Ramsey v. Culpepper, 82-2135

• Decision Date: 05 July 1984
• Docket Number: No. 82-2135,82-2135
• Citation: 738 F.2d 1092
• Parties: 15 Fed. R. Evid. Serv. 1996 Catherine B. RAMSEY, Plaintiff-Appellee, v. Charles H. CULPEPPER and The Farmington Investment Company, Defendants-Appellants.
• Court: U.S. Court of Appeals — Tenth Circuit

Page 1092

738 F.2d 1092

15 Fed. R. Evid. Serv. 1996

Catherine B. RAMSEY, Plaintiff-Appellee, v. Charles H. CULPEPPER and The Farmington Investment Company Defendants-Appellants.

No. 82-2135.

United States Court of Appeals Tenth Circuit.

July 5, 1984.

Charles E. Stuckey, Modrall, Sperling, Roehl, Harris & Sisk, Albuquerque, N.M. (George T. Harris, Jr., Modrall, Sperling, Roehl, Harris & Sisk, Albuquerque, N.M., with him on the brief), for defendants-appellants.

Steven L. Tucker, Jones, Gallegos, Snead & Wertheim, Santa Fe, N.M., for plaintiff-appellee.

Before BARRETT, DOYLE and McKAY, Circuit Judges.

WILLIAM E. DOYLE, Circuit Judge.

This is an action which originally was filed by the appellee herein in the United States District Court for the District of New Mexico. The defendant Charles Culpepper is a realtor, and operates a real estate office, which is also a party to this action. The action alleges breach of fiduciary duty in connection with the negotiation of a lease on plaintiff's behalf. Below the realtor moved for summary judgment on the basis that the action was precluded by the applicable statute of limitations. The trial court denied the motion and the case was tried to a jury. The jury returned a verdict for the plaintiff in the amount of $76,860.00, together with $25,000 in punitive damages. Judgment was entered on these sums and we are called upon to review the proceedings in the district court.

The plaintiff Catherine Ramsey is a retired school teacher and librarian. For many years before her retirement she lived in Farmington, New Mexico. In the late 1930's she acted on the advice of her aunt and acquired four lots on the outskirts of Farmington, New Mexico. She erected a building on the four lots in 1948 at the request of a local businessman who wished to use the lots for a car dealership. He arranged the details concerning the building and paid Mrs. Ramsey a monthly rental of $600. In the early 1960's Mrs. Ramsey bought two adjoining lots in order to own a complete 1/2 block of commercially zoned property. At that time the area of Farmington had grown and her property was in the middle of downtown. She continued to rent the property at $600 per month until 1970, when the successor to the car dealership relocated.

Charles Culpepper, the defendant-appellant, learned that the property would be vacated in 1970 and contacted Mrs. Ramsey in Florida. He advised her that he would like to act as her rental agent. She had a long-time acquaintance with Mr. Culpepper's father and she had taught Mr. Culpepper in school. Based on that acquaintance she retained him to represent her in leasing the property. She left the arrangements to his discretion, because she was unschooled in business matters and knew little about the Farmington rental market.

Mr. Culpepper negotiated with Sears, Roebuck and Company for the lease of the property and actually offered the property to Sears "as is" for $600 per month. Sears responded that it required remodeling of the building. Culpepper told Mrs. Ramsey this and she authorized him to make the necessary changes. Culpepper reached an agreement with Sears which provided for a five year term at a monthly rental of $600, with remodeling. Under the agreement Mrs. Ramsey would pay $12,500 towards the remodeling and pay all taxes and insurance for the building. The agreement also gave Sears an option for an additional five years at the same rent. Culpepper told Mrs. Ramsey "this is the best I can do." He forwarded the lease to her for her approval and she signed it.

Sears exercised its option in 1974, and it sought additional options. Apparently, the realtor prepared a new document granting Sears two additional five year options at the same monthly rate. Although plaintiff does not remember signing the form, the document apparently bears her signature.

On March 10, 1980, Sears renewed the lease for another five years at the $600 per month rent. On March 17, 1980, obviously unaware of Sears' renewal, Mrs. Ramsey wrote to Mr. Culpepper, indicating that because Sears was moving out and Mr. Culpepper did not have time to search for a new tenant, she wished to close her account with the Farmington Investment Company. Culpepper then informed Mrs. Ramsey that Sears had exercised its option, and would remain on the property at a monthly rent of $600 until at least 1985. She was surprised and upset to learn of this.

