1997 -NMSC- 9, Burge v. Mid-Continent Cas. Co.

• Decision Date: 04 December 1996
• Docket Number: No. 22284,MID-CONTINENT,22284
• Citation: 1997 NMSC 9,123 N.M. 1,933 P.2d 210
• Parties: , 1997 -NMSC- 9 Dale BURGE, Plaintiff-Appellee, v.CASUALTY COMPANY, a foreign insurance company licensed to do business in the State of New Mexico, and Roger B. Graham, individually and as the agent, officer, director or employee of Mid-Continent Casualty Company, Defendants-Appellants.
• Court: New Mexico Supreme Court

Page 210

933 P.2d 210

123 N.M. 1, 1997 -NMSC- 9

Dale BURGE, Plaintiff-Appellee, v. MID-CONTINENT CASUALTY COMPANY, a foreign insurance company

licensed to do business in the State of New Mexico, and

Roger B. Graham, individually and as the agent, officer,

director or employee of Mid-Continent Casualty Company,

Defendants-Appellants.

No. 22284.

Supreme Court of New Mexico.

Dec. 4, 1996.

Motion for Rehearing Denied Jan. 29, 1997.

[123 N.M. 2] Civerolo, Wolf, Gralow & Hill, P.A., William P. Gralow, Nickay B. Manning, Albuquerque, for Defendants-Appellants.

Beall, Biehler & Bannerman, Gregory L. Biehler, Felicia Norvell, Lisa A. Joynes, Albuquerque, for Plaintiff-Appellee.

OPINION

FRANCHINI, Justice.

Appellee Dale Burge ("Burge") was involved in a traffic collision with uninsured motorist Michael Sanchez ("Sanchez"). Burge brought a negligence action against Sanchez ¹ in district court in Taos ("Burge I "). At approximately the same time, Burge filed a separate action against his insurance carrier, Appellant Mid-Continent Casualty Company (Mid-Continent) in district court in Albuquerque ("Burge II "), alleging breach of contract and bad faith. While neither Burge nor Mid-Continent sought to consolidate the two suits, Mid-Continent did attempt to intervene in Burge I. When Sanchez failed to answer the complaint in Burge I, the court entered a default judgment in favor of Burge and against Sanchez. Thereafter, the Burge II court granted a partial summary judgment in favor of Burge, holding that, under the policy, once the default judgment was entered against Sanchez in Burge I Mid-Continent became liable to pay Burge damages up to the policy limits.

On appeal we decide whether an automobile liability insurance carrier providing uninsured motorist coverage is bound by a default judgment rendered against the uninsured motorist in a separate suit. We review this case pursuant to SCRA 1986, 12-102(A)(1) (Repl.Pamp.1992), and we reverse. Because we reverse and remand this case for a new trial, we do not address Appellant's other claimed errors.

Facts and procedure. The relevant facts in addressing this issue are as follows. On August 31, 1990, Burge drove from Lawton, Oklahoma to Red River, New Mexico to visit some friends. The following morning, while riding his motorcycle in Questa, Burge was involved in a collision with an automobile driven by Sanchez. Sanchez was cited at the scene for not having automobile insurance. As a result of the accident, Burge sustained multiple injuries and damage to his motorcycle.

At the time of the accident, Mid-Continent was Burge's insurance carrier. Burge had uninsured motorist coverage of $25,000 on each of his four vehicles, making available to him a potential $100,000 of coverage with Mid-Continent. In September 1990, Burge notified Mid-Continent of the accident. Thereafter, Mid-Continent began its accident investigation, taking witness statements and examining the site of the accident in Questa. In April 1991, Mid-Continent took Burge's sworn statement. During an off-the-record break, Burge reported that the night before the accident, he and his friends drank heavily but denied drinking any alcohol the morning of the accident. After Mid-Continent evaluated Burge's sworn statement and his off-the-record statement, it determined that there were a number of inconsistencies between Burge's version of the accident and the witness statements. One witness reported that Burge's bike was parked in front of a bar before the accident. Two other witnesses told the investigating officer that immediately before the accident Sanchez was stopped in his traffic lane waiting to make a left turn. They stated that Burge then attempted to pass Sanchez in the left lane at a high rate of speed. Although one witness stated that Sanchez's left-turn signal was flashing, the officer reported that the signal did not have a bulb and appeared to have been broken for some time. Although Burge reported his speed at time of the accident to be 40 to 45 miles per hour, the police officer estimated Burge's speed to have been in excess of 50 miles per hour. Thereafter, Mid-Continent questioned Burge's claim for coverage because it had evidence that arguably established Burge's comparative negligence. Over the next year and a half, Mid-Continent and Burge attempted to settle the case on various occasions but were unable to reach an agreement.

