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1 IN THE COURT OF APPEALS OF THE STATE OF NEW MEXICO
2 THOMAS L. STROMEI and STROMEI 3 REALTY, LLC, a New Mexico Limited 4 Liability Company,
5 Plaintiffs-Appellees/Cross-Appellants, 6 v. NO. 30,499
7 RAYELLEN RESOURCES, INC., a New 8 Mexico Corporation, LIONEL BURNS, 9 individually, JANE BURNS, a/k/a JANE 10 McVEY, individually, KENYON BURNS, 11 individually, DESTINY RESOURCES, INC., 12 a New Mexico Corporation, and DESTINY 13 CAPITAL, INC., a New Mexico Corporation,
14 Defendants-Appellants/Cross-Appellees.
15 APPEAL FROM THE DISTRICT COURT OF SANDOVAL COUNTY 16 George P. Eichwald, District Judge
17 Stelzner, Winter, Warburton, Flores, Sanchez & Dawes, P.A. 18 Luis G. Stelzner 19 Robert P. Warburton 20 Jaime L. Dawes 21 Albuquerque, NM
22 for Appellees 23 Tucker Law Firm, PC
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1 Steven L. Tucker 2 Santa Fe, NM
3 The Simons Firm, LLP 4 Frank M. Bond 5 Faith Kalman Reyes 6 Santa Fe, NM
7 for Appellants 8 MEMORANDUM OPINION 9 VIGIL, Judge. 10 I. Introduction 11 Defendants are Rayellen Resources, Inc.1 and Lionel Burns, Jane McVey, and 12 Kenyon Burns, individually. Lionel Burns and Jane McVey were married, and 13 Kenyon Burns is their son. During the relevant periods to this lawsuit, Lionel Burns 14 and Jane McVey owned Rayellen Resources, Inc. (Rayellen), and Kenyon Burns was 15 involved with the company in various capacities. Plaintiffs are Stromei Realty, LLC 16 and its co-owners, Thomas L. Stromei (Tom) and Thomas D. Stromei (Tommy). 17 Rayellen purchased the L-Bar Ranch (L-Bar) in 1989 after Tom Stromei, sub- 18 agent for the seller, contacted Lionel Burns, having been previously involved with real
1 18 Rayellen was formerly organized as Caprock Pipe and Supply, and was 19 operating under the Caprock name during a portion of the relevant period to this 20 lawsuit. However, for ease of reference and to avoid confusion, we refer to Caprock 21 as Rayellen throughout the opinion.
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1 estate transactions for Rayellen. After Rayellen purchased the L-Bar, Tom Stromei 2 became the ranch manager and worked on the L-Bar for seventeen years. Stromei 3 Realty also brokered many real estate deals for Rayellen during that time period. In 4 2005, Rayellen listed the L-Bar for sale with Stromei Realty. Stromei Realty located 5 Triple Bar S Ranch (Triple Bar) as a buyer for the L-Bar, and a Purchase and Sale 6 Agreement (PSA) was signed between Triple Bar and Rayellen on December 16, 7 2005. The parties proceeded towards a closing scheduled for April 20, 2006, but the 8 sale was never completed. 9 Tom Stromei and Stromei Realty sued Rayellen, Lionel Burns, Jane McVey, 10 and Kenyon Burns for breach of Stromei Realty’s exclusive listing agreement on the 11 L-Bar, breach of an oral agreement for a share in the profits of the L-Bar between 12 Tom Stromei and Rayellen, tortious interference with contracts, and breach of the duty 13 of good faith and fair dealing, among other causes of action, relating to the failure of 14 the sale of the L-Bar to Triple Bar. Defendants appeal from a jury verdict awarding 15 $4.5 million to Tom Stromei for breach of an oral agreement under which Tom 16 Stromei was entitled to 25 percent of the net profits from the sale of the L-Bar, and 17 awarding $2.9 million to Stromei Realty for its commission on the exclusive listing 18 agreement. The jury also found that Rayellen breached the duty of good faith and fair
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1 dealing as to both contracts and that each individual Defendant committed tortious 2 interference with contracts. 3 II. Denial of Directed Verdicts 4 A directed verdict is a drastic measure that is generally disfavored. Melnick v. 5 State Farm Mut. Auto. Ins. Co., 106 N.M. 726, 729, 749 P.2d 1105, 1108 (1988). A 6 trial court should not grant a motion for directed verdict unless it is clear that “the 7 facts and inferences are so strongly and overwhelmingly in favor of the moving party 8 that the judge believes that reasonable people could not arrive at a contrary result.” 9 Id. When reviewing a denial of a directed verdict, we view the evidence in the light 10 most favorable to the party opposing the directed verdict, indulging every reasonable 11 inference to support the evidence, and ignoring conflicts in the evidence that are 12 unfavorable to the party opposing the motion. See C.E. Alexander & Sons, Inc. v. 13 DEC Int’l, Inc., 112 N.M. 89, 93, 811 P.2d 899, 903 (1991). 14 Defendants argue that the district court erred in denying their motions for a 15 directed verdict on the following issues: (1) Stromei Realty failed to produce a ready, 16 willing, and able buyer; (2) there was no meeting of the minds on the oral contract; 17 and (3) Plaintiffs are not entitled to recover on the oral contract due to the failure of 18 a condition precedent. Defendants also argue that the district court erred in granting
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1 Plaintiff’s motion for directed verdict on the issue of the statute of frauds. We address 2 each in turn. 3 A. Ready, Willing, and Able Buyer 4 The district court denied Defendants’ motion for a directed verdict on their 5 assertion that Stromei Realty failed to produce a ready, willing, and able buyer. The 6 jury was instructed on producing a ready, willing, and able buyer as follows:
7 A real estate broker has earned his agreed commission when he produces 8 a prospect who is ready, willing and able to purchase on terms agreeable 9 to the seller. When seller accepts the prospect produced by the broker 10 as a purchaser, the broker’s right to commission becomes fixed. The 11 seller relieves the broker of any further duty when he accepts the 12 purchaser as satisfactory and a binding contract is made. The question 13 of the purchaser’s readiness, willingness and ability to buy are factors no 14 longer to be considered once the broker turns over his prospect to the 15 owner, who accepts the prospect as purchaser by entering a binding 16 contract.
