February 11, 2021- NM-Emerald, LLC v. Interstate Development, LLC, No. A-1-CA-37113

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IN THE COURT OF APPEALS OF THE STATE OF NEW MEXICO	1
Opinion Number: ________________	2
Filing Date: February 11, 2021	3
NO. A-1-CA-37113	4
NM-EMERALD, LLC,	5
Plaintiff-Appellant,	6
v.	7
INTERSTATE DEVELOPMENT, LLC	8
and TERRY CORLIS,	9
Defendants-Appellees,	10
and	11
CENTRAL MUTUAL INSURANCE	12
COMPANY,	13
Defendant,	14
and	15
INTERSTATE DEVELOPMENT, LLC;	16
TERRY CORLIS; and BK SALES, INC.,	17
Cross-Plaintiffs,	18
v.	19
INTERSTATE DEVELOPMENT, LLC;	20
BFI PLUMBING & HEATING; CJL	21
ENGINEERS, INC.; FOX ELECTRIC	22
LTD. CO.; KLEE ARCHITECTS AND	23
ENGINEERS, INC.; and SMITH & SONS	24
Court of Appeals of New Mexico
Filed 2/11/2021 10:03 AM

MECHANICAL, LLC,	1
Cross-Defendants,	2
and	3
CENTRAL MUTUAL INSURANCE	4
COMPANY,	5
Third-Party Plaintiff,	6
v.	7
NM-EMERALD, LLC; INTERSTATE	8
DEVELOPMENT, LLC; JOHN KLEE; and	9
TERRY CORLIS,	10
Third-Party Defendants.	11
APPEAL FROM THE DISTRICT COURT OF BERNALILLO COUNTY	12
Valerie A. Huling, District Judge	13
Modrall, Sperling, Roehl, Harris & Sisk, P.A.	14
R.E. Thompson	15
Emil J. Kiehne	16
Mia K. Lardy	17
Albuquerque, NM	18
Polsinelli Shughart PC	19
Jonathan G. Brinson	20
Phoenix, AZ	21
for Appellant	22
Allen, Shepherd, Lewis & Syra, P.A.	23
E.W. Shepherd	24
Tiffany A. Owens	25
Albuquerque, NM	26
for Appellees	27

OPINION	1
HANISEE, Chief Judge.	2
{1} 	Plaintiff NM-Emerald, LLC, appeals the district court’s order granting	3
summary judgment and dismissing its claim for negligence against Defendants	4
Interstate Development, LLC, and Terry Corlis for defects to a property constructed	5
by Defendants and purchased through foreclosure by Plaintiff, based on the	6
economic loss rule. On appeal, Plaintiff contends that the economic loss rule does	7
not apply to bar its claim because (1) based on the language in the contract between	8
the parties, both parties agreed that tort remedies would be available to Plaintiff; and	9
(2) tort remedies were available to Plaintiff as a subsequent purchaser of the	10
property. Though we conclude the parties have failed to demonstrate that the	11
economic loss rule is applicable in this case, we nevertheless affirm on the basis that	12
Plaintiff 	does 	not 	qualify 	as 	a 	subsequent 	purchaser 	within 	the 	meaning	13
contemplated in Steinberg v. Coda Roberson Construction Co., 1968-NMSC-055,	14
¶ 6, 79 N.M. 123, 440 P.2d 798.	15
BACKGROUND	16
{2} 	IMH Secured Loan Fund, LLC, (IMH) and Interstate Development, LLC,	17
(Interstate) entered into a construction loan agreement (the Construction Contract)	18
whereby IMH loaned over $4 million to Interstate for construction of a three-story	19
office building (the Property). Interstate, as both owner and general contractor for	20

