DAVID J. FOGELSON and CORINNE FOGELSON, husband and wife, Plaintiffs-Appellees/Cross-Appellants,
ERIC WALLACE and MARK BOZZONE, Defendants-Appellants/Cross-Appellees, and WALLEN DEVELOPMENT, INC.; DEVELOPMENTS BY WALLEN, LLP; BANK OF AMERICA, N.A.; RAY'S FLOORING SPECIALIST, INC.; and ESTANCIAS AT SANTIAGO HOMEOWNERS' ASSOCIATION, Defendants.
FROM THE DISTRICT COURT OF SANDOVAL COUNTY George P.
Eichwald, District Judge
& Davis, P.C., Catherine F. Davis Albuquerque, NM for
Mexico Litigation Group, LLC, Robert M. Koeblitz Albuquerque,
NM for Appellant Wallace
Law, Alice T. Lorenz Albuquerque, NM, Lastrapes, Spangler
& Pacheco, P.A., Matthew M. Spangler Bernalillo, NM for
J. WECHSLER, Judge
This appeal results from a dispute between parties to a
contract for the construction of a new home in Bernalillo,
New Mexico. Appellants/Cross-Appellees Eric Wallace and Mark
Bozzone (Appellants) appeal the district court's ruling
that they are jointly and severally liable for intentional
torts, including prima facie tort, intentional interference
with contractual relations, and civil
conspiracy.Appellees/Cross-Appellants David and
Corinne Fogelson (Appellees) appeal the district court's
dismissal of various claims, including unfair trade practices
against both Appellants and conversion against Bozzone.
Appellants first argue that the doctrines of res judicata or
collateral estoppel barred Appellees' claims against
them. Bozzone did not raise res judicata at
trial, but Wallace filed a motion to dismiss that ostensibly
also applied to Bozzone and argued that res judicata barred
Appellees' claims. As to Wallace, the requirements for
res judicata are met, and Appellees' claims against him
were barred. We therefore reverse the district court's
judgment against Wallace. As to Bozzone, Appellees first
argue that Bozzone waived res judicata by failing to raise it
at trial. Even if Wallace's motion to dismiss was
procedurally sufficient to raise this issue for Bozzone,
Appellees made fact-specific allegations against Bozzone.
These allegations negated the applicability of Wallace's
res judicata argument as to Appellees' claims against
Bozzone. Appellees' claims against Bozzone were not,
therefore, barred by res judicata.
Bozzone additionally argues that the district court erred in
(1) failing to dismiss Appellees' claim of prima facie
tort and (2) ruling that he was liable for intentional
interference with contractual relations because no duty
existed between him and Appellees. With respect to
Bozzone's first argument, we agree and reverse the
district court's ruling on Appellees' claim of prima
We reinterpret Bozzone's second argument to question
whether substantial evidence supports the district
court's ruling that he was liable for intentional
interference with contractual relations. We conclude that the
district court's ruling in this regard was predicated
upon its finding that Bozzone was a de facto officer or
director of Wallen Development, Inc. and other affiliated
corporate entities. We in turn also conclude that substantial
evidence does not support the district court's ruling on
Appellees' claim of intentional interference with
contractual relations and reverse on that claim as well.
Bozzone further argues that reversal of the district
court's rulings on Appellees' claims of prima facie
tort and intentional interference with contractual relations
necessitates that we reverse the district court's ruling
on Appellees' claim of civil conspiracy as a matter of
law. We agree and reverse on that claim.
In their cross-appeal, Appellees first argue that the
district court erred in dismissing their unfair trade
practices claim. Although we take no position on the merits
of the claim, we reverse the district court's dismissal
as a matter of law and remand for additional proceedings on
Appellees' unfair trade practices claim as to Bozzone
only. Appellees additionally argue that the district court
erred in dismissing their conversion claim against Bozzone.
For the reasons discussed herein, we conclude that this claim
Although for different reasons, we reverse the district
court's judgment against each Appellant. We remand for
additional proceedings to determine whether Bozzone engaged
in unfair trade practices.
In 2007, Appellants, through various corporate entities to be
discussed herein, along with Larry Filener, purchased Wallen
Development, Inc. and other affiliated corporate entities
(collectively, Wallen) from Garry and Mary Wallen. They
retained Jenice Montoya as the titular president and general
manager of Wallen. Wallace was Wallen's president and
vice president. Filener was Wallen's registered agent,
secretary, and treasurer. Montoya oversaw the day-to-day
operations of the company.