17 The buyer, Triple Bar, was officially recognized as an LLC by the State of 18 Colorado on January 25, 2006, when it filed its articles of organization with the state 19 pursuant to Colorado law. See Colo. Rev. Stat. § 7-80-207 (2004). Therefore, the 20 company did not formally exist on December 16, 2005, the date the PSA was signed 21 by Michael Malano, as manager of Triple Bar S, LLC. Further, Triple Bar did not 22 formally exist on the date that the financial assurance letter was prepared pursuant to 23 the PSA, December 27, 2005. Thus, Defendants argue that the PSA was void for 24 impossibility on the grounds that Triple Bar was unable to comply with the condition
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1 that required production of written confirmation at closing, and the condition for the 2 financial assurance letter was not satisfied because the letter produced was invalid. 3 On these grounds, Defendants assert that Triple Bar and Rayellen did not enter into 4 a valid, binding contract, and therefore, Stromei Realty failed to produce a ready, 5 willing, and able buyer so as to entitle the company to its commission. 6 However, sufficient evidence was presented for reasonable minds to differ 7 about whether Stromei Realty produced a ready, willing, and able buyer. The jury 8 was instructed “[u]nless the parties make technical performance a condition of the 9 contract, a failure to perform a contractual obligation, in order to be a breach, must be 10 substantial rather than a minor or technical failure.” The jury was further instructed 11 as follows:
12 If you find that Triple Bar S was not legally formed as a limited 13 liability company at the time individuals associated with Triple Bar S 14 Ranch signed the Purchase and Sale Agreement, Triple Bar S is 15 nonetheless bound by the terms of the purchase and sale agreement if it 16 expressly or impliedly adopted or ratified the Purchase and Sale 17 Agreement after it was formally organized as a limited liability company. 18 An entity impliedly adopts or ratifies a contract if it receives benefits 19 from such contract, or takes any other action showing an intention to 20 adopt and be bound by the contract.
21 Substantial evidence supported a finding that Triple Bar ratified the contract 22 after it was formally incorporated on January 25, 2006. This includes its continued 23 communication with sellers through its attorney, the signing of a first amendment to
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1 the PSA with Rayellen on April 11, 2006, and filing a lawsuit in federal court for 2 specific performance on the contract on April 21, 2006. Rayellen received a fax from 3 Tom Stromei on April 26, 2006, containing the organizational documents of Triple 4 Bar showing that the company was not formed until January 25, 2006. Therefore, any 5 technical breach that occurred was cured as of January 25, 2006, when Triple Bar 6 incorporated, long before the scheduled closing date or knowledge of the breach by 7 Rayellen. 8 Furthermore, evidence was presented that Defendants waived the breach under 9 the provisions of the PSA and that the breach was cured. Defendants argue that § 14.3 10 of the PSA required all waivers to be in writing, and thus, Rayellen did not waive this 11 breach. However, the remedies provision in the PSA required Rayellen to give Triple 12 Bar at least five days to cure any breach, and the breach was cured before Rayellen 13 had notice of the breach. In addition, both parties proceeded in attempting to close the 14 contract after notice, and Rayellen presented no evidence that it took any action to 15 enforce the breach under the remedies provision after it received the organizational 16 documents. 17 Defendants also argue that the remedies provision was intended only for 18 breaches occurring prior to the first closing, and this breach could have only occurred 19 at the closing, when Triple Bar could not have produced the written confirmation of
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1 existence on December 16, 2005. Thus, Defendants argue that the inability of Triple 2 Bar to produce the documentation at closing renders the contract impossible, citing 3 Sanders v. Freeland, which states: “Impossible conditions cannot be performed; and 4 if a person contracts to do what at the time is absolutely impossible, the contract will 5 not bind him, because no man can be obligated to perform an impossibility.” 64 N.M. 6 149, 152, 325 P.2d 923, 925 (1958). This asserted impossibility does not alter the fact 7 that Triple Bar cured the breach before the scheduled closing date and before Rayellen 8 knew of the breach. The material contractual condition was satisfied that Triple Bar 9 be a validly existing company authorized to do business in New Mexico at the 10 scheduled closing date. In addition, Plaintiffs’ expert testified that when 11 organizational paperwork is not filed before closing, the typical remedy is to get the 12 paperwork filed, not to claim a breach. Thus, although the production of the 13 paperwork evidencing the existence of Triple Bar in December 2005 was impossible, 14 Triple Bar was a validly existing company long before the scheduled closing. This 15 condition did not make performance of the underlying goal of the contract impossible. 16 Instead, it was a breach of a technical term of the contract, and the jury was instructed 17 to determine whether any breaches resulted in the failure of Stromei Realty to produce 18 a ready, willing, and able buyer. Therefore, we conclude that substantial evidence was