2
the project, and Terry Corlis, as a principal, engaged various subcontractors to	1
perform 	work 	on 	the 	Property. 	The 	Construction 	Contract 	outlines 	the	2
responsibilities and remedies available to both parties. In particular, Interstate had a	3
duty to build the Property in a good and workmanlike manner and to correct any	4
defects in the construction. IMH was allowed, but not required, to inspect the work	5
done by Interstate at any time. Interstate’s failure to abide by the provisions of the	6
Construction Contract, including any failure to construct the Property in a good and	7
workmanlike manner or fix any construction defects, constituted default under the	8
Construction Contract. In the event of default, IMH had the option to “enter into	9
possession of the Property” and “perform all work necessary to complete the	10
construction.” In such a circumstance, Interstate would be obligated to “pay to	11
[IMH] on demand any amount expended by [IMH] in such performance or attempted	12
performance, together with interest thereon.” The Construction Contract also stated	13
that IMH:	14
shall have all of the [r]ights granted in the [l]oan [d]ocuments or	15
otherwise and all of those available at law or in equity, and these same	16
[r]ights 	shall 	be 	cumulative 	and 	may 	be 	pursued 	separately,	17
successively or concurrently against [Interstate], Guarantor or any	18
property covered under the [l]oan [d]ocuments at the sole discretion of	19
[IMH].	20
(Emphasis added.) In addition, Section 6.01 of the Construction Contract states	21
“[s]hould a Default occur and be continuing, . . . [IMH] may, at its election, do any	22
one or more of the following: . . . Exercise any and all [r]ights afforded by any of	23

3
the [l]oan [d]ocuments, or by law or equity or otherwise, as [IMH] shall deem	1
appropriate.” (Emphasis added.) The parties further agreed that the Construction	2
Contract was to be governed by New Mexico law.	3
{3} 	Interstate stopped payment and defaulted on the loan associated with the	4
Construction Contract approximately a year and a half after the loan’s inception and,	5
as a result, IMH filed a foreclosure lawsuit. IMH did not complete the foreclosure,	6
and instead, gave Interstate time to cure its default. IMH eventually assigned its	7
interest in the Construction Contract to Plaintiff, a single-asset entity specifically	8
created by IMH to permit the Property to be held by Plaintiff. Thereafter, the	9
foreclosure was completed, and Plaintiff purchased the Property at the foreclosure	10
sale. Plaintiff did not inspect the Property until after it was purchased through	11
foreclosure. After inspecting the Property, Plaintiff discovered numerous, significant	12
construction defects. Plaintiff alleges it incurred over $615,000 in repair costs to	13
repair the defects and lost approximately $913,132 in lost rents. Plaintiff filed suit	14
against 	Defendants 	in 	negligence 	for 	the 	construction 	defects, 	alleging 	that	15
Defendants 	breached 	their 	duty 	to 	Plaintiff 	by 	“(1) 	negligently 	choosing 	a	16
subcontractor that caused structural and other defects to the Property; (2) failing to	17
properly supervise its subcontractor’s work on the Property; and/or (3) failing to	18
properly inspect construction of the Property.”	19

4
{4} 	Defendants filed a motion for summary judgment seeking dismissal of	1
Plaintiff’s negligence claims, arguing that (1) the construction defects alleged by	2
Plaintiff were patent defects, and a subsequent purchaser’s remedies against a	3
contractor for negligence exist only for latent defects; and (2) Plaintiff’s tort claims	4
were barred by the economic loss rule, which in circumstances applicable precludes	5
recovery of economic loss damages in tort, rather than contract, causes of action. In	6
response, Plaintiff argued that (1) Defendants’ latent-defect argument fails because	7
New Mexico does not limit recovery to latent defects; (2) the economic loss rule	8
does not apply because Defendants owed Plaintiff an independent duty of care as a	9
subsequent purchaser, and the rule was not meant to apply to construction damages	10
suffered by subsequent purchasers.	11
{5} 	The district court held a hearing and heard argument from the parties on the	12
motion for summary judgment. During the hearing, the district court judge rejected	13
Defendants’ latent defect argument, but stated that “recovery could be barred . . .	14
based 	on 	the 	[e]conomic 	[l]oss 	[r]ule” 	and 	sought 	argument 	on 	the 	rule’s	15
applicability. 	After 	the 	hearing, 	the 	district 	court 	entered 	an 	order 	granting	16
Defendants’ motion for summary judgment, dismissing all of Plaintiff’s claims	17
against Defendants based on the economic loss rule.	18
{6} 	Plaintiff moved to reconsider, arguing that the economic loss rule did not	19
apply because the parties stated in the Construction Contract that Plaintiff was not	20

