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 Defendants entered into a contract in 1983 to purchase a recreational vehicle (RV) repair business, Manta Corporation, from the Plaintiff. The purchase price was $180,000, which included stock, assets, and goodwill. The Defendants reviewed the business records, worked in the business for six weeks, and negotiated terms before finalizing the sale. In 1986, the Defendants alleged misrepresentations about the value of the business and stopped payments on the note but continued operating the business and making improvements (paras 2-7).
Procedural History
- Trial court: The trial court ruled in favor of the Plaintiff, granting the requested relief, including a deficiency judgment for any amount not covered by the sale of the assets. The court excluded evidence of alleged misrepresentations based on the parol evidence rule and denied the Defendants' request for a jury trial on compensatory damages (headnotes, paras 1, 8).
Parties' Submissions
- Plaintiff-Appellee: Argued that the Defendants defaulted on the payment obligations under the contract and sought recovery of the unpaid amount, interest, costs, attorney fees, and a declaration of superior rights to the corporate stock (para 1).
- Defendants-Appellants: Claimed that the Plaintiff made material misrepresentations about the value of the business assets, justifying rescission of the contract. They also argued that the trial court erred in excluding evidence of misrepresentation, denying their jury request, and awarding a deficiency judgment beyond the relief requested (paras 1, 8, 17).
Legal Issues
- Did the trial court correctly exclude evidence of alleged misrepresentations under the parol evidence rule?
- Did the Defendants meet the conditions for rescission of the contract?
- Did the trial court err in awarding a deficiency judgment beyond the relief requested in the pleadings?
Disposition
- The Supreme Court of New Mexico affirmed the trial court's judgment in favor of the Plaintiff (para 19).
Reasons
Per Baca J. (Ransom and Wilson JJ. concurring):
Parol Evidence Rule: The court clarified that the parol evidence rule does not bar evidence of misrepresentation inducing a contract, even if it relates to the terms of the contract. However, the evidence was properly excluded because the Defendants failed to establish a proper predicate for misrepresentation (paras 9-12).
Rescission Conditions: The Defendants did not meet the conditions for rescission. Their reliance on alleged misrepresentations was not justified, given their professional experience, access to business records, and opportunity to investigate. Additionally, they failed to promptly offer to return the business after discovering the alleged misrepresentations and continued to operate and improve it (paras 13-16).
Deficiency Judgment: The court held that the trial court did not err in awarding a deficiency judgment, as Rule 1-054(D) allows granting relief to which a party is entitled, even if not explicitly requested in the pleadings (para 17).
Miscellaneous Claims: The Defendants' other claims were dismissed for lack of supporting authority (para 18).