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1 introduced upon which reasonable minds could differ about whether the breach was 2 either merely technical, or that it was cured by Triple Bar pursuant to the PSA. 3 As to the financial assurance letter, Defendants argue that it was invalid, as it 4 stated that the “principals of Triple Bar” had the financial resources to complete the 5 purchase of the L-Bar. Defendants argue that because Triple Bar had not been 6 incorporated as of December 27, 2005, there could be no principals in existence, 7 rendering the letter false and the condition of the PSA unsatisfied. 8 However, acceptance of the financial assurance under the contract was in 9 Rayellen’s absolute discretion: “Buyer shall deliver to Seller written confirmation 10 from a financial institution acceptable to Seller that Buyer has the resources available 11 to satisfy the [closing payment] in a timely manner, the form and substance of such 12 written confirmation being subject to the approval of Seller in its sole and absolute 13 discretion.” This provision also granted to Rayellen the option to terminate the 14 agreement in stating, [i]n the event Seller is not satisfied with the information 15 contained in such written confirmation, Seller may deliver written notice of 16 termination within ten (10) Business Days of the Opening of Escrow, in which case 17 this Agreement shall be null and void and of no force and effect.” 18 Rayellen did not terminate the agreement after receipt of the financial assurance 19 letter and testimony was introduced that Rayellen was satisfied with the letter after its
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1 proposed changes were made. Rayellen continued towards closing the transaction 2 after receipt of the letter, effectuating the provision of the financial assurance clause 3 stating, “[i]n the event Seller does not provide to Buyer such written notice of 4 termination within such ten (10) Business Day period, Seller shall be deemed to have 5 approved of Buyer’s written confirmation of its financial resources and the parties 6 shall proceed with this Agreement.” Furthermore, Plaintiffs’ expert testified that even 7 if the letter was false, Rayellen still accepted the letter in satisfaction of § 3.1.1 and 8 Triple Bar as ready, willing, and able buyers. In addition, testimony was introduced 9 that Rayellen could have structured the transaction to require financial assurance from 10 Triple Bar before the PSA was signed, that the corporation’s attorney asked if Lionel 11 Burns wanted additional financial information from Triple Bar, and that Rayellen 12 requested no further financial information. Thus, substantial evidence was presented 13 from which the jury could infer that any purported failure of the financial assurance 14 letter did not affect Stromei Realty’s production of a ready, willing, and able buyer. 15 Additionally, Plaintiffs’ expert testified that Stromei Realty produced a ready, 16 willing, and able buyer when the conditional provisions of the PSA were fulfilled: 17 acceptance of the financial assurance letter and expiration of the due diligence period. 18 Plaintiffs’ expert testified that the latest date these conditions could have been 19 satisfied was at the signing of the first amendment to the purchase agreement, April
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1 11, 2006, and he therefore determined that Stromei Realty had produced a ready, 2 willing, and able buyer as of that date. Accordingly, to the extent Appellants argue 3 that breaches to the PSA occurring after April 11, 2006, affected Stromei Realty’s 4 production of a ready, willing, and able buyer, we conclude that substantial evidence 5 was presented from which the jury could have inferred that Stromei Realty had 6 already produced a ready, willing, and able buyer as of that date, and any subsequent 7 actions taken by either party no longer affected Stromei Realty’s right to the 8 commission. 9 Finally, with regard to Defendant’s arguments regarding alleged 10 misrepresentations by Tom Stromei, we conclude that sufficient evidence was 11 presented for the jury to find that he fully disclosed all information to Rayellen and 12 was entitled to his commission. See Canfield v. With, 35 N.M. 420, 426, 299 P. 351, 13 353 (1931) (stating that the jury could consider the broker’s knowing false 14 misrepresentations to his client to induce him to enter the transaction in determining 15 if he was entitled to a commission on the sale). Tom Stromei sent the organizational 16 documents that stated that Triple Bar was not formed until January 25, 2006, to 17 Kenyon Burns with his fax that purportedly misrepresented the formation date of the 18 company. In addition, any statements Tom Stromei made regarding the buyers being 19 “stout” were explained by Tom Stromei to refer to Malano’s physique as an ex-
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1 football player. Furthermore, he testified that he disclosed the information 2 immediately when he learned that Pacheco was involved with Triple Bar, as Pacheco 3 had been involved in an earlier offer on the L-Bar. Resolving conflicting evidence in 4 favor of denying the motion, reasonable minds could differ as to whether 5 misrepresentations were made by Tom Stromei, and the motion for directed verdict 6 was properly denied as to this issue. 7 B. Meeting of the Minds 8 Defendants argue that because of a disagreement between Plaintiffs and 9 Defendants as to whether interest was to be included on Rayellen’s expenditures and 10 how to calculate the interest, the parties did not come to a meeting of the minds as to 11 a material term of the oral agreement as a matter of law. At trial, the jury was 12 instructed,
13 [a] contract is a legally enforceable set of promises. In order for a set of 14 promises to be legally enforceable, there must be an offer, an acceptance, 15 consideration, and mutual assent. Any of these four requirements, 16 although not expressly stated, may be found in the surrounding 17 circumstances, including the parties’ words and actions, what they 18 wanted to accomplish, the way they dealt with each other, and how 19 others in the same circumstances customarily deal or would deal.
