Jaramillo v. Gonzales

• Decision Date: 09 April 2002
• Docket Number: No. 21,180.,21,180.
• Citation: 50 P.3d 554,2002 NMCA 72,132 N.M. 459
• Parties: Nicklos E. JARAMILLO and Darrell Jaramillo, Plaintiffs-Appellees/Cross-Appellants, v. Larry GONZALES and Bank of America Housing Services, a Division of Bank of America FSB, Defendants-Appellants/Cross-Appellees.
• Court: Court of Appeals of New Mexico

50 P.3d 554

132 N.M. 459

2002 NMCA 72

Nicklos E. JARAMILLO and Darrell Jaramillo, Plaintiffs-Appellees/Cross-Appellants, v. Larry GONZALES and Bank of America Housing Services, a Division of Bank of America FSB, Defendants-Appellants/Cross-Appellees.

No. 21,180.

Court of Appeals of New Mexico.

April 9, 2002.

Certiorari Denied May 28, 2002.

James A. Burke, Santa Fe, NM, for Appellees/Cross-Appellants.

John P. Burton, Rodey, Dickason, Sloan, Akin & Robb, P.A. Santa Fe, NM, for Appellants/Cross-Appellees.

Certiorari Denied, No. 27,490, May 28, 2002.

OPINION

FRY, Judge.

{1} Plaintiffs Nicklos E. and Darrell Jaramillo filed suit against Bank of America Housing Services (Bank), which was the lien holder on a mobile home owned by Plaintiffs, when the home was damaged by water leaking from defective pipes. Plaintiffs claimed that they were entitled to revoke acceptance of the mobile home and that the Bank had engaged in unfair trade practices when it refused to acknowledge Plaintiffs' right to seek redress against it. The trial court granted Plaintiffs revocation of the sales contract; damages in the amount of $29,636 for payments made pursuant to the contract and $6,765 compensatory damages for the cost of obtaining alternative housing; $25,000 for emotional distress resulting from the Bank's breach of the duty of contractual good faith; and $5,000 to Nicklos for defamation resulting when the Bank made false reports to credit reporting agencies. The trial court also awarded attorney fees to Plaintiffs based on their Unfair Practices Act claim. The trial court allowed the Bank to offset those amounts by $15,317, which was the amount paid by Plaintiffs' insurance company for the water damage, plus accrued interest. The Bank appeals. Plaintiffs cross-appeal the award of attorney fees and the offset of insurance proceeds against the judgment. We affirm.

BACKGROUND

{2} In December 1989, Nicklos Jaramillo purchased a mobile home for his son, Darrell, that was delivered the following January. To finance the purchase, Nicklos executed a retail installment contract and security agreement with the seller, who then assigned the contract and security agreement to a predecessor of the Bank. The contract required the Jaramillos to maintain insurance on the mobile home. The Jaramillos consistently made the required monthly payments on the home and were current on their payments at the time the following incident occurred.

{3} In June 1995, Darrell returned home from work one day to discover that the mobile home had flooded. He attempted to clean up the water and dry out the mobile home. He then began investigating the cause of the flooding. He learned that the seller of the mobile home had gone out of business. After numerous phone calls, he finally traced the manufacturer of his mobile home to a plant in Georgia. The Georgia plant dispatched a local repairman to determine the cause of the flooding. The repairman informed Darrell that the flooding was caused by leaks in the polybutylene used in the plumbing throughout the home and that his "problems were just beginning." The deficiencies of polybutylene are well known throughout the mobile home industry.

{4} Darrell filed a claim with his insurance company to recover for the damage the flooding caused to the mobile home and his personal effects. The insurance company settled the claim for $15,317 and issued a check payable to Darrell and the Bank. Darrell deposited the check in his own account without informing the Bank. Darrell did not use the money to repair the mobile home.

{5} In February 1996, the Jaramillos' attorney sent a letter of revocation to the Bank, stating that the flooding had caused considerable damage and had rendered the mobile home uninhabitable. The letter asserted that the Bank, as the assignee of the contract, was subject to all claims and defenses that could have been asserted against the seller. The Bank did not acknowledge the letter of revocation; instead, it sent a routine monthly billing statement showing a past due balance. The Bank followed the billing statement with a collection letter and a phone call to Nicklos. When Nicklos told the Bank that he had revoked acceptance of the mobile home and that he would not be paying on the contract, the Bank advised him of his contractual obligation and the effect of non-payment on his credit rating. The Bank continued to seek to collect on the contract and reported a delinquent debt to credit agencies. Thereafter, Nicklos was denied credit twice due to the reports made by the Bank. In April 1996, upon the Bank's continued refusal to accept the revocation, the Jaramillos filed suit.

