Romero v. Mervyn's

Supreme Court of New Mexico
784 P.2d 992 (1989)

ELI5:

Rule of Law:

Punitive damages are recoverable for a breach of contract if the defendant's conduct was malicious, fraudulent, oppressive, or committed recklessly with a wanton disregard for the plaintiff’s rights. Malice, in this context, is defined as the intentional doing of a wrongful act without just cause or excuse, with knowledge that the act was wrong when it was committed.

Facts:

On November 23, 1984, the day after Thanksgiving, Lucy Romero was shopping in a crowded Mervyn’s store with her daughters.
Another customer pushed Romero on an escalator, causing her to fall and injure her jaw.
Dennis Wolf, the acting store manager, arrived at the scene where Romero's daughters were 'very upset, a little bit hysterical' about medical expenses.
According to Romero's testimony, Wolf, who seemed 'nervous and in a hurry,' told her that Mervyn's would pay for her medical expenses.
A few days later, Romero's daughter called Wolf to confirm the promise, and he allegedly reiterated that Mervyn's would pay.
Relying on this promise, Romero sought medical attention and physical therapy, incurring costs of $2,041.
Mervyn’s subsequently refused to pay Romero's medical bills.

Procedural Posture:

Lucy Romero filed suit against Mervyn’s in Santa Fe District Court (trial court) alleging negligence and breach of contract.
The trial court granted summary judgment to Mervyn’s on the contract claim.
Following a trial on the negligence claim, a jury returned a verdict in favor of Mervyn’s.
Romero appealed the summary judgment on the contract claim to the New Mexico Supreme Court.
The Supreme Court reversed the summary judgment, holding that the manager's authority was a genuine issue of material fact, and remanded the case for a new trial on the contract claim.
On remand, a jury found in favor of Romero and awarded her $2,041 in compensatory and $25,000 in punitive damages.
Mervyn's appealed the jury's verdict and the award of damages to the New Mexico Supreme Court.

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Issue:

Does a store's breach of a promise to pay a customer's medical bills, when evidence suggests the promise was made without intent to perform and for the purpose of defusing a tense situation, constitute malicious or wanton conduct sufficient to support an award of punitive damages?

Opinions:

Majority - Ransom, Justice

Yes, such conduct can constitute malicious or wanton conduct sufficient to support an award of punitive damages. Punitive damages are appropriate for a breach of contract when the breaching party's conduct is malicious, fraudulent, oppressive, or reckless. The court found substantial evidence for the jury to infer that the manager, Dennis Wolf, acted with malice. Malice does not require ill will, but rather 'the intentional doing of a wrongful act without just cause or excuse... [knowing] it was wrong when he did it.' The evidence—including the chaotic store environment, the family's distress, and the manager's haste—supported the inference that Wolf promised to pay Romero's bills simply to get her out of the store without intending for Mervyn's to honor the promise. This act of making a promise with knowledge it would not be kept constitutes a knowing wrongful act sufficient for a punitive damages award. The court also affirmed that Wolf had at least apparent authority to bind Mervyn's, as the company placed him in a managerial position where a reasonable customer would believe he could make such a commitment, regardless of any secret internal policies to the contrary.

Analysis:

This decision significantly clarifies the standard for awarding punitive damages in breach of contract cases in New Mexico. By defining 'malice' not as spite or ill will but as the knowing commission of a wrongful act, the court makes punitive damages more accessible in contract disputes. It establishes that a promise made in bad faith, with no intention of performance, can elevate a simple breach into conduct punishable by more than just compensatory damages. This precedent pressures businesses to ensure their agents act in good faith when making commitments to customers, as a self-serving promise made to resolve an immediate problem can lead to significant punitive liability.

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