Hon. David T. Thuma, United States Bankruptcy Judge.
Before the Court is Debtor's objection to Carol Ann Sanchez's ("Sanchez's") proofs of claim. Sanchez filed claims of $59,314 for wages and expense reimbursements. Debtor argues Sanchez provided no value to its company and in any event was paid more than she was owed. After considering all evidence and arguments, the Court finds that Sanchez has a non-priority, unsecured claim of $11,979.
The Court finds:
Debtor installs and repairs swimming pools. Debtor employs a small staff in its Albuquerque, New Mexico headquarters and also employs field workers in New Mexico and surrounding states. Ron Yates owns and operates Debtor with the assistance of his father Glenn Yates.
In June 2014 Ron Yates called Sanchez to see if she could provide consulting services to the Debtor. He had heard about Sanchez from an acquaintance of his, Raymond Sanchez. Sanchez is Raymond Sanchez's ex-wife. Debtor had suffered financially because of the economic downtown, and also lacked normal accounting and financing procedures and controls. Debtor had lost its relationships with several banks, could not get a line of credit to finance day-to-day operations, and had to pay most of its expenses in cash.
On June 9, 2014, Debtor engaged Sanchez to provide management services, prepare job descriptions and an organizational chart, collect outstanding receivables, and get the business back on track. Glenn Yates also hoped Sanchez would use her business and banking contacts to help Debtor obtain a loan and a banking relationship. On or about June 11, 2014, the parties signed a two-page agreement outlining Sanchez's scope of services and compensation. Sanchez did not produce the document in discovery or at the final hearing. Glenn Yates remembered that the agreement entitled Sanchez to receive a fixed consulting fee that could have been as high as $90,000. However, when testifying about Sanchez's compensation, the parties all remembered a figure of $7,500 a month. The Court therefore finds Debtor orally agreed to pay Sanchez $7,500 a month (or $1,731 a week) in compensation for consulting services.
Shortly after starting her consulting work, Sanchez and her domestic partner Patrick Glennon began using their personal credit cards to pay some of Debtor's expenses. Both also made personal loans to Debtor.
Lender Amount Type of loan Sanchez $32,009 Charges to personal credit card for Debtor's expenses Sanchez $1,600 Cash to Ron Yates for the benefit of Debtor Glennon $8,8083 Charges to personal credit card for Debtor's expenses Glennon $6,000 Cash to Ron Yates for the benefit of Debtor _______ Total $48,417 =======
Sanchez never received a normal paycheck from Debtor. For the most part, she paid herself by cashing checks drawn on the NMBT account, which she wrote and signed.
By October 2014, the relationship between Debtor and Sanchez had broken down. The Yateses decided that Sanchez had not accomplished enough, had not helped Debtor get a loan, and was too secretive about the NMBT checking account activity. When Sanchez left town for a vacation, Ron Yates went to NMBT and removed Sanchez's name from the NMBT account. Sanchez did not work with Debtor after that.
Because of the informal payment system described above, it is difficult to determine how much Sanchez is owed. Debtor's representatives asked Sanchez many times for an accounting, including copies of her and Glennon's bank statements. Sanchez provided some documents, but the bank statement copies were heavily redacted. At one point Raymond Sanchez met with Debtor's accountant to negotiate on Sanchez's behalf, but the parties were unable to agree on a figure without the requested bank statements. In response to the impasse, the Debtor took the position it did not owe her anything.
Debtor filed this case on May 28, 2015. Debtor did not schedule Sanchez's claim, provide her with notice of the bankruptcy, or send her a copy of the order setting a bar date for filing a proof of claim. The general claims bar date was September 4,
Sanchez now asserts she is owed $90,883, which includes all compensation, credit charges, and loans discussed above without any deductions for money she kept from the cashed checks.
Debtor contends it owes Sanchez nothing. According to Debtor, the compensation agreement is unenforceable because it was not in writing; Sanchez provided no value to Debtor; and the amount of cash she received exceeded the expenses she and Glennon paid.
Debtor's primary legal argument is that any oral agreement to pay Sanchez for consulting services is void under the statute of frauds. The argument fails. New Mexico has adopted the fourth section of the English Statute of Frauds, which states:
Jennings v. Ruidoso Racing Ass'n, 79 N.M. 144, 441 P.2d 42, 44 (1968). Thus, "agreements not to be performed within one year are ... void." Skarda v. Skarda, 87 N.M. 497, 536 P.2d 257, 261 (1975).
Agreements for personal services, including employment, construction work, advertising, etc., do not need to be in writing if they can be performed within one year. Professional Bull Riders, Inc. v. Autozone, Inc., 144 Fed.Appx. 735, 737 (10th Cir.2005) (oral sponsorship agreement could be performed within a year, and was not void under the statute of frauds);
The oral agreement here — under which Sanchez provided consulting services to Debtor in exchange for $7,500 a month —
Aside from Debtor's statute of frauds argument, this contested matter hinges on how much Sanchez is owed. To calculate the claim amount, the Court used the following formula: A (total compensation) + B (total loans) - C (total reimbursements) = D (claim amount). The total compensation and total loan amounts are set out above.
