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Fogelson v. Wallace

Court of Appeals of New Mexico

July 26, 2017

DAVID J. FOGELSON and CORINNE FOGELSON, husband and wife, Plaintiffs-Appellees/Cross-Appellants,
v.
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.

         APPEAL FROM THE DISTRICT COURT OF SANDOVAL COUNTY George P. Eichwald, District Judge

          Hunt & Davis, P.C., Catherine F. Davis Albuquerque, NM for Appellees

          New Mexico Litigation Group, LLC, Robert M. Koeblitz Albuquerque, NM for Appellant Wallace

          Lorenz Law, Alice T. Lorenz Albuquerque, NM, Lastrapes, Spangler & Pacheco, P.A., Matthew M. Spangler Bernalillo, NM for Appellant Bozzone

          OPINION

          JAMES J. WECHSLER, Judge

         {1} 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.[1]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.

         {2} Appellants first argue that the doctrines of res judicata or collateral estoppel barred Appellees' claims against them.[2] 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.

         {3} 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 facie tort.

         {4} 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.

         {5} 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.

         {6} 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 lacks merit.

         {7} 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.

         I. BACKGROUND

         {8} 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.

         {9} 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 Purchase Agreement.

         {10} 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.

         {11} 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 Arbitration Judgment.

         {12} 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 Bozzone only.

         {13} 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.[3] 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.

         {14} 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] . . . Filener[.]
. . . .
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, New Mexico.
. . . .
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 into.
. . . .
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 first.
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] would close.
79. . . . Bozzone told . . . Montoya not to keep a skeleton staff to finish up the few homes within 30 ...

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