Camino Real Mobile Home Park Partnership v. Wolfe

Decision Date10 February 1995
Docket NumberNo. 21282,21282
Citation891 P.2d 1190,1995 NMSC 13,119 N.M. 436
PartiesCAMINO REAL MOBILE HOME PARK PARTNERSHIP, a Colorado general partnership, Plaintiff-Appellant, v. Patricia WOLFE, as personal representative of the Estate of Ruel M. McCarson, Defendant-Appellee.
CourtNew Mexico Supreme Court
OPINION

FRANCHINI, Justice.

This case concerns a purchaser's action against a seller for breach of warranty as a result of the sale and purchase of a mobile home park. The seller warranted that a sewage treatment plant, which was part of the property and serviced the park, was in good working condition. The purchaser had problems with the sewage treatment plant and eventually had to replace the plant as part of a settlement with the Environmental Improvement Division (EID). The purchaser sued the seller to recover damages for replacing the sewage treatment plant and adding an additional leach field, as well as for fines paid to the EID, lost profits, and diminution in value of the property.

The trial court ruled that the purchaser had failed to prove that the corrective action taken was reasonably necessary to cure or correct the breach of warranty; that it failed to prove that the expenses incurred in the corrective action were fair and reasonable in amount; and that actions taken by the purchaser shortly after buying the property distorted and rendered speculative the damages claimed for lost profits and diminution in value of the property. We reverse in part and affirm in part. We hold that the court misapprehended the proof required to show damages in a cause of action for breach of warranty.

I. BACKGROUND

A. Facts. In 1984 Plaintiff-Appellant Camino Real Mobile Home Park Partnership (Camino Real) purchased a 20.46 acre mobile home park located south of Las Cruces, New Mexico, from Defendant-Appellee Estate of Ruel McCarson (the Estate). Shortly after purchase of the mobile home park Camino Real sent notices to all tenants raising their rent from $75.00 per month to $135.00 per month, requiring an additional security deposit of $110.00 per month, and imposing a "pet fee," calculated on a per pet basis, which sums were immediately due and payable by the tenants. Within six weeks of the notice approximately 80 of the 167 tenants terminated their tenancy and vacated the park. Camino Real recognized that it had made a poor business decision and eventually lowered the rent, and by 1986 the park began once again to show a profit.

The purchase of the mobile home park also presented other problems for Camino Real. The park included a sewage treatment plant for treatment and disposal of the park's wastewater. The contract of sale between Camino Real and the Estate provided that the Estate, as seller, warranted that the sewage system was in good working order and was in compliance with all inspections and local ordinances.

Three weeks after Camino Real purchased the mobile home park a pool of sewage effluent surfaced in the area of the park's liquid waste drainage field (leach field). The EID notified the manager of the park that the surfacing effluent appeared to be causing a public nuisance and a health hazard to the residents of the park and insisted that steps be taken to remedy the problem. Ronald McCarson, the executor of the Estate, was informed of the problem and apparently solicited bids on a new effluent disposal system. Plans and specifications for an additional leach field were submitted to the EID and approved in November 1984. In January 1985 the EID contacted Camino Real, threatening legal action if the proposed work was not completed by February 17, 1985.

On February 18, 1985, a health program manager from the EID met with McCarson and the manager of the mobile home park to inspect the sewage treatment plant. An unused leach field was discovered during the inspection and connected to the existing system. It appeared to the health program manager that the ponding of the effluent would be remedied by use of the second leach field. Two months later, however, the EID received a complaint of offensive odors and raw sewage on the grounds of the park. A follow-up investigation by the EID confirmed that offensive odors were emanating from the sewage treatment plant but did not locate any raw sewage on the premises.

In July 1985 Camino Real contracted to have New Mexico State University students, under the supervision of experts from the New Mexico State University Wastewater Treatment Department, operate and maintain the sewage treatment plant. The contract was terminated in July 1986 due to the University's inability to control odors from the sewage treatment plant or the repeated flooding of the leach field by effluent.

