Sharfi v. Serrano ( 2012 )

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1 IN THE COURT OF APPEALS OF THE STATE OF NEW MEXICO
2 ASIF SHARFI,
3 Plaintiff-Appellee,
4 v. NO. 30,034
5 DANIEL T. SERRANO, an individual,
6 and GREAT WESTERN HOTELS, LLC,
7 a New Mexico Limited Liability Company,
8 Defendants-Appellants.
9 APPEAL FROM THE DISTRICT COURT OF BERNALILLO COUNTY
10 Nan G. Nash, District Judge
11 Ira Robinson
12 Albuquerque, NM
13 Kate Fitz Gibbon
14 Santa Fe, NM
15 for Appellee
16 Robles, Rael & Anaya, P.C.
17 Daniel J. Macke
18 Albuquerque, NM
19 for Appellants
1 MEMORANDUM OPINION
2 KENNEDY, Judge.
3 Daniel Serrano (Defendant) and his company, Great Western Hotels, LLC,
4 appeal the district court’s decision granting compensatory and punitive damages to
5 Asif Sharfi (Plaintiff) for breach of an employment contract that the two entered into
6 in 2004. Defendant contends that the district court abused its discretion in admitting
7 testimony from two character witnesses without proper foundation. Defendant also
8 argues that the district court erred in awarding punitive damages for breach of
9 contract. We affirm the district court on all grounds.
10 I. BACKGROUND
11 In 2004, Defendant became interested in purchasing the University Airport Inn.
12 While Defendant and Great Western were attempting to secure financing for the
13 purchase of the Inn, Defendant was given charge of the Inn’s business for the period
14 of “due diligence” to oversee and evaluate the Inn’s overall operation. Conditional
15 on the financing, Defendant would finalize the purchase and take over as the
16 permanent owner. Around March 22, 2004, Defendant agreed to employ Plaintiff as
17 the general manager of the Inn during a period of due diligence, which would last
18 approximately sixty to ninety days. Defendant agreed to pay Plaintiff $1,500 per
2
1 week. Plaintiff began work on March 26, 2004. Plaintiff remained employed at the
2 Inn until June 15, 2004, in accordance with the contract.
3 During his employment, Plaintiff received approximately twenty nights of
4 complimentary lodging, food, and dry cleaning. Nonetheless, Defendant failed to pay
5 Plaintiff for any of his work, which he claims amounted to $17,548. Defendant
6 ultimately failed to secure financing and relinquished control of the Inn in mid-June
7 2004. Plaintiff was assured by Defendant that he would be paid on multiple occasions
8 between 2004 and 2006, but Defendant refused to actually do so. Plaintiff
9 subsequently brought suit for breach of contract and was awarded compensatory and
10 punitive damages by the district court. At trial, Defendant objected to the admission
11 of character evidence and to the district court’s award of punitive damages.
12 Defendant now appeals.
13 II. STANDARD OF REVIEW
14 “With respect to the admission or exclusion of evidence, we generally apply an
15 abuse of discretion standard where the application of an evidentiary rule involves an
16 exercise of discretion or judgment, but we apply a de novo standard to review any
17 interpretations of law underlying the evidentiary ruling.” Dewitt v. Rent-A-Center,
18 Inc., 2009-NMSC-032, ¶ 13, 146 N.M. 453, 212 P.3d 341. “An abuse of discretion
19 occurs when a ruling is clearly contrary to the logical conclusions demanded by the
3
1 facts and circumstances of the case.” Sims v. Sims, 1996-NMSC-078, ¶ 65, 122 N.M.
2 618, 930 P.2d 153. “[E]ven when we review for an abuse of discretion, our review
3 of the application of the law to the facts is conducted de novo. Accordingly, we may
4 characterize as an abuse of discretion a discretionary decision that [is] premised on a
5 misapprehension of the law.” N.M. Right to Choose/NARAL v. Johnson, 1999-
6 NMSC-028, ¶ 7, 127 N.M. 654, 986 P.2d 450 (second alteration in original) (internal
7 quotation marks and citation omitted). “The question [of whether a district court’s
8 findings are supported by substantial evidence] is not whether substantial evidence
9 exists to support the opposite result, but rather whether such evidence supports the
10 result reached.” Las Cruces Prof’l Fire Fighters v. City of Las Cruces,
11 1997-NMCA-044, ¶ 12, 123 N.M. 329, 940 P.2d 177. When reasons both supporting
12 and detracting from a decision exist, there is no abuse of discretion. Talley v. Talley,
13 115 N.M. 89, 92, 847 P.2d 323, 326 (Ct. App. 1993).