20 An additional instruction was given that stated, “[f]or there to be a mutual assent, the 21 parties must have had the same understanding of the material terms of the agreement.”
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1 The jury found that interest was a component of Lionel Burns and Tom Stromei’s oral 2 agreement and calculated it at the prime rate, compounded annually. 3 Defendants argue that because Defendants contended at trial that interest was 4 a part of the agreement, and Plaintiffs contended that it was not, that a directed verdict 5 should have been granted because no reasonable minds could differ as to the absence 6 of mutual assent to a material term of the agreement. 7 However, substantial evidence was presented from which the jury could 8 determine that the parties came to a meeting of the minds on interest when they made 9 the original agreement, despite their disagreement at trial regarding the term. Multiple 10 exhibits were introduced by Defendants in which Tom Stromei had included interest 11 in the calculation of his net profit, and two where he had classified that interest as 12 being “reasonable interest.” Tom Stromei stated at trial that interest was not a term 13 of the agreement, but exhibits were presented to the jury to contradict that statement. 14 Lionel Burns testified that he agreed that “reasonable interest” was a term of the 15 agreement, and several defense witnesses stated that they thought that the purported 16 agreement to deduct “costs of all kinds” from the gross profit would include interest 17 as a cost. Bill Dillard, an original partner with Lionel Burns in the L-Bar, stated that 18 he thought interest was a component of Lionel Burns and Tom Stromei’s agreement. 19 Tommy Stromei testified that he and Lionel Burns entered into an agreement similar
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1 to one Lionel Burns had with Tom Stromei, and Lionel Burns required that interest 2 be a component of that agreement, calculated at the prime rate, but not compounded. 3 In addition, three drafts were presented at trial that Lionel Burns directed his 4 attorney to prepare to memorialize Lionel Burns’ and Tom Stromei’s oral agreement, 5 and all included interest calculated at the prime rate, with two annually compounding 6 the interest. Jimmy Waechter, Lionel Burns’ accountant, testified that he included 7 interest in the calculations of Tom Stromei’s share because he thought that Lionel 8 Burns would want it to be included in the same manner as it was included in the profit 9 sharing agreement with Tommy Stromei. Furthermore, Jimmy Waechter applied a 10 prime rate, compounded annually, and testified he did so because that is what he 11 thought the reasonable interest rate would be, and figured that Rayellen would give 12 Tom Stromei the best interest rate possible under the agreement. Furthermore, despite 13 Defendants’ argument on appeal that no mutual assent was reached as to interest or 14 the rate at which it would be calculated, Defendants argued in closing argument that 15 the parties had agreed on a reasonable interest rate, and the most reasonable 16 interpretation of that rate was that it should be calculated at the prime rate, 17 compounded annually. 18 Thus, sufficient evidence was presented for reasonable minds to differ as to 19 whether there was a meeting of the minds regarding interest. Rule 11-606 NMRA
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1 precludes consideration of Defendants’ argument that the spontaneous statement made 2 by a juror after the verdict, is evidence that reasonable minds could not conclude that 3 the parties had a meeting of the minds on the calculation of interest. See Shadoan v. 4 Cities of Gold Casino, 2010-NMCA-002, ¶ 13, 147 N.M. 444, 224 P.3d 671 5 (determining that in a motion for new trial, it was error to consider affidavits of jurors 6 stating the amount they intended to award the plaintiff, stating “[t]o hold otherwise 7 would make deliberations reviewable, and the final authority of a verdict would not 8 be by jury, but by a reviewing court”). 9 C. Failure of a Condition Precedent 10 Defendants argue that a directed verdict should have been granted that Tom 11 Stromei was not entitled to recover on the oral profit sharing agreement because of the 12 failure of a condition precedent, the sale of the L-Bar. We disagree. 13 The jury was instructed: “Where a party to a contract prevents the fulfillment 14 of condition precedent to its performance under the contract, that party cannot rely on 15 such a condition precedent to defeat its liability under the contract.” Substantial 16 evidence was introduced that Rayellen prevented the sale of the L-Bar. Evidence 17 demonstrated that the board of directors of Rayellen was involved in conflict, 18 including a divorce, dissension regarding the leadership of the company, and Lionel 19 Burns admitted that he refused to work with the other directors of the board because
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1 they were not communicating with him. At the time of the closing, the title insurer 2 for the transaction sent an e-mail to the parties stating that it could not insure or close 3 the sale based on an inability to determine who had authority to sign for Rayellen. 4 Triple Bar instituted a federal lawsuit for specific performance based on this confusion 5 on April 21, 2006. Although evidence was also presented at trial that Triple Bar was 6 an alternative cause for the failure to complete the sale, substantial evidence was 7 presented from which the jury could find that Rayellen prevented the fulfillment of 8 the sale and, therefore, that the condition precedent was excused. 9 In addition, the jury was instructed:
10 If you find that Rayellen breached or unequivocally demonstrated an 11 intent to not perform its obligations under its contracts with Mr. Stromei 12 or Stromei Realty, LLC, then all remaining duties Mr. Stromei or 13 Stromei Realty, LLC had under their contracts were discharged. Once 14 Rayellen breached or repudiated its contractual obligations, Mr. Stromei 15 and Stromei Realty, LLC became entitled to recover for breach of 16 contract, regardless of whether they performed any remaining duties 17 under the contract.
