Bishop v. Evangelical Lutheran ( 2010 )

1 This memorandum opinion was not selected for publication in the New Mexico Reports. Please
2 see Rule 12-405 NMRA for restrictions on the citation of unpublished memorandum opinions.
3 Please also note that this electronic memorandum opinion may contain computer-generated
4 errors or other deviations from the official paper version filed by the Court of Appeals and does
5 not include the filing date.
6 IN THE COURT OF APPEALS OF THE STATE OF NEW MEXICO
7 SUSAN BISHOP and MARK SKOFIELD,
8 as Class Representatives in their capacities
9 as Personal Representatives of the Estate of
10 RICHARD H. SKOFIELD, Individually and
11 in his capacity as Class Representative,
12 Plaintiffs-Appellants/Cross-Appellees,
13 v. NO. 25,510
14 THE EVANGELICAL LUTHERAN GOOD
15 SAMARITAN SOCIETY, a foreign
16 corporation d/b/a MANZANO DEL SOL
17 GOOD SAMARITAN VILLAGE,
18 Defendant-Appellee/Cross-Appellant.
19 APPEAL FROM THE DISTRICT COURT OF BERNALILLO COUNTY
20 Wendy E. York, District Judge (presiding until appeal)
21 Beatrice J. Brickhouse, District Judge (currently presiding)
22 Eric Sedillo Jeffries, LLC
23 Eric Sedillo Jeffries
24 Albuquerque, NM
25 Law Offices of Brian A. Thomas, PC
26 Brian A. Thomas
27 Albuquerque, NM
28 for Appellants
1 Quarles & Brady LLP
2 Daniel E. Conley
3 Milwaukee, WI
4 Modrall, Sperling, Roehl, Harris & Sisk, P.A.
5 Martha G. Brown
6 Albuquerque, NM
7 for Appellee
8 MEMORANDUM OPINION
9 SUTIN, Judge.
10 This case returns to us following reversal by our Supreme Court of our decision
11 in Bishop v. Evangelical Lutheran Good Samaritan Society (Bishop I), 2008-NMCA-
12 033, 143 N.M. 640, 179 P.3d 1248, and remand to determine the issues that remain.
13 See Bishop v. Evangelical Good Samaritan Soc’y (Bishop II), 2009-NMSC-036, ¶¶ 1,
14 30, 146 N.M. 473, 212 P.3d 361. The issues we address relate primarily to the district
15 court’s determinations regarding prejudgment interest and calculation of damages.
16 We affirm the district court’s determinations on those and other issues raised on
17 appeal. Further, we remand this case to the district court for amendment of the
18 judgment consistent with this opinion.
19 BACKGROUND
2
1 Defendant Evangelical Lutheran Good Samaritan Society (Good Samaritan) is
2 a nonprofit corporation that owns Manzano Del Sol Good Samaritan Village
3 (Manzano). Manzano consists of two facilities situated in New Mexico: a nursing
4 home and senior independent living apartments. Since 1985, Manzano has been
5 governed by the Continuing Care Act, NMSA 1978, §§ 24-17-1 to -18 (1985, as
6 amended through 2005) (the Act).
7 Manzano’s residents pay monthly service fees. Plaintiff Richard H. Skofield
8 was a resident at Manzano until his death. He and other residents entered into
9 entrance agreements to live in apartments at Manzano. This case arose from
10 Skofield’s objection to percentage increases in service fees on the first day of January
11 of the years 1994 (2.5%), 1995 (6.0%), 1996 (3%), 1997 (4.0%), 1998 (2.0%).
12 During those years, the Act required service-fee increases at facilities such as
13 Manzano to be based on “economic necessity, the reasonable cost of operating the
14 community, the cost of care[,] and a reasonable return on investment.” Section 24-17-
15 5(B)(11).1
16 1
This statute was amended in 2005 to state that the fee increase requirements
17 be “defined by rules promulgated by the aging and long term services department no
18 later than January 31, 2006[.]” Section 24-17-5(B)(11); see 9.2.24.7 to .15 NMAC
19 (1/31/06); see also Bishop II, 2009-NMSC-036, ¶¶ 13 n.1, 23 n.3 (stating that the
20 amended regulations are not applicable and limiting the court’s “consideration to the
21 language used by the Legislature and in effect at the time”).
3
1 Skofield filed a complaint against Good Samaritan in July 1999 and an
2 amended complaint in April 2001, in his individual capacity and as class
3 representative, alleging that Good Samaritan failed to comply with Section 24-17-
4 5(B)(11) and seeking compensation for service-fee overcharges, plus prejudgment
5 interest. The court certified the case as a class action in September 2001 and certified
6 a class of “residents of Manzano . . . who were subject to fee increases between July
7 30, 1993 and July 30, 1999.” It appears that of 287 putative members of the class who
8 were mailed notices of the class action, 193 were returned as undeliverable, that at the
9 time the notices were sent there were actually only 111 putative class members still
10 living at Manzano, that there were some persons who were given notice who were not
11 within the class as defined by the court, and that fifty members receiving notice gave
12 notice of their intent to opt out of the class.
13 The case was tried by the district court in September 2002. The court entered
14 findings of fact and conclusions of law, but numerous post-trial proceedings followed
15 in December 2002. The court reopened the case in February 2004 to hear evidence
16 solely on the turnover rate at Manzano during the class period, and an evidentiary
17 hearing on that issue occurred in May 2004. In July 2004, the court placed its rulings
18 on outstanding issues in a letter to the parties. In December 2004, the court entered
4
1 a judgment for “the Plaintiff Class” and also filed amended findings of fact and
2 conclusions of law.
3 The district court determined that Good Samaritan violated the Act and
4 breached the terms of the entrance agreements because it failed to consider economic
5 necessity and reasonable return on investment in setting its service-fee increases as
6 required in the agreements and in Section 24-17-5(B)(11). The court held Good
7 Samaritan liable to Plaintiffs and ultimately awarded damages of $122,548.2 The
8 court also awarded Plaintiffs prejudgment interest for the period beginning with the
9 filing of Skofield’s complaint, but refused to award Plaintiffs pre-complaint
10 prejudgment interest.
