Charter Services, Inc. v. Principal Mut. Life Ins. Co.

Decision Date12 January 1994
Docket NumberNo. 13774,13774
Citation1994 NMCA 7,117 N.M. 82,868 P.2d 1307
PartiesCHARTER SERVICES, INC., a New Mexico corporation, Plaintiff-Appellee/Cross-Appellant, v. PRINCIPAL MUTUAL LIFE INSURANCE COMPANY, formerly Bankers Life Insurance Company, Defendant-Appellant/Cross-Appellee.
CourtCourt of Appeals of New Mexico


Principal Mutual Life Insurance Company (Defendant) appeals and Charter Services, Inc., (Plaintiff) cross-appeals a judgment after a bench trial. The judgment awarded Plaintiff damages for negligent misrepresentation involving the purchase of a group health insurance policy from Defendant. In its appeal, Defendant raises the following issues: (1) whether the trial court erred in not apportioning Plaintiff's damages consisting of attorney fees expended in defending against Plaintiff's former employee's lawsuit for workers' compensation and for wrongful discharge; and (2) whether the trial court erred in awarding as damages certain legal costs and expenses allegedly paid directly by Plaintiff in defending against the lawsuit of its former employee. Defendant has expressly abandoned another issue listed in its docketing statement. In its cross-appeal, Plaintiff challenges the trial court's refusal to award punitive damages and prejudgment interest. We affirm on issue (1) and reverse and remand for a new hearing on issue (2) in Defendant's appeal. We affirm on the issues raised in Plaintiff's cross-appeal.


Allen Weh was president and principal officer of Plaintiff. James Straus was an agent of Defendant. In August and September of 1983, Weh and Straus discussed the purchase of a group medical insurance policy to cover Plaintiff's employees. The trial court found that, during these discussions, Straus advised Weh that the comprehensive major medical insurance policy offered by Defendant would cover on-the-job injuries suffered by Plaintiff's employees, and that, if Plaintiff bought the policy, it was not necessary to buy a separate workers' compensation insurance policy. This advice was incorrect. The trial court also found that Weh relied on Straus' misrepresentations in deciding to buy Defendant's policy, and that Plaintiff allowed its workers' compensation policy to lapse.

In November 1985, Kathleen Shores, an employee of Plaintiff, was injured at work. Shores informed Defendant's claims office of the injury but was told that the policy would not cover the injury because it was work-related. Plaintiff, having discontinued its workers' compensation insurance, paid Shores' medical expenses in the amount of $5,744.90 and made workers' compensation equivalent payments to her of $8,170.30. Shortly after recovering from her injury and returning to work, Shores was discharged by Plaintiff, allegedly for substandard performance. Shores sued Plaintiff, asserting claims for both workers' compensation and wrongful discharge. Plaintiff moved to dismiss the wrongful discharge claim on the ground that Shores was limited to a remedy under the Workers' Compensation Act. The matter was eventually appealed to our Supreme Court. See Shores v. Charter Servs., Inc., 106 N.M. 569, 746 P.2d 1101 (1987). The entire proceedings in Shores, including the appeal and proceedings on remand, shall be referred to as the Shores lawsuit. The Supreme Court held that Shores was required to elect to pursue either her workers' compensation claim or her wrongful discharge action. Id. at 570, 746 P.2d at 1102. Shores elected to pursue her workers' compensation claim.

The Shores lawsuit had been remanded but had not gone to trial when the present case was tried in June 1989. Despite its pronouncement in a letter decision that any attorney fees or costs incurred in connection with Shores' wrongful discharge count should be excluded from Plaintiff's recoverable damages, the trial court ultimately concluded that Defendant was liable to Plaintiff for "all damages resulting from the misrepresentations, including all of its damages in [the Shores lawsuit] such as workers' compensation benefits, medical benefits and the costs of defending that action." Plaintiff's damages could not be qualified until the conclusion of the Shores lawsuit.