14 If the evidence was admitted in error, “the complaining party on appeal must
15 show the erroneous admission . . . of evidence was prejudicial in order to obtain a
16 reversal.” Cumming v. Nielson’s, Inc., 108 N.M. 198, 203-04, 769 P.2d 732, 737-38
17 (Ct. App. 1988). This burden includes having to show a “high probability that the
18 improper evidence may have influenced the factfinder[.]” Santa Fe Custom Shutters
4
1 & Doors, Inc. v. Home Depot U.S.A., Inc., 2005-NMCA-051, ¶ 32, 137 N.M. 524, 113
2 P.3d 347 (internal quotation marks and citation omitted).
3 III. DISCUSSION
4 A. The Character Evidence Was Properly Admitted
5 Defendant argues that the admission of testimony from two character witnesses
6 was an abuse of discretion because their testimony lacked foundation. “Pursuant to
7 [Rule] 11-608(A) [NMRA], the credibility of a witness may be attacked by evidence
8 in the form of an opinion or as to reputation, but only as it relates to the witness’s
9 character for truthfulness or untruthfulness and only after a proper foundation is laid.”
10 Constr. Contracting & Mgmt., Inc. v. McConnell, 112 N.M. 371, 376, 815 P.2d 1161,
11 1166 (1991). Foundation for opinion evidence is “based upon [the testifying
12 witness’s] own repeated dealings with [the person being impeached] and his
13 impressions from other people[.]” Id. In contrast, to provide foundation for
14 reputation evidence, the offering party must establish “the factual context that gives
15 rise to a witness’s claimed ability to describe accurately another witness’s reputation
16 in the community.” Id. This may involve eliciting testimony to show “how long he
17 had lived in the community or whether he was familiar with [the defendant’s]
18 reputation for truth and veracity.” Id.5
1 In this case, Michael Gallegos testified to Defendant’s reputation in the
2 community for untruthfulness. At trial, Plaintiff’s direct examination of Gallegos
3 established that he knew Defendant from his involvement in local politics and that he
4 was “friends” with Defendant. Gallegos testified that he had held several different
5 political or governmental positions while working under a former county
6 commissioner and city councilman as a member of the state gaming board and under
7 a district court judge. Gallegos explained that he routinely held “democratic
8 breakfasts” at a local restaurant, which were attended by local politicians. At these
9 breakfasts, Gallegos met Defendant around the time Defendant was running for city
10 council and introduced him to various local political figures, including members of
11 the state central committee. Gallegos stated that he was “kind of always interested in
12 [Defendant’s] political career.” Gallegos testified that even after Defendant lost the
13 city council election, he invited Defendant over to his house and encouraged him to
14 run for city council again. Finally, Gallegos testified that he was familiar with
15 Defendant’s reputation for “untruthfulness” and that “he’s been untruthful about a few
16 things.”
17 We conclude that Plaintiff sufficiently laid a foundation for Gallegos’s
18 reputation testimony. Through direct examination, Plaintiff established that Gallegos
19 knew Defendant from local politics, in which Gallegos and Defendant were both
6
1 active members. Gallegos hosted events in the political community, which Defendant
2 attended, along with other members of the Democratic Party. Gallegos was interested
3 in Defendant’s political career and even encouraged him when he failed to win the city
4 council election. From this evidence, it appears evident that Gallegos knew Defendant
5 and was exposed to the others’ opinions about Defendant in the political arena.
6 Plaintiff therefore provided the factual context that gave rise to Gallegos’s claimed
7 ability to accurately describe Defendant’s reputation in the community.
