Lisanti v. Alamo Title Ins. of Texas

Decision Date15 September 2002
Docket NumberNo. 27,166.,27,166.
Citation132 N.M. 750,2002 NMSC 32,55 P.3d 962
PartiesNicholas LISANTI and Geraldine Lisanti, Plaintiffs-Respondents, v. ALAMO TITLE INSURANCE OF TEXAS, a member of the Fidelity National Group of Companies, and Fidelity National Title Insurance Company, Defendants Petitioners.
CourtNew Mexico Supreme Court

Cuddy, Kennedy, Hetherington, Albetta & Ives, L.L.P., Charlotte H. Hetherington, Santa Fe, NM, for Petitioners.

Landry & Ludewig, L.L.P., Stephanie Landry, Albuquerque, NM, for Respondents.

The Simons Firm, L.L.P., Thomas A. Simons, IV, Charles V. Henry, IV, Santa Fe, NM, for Amicus Curiae New Mexico Land Title Association.

Jeffries & Rugge, P.C., Brian A. Thomas, Mikal M. Altomare, Albuquerque, NM, for Amicus Curiae New Mexico Defense Lawyers Association.

Leo V. Boyle, John Vail, Washington, DC, for Amicus Curiae The Association of Trial Lawyers of America.

OPINION

MINZNER, Justice.

{1} Alamo Title Insurance of Texas ("Alamo") appeals from an opinion of the Court of Appeals reversing an order of the district court staying proceedings on a complaint filed by Nicholas and Geraldine Lisanti ("the Lisantis") pending arbitration. Lisanti v. Alamo Title Ins. of Tex., 2001-NMCA-100, 131 N.M. 334, 35 P.3d 989. The Court of Appeals held that NMSA 1978, § 59A-30-4(A) (1985), which gives the superintendent of insurance the power to promulgate regulations, and a regulation which requires that all title insurance claims under $1,000,000 be resolved through arbitration, violate the Lisantis' right to a trial by jury guaranteed by Article II, § 12 of the New Mexico Constitution. Lisanti, 2001-NMCA-100, ¶ 10, 131 N.M. 334, 35 P.3d 989; see also N.M. Form 1: Owner's Policy, Public Regulation Commission, Insurance Division, Title Insurance Bureau, 13 NMAC § 14.18.14 (Apr. 3, 1995). The Court of Appeals also held that the trial court's decision regarding the Lisantis' statutory claims conflicted with NMSA 1978, § 59A-16-30 (1990) and NMSA 1978, § 57-12-10 (1987), which provide for claims brought under the Trade Practices and Frauds section of the Insurance Code and the Unfair Practices Act, respectively, to be judicially resolved. Lisanti, 2001-NMCA-100, ¶ 11, 131 N.M. 334, 35 P.3d 989. We affirm.

I.

{2} Because of the procedural posture of this case, we know few facts concerning the dispute from which this appeal arose. The few facts we do know are undisputed. In November of 1995, the Lisantis purchased property in Torrance County. They also purchased title insurance for the transaction in the amount of $68,818 from Alamo, which has since merged with Defendant Fidelity National Title Insurance Company. Id. ¶ 3 n. 1. A dispute arose between Alamo and the Lisantis regarding the coverage of the insurance policy, and Alamo filed a demand for arbitration, pursuant to a clause contained in the policy. The Lisantis filed a complaint in Torrance County District Court, accompanied by a motion for preliminary injunction to prevent arbitration. The complaint alleged breach of contract, breach of the covenant of good faith and fair dealing, breach of fiduciary duty, and statutory claims for unfair insurance practices and unfair trade practices. The trial court denied the motion for preliminary injunction and stayed the Lisantis' claims pending arbitration. On January 20, 2000, the trial court entered an order staying arbitration pending appeal.

{3} On appeal the Court of Appeals concluded that the Lisantis had not consented to arbitration. Relying on Board of Education v. Harrell, 118 N.M. 470, 476, 882 P.2d 511, 517 (1994), the Court of Appeals noted that the arbitration clause contained in the insurance policy was required by law. Lisanti, 2001-NMCA-100, ¶ 7, 131 N.M. 334, 35 P.3d 989. In Harrell, a school superintendent argued that he never agreed at arm's length to mandatory arbitration of his claim that he was unfairly dismissed; that such mandatory arbitration violated his right to a jury trial, his right of access to the courts, and constituted an unconstitutional delegation of judicial authority; and that the manner in which the arbitration was handled violated due process. The Court concluded that, because the arbitration was required by statute, Harrell could not be said to have consented to it, but otherwise rejected his claims. The Court of Appeals analysis was based on both statutory and regulatory law.