11 In arriving at its service-fee overcharge damages award, the district court
12 measured overcharges using a threshold reasonable rate of return of 15%, but reduced
13 Good Samaritan’s excess revenue and the accumulated damages to Plaintiffs to
14 $154,415 after applying credits for the years 1998 and 1999 based on Good
14 2
The court’s amended findings of fact and conclusions of law awarded
15 Plaintiffs $154,415. The court’s judgment, however, awarded Plaintiffs $122,548.
16 The court’s amended findings of fact and conclusions of law were filed on December
17 30, 2004, but its judgment was filed two days earlier, on December 28, 2004. The
18 Supreme Court in Bishop II stated that the district court awarded $154,415 to
19 Plaintiffs. Bishop II, 2009-NMSC-036, ¶ 5. The earlier filed judgment incorporated
20 and adopted the amended findings of fact and conclusions of law by reference. We
21 believe that the amount awarded in the court’s judgment controls even though entered
22 before the court’s amended findings of fact and conclusions of law. The parties do not
23 contend otherwise.
5
1 Samaritan’s having charged rates below the 15% threshold those years, and after
2 applying a resident turnover rate which had the effect of reducing the number of
3 people who could complain about improper rate increases. The court then reduced the
4 damages award to $122,548 after considering the fact that a number of putative class
5 members opted out of membership in the class. Plaintiffs appealed, and Good
6 Samaritan cross-appealed.
7 Plaintiffs asserted on appeal that the district court erred by (1) failing to award
8 prejudgment interest up to the date of the complaint; (2) reducing damages by giving
9 credits below the statutory threshold; (3) reducing damages based on turnover; and
10 (4) applying the statute of limitations to bar claims for damages that resulted from a
11 rate increase imposed before, but that were suffered within, the class period. They
12 sought this Court’s remand instructing the district court to amend its judgment and
13 award Plaintiffs $1,112,662, plus prejudgment interest to run from August 1, 1993,
14 the amount that Plaintiffs consider to be their full measure of damages.
15 Good Samaritan raised five issues in its cross-appeal: (1) the Act’s requirement
16 that fee increases be based on a “reasonable rate of return on investment” was
17 unconstitutionally vague; (2) if the Act were interpreted correctly, the fee increases
18 during the class period were reasonable; and (3) the district court abused its discretion
19 by reopening the trial to permit Plaintiffs a second chance to meet their burden of
6
1 proof on damages; (4) the district court abused its discretion by awarding prejudgment
2 interest for the period following the filing of the complaint; and (5) the district court
3 abused its discretion by not decertifying the class because the court erred in entering
4 a judgment that failed to identify the class members who were bound.
5 The Appeal and Certiorari Proceedings, and the Current Remand to This Court
6 In an opinion filed in January 2008, this Court reversed the judgment of the
7 district court and remanded with instructions to enter judgment in favor of Good
8 Samaritan. Bishop I, 2008-NMCA-033, ¶ 14. The basis for reversal was our view that
9 the district court erred by construing the Act to require nonprofit providers such as
10 Good Samaritan to base service-fee increases on a reasonable return on investment.
11 Id. ¶ 11.
12 On a writ of certiorari, our Supreme Court reversed this Court, holding that
13 under the Act, nonprofit providers are able and required to consider a reasonable rate
14 of return on investment when calculating service-fee increases. Bishop II, 2009-
15 NMSC-036, ¶¶ 16-18, 25, 29, 30. The Court was not persuaded by Good Samaritan’s
16 constitutional vagueness argument. Id. ¶ 24. The Court also addressed whether the
17 district court’s judgment was supported by substantial evidence. Id. ¶¶ 25-29. The
18 Court noted that in the district court, Plaintiffs’ expert presented calculations on return
19 on investment that yielded the following percentages: 16.09% in 1993, 17.17% in
7
1 1994, 18.13% in 1995, 21.34% in 1996, 22.42% in 1997, 12.62% in 1998, and
2 10.18% in 1999. Id. ¶ 26. The Court also noted that Good Samaritan’s accountant
3 testified that a reasonable rate of return would fall between 12 and 15%. Id. The
4 Court further noted that the district court adopted these figures in its findings and
5 conclusions. Id. In addition, the Court noted that the district court held that Good
6 Samaritan breached the entrance agreements resulting in Good Samaritan having
7 “earned rates of return in excess of even its own representatives’ determination of
8 what is reasonable.” Id. (internal quotation marks omitted). After noting these
9 findings and conclusions of the district court, the Court determined that “[s]ubstantial
10 evidence supports the district court’s findings and conclusions on this point.” Id. The
11 Court held that substantial evidence existed to uphold the district court’s
12 determination that Good Samaritan violated the agreements and the Act “by imposing
13 rate increases without considering reasonable return on investment.” Id. ¶ 29. The
14 Supreme Court remanded the case to this Court “to determine the remaining issues
15 raised before [this] Court on appeal and cross-appeal.” Id. ¶ 30. We therefore
16 proceed in this opinion to address those issues.
17 DISCUSSION
18 I. Plaintiffs’ Appellate Points
19 A. Prejudgment Interest
8
1 The district court awarded prejudgment interest only from the date of the filing
2 of the complaint. Plaintiffs complain that the court erred in failing to award
3 prejudgment interest covering the period of August 1, 1993, to the date the complaint
4 was filed.
5 “In New Mexico, the award of prejudgment interest is governed by the common
6 law and NMSA 1978, Sections 56-8-3 [(1983),] -4(B) [(1993) (amended 2004)].”