8 In addition, Ray Barrera testified to both his opinion of Defendant’s character
9 for untruthfulness, and his reputation in the community for untruthfulness. Barrera
10 testified that he developed hotels and casinos and, at the time of questioning, had
11 about six years experience in the business. Barrera stated he was familiar with
12 Albuquerque’s hotel industry with regard to development and construction. Barrera
13 testified that he worked and has bid on projects in Albuquerque’s hotel industry, the
14 same industry in which Defendant has worked. It was within this industry that Barrera
15 was introduced to Defendant in 2004. Barrera explained that Defendant “was asked
16 to be part of the development team on a proposal [he and others were] putting together
17 for the Isleta Pueblo.” Barrera confirmed that he knew Defendant’s reputation with
18 regard to truth and veracity in the Albuquerque hotel industry and that it was “[v]ery
7
1 poor.” Barrera also stated that, in his personal opinion, Defendant was “[j]ust a big
2 liar.”
3 We reason that this information also provides sufficient foundation for
4 admission of the character testimony. Plaintiff established that Barrera was involved
5 in Albuquerque’s hotel industry for the preceding six years, to which Defendant was
6 also a member. And Barrera stated that he knew Defendant’s reputation for truth and
7 veracity within that community. At one time, Barrera had a working relationship with
8 Defendant and had known him during the five years prior to trial. Based on this
9 information, Barrera could know and testify to Defendant’s reputation in the hotel
10 industry and his own personal opinion about Defendant.
11 Defendant argues that neither community in which the witnesses had contact
12 with him was sufficient to establish foundation for character testimony. We disagree.
13 Our case law does not require that the witnesses be part of a particular community.
14 Foundation for reputation testimony only requires that the witness have sufficient
15 involvement in a community, such that he or she could make an evaluation of
16 Defendant’s reputation within the community. McConnell, 112 N.M. at 376, 815 P.2d
17 at 1166. As we stated above, this standard was satisfied.
18 To the extent that Defendant argues that the witnesses “gleaned [their
19 impressions of Defendant] from newspaper and television reports[,]” we disagree.
8
1 Both witnesses had personal dealings with Defendant and participated in the same
2 political or business communities as Defendant. Gallegos explained that he was
3 Defendant’s friend and interacted with Defendant on both the political and personal
4 level. Barrera also testified on cross- examination that he knew Defendant within the
5 hotel industry—meeting with Defendant in regard to a construction bid for the Isleta
6 Pueblo and, subsequently, working closely and personally with Defendant on a bid for
7 the construction of a hotel casino at the Sandia Pueblo. The two met together on
8 several occasions and worked on details for the Sandia proposal. But, shortly
9 thereafter, Barrera discovered Defendant had been secretly constructing a bid of his
10 own with another team. Barrera stated that Defendant “literally took the model that
11 we had put together, stole it, put the same model with the other team[,] and bid against
12 us. I think that’s a pretty big lie.” We conclude that both witnesses’ testimony was
13 founded upon their respective personal dealings with Defendant and impressions from
14 other people in the community.
15 Therefore, the opinion testimony was supported by sufficient foundation. We
16 conclude that the district court did not abuse its discretion in admitting the
17 impeachment evidence.
9
1 B. The District Court Did Not Abuse Its Discretion in Awarding Punitive
2 Damages
3 Defendant argues that the district court erred in awarding punitive damages
4 because they may not be awarded for breach of contract. In the alternative, Defendant
5 contends that, even if punitive damages may be awarded for breach of contract, the
6 district court abused its discretion by awarding them in this case. In New Mexico, it
7 is well settled that punitive damages may be awarded for breach of contract. Bogle
8 v. Summit Inv. Co., LLC, 2005-NMCA-024, ¶ 28, 137 N.M. 80, 107 P.3d 520; Paiz
9 v. State Farm Fire & Cas. Co., 118 N.M. 203, 210, 880 P.2d 300, 307 (1994);
10 McConnell, 112 N.M. at 376, 815 P.2d at 1166; Romero v. Mervyn’s, 109 N.M. 249,
11 255-256, 784 P.2d 992, 998-999 (1989). A court can award punitive damages for
12 breach of contract where a defendant has a culpable mental state demonstrated by
13 some “form of overreaching, malicious, or wanton conduct.” McConnell, 112 N.M.
