The Supreme Court of New Mexico consolidated two cases with common issues. Both cases involved debtors who had purchased and financed cars. Unfortunately, the debtors each made untimely payments. In turn, the bank invoked acceleration clauses, which required the debtor to pay off the remaining balance or forfeit their cars immediately. The debtors voluntarily returned their cars, which the creditor subsequently sold to reduce the balance of the debts. The bank sold and assigned its interest in the debts to a third-party debt collector corporation. Later, the debtors approved a draw “from their account in a good faith effort to pay down the deficiency.” Over five years after the default and eight years after the initial purchase of the cars, the debt collector brought an action to recover the remaining deficiency. The debtors responded that the four-year statute of limitations barred the suit. The Court of Appeals ruled in favor of the debtors by applying a plain language interpretation of N.M. Stat. Ann. § 37-1-17. The debt collector then appealed to the Supreme Court of New Mexico.
In Autovest, L.L.C. v. Agosto, 563 P.3d 811 (N.M. 2024), the court affirmed the Court of Appeals ruling and remanded the case for further proceedings. First, the court looked at New Mexico statue’s Chapter 37 exclusion provision and its application. N.M. Stat. Ann. § 37-1-17. The statute excluded any preceding provisions of the chapter, which included the provision the debt collector relied upon regarding their partial payment plan. N.M. Stat. Ann. § 37-1-16. The debt collector contended that when the legislature adopted model acts of the UCC, the intention was for the tolling provision to override the exclusion provision. The court examined the verbiage of N.M. Stat. Ann. § 55-2-725(4) and found that the use of “does not alter” in the statute indicated that the UCC does not alter or modify the law on tolling. Based on this analysis, the court determined that the legislature’s intent was clear: the UCC did not change or alter the law on tolling. Alternatively, the debt collector argued that “adopting the chosen language of the Legislature would force creditors to bring suit after each missed installment payment, thereby flooding the courts with unnecessary litigation.” However, the court concluded that the UCC “already provides an avenue that avoids the flood of unnecessary litigation” by allowing parties to modify an agreement without consideration and establish a new agreement. For those reasons, the court held that the partial repayment rule of N.M Stat. Ann. § 37-1-16 “does not override or otherwise supersede the mandatory terms of the exclusion provision.”
By Jace Brown [email protected]
Edited by Taylor O’Brien [email protected]
Edited By Ashley Boyce [email protected]
Edited By Hayden Mariott [email protected]