5
limited to contractual remedies, alternatively seeking certification of the order	1
granting summary judgment for immediate appeal. In denying Plaintiff’s motion to	2
reconsider, the district court stated that “[t]he economic loss rule is not a matter of	3
waiving or preserving tort remedies. Rather, it is a doctrine of law that prohibits	4
plaintiffs from recovering in tort economic losses to which their entitlement flows	5
only from contract.” The district court then entered an order directing entry of final	6
judgment against Plaintiff, concluding that the order granting summary judgment	7
was final and that there was no just reason for delay under Rule 1-054(B) NMRA.	8
DISCUSSION	9
{7} 	On appeal, Plaintiff contends that Defendants’ motion for summary judgment	10
was improperly granted because (1) the parties agreed in the Construction Contract	11
that tort remedies would be available to the lender; (2) the economic loss rule does	12
not bar Plaintiff’s negligence claims as Defendants owed Plaintiff a separate duty of	13
care as a subsequent purchaser; and (3) Defendants’ argument that the construction	14
defects were patent defects provides no alternative basis for affirmance.1
15
1 Defendants argued in the district court that the asserted defects were patent
defects that could have been discovered through a reasonable inspection and that by
purchasing the Property at a foreclosure sale without conducting an inspection,
Plaintiff essentially waived its negligence claims. Because we disagree with
Plaintiff’s first two arguments and affirm the district court on these bases, we need
not address Plaintiff’s third argument in response to Defendants’ alternative basis
for affirmance.

6
I. 	Standard of Review	1
{8} 	“Summary judgment is appropriate where there are no genuine issues of	2
material fact and the movant is entitled to judgment as a matter of law.” Bank of N.Y.	3
Mellon v. Lopes, 2014-NMCA-097, ¶ 6, 336 P.3d 443 (internal quotation marks and	4
citation omitted). “We review issues of law de novo.” Id. Plaintiff is not contending	5
a genuine issue of material fact exists. Accordingly, “if no material issues of fact are	6
in dispute and an appeal presents only a question of law, we apply de novo review	7
and are not required to view the appeal in the light most favorable to the party	8
opposing summary judgment.” City of Albuquerque v. BPLW Architects & Eng’rs,	9
Inc., 2009-NMCA-081, ¶ 7, 146 N.M. 717, 213 P.3d 1146.	10
II. 	Economic Loss Rule	11
{9} 	New Mexico adopted the economic loss rule in 1989 in Utah International,	12
Inc. v. Caterpillar Tractor Co., 1989-NMCA-010, ¶ 7, 108 N.M. 539, 775 P.2d 741,	13
a case where a purchaser of a coal-hauler sued the manufacturer after the hauler	14
caught fire during normal use and destroyed itself. There, we held, “in commercial	15
transactions, when there is no great disparity in bargaining power of the parties,	16
economic losses from injury of a product to itself are not recoverable in tort actions;	17
damages for such economic losses in commercial settings in New Mexico may only	18
be recovered in contract actions.” Id. ¶ 17 (emphasis added) (citation omitted). In	19
the three decades since, application of the rule by New Mexico courts has occurred	20

