Kirkpatrick v. Introspect Healthcare Corp.

• Decision Date: 29 December 1992
• Docket Number: No. 19944,19944
• Parties: , 21 UCC Rep.Serv.2d 493 Susan KIRKPATRICK, d/b/a Kirkpatrick & Associates, Plaintiff-Appellant, v. INTROSPECT HEALTHCARE CORPORATION, a New Mexico corporation, d/b/a Introspect Healthcare of New Mexico and Daniel Lopez, Defendants-Appellees.
• Court: New Mexico Supreme Court

Page 800

845 P.2d 800

114 N.M. 706, 21 UCC Rep.Serv.2d 493

Susan KIRKPATRICK, d/b/a Kirkpatrick & Associates, Plaintiff-Appellant, v. INTROSPECT HEALTHCARE CORPORATION, a New Mexico corporation, d/b/a Introspect Healthcare of New Mexico and Daniel Lopez, Defendants-Appellees.

No. 19944.

Supreme Court of New Mexico.

Dec. 29, 1992.

[114 N.M. 708] Sager, Curran, Sturges & Tepper, C. Kristine Osnes, Stanley C. Sager, The Payne Law Firm, P.C., H. Vern Payne, Albuquerque, for plaintiff-appellant.

Richard N. Feferman, Albuquerque, for defendants-appellees.

OPINION

BACA, Justice.

Plaintiff-appellant, Susan Kirkpatrick ("Kirkpatrick") brought suit against Introspect Healthcare Corporation and Daniel Lopez (together referred to as "Introspect"), alleging breach of contract and several related counts. Pursuant to Introspect's motion under SCRA 1986, 1-012(B)(6) (Repl.Pamp.1992), the trial court dismissed Kirkpatrick's complaint for failure to state a claim upon which relief can be granted. Kirkpatrick appeals the dismissal of her complaint. Her appeal raises the following issues: (1) Whether the trial court erred in dismissing Kirkpatrick's breach of contract claim; (2) whether the contract is ambiguous; (3) whether the trial court erred in dismissing the additional counts raised in Kirkpatrick's complaint; and (4) whether the trial court misapplied SCRA 1986, 1-054(C)(1) (Repl.Pamp.1992). We note jurisdiction under SCRA 1986, 12-102(A)(1) (Repl.Pamp.1992) and reverse.

I

Kirkpatrick, an interior designer, entered into a written contract with Introspect Healthcare Corporation in September of 1989. The contract required Kirkpatrick to create the interior design for the Desert Hills adolescent mental healthcare facility and to sell furnishings to Introspect to complete the designs. Kirkpatrick was to perform 23 itemized services during the course of the Desert Hills project, all related to the creation and development of the facility's interior design. The terms of the contract provided that the fee for Kirkpatrick's interior design services would be generated through markups on furnishings that Kirkpatrick purchased and resold to Introspect for use in Desert Hills. The contract required Introspect to pay Kirkpatrick $12,000 during the beginning stages of the project. After Introspect paid an initial $6,000, the contract required Kirkpatrick to design the interior and specify all the furnishings for Desert Hills. A second payment of $6,000 was due after Introspect approved of Kirkpatrick's "interior specifications, selections and drawings." Both $6,000 payments were to be deducted from Kirkpatrick's design fee generated from the sale of furnishings.

Introspect paid Kirkpatrick $12,000 at the outset of the Desert Hills project. Kirkpatrick proceeded to create the interior designs and to specify furnishings for Desert Hills. In December of 1989, Introspect sent a letter to Kirkpatrick, notifying her that it was over budget on the Desert Hills project and requesting that certain revisions and modifications be made to Kirkpatrick's designs and specifications.

In January of 1990, Introspect advised Kirkpatrick that bids to provide the furnishings for Desert Hills were being obtained from other sources. Unable to realize a portion of her design fee from the sale of furnishings, Kirkpatrick brought suit for damages, alleging breach of contract, negligent misrepresentation, fraudulent representation, loss of reputation mental anguish and distress, and violations of the New Mexico Unfair Trade Practices Act. Alternatively, Kirkpatrick sought recovery for the reasonable value of her services under a quantum meruit theory.

Introspect filed a motion to dismiss all counts of the complaint under Rule 12(B)(6), arguing that Kirkpatrick failed to state a claim on which relief could be granted. The trial court made a preliminary decision to grant Introspect's motion to dismiss. Kirkpatrick subsequently moved the trial court to enter final judgment pursuant to SCRA 1986, 1-054(C)(1), for the purpose of facilitating immediate appeal, and alternatively sought permission to amend her complaint. On May 17, 1991, the trial court issued an order and judgment, dismissing Kirkpatrick's complaint, entering final judgment pursuant to SCRA 1986, 1-054(C)(1), and denying Kirkpatrick permission to amend. Kirkpatrick appeals, contending that the trial court erred by dismissing her complaint.

