2018 New Mexico Statutes
Chapter 37 - Limitation of Actions; Abatement and Revivor
Article 1 - Limitations of Actions
Section 37-1-23 - Contractual liability; statute of limitations.

A. Governmental entities are granted immunity from actions based on contract, except actions based on a valid written contract.

B. Every claim permitted by this section shall be forever barred unless brought within two years from the time of accrual.

History: 1953 Comp., § 22-23-1, enacted by Laws 1976, ch. 58, § 24.

Repeals and reenactments. — Laws 1976, ch. 58, § 24, repealed 22-23-1, 1953 Comp., relating to suits allowed against the state, and enacted a new section.

Compiler's notes. — Laws 1978, ch. 28, § 2, and Laws 1978, ch. 166, § 17, repealed Laws 1976, ch. 58, § 24, which provided that Laws 1976, ch. 58, § 24, which enacted this section, would terminate on July 1, 1978.

Cross references. — For provisions of the Tort Claims Act, see 41-4-1 NMSA 1978 et seq.

Written contract required. — Section 37-1-23A NMSA 1978 does not require the party making the claim to be a party to a contract with the governmental entity. Rather, Section 37-1-23A NMSA 1978 only requires a written contract underlying the claim. Treloar v. County of Chaves, 2001-NMCA-074, 130 N.M. 794, 32 P.3d 803.

Fair Labor Standards Act claims. — Where a FLSA claim is purely statutory, it is not one "based on a valid written contract" within the meaning of Section 37-1-23 NMSA 1978. Thus, Section 37-1-23 NMSA 1978 does not provide an express waiver of immunity for a FLSA claim. Cockrell v. Board of Regents, 2002-NMSC-009, 132 N.M. 156, 45 P.3d 876.

Oral terms in collective bargaining agreement. — Section 37-1-23A NMSA 1978 granting governmental immunity from contract actions not based upon a "valid written contract," allows an ambiguous term of a written collective bargaining agreement, in this instance wages, to be defined by oral representations extrinsic to the contract. University of N.M. Police Officer's Ass'n v. University of N.M., 2005-NMSC-030, 138 N.M. 360, 120 P.3d 442.

Subsection A of Section 37-1-23 NMSA 1978 bars quantum merit claims against governmental entities. Village of Angel Fire v. Board of Cnty. Comm'rs of Colfax Cnty., 2010-NMCA-038, 148 N.M. 804, 242 P.3d 371.

Action barred by statute of limitations. — Where the parties entered into a joint powers agreement which provided that the municipality would collect the trash of certain county residents in consideration of a certain sum to be paid by the county in equal semi-annual payments; the county made payments until July 15, 2004; after the county stopped making payments, the county repeatedly promised that it would make payments after it restructured its finances; based on the county's representations, the municipality refrained from filing suit and continued to collect garbage for the county; the municipality filed suit on April 10, 2007 for breach of contract, equitable estoppel and quantum merit; and the municipality failed to preserve its claim that the joint powers agreement was an installment agreement and failed to allege facts to establish equitable estoppel, the statute of limitations began to run when the county first failed to make a payment under the joint powers agreement and the municipality's claims were barred. Village of Angel Fire v. Board of Cnty. Comm'rs of Colfax Cnty., 2010-NMCA-038, 148 N.M. 804, 242 P.3d 371.

Hybrid suit. — Where the employee's union acts arbitrarily, fraudulently, and in bad faith in failing to process the employee's grievance through all of the procedure provided by a collective bargaining agreement, an action against the employer will lie where the employee has also brought an action against his or her union for breach of the duty of fair representation; the two year statute of limitation applies; and the statute of limitations on the employee's claim against the employer does not begin to run until the employee is given notice that the union will not pursue the employee's grievance against the employer. Howse v. Roswell Indep. Sch. Dist., 2008-NMCA-095, 144 N.M. 502, 188 P.3d 1253, cert. denied, 2008-NMCERT-006, 144 N.M. 380, 188 P.3d 104.

Constitutionality. — It is not a denial of equal protection to provide for a shorter statute of limitations for contracts with governmental entities than with private entities because the greater volume of contracts with which governmental entities are involved would tend to cause the memory to fade as to any one contract. Sena Sch. Bus Co. v. Board of Educ., 1984-NMCA-014, 101 N.M. 26, 677 P.2d 639.

