Freeman v. Fairchild ( 2014 )

IN THE COURT OF APPEALS OF THE STATE OF NEW MEXICO
Opinion Number: _______________
Filing Date: September 10, 2014
Docket No. 32,542
JERALD W. FREEMAN, THE TEA LEAF,
INC., and THOMAS NYGARD, INC.,
Plaintiffs-Appellees,
v.
PAUL W. FAIRCHILD, JR.,
Defendant/Cross-Claimant-Appellee,
v.
RICHARD H. LOVE and R.H. LOVE
GALLERIES, INC.,
Defendants-Appellants.
APPEAL FROM THE DISTRICT COURT OF SANTA FE COUNTY
Barbara J. Vigil, District Judge
Keleher & McLeod, P.A.
Thomas C. Bird
Kurt Wihl
Christina Muscarella Gooch
Albuquerque, NM
for Plaintiffs-Appellees Jerald W. Freeman, The Tea Leaf, Inc.,
and Thomas Nygard, Inc.
Thompson, Hickey, Cunningham, Clow, April & Dolan, P.A.
David F. Cunningham
Brenden J. Murphy
Santa Fe, NM
for Defendant/Cross-Claimant-Appellee Paul W. Fairchild, Jr.
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Coberly & Attrep, LLLP
Todd A. Coberly
Santa Fe, NM
for Appellants
OPINION
FRY, Judge.
{1} The Opinion filed on July 30, 2014 is withdrawn, and the following is substituted for
it. Defendants’ motion for rehearing is denied.
{2} Plaintiffs Jerald W. Freeman, The Tea Leaf, Inc., and Thomas Nygard, Inc., owned
a painting that they agreed to sell to Paul Benisek. Benisek, in turn, agreed to sell the
painting to Defendants R.H. Love Galleries, Inc., and Richard H. Love (collectively referred
to as Love). Love then sold the painting to Defendant Paul W. Fairchild, Jr. Fairchild paid
Love in full for the painting, but Love never completely paid Benisek, and Benisek never
completely paid Plaintiffs. In this controversy over possession of the painting and amid the
claims, cross-claims, and counterclaims asserted, we reverse summary judgment entered in
favor of Plaintiffs against Love because they failed to make a prima facie showing of the
elements necessary to support their claims. Accordingly, we also reverse the district court’s
award of damages on Plaintiffs’ claims against Love. We affirm summary judgment in favor
of Fairchild against Love and the district court’s later award of damages on Fairchild’s
claims against Love.
BACKGROUND
{3} Plaintiffs jointly owned a painting by Albert Bierstadt titled “Sunset Over the Plains”
(the painting). Freeman, on behalf of himself and the other Plaintiffs, negotiated with
Benisek and agreed to sell the painting to Benisek for $240,000. In the written purchase
agreement dated October 28, 2002, Benisek agreed to pay Freeman for the painting in twelve
monthly installments. He further agreed that “[t]itle in the [painting] shall remain with
[Freeman] until the [p]urchase [p]rice is paid in full” and that he would execute “UCC or
similar documents as [Freeman] may reasonably require.” The agreement also provided that
“[Benisek] shall be in possession” of the painting.
{4} On the same day that Freeman and Benisek entered into their written agreement (the
Freeman/Benisek agreement), Benisek entered into a written agreement to sell the painting
to Love for $300,000 (the Benisek/Love agreement). As in the Freeman/Benisek agreement,
the Benisek/Love agreement provided that Love would pay for the painting in twelve
monthly installments, but the due date for each payment was scheduled to occur several days
before each of Benisek’s corresponding payments to Freeman. The remaining terms of the
Benisek/Love agreement were similar to the terms of the Freeman/Benisek agreement,
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including the provision that title to the painting would remain with the seller (Benisek) until
the purchase price had been paid in full and the provision that the buyer (Love) would be in
possession of the painting. Thus, the two agreements were in conflict as to who had title to
and who would retain possession of the painting. The other material difference between the
two agreements—apart from the names of the parties, the amounts of the purchase price and
the installment payments, and the due dates of payments—was the provision in the
Benisek/Love agreement that “[t]he [painting] constitutes security for payment of the
[p]urchase [p]rice.” In addition, the Benisek/Love agreement referred to Benisek as
“[s]eller’s [a]gent” rather than as “[s]eller,” which was the designation applied to Freeman
in the Freeman/Benisek agreement.
{5} Despite the express terms of the Freeman/Benisek agreement, Benisek had orally
agreed—prior to the execution of either agreement—to sell the painting to Love, and he had
also given possession of the painting to Love. Also prior to the execution of the two
agreements and contrary to the express terms of the Benisek/Love agreement, Love had
orally agreed to sell the painting to Fairchild for $375,000 and had given Fairchild
possession of the painting in exchange for cash and three other paintings. The cash and three
paintings constituted payment in full from Fairchild to Love for the painting.