7 Smith v. McKee, 116 N.M. 34, 36, 859 P.2d 1061, 1063 (1993). Section 56-8-3(A)
8 through (C) states that the rate of interest in the absence of a written contract fixing
9 the rate “shall be not more than fifteen percent annually” in three instances, namely,
10 (A) “on money due by contract[,]” (B) “on money received to the use of another and
11 retained without the owner’s consent expressed or implied[,]” and (C) “on money due
12 upon the settlement of matured accounts from the day the balance is ascertained.”
13 Section 56-8-4(A) relates to interest on judgments and decrees, and Section 56-8-4(B),
14 under certain guidelines, permits interest from the date the complaint is served on the
15 defendant. Section 56-8-4(C) independently states that nothing in the section “shall
16 affect the award of interest or the time from which interest is computed as otherwise
17 permitted by statute or common law.”
18 The court refused to award pre-complaint prejudgment interest as a matter of
19 right under Section 56-8-3 because the amount owing was not fixed or readily
9
1 ascertainable. The court explained that while it had discretion under Section 56-8-3
2 to award prejudgment interest “even if the amount owing was not fixed or readily
3 ascertainable, the court must consider the equities in each case before doing so.” The
4 court determined that “[t]he equities do not favor an award for [Good Samaritan’s] use
5 and retention of Plaintiff[s’] money since [Good Samaritan] had very little guidance
6 regarding how to comply with the [Act].”
7 Plaintiffs argue that in a breach of contract case the damages award should fully
8 compensate the injured party and that the damages award should include the lost use
9 of money. They argue, too, that Good Samaritan wrongfully profited from the
10 overcharges. Although Plaintiffs fail to mention Sections 56-8-3 and 56-8-4 in any
11 regard in their brief in chief, in their reply brief, and based on assertions in Good
12 Samaritan’s answer brief, Plaintiffs acknowledge that they “seek to recover
13 prejudgment interest as a matter of discretion under either [Section] 56-8-3 or
14 [Section] 56-8-4.”
15 We think it useful to discuss pertinent case law on the issues. Early on, our
16 Supreme Court determined that under NMSA 1953, Section 50-6-3(A) (Vol. 8)
17 (current version at Section 56-8-3), in the absence of a readily ascertained
18 indebtedness amount, the allowance of interest as an element of total damages is a
19 matter of discretion and not a matter of right. O’Meara v. Commercial Ins. Co., 71
10
1 N.M. 145, 151-52, 376 P.2d 486, 490-91 (1962). In connection with this proposition,
2 the Court cited and relied on Restatement (First) of Contracts § 337(b) (1932).
3 O’Meara, 71 N.M. at 152, 376 P.2d at 490-91. Restatement Section 337 reads:
4 If the parties have not by contract determined otherwise, simple
5 interest at the statutory legal rate is recoverable as damages for breach
6 of contract as follows:
7 (a) Where the defendant commits a breach of a
8 contract to pay a definite sum of money, or to render a
9 performance the value of which in money is stated in the
10 contract or is ascertainable by mathematical calculation
11 from a standard fixed in the contract or from established
12 market prices of the subject matter, interest is allowed on
13 the amount of the debt or money value from the time
14 performance was due, after making all the deductions to
15 which the defendant may be entitled.
16 (b) Where the contract that is broken is of a kind not
17 specified in Clause (a), interest may be allowed in the
18 discretion of the court, if justice requires it, on the amount
19 that would have been just compensation if it had been paid
20 when performance was due.
21 After quoting Section 337 and stating that Subsection (b) applied in the case, the
22 Court in O’Meara stated that recognition of this Restatement rule “should aid the trial
23 courts in their determination of the vexatious problems relating to the awarding or not
24 awarding of interest, and will avoid the necessity of making the fine distinctions
25 which many courts have done.” O’Meara, 71 N.M. at 153, 376 P.2d at 491. After
26 O’Meara, our Supreme Court adopted Restatement Section 337(a) and, following that
11
1 section, the Court stated that when the amount is “ascertainable by mathematical
2 calculation from a standard fixed in the contract or from established market prices,”
3 Section 56-8-3 is applicable. Shaeffer v. Kelton, 95 N.M. 182, 187-88, 619 P.2d 1226,
4 1231-32 (1980) (internal quotation marks and citation omitted); see also Grynberg v.
5 Roberts, 102 N.M. 560, 562-63, 698 P.2d 430, 432-33 (1985) (determining that under
6 the Shaeffer rule, Section 56-8-3 and Restatement Section 337(a) applied and that
7 Restatement Section 337(b) did not apply, because the debt was ascertainable by
8 mathematical calculation from a standard fixed in the contract). In Grynberg, the
9 Court referred to Restatement Section 337 as stating the common law rule of
10 prejudgment interest. Grynberg, 102 N.M. at 563, 698 P.2d at 433.
11 Based on O’Meara, Shaeffer, and Grynberg, our Supreme Court in Mascarenas
12 v. Jaramillo, 111 N.M. 410, 806 P.2d 59 (1991), confirmed that when Section 56-8-3
13 applies and the indebtedness is ascertainable as stated in Restatement Section 337(a),
14 that Restatement section applies and interest is due as a matter of right. Mascarenas,
15 111 N.M. at 414, 806 P.2d at 63. The Court added that in breach of contract cases
16 “damage awards should fully compensate the injured party” and that the breaching
17 party is “justly responsible for all of the damages flowing naturally from the breach.”
18 Id. (internal quotation marks and citation omitted). Yet, reiterating that it had adopted
19 Restatement Section 337(a), the Court in Mascarenas recognized earlier stated law
12
1 that an award of prejudgment interest should not be made “arbitrarily without regard
2 for the equities of each particular situation.” Mascarenas, 111 N.M. at 414, 806 P.2d
3 at 63 (internal quotation marks and citation omitted). In Mascarenas, the Court
4 reversed the district court’s award of prejudgment interest because it did not appear
5 that the court “weighed the equities involved” and because the findings did not justify
6 a denial of interest. Id. at 414-15, 806 P.2d at 63-64; see also Smith, 116 N.M. at 36-
7 37, 859 P.2d at 1063-64 (adhering to Shaeffer and Restatement Section 337(a) and
8 concluding that when a district court does not make a finding that interest was
9 awarded as a matter of right, the award is made in the court’s discretion).