{4} Section 59A-30-4(A) provides that the superintendent of insurance "shall promulgate such rules and regulations as are necessary to carry out the provisions of the New Mexico Title Insurance Law, including rules and regulations requiring uniform forms of policies. . . ." The Legislature has further provided that "[n]o title insurer or title insurance agent shall use any form of title insurance policy other than the uniform forms promulgated by the superintendent. . . ." NMSA 1978, § 59A-30-5 (1985).

{5} The superintendent of insurance has promulgated a regulation regarding title insurance policies that requires arbitration for all claims under $1,000,000. That regulation reads:

Unless prohibited by applicable law, either the Company or the insured may demand arbitration pursuant to the Title Insurance Arbitration Rules of the American Arbitration Association. Arbitrable matters may include, but are not limited to, any controversy or claim between the Company and the insured arising out of or relating to this policy, any service of the Company in connection with its issuance or the breach of a policy provision or other obligation. All arbitrable matters when the Amount of Insurance is $1,000,000 or less shall be arbitrated at the option of either the Company or the insured. All arbitrable matters when the Amount of Insurance is in excess of $1,000,000 shall be arbitrated only when agreed to by both the Company and the insured. Arbitration pursuant to this policy and under the Rules in effect on the date the demand for arbitration is made or, at the option of the insured, the Rules in effect at Date of Policy shall be binding upon the parties.

13 NMAC § 14.18.14.

{6} In view of this regulation and the statutes under which it was promulgated, the Court of Appeals concluded that the Lisantis did not waive their right to a judicial forum. Lisanti, 2001-NMCA-100, ¶ 7, 131 N.M. 334, 35 P.3d 989. The Court of Appeals described the agreement represented by the title insurance policy as a "`nonconsensual submission' to state-compelled arbitration." Id. (quoting Harrell, 118 N.M. at 476, 882 P.2d at 517).

{7} The Court of Appeals also reasoned that the Lisantis' claims were claims for which jury trial is guaranteed by our state constitution, or statutory claims for which the Insurance Code and the Unfair Practices Act specifically provide a trial in district court. Lisanti, 2001-NMCA-100, ¶¶ 10-11, 131 N.M. 334, 35 P.3d 989. The Court of Appeals, after reviewing early New Mexico cases, concluded that "contract actions seeking money damages were routinely tried to juries during the territorial period." Id. ¶ 10. The Court of Appeals characterized the Lisantis' common law claims as contractual in nature and noted that they sought money damages. Id. The Court of Appeals also held that the regulation requiring mandatory arbitration in title insurance cases conflicts with Section 59A-16-30 and Section 57-12-10, the statutes that respectively form the basis of the Lisantis' unfair insurance and unfair trade practices claims. Section 59A-16-30 specifically grants to plaintiffs injured by an unfair insurance practice "a right to bring an action in district court to recover actual damages." Section 57-12-10(B) allows any person injured by prohibited trade practices to "bring an action to recover actual damages." The Court of Appeals quoted an earlier case noting that "`[a]n agency by regulation cannot overrule a specific statute'" and that the rights created by these statutes prevailed over the regulation on which Alamo relied. Lisanti, 2001-NMCA-100, ¶ 11, 131 N.M. 334, 35 P.3d 989 (quoting Jones v. Employment Serv. Div. of the Human Servs. Dep't., 95 N.M. 97, 99, 619 P.2d 542, 544 (1980)).

{8} For these reasons, the Court of Appeals reversed the trial court's order staying further proceedings in district court pending arbitration pursuant to the title insurance policy terms. We agree with the Court of Appeals that the Lisantis cannot be said to have consented to the arbitration clause under which Alamo has asserted a right to arbitration. We also agree with the Court of Appeals that the statutory claims the Lisantis raise are claims for which the Legislature has provided a right to jury trial. Finally, we agree with the Court of Appeals that the regulation providing for mandatory arbitration violates the Lisantis' right to a trial by jury. Our reasons follow.

II.

{9} The Court of Appeals concluded NMSA 1978, § 44-7-2(B) (repealed 2001) informs appellate review in this appeal and that the standard of review is de novo. Lisanti, 2001-NMCA-100, ¶ 6, 131 N.M. 334, 35 P.3d 989. No one disputes either conclusion, and we believe both are correct. Although the Lisantis requested a preliminary injunction, Section 44-7-2(B) provided for a summary trial on the issue of whether or not there is an agreement to arbitrate when the agreement is "in substantial and bona fide dispute." It also authorized an order staying arbitration or an order to proceed to arbitration, depending on the resolution of the issue.

{10} Article II, Section 12 of the New Mexico Constitution provides in pertinent part that "[t]he right to trial by jury as it has heretofore existed shall be secured to all and remain inviolate." New Mexico courts have consistently held that the phrase "as it heretofore existed" refers to the right to a jury trial as that right existed in the Territory of New Mexico immediately prior to the adoption of the state constitution. See State ex rel. Bliss v. Greenwood, 63 N.M. 156, 161, 315 P.2d 223, 226 (1957)

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