This summary was computer-generated without any editorial revision. It is not official, has not been checked for accuracy, and is NOT citable.
Facts
Amrep Southwest, Inc. constructed 180 homes in a Rio Rancho development, using pressure-treated wood for retaining walls to prevent rot and insect damage. The wood was supplied by Baldridge Lumber Company, which subcontracted with Shollenbarger Wood Treating, Inc. Concerns arose when it was discovered that the wood, primarily spruce, was inadequately treated. Despite assurances from Baldridge and Shollenbarger, the wood was deemed unsuitable, leading to defects in the homes and subsequent homeowner complaints (paras 2-3).
Procedural History
- District Court of Sandoval County: Granted summary judgment in favor of Shollenbarger, dismissing Amrep's claims for indemnification and damages, citing Amrep's partial fault and the economic-loss rule (headnotes, para 6).
Parties' Submissions
- Appellant (Amrep Southwest, Inc.): Argued that the trial court erred in dismissing its indemnification claim, asserting unresolved factual issues regarding its conduct and seeking adoption of proportional indemnification. It also contended that the economic-loss rule should not bar its indemnification claims (paras 14, 27-28, 39).
- Appellee (Shollenbarger Wood Treating, Inc.): Maintained that Amrep's active conduct precluded indemnification and that the economic-loss rule barred recovery. It also argued that Amrep was collaterally estopped from contesting its negligence due to prior litigation (paras 14, 16, 26).
Legal Issues
- Whether Amrep's conduct was active or passive, affecting its entitlement to traditional indemnification (para 14).
- Whether the economic-loss rule bars Amrep's indemnification claims (para 25).
- Whether proportional indemnification should be adopted to apportion liability based on fault (para 32).
- Whether Amrep can seek indemnification for damages under the Unfair Practices Act and punitive damages (paras 42, 44).
Disposition
- The Supreme Court of New Mexico reversed the trial court's summary judgment and remanded the case for further proceedings (para 47).
Reasons
Per Ransom J. (Franchini and Frost JJ. concurring):
Traditional Indemnification: The Court found unresolved factual issues regarding whether Amrep's conduct was active or passive. Active conduct would preclude indemnification, while passive conduct would allow it. The trial court erred in granting summary judgment without resolving this issue (paras 14, 20).
Economic-Loss Rule: The Court held that the economic-loss rule does not bar indemnification claims. While the rule limits recovery of economic losses in tort, indemnification is based on equitable principles to shift liability from a party not at fault to one at fault (paras 25, 31).
Proportional Indemnification: The Court adopted the doctrine of proportional indemnification, allowing liability to be apportioned based on fault when traditional indemnification or contribution is unavailable. This ensures equitable allocation of damages, particularly in cases where a defendant is held fully liable under a non-tort theory (paras 32, 39).
Unfair Practices Act and Punitive Damages: Amrep may seek indemnification for damages related to the Unfair Practices Act settlement, excluding civil penalties. However, it cannot recover punitive damages through indemnification, as such damages are intended to punish the wrongdoer and cannot be shifted to another party (paras 42, 45-46).