10 Following the rules expressed in O’Meara, Shaeffer, and Grynberg, in Kueffer
11 v. Kueffer, 110 N.M. 10, 12, 791 P.2d 461, 463 (1990), which involved that part of
12 Section 56-8-3 relating to the use and retention of another’s money without the other’s
13 consent, see § 56-8-3(B), our Supreme Court stated that “[t]he trial court has
14 discretion to award prejudgment interest, if justice requires, when the contract amount
15 is not ascertainable.” Kueffer also stated that “[p]rejudgment interest is meant to
16 compensate a plaintiff for injuries resulting from the defendant’s failure to pay and the
17 loss of use and earning power of [the] plaintiff’s funds expended as a result of the
18 defendant’s breach.” 110 N.M. at 12, 791 P.2d at 463. Then, in State ex rel. Bob
19 Davis Masonry, Inc. v. Safeco Insurance Co. of America, 118 N.M. 558, 883 P.2d 14413
1 (1994), the Court stated that whether as a matter of right or in the district court’s
2 discretion under Section 56-8-3 “we examine any countervailing equities to determine
3 whether the award was properly made.” Bob Davis Masonry, Inc., 118 N.M. at 561,
4 883 P.2d at 147.
5 The foregoing cases tell us that Section 56-8-3(A) and Restatement Section
6 337(b) apply in the present case and that the award of interest was left to the sound
7 discretion of the district court. While an award of prejudgment interest is to be
8 considered in compensating the injured party in breach of contract cases, in
9 considering that award in the present case, the district court was permitted to consider
10 the equities of the particular situation. The court exercised its discretion and, in
11 considering an award, the court considered equities. In doing so, the court refused to
12 award pre-complaint prejudgment interest because Good Samaritan received “very
13 little guidance” as to how it was to comply with the Act. We hold that the district
14 court did not abuse its discretion.
15 B. Credits and Deductions in Assessing Damages
16 The district court made the following findings in regard to the credits and
17 deductions it applied to excess revenue from overcharging:
18 64. Gross excess revenue for the class period, as modified by the
19 [c]ourt’s post-trial rulings, is $888,294. Since the rate of return did not
20 exceed 15% in 1998 and 1999, credit must be given for those years. For
14
1 1999, the credit amount is $410,916. For 1998, the credit is $147,204.
2 The adjusted excess revenue is $330,174.
3 65. There must be a deduction from the $330,174 to reflect the
4 turnover rates. Such a deduction ensures that . . . Plaintiffs are not
5 compensated for those apartments that may have been turned over to a
6 new resident who had agreed to the higher rates, persons who died, or
7 left the facility. That deduction is $175,759 leaving the excess revenue,
8 less turnover rate at $154,415.
9 Plaintiffs do not contest the numbers; they contest the court’s application of credits
10 and deductions to reduce their damages.
11 1. Standard of Review
12 We do not perceive that the applicable findings of fact on which the
13 measurement of damages was based have been successfully attacked as being
14 unsupported in the evidence. We review de novo the application of law to the facts.
15 See, e.g., N.M. Right to Choose/NARAL v. Johnson, 1999-NMSC-028, ¶ 7, 127 N.M.
16 654, 986 P.2d 450. We give deferential treatment to the manner in which the district
17 court analyzed the damages model presented by Plaintiffs and to the court’s damages
18 evaluations and determinations. See Sierra Life Ins. Co. v. First Nat’l Life Ins. Co.,
19 85 N.M. 409, 414, 512 P.2d 1245, 1250 (1973) (stating that appellate courts “will not
20 attempt to second guess the trial court’s determination of the proper measure to be
21 applied for damages if that trial court had several alternatives before it supported by
22 substantial evidence”); Moody v. Stribling, 1999-NMCA-094, ¶ 40, 127 N.M. 630,
15
1 985 P.2d 1210 (“As long as there is a reasonable method used to achieve an amount
2 of damages, we will accept that amount.”).
3 2. Credits
4 Plaintiffs argue that the allowance of credits by the district court runs contrary
5 to the Supreme Court’s ruling in Capo v. Century Life Insurance Co., 94 N.M. 373,
6 610 P.2d 1202 (1980), because Good Samaritan was taking advantage of an illegal
7 contract. Capo sued his insurer who, in lending money to Capo, violated a criminal
8 statute, NMSA 1978, § 30-16-15 (1963), by coercing Capo to purchase insurance in
9 order to obtain a loan. Capo, 94 N.M. at 376, 610 P.2d at 1205. The Court held that
10 the insurer’s assignee could not retain the premiums paid by Capo because that
11 “would in effect validate the illegal contract, nullify the statutory penalty[,] and permit
12 [the assignee] to take advantage of the criminal act.” Id. at 377, 610 P.2d at 1206. We
13 are not persuaded. Good Samaritan did not contract with Plaintiffs in violation of a
14 statute, much less a criminal statute carrying a penalty for its violation. While Good
15 Samaritan failed to follow a statutory requirement that was placed in the entrance
16 agreements, we do not consider that in the same category as entering into a contract
17 forbidden under criminal law. See Smith v. Tinley, 100 N.M. 663, 665, 674 P.2d 1123,
18 1125 (1984) (refusing to apply Capo where “[t]he agreement . . . [was] far from
19 illegal”).