{6} In summary, Benisek agreed to purchase the painting from Freeman and sold and
delivered the painting to Love, who in turn sold and delivered the painting to Fairchild, all
before Benisek signed the written agreement with Freeman promising to retain possession
of the painting and before Love signed a similar agreement with Benisek also promising to
retain possession of the painting. The only person who paid for the painting in full was
Fairchild.
{7} Love made the first four installment payments owed to Benisek, and Benisek in turn
made the first four installment payments to Freeman. Then, in April 2003, Love told
Benisek that he was declaring a moratorium on any further payments due to financial
troubles, and Love’s check for the fifth installment payment bounced. Benisek had already
made his fifth installment payment to Freeman, so he informed Freeman about Love’s
moratorium and asked Freeman to return the fifth payment to him.
{8} Although the details are far from clear, Love and Freeman apparently made contact
at some point after this because Love sent a letter to Freeman’s attorney explaining that he
was experiencing financial difficulties. In the letter, Love proposed to liquidate various
assets and to allow creditors to assert liens on certain assets “in amounts and on terms to be
negotiated.” The letter further provided that creditors would forebear enforcing their liens
or claims for a period of time until Love could reestablish his gallery. Finally, the letter
stated that Love would make his financial information available to Freeman if Freeman
signed and returned a non-disclosure agreement. Freeman did sign the non-disclosure
agreement, which essentially provided that Freeman would “enter discussions concerning
past and potential business transactions with [Love]” and that Freeman would “use best
efforts to assure that any confidential and/or proprietary information disclosed in connection
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with such discussions will be kept confidential.” The record does not disclose any further
details about other discussions, if any, between Love and Freeman.
{9} In February 2004, Fairchild apparently placed the painting on consignment with
Owen Gallery, and Freeman saw an Owen Gallery catalog offering the painting for sale.
Freeman asked Owen Gallery if he could view the painting, and Owen Gallery shipped the
painting from New York to a gallery in Santa Fe, New Mexico, where Freeman was located.
Freeman then took possession of the painting and refused to return it to Owen Gallery.
{10} Shortly after Freeman regained possession of the painting, he filed suit against
Benisek, Love, and Fairchild. Freeman sought (1) a declaratory judgment establishing that
his rights to possession of the painting were superior to the rights of Defendants, and (2)
damages for breach of contract, conversion, negligent misrepresentation, fraud, prima facie
tort, and breach of the implied covenant of good faith and fair dealing. Freeman later
amended his complaint to add the other Plaintiffs. Fairchild then filed counterclaims against
Plaintiffs for declaratory judgment, conversion, and fraud, and cross-claims against Love for
fraud, negligent misrepresentation, and violation of the Illinois Consumer Fraud and
Deceptive Business Practices Act (Illinois Act).
{11} After nearly six years of litigation, Plaintiffs filed a motion seeking partial summary
judgment against Love on their claims for breach of contract, negligent misrepresentation,
and fraud. Following a hearing, the district court granted the motion, holding that there were
no material issues of fact that (1) Love had breached the contract with Benisek “as agent for
Plaintiffs” by failing to maintain possession of the painting, by failing to pay Benisek, and
by failing to perfect a security interest in the painting; (2) Love negligently represented that
he would keep possession of the painting and perfect a security interest in it; and (3) Love
was guilty of fraud because he intended that “Plaintiffs, through their agent Benisek,” rely
on Love’s misrepresentations and because he misrepresented to Plaintiffs, “through their
agent Benisek” that he would keep possession of the painting and perfect a security interest
in it while being aware that he had already sold and delivered the painting to Fairchild.
Thus, the district court’s summary judgment in favor of Plaintiffs depended on the notion
that Benisek was acting as Plaintiffs’ agent in his dealings with Love. The district court
ordered that damages would be determined at a subsequent trial.
{12} Meanwhile, Fairchild had filed his own motion seeking partial summary judgment
against Love. Instead of responding to the motion, Love’s counsel moved to withdraw, and
the district court granted the motion and advised Love in its order that Love would have
twenty days in which to retain substitute counsel. Love did not retain substitute counsel and
appeared pro se by telephone at the hearing on Fairchild’s motion a month and a half later.
At the hearing, Fairchild’s counsel argued only that Love had not responded to Fairchild’s
motion for summary judgment, and the district court announced that “[b]ecause there ha[d]
not been a substantive response to the motion, . . . the motion shall be granted.” The court
concluded that it would determine damages “at a later proceeding.”
