Otero v. Buslee

• Citation: 695 F.2d 1244
• Decision Date: 13 December 1982
• Docket Number: No. 80-1981,80-1981
• Parties: Sonny OTERO, Plaintiff-Appellee, v. Roger M. BUSLEE and Shirley R. Buslee, Defendants-Appellants.
• Court: United States Courts of Appeals. United States Court of Appeals (10th Circuit)

Page 1244

695 F.2d 1244

Sonny OTERO, Plaintiff-Appellee, v. Roger M. BUSLEE and Shirley R. Buslee, Defendants-Appellants.

No. 80-1981.

United States Court of Appeals, Tenth Circuit.

Dec. 13, 1982.

Thomas A. Simons, IV, Santa Fe, N.M., for defendants-appellants.

Karen Aubrey of Kellahin & Kellahin, Santa Fe, N.M., for plaintiff-appellee.

Before McWILLIAMS, BARRETT and McKAY, Circuit Judges.

McKAY, Circuit Judge.

This is an appeal by Roger and Shirley Buslee, defendants, from a judgment entered against them in a diversity action for breach of a contract to buy real estate from the plaintiff, Sonny Otero. We modify the judgment by deducting $1000 for a deposit paid by the Buslees, and affirm on all other issues.

On September 5, 1979, Mrs. Buslee signed three copies of an agreement to buy a fourplex from Mr. Otero, a developer who owned the property in joint tenancy with his wife. Mrs. Buslee signed the agreements in the office of James Wheeler, a real estate broker. Mr. Otero was not present. Mr. Wheeler kept two of the agreements; Mr. Otero signed at least one of the two that day. Mrs. Buslee took the third copy for her husband to sign. Mr. Buslee signed, but only after attaching some modifications. Mr. Otero also signed the third copy, but not the attachment. The parties dispute whether Mr. Otero signed the third copy before or after Mr. Buslee added the modifications. On the day set for closing, Mrs. Buslee backed out, complaining that the financing Mr. Wheeler had obtained provided for a prepayment penalty.

Mr. Otero then brought this diversity action for breach of contract in the district court. The Buslees counterclaimed to recover a $1000 deposit. The court awarded Mr. Otero $23,911.60 and dismissed the Buslees' counterclaim. The Buslees make six arguments on appeal:

(1) The trial court wrongfully granted a protective order preventing the Buslees from deposing Mr. Otero and Mr. Wheeler and the Buslees should therefore be granted a new trial;

(2) The parties did not form a contract;

(3) The contract was void because Mr. Otero did not have a valid power of attorney from his wife as required under New Mexico law to convey the jointly owned property;

(4) The contract contained a liquidated damages clause for $1000, the deposit Mrs. Buslee paid, so that the trial court should have awarded no damages over that amount;

(5) Mr. Otero failed to mitigate his damages;

(6) The trial court incorrectly measured damages.

I. Depositions

In its initial pretrial order of February 4, 1980, the court imposed a May 1, 1980 deadline for the completion of discovery. Both parties then moved for summary judgment. The Buslees made no effort to depose Mr. Otero or Mr. Wheeler while waiting for a decision on the summary judgment motions since they did not want to conduct unnecessary discovery. On April 16, two and one-half months after the initial pretrial report, the court had not yet ruled on the summary judgment motions. The Buslees moved for an extension of the discovery period, which still had two weeks to go. The court denied the motion on May 6. On May 27, the Buslees notified Mr. Otero's attorney that they would depose Mr. Otero and Mr. Wheeler on June 9. Mr. Otero moved for a protective order, which the court granted on the basis of the discovery period's expiration. The Buslees argue that the trial court erred in granting the protective order, and that they should be granted a new trial.

As this court has recently held,

[A] protective order entered by a trial court pursuant to Fed.R.Civ.P. 26(c) should not be overturned on appeal unless there has been an abuse of discretion .... An abuse of discretion occurs only when the trial court bases its decision on an erroneous ruling of law or where there is no rational basis in the evidence for the ruling .... It is the unusual or exceptional case where the reviewing court will vacate a protective order entered by a trial court under Fed.R.Civ.P. 26(c).

In re Petroleum Products Antitrust Litigation, 669 F.2d 620, 623 (10th Cir.1982).

