect that
the New Mexico state court would give to the Judgment.
Under New Mexico law, the party seeking to establish
collateral estoppel must establish four elements: 1) same parties
or privity, 2) subject matter of the two suits are different, 3)
the ultimate facts or issues were actually litigated, and 4) the
issue was necessarily determined. 	Reeves v, Wimberly, 107 N.M.
231, 233, 755 P.2d 75, 77 (Ct. App. 1988). 	Then, once those four
elements are established, “the trial court must then determine
whether the party against whom estoppel is asserted had a full
and fair opportunity to litigate the issue in the prior
litigation.” 	Shovelin v. Central New Mexico Electric Coop, Inc.,
115 N.M. 293, 297, 850 P.2d 996, 1000 (1993)(citing Silva v.
State, 106 N.M. 472, 474, 745 P.2d 380, 382 (1987)).
Furthermore, the trial court may refuse to apply the doctrine if
it would be inequitable or fundamentally unfair. 	In re Duran,
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141 N.M. 793, 799, 161 P.3d 290, 296 (2007); Reeves, 107 N.M. at
235, 755 P.2d at 78.
Under New Mexico law, default judgments have no 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.”) 	The Judgment was entered after a
trial at which Defendant did not appear. 	By definition, this is
a default judgment. 	See Black’s Law Dictionary 428 (7 th ed.
1999)(Defining “default judgment” as “A judgment entered against
a defendant who has failed to plead or otherwise defend against
the plaintiff’s claim, often by failing to appear at trial.”)
Therefore, it has no preclusive effect.
Plaintiffs argue that the Judgment should not be treated as
a default judgment because so many resources were expended to get
to trial and Defendant had ample opportunity to litigate.
Unfortunately for Plaintiffs, “opportunity” to litigate is not
sufficient under New Mexico law to satisfy the “actual”
litigation element. 	Compare Grynberg v. Arkansas Oklahoma Gas
Corp., 116 P.3d 1260, 1263 (Colo. App.), cert. denied, 2005 WL
1864128 (Colo. 2005):
The following factors must be satisfied to apply the
doctrine: 	(1) the issue precluded is identical to an
issue actually determined in the prior proceeding; 	(2)
the party against whom estoppel is asserted was a party
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in the prior proceeding; 	(3) there is a final judgment
on the merits in the prior proceeding; 	and (4) the
party against whom estoppel is asserted had a full and
fair opportunity to litigate the issue in the prior
proceeding.
(Emphasis added; applying Colorado law; citation omitted.) with
Shovelin, 115 N.M. at 297, 850 P.2d at 1000 (New Mexico requires
“actual” litigation.) 	See also Restatement (Second) of Judgments
§ 27 cmt. e. (1982)(“In the case of a judgment entered by
confession, consent, or default, none of the issues is actually
litigated.”) 	Nor does the fact that Defendant participated in
the state court proceedings benefit Plaintiffs. 	New Mexico does
not distinguish between pre-answer and post-answer defaults.
Compare Gober v. Terra + Corp. (In re Gober), 100 F.3d 1195, 1204
(5 th Cir. 1996) (applying Texas law, issues in a post-answer
default judgment are “actually litigated” for purposes of
collateral estoppel; state court judgment rendered as a sanction
for discovery abuse collaterally estopped subsequent litigation
in bankruptcy court.)
Finally, even if the Judgment were not a default judgment,
the Court would find that it would be fundamentally unfair to
apply collateral estoppel in this case. 	Defendant failed to
receive notice of the trial of the state court case. 	Whether
Defendant bears any culpability for that failure is not the
issue. 	Defendant should have the opportunity to defend himself
in this case. 	See Restatement (2 nd ) of Judgments § 28 (1982):
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Although an issue is actually litigated and determined
by a valid and final judgment, and the determination is
essential to the judgment, relitigation of the issue in
a subsequent action between the parties is not
precluded in the following circumstances:
...
(5) There is a clear and convincing need for a new
determination of the issue because the party sought to
be precluded, as a result of the conduct of his
adversary or other special circumstances, did not have
an adequate opportunity or incentive to obtain a full
and fair adjudication in the initial action.
The Court finds that the non-receipt of notice of the trial is a
special circumstance.
For the reasons set forth above, the Court will enter an
Order Denying Plaintiff’s Motion for Summary Judgment.
Honorable James S. Starzynski
United States Bankruptcy Judge
copies to:
Chris W Pierce
Velarde & Pierce
2531 Wyoming Blvd. NE
Albuquerque, NM 87112
Jason Neal
320 Gold Avenue SW, Suite 900
Post Office Box 8
Albuquerque, NM 87103-0008
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