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{13} Plaintiffs and Fairchild settled their respective claims against one another. Plaintiffs
filed a motion for summary judgment on their claims against Benisek, which the district
court granted only as to the claim for breach of contract. Plaintiffs and Benisek reached a
settlement whereby Benisek agreed to pay Plaintiffs $38,000 for the breach of contract, and
Plaintiffs dismissed their other claims against Benisek.
{14} The issue of damages to be assessed against Love in favor of Plaintiffs and in favor
of Fairchild was tried to the district court over two days. Again, Love appeared pro se by
telephone. At the conclusion of the trial, the district court awarded Plaintiffs $731,744 in
compensatory damages and $4,390,645 in punitive damages. The court awarded Fairchild
$1,942,446 in compensatory damages and $9,712,232 in punitive damages. Thus, the district
court found Love liable for a total of $16,777,067 in damages. The district court denied
Love’s motion for a new trial. This appeal followed.
DISCUSSION
{15} Love argues that the district court erred in granting summary judgment to Plaintiffs
and Fairchild and in its assessment of damages. We conclude that the district court
erroneously entered summary judgment in favor of Plaintiffs. We further conclude that
summary judgment in favor of Fairchild was appropriate.
{16} We review summary judgment de novo. Self v. United Parcel Serv., Inc.,
1998-NMSC-046, ¶ 6, 126 N.M. 396, 970 P.2d 582. “Summary judgment is appropriate
where there are no genuine issues of material fact and the movant is entitled to judgment as
a matter of law.” See Rule 1-056(C) NMRA. The appellate courts “view the facts in a light
most favorable to the party opposing summary judgment and draw all reasonable inferences
in support of a trial on the merits.” Romero v. Philip Morris Inc., 2010-NMSC-035, ¶ 7, 148
N.M. 713, 242 P.3d 280 (internal quotation marks and citation omitted). The party moving
for summary judgment must make a prima facie showing and come forward with “such
evidence as is sufficient in law to raise a presumption of fact or establish the fact in question
unless rebutted.” Rivera v. Brazos Lodge Corp., 1991-NMSC-030, ¶ 5, 111 N.M. 670, 808
P.2d 955.
I. Summary Judgment in Favor of Plaintiffs
{17} Love maintains that Plaintiffs failed to make a prima facie showing that Benisek was
acting as their agent in his dealings with Love. Because Plaintiffs and Love had no direct
interaction with each other, Love contends, the only way Plaintiffs could prove their claims
of breach of contract, misrepresentation, and fraud was by establishing an agency
relationship between Plaintiffs and Benisek. We agree with Love and, as a result, we need
not address Love’s alternative arguments challenging the summary judgment in favor of
Plaintiffs.
{18} Before considering the substance of Plaintiffs’ motion for summary judgment, it is
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useful to place the motion in context. When Freeman filed his initial complaint against
Defendants, he alleged, among other things, that “Benisek was introduced to Freeman as a
buyer for the [p]ainting . . . on or about October 28, 2002,” and that Freeman entered into
an agreement to sell the painting to Benisek. The complaint went on to recite the details of
the Freeman/Benisek agreement and that Benisek had transferred possession of the painting
to Love in violation of the agreement. The complaint then alleged that “in purchasing the
[p]ainting from Freeman, Benisek was acting as agent for Love” and that Freeman
“believe[d] that Defendants colluded to defraud Freeman of the [p]ainting.” Nowhere in the
initial complaint did Freeman allege that Benisek was acting as his (Freeman’s) agent.
{19} The first amended complaint added Thomas Nygard, Inc. and The Tea Leaf as
Plaintiffs and made allegations similar to those in the original complaint. Specifically, the
amended complaint alleged that “[a]t all times, Benisek was acting as agent and/or partner
for Defendants” and that “in purchasing the [p]ainting from Freeman, Benisek was acting
as agent for Love . . . and Fairchild.” The amended complaint further alleged that
“Defendants entered into a partnership to purchase the [p]ainting and to defraud Plaintiffs
of the [p]ainting.” Once again, the amended complaint never alleged that Benisek was
acting as Plaintiffs’ agent. Plaintiffs never amended their complaint again in order to change
their theory of the case.
{20} Plaintiffs’ next major undertaking in the case was their motion for partial summary
judgment against Benisek in which they alleged that Benisek was liable for breach of
contract, negligent misrepresentation, and fraud. As undisputed material facts, Plaintiffs
alleged that they had entered into an agreement to sell the painting to Benisek, that Benisek
had stopped making the payments required by the agreement, and that Benisek had violated
the agreement by failing to retain possession of the painting. At no point in this motion did
Plaintiffs suggest that Benisek was ever their agent for any purpose. Indeed, in an excerpt
from Freeman’s deposition attached to the motion, counsel, noting that Benisek identified
himself as “[s]eller’s [a]gent” in several documents, asked Freeman if Benisek was
Freeman’s agent. Thus, as of this point in the litigation—some six years after the suit was
filed—the pleadings and evidence had given no indication that Plaintiffs believed Benisek
was their agent. Yet, on the very same day that they filed their motion for summary judgment
against Benisek, Plaintiffs filed their motion for summary judgment against Love, in which
they rested their entire argument on the notion that Benisek was their agent. Against this
contextual backdrop, we turn now to the substantive aspects of that motion.