7
only in the context of strict products liability cases. See, e.g., Spectron Dev. Lab. v.	1
Am. Hollow Boring Co., 1997-NMCA-025, ¶ 20, 123 N.M. 170, 936 P.2d 852	2
(reaffirming Utah International and holding that the plaintiffs could not recover in	3
strict products liability for any injury of the product to itself, or any interruption of	4
business attributed to the injury to the product); see also Amrep Sw., Inc. v.	5
Shollenbarger Wood Treating, Inc., 1995-NMSC-020, ¶¶ 25, 31, 119 N.M. 542, 893	6
P.2d 	438 	(holding 	that 	“the 	economic[]loss 	rule 	does 	not 	bar 	a 	claim 	for	7
indemnification” and declining to address the validity of the trial court’s underlying	8
dismissal of the plaintiff’s negligence and strict liability claims based on the	9
economic loss rule because the plaintiff did not appeal that dismissal).	10
{10} 	Although the parties in this case assume that the economic loss rule also	11
applies to construction defect cases,2 they have neither acknowledged nor briefed	12
the matter as an issue of first impression in New Mexico.3 We are not bound by their	13
2 Plaintiff disputes application of the economic loss rule on other grounds;
namely, that the parties contractually agreed to the availability of tort remedies.
Neither party argued, nor did the district court discuss or conclude, that the rule was
limited to strict product liability cases and was therefore inapplicable here.
3 We are aware that the United States District Court for the District of New
Mexico has interpreted New Mexico precedent to indicate that “the economic loss
rule applies to both contracts for goods as well as contracts for services.” Farmers
All. Mut. Ins. Co. v. Naylor, 480 F. Supp. 2d 1287, 1289 (D.N.M. 2007). However,
neither this nor our New Mexico Supreme Court has extended application of the
economic loss rule in such a manner, and we “emphasize that federal precedent does
not necessarily control our analysis of state law[.]” Cal. First Bank v. State, 1990-
NMSC-106, ¶ 34, 111 N.M. 64, 801 P.2d 846.

8
interpretation or agreement. Tucson Elec. Power Co. v. Tax’n & Revenue Dep’t,	1
2020-NMCA-011, ¶ 10, 456 P.3d 1085 (stating that “while we generally look to	2
parties’ stipulations with favor, we are not bound by parties’ stipulations [or	3
concessions] as to applicable law, because we must conduct our own analysis; and	4
we also will not enforce stipulations if they are unreasonable, against good morals	5
or sound public policy” (alterations, omissions, internal quotation marks, and	6
citations omitted)).	7
{11} 	We observe that courts have taken divergent approaches to determining	8
whether and when the economic loss rule applies to bar recovery for economic losses	9
in tort, and our own research reveals that at least one state, Florida, has “h[eld] that	10
the economic loss rule applies only in the products liability context.” Tiara Condo.	11
Ass’n v. Marsh & McLennan Cos., 110 So. 3d 399, 407 (Fla. 2013) (reviewing the	12
origin and purpose of the economic loss rule and receding from “what has been	13
described as the unprincipled extension of the rule”); see Vincent R. Johnson, The	14
Boundary-Line Function of the Economic Loss Rule, 66 Wash. & Lee L. Rev. 523,	15
527-28 (2009) (noting that although 	courts generally agree about the rule’s	16
application in products liability cases, there is substantial variation among states as	17
applied to other contracts between the parties or other areas of tort law). While the	18
Restatement (Third) of Torts: Liability for Economic Harm § 3 (2020) indicates that	19
a majority of courts apply the economic loss rule any time parties have a contract	20

9
such that “there is no liability in tort for economic loss caused by negligence in the	1
performance or negotiation of a contract between the parties[,]” Professor Johnson	2
notes there are “numerous competing formulations” and no agreement for how to	3
apply the rule. Johnson, surpa, at 526. The out-of-state authority cited by the parties	4
amply demonstrates this point. Compare S K Peightal Eng’rs, LTD v. Mid Valley	5
Real Est. Sols. V, LLC, 2015 CO 7, ¶ 7 (stating that the application of the economic	6
loss rule “focuses on the source of the duty that the defendant allegedly breached”	7
and that if “the duty breached arises independently of any contract duties between	8
the parties, then a tort action premised on that breach remains viable” (internal	9
quotation marks and citation omitted)), with Flagstaff Affordable Hous. Ltd. P’ship	10
v. Design All., Inc., 223 P.3d 664, 669, 672 (Ariz. 2010) (en banc) (noting that “it is	11
often difficult to draw bright lines between obligations imposed by law and those	12
arising from contract” and stating that “[t]he economic loss doctrine may vary in its	13
application depending on context-specific policy considerations”).	14
{12} 	Consequently, the question is not only whether to expand the application of	15
the economic loss rule, but also how our courts would apply the rule in light of its	16
multiple variations and exceptions. The parties have offered no argument on these	17
points, and to rule on these questions would thus require this Court “to develop the	18
arguments 	itself, 	effectively 	performing 	the 	parties’ 	work 	for 	them.” 	Elane	19
Photography, LLC v. Willock, 2013-NMSC-040, ¶ 70, 309 P.3d 53 (“To rule on an	20