II

We first address whether the trial court erred in dismissing Kirkpatrick's breach of contract claim for failure to state a claim upon which relief can be granted. A motion to dismiss made pursuant to Rule 12(B)(6) tests the legal sufficiency of plaintiff's complaint. Garcia v. Rodey, Dickason, Sloan, Akin & Robb, P.A., 106 N.M. 757, 760, 750 P.2d 118, 121 (1988). A motion to dismiss should be granted only when it appears that the plaintiff is not entitled to recover under any facts provable under the complaint. Castillo v. County of Santa Fe, 107 N.M. 204, 206, 755 P.2d 48, 50 (1988). We limit our inquiry to the contents of Kirkpatrick's complaint and the attached contract and assume that the facts alleged in the complaint are true. Id. at 205, 755 P.2d at 49.

Introspect argues that the trial court properly granted its motion to dismiss. In essence, Introspect claims that the contract between the parties, requiring the purchase and sale of "furnishings," constituted a contract for the sale of goods, see NMSA 1978, Section 55-2-105 (defining "goods"), and is therefore governed by Article 2 of New Mexico's Uniform Commercial Code (NMSA 1978, Secs. 55-2-101 to -725 (Orig.Pamp. & Cum.Supp.1992)) ("the UCC"). The linchpin of Introspect's argument is that all facts alleged by Kirkpatrick, taken as true, fail to state an actionable claim for breach of contract because the contract between the parties fails to state a quantity term as required by the UCC's Statute of Frauds. See NMSA 1978, Sec. 55-2-201(1). The trial court agreed and dismissed Kirkpatrick's claim for breach of contract.

In addressing Introspect's argument that Kirkpatrick's count for breach of contract fails because the contract lacked a quantity term, a threshold question is presented as to whether Article 2 of the UCC applies to the contract between the parties. Article 2 applies to contracts for the sale of goods and has no application to contracts for services. NMSA 1978, Sec. 55-2-102.

In this case, Kirkpatrick and Introspect entered into a mixed contract, both for interior design services and the sale of goods. There are two generally recognized tests used to determine whether mixed contracts are subject to Article 2. See James J. White & Robert S. Summers, Uniform Commercial Code Sec. 1-1, at 26 (3d ed.1988). A minority of jurisdictions divide a mixed contract for goods and services into its component parts and apply Article 2 solely to the transaction for the sale of goods. See, e.g., Foster v. Colorado Radio Corp., 381 F.2d 222, 226 (10th Cir.1967). New Mexico and a majority of jurisdictions apply the "primary purpose" test. See, e.g., State ex rel. Concrete Sales & Equip. Rental Co. v. Kent Nowlin Constr., Inc., 106 N.M. 539, 541, 746 P.2d 645, 647 (1987). Under this test, Article 2 applies to mixed contracts only if the primary purpose of the contract is to sell goods rather than to provide services. Id.

A leading case associated with the primary purpose test is Bonebrake v. Cox, 499 F.2d 951 (8th Cir.1974). In Bonebrake, the parties contracted for the sale and installation of used bowling equipment. In holding the UCC applicable because the "sale of goods" aspect of the contract predominated over the substantial labor and installation services involved, the Eighth Circuit Court of Appeals stated that:

The test for inclusion or exclusion [from Article 2] is not whether [the contracts] are mixed, but, granting that they are mixed, whether their predominant factor, their thrust, their purpose, reasonably stated, is the rendition of service, with goods incidentally involved ... or is a transaction of sale, with labor incidentally involved....

Id. at 960.

The application of the primary purpose test articulated in Bonebrake to mixed contracts for design services and the sale of goods has never been addressed by this Court. Other jurisdictions, however, have addressed this issue. In Care Display, Inc. v. Didde-Glaser, Inc., 225 Kan. 232, 589 P.2d 599 (1979), the Supreme Court of Kansas applied the Bonebrake test to a mixed contract for goods and design services. In Care Display, Inc., the plaintiff entered into an oral contract with the defendant for the design and construction of a trade show exhibit. Id. at 602. The plaintiff sued the defendant when bids were solicited from other exhibit makers after the course of communication between the parties indicated the existence of an exclusive contract. Id. at 602-03. After losing a jury verdict for breach of oral contract, the defendant appealed and argued that any oral contract between the parties was barred by the UCC's Statute of Frauds. Id. at 602.

The Supreme Court of Kansas applied the "primary purpose" test to the contract between the parties and held Article 2 of the UCC inapplicable. Id. at 605-06. While the contract involved the sale of goods, the Court held that its primary purpose was the rendition of services through the use of the plaintiff's specialized knowledge and expertise to create a "unique setting in which to exhibit and promote [the defendant's] products...." Id. at 605. Accordingly, the sale of goods was merely incidental to the rendition of services. Id.

We find the rationale of Care Display, Inc. instructive and hold that Article 2 of the UCC does not apply to the contract between Kirkpatrick and Introspect. Examination of the contract as a whole makes it clear that the contract's primary purpose was to provide interior design services. The contract itemized 23 different services to be performed,...