{21} It is undisputed that Plaintiffs did not have any direct contact or a direct contractual
relationship with Love at the relevant times when the painting was being sold and possession
was being transferred. Consequently, Plaintiffs could not establish that Love breached a
purported contract with them or that Love made any misrepresentations to them unless they
proved that Benisek was acting as their agent when he entered into the Benisek/Love
agreement and when Love allegedly misrepresented to Benisek that he (Love) would keep
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possession of the painting.1 And, as we have noted, Plaintiffs’ argument in their motion for
summary judgment was based on their contention that Benisek was their agent when he
entered into the Benisek/Love agreement.
{22} “An agent is a person who, by agreement with another called the principal, represents
the principal in dealings with third persons or transacts some other business, manages some
affair, or does some service for the principal, with or without compensation.” Barron v.
Evangelical Lutheran Good Samaritan Soc’y, 2011-NMCA-094, ¶ 16, 150 N.M. 669, 265
P.3d 720 (alteration, internal quotation marks, and citation omitted). While the authority of
an agent may be actual or apparent, Plaintiffs do not argue that Benisek’s authority was
anything other than actual. “Actual authority is given to the agent by the principal in terms
that are express, or in terms that are implied from words or conduct of the principal to the
agent or from the circumstances of the relationship.” Id. (internal quotation marks and
citation omitted). An agency relationship does not arise until the principal “manifests assent
to [the agent] that the agent shall act on the principal’s behalf and subject to the principal’s
control, and the agent manifests assent or otherwise consents so to act.” Maes v. Audubon
Indem. Ins. Group, 2007-NMSC-046, ¶ 17, 142 N.M. 235, 164 P.3d 934 (internal quotation
marks and citation omitted). Significantly, “[t]he existence of agency is a question of fact.”
Santa Fe Techs., Inc. v. Argus Networks, Inc., 2002-NMCA-030, ¶ 26, 131 N.M. 772, 42
P.3d 1221. Therefore, in order to establish entitlement to summary judgment, it was
Plaintiffs’ burden to make a prima facie showing of an agency relationship between
themselves and Benisek. See id.{23} We pause to address Plaintiffs’ contention that Love never argued in response to the
motion for summary judgment that Plaintiffs failed to establish the existence of an agency
relationship with Benisek. This contention is unavailing because, even if Love had not
responded at all to Plaintiffs’ motion, we would still have to consider whether Plaintiffs
made a prima facie showing of entitlement to summary judgment. See Brown v. Taylor,
1995-NMSC-050, ¶ 8, 120 N.M. 302, 901 P.2d 720 (explaining that “[t]he moving party may
not be entitled to judgment even if the non-moving party totally fails to respond to the
motion” because “until the moving party has made a prima facie case that it is entitled to
summary judgment, the non-moving party is not required to make any showing with regard
to factual issues” (internal quotation marks and citation omitted)). Moreover, Love clearly
argued at the summary judgment hearing that Plaintiffs’ claim of agency was questionable.
{24} Plaintiffs asserted numerous allegedly undisputed material facts to support their
1
We recognize that third-party beneficiaries may be able to recover for breach of
contract under some circumstances. See Fleet Mortg. Corp. v. Schuster, 1991-NMSC-046,
¶ 4, 112 N.M. 48, 811 P.2d 81 (stating that a third party may have an enforceable right
against an actual party to a contract if the third party is an intended beneficiary of the
contract). However, Plaintiffs do not argue that they are third-party beneficiaries of the
Benisek/Love agreement.
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motion for summary judgment against Love, including the following:
• Plaintiffs owned the painting and, through Freeman, they began negotiating with
Benisek about selling the painting in October 2002.
• Freeman entered into the Freeman/Benisek agreement by which Benisek purchased
the painting and, on the same day, Love agreed to purchase the painting from
Benisek.
• Love agreed to keep possession of the painting until Benisek was paid in full, but
Love did not do this because he sold it to Fairchild. In the Benisek/Love agreement,
Love agreed to execute UCC or similar documents, and the filing of a “UCC Form
1” was “[a]n important part of the [Freeman/]Benisek [a]greement.”
• “Freeman relied on the provision in the [Freeman/]Benisek [a]greement that
prohibited Benisek from alienating the [p]ainting before he had paid for it in full.”