In an effort to remedy the inadequacy of the waste-water disposal system, Camino Real replaced the leach field in January 1987, but problems with ponding effluent and strong odors reappeared soon thereafter. In a letter dated July 2, 1987, the EID agreed to temporarily refrain from filing legal action against Camino Real on the condition that Camino Real submit an acceptable discharge plan, designed in accordance with the Water Quality Control Commission Regulations. In October 1987 the EID approved a discharge plan that contemplated construction of a new sewage treatment plant on the condition that the plant be operational by December 14, 1987. Camino Real had not even begun construction of the plant by this deadline and the EID initiated legal action. Camino Real and the EID subsequently entered into a settlement agreement, in which Camino Real agreed to complete the plant by January 1990 and pay a fine of $11,000 for past violations of the Water Quality Act, NMSA 1978, Section 74-6-10(B) (Repl.Pamp.1989), and Water Quality Control Commission Regulations. The new sewage treatment plant was installed in late 1989 at a cost of over $100,000.

B. Proceedings. In April 1990 Camino Real filed a complaint against the Estate alleging breach of contract and fraud. A bench trial was held in December 1992. Camino Real claimed damages for the actual amounts spent in repairs and replacement of the sewage treatment plant and leach field, as well as damages for fines paid to the EID, loss of rents, and diminution of value of the mobile home park.

At the close of Camino Real's case-in-chief, the Estate moved for dismissal of the claim on the basis that Camino Real had not proven its damages. The trial court found that Camino Real had failed to prove that "corrective action taken by Plaintiff to cure the alleged breach of contract warranty by Defendant was reasonably necessary to cure or correct the alleged warranty breach." The court also found that Camino Real "failed to prove the costs and expenses incurred in the corrective action were fair, reasonable or necessary to correct the alleged breach of warranty." Finally, the court found that the raising of space rental rates immediately following the purchase of the mobile home park resulted in adverse financial consequences that irredeemably distorted the lost profits and diminution in value claims, causing those claims "to become purely speculative." The court concluded that Camino Real had "failed to prove any damages with reasonable certainty or by substantial evidence of fairness, reasonableness or necessity" and dismissed the cause of action.

Camino Real appeals the order of dismissal, arguing that (1) the trial court erred in dismissing the case on the ground that the damages incurred for repairing and replacing the sewage treatment plant and paying the EID fine had not been shown to be necessary and reasonable in cost; (2) the court erred in ruling that the claims for lost profits and diminution of value of the property were so speculative as to preclude recovery; and (3) the court erred in refusing to admit into evidence, as hearsay, an appraisal of the property and an engineer's report suggesting methods for remedying the recurring EID violations. We affirm in part and reverse in part.

II. DISCUSSION

A. Standard of Review. We assume, because the trial court failed to specify the authority for its ruling, that the court dismissed the cause of action under SCRA 1986, 1-041(B) (Rule 41(B)), which provides in pertinent part:

After the plaintiff, in an action tried by the court without a jury, has completed the presentation of evidence, the defendant, without waiving the right to offer evidence in the event the motion is not granted, may move for a dismissal on the ground that upon the facts and the law the plaintiff has shown no right to relief. The court as trier of the facts may then determine them and render judgment against the plaintiff or may decline to render any judgment until the close of all the evidence.

In ruling on a motion to dismiss under Rule 41(B), the court, as factfinder, weighs the evidence and passes judgment on whether the plaintiff has proved the necessary facts to warrant the relief asked. Panhandle Pipe & Steel, Inc. v. Jesko, 80 N.M. 457, 460, 457 P.2d 705, 708 (1969). A Rule 41(B) dismissal thus is a judgment on the merits. Garcia v. American Furniture Co., 101 N.M. 785, 787, 689 P.2d 934, 936 (Ct.App.), certs. denied, 101 N.M. 686, 687 P.2d 743 and 102 N.M. 7, 690 P.2d 450 (1984). The motion to dismiss may be sustained even though plaintiff's evidence establishes a prima facie case that would have precluded a directed verdict under SCRA 1986, 1-050(A), for defendant in a jury trial. See Panhandle Pipe, 80 N.M. at 460, 457 P.2d at 708.

We review the involuntary dismissal of a plaintiff's case under Rule 41(B) for failure to carry a burden of proof as we review any other judgment on the merits. The judgment of the trial court will not be disturbed on appeal if the findings of fact entered by the court are supported by substantial evidence, are not clearly...

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