The protective order granted in this case was rational and was not based on an erroneous ruling of law. In imposing a discovery deadline in its initial pretrial report and in denying the Buslees' request for an extension of the deadline, the trial court acted consistently with the established rule that "a party may be too late in seeking to take depositions. Either by order in a particular case or by local rule a court may set a date by which all discovery must be completed." 8 Wright and Miller, Federal

                Practice and Procedure Sec. 2111 (1970) at 402.  A court may not impose too rigorous a time limit on discovery.   Transamerica Computer Co. v. International Business Machines Corp., 573 F.2d 646 (9th Cir.1978).  When it sets a reasonable limit and there are no extenuating circumstances, however, a district court has discretion to enforce the limit by granting a protective order under Rule 26(c)(2) of the Federal Rules of Civil Procedure.  See 8 Wright and Miller, Federal Practice and Procedure Sec. 2038 (1970).  In this case, in which the issues on the merits are not overly complex, the court gave the litigants almost three months to complete discovery.  The Buslees unilaterally decided to postpone their depositions of Mr. Otero and Mr. Wheeler, and made no effort to obtain an extension of the discovery period until two weeks before its expiration. 1   They alleged no extenuating circumstances such as discovery of new information or potential unavailability of one of the deponents at trial.  This is not the "unusual or exceptional case" that we contemplated in Petroleum Products.    We find that the district court did not abuse its discretion in imposing a reasonable discovery deadline and enforcing it by granting Mr. Otero's motion for a protective order. 2   Since the protective order was proper, its issuance does not entitle the Buslees to a new trial
                

II. Contract Formation and Validity

The Buslees assert that no contract was formed. They claim that there was no "meeting of the minds" since Mr. Otero signed the purchase agreement after the addition of, but without approving, the modifications on which Mr. Buslee had conditioned his approval. However, there were at least three purchase agreements, and both Mr. Otero and Mrs. Buslee signed at least one, to which Mr. Buslee's addendum was never attached, on September 5. There was evidence that Mrs. Buslee was authorized to contract for both herself and her husband. Moreover, Mrs. Buslee was apparently ready to close the sale even though she knew that Mr. Otero had not signed the modifications. There was sufficient evidence for the trial court to find that the parties had a "meeting of the minds." We uphold its finding that they formed a contract.

The Buslees also argue that the contract is void under N.M.Stat.Ann. Sec. 40-3-13 (1978). Under that section, a contract to sell land held in joint tenancy by a husband and wife is void unless the wife either signs the contract or gives the husband a power of attorney to sell the land. Hannah v. Tennant, 92 N.M. 444, 589 P.2d 1035 (1979). The power of attorney must be recorded as if it were a conveyance of the property. N.M.Stat.Ann. Sec. 47-1-7 (1979).

A contract's invalidity under section 40-3-13 is an affirmative defense. See Hannah, 589 P.2d at 1037. The defendant bears the burden of proving an affirmative defense, ³ Wendell v. Foley, 92 N.M. 702, 594 P.2d 750 (Ct.App.), cert. denied, (1979), even if he must assert a negative, see Kuchan v.

                Strong, 39 N.M. 281, 46 P.2d 55 (1935).  At trial, the Buslees did not testify that a search of the relevant land records had failed to produce a properly recorded power of attorney;  they offered no evidence suggesting that there was none. 4   We uphold the trial court's finding that the Buslees did not establish this affirmative defense. 5
                

III. Damages

A. Liquidated Damages Clause

The purchase agreement contained the following provision:

$1,000.00

EARNEST MONEY

It is understood & Agreed that EARNEST MONEY will be held by James F. Wheeler & Associates until this transaction is concluded. EARNEST MONEY will be refunded if Sellers do not accept this agreement. Buyer will forfeit said EARNEST [sic] if buyer fails to comply with the terms and conditions of this offer or if buyer causes seller to lose money thru [sic] any action or failure on the part of the buyer.

Pl. Exhibit 3. The Buslees argue that this is a liquidated damages clause so that Mr. Otero was entitled to their deposit and nothing more when they breached.

Under New Mexico law, a clause in a real estate contract providing for a deposit of "earnest money" is presumed not to be a liquidated damages provision absent proof that the parties intended otherwise. Ashley v. Fearn, 64 N.M. 51, 323 P.2d 1093 (1958). A court may infer the parties' intent from unambiguous contract language, and may consider other evidence if the contract is not clear. Id. The Buslees argue that the word "forfeit" in this clause renders it a liquidated damages provision. We agree with the trial court that the clause is ambiguous. At trial, there was conflicting testimony about the parties' intent, and we find that there is sufficient evidence to uphold the trial court's finding that the parties did not intend the deposit to be liquidated damages.

B. Mitigation

The Buslees claim that Mr. Otero failed to mitigate his damages since he turned down an offer to buy the property for $139,000, $3,000 more than his contract price with the Buslees. There was testimony, however, that the later offer fell through because the buyers were leery of the effect of this suit on their title if they bought the land. In addition, Mr. Otero testified that the property had been continuously listed for sale with Mr. Wheeler since the breach. We hold that there was sufficient evidence for the trial court to find that Mr. Otero made reasonable efforts to mitigate his damages....