In 1981 Plaintiff Ramsey brought this negligence and fraud action against the realtor, Mr. Culpepper and his realty office. She alleged that the realtor had breached his fiduciary duty to her in failing to ascertain the fair rental value of the property, in requiring her to make improvements without any enhancement of the rental rate, in failing to escalate the rental rate over the term of the lease, and in failing to advise her or protect her interests as to the agreement to extend the lease for additional terms.

On appeal Culpepper maintains that the trial court erred in a number of respects. He alleges that the court should have granted his motion for a directed verdict, which alleged that the plaintiff's claim was barred by the statute of limitations and; that the trial court's instructions to the jury on applicable standards in connection with the statute of limitations were erroneous; that there was inadequate evidence to allow the issue of punitive damages to be submitted to the jury; that the trial court erred in admitting evidence of the financial condition of the defendant; that the trial court improperly allowed plaintiff's counsel to discuss punitive damages in his rebuttal argument; and that the trial court erred in admitting the testimony of one of plaintiff's proffered experts. Defendant claims that these errors demand a reversal in this case.

1. WHETHER THE STATUTE OF LIMITATIONS BARRED THE ACTION?

The argument of Culpepper is that the New Mexico statute of limitations period applicable to claims of constructive fraud and negligence is four years. In cases of fraud, the limitations period begins running when the plaintiff discovers the fraud or when, with reasonable diligence, the plaintiff could have discovered the fraud. According to Culpepper, plaintiff testified at trial that in 1975 she first learned that a rent escalation clause would be advantageous to her but was not in her lease with Sears. It is Culpepper's position that plaintiff had four years from learning this to bring her claim. The limitations period allegedly ended sometime in 1979, but plaintiff did not file this action until January 1981. From this Culpepper maintains that the court should have granted his motion for a directed verdict, on the ground that the action was barred by the statute of limitations.

Mrs. Ramsey argues that in 1975 she learned that escalation clauses benefit lessors, but she knew little about the circumstances surrounding the lease at issue. She relied on defendant's representations that the lease as written was the best he could obtain. She claims that she first discovered the inadequacy of the lease when she learned in 1980 that Culpepper had extended the agreement, without any rent enhancement, until 1990. She contends that the issue of when she discovered the cause of action is in dispute and was properly left to the jury's determination.

It is true that in New Mexico, a cause of action based upon fraud and negligence is subject to a four year statute of limitations. N.M.Stat.Ann. Sec. 37-1-4 (1978). Both causes of action, however, are subject to equitable tolling. The New Mexico doctrine of fraudulent concealment provides:

[W]here a party against whom a cause of action accrues prevents the one entitled to bring the cause from obtaining knowledge thereof by fraudulent concealment, or where the cause is known to the injuring party, but is of such character as to conceal itself from the injured party, the statutory limitation on the time for bringing the action will not begin to run until the right of action is discovered, or, by the exercise of ordinary diligence, could have been discovered.

Hardin v. Farris, 87 N.M. 143, 530 P.2d 407, 410 (1974) (citations omitted). The fraudulent concealment doctrine is codified as to fraud actions in the New Mexico statutes, ¹ but applies equally to causes of action grounded in negligence. Hardin, supra.

In most cases, defendant must have made some affirmative false representation to justify the invocation of the fraudulent concealment doctrine. "However, in a confidential relationship where there exists a duty to speak, ... mere silence constitutes fraudulent concealment." Hardin, 530 P.2d at 410. Moreover, the false statement or omission by a defendant who has a special relationship with the plaintiff may also constitute constructive fraud.

Generally speaking constructive fraud is a breach of a legal or equitable duty which the law declares fraudulent because of its tendency to deceive others. Such fraud may be present on the part of the fraud feasor without any showing of dishonesty of purpose or intent to deceive

Gaston v. Hartzell, 89 N.M. 217, 549 P.2d 632, 634 (1976) (quoting Barber's Super Markets, Inc. v. Stryker, 84 N.M. 181, 500 P.2d 1304, 1309 (1972)) (emphasis in original). In cases in which the false statement or omission also constitutes constructive fraud, "[i]rrespective of the good faith with which a false representation is made, if it is justifiably relied on by the purchaser, he has no duty to make inquiries or examination of the misrepresentation, unless he had knowledge of his own or of facts which should arouse suspicion and cast doubt upon the truth of the statement made." Gaston, 549 P.2d at 634.

There can be no question that in the case at bar Culpepper was acting in a fiduciary capacity on behalf of Mrs. Ramsey and as we pointed out before, she was extremely dependent upon him. Under those circumstances he had a duty to represent her best interests. Without particular...