When doing a small-scale home improvement project, your contractor will likely require some percentage of the costs up front. Imagine that you hire a contractor to renovate the porch of your Albuquerque home, but he fails to finish the job. He rips up your porch and then leaves. Or worse, he “finishes” the porch, but a week later, you notice that the wood he used is already crumbling or warping. How can you recover the amount you’ve paid out?New Mexico’s Small Claims Court (sometimes called Magistrate’s Court) might be your answer.
In New Mexico’s Small Claims Court, individuals can sue other individuals or businesses for up to $10,000. These courts – 41 of them throughout the state – are meant for use without an attorney, which is sensible for disputes for smaller construction projects where the amount in controversy will likely be only a few thousand dollars.
Your lawsuit can be filed under different “theories of liability,” which is just a different way of saying that you can sue your contractor for multiple wrongs. Maybe the contractor breached your written contract. Maybe he also damaged your electrical system. Maybe he negligently set a fire in your garage. Your lawsuit can enumerate all of the various ways that your contractor damaged you, so long as those damages add up to no more than $10,000 (or you're willing to waive the amount beyond that).
Even the relatively simple procedures of small claims courts can be stressful and time-consuming. If you and your contractor can talk it out – work out a payment plan, a new construction schedule, a better subcontractor – you will both be better off than having to slog through litigation.
Talking might not get your contractor’s attention, however -- you've probably tried a bit of it already. If that's the case, try sending a demand letter. A demand letter tends to be taken more seriously, especially if you note that you are “reserving all legal rights should a resolution not be worked out.”
Another useful aspect of a demand letter is that it can later be used as evidence that you did your best to avoid court, which busy small claims judges will appreciate. You gave your contractor a reasonable chance to fix the error, or refund your money, rather than burdening the court system from the get-go.
Statutes of limitations are state laws that narrow the amount of time that a plaintiff like you has to file a lawsuit. Their purpose is to give certainty, so that potential defendants know when (usually years later) they have no further legal liability for a particular incident.
As a homeowner, however, it’s critical that you sue within New Mexico’s limitations periods, or your contractor will be able to evade responsibility. The most common legal causes of action against a contractor are breach of contract (“He promised to use first-rate materials, and instead used cheap lead-based paint on my walls!”) and property damage (“I hired her to fix my air conditioner, and she caused a huge electrical surge that destroyed my electronics!”).
New Mexico has a six-year limit on filing suit for breach of contract under N.M. Stat. § 37-1-3(A) and a four-year limit under N.M. Stat. § 37-1-4 for property damage. As you negotiate with your contractor, be mindful not to run past either of these limits.
After you’ve considered the statutes of limitations, made attempts at negotiation, and considered your likelihood of success, you are ready to begin the next step: filing your lawsuit.
Because New Mexico’s counties are decentralized, each has its own website with its own court forms. The Claim Form from the County of Bernalillo is representative of the information you’ll need: names, addresses, and phone numbers for both yourself and the defendant contractor (or the business entity name).
You’ll then need to describe your claim and state the amount of money you believe you are owed. Don’t exaggerate beyond what you can prove based on your contract or other evidence; you will need to prove every dollar of those damages.
Next, you’ll need to serve the defendant contractor. Usually this is done through a process server, who will hand-deliver your lawsuit. You’ll file an Affidavit of Service Form, which essentially proves to the court that the defendant is aware of the lawsuit. He will then have the opportunity to file an Answer, where he will typically deny everything that you’ve accused him of doing (or failing to do).
Keep in mind that you’ll need to pay certain fees in connection with filing your small claims case. Again, each county in New Mexico will be a little bit different, but you can generally expect to spend about $100 in various fees, with additional costs if you sue multiple defendants (e.g. subcontractors or material suppliers).
Judges will not decide your case purely based on your Claim Form. Rather, they will listen to both you and your contractor at a trial, on a date set by the clerk when you file the lawsuit.
This trial won’t be as formal as the ones you’ve seen on television. More likely, you and your contractor will stand next to one another, with the judge sitting on the bench, and you will be asked to orally explain your case. Your contractor will have an opportunity to do the same, and defend himself from your allegations. Try explaining your case in a few minutes to friends, and practice until it makes sense.
It will also be important to bring various documents to court. You’ll want to bring copies of your Claim Form and Proof of Service Form.
You’ll also want to bring evidence. In home-improvement litigation with a contractor, evidence is crucial to avoiding a he-said/she-said situation. Typically, the most important evidence will include: 1) Any written contracts between you and the contractor outlining the work he promised to perform, the timeline for performance, and the payment agreed upon; 2) Any proof of payments from you to the contractor, showing how much money you’ve already paid; 3) Any emails, letters, or other correspondence you’ve sent to the contractor outlining your dispute; and 4) Photographs of your home before and after the construction work, especially photos that show shoddy or inadequate workmanship.
In some circumstances, you might also bring witnesses with you to court to describe elements of the story to the judge.
If the judge agrees with your version of the story, and believes your contractor breached your agreement or damaged your property, you will receive a piece of paper called a judgment. This indicates that you are owed a certain amount of money – perhaps everything that you asked for, or perhaps a portion of it.
The next step will be collecting your judgment. Generally, reputable contractors will pay their judgments without hesitation. As businesspeople, they want to maintain a strong reputation with banks and lenders, and also don’t want to develop a reputation as deadbeats. If your contractor pays you in full, you can file a Satisfaction of Judgment form, which tells the court that your case is officially done.
Not all contractors will pay you so willingly, however, despite losing in court. If 20 days have elapsed since your judgment, and you still have not been paid, you can try to enforce your judgment. First, this involves filing a Writ of Garnishment form. If granted, the garnishment application allows you to hire a third-party collections company to seize any assets held by your contractor (in particular, bank accounts or equipment) in the amount of the judgment. Keep in mind that these third-party companies will cost you more money.
It’s also possible that your contractor may not have any assets in his own name, making it extremely difficult to enforce the judgment. You’ll have to assess this cost and difficulty against the perceived chance of collection.