Nature of statute. — Subsection A is an immunity statute and not a statute of frauds, because of the policy favoring governmental immunity; and because a court considering a statute of frauds defense at the summary judgment stage resolves facts in favor of the non-movant and views the evidence in the light most favorable to a trial on the merits, a court must ensure that a plaintiff has affirmatively overcome the assertion of immunity. Campos de Suenos, Ltd. v. County of Bernalillo, 2001-NMCA-043, 130 N.M. 563, 28 P.3d 1104, cert. denied, 130 N.M. 484, 27 P.3d 476.

This section cannot be made applicable to cities because 37-1-24 NMSA 1978, specifically applies to cities and these sections contain conflicting and irreconcilable provisions; the two statutes are inconsistent concerning the binding effect that written or unwritten contracts will have upon a city and the length of the statute of limitations to be applied. Spray v. City of Albuquerque, 1980-NMSC-028, 94 N.M. 199, 608 P.2d 511.

Extension provision inapplicable. — Section 37-1-14 NMSA 1978, which extends the statute of limitations for an additional six months, does not apply to breach of contract suits against the state. Gathman-Matotan Architects & Planners, Inc. v. State, Dep't of Fin. & Admin., 1990-NMSC-013, 109 N.M. 492, 787 P.2d 411.

Immunity not available to purely statutory action. — Governmental immunity was not available to the state general services department when an offeror expended money and time in reliance upon an award of a contract since the action was purely statutory, based solely upon a right granted in the New Mexico Procurement Code (13-1-28 to 13-1-117 and 13-1-118 to 13-1-199 NMSA 1978). Renaissance Office, LLC v. State, 2001-NMCA-066, 130 N.M. 723, 31 P.3d 381, cert denied, 130 N.M. 713, 30 P.3d 1147.

Validity of time-to-sue provisions. — Time-to-sue provisions are contractual clauses agreed to between the state and insurers to apply to a specific issue, and more closely resemble a statute of limitations that by its terms expressly is applied against the state than a statute of general applicability. A public contract should not be construed liberally in favor of the public interest when to do so would be unreasonable and require abrogation of accepted rules of contract interpretation. State ex rel. Udall v. Colonial Penn Ins. Co., 1991-NMSC-048, 112 N.M. 123, 812 P.2d 777.

Issue of governmental immunity is jurisdictional in nature and it may be raised at any time during the proceedings. Spray v. City of Albuquerque, 1980-NMSC-028, 94 N.M. 199, 608 P.2d 511.

Review of governmental immunity determination. — As a general matter, the limited exception to the rule of finality known as the collateral order doctrine applies to district court determinations regarding governmental immunity under Subsection A, and such determinations are subject to review by writ of error. Handmaker v. Henney, 1999-NMSC-043, 128 N.M. 328, 992 P.2d 879.

Appeal unacceptable without specific contract language. — Where, based solely on department's failure to disclose as required by statute and regulation, plaintiff contends department breached an unspecified written contract and waived liability under Subsection A of this section, this contention on appeal is not acceptable since nowhere in his documents filed in the action, and nowhere in his briefs on appeal, much less even in his complaint, does plaintiff set out any specific contract or any language in any written contract. Young v. Van Duyne, 2004-NMCA-074, 135 N.M. 695, 92 P.3d 1269.

Applicable to unjust enrichment claims. — Even though an action for unjust enrichment is not "based on contract" in a strict theoretical since, it is so closely related to an action that is based on contract that this section should be construed to extend immunity to an unjust enrichment claim as well as to a claim founded on a true, but unwritten, contract. Hydro Conduit Corp. v. Kemble, 1990-NMSC-061, 110 N.M. 173, 793 P.2d 855; Valdez v. State, 2002-NMSC-028, 132 N.M. 667, 54 P.3d 71.

Indian tribe engaged in off-reservation activity. — The district court may exercise jurisdiction over an Indian tribe when the tribe is engaged in activity off of the reservation as an unincorporated association registered and authorized to do business in this state and is sued in that capacity for breach of a written contract to pay for the performance of contractual obligations accomplished or intended to be accomplished in connection with this off-reservation activity of the tribe. Padilla v. Pueblo of Acoma, 1988-NMSC-034, 107 N.M. 174, 754 P.2d 845, cert. denied, 490 U.S. 1028, 109 S. Ct. 1767, 104 L. Ed. 2d 202 (1989), overruled by Armijo v. Pueblo of Laguna, 2011- NMCA-006; Antonio v. Inn of the Mt. Gods Resort & Casino, 2010-NMCA-077, 148 N.M. 858, 242 P.3d 425; Kiowa Tribe of Oklahoma v. Manufacturing Technologies, Inc., 523 U.S. 751, 118 S.Ct. 1700, 140 L.Ed.2d. 981 (1998).

