This summary was computer-generated without any editorial revision. It is not official, has not been checked for accuracy, and is NOT citable.
Facts
The Defendant, a New Mexico corporation, ordered 20,000 custom dog food labels from a printing company. The labels delivered were defective, as they did not match the agreed specifications in size or color and were unusable without modification. Despite rejecting the labels and notifying the Seller, the Defendant used approximately 4,000 to 4,500 labels under the Seller's instructions. The Seller did not retrieve the defective labels or address the issues, and the matter was referred to the Plaintiff, a collection agency, for payment collection (paras 2-7).
Procedural History
- District Court of Dona Ana County: The trial court found that the Seller delivered defective and nonconforming goods, and the Defendant properly rejected them. However, the court sua sponte awarded restitution to the Plaintiff for the Defendant's use of some labels and granted attorney fees to the Plaintiff (paras 9-10).
Parties' Submissions
- Appellant (Defendant): Argued that the trial court erred in awarding restitution and attorney fees because the Plaintiff did not plead or argue unjust enrichment, and the Defendant did not have notice or an opportunity to defend against such a claim. The Defendant also contended that its use of the defective labels was not unjust (paras 10, 16).
- Appellee (Plaintiff): Asserted that the trial court's award of restitution was proper and that the Defendant waived its right to challenge the judgment by failing to file an answer to the amended complaint or submit requested findings of fact and conclusions of law (paras 11-12).
Legal Issues
- Whether the trial court erred in awarding restitution based on unjust enrichment when the theory was not pleaded, argued, or tried by the parties (para 16).
- Whether the Defendant's use of the defective labels constituted partial acceptance under the Uniform Commercial Code (UCC) (para 33).
- Whether the trial court erred in awarding attorney fees to the Plaintiff (para 38).
Disposition
- The Court of Appeals reversed the trial court's judgment awarding restitution and attorney fees to the Plaintiff and remanded the case for entry of judgment in favor of the Defendant (para 41).
Reasons
Per Robinson J. (Bosson CJ. and Fry J. concurring):
Award of Restitution: The trial court abused its discretion by awarding restitution sua sponte based on unjust enrichment. The Plaintiff did not plead or argue unjust enrichment, and the Defendant did not consent to the trial of this issue. The Defendant was prejudiced as it was deprived of the opportunity to present defenses or evidence against the unjust enrichment claim. The evidence presented at trial was relevant to the Defendant's affirmative defenses and did not imply consent to litigate unjust enrichment (paras 16-32).
Partial Acceptance: The Defendant's use of the defective labels did not constitute partial acceptance under the UCC. The trial court's findings supported the conclusion that the Defendant properly rejected the goods, and its use of the labels was consistent with the Seller's instructions, not an act of acceptance (paras 33-36).
Attorney Fees: The award of attorney fees was improper as the Plaintiff did not prevail on its open account claim, and the contract did not support an award of fees where the Defendant was not indebted to the Seller. The Plaintiff was not entitled to fees solely as the prevailing party (paras 38-40).