18 Another instruction stated that “[a]n entity may breach a contract by failing to perform 19 a contractual obligation when that performance is called for or announcing ahead of 20 time that it will not perform a contractual obligation when the time for that 21 performance comes due.” Another instruction stated, “It is a breach of contract if, 22 before performance became due, Rayellen announced or otherwise demonstrated its 23 intention not to perform a contractual obligation.”
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1 Evidence was presented at trial that Lionel Burns sent Tom Stromei a letter on 2 April 14, 2006, purportedly withdrawing any offer he had made Tom Stromei about 3 deferred compensation. Further evidence was submitted that Jane McVey stated that 4 she would not honor any agreement that Lionel Burns had made with Tom Stromei. 5 The jury was instructed: “A corporation can act only through its officers and 6 employees. Any act or omission of an officer or an employee of a corporation, within 7 the scope or course of his or her employment, is the act or omission of the 8 corporation.” 9 This constituted additional sufficient evidence to allow reasonable minds to find 10 that the parties in control of Rayellen unequivocally demonstrated an intent not to 11 honor its contracts with Tom Stromei, thus entitling Tom Stromei to recover for 12 breach of the net profit sharing agreement, and for Stromei Realty to recover the 13 listing agreement in spite of the failure of the sale of the L-Bar. 14 D. Statute of Frauds 15 The district court granted a directed verdict on Defendants’ statute of frauds 16 defense to the oral agreement. See Lightsey v. Marshall, 1999-NMCA-147, ¶ 16, 128 17 N.M. 353, 992 P.2d 904 (“The statute of frauds requires that an action brought on a 18 contract concerning an interest in land be based upon an agreement in writing signed 19 by the party to be charged or one authorized by the party to be charged.”). Generally,
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1 the applicability of the statute of frauds is a question of law for the court; however, “a 2 factual question concerning the particulars of a contract may prevent a ruling on the 3 statute’s applicability as a matter of law.” Kestenbaum v. Pennzoil Co., 108 N.M. 20, 4 24, 766 P.2d 280, 284 (1988). 5 To support a statute of frauds defense, Defendants were required to present 6 evidence that the parties had a meeting of the minds that Tom Stromei was entitled to 7 an interest in land rather than net profits. We agree that no testimony or evidence was 8 presented upon which reasonable minds could differ regarding this issue. 9 Defendants assert that Plaintiffs’ filing of lis pendens on the L-Bar in this 10 lawsuit, assertions in the complaint for an equity share in the land and real estate, and 11 Tom Stromei’s documents stating they he had an “equity sharing agreement” with 12 Rayellen are evidence that Tom Stromei claimed an interest in land. However, despite 13 these actions, no evidence was presented at trial that Lionel Burns and Tom Stromei 14 came to a meeting of the minds for an interest in land under the oral contract. 15 Moreover, testimony by Lionel Burns and others that the original agreement was for 16 net profits was undisputed. Mere assertions in the complaint and documents do not 17 establish that a meeting of the minds occurred in the face of the undisputed testimony 18 by Lionel Burns and Tom Stromei that they never agreed Tom Stromei would have 19 an interest in land. Lionel Burns stated that initially Tom Stromei had asked to be 50
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1 percent owner in the ranch, but Lionel Burns only agreed that Tom Stromei that would 2 receive “10 % of the net profit.” Tom Stromei, likewise, stated in his testimony that 3 the oral agreement was for net profits. Lionel Burns also said that Tom Stromei does 4 not and has never had any ownership interest in the L-Bar, and Rayellen retained 5 complete control over the L-Bar. Tom Stromei stated in testimony and draft 6 agreements that Rayellen maintained control of all rights regarding decisions to 7 convey the property, and it was undisputed that Tom Stromei never took any title to 8 the property nor received any tax documents regarding an ownership in the property. 9 Testimony was presented at trial regarding Tom Stromei’s attempts to obtain 10 a property interest in the L-Bar for capital gains treatment on his profit share, but it 11 was undisputed that Lionel Burns and his accountant and lawyers told Tom Stromei 12 that it was not possible, and thus no evidence was presented indicating a meeting of 13 the minds for an interest in land. Kenyon Burns testified that Tom Stromei told him 14 the original agreement was for an interest in land, but explained that this was because 15 Tom Stromei was trying to get capital gains treatment on his profit share. Tom 16 Stromei added that the equity he was referring to in regard to the oral agreement was 17 the amount of money invested in the property over what was owed, and not to an 18 interest in land.