10
inadequately briefed issue, this Court would have to develop the arguments itself,	1
effectively performing the parties’ work for them.”). This we will not do, as it	2
“creates a strain on judicial resources and a substantial risk of error,” particularly on	3
a question that has the potential to significantly impact contractual relationships in	4
New Mexico. Id.	5
{13} 	Because we decline to expand and apply the economic loss rule in this case,	6
we need not consider whether the parties’ contract waived the application of the rule.	7
III. 	Subsequent Purchaser	8
{14} 	Our 	holding 	regarding 	the 	economic 	loss 	rule 	does 	not 	conclude 	our	9
evaluation of whether summary judgment was properly granted on Plaintiff’s	10
negligence claim, however. From the inception of this lawsuit, Plaintiff has argued	11
that its right to damages for Defendants’ negligent construction does not arise from	12
the Construction Contract at all, but instead, through its status as a subsequent	13
purchaser of the property. Plaintiff’s complaint asserted that as a subsequent	14
purchaser, Defendants owed Plaintiff an independent duty of care under Steinberg,	15
1968-NMSC-055, ¶ 6. The parties’ arguments on this point in the district court	16
centered on whether Plaintiff, as a wholly owned subsidiary of IMH, can properly	17
be considered a subsequent purchaser. For the reasons that follow, we conclude the	18
district court correctly determined that no independent tort duty was owed to	19
Plaintiff here.	20

11
{15} 	“New Mexico courts have long held that duty is a matter of law to be	1
determined by the court.” Lopez v. Devon Energy Prod. Co., L.P., 2020-NMCA-	2
033, ¶ 16, 468 P.3d 887, cert. denied, 2020-NMCERT-___ (No. S-1-SC-38161, Apr.	3
28, 2020). In Steinberg, our Supreme Court established that a contractor owed an	4
independent duty to subsequent home buyers to exercise care in the construction of	5
the home. 1968-NMSC-055, ¶¶ 6, 9, 10. The plaintiffs in Steinberg were the second	6
couple to purchase a home constructed by the defendant builder. Id. ¶ 2. When the	7
plaintiffs purchased the home, the former owners gave the plaintiffs a booklet that	8
contained a page stating “Roof—10 years” directly under “GUARANTEES.” Id.	9
Within ten years of the initial sale of the home, the roof began to leak and the	10
plaintiffs contacted the defendant, who took no action. Id. ¶ 3. The defendant argued	11
that it was not liable for negligence “to a purchaser not in privity with the	12
manufacturer.” Id. ¶ 4. The Court denied the defendant’s argument, and held that:	13
in a tort action for negligence against a manufacturer, or supplier,	14
whether or not privity exists is wholly immaterial. The question of	15
liability should be approached from the standpoint of the standard of	16
care to be exercised by the reasonably prudent person in the shoes of	17
the defendant manufacturer or supplier.	18
Id. ¶ 6 (internal quotation marks and citation omitted). The Court reasoned that the	19
plaintiffs were owed a duty of care because they were members of the class of	20
prospective homebuyers for whom the defendant built the house and “as a matter of	21

