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Date: 08-20-2024
Case Style:
Autovest, L.L.C. v. Debra M. Agosto and Debbie M. Agosto
Case Number:
Judge:
Court: District Court, Dona Ana County, New Mexico
Plaintiff's Attorney: Jody Jenkins
Defendant's Attorney:
Click Here For The Best Las Cruces Consumer Credit Lawyer Directory
Description:
Las Cruces, New Mexico consumer credit lawyer represented the Defendants sued for breach of contract on an auto purchase agreement.
{¶2} The financial journeys of Debra and Debbie Agosto, and Maria Estrada (collectively, Respondents) share a beginning familiar to many New Mexicans, the purchase of a car.[1] A buyer trades in their old car and signs a six-year finance agreement borrowing more than $23,000 for a three-year-old sedan worth $11,790.
The total amount financed includes the accrued annual interest (17%) and an array of finance charges and associated fees. One of those fees is a life insurance policy funded by and rolled into the loan, providing the bank, as the lender and primary beneficiary, the entire value of the contract.
{¶3} Over two years, some payments are timely, and some are not. The bank invokes the agreement's acceleration clause, requiring the buyer to immediately repay the entire balance or risk losing the car; the buyer chooses to voluntarily return the vehicle. Within two months of repossession, the sedan is sold at auction for $3,800, representing a 67.8% depreciation in two and a half years. The auction proceeds are applied to the balance of the debt, but a deficiency of almost $9,000 remains. The bank sells and assigns its interest to a third-party debt collector like Autovest. The collection calls continue, and the buyer approves a draw from their account in a good faith effort to pay down the deficiency.
{¶4} More than five years after default and eight years after purchasing the sedan, the debt's new owner brings an action to recover the remaining deficiency. Respondents argue that the UCC bars the claim because the UCC specifies a four-year statute of limitations for transactions involving the sale of goods. Section 55-2-725(1). A statute of limitations establishes a maximum time frame for a party to bring a suit. It prevents the disposition of aging claims so that a case is brought before evidence is lost and memories fade. Because more than four years have passed, Respondents contend that the Court of Appeals correctly dismissed the creditor's lawsuit.
{¶5} Autovest maintains that the suit was timely because Defendant's payment revived the statute of limitations under New Mexico's partial payment rule, which renews the four-year limitation period whenever a debtor remits any amount toward an outstanding balance. See NMSA 1978, § 37-1-16 (1957) ("Causes of action founded upon contract shall be revived by the making of any partial or installment payment."). The two district courts reached different conclusions on revival by partial payment, albeit under theories not at issue in this appeal. See Agosto, 2021-NMCA-053, ¶ 1.
{¶6} The Court of Appeals consolidated the cases and rejected Autovest's argument that the partial payment rule applied to this transaction, relying on a plain-language interpretation of Section 37-1-17. Agosto, 2021-NMCA-053, ¶ 1 n.1, ¶¶ 12-13; NMSA 1978, Section 37-1-17 (1880). Section 37-1-17 functions as an exclusion provision that prohibits the application of all of Chapter 37's terms, including the partial payment rule, when another statute establishes a different limitation period. Section 37-1-17 ("None of the provisions of this chapter shall apply to any action or suit which, by any particular statute of this state, is limited to be commenced within a different time." (emphasis added)). The Court of Appeals noted that Chapter 37 establishes a default statute of limitations period of six years for contracts in writing. Agosto, 2021-NMCA-053, ¶ 12; NMSA 1978, § 37-1-3(A) (2015). Because the UCC mandates a different time of four years, the Court held that the exclusion provision "render[ed] the [partial payment rule] inapplicable." Agosto, 2021-NMCA-053, ¶ 12; Section 37-1-17.
{¶7} Fifteen years after the buyer purchased the sedan, Autovest appealed to this Court, arguing that Section 55-2-725(4) of the UCC (the tolling provision) overrides the mandatory prohibition of the exclusion provision.[2] See id.; NMSA 1978, Section 55-2-725(4) (1961). ("This section does not alter the law on tolling of the statute of limitations." (emphasis added)). We disagree. The exclusion provision unambiguously precludes the application of the partial payment statute. Further, the UCC's declaration that its terms do not alter existing tolling law does not operate to supersede the Legislature's mandatory exclusion of Chapter 37. It does the opposite; it restricts the reach of the UCC's provisions rather than extending their command.
{¶8} Accepting Autovest's argument would restart the statute of limitations whenever a consumer makes a partial payment. Reviving the limitation period would allow a debt collector to file a lawsuit regardless of how many years have passed since default, even if the lawsuit would normally be time-barred. Joslin v. Gregory, 2003-NMCA-133, ¶ 14, 134 N.M. 527, 80 P.3d 464 ("A partial payment will renew a barred debt when such payment is made under circumstances that warrant a clear inference that the debtor acknowledges and is willing to pay a further indebtedness." (text only)[3] (emphasis added) (quoting II Calvin W. Corman, Limitation of Actions § 9.12.3 at 93 (1991))). This would sanction the eternal revival of claims such that the specter of zombie debt rising from the grave would forever haunt consumers. There would be no end to the underinformed debtor's financial anguish.
{¶9} This is not to suggest that Respondents should not answer for their obligations under the financial agreement. They should. But where the Legislature's language is unambiguous and mandatory, as it is in the exclusion provision, we are compelled to enforce its terms. We hold that Section 37-1-16's partial payment rule does not override or otherwise supersede the mandatory terms of the exclusion provision. We, therefore, affirm the Court of Appeals and remand each case to its respective district court to amend the judgment consistent with our holdings.
* * *
{¶28} The statute of limitations in a breach of contract action "begins to run from the time of the breach." Welty v. W. Bank of Las Cruces, 1987-NMSC-066, ¶ 8, 106 N.M. 126, 740 P.2d 120.
Installment contracts require continuous performance, so that partial breaches may occur with each missed payment. Restatement (Second) of Contracts § 243 cmt. c. (Am. L. Inst. 1981) ("[A] breach as to any number less than the whole of such installments gives rise to a claim merely for damages for partial breach."). With each partial breach, a new statute of limitations begins to run. Welty, 1987-NMSC-066, ¶ 9 ("[U]nder contract obligations payable by installments, the statute [of limitations] would have begun to run only with respect to each installment when due.") Autovest and Amicus argue that recovery of missed payments would require separate lawsuits against a consumer after each breach.
Outcome: {¶35} We hold that Section 37-1-16's partial payment rule does not override or otherwise supersede the mandatory terms of the exclusion provision. We, therefore, affirm the Court of Appeals and remand each case to its respective district court to amend the judgment consistent with our holdings.
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