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1 For the foregoing reasons, we conclude that the district court did not err in 2 ordering a directed verdict on Defendants’ statute of frauds defense. 3 III. Admission of Extra-Marital Affairs 4 Defendants argue that the district court erred in introducing two exhibits and 5 allowing testimony about Lionel Burns’ marital infidelity. The admission of evidence 6 is reviewed for an abuse of discretion and will not be overturned absent a clear abuse 7 of that discretion. Nelson v. Homier Distrib. Co., 2009-NMCA-125, ¶ 29, 147 N.M. 8 318, 222 P.3d 690. 9 Two exhibits were admitted referencing Lionel Burns’ affairs: A handwritten 10 agreement signed by Lionel Burns promising to not be involved with other women 11 and allowing Jane McVey three-quarters of the marital assets if he broke that promise, 12 and Jane McVey’s petition for dissolution of marriage, citing Lionel Burns’ infidelity 13 and her claim to three-quarters of the marital assets based on the handwritten 14 agreement. Defendants argue that the probative value of this evidence was 15 substantially outweighed by the danger of unfair prejudice to Lionel Burns and 16 improper use of the evidence by the jury. 17 The relevance of the testimony and exhibits concerned the potential motives of 18 Defendants behind the breakdown among the board members of Rayellen at the time 19 of the Triple Bar transaction. Defendants argued that all that was necessary to achieve
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1 that purpose was to inform the jury that Lionel Burns and Jane McVey were 2 undergoing a divorce, citing decisions that have limited this type of evidence. 3 However, the mere fact that a divorce was occurring did not evidence the 4 circumstance of Jane McVey claiming three-quarters of the marital assets under an 5 agreement with Lionel Burns, or give context to the emotional events underlying the 6 divorce, distinguishing this case from Bourgeous, where the additional facts did not 7 increase the probative value of the evidence. See Bourgeous v. Horizon Healthcare 8 Corp., 117 N.M. 434, 440, 872 P.2d 852, 858 (1994). Furthermore, the district court 9 issued a limiting instruction and cautioned the attorneys from going into any details 10 of the affairs and required the attorneys to refer to “inappropriate conduct,” rather than 11 using the term “extramarital affairs.” 12 Under the circumstances, we cannot say the district court abused its discretion 13 in admitting this evidence. 14 IV. The Special Verdict Form 15 The jury found that Rayellen breached the implied duty of good faith and fair 16 dealing as to both the listing agreement and the oral agreement and that each of the 17 three individual defendants tortiously interfered with contract. However, the special 18 verdict form did not require the jury to specifically allocate damages based on these 19 determinations. Thus, Defendants argue that the judgment cannot stand on either the
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1 award for tortious interference with contracts, or a breach of the duty of good faith and 2 fair dealing, as the jury awarded no damages on those claims. 3 As an initial matter, we observe that Defendants failed to preserve this 4 argument. Rule 1-051 NMRA requires that a party object to errors in jury 5 instructions. Rule 1-051(I). Defendants assert that the tender of an alternative special 6 verdict form, which was structured to allow the jury to award damages in the same 7 section as the determination of liability was sufficient to preserve this error even 8 though they failed to apprise the district court of the argument they now make on 9 appeal. Simply tendering an alternative jury instruction is not sufficient to preserve 10 an error without some indication to the court of the alleged error. Heath v. La 11 Mariana Apartments, 2007-NMCA-003, ¶ 26, 141 N.M. 131, 151 P.3d 903 (“To 12 preserve an issue for appellate review, the objection must be specific enough to alert 13 the district court to the particular vice in the defective instruction.” (internal quotation 14 marks and citation omitted)), aff’d on other grounds by 2008-NMSC-017, ¶¶ 1, 24, 15 143 N.M. 657, 180 P.3d 664; City of Albuquerque v. Ackerman, 82 N.M. 360, 364, 16 482 P.2d 63, 67 (1971) (same). 17 Alternatively, Defendants argue that this is an issue for fundamental error 18 review, on the grounds that there is “a total absence of anything in the record showing 19 a right to relief.” See Chavez v. Bd. of Cnty. Comm’rs, 2001-NMCA-065, ¶ 41, 130
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1 N.M. 753, 31 P.3d 1027 (“[Fundamental error] applies only in exceptional 2 circumstances, such as when substantial justice was not done, the court was deprived 3 of jurisdiction to hear the case, the issue was one of general public interest that would 4 impact a large number of litigants, or, there was a total absence of anything in the 5 record of the case showing a right to relief.” (internal quotation marks and citation 6 omitted)). We disagree that this issue warrants review as fundamental error. The jury 7 awarded damages predicated on its findings that Defendants breached the oral 8 agreement, the listing agreement, breached the duty of good faith and fair dealing as 9 to both contracts, and tortiously interfered with contract. Further, even if Defendants 10 had preserved this issue or it was a matter of fundamental error, reversal is not 11 warranted. See McNeill v. Burlington Res. Oil & Gas Co., 2007-NMCA-024, ¶ 19, 12 141 N.M. 212, 153 P.3d 46 (“A civil case will not be reversed due to error in jury 13 instructions unless the result is fundamentally unjust.”), aff’d on other grounds by 14 2008-NMSC-022, ¶ 30, 143 N.M. 740, 182 P.3d 121. The jury undisputedly found 15 breaches of both contracts, breaches of the duty of good faith and fair dealing to both 16 contracts, tortious interference with contract, and awarded compensatory damages as 17 to both contracts. Furthermore, the jury was instructed to allocate damages against 18 the individual Defendants based upon its finding of tortious interference with 19 contracts, and this was the only cause of action the jury found upon which the