DISCUSSION

The Bank's Appeal

Statute of Limitations

{6} The Bank argues that Plaintiffs' claims relating to the defects in the mobile home are barred by the statute of limitations. Plaintiffs maintain that the Bank waived this defense by raising it only a couple of weeks before trial and long after it had filed its original answer. Plaintiffs' amended complaint stated claims for breach of express and implied warranties, revocation of acceptance, violation of the Unfair Practices Act, breach of contract for failure to acknowledge the Federal Trade Commission (FTC) holder clause in the contract, and defamation. The Bank denied the allegations in the amended complaint. Shortly before trial, the Bank moved to amend its answer, arguing that Plaintiffs' claims relating to defects in the mobile home were barred by the statute of limitations. Plaintiffs argue that the trial court erred by allowing the Bank to raise this defense so late in the course of litigation. We disagree.

{7} When Plaintiffs complained they were unfairly prejudiced by the Bank's tardy assertion of the statute of limitations defense, the trial court offered a continuance in order to allow them to prepare to meet the argument. Plaintiffs declined the offer. Therefore, we cannot say assertion of the defense prejudiced Plaintiffs. Without prejudice, there is no basis to reverse the trial court's decision allowing the Bank to raise the defense of statute of limitations. See Sanchez v. Saylor, 2000-NMCA-099, ¶ 30, 129 N.M. 742, 13 P.3d 960 (holding that orders allowing amendment of pleadings are reviewed for abuse of discretion and indicating that discretion will not be abused when there is no prejudice to the party opposing the amendment).

{8} We turn now to the merits of the statute of limitations defense. The Bank argues the applicable statute of limitations is NMSA 1978, Section 55-2-725 (1961), which is a four year statute of limitations for "[a]n action for breach of any contract for sale." Id. "A cause of action accrues when the breach occurs, regardless of the aggrieved party's lack of knowledge of the breach. A breach of warranty occurs when tender of delivery is made...." Id. We review de novo whether a particular statute of limitations applies. In re Estate of Baca, 1999-NMCA-082, ¶ 12, 127 N.M. 535, 984 P.2d 782.

{9} The mobile home was delivered in January 1990. Plaintiffs filed their complaint in April 1996, more than six years later. We agree with Defendant that Section 55-2-725 appears to bar Plaintiffs' breach of warranty claims. However, although Defendant requested them, the trial court made no findings on the applicability of this statute of limitations to the warranty claims. Moreover, the trial court did not award damages for breach of warranty. Consequently, there is no basis to reverse the trial court's judgment. See In re Estate of Heeter, 113 N.M. 691, 695, 831 P.2d 990, 994 (Ct.App.1992) (stating that we will not correct error if it will not change the result).

{10} The Bank also argues the claim for revocation is barred by the same statute of limitations. Plaintiffs contend that this issue was not preserved below. They argue that the Bank asserted the statute of limitations only with regard to the breach of warranty claims. Our review of the hearing where the Bank sought permission to amend its answer to assert the statute of limitations indicates that it tied all the UCC claims together and claimed the benefit of the same statute of limitations—Section 55-2-725—with respect to all. Thus, although the Bank did not specifically argue that the revocation claim is barred by the same statute of limitations, we believe that its arguments regarding all the UCC claims and the application of the statute of limitations adequately preserved the issue. See Quintana v. Baca, 1999-NMCA-017, ¶ 12, 126 N.M. 679, 974 P.2d 173 (reviewing an issue that was arguably not preserved in the trial court when the general theory was discussed in the trial court, even though objection was not as specific as it could have been).

{11} We do not agree with the Bank that a claim of revocation is governed by Section 55-2-725. Although the Bank has cited two cases directly on point, Snyder v. Boston Whaler, Inc., 892 F.Supp. 955, 959 (W.D.Mich.1994), and Grus v. Patton, 790 S.W.2d 936, 939 (Mo.Ct.App.1990), we are not impressed by the reasoning of either case. In particular, Snyder contained no reasoning whatsoever and simply stated the conclusion that because revocation of acceptance is based on a breach of warranty, the statute of limitations for an action to revoke is the same as one for breach of warranty. Snyder, 892 F.Supp. at 959. Grus noted the lack of case law on the issue, probably because in the cases it cited, dealing with defective automobiles, a reasonable time to discover the defect was much less than the four-year statute. Grus, 790 S.W.2d at 939-40. In our case, because of the hidden nature of the defect, we believe that the following rationale is most persuasive.

{12} The UCC provides two distinct buyers' remedies, each of which offers a different form of relief governed by different sections of the Code. Thus, there are remedies available for buyers who have not accepted goods or who justifiably revoke acceptance, NMSA 1978, Section...