16
1 Plaintiffs further argue that Good Samaritan voluntarily decided not to charge
2 amounts for rent and that this unconditional benefit conferred on Plaintiffs bars Good
3 Samaritan from receiving a credit by way of restitution. See Restatement (First) of
4 Restitution § 112 (1937); see also Cheesecake Factory, Inc. v. Baines, 1998-NMCA-
5 120, ¶ 6, 125 N.M. 622, 964 P.2d 183 (holding that where a judgment debtor paid a
6 judgment voluntarily, the court could not compel the judgment creditor to return the
7 payment, stating that this followed from the general rule that a party cannot recover
8 money voluntarily paid with full knowledge of the facts even if no payment obligation
9 existed). In addition, Plaintiffs argue that the court impermissibly reduced damages
10 already incurred because the reduction was based on retrospective rate-setting for later
11 years. Plaintiffs contend that this violated contract-breach principles requiring that
12 the injured party be fully compensated, including receiving consequential damages
13 flowing from the breach, such as loss of the use of money. We are equally
14 unpersuaded by these arguments. Plaintiffs’ damages model used a retrospective
15 assessment of increases pursuant to which aggregate damages were determined based
16 on apartments and not individuals, and on the extent to which increases exceeded a
17 threshold rate of return. The entire process in which the court engaged on the issue
18 of damages involved retrospective determination of a reasonable threshold rate, a
19 process that benefitted Plaintiffs. Particularly, based on the manner in which Plaintiffs
17
1 presented their damages methodologies to the court, we see no reason why the court
2 could not also consider and give credit for monetary benefits to Plaintiffs from
3 undercharges in certain years, while at the same time it considered overcharges in
4 certain years.
5 3. Deductions
6 Plaintiffs assert that Good Samaritan did not carry its burden of proof in
7 claiming deductions based on turnover because it failed to introduce direct evidence
8 of turnover. Thus, according to Plaintiffs, the court’s finding number 65 on turnover
9 “should be overruled.” Plaintiffs also assert that Good Samaritan’s claim to
10 deductions required its reliance on illegal contracts as a defense to liability. Plaintiffs
11 further assert that Good Samaritan did not demonstrate that new residents knowingly
12 accepted rates that offended their rights protected by the Act and thereby waived their
13 rights to be free of excessive charges.
14 We reject these contentions. There was evidence of turnover rate, and the court
15 utilized that information in evaluating damages. Plaintiffs sought damages for the
16 class in the aggregate considering only apartments and not individuals and claiming
17 that they did not have to prove damages specifically, and we see no reason why the
18 court could not evaluate those damages taking the turnover rate evidence submitted
19 by Plaintiffs and Good Samaritan into consideration. Further, we see no basis on
18
1 which to determine that the entrance agreements with new residents were in any sense
2 illegal or that Good Samaritan did not have the right to set new rates for new residents.
3 4. Summary of Credits and Deductions Issues
4 In sum, we see no error in the application of law to the facts in the district
5 court’s application of credits and deductions in assessing damages. Nor do we see any
6 irrationality in the court’s assessments. The court was at liberty to determine if the
7 damages model presented by Plaintiffs fairly represented the proper way of assessing
8 damages. The court evaluated damages suffered in each calendar year correlated to
9 the rates of return in excess of a threshold rate of return. We are not persuaded that
10 in these circumstances Plaintiffs’ view of a single and definite way to measure
11 damages to make Plaintiffs whole was the only avenue to consider in arriving at the
12 measurement. We determine that no damages rule or rationale by which Plaintiffs
13 seek to bar consideration of credits and deductions applies. Plaintiffs fail to
14 demonstrate error in the application of law or in factual determinations, and we will
15 not overturn the district court’s reasonable evaluation and measurement of damages
16 considering credits and deductions.
17 C. The Bar of the Statute of Limitations
18 Good Samaritan asserted and the district court applied the six-year statute of
19 limitations in NMSA 1978, Section 37-1-3 (1975), to bar Plaintiffs’ claim of
19
1 overcharges related to one particular fee increase, namely, a fee increase that was
2 announced in November 1992 to be effective January 1, 1993. Based on a continuing-
3 wrong theory, Plaintiffs assert a right to sue as each monthly overcharge occurred
4 following January 1993. They argue that the statute is therefore inapplicable to
5 service fee increases that were first charged in January 1993 and were still being
6 charged at the start of the class period in August 1993, notwithstanding that the
7 decision to implement the January 1, 1993, increase was made in 1992.
8 We are persuaded by Good Samaritan’s position that Plaintiffs’ claim derives
9 only from Good Samaritan’s singular act of charging the increased yearly fee on its
10 effective date of January 1, 1993, and not from each monthly overcharge that followed
11 that act during the year or from a continuing wrong notion based on the consequences
12 of the initial fee increase. See Tull v. City of Albuquerque, 120 N.M. 829, 830-31, 907
13 P.2d 1010, 1011-12 (Ct. App. 1995) (stating, in an employment contract case, that the
14 allegations “would establish that the [employer] committed a single wrong with
15 continuing effects”; holding that for statute of limitation purposes the only actionable
16 breach and wrong was the employer’s initial refusal to increase the plaintiff’s salaries;
17 and rejecting the continuing wrong theory in which each paycheck constituted a new
18 wrong for statute of limitations purposes).
20
1 II. Good Samaritan’s Points
2 Good Samaritan’s first two points on appeal were disposed of in Bishop II,
3 2009-NMSC-036. The points were that the language in Section 24-17-5(B)(11)
4 requiring fee increases to be based on “reasonable return on investment” is
5 unconstitutionally vague, and that if the Act were interpreted correctly, the fee
6 increases during the class period were “reasonable.” We, therefore, do not address
7 these points. We turn to Good Samaritan’s claims that the district court abused its
8 discretion in three rulings.