On May 28, 1992, Burge filed an action against Sanchez, Burge I, alleging negligence, and on June 6, 1992, Sanchez was served process by personal service. On June 3, 1992, a copy of the Burge I complaint was sent to Mid-Continent. On June 24, 1992, Burge filed an action against Mid-Continent, Burge II, seeking a declaratory judgment that he was entitled to coverage under the terms and conditions of the uninsured motorist insurance policy. Burge also alleged claims for breach of contract, bad faith, violation of the Unfair Practices Act ("UPA"), NMSA 1978, §§ 57-12-1 to -22 (Repl.Pamp. 1987 & Cum.Supp.1994), and violation of the Trade Practices and Fraud Act ("TPFA"), NMSA 1978, §§ 59A-16-1 to -30 (Repl.Pamp.1992 & Cum.Supp.1992).

On July 7, 1992, Burge filed a motion for default judgment in Burge I because Sanchez had not answered the complaint. On July 14, 1992, the trial court entered the default judgment, finding Sanchez liable for negligence. Mid-Continent did not receive a copy of the default motion until July 10, 1992, and was never given notice of the hearing date. On July 15, 1992, within three days of the receipt of the motion, Mid-Continent filed its motion to intervene in Burge I. The Burge I court, however, did not grant Mid-Continent's motion until September 1, 1992, and on August 24, 1992, it heard testimony from Burge only on the issue of damages. When its motion to intervene was granted, Mid-Continent filed a complaint-in-intervention, requesting to submit the contested issues of Burge's comparative negligence and damages to the court for a determination. Upon Burge's motion to dismiss the complaint-in-intervention the trial court decided to dismiss it, thereby allowing all of Mid-Continent's issues to be heard in the Burge II suit in Bernalillo County. Accordingly, on November 20, 1992, the Burge I court awarded Burge $350,000 in damages against Sanchez but hand-wrote on the final judgment "This judgment has no binding effect upon the plaintiff-in-intervention, Mid-Continent Casualty Company."

In August 1993, Burge filed a motion in Burge II for a partial summary judgment against Mid-Continent on the liability issues. The motion sought to have the default judgment obtained against Sanchez in Burge I be conclusive on the issue of liability against Mid-Continent in Burge II. The trial court granted that motion, concluding that Burge was legally entitled to coverage and had fully complied with the uninsured motorist policy by giving Mid-Continent notice of his action in Burge I and obtaining a judgment. The Burge II court ruled that, on the issue of liability, Mid-Continent was bound to the default judgment obtained in the tort action between Burge and Sanchez. In the trial on the remaining claims, the court allowed evidence that showed Burge drank heavily before the accident, rode his motorcycle while intoxicated, passed in an unsafe manner and at an unsafe speed, and failed to properly control his motorcycle. However, this evidence was admitted solely on the bad-faith issue to show Burge's failure to deal honestly and fairly with Mid-Continent. The trial court refused to allow Mid-Continent to instruct the jury on the issue of Burge's comparative fault. The jury returned a verdict for Burge and against Mid-Continent in the amount of $100,000 compensatory damages and $350,000 in punitive damages on the claims of breach of contract, bad faith, and violation of the UPA and TFPA.

The Burge II Court erred in granting Burge's motion for a partial summary judgment. Summary judgment is only proper when no genuine issue of material fact exists and the movant is entitled to a judgment as a matter of law. Gardner-Zemke Co. v. State, 109 N.M. 729, 732, 790 P.2d 1010, 1013 (1990); SCRA 1986, 1-056(C) (Repl.Pamp.1992).

Mid-Continent contends that the Burge II court's refusal to allow it to litigate its contractual liability essentially denied Mid-Continent its day in court. Mid-Continent argues that the default judgment in Burge I had no binding effect in Burge II because it was not a party in Burge I, nor was it not allowed to participate. Mid-Continent also directs our attention to the court's handwritten language contained in the final judgment order in Burge I as support for its contention. Mid-Continent further argues that the Burge I court's dismissal of its complaint-in-intervention precluded it from litigating the issue of Burge's comparative negligence in the first suit thus allowing it to litigate in Burge II the issue of Burge's comparative fault. We agree with Mid-Continent's contentions and therefore hold that the court in Burge II erred by binding Mid-Continent to the default judgment entered in Burge I.

We have not previously addressed the question of the binding effect of a default judgment against the uninsured motorist upon an insurance carrier. Other courts that have considered this issue, however, recognize that the conclusive effect of a judgment obtained in the prior action depends, in part, upon the insured's compliance with the fundamentals of procedural due process. See, e.g., Champion Ins. Co. v. Denney, 555 So.2d 137, 139-40 (Ala.1989) (holding insurer would be bound only if it had "full notice and adequate opportunity to intervene and present any defenses and arguments necessary to protect its position"); Briggs v. American Family Mut. Ins. Co., 833 P.2d 859, 864 (Colo.App.1992) (holding insurer was bound by judgment only if it had adequate notice and opportunity to intervene in insured's action against uninsured motorist); ...