Hedicke v. Gunville

• Decision Date: 21 November 2002
• Docket Number: No. 485., No. 473, No. 22
• Parties: Robert E. HEDICKE and Donna J. Kelley-Hedicke, Plaintiffs-Appellees/Cross-Appellants, v. Thomas S. GUNVILLE and Tana E. Gunville, Defendants-Appellants/Cross-Appellees.
• Court: Court of Appeals of New Mexico

62 P.3d 1217

133 N.M. 335

Robert E. HEDICKE and Donna J. Kelley-Hedicke, Plaintiffs-Appellees/Cross-Appellants, v. Thomas S. GUNVILLE and Tana E. Gunville, Defendants-Appellants/Cross-Appellees.

Nos. 22,473, 22,485.

Court of Appeals of New Mexico.

November 21, 2002.

Certiorari Denied February 3, 2003.

Robert E. Hedicke, Donna J. Kelley-Hedicke, El Paso, TX, Pro Se Appellees/Cross-Appellants.

Robert L. Diaz, Santa Fe, NM, for Appellants/Cross-Appellees.

Certiorari Denied, No. 27,866, February 3, 2003.

OPINION

PICKARD, Judge.

{1} This appeal and cross-appeal concern a dispute about the lease with an option to buy of a residence and a 17-acre parcel of land near Cloudcroft, New Mexico. The property is owned by the Defendants-Appellants/Cross-Appellees (the Gunvilles) and was leased to Plaintiffs-Appellees/Cross-Appellants (the Hedickes). In November of 1995 the Gunvilles entered into a lease agreement with John and Sandra Hassenflu, who are not parties to this lawsuit. The lease included an option to purchase this parcel. The Hassenflus paid the Gunvilles $50,000 in two installments of $25,000, which the lease referred to as a security deposit. The lease also contained a provision to apply this $50,000 deposit towards the purchase price in the event the tenants elected to purchase the property. The term of the lease was for ten years, and called for rent payments of $1,500 per month and a total purchase price of $400,000. The Hassenflus assigned their interests in the lease and purchase option to the Hedickes in March of 1997, and the parties agreed to a monthly rental increase to $1,600 per month. The Hedickes stopped paying on June 1, 1998, and paid no rent at all through November 30, 1999. On November 23, 1999, the house on the property caught fire and was completely destroyed. After the fire, the Hedickes paid the Gunvilles $100 each month to continue to use the property for their horses until the trial court issued a writ of restitution on August 24, 2000.

{2} The Hedickes brought this suit against the Gunvilles in September of 1998 for interest they claimed was due on the $50,000 security deposit, for conversion of the $50,000, and for punitive damages. The Gunvilles answered and counterclaimed for breach of contract for failure to pay rent and for failure to pay late fees, and they filed a motion for restitution of the premises at the same time. The Hedickes defended on the basis that they were abating rent pursuant to the New Mexico Uniform Owner-Resident Relations Act (UORRA), NMSA 1978, §§ 47-8-1 through -51 (1975, as amended through 1999), and responded to the Gunvilles' motion for restitution claiming retaliation in violation of the UORRA.

{3} At trial, the Gunvilles maintained that the $50,000 security deposit was in fact a down payment for the purchase option and that the parties had intended for this to be a purchase, not merely a lease. The Gunvilles argued that, as a lease with an option to buy, the agreement was not governed by the UORRA. The Hedickes argued that the UORRA governed the lease and that, under its provisions, they were entitled to interest on the security deposit and to abate rent when the Gunvilles failed to properly maintain the premises.

{4} The trial court ruled that the UORRA governed the lease agreement because the Act was to be broadly construed, but conceded that the agreement was not a pure lease and not a pure contract for sale, that the parties did not intend for the UORRA to govern it, and that the UORRA was not written with this kind of tenancy in mind. The trial court ruled that the $50,000 security deposit was truly a down payment or the consideration given to the Gunvilles for the purchase option, or both, and therefore there were no interest payments due and there could be no conversion. The trial court ultimately granted directed verdicts in favor of the Gunvilles on the claims of interest, conversion, and punitive damages. The trial court directed a verdict in favor of the Gunvilles on their counterclaim for breach of contract because it ruled that the Hedickes were not entitled to abate rent under the UORRA or under the terms of the lease agreement and were therefore required to pay rent. The trial court also ruled that since there was no right to abate rent, there could be no retaliation as a matter of law. The trial court directed a verdict in favor of the Hedickes on the Gunvilles' claim for late fees, ruling that the Gunvilles did not adhere to the notice requirements in the UORRA. Finally, the trial court granted the Gunvilles' petition for restitution, determining that the lease was terminated when the premises were destroyed by the fire.