Proportionate share of attorney's fees in hospital lien. — When a public hospital held liens to be paid from the proceeds of the patients' personal injury claims, the patients did not have enforceable claims against the hospital for a proportionate share of attorney's fees and costs incurred in obtaining recovery because the claims were, in effect, based on contract and were not supported by writing. Eaton, Martinez & Hart v. University of N.M. Hosp., 1997-NMSC-015, 123 N.M. 76, 934 P.2d 270; Schroeder v. Memorial Med. Ctr., 1997-NMSC-046, 123 N.M. 719, 945 P.2d 449.

Misleading bid specifications. — Contractor's characterization of misrepresentations issued by authorities for bidding purposes as "negligent" did not determine the nature of the cause of action; what was determinative was the allegation that conditions found in the area of the project were not as warranted, necessitating extra work and expenses, so that, contractor's action was based on a written contract within the meaning of this section and could be maintained against the state and its highway commission. Vinnell Corp. v. State, 1973-NMSC-063, 85 N.M. 311, 512 P.2d 71).

Finding that dispute involved contract term. — Where there was indisputably a valid written contract and the dispute is about the meaning of one provision of that contract, considering the evidence surrounding the making of the contract, and particularly the representations made by the University official, the discussion about the salary study and the agreement to fully implement the study's salary classification and compensation, the trial court could reasonably conclude that the dispute involves a term of the contract. University of N.M. Police Officer's Ass'n. v. University of N.M., 2004-NMCA-050, 135 N.M. 655, 92 P.3d 667, aff'd, 2005-NMSC-030, 138 N.M. 360, 120 P.3d 442.

Department of public safety manual is written contract for purposes of Subsection A of this section. Whittington v. N.M. Dep't of Pub. Safety, 2004-NMCA-124, 136 N.M. 503, 100 P.3d 209, cert. denied, 2004-NMCERT-010, 136 N.M. 541, 101 P.3d 807.

College student handbook was insufficient to create a valid written contract. — Where plaintiffs, a group of former students who were enrolled in defendant's community college's associate's degree nursing program, brought an action that included breach of contract based on the fact that when the plaintiffs enrolled in the program, the community college stated that the program was nationally accredited, but by the time the plaintiffs completed their studies, the community college had lost it accreditation, the plaintiffs failed to demonstrate that the terms in the offer letter and student handbook created a reasonable expectation of contractual rights in continued accreditation, and therefore the writings did not constitute a valid written contract sufficient to waive defendant's immunity. Avalos v. Board of Regents, 2017-NMCA-082, cert. denied.

Limitation on source of recovery does not grant immunity. — Where investors, who had entered into contracts with the defendants to participate in the state's qualified higher education tuition programs, sued defendants, including the state, for breach of contract for mismanaging the investors' investments; and the state argued that the provision of Subsection C of Section 21-21K-3 NMSA 1978 which limits the source of recovery to the education trust fund overrides Subsection A of Section 37-1-23 NMSA 1978 which waives governmental immunity for written contracts, the state was not immune from suit because Subsection C of Section 21-21K-3 NMSA 1978 places limits on liability and identifies sources of recovery, but does not expressly or impliedly grant sovereign immunity. Lu v. Education Trust Bd. of N.M., 2013-NMCA-010, 293 P.3d 186.

Contractual obligation for liability not found. — Since the application for participation in a summer day camp operated by a town made no mention of ensuring the safety of the children enrolled and expressly stated that the town would not do so, the town did not undertake a contractual obligation for liability in the event of injury to a child. Espinoza v. Town of Taos, 1995-NMSC-070, 120 N.M. 680, 905 P.2d 718.

Waiver of immunity is not restricted to only those implied employment contracts that modify the at-will status of employees. Whittington v. N.M. Dep't of Pub. Safety, 2004-NMCA-124, 136 N.M. 503, 100 P.3d 209, cert. denied, 2004-NMCERT-010, 136 N.M. 541, 101 P.3d 807.