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1 damages against the individual Defendants could be based. As to the breach of the 2 duty of good faith and fair dealing, the lack of specification of the damages awarded 3 based on each cause of action does not invalidate the jury’s explicit findings. 4 Defendants do not challenge the findings of the jury as erroneous, thus, it is 5 immaterial for the purposes of upholding the judgments that there be a specific 6 allocation of damages to the breaches of the duty of good faith and fair dealing. See 7 H.T. Coker Constr. Co. v. Whitfield Transp., Inc., 85 N.M. 802, 805, 518 P.2d 782, 8 785 (Ct. App. 1974) (determining that even if evidence was insufficient to support a 9 finding of the court, the finding was unnecessary to uphold the judgment because 10 other findings supported the judgment). We decline to reverse the judgments on these 11 grounds. 12 V. Post-Judgment Interest 13 NMSA 1978, § 56-8-4(A)(2) (2004), provides that post-judgment interest 14 applies to all judgments, calculated at 8.75 percent unless the judgment is based on 15 “tortious conduct, bad faith or intentional or willful acts,” in which case, interest shall 16 be computed at 15 percent. The district court awarded 15 percent interest on the 2.9 17 million dollar judgment against all Defendants based on the breach of the listing 18 agreement with Stromei Realty, and 8.75 percent on the 4.5 million judgment against 19 all Defendants based on the breach of the net profits agreement with Tom Stromei.
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1 Defendants contend that post-judgment interest should have been assessed at 2 8.75 percent on the entire judgment, as the jury assessed no damages in the special 3 verdict form to any “tortious conduct, bad faith or intentional or willful acts.” 4 Plaintiffs cross-appeal, arguing that post-judgment interest should be assessed at 15 5 percent on the entire judgment, as the compensatory damages were premised on the 6 jury’s findings of Rayellen’s intentional conduct in breaching the duty of good faith 7 and fair dealing and the individual Defendants’ tortious interference with contracts. 8 The special verdict form instructed the jury if they found either a breach of 9 contract and/or a breach of the duty of good faith and fair dealing to determine one 10 amount of compensatory damages in Part “A” for the oral agreement, and one amount 11 in Part “B” for the listing agreement. The special verdict form instructed the jury, 12 “[i]f you answered “Yes” to Interrogatory Number 8 [tortious interference] . . . you 13 may allocate compensatory damages due to Tom L. Stromei determined in Part “A” 14 and the compensatory damages due to Stromei Realty determined in Part “B” among 15 the responsible individual defendants and Rayellen.” 16 The jury found that Rayellen breached the oral contract and that Rayellen was 17 liable to Stromei Realty for the commission on the listing agreement as well. 18 Moreover, the jury also found that Rayellen acted intentionally, and thereby breached 19 the duty of good faith and fair dealing with respect to both contracts. Thus, all
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1 damages assessed against Rayellen were premised upon a finding of Rayellen’s 2 intentional conduct in breaching the duty of good faith and fair dealing in regard to 3 both contracts. 4 With respect to the individual Defendants, the only theory of liability upon 5 which the jury could have awarded damages was based upon tortious interference with 6 contract. The jury found that Lionel Burns, Jane McVey, and Kenyon Burns 7 tortiously interfered with the performance of the PSA between Rayellen and Triple 8 Bar. The jury allocated damages under Part “A” and under Part “B” to each individual 9 Defendant, and the only liability assessed against the individual defendants was on the 10 basis of tortious interference with contract. Thus, any damages against the individual 11 Defendants were necessarily based upon the jury’s finding of tortious interference 12 with contract. 13 All judgments against Rayellen and the individual defendants were premised 14 upon findings of tortious interference with contracts or intentional conduct in 15 breaching the duty of good faith and fair dealing. The 15 percent interest rate is 16 mandatory where a judgment is based on tortious conduct or intentional acts. See § 17 56-8-4(A)(2). Thus, the district court erred in awarding an 8.75 percent interest rate 18 to 39 percent of the judgment and should have awarded 15% on the entire judgment. 19 We therefore reverse.