1.
The trial evidence showed:
Date Exhibit Face Net Enough evidence about amount retained, if less
Amount Retained than face amount?
Checks to Sanchez
6/20/2014 CC-6 $2,000 $2,000 No. Sanchez admitted she kept all of the money.
7/4/2014 CC-7 $2,492 $2,492 No. Sanchez admitted she kept all of the money.
7/4/2014 CC-7 $4,000 $4,000 No. Sanchez said she returned some of the
money but did not identify the amount.
7/28/2014 CC-8 $4,000 $4,000 No.8
8/29/2014 P9 $900 $900 No. Sanchez could not remember what portion,
if any, of the funds she returned, and her chart
shows she kept the full amount.
8/30/2014 C $6,000 $3,000 Yes. Sanchez testified she returned $3,000 to
Ron Yates.
8/30/2014 L $2,000 $2,000 No. Sanchez's counsel represented she kept the
full amount, which her chart supports.
9/2/2014 D $6,000 $6,000 No. Sanchez did not know whether or to what
extent she returned any funds.
9/2/2014 E $5,000 $3,000 Yes. Sanchez testified the check was partially for
loans and partially for compensation, and her
chart shows she returned $2,000. 10 9/4/2014 I $3,000 $3,000 No. Sanchez's counsel represented she kept the full amount, which her chart supports. 9/8/2014 J $2,000 $2,000 No. Sanchez's counsel represented she kept the full amount, which her chart supports. 9/9/2014 R $2,000 $2,000 No. The check was payable to cash, and Sanchez cashed it. It is unclear what amount, if any, was returned. 9/11/2014 M $837.79 $0 Yes. Sanchez testified she did not receive any of the funds. 9/12/2014 S $1,000 $1,000 No. The check was payable to cash, and Sanchez signed it. It is unclear what amount, if any, was returned. 9/12/2014 XYZ $5,315 $5,315 No. Glenn Yates testified Sanchez received the funds as a credit card reimbursement. Sanchez testified she never received the check. The check was not proffered, but the Court finds Glenn Yates' testimony more credible on this point. 9/13/2014 U $3,000 $3,000 No. The check is payable to "cash," and Sanchez signed it. Although the memo line says "Ron Yates Monday distribution," there was no testimony about what amount went to Yates versus Sanchez. 9/15/2014 Q $3,500 $1,000 Yes. Sanchez testified that she met with field workers to deliver a portion of the funds, and her chart shows she returned $2,500. 9/15/2014 T11 $2,500 $2,500 No. The check is payable to "cash," and Sanchez signed it. Although the memo line says "Ron Yates distribution," there was no testimony about what amount went to Yates versus Sanchez. 9/20/2014 O $6,000 $3,000 Yes. Sanchez thought she returned some of the funds; her chart shows she returned $3,000.12 9/24/2014 N $500 $500 No. Sanchez testified she could have kept the entire amount. 10/8/2014 G $2,000 $2,000 No. Sanchez testified it was difficult to tell how
much she kept. 10/10/2014 V $1,900 $400 Yes. The check is payable to cash, and the memo line reads "payroll [ ] reimbursement Jeff 10/10/14." Sanchez's chart shows that she distributed $1,500 to Debtor's employees. 10/14/2014 W $150 $150 No. The check is payable to "cash," and Sanchez signed it. There was no testimony that any funds were returned. 11/03/2014 CC-4 $270 $270 No. Sanchez admitted she kept all of the money. 11/10/2014 F $2,900 $2,900 No. Sanchez admitted she kept the entire amount, which her chart supports. 11/10/2014 K $2,900 $2,900 No. Sanchez admitted she kept the entire amount, which her chart supports. Late June n/a $4,000 $4,000 No. Glenn Yates testified he wrote Sanchez a or early personal check for $4,000 because she had July, 2014 reached her credit limit and was about to travel to New York. Checks to Glennon 9/20/2014 AA $5,500 $2,000 Yes. Sanchez and Glennon testified that Glennon only kept a portion of the funds; Sanchez's chart shows that he returned $3,500. 9/27/2014 BB $8,000 $4,000 Yes. Glennon returned $4,000 to Ron Yates. Total $69,327
The Court considered the following in calculating Sanchez's claim amount:
The Court finds that Sanchez received $71,057 from Debtor.
2.
A (total compensation) $32,889
+
B (Total Loans) $48,417
-
C (Total reimbursements) $69,327
_______
Claim amount $11,979
=======
Based on the parties' unusual dealings and disorganized business practices, the amount of Sanchez's claim is difficult to determine. After reviewing the evidence and making its own calculations, the Court concludes Sanchez has an unsecured, non-priority claim for $11,979. A separate order will be entered.