12
legal effect the home may be considered to have been intended for the plaintiffs[.]”	1
Id. ¶ 9 (internal quotation marks and citation omitted).	2
{16} 	Applying the principles in Steinberg, we reach a different conclusion. Plaintiff	3
is not owed a separate duty of care because unlike the plaintiffs in Steinberg, Plaintiff	4
here is not a member of the class of prospective home buyers our Supreme Court	5
held was owed such a duty. In Steinberg, and the two California cases relied upon	6
by the Court in Steinberg, the plaintiffs were homebuyers in the traditional sense—	7
public purchasers. Id. ¶¶ 2-3, 8-9. There is no indication in Steinberg that a	8
commercial entity with equal bargaining power to the builder and in privity with the	9
builder through a construction loan contract, qualifies as a subsequent purchaser, as	10
contemplated by the Court, simply because the commercial buyer purchased the	11
property through foreclosure.	12
{17} 	Plaintiff further argues that because anyone could have purchased the	13
Property at the foreclosure sale, under the district court’s reasoning, Defendants are	14
not liable for their negligence because of the fortuity that Plaintiff purchased the	15
Property; although if anyone else had outbid Plaintiff, that subsequent purchaser	16
would 	be 	entitled 	to 	maintain 	a 	negligence 	action 	against 	Defendants.	17
Acknowledging that there is no New Mexico case law on the question, Plaintiff	18
asserts other jurisdictions have recognized that allowing a builder to escape the	19

13
consequences of its negligence, merely because its negligence was discovered by the	1
lender acting in its capacity as a subsequent purchaser, makes no sense.	2
{18} 	In support of its position, Plaintiff cites Sumitomo Bank of California v.	3
Taurus Developers, Inc., 229 Cal. Rptr. 719, 728 (Cal. Ct. App. 1986), for its holding	4
prohibiting the defendant builder from escaping the consequences of its negligent	5
actions merely because the plaintiff purchaser of a defective property was also the	6
lender. In Sumitomo, the plaintiff loaned the defendant funds, secured by a trust deed,	7
for the defendant to construct a condominium building. Id. at 720. The plaintiff	8
“could enter the property at all times and take appropriate actions if construction did	9
not conform with specifications, but this right did not relieve [the defendant] of its	10
duty to inspect the construction” and notify the plaintiff of any defects. Id. at 720-	11
21. The defendant defaulted on its payments and the plaintiff “exercised its power	12
of sale and purchased the property for a bid equal to the amount of the outstanding	13
indebtedness at the trustee’s sale.” Id. at 721. After discovering latent construction	14
defects following the sale, the plaintiff sued under various theories, including	15
negligence. Id. The court held that the plaintiff’s claim for negligence was not barred	16
because “[n]egligent construction principles rest on a policy determination that	17
purchasers of homes should not be harmed by defective housing caused by the	18
breach of a duty to construct properly[,]” and “such harm is foreseeable when	19
housing projects are built for eventual sale[.]” Id. at 727. The court reasoned that	20

14
“[l]iability for negligence should not depend upon the randomness in selection of the	1
party who purchases an item when placed in the market[,]” and “the fact [that] it is	2
the lender who purchases and not a third party, is fortuitous.” Id. at 727-28.	3
{19} 	Defendants, on the other hand, rely on S K Peightal, 2015 CO 7, ¶ 8, a	4
factually 	similar 	case 	where 	the 	Colorado 	Supreme 	Court 	was 	tasked 	with	5
determining whether “a third-party beneficiary of [a d]eed-[i]n-[l]ieu, which is	6
simply a modification of the [c]onstruction [l]oan [c]ontract that facilitated the	7
development of the home at issue—can be properly considered a ‘subsequent	8
purchaser.’ ” In that case, a developer entered into intertwined construction loan	9
agreements with a bank and a general contractor to construct a “spec” home to be	10
sold on the open market. Id. ¶¶ 2-3. Once constructed, the home “sat unsold until the	11
[c]onstruction [l]oan [c]ontract matured and came due[.]” Id. ¶ 3. The developer and	12
a wholly owned subsidiary created by the bank (the subsidiary) then entered into a	13
contract titled “[a]greement for [d]eed-in-[l]ieu of [f]oreclosure,” which released the	14
developer from liability and provided the bank with the deed to the house “and a	15
lump-sum payment of the difference between the home’s appraised value and the	16
remaining indebtedness due on the [c]onstruction [l]oan [c]ontract.” Id. After the	17
subsidiary took possession of the home, “large cracks formed in the walls of the	18
home as a result of settling soil beneath the home’s foundation.” Id. ¶ 4. The	19
subsidiary sued the soil engineering corporations who subcontracted with the	20