9 A. Asserted Error in Reopening the Trial
10 Good Samaritan complains that the district court abused its discretion when it
11 permitted Plaintiffs a second chance to meet their burden of proof on damages. Trial
12 occurred in September 2002. The court decided to reopen the record in February 2004
13 for the purpose of allowing supplemental evidence on the turnover issue. The
14 standard of review is abuse of discretion. See State v. Harrison, 2000-NMSC-022,
15 ¶ 56, 129 N.M. 328, 7 P.3d 478 (stating that appellate courts review a district court’s
16 decision to reopen the record for abuse of discretion). We first discuss the
17 background giving rise to the reopen issue, followed by the parties’ arguments and our
18 analysis.
21
1 1. Background
2 In December 2002, the court found that Plaintiffs had not shown that particular
3 Plaintiffs lived, or had not shown the amount of time Plaintiffs lived in any particular
4 apartment at any particular service fee amount after any allegedly improper increase
5 in rent. The court also found that residents had moved in and out of apartments and
6 that sometimes they had moved in and out before fee increases had gone into effect.
7 Further, the court found that residents transferred from one apartment to another and
8 in doing so had signed new contracts and had agreed to new rates. In addition, the
9 court found that Plaintiffs’ expert’s damages methodology assigned damages to
10 apartments and not individual residents and assumed that damages existed regardless
11 of how many times an apartment was turned over to a new resident who agreed to a
12 higher fee. Based on these findings, the court found that it was necessary to
13 incorporate a turnover rate into the damages calculation, and the court selected a
14 turnover rate of 29.8%. This turnover rate was taken from a defense exhibit, The State
15 of Seniors Housing 2001 by the National Investment Center, the American Senior
16 Housing Association, and Price WaterhouseCoopers. The court entered a finding that
17 29.8% “must be deducted from [Plaintiffs’ damages] to reflect the turnover rate.”
18 In February 2004, faced with proposed amendments to its findings of fact and
19 conclusions of law, particularly with differing views of the parties in regard to burdens
22
1 of proof relating to damages, the court decided to look further into its prior ruling
2 regarding the turnover rate. In a February 9, 2004, letter to the parties, the court
3 explained why it was reopening the case to hear evidence on the turnover rate. The
4 court expressed concern that neither party had offered sufficiently explicit testimony
5 in 2002 of an exact turnover rate and that the court had likely erred in two respects in
6 choosing and applying the 29.8% turnover rate. The court determined, among other
7 things, that its errors were (1) using an annual rate applied as a one-time deduction,
8 and (2) that, given the desirability of the facility, the rate the court used was not
9 supported by the evidence.
10 The court reasoned that it would be less costly to the parties for it to reopen the
11 case than to have the case proceed to appeal and that it would be more efficient to
12 clarify the matter before the anticipated ultimate appeal of the case. The court
13 indicated that the cost of delay to take more evidence before entry of judgment would
14 be slight in comparison to the parties appealing an issue not clarified and not
15 supported by substantial evidence. The court concluded its analysis by stating the
16 following:
17 I do not believe that . . . Plaintiffs were at fault for failing to recognize
18 that the turnover rate would become a pivotal issue from [Good
19 Samaritan’s] point of view. [Good Samaritan] has possession of the
20 documents that are relevant for determining turnover rate, and . . . the
21 damages issues and the post-trial distribution issue cannot be easily
22 separated. The turnover rate can be viewed, in part, as a distribution
23
1 issue. Finally, New Mexico [c]ourts have recognized that there are
2 certain cases for which it is proper for the court to reopen the evidence
3 for the limited purpose of receiving additional information on a discrete
4 topic. Cienfuegos v. Pacheco, 56 N.M. 667, 248 P.2d 664 (1952).
5 At the outset of a hearing in May 2004 on the merits of the turnover rate issue, the
6 court indicated that, throughout the long litigation, it had “made a determination that
7 one of the elements of damage would include the turnover rate” and, further, that the
8 court had made a determination that “the turnover rate [was] a necessary element and
9 not part of the distribution issue” and that “if the turnover rate is not brought forward,”
10 the court would be “faced with the unenviable decision of, very possibly, throwing the
11 verdict out.”
12 The court stated in a July 8, 2004, letter to the parties that, based on the
13 evidence that was presented at the hearing, it was modifying the findings of fact to set
14 out “appropriate turnover rates” for each of the years from 1994 through 1999, with
15 the rates varying from as low as 7% in 1998 to as high as 9.98% in 1999. The court’s
16 amended findings of fact entered in December 2004 reflect these determinations.
24
1 2. The Parties’ Arguments
2 Good Samaritan attacks the reopening of the case on several fronts. It argues
3 that Plaintiffs knew that turnover was an issue that Good Samaritan would raise and
4 that Plaintiffs could have produced turnover evidence before the close of the evidence
5 at trial. Good Samaritan further argues that the “deficiency” in Plaintiffs’ proof
6 resulted from their tactical decision to treat the case as if the Act governed rates rather
7 than permissible increases in rates and to treat the case as if the class consisted of
8 apartments and not “real individuals.” Good Samaritan faults the court for not
9 sticking with “the only turnover rate in the record . . . which [Good Samaritan]
10 demonstrated in post-trial briefing would yield no damages whatsoever if applied in
11 each of the six years of the class period” and for permitting Plaintiffs to cure the
12 deficiency in their proof of any damages. In support of its position, Good Samaritan
13 argues that the court can reopen only if the court determines that the failure of proof
14 did not result from lack of due diligence on the part of Plaintiffs. See Harrison, 2000-
15 NMSC-022, ¶ 56 (“Two factors which appellate courts consider in this context are the
16 extent to which the movant used due diligence to obtain the testimony and the
17 probable value of that testimony.”).
18 Plaintiffs essentially respond to Good Samaritan’s position by arguing that the
19 court erred in even considering turnover in its damages assessment. Plaintiffs
25
1 complain that the court’s consideration of turnover throughout the proceedings
2 improperly placed the burden of proof on Plaintiffs. They argue that it was proper in
3 the class action to present their claim in the aggregate instead of individualized
4 evidence. They further complain that Good Samaritan never argued at the 2002 trial
5 that turnover should be imposed and did not indicate a specific turnover rate, that
6 Good Samaritan provided no evidence of turnover as to any particular resident, and
7 that the one turnover statistic of 29.8% in evidence before the record was reopened
8 was offered for a purpose other than to measure damages based in part on turnover.