• Love did not pay Benisek as required by the Benisek/Love agreement and, as a
result, Benisek did not fully pay Plaintiffs.
• Love issued a moratorium by which he stopped paying his financial obligations.
{25} The above alleged material facts do not shed any light on whether there was an
agency relationship between Plaintiffs and Benisek. At most, they suggest that Love’s only
contractual relationship was with Benisek, and there is no material fact suggesting that
Plaintiffs and Benisek had any relationship other than as sellers and buyer. No fact gives
rise to any inference that Plaintiffs and Benisek explicitly or implicitly manifested to each
other the assent necessary to establish the relationship of principal and agent.
{26} The only alleged material facts that appear to even remotely address the question of
agency were as follows:
• Following Love’s issuance of his moratorium, “Love’s representative negotiated
directly with Freeman’s lawyer regarding Love’s indebtedness to . . . Plaintiffs.”
• Freeman signed a non-disclosure agreement stating that “the individuals who have
signed as individual creditors . . . have agreed to enter discussions concerning past
. . . business transactions with Love.” (Alterations omitted and omissions in
original).
• “The [Benisek/]Love agreement provide[d] that Benisek was Plaintiffs’ agent for
selling the [p]ainting to Love.”
{27} These alleged material facts also fail to establish the existence of an agency
8
relationship between Plaintiffs and Benisek. The evidence that Love negotiated directly with
Freeman and that Freeman viewed himself to be Love’s creditor may be indicative of a
relationship Freeman and Love may have established after the various sales of the painting.
This evidence says nothing about whether Plaintiffs and Benisek had an agency relationship
at the time of the sales. As for the Benisek/Love agreement’s alleged provision that Benisek
was acting as Plaintiffs’ agent in the sale to Love, the evidence offered in support of this
allegation does not support the proposition. The Benisek/Love agreement did nothing more
than identify “Paul D. Benisek (Seller’s Agent)” as a party to the agreement, and the body
of the agreement referred to Love as “Purchaser” and Benisek as “Seller’s Agent.” Again,
this nomenclature reveals nothing about whether Plaintiffs and Benisek manifested assent
to each other to enter into an agency relationship of any kind, and such assent is essential to
establishing the existence of agency. “[A]n agency relationship arises only when the
elements [of mutual assent, among other things,] are present. Whether a relationship is
characterized as agency in an agreement between parties or in the context of industry or
popular usage is not controlling.” Restatement (Third) of Agency § 1.02 (2006) (emphasis
added).
{28} Plaintiffs maintain that Love conceded the existence of an agency relationship
between Plaintiffs and Benisek because Love signed the agreement referring to Benisek as
“Seller’s Agent” and because he entered into negotiations with Freeman directly after he
stopped paying Benisek. We are not persuaded by either argument. First, as we have already
noted, Benisek’s label as “Seller’s Agent” is meaningless without evidence that Plaintiffs
and Benisek manifested assent to one another that an agency existed. See Restatement
(Third) of Agency § 1.02 cmt. c (“How the parties characterized the relationship is not
dispositive, nor is popular usage.”). Second, whatever negotiations Love entered into with
Plaintiffs after the sale from Benisek to Love are irrelevant to the existence of a
Plaintiffs/Benisek agency relationship. Perhaps Love and Plaintiffs entered into their own
direct agreement about payment for the painting, but Plaintiffs did not present any evidence
about the details of any such purported agreement. To the extent Plaintiffs argue that Love
“ratifi[ed] Benisek’s agency for . . . Freeman,” an agent’s conduct can only be “ratified” by
the putative principal, which in this case would be Plaintiffs. See Restatement (Third) of
Agency § 4.03 (2006) (stating that “[a] person may ratify an act if the actor acted or
purported to act as an agent on the person’s behalf” (emphasis added)).
{29} We also decline Plaintiffs’ invitation to conclude that Plaintiffs ratified Benisek’s
sale agreement with Love. Apparently conceding that they did not make this argument in
the district court, Plaintiffs argue that we can affirm on this “right for any reason” basis. An
appellate court may “affirm the district court if it is right for any reason and if affirmance is
not unfair to the appellant.” Bd. of Cnty. Comm’rs v. Chavez, 2008-NMCA-028, ¶ 12, 143
N.M. 543, 178 P.3d 828 (internal quotation marks and citation omitted). We conclude that
affirming on this basis would be unfair to Love for two reasons. First, Love had no
opportunity in the district court to respond to the unasserted argument about ratification.