15
developer (the subcontractors) for “purely economic damages under a negligence	1
theory for breaching their duties and applicable standard of care in providing soils	2
and other engineering services and/or design services for the [h]ome.” Id. (alteration,	3
omission, and internal quotation marks omitted).	4
{20} 	On certiorari, the Colorado Supreme Court held that the subsidiary, as a third-	5
party beneficiary under the deed-in-lieu, was not a subsequent homeowner owed an	6
independent duty of care. Id. ¶ 24. The court explained that Colorado “recognized	7
that construction professionals owe an independent duty to act non-negligently in	8
the construction of a home, but . . . limited this duty so as to allow only subsequent	9
home owners to maintain an action against a builder.” Id. ¶ 23 (alteration, internal	10
quotation marks, and citation omitted). However, the court stated that unlike a	11
situation where the plaintiffs	12
had their complaint originally dismissed for lack of privity and lacked	13
alternate legal avenues to enforce their rights, [the subsidiary] here may	14
enforce the [d]eed-in-[l]ieu as a third-party beneficiary thereof, and the	15
[d]eed-in-[l]ieu preserves [the bank’s] enforcement rights against [the	16
developer] from the [c]onstruction [l]oan [c]ontract, which was the very	17
contract that facilitated the construction of the home.	18
Id. ¶ 24 The court accordingly concluded, “[t]herefore, as a third-party beneficiary	19
of a commercial entity that negotiated at arm’s length a [c]onstruction [l]oan	20
[c]ontract outlining the parties’ duties and liabilities during the construction of a	21
home, [the subsidiary] does not qualify as a subsequent homeowner . . . and is not a	22
member of the class to which this special independent duty is owed.” Id.	23

16
{21} 	Due to the factual similarities between this case and S K Peightal, we are	1
persuaded by and apply the rationale in S K Peightal. Plaintiff in this case was	2
assigned 	the 	Construction 	Contract 	by IMH 	as 	a 	single-asset 	entity created	3
specifically to take control over the Property. This is similar to the status of the third-	4
party beneficiary of the contract in S K Peightal, a subsidiary wholly owned by the	5
original lender and assignor; both parties were closely connected to the original	6
lender and were assigned the previous lenders’ rights under the construction	7
contract. While the third-party beneficiary in S K Peightal received ownership of the	8
property through a deed-in-lieu of foreclosure, whereas Plaintiff here obtained	9
ownership of the Property through a foreclosure sale, each acquired contractual	10
remedies available against the defaulting party. Plaintiff attempts to distinguish itself	11
from the third-party beneficiary in S K Peightal, asserting that because Plaintiff	12
purchased the Property at a foreclosure sale, it “no longer had a contractual route by	13
which it could obtain relief against Defendants,” whereas the third-party beneficiary	14
still had “contractually enforceable rights” under the deed-in-lieu, but we are	15
unpersuaded. See id. ¶ 23.	16
{22} 	Plaintiff failed to put forth any evidence showing that, because it obtained	17
ownership via the foreclosure sale, it was precluded from pursuing additional	18
contractual remedies pursuant to its assignment of the Construction Contract from	19
IMH. See Associated Home & RV Sales, Inc. v. Bank of Belen, 2013-NMCA-018,	20

