Fogelson v. Wallace
35,086
| N.M. Ct. App. | Jul 26, 2017Background
- In 2007–2008 Appellants (Wallace and Bozzone, through an ownership/management web of entities) acquired Wallen Development, Inc.; Montoya was the company’s nominal general manager.
- Appellees (David and Corinne Fogelson) signed a May 25, 2008 purchase agreement with Wallen for a new home; they paid $165,111 but the home was not completed when Wallen ceased operations in Feb. 2009.
- Appellees initiated arbitration against Wallen, obtained an arbitration award (breach of contract, fraud, Unfair Practices Act) and a confirmed district-court judgment (Arbitration Judgment) for $165,111 compensatory and punitive damages; Wallen did not pay.
- Appellees then sued Wallace and later amended to add Bozzone, alleging conversion, fraud, unfair trade practices, prima facie tort, intentional interference with contractual relations (against Bozzone), and civil conspiracy; district court found Wallace and Bozzone jointly and severally liable on several intentional tort claims.
- On appeal, court addressed (1) whether res judicata barred claims against Wallace and/or Bozzone based on the prior arbitration judgment, (2) whether substantial evidence supported Bozzone’s individual liability for prima facie tort, intentional interference, and conspiracy, and (3) whether the Unfair Practices Act applied to construction services.
Issues
| Issue | Plaintiff's Argument (Fogelson) | Defendant's Argument (Wallace / Bozzone) | Held |
|---|---|---|---|
| Does res judicata bar post-arbitration claims against Wallace? | The arbitration judgment was limited to Wallen; plaintiffs could still sue individuals. | Wallace: he was in privity with Wallen and claims could/should have been raised in arbitration. | Held: res judicata applies to Wallace — claims against him are barred; judgment against Wallace reversed. |
| Does res judicata bar post-arbitration claims against Bozzone? | Bozzone wasn’t raised in arbitration; factual allegations against him differ (intentional interference). | Bozzone: argued res judicata should bar these claims (preservation contested). | Held: res judicata does not bar Appellees’ claims against Bozzone — factual allegations distinguished him from Wallace/Wallen. |
| Did substantial evidence support Bozzone’s liability for intentional torts (prima facie tort, intentional interference, civil conspiracy)? | Plaintiffs: Bozzone prioritized homes he financed, directed nonpayment of vendors, and caused breach; thus acted for private interest. | Bozzone: decisions were corporate, privileged, or in good faith to preserve company; insufficient evidence of acting for private interest. | Held: reversed for Bozzone — prima facie tort and intentional interference lacked sufficient evidentiary support; conspiracy reversed as dependent on those claims. |
| Do New Mexico Unfair Practices Act protections cover construction services for an uncompleted home? | Plaintiffs: construction services are "services" under the Act and therefore covered. | Defendants: relied on precedent excluding certain real-estate transactions from the Act. | Held: reversed dismissal as to Bozzone only — construction services for an uncompleted new home fall within Section 57-12-2’s definition of services; remanded for further proceedings on the UDTP claim as to Bozzone. |
Key Cases Cited
- Potter v. Pierce, 342 P.3d 54 (N.M. 2015) (elements for res judicata and transactional approach to identity of causes of action)
- Deflon v. Sawyers, 137 P.3d 577 (N.M. 2006) (privity analysis and limitations on preclusion when defendants acted outside corporate authority)
- First State Bank v. Muzio, 666 P.2d 777 (N.M. 1983) (prior adjudication as res judicata on issues that were or could have been determined)
- Behrens v. Skelly, 173 F.2d 715 (3d Cir. 1949) (arbitration award can have the same preclusive effect as a court judgment)
- Kaveny v. MDA Enters., Inc., 120 P.3d 854 (N.M. Ct. App. 2005) (officers can be personally liable for intentional torts)
- McElhannon v. Ford, 73 P.3d 827 (N.M. Ct. App. 2003) (analysis of goods/services under the Unfair Practices Act where a completed house is involved)