Second, the question of ratification is highly fact-dependent, and Plaintiffs did not present
evidence sufficient for the district court to determine whether Plaintiffs had made a prima
9
facie showing of ratification. See State v. Vargas, 2008-NMSC-019, ¶ 8, 143 N.M. 692, 181
P.3d 684 (“Under the ‘right for any reason’ doctrine, we may affirm the district court’s order
on grounds not relied upon by the district court if those grounds do not require us to look
beyond the factual allegations that were raised and considered below.” (internal quotation
marks and citation omitted)).
{30} In summary, we hold that Plaintiffs failed to make a prima facie showing of an
agency relationship between themselves and Benisek. Without the existence of such a
relationship, Plaintiffs could not establish that Love breached any contract with them
because Plaintiffs have not shown the existence of a contract between themselves and Love.
Plaintiffs further could not show that Love made any negligent or fraudulent
misrepresentations to them because all of Love’s relevant representations were made only
to Benisek. Therefore, summary judgment in favor of Plaintiffs against Love was improper.
Because summary judgment was improper, the award of damages to Plaintiffs was also in
error.
II. Summary Judgment in Favor of Fairchild
{31} Fairchild sought partial summary judgment against Love on the issues of liability for
fraud, negligent misrepresentation, and violation of the Illinois Act. Love, whose counsel
had withdrawn, filed no response to the motion. At the hearing on the motion, which Love
attended by phone, Fairchild’s counsel did not argue the merits of the motion but instead
argued only that Love was “in default” and that Fairchild was entitled to summary judgment.
Love responded that he filed no response because he had no counsel. He also contended that
he was not at his office due to ill health and did not often get his mail. He stated, “If there
is some way to reconsider this, I would like to.” The district court responded, “I find that
there is not a sufficient basis upon which to allow . . . Love additional time in which to
respond. Because there has not been a substantive response to the motion, under the Rules
. . . I find that the motion shall be granted.” And, as it did in connection with Plaintiffs’
summary judgment, the district court reserved the issue of damages to be determined at a
later proceeding.
{32} We agree with Love that it was error for the district court to grant Fairchild’s motion
for summary judgment solely on the basis of Love’s failure to respond to the motion. See
Brown, 1995-NMSC-050, ¶ 8 (“The moving party may not be entitled to judgment even if
the non-moving party totally fails to respond to the motion.”). The district court should have
deemed admitted the facts alleged in Fairchild’s motion and then determined whether those
facts made a prima facie showing of entitlement to summary judgment. See id. (explaining
that “until the moving party has made a prima facie case that it is entitled to summary
judgment, the non-moving party is not required to make any showing with regard to factual
issues” (internal quotation marks and citation omitted)). Because our review is de novo, we
undertake this task and conclude that Fairchild did establish a prima facie case of entitlement
to summary judgment, and we affirm on the ground that the district court was right for
another reason. See Vargas, 2008-NMSC-019, ¶ 8.
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A. Negligent Misrepresentation
{33} In order to prevail on his claim of negligent misrepresentation, Fairchild had to make
a prima facie showing that (1) Love made a material misrepresentation of fact to Fairchild,
(2) Fairchild relied upon the representation, (3) Love knew the representation was false at
the time it was made or he made it recklessly, and (4) Love intended to induce Fairchild to
rely on the representation. See Saylor v. Valles, 2003-NMCA-037, ¶ 17, 133 N.M. 432, 63
P.3d 1152. A misrepresentation can be made by either commission or omission. In re Stein,
2008-NMSC-013, ¶ 35, 143 N.M. 462, 177 P.3d 513.
{34} Fairchild alleged in his motion for summary judgment that Love did not own the
painting, had not paid for it, had no bill of sale showing ownership when he sold the painting
to Fairchild, and that Love knew these facts and did not disclose them to Fairchild when he
sold the painting. Fairchild further alleged that he would not have bought the painting or
paid the purchase price had he known that Love did not own the painting and had not paid
for it and that he relied on Love’s misrepresentations by omission. In addition, Fairchild
alleged that Love knew Fairchild was relying on him to be honest. Fairchild presented
evidence supporting these allegations. Thus, Fairchild established a prima facie case of
Love’s liability for negligent misrepresentation.
B. Fraud
{35} The elements of fraudulent representation are virtually the same as the elements of
negligent misrepresentation except that the elements must be proved with clear and
convincing evidence. See Encinias v. Whitener Law Firm, P.A., 2013-NMSC-045, ¶ 22, 310
P.3d 611. Under the procedural posture of this case, the heightened burden of proof should
have no impact. Fairchild supported his allegations of fact with evidence establishing each
element. Therefore, we conclude that Fairchild established the prima facie liability of Love
on the claim of fraudulent misrepresentation.
