1997 -NMCA- 55, Las Campanas Ltd. Partnership v. Pribble

• Decision Date: 02 June 1997
• Docket Number: No. 17125,17125
• Citation: 1997 NMCA 55,123 N.M. 520,943 P.2d 554
• Parties: , 1997 -NMCA- 55 LAS CAMPANAS LIMITED PARTNERSHIP, a Delaware Limited Partnership, Plaintiff-Appellee, v. Napoleon PRIBBLE, Defendant-Appellant.
• Court: Court of Appeals of New Mexico

Page 554

943 P.2d 554

123 N.M. 520, 1997 -NMCA- 55

LAS CAMPANAS LIMITED PARTNERSHIP, a Delaware Limited Partnership, Plaintiff-Appellee, v. Napoleon PRIBBLE, Defendant-Appellant.

No. 17125.

Court of Appeals of New Mexico.

June 2, 1997.

[123 N.M. 522] Bill Chappell, Jr., Frances C. Bassett, Chappell & Barlow, P.A., Albuquerque, for Plaintiff-Appellee.

Paul S. Wainwright, Paul S. Wainwright, P.A., Albuquerque, for Defendant-Appellant.

OPINION

ARMIJO, Judge.

¶1 Defendant (Pribble) appeals a judgment offoreclosure entered against him. On appeal, Pribble raises three issues: (1) whether the trial court improperly granted Plaintiff's (Las Campanas') motion to strike Pribble's request for a jury trial on his counterclaim alleging a violation of federal law; (2) whether the trial court erred in finding that Las Campanas' violation of the federal law was a technical violation that did not warrant rescission of Pribble's real estate contract with Las Campanas; and (3) whether the trial court erred in awarding Las Campanas' requested costs. For the reasons that follow, we affirm.

I. FACTUAL BACKGROUND

¶2 Pribble entered into an agreement in 1992 to purchase Lot 55 from Las Campanas, the owner of a real estate development in Santa Fe County, New Mexico. As part of this transaction, Pribble acknowledged receipt of a property report prepared by Las Campanas regarding the development in which Lot 55 was located. Pribble later used his equity in Lot 55 as partial payment for Lot 333, which Pribble agreed to purchase from Las Campanas in June of 1993. As part of this second transaction, an employee of Las Campanas mailed a package of documents to Pribble on June 7, 1993.

¶3 According to the cover letter accompanying this packet, the package contained the following enclosures: a purchase agreement, a trade addendum, two identical documents entitled "Receipt, Agent Certification and Cancellation Page"; a disclosure and disclaimer of committed facilities; a buyer's settlement statement; a certificate of inspection; a special warranty deed to reconvey Lot 55 back to Las Campanas; a disclosure statement; a promissory note; a mortgage; account servicing instructions; a list of covenants, conditions, restrictions and easements for the development in which Lot 333 was located; a supplemental declaration regarding this development; a commitment for title insurance; a property report; and a set of instructions for wiring the closing funds.

¶4 The property report was forty-four pages in length and had the following words printed on its cover in large red letters: "READ THIS PROPERTY REPORT BEFORE SIGNING ANYTHING." The "Receipt, Agent Certification and Cancellation Page," on which Pribble was to acknowledge receipt of the property report, was not physically attached to the property report. Before mailing the package, an employee of Las Campanas had written "June 1, 1993" in the space for the date that accompanies the signature block on the receipt for the property report. The trial court found that the receipt for the property report was signed by Pribble on June 15, 1993. The trial court also found that Pribble signed a promissory note and a mortgage for Lot 333 on that same date.

¶5 Pribble failed to make the payments required under the promissory note. After Las Campanas gave Pribble three written notices of default and Pribble failed to cure the default, Las Campanas initiated a foreclosure suit in district court. Pribble responded by filing an answer, a counterclaim, and a demand for a jury trial. Las Campanas filed a motion to strike Pribble's jury demand, which the trial court granted. The matter was tried to the bench; the trial court denied the counterclaim and entered its findings and conclusions followed by a judgment of foreclosure. This appeal followed.

II. DISCUSSION

A. Right to a Jury Trial

¶6 Pribble asserts that the trial court erred in granting Las Campanas' motion to strike his jury demand. Pribble's counterclaim and some of his affirmative defenses asserted that Las Campanas violated the Interstate Land Sales Full Disclosure Act (ILSFDA). 15 U.S.C. §§ 1701-1720 (1994). In his counterclaim, Pribble asserted his entitlement to rescind the contract and specifically plead: "The Defendant [Pribble] hereby elects to cancel the Promissory Note and Mortgage pursuant to Federal law." (Emphasis added.) Under ILSFDA, an aggrieved party may either rescind the contract or recover damages, but may not do both. See 15 U.S.C. §§ 1703, 1709; Gaudet v. Woodlake Dev. Co., 413 F.Supp. 486, 490 (E.D.La.1976). While Pribble's counterclaim alludes to other remedies that may be incidental to the enforcement of a right of revocation under Section 1703, including interest, costs and attorney fees under Section 1709(c), he did not specifically plead any damages. Therefore, we conclude that Pribble sought only rescission of the contract.