14 at 375, 815 P.2d at 1165. Culpable conduct may also be characterized by a
15 “recklessness” that violates covenants of fair dealing. See Paiz, 118 N.M. at 211, 880
16 P.2d at 308 (noting that “[a] mental state sufficient to support an award of punitive
17 damages will exist when the defendant acts with ‘reckless disregard’ for the rights of
18 the plaintiff”); Cont’l Potash, Inc. v. Freeport-McMoran, Inc., 115 N.M. 690, 706,
19 858 P.2d 66, 82 (1993) (stating that there exists a “duty of good faith and fair dealing
20 upon the parties in the performance and enforcement of the contract”). A reckless or
10
1 wanton disregard for the rights of another party will justify punitive damages. See
2 Bogle, 2005-NMCA-024, ¶ 28.
3 We conclude that punitive damages can be awarded for breach of contract.
4 Thus, the issue is whether Defendant’s conduct was sufficient to support a punitive
5 damages award. We reason that it is.
6 In this case, testimony indicated that Defendant entered into a contract with
7 Plaintiff, promising to pay him $1,500 per week. Evidence showed that Defendant
8 never intended to pay Plaintiff after Plaintiff had fully performed on the contract.
9 Plaintiff testified that Defendant had approached him on one occasion and said: “I
10 have not received the monies yet. As soon as I get them, I’ll pay them to you.”
11 However, when Plaintiff later inquired about his pay, Defendant responded: “I did get
12 the money, and I ended up paying it to the attorneys, and I will get you paid on the
13 next one.” Defendant continued to assure Plaintiff that he would be compensated on
14 numerous other occasions between 2004 and May 2006. Plaintiff testified that
15 Defendant stopped by his restaurant one day in 2006 and stated: “I’m still working
16 on a project, and I will get you paid.” Plaintiff recalled that Defendant approached
17 him hoping that he might help Defendant with some introductions to potential
18 business associates, so that he might “land some additional business” from which he
19 would pay Plaintiff.
11
1 In May 2006, Defendant and Plaintiff saw one another at the Doubletree Hotel.
2 They did not discuss the debt directly, but a mutual friend, Gallegos, who understood
3 Plaintiff’s situation, agreed to speak to Defendant on behalf of Plaintiff. Gallegos
4 testified that when he inquired about the debt, Defendant told him that “[Plaintiff] was
5 working for food.” Evidence also suggested that Defendant had significant financial
6 resources during the time that Plaintiff had requested reimbursement.
7 We reason that Defendant’s actions in providing repeated false assurances were
8 lacking in proper purpose or motive. The district court found that Defendant’s
9 repeated false assurances constituted “bad faith or at least acted with reckless
10 disregard for the interests of Plaintiff.” The New Mexico Supreme Court in Golden
11 Cone Concepts, Inc. v. Villa Linda Mall, Ltd. similarly determined that punitive
12 damages were appropriate where the defendant made implicit and explicit
13 misrepresentations. 113 N.M. 9, 14-15, 820 P.2d 1323, 1328-29 (1991). The
14 Supreme Court recognized that punitive damages may be predicated on promises
15 which are “based on a concealment of known facts . . . especially in a situation where
16 the defendant states an opinion or belief as to future occurrences which are shown to
17 have had no support by the facts at the time the opinions or beliefs were given.” Id.18 at 12, 820 P.2d at 1326 (internal quotation marks and citation omitted). “[P]unitive
19 damages may be recovered for breach of contract when the defendant’s conduct was
12
1 malicious, fraudulent, oppressive, or committed recklessly with a wanton disregard
2 for [the] plaintiff’s rights.” Golden Cone Concepts, Inc., 113 N.M. at 14-15, 820 P.2d
3 at 1328-29 (internal quotation marks and citation omitted). Furthermore, in Bogle,
4 this Court determined that the defendant’s attempt to retain the plaintiff’s purchase
5 agreement commission for itself with no “legitimate business reason” was sufficiently
6 culpable to warrant punitive damages because he was motivated by an “improper
7 purpose.” 2005-NMCA-024, ¶ 32.
8 In this case, Defendant’s behavior was egregious enough to warrant punitive
9 damages because he acted with an improper purpose and lacked a legitimate business
10 reason for deceiving Plaintiff. Defendant was dishonest and deceitful by repeatedly
11 making false promises to pay, which were unsupported by facts and without a proper
12 business purpose. Defendant’s repeated false assurances amounted to a reckless
13 disregard for the rights of Plaintiff and a breach of Defendant’s duty of good faith to
14 Plaintiff. Moreover, they had the capacity to “lull” Plaintiff into the unfounded belief
15 that he would be paid what was contractually owed to him, thereby delaying or
16 preventing Plaintiff’s pursuit of legal recourse. Therefore, punitive damages were
17 appropriate under these facts.
