Cobb v. Gammon
32,936 32,945 32,953
| N.M. Ct. App. | Oct 14, 2016Background
- In 1980 a common grantor placed identical restrictive covenants on four tracts (HMBL Property) providing minimum lot size (no parcels under five acres) and stating the covenants "shall run with and bind the land until 2020" and are enforceable by any owner similarly burdened.
- Joseph and Linda Gammon (represented by French & French Fine Properties, "FFFP") bought a five-acre parcel (Lot 4A2), split it into two 2.5-acre lots, and built homes, creating covenant violations; title documents and recorded covenants put them on constructive notice.
- FFFP attempted to cure violations by soliciting waivers/amendments from HMBL owners; some owners (including sellers of the Simmons' lot) signed a waiver before the Simmons closed, but FFFP’s brokers did not disclose that fact to the Simmons at purchase.
- Clarence and Susan Simmons bought adjacent Trust Property in 2005, represented by FFFP brokers; they later were drawn into litigation when FFFP filed a third-party complaint seeking to bind all HMBL owners to the covenant-enforcement suit.
- The Simmons countersued FFFP for negligent misrepresentation and related claims; the district court found FFFP liable for negligent misrepresentation and negligence per se, awarding pecuniary damages (diminution in value), disgorgement/commission-related amounts, carry costs, and attorney’s fees.
- On appeal the Court of Appeals: (1) held the restrictive covenant runs with the land and is enforceable by any HMBL owner; (2) affirmed negligent misrepresentation and negligence per se findings; (3) affirmed the pecuniary-diminution award ($123,000 for three lots); and (4) remanded to recalculate disgorgement of commission, recompute carry-costs consistent with the diminution, and to apportion attorney fees to only those fees incurred defending FFFP’s third-party suit.
Issues
| Issue | Plaintiff's Argument (Simmons) | Defendant's Argument (FFFP) | Held |
|---|---|---|---|
| Enforceability: Does the restrictive covenant run with the land and is it enforceable by all HMBL owners? | Covenant language expressly states it "shall run with and bind the land"; identical restrictions across tracts show a general plan and intent to benefit all lots. | Covenant does not run across tracts conveyed at different times; phrase "this land" limits enforcement to each tract (or covenant is personal). | Covenant runs with the land; identical language and express terms support a general plan; any owner subject to identical restrictions may enforce them. |
| Negligent misrepresentation: Did FFFP make material misrepresentations/omissions and did Simmons justifiably rely? | Brokers knew of covenant violations and of a signed waiver/amendment but failed to disclose seller-signed waiver; Simmons would not have purchased if so informed. | No expert showed breach of professional standard; purchase agreement disclaimers and lack of reliance bar claim. | Jury findings supported by substantial evidence: brokers breached duty to disclose (statutory/contractual disclosure duty); Simmons’ reliance was justified; negligent misrepresentation proven. |
| Negligence per se: Do the NMAC broker disclosure rules provide a specific standard violated by FFFP? | 16.61.19.8(H) NMAC requires disclosure in writing of adverse material facts; FFFP failed to disclose signed waiver. | The regulation is too general/vague to support negligence per se. | Regulation’s specific written-disclosure requirement is sufficiently precise; negligence per se established because Simmons are within the protected class and harm was the type the rule aims to prevent. |
| Damages & fees: What damages are recoverable and how must they be apportioned? | Seek pecuniary losses (diminution in value), disgorgement/commission and carry costs, and attorney’s fees caused by FFFP’s misrepresentations and by defending the third-party suit. | Awards duplicate or exceed recoverable measures; Simmons did not personally pay commission; purchase agreement/disclaimers limit recoverable damages; attorney’s fees not recoverable beyond those permitted by law. | Pecuniary-diminution award ($123,000) affirmed. Disgorgement and carry-cost awards must be recalculated to reflect only the portion of commission attributable to the $123,000 overpayment; attorney’s fees remanded to award only fees incurred defending FFFP’s third-party suit (fees prosecuting their counterclaim are not recoverable). |
Key Cases Cited
- Suttle v. Bailey, 361 P.2d 325 (N.M. 1961) (reservation of a grantor’s power to alter restrictions can prevent covenants from running with land)
- Lex Pro Corp. v. Snyder Enters., Inc., 671 P.2d 637 (N.M. 1983) (requirements for a covenant to run with the land: touch and concern, intent, and notice)
- Montoya v. Barreras, 473 P.2d 363 (N.M. 1970) (restrictions on use are reciprocal servitudes that run with the land)
- Rowe v. May, 101 P.2d 391 (N.M. 1940) (identical restrictive language across conveyances supports inference of grantor intent to benefit all lots)
- Lockwood v. Steiner, 689 P.2d 932 (N.M. 1984) (restrictive covenants in initial conveyances support enforceability against successors)
- Golden Cone Concepts, Inc. v. Villa Linda Mall, Ltd., 820 P.2d 1323 (N.M. 1991) (substantial-evidence review of negligent misrepresentation findings)
- Charter Servs., Inc. v. Principal Mut. Life Ins. Co., 868 P.2d 1307 (N.M. Ct. App. 1994) (attorney fees may be recoverable when they are the proximate result of another’s negligent misrepresentation)
- First Nat’l Bank of Clovis v. Diane, Inc., 698 P.2d 5 (N.M. Ct. App. 1985) (allowing recovery of attorney fees incurred defending a suit that resulted proximately from another’s conduct; require apportionment)