The Shores lawsuit concluded in August 1990 with entry of a judgment awarding Shores workers' compensation benefits. At an August 1990 post-trial hearing on damages in this case, Defendant agreed that the judgment in the Shores lawsuit should be incorporated into the judgment to be entered against Defendant as part of Plaintiff's damages. Other elements of Plaintiff's damages, including the attorney fees incurred by Plaintiff in defending against the Shores lawsuit, remained unresolved. On July 9, 1991, the trial court held another post-trial damages hearing in this case. Plaintiff presented evidence that its total attorney fees in the Shores lawsuit amounted to $41,034.30. Weh could not identify the portion of that amount relating to defense of the workers' compensation claim before Shores' election to pursue that remedy pursuant to our Supreme Court's mandate. Defendant argued that Plaintiff had not met its burden of allocating the fees paid to its attorneys in the Shores lawsuit between those related to the workers' compensation claim and those related to the wrongful discharge claim. Contrary to the trial court's prior letter decision allowing recovery of only those expenses related to the workers' compensation claim, the trial court stated that, if the fees could not be apportioned between the two claims, then the entire amount would be allowed as damages.

Plaintiff also requested that the judgment include an award of $8,987.95 for legal costs and expenses associated with the Shores lawsuit that were paid directly by Plaintiff, over and above the $41,034.30 paid in attorney fees. The trial court did not make any finding on this claimed element of damages. After the July 9, 1991, hearing, Frederick M. Mowrer, the judge who presided over the trial, retired from the bench without making any additional findings or conclusions and without entering judgment. A successor judge, Robert L. Thompson, was assigned to the case. Two hearings were held before Judge Thompson in December 1991 to address entry of judgment. Defendant objected to inclusion of the $8,987.95 amount in the judgment, both because the amount had not been adequately proven and because Judge Mowrer had made no finding on which Judge Thompson could enter judgment.

The trial court awarded Plaintiff judgment against Defendant. The judgment included an award of $41,034.30 for attorney fees incurred in defending the Shores lawsuit, and $8,987.95 for Plaintiff's direct legal costs and expenses in that lawsuit. The trial court denied Plaintiff's requests for punitive damages and prejudgment interest.


Defendant argues that the trial court erred in awarding as damages the total amount of Plaintiff's attorney fees incurred in defending the Shores lawsuit. Relying on Economy Rentals, Inc. v. Garcia, 112 N.M. 748, 819 P.2d 1306 (1991), Defendant contends that the fees incurred by Plaintiff in defending against Shores' unlawful discharge claim should have been excluded. In Economy Rentals, Inc., our Supreme Court held that, when an attorney's services are rendered in pursuit of multiple objectives, some of which permit a fee and some of which do not, the trial court must apportion the fees and award only those that are compensable. Id. at 765, 819 P.2d at 1323. We reject Defendant's argument because we disagree with its premise that Plaintiff's legal expenses in defending against Shores' wrongful discharge claim were not compensable.

Defendant does not claim that the trial court's letter decision disallowing the fees for defending the wrongful discharge claim controls over the court's later conclusion to the contrary. See Sheets v. Sheets, 106 N.M. 451, 456, 744 P.2d 924, 929 (Ct.App.1987) (language contained in trial court's decision that is not carried forward in judgment is of no effect). Rather, Defendant asserts that the trial court misapplied the law in awarding damages unrelated to Plaintiff's defense of Shores' workers' compensation action.

"Negligent misrepresentation is an action governed by the general principles of the law of negligence." R.A. Peck, Inc. v. Liberty Fed. Sav. Bank, 108 N.M. 84, 88, 766 P.2d 928, 932 (Ct.App.1988); accord Ruiz v. Garcia, 115 N.M. 269, 274, 850 P.2d 972, 977 (1993). Damages for negligent misrepresentation are those proximately caused by the misrepresentation. See First Interstate Bank v. Foutz, 107 N.M. 749, 751, 764 P.2d 1307, 1309 (1988); SCRA 1986, 13-1632 (Repl.1991). "Proximate cause is that which in a natural and continuous sequence unbroken by any new independent causes produces the injury and without which the injury would not have occurred." Pittard v. Four Seasons Motor Inn, Inc., 101 N.M. 723, 730, 688 P.2d 333, 340 (Ct.App.), cert. quashed, 101 N.M. 555, 685 P.2d 963 (1984). Defendant contends that, because its actions had nothing to do with Shores' wrongful discharge claim, Plaintiff's fees in defending against that claim were not proximately caused by Defendant's misrepresentations. In support of its position, Defendant cites evidence that Shores was discharged for poor job performance. Weh also conceded at trial that Defendant was not responsible for Shores' discharge.

We fully appreciate Defendant's arguments. However, the facts do not support those arguments. We so conclude because the gist of Shores' wrongful discharge claim was that she was fired in retaliation for filing her workers' compensation action. Our Supreme Court recognized this basis for Shores' allegation...

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