18 Defendant argues that “[b]esides the breach of contract, the only other basis for
19 the trial court’s bad faith finding [was] the alleged subsequent reassurances that
13
1 Plaintiff would be paid.” Defendant contends that a punitive damages award may not
2 be predicated on false assurances. We disagree. Defendant’s culpable conduct was
3 not merely repeatedly representing that he would repay Plaintiff. Rather, Defendant
4 acted with a culpable mental state and bad faith when he showed that he intended to
5 avoid payment altogether by making numerous specific false assurances. We found
6 such culpable conduct sufficient for punitive damages in Bogle. 2005-NMCA-024,
7 ¶¶ 2-6, 29-32. There, the defendant “had full knowledge that [the plaintiff] was
8 entitled to its commission and [contracted with another party] with the intention of
9 depriving [the plaintiff] of its due.” Id. ¶ 30. The district court determined that the
10 defendant’s “conduct was not justifiable under all the circumstances and that it was
11 motivated by an improper purpose to divert the commission to itself.” Id. We
12 reiterated that “every intentional breach can be seen as a wrongful act [if] the
13 breaching party knows [it] will cause financial harm to the other party.” Id. ¶ 31. We
14 concluded that there was no “legitimate business reason for an intentional breach.
15 Rather [the defendant’s] acts and motive fit[] the standard for malicious conduct.” Id.
16 ¶ 32.
17 Likewise, in this case, Defendant’s repeated false reassurances were in bad faith
18 and with the intention to deprive Plaintiff of his due. Defendant lied to Plaintiff about
19 reasons he could not pay him, despite having resources to make payment and told
14
1 others that Plaintiff had performed the contract in exchange for food. We conclude
2 that there were no legitimate business reasons to intentionally breach the contract, and
3 Defendant’s motive for avoiding payment fits the standard for malicious conduct.
4 Defendant further argues that the decision should be reversed because awarding
5 punitive damages would result in a landslide of undesirable claims. The Court in
6 Romero dispensed with this argument by recognizing that not every breach warrants
7 punitive damages. Rather, punitive damages are only permissible where the beaching
8 party’s behavior was predicated on some odious practice rising to the established
9 culpability threshold. See Allsup’s Convenience Stores, Inc. v. North River Ins. Co.,
10 1999-NMSC-006, ¶ 53, 127 N.M. 1, 976 P.2d 1 (stating that punitive damages are
11 appropriate where “there coexists a culpable mental state indivisible from the conduct
12 constituting liability . . . and bad faith in turn is a culpable mental state” (internal
13 quotation marks and citation omitted)). Thus, awarding punitive damages in this case,
14 like in Romero, will not result in a multitude of plaintiffs seeking punitive damages
15 in contract cases because there is a threshold of culpability that must be proven to
16 obtain such damages.
17 Last, to the extent that Defendant has argued that punitive damages should not
18 be awarded because his actions amounted to efficient breach, he fails to cite where this
19 argument has been preserved. Crutchfield v. N.M. Dep’t of Taxation & Revenue,
15
1 2005-NMCA-022, ¶ 14, 137 N.M. 26, 106 P.3d 1273 (“[O]n appeal, the party must
2 specifically point out where, in the record, the party invoked the court’s ruling on the
3 issue. Absent that citation to the record or any obvious preservation, we will not
4 consider the issue.”). Furthermore, upon review of the record, we conclude that this
5 argument was not preserved, and we therefore do not review it. Woolwine v. Furr’s,
6 Inc., 106 N.M. 492, 496, 745 P.2d 717, 721 (Ct. App. 1987) (stating “[t]o preserve an
7 issue for review on appeal, it must appear that [the] appellant fairly invoked a ruling
8 of the trial court on the same grounds argued in the appellate court”).
9 Thus, we conclude that Defendant acted with a culpable mental state and bad
10 faith in breaching the contract. The district court did not abuse its discretion in
11 awarding punitive damages.
12 IV. CONCLUSION
13 For the reasons stated above, we affirm the district court.
14 IT IS SO ORDERED.
15 _______________________________
16 RODERICK T. KENNEDY, Judge
16
1 WE CONCUR:
2 ________________________
3 LINDA M. VANZI, Judge
4 ________________________
5 J. MILES HANISEE, Judge
17