¶7 Because Pribble sought to have the court use its equitable powers to cancel his obligations under the promissory note and mortgage, we conclude that the type of relief Pribble sought in his counterclaim was equitable. See 15 U.S.C. § 1709(b) (allowing purchaser to bring an action in equity against seller to enforce purchaser's right of revocation under Section 1703); 1 Dan B. Dobbs, Dobbs Law of Remedies § 4.3(6), at 616 (2d ed. 1993) ("[A] rescission that requires, for effective restitution, a cancellation or amendment of any document, normally is effected in equity courts.").

¶8 Because Pribble's counterclaim sought equitable rescission, we conclude that Pribble does not have a right to a jury trial on this counterclaim under ILSFDA or the New Mexico Constitution. The scope of Pribble's constitutional right to a jury trial in state court is governed by Article II, Section 12 of the New Mexico Constitution. See Scott v. Woods, 105 N.M. 177, 182, 730 P.2d 480, 485 (Ct.App.1986) (Seventh Amendment does not control right to jury trial in state courts); Vivian v. Atchison, Topeka & Santa Fe Ry. Co., 69 N.M. 6, 9, 363 P.2d 620, 622 (1961) (same). We define the scope of a party's constitutional right to a jury trial in a civil case in state court by determining whether such a right existed either at common law or by statute at the time our New Mexico Constitution was adopted. See Board of Educ. v. Harrell, 118 N.M. 470, 481, 882 P.2d 511, 522 (1994). New Mexico courts have held that there is no right to a jury trial in a suit for equitable rescission. See Golden Cone Concepts, Inc. v. Villa Linda Mall, Ltd., 113 N.M. 9, 10 n. 2, 820 P.2d 1323, 1324 n. 2 (1991) (rescission of a contract is an equitable remedy that is tried to the court without a jury); Ledbetter v. Webb, 103 N.M. 597, 601, 711 P.2d 874, 878 (1985) (rescission is an equitable remedy). Pribble has provided us with no authority suggesting that there was any contrary practice prior to statehood in 1912. Therefore, we conclude that Pribble has no constitutional right to a jury trial in the present case.

¶9 This conclusion finds further support in the fact that Pribble's suit for equitable rescission arose as a counterclaim in a foreclosure action. Foreclosure suits are equitable in nature, see 1 Dobbs, supra § 2.6(3), at 162-63, and New Mexico courts have not recognized a constitutional right to a jury trial on issues that are necessarily decided in the course of a foreclosure suit in state court such as the existence or the amount of the debt. See Sunwest Bank v. Garrett, 113 N.M. 112, 115-16, 823 P.2d 912, 915-16 (1992); State ex rel. McAdams v. District Court, 105 N.M. 95, 96-97, 728 P.2d 1364, 1365-66 (1986). Pribble's claim that he was entitled to rescind the promissory note and mortgage under federal law was necessarily decided as part of Las Campanas' foreclosure action since Las Campanas could not foreclose on a mortgage and promissory note that were invalid. Similarly, any affirmative defense asserted would necessarily be decided in the course of the foreclosure action.

¶10 We do not rule out the possibility that some federal statutes may create a statutory right to a jury trial regarding certain types of counterclaims even when there is no constitutional right to a jury trial on such counterclaims. However, ILSFDA is silent on a purchaser's right to a jury trial, and we find no authority to support the proposition that ILSFDA implicitly grants a purchaser a statutory right to a jury trial when that purchaser brings a suit for equitable rescission in state court. In cases where other types of equitable relief are sought by the government under ILSFDA, or where equitable rescission is sought under federal securities laws that are analogous to ILSFDA, federal courts have reached the conclusion that there is no right to a jury trial. See Pierce v. Moore, 654 F.Supp. 401, 402 (W.D.Tex.1987) (no right to jury trial in suit for injunctive and restitutory relief brought by federal government under ILSFDA); Kamen v. Kemper Fin. Servs., 908 F.2d 1338, 1350-51 (7th Cir.1990) (interpreting Investment Company Act, 15 U.S.C. § 80a-35(b) (1988)), rev'd in part on other grounds, 500 U.S. 90, 111 S.Ct. 1711, 114 L.Ed.2d 152 (1991); cf. Markowitz v. Northeast Land Co., 906 F.2d 100, 103 (3d Cir.1990) (noting analogy between ILSFDA and federal securities laws). Thus, we conclude that neither ILSFDA nor the New Mexico Constitution grant Pribble a right to a jury trial on his counterclaim for equitable rescission in state court.

B. Right to Rescind the Promissory Note and Mortgage

¶11 The trial court, as fact finder, determined that Las Campanas mailed Pribble a packet of documents, including the property report and two documents titled, "Receipt, Agent Certification and Cancellation Page." It also determined that Pribble received these documents before he executed the promissory note on June 15, 1993. The trial court further found that Las Campanas did not provide the property report in such a manner as to conceal it and did not engage...