9 Plaintiffs argue that whether they knew of Good Samaritan’s arguments regarding
10 turnover was not relevant to the issues of burden of proof and obligations. Thus,
11 Plaintiffs’ main counter to Good Samaritan’s point is that it was Good Samaritan’s
12 burden and obligation to discredit Plaintiffs’ damages proof and to show why the
13 damages Plaintiffs proved should be reduced and that Good Samaritan failed to
14 sustain its burden. Plaintiffs cite First National Bank v. Sanchez, 112 N.M. 317, 319,
15 815 P.2d 613, 615 (1991) (holding that a new trial was required due to inadequate
16 proof of damages on which the jury was instructed); Yates Petroleum Corp. v.
17 Kennedy, 108 N.M. 564, 566-67, 775 P.2d 1281, 1283-84 (1989) (discussing the
18 parties’ burdens of proof relating to damages in an eminent domain proceeding).
26
1 However, Plaintiffs also argue that even if they and not Good Samaritan had the
2 burden to show turnover, the court’s decision to reopen was within its sound
3 discretion and the decision is not to be lightly overturned. See Foreman v. Myers, 79
4 N.M. 404, 408, 444 P.2d 589, 593 (1968) (stating that our Supreme Court has
5 consistently held that the determination not to reopen a case is within the sound
6 discretion of the district court and will not be lightly overturned); Riggs v. Gardikas,
7 78 N.M. 5, 8, 427 P.2d 890, 893 (1967) (stating that a motion to reopen a case to take
8 additional evidence is addressed to the sound discretion of the district court and our
9 Supreme Court is “always loath to interfere with that discretion”).
10 3. Analysis
11 There is ample support for the district court’s exercise of its discretion to reopen
12 the case for further evidence of turnover rates. The district court determined early on
13 that under the circumstances here, turnover was an integral and critical aspect of
14 damages. The court developed concern about the propriety of its selection of the
15 29.8% rate and required further evidence on the issue. The court’s concern was
16 justifiable, and its explanations for having to reopen the case for further evidence in
17 order to meaningfully evaluate damages were reasonable and sound. We understand
18 Good Samaritan’s position that without having provided turnover evidence, Plaintiffs
19 failed in their damages proof and that the court should not have given Plaintiffs any
27
1 chance, much less a second one, to prove damages by allowing Plaintiffs to offer
2 turnover rate evidence. However, under the circumstances as set out earlier in this
3 opinion, we will not override the court’s discretion and determination to reopen and
4 attempt to assure that turnover was thoroughly and adequately considered.
5 B. Asserted Error in Awarding Prejudgment Interest
6 After first refusing to award Plaintiffs any prejudgment interest, the court on
7 reconsideration awarded Plaintiffs prejudgment interest under Section 56-8-4(B) from
8 the time of the filing of the complaint to the time of judgment. The court found that
9 it could not attribute delay to either party; however, the court also found that Good
10 Samaritan “did not make reasonable and timely offers to settle with . . . Plaintiffs until
11 long after the trial in this matter.”
12 “The purpose of awarding prejudgment interest under Section 56-8-4(B) is to
13 foster settlement and prevent delay.” Lucero v. Aladdin Beauty Colls., Inc., 117 N.M.
14 269, 272, 871 P.2d 365, 368 (1994). That section “is not . . . limited by whether
15 damages are fixed or ascertainable.” Id. We review an award of prejudgment interest
16 under Section 56-8-4(B) for abuse of discretion. See Lucero, 117 N.M. at 272, 871
17 P.2d at 368 (stating that the “statute allows the trial court in its discretion to award
18 interest after considering whether the plaintiff caused unreasonable delay and whether
19 the defendant made a reasonable and timely offer of settlement to the plaintiff” and
28
1 further stating that the Legislature must have intended by the statute “that, to foster
2 timely settlements, a discretionary award of prejudgment interest is allowed in all
3 cases” (internal quotation marks and citation omitted)).
4 Good Samaritan complains that under the “highly unusual” circumstances in
5 this case the court’s award of prejudgment interest from the date of the filing of the
6 complaint was an abuse of discretion. More specifically, Good Samaritan argues
7 abuse of discretion in awarding prejudgment interest where the liability ultimately
8 imposed on it “for its objectively modest fee increases” was unpredictable and was
9 considerably less than what Plaintiffs demanded in damages. Good Samaritan points
10 out that Plaintiffs sought as much as $18 million in damages after trebling, that
11 Plaintiffs’ settlement demands began at $6 million by March 2001, dropped to $2.5
12 million in May 2002, and were at $1.4 million on the eve of trial, and that the court
13 ultimately entered judgment in favor of Plaintiffs for only $122,548; whereas, Good
14 Samaritan notes, it made reasonable offers before trial and on the eve of trial.
15 Good Samaritan characterizes its settlement offers as follows. In a March 2001
16 settlement facilitation conducted some eighteen months before trial, Good Samaritan
17 “outlined an approach that would include making capital improvements to [Good
18 Samaritan’s] facility and freezing future rent increases to Manzano residents.” In a
19 second settlement facilitation in May 2002, Good Samaritan’s “opening offer was to
29
1 spend $1 million for the benefit of residents at the facility on improvements and
2 programs that were negotiable.” On the first day of trial, Good Samaritan offered to
3 spend $2 million at its facility for the benefit of residents and to also pay $50,000 in
4 attorney fees.
