Roddie Chavarria and Norma Castaneda v. Fleetwood Retail Corporation of New Mexico

{1} In this case, it is undisputed that employees of Fleetwood Mobile Homes committed fraud during the sale of a mobile home to Roddie Chavarria and Norma Castaneda (Plaintiffs). It is also undisputed on appeal that Fleetwood failed to deliver the customized mobile home it promised and set up the home it did deliver in an unworkmanlike manner. The district court judge, sitting without a jury, found in favor of Plaintiffs and awarded compensatory and punitive damages plus attorney fees. On appeal, the Court of Appeals reversed a portion of the compensatory damages award, concluding that certain elements of damages were duplicated, and reversed the punitive damages award, concluding that Fleetwood was not liable for the fraudulent conduct of its employees. Chavarria v. Fleetwood Retail Corp., 2005-NMCA-082, 137 N.M. 783, 115 P.3d 799. We granted certiorari and reverse the Court of Appeals regarding the compensatory and punitive damages claims. We affirm that portion of the Court of Appeals' opinion reinstating Defendant's counterclaim.

I. FACTS

{2} Plaintiffs lived in a 1,120-square-foot trailer with their four children in Las Cruces. Mr. Chavarria, who attended school up to the 9th grade, worked as a custodian at New Mexico State University, and Ms. Castaneda worked as a presser at Alameda Laundry and Cleaners. Plaintiffs noticed a marquee at Fleetwood advertising no payments for ninety days. Plaintiffs found the ninety-day grace period attractive because it would allow them to pay off other debts, which in turn would enable them to purchase a new mobile home with a higher monthly mortgage payment. When Plaintiffs went to Fleetwood to investigate the purchase of a mobile home, sales agent Devon Pike assured Plaintiffs that the ninety-day grace period would apply to them. Bob Lancaster, the general manager of the Fleetwood office in Las Cruces assisted Pike in selling a mobile home to Plaintiffs.

{2} Plaintiffs lived in a 1,120-square-foot trailer with their four children in Las Cruces. Mr. Chavarria, who attended school up to the 9th grade, worked as a custodian at New Mexico State University, and Ms. Castaneda worked as a presser at Alameda Laundry and Cleaners. Plaintiffs noticed a marquee at Fleetwood advertising no payments for ninety days. Plaintiffs found the ninety-day grace period attractive because it would allow them to pay off other debts, which in turn would enable them to purchase a new mobile home with a higher monthly mortgage payment. When Plaintiffs went to Fleetwood to investigate the purchase of a mobile home, sales agent Devon Pike assured Plaintiffs that the ninety-day grace period would apply to them. Bob Lancaster, the general manager of the Fleetwood office in Las Cruces assisted Pike in selling a mobile home to Plaintiffs.

{4} Plaintiffs ultimately agreed to purchase a 1,232-square-foot, three-bedroom home, paying virtually the same amount for it that they would have paid for the four-bedroom home they previously selected. Plaintiffs ordered the home without double sinks or a garden tub in the master bathroom and without a new dishwasher or refrigerator, features Plaintiffs did not deem necessary. In addition, Plaintiffs requested three custom features: bigger closets in the kids' rooms, commercial-grade carpet throughout the trailer, and a window in the master bathroom. Pike assured Plaintiffs they would receive a "custom ordered trailer."

{5} Unbeknownst to Plaintiffs, Pike and Lancaster falsified Plaintiffs' income to GreenPoint, altering their credit applications to show that Ms. Castaneda earned an additional eight hundred dollars a month from a side job at another dry cleaning business. Pike and Lancaster set up a fake, or "dummy," telephone number so that GreenPoint could call and "verify" the false income, and fabricated a pay stub from Ms. Castaneda's fictitious employer. In addition, Pike and Lancaster forged Plaintiffs' signatures on credit and loan application documents.

{5} Unbeknownst to Plaintiffs, Pike and Lancaster falsified Plaintiffs' income to GreenPoint, altering their credit applications to show that Ms. Castaneda earned an additional eight hundred dollars a month from a side job at another dry cleaning business. Pike and Lancaster set up a fake, or "dummy," telephone number so that GreenPoint could call and "verify" the false income, and fabricated a pay stub from Ms. Castaneda's fictitious employer. In addition, Pike and Lancaster forged Plaintiffs' signatures on credit and loan application documents.