On May 25, 2008, Wallen entered into a purchase agreement
(the Purchase Agreement) with Appellees for the construction
and purchase of a residential home (the Home) in Bernalillo,
New Mexico. The Purchase Agreement contained an arbitration
agreement (the Arbitration Agreement), mandating that
disputes between the "Seller" and the
"Purchasers" be settled by binding arbitration.
Wallen was defined as "Seller, " and Montoya signed
the Purchase Agreement on behalf of Wallen. The Purchase
Agreement also contained a cash addendum that called for four
incremental cash payments. Construction of the Home began,
and Appellees paid $165, 111 of the total due under the
After experiencing significant financial difficulties, Wallen
ceased operations in late February 2009. Appellees were
notified of this closure by their Wallen sales associate.
They attempted to contact Montoya and Bozzone about
Wallen's plan, if any, to complete and deliver the Home.
They then retained counsel, who, on March 18, 2009, sent
Wallen a demand letter. Appellees copied Appellants and
Filener on this letter.
Appellees filed a complaint in arbitration against Wallen in
district court seeking to enforce the Arbitration Agreement
(the First Complaint). Wallen did not appear at the ordered
arbitration proceeding, and the arbitrator entered an award
in favor of Appellees. The arbitrator found that Wallen (1)
breached the Purchase Agreement, (2) committed fraud, and (3)
violated the Unfair Practices Act, NMSA 1978, §§
57-12-1 to -26 (1967, as amended through 2009), and awarded
Appellees compensatory damages in the amount of $165, 111.
The arbitrator also awarded punitive damages in the amount of
$165, 111, as well as pre-judgment interest, costs, attorney
fees plus gross receipts tax, and arbitrator fees. The
district court entered a judgment confirming the arbitration
award (the Arbitration Judgment). Wallen did not pay the
Appellees then filed a complaint in the district court
against Wallace, Filener, and other individuals and entities
(the Second Complaint). Bozzone was not named in the Second
Complaint. Appellees amended the Second Complaint (the
Amended Complaint) to add Bozzone and Wallen and to remove
Filener and other individuals and entities. The Amended
Complaint alleged conversion, fraud, unfair trade practices,
and civil conspiracy against Appellants. It also alleged
intentional interference with contractual relations against
Wallace filed a motion to dismiss the Amended Complaint,
raising res judicata as an affirmative defense. The parties
litigated the motion, and it was denied by the district
court. Approximately two months after this denial, Bozzone
answered the Amended Complaint. He did not raise res judicata
in his answer. Bozzone then filed a motion to dismiss
Appellees' unfair trade practices claim, which the
district court granted. The district court also granted
Bozzone's motion to dismiss Appellees' fraud and
conversion claims following the close of Appellees' case
in chief at trial.
After trial, the district court ruled that (1) Wallace was
liable for prima facie tort and civil conspiracy and (2)
Bozzone was liable for prima facie tort, intentional
interference with contractual relations, and civil
conspiracy. As a basis for these rulings, it found that:
1. [Wallen was] purchased by [Appellants and] . . .
. . . .
16. . . . Wallace was active at a high level in the
management of the business.
17. . . . Bozzone was active at a high level of management,
staffing, land purchases, [and] strategic planning for sales.
. . . .
19. [Appellants] and . . . Filener knew that subcontractors
could lien properties.
. . . .
22. [Appellees] signed a Purchase Agreement with Wallen . . .
to purchase a home to be constructed [in] . . . Bernalillo,
. . . .
24. [Appellees] were to pay cash for the house.
. . . .
30. [Appellants] and . . . Filener were aware that there was
just a general operating account that all monies were put
. . . .
44. In September of 2008, construction financing was being
cut off by Wachovia [Bank.]
. . . .
51. The decision to push payables and not pay vendors timely
was made by [Appellants] collaboratively.
. . . .
55. Construction credit with Charter [Bank] and Compass
[Bank] was expiring in December of 2008.
. . . .
60. [Appellants] and . . . Filener knew, or should have
known, that [Appellees] had purchased property and were
paying cash for it.
. . . .
69. Liens were being filed because of the instructions given
by [Appellants] to delay payments to vendors.
70. . . . Bozzone became directly involved in the decisions
about which liens to pay and that liens on closed homes
should be paid first.
71. Even though [Appellees] had paid cash, other homes were
being put ahead of [Appellees'] home for payment of liens
based on . . . Bozzone's instructions to pay closed homes
72. [Appellants] were directly responsible for the failure to
pay vendors on [Appellees'] home based on their decision
to not pay vendors timely and which vendors to pay.
. . . .
78. . . . Bozzone instructed . . . Montoya that [Wallen]
79. . . . Bozzone told . . . Montoya not to keep a skeleton
staff to finish up the few homes within 30 ...