C. Illinois Act
{36} In order to prove a private claim under the Illinois Act, a claimant must establish “(1)
a deceptive act or practice by the defendant, (2) the defendant’s intent that the plaintiff rely
on the deception, (3) the occurrence of the deception in the course of conduct involving trade
or commerce, and (4) actual damage to the plaintiff (5) proximately caused by the
deception.” Avery v. State Farm Mut. Auto. Ins. Co., 835 N.E.2d 801, 850 (Ill. 2005). These
elements are similar to the elements of negligent and fraudulent misrepresentation discussed
above. The only additional element is that the deception must occur “in the course of
conduct involving trade or commerce.” Id. The Illinois Act defines the terms “trade” and
“commerce” as “the advertising, offering for sale, sale, or distribution of any services and
any property, tangible or intangible, real, personal or mixed, and any other article,
commodity, or thing of value . . . and shall include any trade or commerce directly or
indirectly affecting the people of this [s]tate.” 815 Ill. Comp. Stat. 505/1(f) (2007). Given
11
the evidence Fairchild submitted in support of his claims for negligent and fraudulent
misrepresentation, plus evidence that Love’s alleged deception occurred in the course of his
sale of the painting to Fairchild, it is clear that Fairchild also made a prima facie showing of
entitlement to judgment on the claim under the Illinois Act.
{37} Because Fairchild established prima facie entitlement to judgment under all of his
claims against Love, we conclude that the district court’s entry of summary judgment in
favor of Fairchild was proper for a reason other than Love’s failure to file a response to
Fairchild’s motion. It is not unfair to Love to employ this “right for any reason” analysis
because Love had the opportunity to respond to Fairchild’s prima facie showing and failed
to do so. We therefore turn to the question of whether the district court’s award of damages
to Fairchild was proper.
III. Damages Awarded to Fairchild
{38} As previously mentioned, the district court conducted a hearing on damages and
awarded Fairchild $1,942,446 in compensatory damages and $9,712,232 in punitive
damages. Love argues that the damages awards were erroneous because (1) part of the
compensatory damages were awarded for Fairchild’s loss of the “use of the money” he had
spent to purchase the painting, which is simply prejudgment interest in disguise, and Illinois
law does not permit the recovery of prejudgment interest; (2) the award of attorney fees,
costs, and interest was contrary to Illinois law and, even if such damages were compensable,
the district court failed to exclude fees and costs attributable to work unrelated to this case;
(3) nothing in the Illinois Act permitted the district court to award Fairchild compensation
for his own time expended in the course of the litigation; and (4) the punitive damages award
was insupportable because it was based on the grossly erroneous award of compensatory
damages and because it was based in part on evidence of Love’s “bad acts” that were
unrelated to his conduct in connection with the sale of the painting.
{39} At first blush, it does seem extraordinary that Fairchild should be awarded in excess
of $11 million for the fraudulent sale of a painting worth in the neighborhood of $400,000.
But we need not analyze Love’s arguments attacking the damages awards because, as
Fairchild contends, Love failed to preserve his arguments in the district court.
{40} Fairchild presented the testimony of several witnesses, both live and by deposition,
as well as documentary evidence on the question of damages. Love cross-examined some
of the witnesses. Love introduced no evidence of his own apart from a very short direct
examination of Fairchild. At no point did Love make any of the arguments challenging the
damages award that he now makes on appeal.
{41} Love maintains that he preserved his arguments in his motion for a new trial, which
he filed after the district court entered judgment in favor of Fairchild. We are not persuaded.
The motion for a new trial argued that “the [j]udgment is excessive, that [it] violated
[Love’s] rights to due process of law, and for error in evidentiary rulings.” The motion
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provided no elaboration on these points. More importantly, a motion for new trial cannot
make up for the failure to preserve issues at trial. See Goodloe v. Bookout,
1999-NMCA-061, ¶ 13, 127 N.M. 327, 980 P.2d 652 (“Raising the matter in [the] motion
for a new trial came too late; objections must be raised in time for the [district] judge to
correct the error to prevent prejudice.”), superseded by rule on other grounds as stated in
Acosta v. Shell W. Exploration & Prod., Inc., 2013-NMCA-009, 293 P.3d 917.
{42} Love next argues that we should exercise our discretion to review the unpreserved
arguments for fundamental error. See Rule 12-216(B) NMRA (stating that the appellate
court may, in its discretion, review questions that were not preserved in the district court if
they involve jurisdiction, general public interest, or fundamental error or fundamental rights
of a party). Our Supreme Court has observed that it “has applied the doctrine [of
fundamental error] in civil cases under the most extraordinary and limited circumstances.”