{5} At the close of the trial, the Gunvilles moved for an award of attorney fees as the prevailing party pursuant to the UORRA and the lease agreement. After the writ of restitution was filed and while the trial court was considering the motion for attorney fees, the Hedickes moved to amend the pleadings to include enforcement of a provision of the UORRA requiring forfeiture of the entire $50,000. The trial court denied the Hedickes' motion to amend the pleadings, granted the Hedickes judgment for $20,300 of the deposit ($50,000 less the rent they owed), and decreed that both parties were to bear their own attorney fees and costs.

{6} The Gunvilles appeal the denial of an award of attorney fees and the directed verdict granted to the Hedickes on the issue of late fees. The Hedickes cross-appeal, challenging the directed verdicts granted to the Gunvilles on the issues of interest, conversion, and retaliation, and the trial court's denial of their motion to amend the pleadings. We affirm the trial court on all issues but the issue of the award of attorney fees, and we particularly affirm the trial court's view that the UORRA applies to the extent that the parties' agreement was a lease and does not apply to the extent it was a sale. We reverse on the attorney fee issue and remand to the trial court to make a determination as to the prevailing party and as to the amount of attorney fees to be awarded, consistent with this opinion.

{7} For clarity and ease of understanding, we address the Hedickes' cross-appeal first.

HEDICKE CROSS-APPEAL

Directed Verdicts

{8} The Hedickes argue that the trial court erred in granting a directed verdict for the Gunvilles on the issues of interest due on the $50,000 deposit, conversion, and retaliation. They also argue that the trial court abused its discretion in denying their motion to supplement the pleadings with a claim for the $50,000 deposit pursuant to Section 47-8-18 of the UORRA.

Standard of Review

{9} A directed verdict may be granted if there is no legally sufficient evidentiary basis for a reasonable jury to find in favor of a party or may be granted as a matter of law against a party with respect to a claim that cannot, under controlling law, be maintained without a favorable ruling on the issue. Rule 1-050(A)(1) NMRA 2002. Therefore, a directed verdict is appropriate only when there are no issues of fact to be presented to a jury. Sunwest Bank v. Garrett, 113 N.M. 112, 115, 823 P.2d 912, 915 (1992). All evidence, including the evidence presented by the party moving for the directed verdict, must be considered, and any conflicts in the evidence or reasonable interpretations of it are viewed in favor of the party resisting the directed verdict. Id. "The sufficiency of evidence presented to support a legal claim or defense is a question of law for the trial court to decide." Id. This Court reviews questions of law de novo. Sowder v. Sowder, 1999-NMCA-058, ¶ 7, 127 N.M. 114, 977 P.2d 1034.

Directed Verdicts on the Claims for Interest and Conversion

{10} At the heart of the Hedickes' claims for interest, conversion, and punitive damages is their contention that the $50,000 is a security deposit under the UORRA and therefore the provisions of Section 47-8-18 apply. Section 47-8-18(A)(1) provides in relevant part:

A. An owner is permitted to demand from the resident a reasonable deposit to be applied by the owner to recover damages, if any, caused to the premises by the resident during his term of residency.

(1) Under the terms of an annual rental agreement, if the owner demands or receives of the resident such a deposit in an amount greater than one month's rent, the owner shall be required to pay to the resident annually an interest equal to the passbook interest permitted to savings and loan associations....

However, central to the resolution of the issues on appeal was the trial court's determination of the purpose of the $50,000 deposit. The trial court's directed verdict flowed from its determination that the $50,000 was a down payment or consideration for an option to buy the land, or both, and not a true security deposit.

{11} We agree with the trial court that the UORRA applies flexibly to the portions of the parties' agreement that amount to a residential lease within the Act's terms. See § 47-8-2 (indicating that the purpose of the Act is to simplify, clarify, and revise the law governing the rental of dwelling units to the end that housing in New Mexico is improved). We also agree with the determination that the $50,000 was not a security deposit, and therefore there could be no interest due on it under the UORRA and no conversion as a matter of law, whether or not the UORRA applies.

{12} The Hedickes argued at trial that the lease agreement called the $50,000 a security deposit and the trial court had no authority to "construe" the contract any other way. On appeal they continue to argue that this money was a security deposit and in fact was so stipulated as a fact in the pretrial order, because the language of the pretrial order mirrored the language in the lease, which used the term "security deposit." Therefore, they continue to rely on the UORRA's provisions in their argument for interest payments, and they rely on common law in their...