17
¶ 29, 294 P.3d 1276 (“A party opposing a motion for summary judgment must make	1
an affirmative showing by affidavit or other admissible evidence that there is a	2
genuine issue of material fact once a prima facie showing is made by movant.”	3
(internal quotation marks and citation omitted)). Regardless of what remedies are	4
still available to Plaintiff under the Construction Contract to seek economic	5
damages, Plaintiff had contractual rights and remedies available to it, which it chose	6
not to exercise. This fact differentiates Plaintiff from other subsequent purchasers	7
not in privity with the builder and therefore without contractual remedies to rely	8
upon to seek relief.	9
{23} 	Unlike the S K Peightal plaintiffs, Plaintiff here was assigned the rights and	10
responsibilities of the Construction Contract from IMH, “a commercial entity that	11
negotiated at arm’s length,” and entered into a contract “outlining the parties’ duties	12
and liabilities during the construction of [the Property].” 2015 CO 7, ¶ 24. To	13
reiterate, Plaintiff thereby acquired those contractual remedies provided by the	14
Construction Contract that it chose not to pursue, including entering the Property	15
and performing any work that was needed to complete construction, obligating	16
Defendants to pay for the work performed. Consequently, we hold that Plaintiff is	17
not a subsequent purchaser to which a special duty is owed.	18
{24} 	Additionally, we are not persuaded that Sumitomo is sufficiently similar to the	19
present case to warrant our reliance upon its holding. While Sumitomo cogently	20

18
expresses concern that “[l]iability for negligence should not depend upon the	1
randomness in selection of the party who purchases an item when placed in the	2
market,” 229 Cal. Rptr. at 727-28, that concept alone is not inconsistent with our	3
settled policy rationale recognizing the historic distinction between contract and tort	4
law. Kreischer v. Armijo, 1994-NMCA-118, ¶ 6, 118 N.M. 671, 884 P.2d 827	5
(“Courts have long followed the rule that the difference between a tort and a contract	6
action is that a breach of contract is a failure of performance of a duty arising or	7
imposed by agreement; whereas, a tort is a violation of a duty imposed by law.”	8
(alteration, internal quotation marks, and citation omitted)). Plaintiff effectively	9
stands in the shoes of the original lender and the parties’ duties and remedies are	10
provided in the Construction Contract, a document within the contemplation and	11
control 	of 	the 	parties. 	See 	id. 	(“The 	obligation 	to 	properly 	construct 	the	12
house . . . was created by the contract and was not an obligation imposed by law.	13
The mere titling of the cause of action as one for gross negligence did not change its	14
nature.”). Plaintiff has not shown that the tort duties it claims were breached here—	15
the 	duty 	to 	retain, 	supervise, 	and 	inspect 	the 	work 	of 	subcontractors—are	16
independent of the contractual duties to construct the building in a good and	17
workmanlike manner and to correct any defects.	18
{25} 	In accordance with the important policy considerations discussed above, we	19
seek to preserve the integrity of a contract entered into by parties with equal	20

19
bargaining power. By refusing to determine that Plaintiff is owed an independent	1
duty as a subsequent purchaser, we are preventing Plaintiff from “us[ing] tort law to	2
alter or avoid the bargain struck in the contract.” Amrep Sw., Inc., 1995-NMSC-020,	3
¶ 28. In order to avoid subsuming contract law with negligence, we determine that	4
Plaintiff is not owed an independent duty as a subsequent purchaser and is limited	5
to the contractual remedies bargained for in the Construction Contract. Therefore,	6
we hold that Plaintiff’s negligence claims against Defendants fail as a matter of law	7
because no independent tort duty was owed to Plaintiff here.	8
CONCLUSION	9
{26} 	For the foregoing reasons, we affirm the district court’s order granting	10
Defendants’ motion for summary judgment.	11
{27} 	IT IS SO ORDERED.	12
_____________________________	13
J. MILES HANISEE, Chief Judge	14
WE CONCUR:	15
_________________________________	16
MEGAN P. DUFFY, Judge	17
_________________________________	18
ZACHARY A. IVES, Judge	19