5 In support of the court’s award of prejudgment interest, Plaintiffs repeat the
6 argument and authority they presented on their own appellate point seeking pre-
7 complaint prejudgment interest suggesting that they have a right to be fully
8 compensated for the damages they suffered from Good Samaritan’s wrongful taking
9 and use of their money. In regard to Good Samaritan’s settlement offers, Plaintiffs’
10 attorney’s affidavit shows that he saw the offers the same as Good Samaritan
11 characterizes them. In specific regard to Good Samaritan’s offer on the first day of
12 trial, Plaintiffs show that the $50,000 in attorney fees offered by Good Samaritan was
13 substantially below the amount of costs and attorney fees awarded Plaintiffs, and they
14 argue that Good Samaritan’s offer to spend money on the facility was not an offer to
15 pay money to Plaintiffs, but instead would benefit, for example, residents who would
16 reside many years after Plaintiffs lived at the facility and would provide nothing to
17 Plaintiffs who were residents between 1993 and 1999.
18 Again, we will not override the district court’s view of the circumstances and
19 settlement offers. The principal and substantial dollar investment of Good Samaritan
30
1 was contained in offers that would have only indirect, if any, personal benefit or
2 consequence in regard to Plaintiffs. Good Samaritan’s offers appear to be little more
3 than capital investments in its facility that likely would ultimately benefit Good
4 Samaritan’s balance sheet and sales and indirectly benefit future residents. The court,
5 in its discretion, could have reasonable determined that Good Samaritan’s offers were
6 not reasonable or timely. We cannot say that the court abused its discretion.
7 C. Asserted Error in Not Decertifying the Class
8 Good Samaritan contends that the class members were never identified by name
9 at any time during the proceedings and that the judgment fails to identify by name the
10 class members who are bound by the judgment and, therefore, the court abused its
11 discretion in refusing to decertify the class. Class certification determinations are
12 reviewed for abuse of discretion. Enfield v. Old Line Life Ins. Co. of Am., 2004-
13 NMCA-115, ¶ 16, 136 N.M. 398, 98 P.3d 1048.
14 Good Samaritan relies on Rule 1-023(C)(3) NMRA for its position. That rule
15 states that the judgment in an action maintained as a class action under Rule 1-
16 023(B)(3) “shall include and specify or describe those to whom the [required] notice
17 . . . was directed, and who have not requested exclusion, and whom the court finds to
18 be members of the class.” Rule 1-023(C)(3). The judgment entered in this case states
19 that “[t]he [c]ourt defined the class as specifically consisting of: ‘Residents of
31
1 Manzano del Sol independent living apartments, during the period from July 30, 1993
2 to[] July 30, 1999, whose monthly fees were subject to one or more increases during
3 that period.’” The judgment further states that:
4 Notice was given to all potential class members and numerous
5 others in addition by the best practicable notice under the circumstances.
6 The Plaintiff Class was notified by registered mail, posted notice at the
7 facility as well as published notice in a paper of general distribution in
8 the Bernalillo County region. The [c]ourt further finds that this notice
9 was reasonably calculated to provide the members of the class actual
10 notice, and was the best practicable notice under the circumstances.
11 Further, the judgment names the class members who opted out. Other than the
12 foregoing descriptions, the judgment simply refers to the class members as “the
13 Plaintiff Class” and does not identify them by name. The court’s amended findings
14 of fact, which are incorporated and adopted by reference in the judgment defines the
15 class as follows: “This is a class action. The plaintiff class has been certified by the
16 [c]ourt’s ‘Order Granting Certification of Class’ filed September 6, 2001[,] and the
17 [c]ourt’s [o]rder approving the form of class notice. The class is made up of residents
18 of Manzano de Sol who were subject to fee increases between July 30, 1993 and July
19 30, 1999.”
20 Good Samaritan argues that under Rule 1-023(C)(3) the judgment was required
21 to specifically identify the members of the class by name and that the judgment is
22 defective because it did not do so. Good Samaritan also argues that the judgment is
32
1 defective because it is not clear in the record which of the class members who did not
2 opt out were properly notified and which were not. Good Samaritan blames Plaintiffs
3 for failing to create a record that would have allowed the court to enter judgment in
4 compliance with Rule 1-023(C)(3).
5 Plaintiffs argue that there exists no authority and show that Good Samaritan
6 cites none holding that decertification is appropriate if a judgment does not name
7 individual class members. They also argue that, under Rule 1-023(C)(3), a description
8 of the class is sufficient and listing class members by name is not required. Plaintiffs
9 assert that the judgment “evidently includes the class members by describing them.”
10 The class specifically described in the judgment is relatively small. Plaintiffs
11 could and should have identified the class members by name and the court should
12 have listed them by name in the judgment. The class was and remains identifiable and
13 it is sufficiently definite to permit Plaintiffs to ascertain individual class members by
14 name. However, although we do not condone these failures, we do not see why the
15 individual class members cannot be individually identified by name as a part of further
16 proceedings on remand without resulting in prejudice to Good Samaritan. It appears
17 that the damages awarded in the judgment are still subject to the distribution process.
18 Thus, we are not convinced that the failure to name class members entitled to
19 distribution of damages requires decertification of the class. Good Samaritan has not
33
1 shown why this procedural aspect cannot be accomplished in further proceedings. We
2 are not provided with any persuasive rationale or authority, nor do we see any basis,
3 on which to conclude that the district court abused its discretion in not decertifying
4 the class. We remand for Plaintiffs to ascertain and prove the names of the individual
5 class members entitled to damages and for the court to proceed with any issues related
6 to distribution of the damages awarded.
7 CONCLUSION
8 We affirm the judgment of the district court in all respects. However, we
9 remand the case to the district court for further proceedings consistent with this
10 opinion in regard to identification by name of individual class members entitled to a
11 distribution of damages and placement of the names of those members in an amended
12 judgment.
13 IT IS SO ORDERED.
14 __________________________________
15 JONATHAN B. SUTIN, Judge
16 WE CONCUR:
17 ____________________________
18 CYNTHIA A. FRY, Chief Judge
19 ____________________________
20 CELIA FOY CASTILLO, Judge
34