Implied employment contracts. — The waiver contained in Subsection A incorporates an implied employment contract that includes written terms as set forth in a personnel policy. Garcia v. Middle Rio Grande Conservancy Dist., 1996-NMSC-029, 121 N.M. 728, 918 P.2d 7.

Where policies and procedures governing the employment of state police officers create an implied contract regarding terms of employment, the implied contract constitutes a "valid written contract" such that immunity is waived under Subsection A of this section. Whittington v. N.M. Dep't of Pub. Safety, 2004-NMCA-124, 136 N.M. 503, 100 P.3d 209, cert. denied, 2004-NMCERT-010, 136 N.M. 541, 101 P.3d 807.

Employment contract may be implied from written terms. — Where plaintiff doctor sued his employer, the board of regents of the university of New Mexico and the university of New Mexico health sciences center, for breach of contract, arguing that although his written contract had expired, he had an implied contract based on the conduct of the parties, the district court did not err in dismissing plaintiff's claim; without a showing that the terms of the implied contract were written, plaintiff failed to demonstrate the existence of a valid written employment contract as required by Subsection A of this section. Wills v. Board of Regents of the Univ. of N.M., 2015-NMCA-105, cert. denied, 2015-NMCERT-009.

Oral promise of employment. — County commissioners were not estopped from denying the existence of a two-year employment agreement which was orally promised to a county employee, and from asserting the provisions of this section to deny contractual liability. The employee had no right to rely on the oral representations made to him. Trujillo v. Gonzales, 1987-NMSC-119, 106 N.M. 620, 747 P.2d 915.

Implied-in-fact contract. — Trial court erred by denying a county's motion for summary judgment, which claimed county was immune from suit, where the court found that there was an implied-in-fact contract between the county and a builder that waived the county's immunity. Campos de Suenos, Ltd. v. County of Bernalillo, 2001-NMCA-043, 130 N.M. 563, 28 P.3d 1104, cert. denied, 130 N.M. 484, 27 P.3d 476.

Punitive damages. — Punitive damages are not recoverable from a governmental entity that is liable for breach of contract. Torrence Cnty. Mental Health Program, Inc. v. N.M. Health & Env't Dep't, 1992-NMSC-026, 113 N.M. 593, 830 P.2d 145.

Effect of section. — This section, as it read in 1963, made the state or its public agencies subject to suit for breach of its contracts which were lawfully entered into. 1963-64 Op. Att'y Gen. No. 64-74.

Wrongful termination of contract. — If an existing contractor's school bus service contract has been wrongfully terminated by a school board, he has recourse in the form of a legal action against the school board for wrongful breach of contract. 1965-66 Op. Att'y Gen. No. 66-78.

Late charges or interest penalties. — This section implies that no late charges or interest penalties may be assessed against the state unless based upon written contract. 1987 Op. Att'y Gen. No. 87-51.

Payment of utility rates. — A state agency's obligation to pay a utility rate is statutory. A utility's tariff is not a contract; it is the law. 1988 Op. Att'y Gen. No. 88-80.

Law reviews. — For note, "Contracts - Implied Employment Contracts Based on Written Policy Statements Are Not Subject to Governmental Immunity: Garcia v. Middle Rio Grande Conservancy District," see 27 N.M.L. Rev. 649 (1997).

For note, "Trends in New Mexico Law, 1995-96 - Contracts - Implied Employment Contracts Based on Written Policy Statements Are Not Subject to Governmental Immunity: Garcia v. Middle Rio Grande Conservancy District," see 27 N.M.L. Rev. 649 (1997).

For comment, "In the Aftermath of M.D.R., Holding the State to Its Promises: M.D.R. v. State Human Services Department," see 24 N.M.L. Rev. 557 (1994).

For comment, "Contracts The Supreme Court Speaks Where The Legislature Was Silent: Torrance Cnty. Medical Health Program, Inc. v. New Mexico Health & Environment Department," see 23 N.M.L. Rev. 291 (1993).

Am. Jur. 2d, A.L.R. and C.J.S. references. — 72 Am. Jur. 2d States § 88.

Tortious breach of contract as within consent by state to suit on contract, 1 A.L.R.2d 864.

Statute of limitations as bar to arbitration under agreement, 94 A.L.R.3d 533.

81A C.J.S. States §§ 172, 194.