Estate of Gutierrez ex rel. Jaramillo v. Meteor Monument, L.L.C., 2012-NMSC-004, ¶ 33,
274 P.3d 97. The Court pointed to two cases that applied the doctrine. In one case, the
Court in its discretion considered unpreserved arguments related to jury instructions on the
theory of successive tortfeasors because, at the time, there was very little case law on the
theory, and there were no applicable uniform jury instructions. Payne v. Hall,
2006-NMSC-029, ¶ 37, 139 N.M. 659, 137 P.3d 599. In the other case, the Court considered
an argument made for the first time on appeal because the factual basis for the argument did
not even occur until after the initial appeal was filed. Rivera v. Am. Gen. Fin. Servs., Inc.,
2011-NMSC-033, ¶¶ 9, 19-20, 150 N.M. 398, 259 P.3d 803. However, in Estate of
Gutierrez, the Court declined to consider an unpreserved argument regarding jury
instructions even though there were no uniform jury instructions because established case
law provided the necessary guidance. 2012-NMSC-004, ¶ 34. The circumstances in the
present case bear no resemblance to those in Payne and Rivera.
{43} Along similar lines, this Court has noted that “the common element in civil cases that
have been reversed for unpreserved error has been the total absence of anything in the record
of the case showing a right to relief in the person granted relief.” Gracia v. Bittner, 1995-
NMCA-064, ¶ 25, 120 N.M. 191, 900 P.2d 351. In the present case, we cannot say that the
record is devoid of evidence supplying a basis for the damages awarded to Fairchild; indeed,
Love does not argue that the evidence was insufficient to support the award.
{44} In response to Fairchild’s argument that Love failed to preserve the damages issues
raised on appeal, Love relies on a statement in Gracia in urging us to consider the arguments
made for the first time on appeal. We stated in Gracia that “[w]hen a statute does not grant
a right to relief in a particular situation, it is fundamental error to grant relief based on the
statute.” Id. ¶ 26. Thus, Love contends, it was fundamental error for the district court to
award damages not allowed under the Illinois Act.
{45} We have difficulty with Love’s contention. The portions of the transcript Love relies
on to demonstrate the district court’s alleged error comprise arguments of Fairchild’s counsel
or the testimony of Fairchild’s original attorney. These portions of the transcript are
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meaningless in the absence of legal argument by Love to the district court to provide context.
Love made no attempt below to relate the testimony to the legal argument he makes for the
first time on appeal. In addition, the exhibits Love points to in support of his argument show
total attorney fees charged and itemized attorney fee statements, but these documents shed
no light on which charges may or may not be permitted by the Illinois Act.
{46} As a result, we fail to see a valid basis for exercising our discretion to consider
Love’s arguments that were not brought to the district court’s attention in the first place. As
we noted in Gracia, “[w]here there exist theories of recovery that are both within the
pleadings and within the evidence, we should not reverse on an issue raised for the first time
on appeal after the opportunity has passed to timely correct any error presented by the issue.”
1995-NMCA-064, ¶ 28. To reverse in these circumstances “would countenance sandbagging
by trial attorneys” and a “waste of resources by both our trial and appellate courts.” Id.{47} We recognize that Love may have been at a disadvantage during the damages trial
because he was not represented by counsel. However, “a pro se litigant, having chosen to
represent himself, is held to the same standard of conduct and compliance with court rules,
procedures, and orders as are members of the bar.” Woodhull v. Meinel, 2009-NMCA-015,
¶ 30, 145 N.M. 533, 202 P.3d 126. It was incumbent upon Love, as it is upon any attorney,
to raise his arguments challenging the claimed damages at a time when the district court had
the opportunity to consider them and correct any error. Kilgore v. Fuji Heavy Indus. Ltd.,
2009-NMCA-078, ¶ 50, 146 N.M. 698, 213 P.3d 1127 (“The primary purposes for the
preservation rule are: (1) to specifically alert the district court to a claim of error so that any
mistake can be corrected at that time, (2) to allow the opposing party a fair opportunity to
respond to the claim of error and to show why the district court should rule against that
claim, and (3) to create a record sufficient to allow this Court to make an informed decision
regarding the contested issue.”). Love did not do this, and we do not consider his arguments
to rise to the level of extraordinary circumstances triggering our discretion to address them
under the doctrine of fundamental error. See Estate of Gutierrez, 2012-NMSC-004, ¶ 33
(explaining that the doctrine should be applied in civil cases only “under the most
extraordinary and limited circumstances”). We therefore affirm the district court’s award
of damages to Fairchild.
CONCLUSION
{48} For the foregoing reasons, we reverse summary judgment and the resulting damages
award entered in favor of Plaintiffs against Love. We affirm the judgment in favor of
Fairchild.
{49} IT IS SO ORDERED.
_____________________________________
CYNTHIA A. FRY, Judge
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WE CONCUR:
_____________________________________
JONATHAN B. SUTIN, Judge
_____________________________________
LINDA M. VANZI, Judge
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