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1 VI. Pre-Judgment Interest 2 The court also has discretion to award pre-judgment “interest of up to ten 3 percent from the date the complaint is served upon the defendant after considering, 4 among other things: (1) if the plaintiff was the cause of unreasonable delay in the 5 adjudication of the plaintiff’s claims; and (2) if the defendant had previously made a 6 reasonable and timely offer of settlement to the plaintiff.” § 56-8-4(B). The district 7 court stated on the record its determination that Plaintiffs were not the cause of 8 unreasonable delay, that the case was tried fairly quickly under the circumstances, and 9 that Defendants did not make timely and reasonable settlement offers. Therefore, the 10 district court awarded interest at a rate of 7 percent from the date that the complaint 11 was served on Defendants. 12 Defendants argue that the district court abused its discretion in awarding pre- 13 judgment interest on the grounds that they made reasonable and timely offers of 14 settlement, and the court had no way of determining the date at which to calculate the 15 pre-judgment interest because the date of the breaches of contract were unclear. 16 Defendants further argue that the court made no findings of fact supporting its 17 determination to award pre-judgment interest, and that this award is inconsistent with 18 the court’s findings of fact in its refusal to award attorney fees. Finally, Defendants 19 argue that because the settlement offer made eleven days before trial would be
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1 considered timely under Rule 1-068 NMRA, that it should also be considered timely 2 here. 3 The findings of fact Defendants assert are inconsistent with the district court’s 4 pre-judgment interest determination were based on Plaintiffs’ request for attorney fees 5 premised on the allegation that Defendants engaged in vexatious litigation, invoking 6 a different standard and policy than the considerations required under § 56-8-4. See 7 State ex rel. N.M. State Hwy. Dep’t v. Baca, 120 N.M. 1, 8, 896 P.2d 1148, 1155 8 (1995) (determining that the district court may award attorney fees for bad faith and 9 vexatious litigation provided that the award is supported by sufficient findings in an 10 order that is intended and reasonably designed to regulate the court’s docket, promote 11 judicial efficiency, and deter frivolous findings). Further, the findings of fact in the 12 order denying attorney fees state: “Issues related to offers of settlement and their 13 acceptance are not relevant to the Court’s assessment of whether to award attorneys’ 14 fees under the [standard for bad faith or vexatious behavior, and n]o settlement offers 15 were ever before the Court prior to trial . . . ., [and t]here is no legal authority in New 16 Mexico to support plaintiffs’ contention that failure to settle a case is the equivalent 17 of bad faith required to allow an award of attorneys’ fees.” Thus, it is clear that the 18 court did not make a determination that Defendants had made “reasonable and timely”
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1 settlement offers so as to render its decision to award pre-judgment interest 2 inconsistent with this order. 3 In further support of their argument, Defendants point to the district court’s 4 determination that they engaged in settlement negotiations in good faith, their initial 5 offer to settle with Plaintiffs for $5 million dollars before the complaint was filed by 6 Plaintiffs, and their offer to settle eleven days before trial as evidence of reasonable 7 and timely settlement offers. In spite of Defendants’ offers of settlement, we cannot 8 conclude that the court abused its discretion in awarding pre-judgment interest under 9 these circumstances. Defendants cite no authority for the proposition that findings of 10 fact regarding attorney fees under a vexatious litigation standard or the standards 11 under Rule 1-068 are equally applicable to a determination of pre-judgment interest 12 under § 56-8-4(B). Further, the court had discretion to consider, among other things, 13 any settlement efforts made by Defendants and the Plaintiffs’ role in expeditiously 14 trying the case and did so on the record. See § 56-8-4(B). Although Defendants made 15 settlement offers, the court had discretion to determine that they were not reasonable 16 or timely. The court’s discretion is supported by the fact that both offers were less 17 than Plaintiffs’ recovery at trial, and one was made just eleven days before a complex 18 and lengthy trial. Id.
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1 As to Defendants’ argument that the court could not ascertain the date of the 2 breach to determine when pre-judgment interest commenced, we point to the language 3 in the statute that provides for assessment as of the date of service of the complaint, 4 which is the date the court directed from which the interest should be calculated. See 5 § 56-8-4(B) (stating that “the court in its discretion may allow interest of up to ten 6 percent from the date the complaint is served upon the defendant”). Furthermore, the 7 district court, after considering the statutory requirements, awarded pre-judgment 8 interest at 7 percent, a lower rate than the 10 percent allowed under the statute. See 9 § 56-8-4(B). The district court’s award cannot be said to be “clearly against the logic 10 and effect of the facts and circumstances before the court.” See City of Santa Fe v. 11 Komis, 114 N.M. 659, 663, 845 P.2d 753, 757 (1992). We therefore conclude that the 12 district judge did not abuse its discretion, and affirm the award of pre-judgment 13 interest. 14 VII. Conclusion 15 We reverse the district court’s post-judgment interest ruling, and remand for 16 entry of an amended judgment consistent with this opinion. We affirm the district 17 court as to all other issues raised on appeal. 18 IT IS SO ORDERED.
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1 ______________________________ 2 MICHAEL E. VIGIL, Judge
3 WE CONCUR:
4 _________________________________ 5 CELIA FOY CASTILLO, Chief Judge
6 _________________________________ 7 CYNTHIA A. FRY, Judge