Farmers Ins. Group of Companies v. Martinez, 10308
| Decision Date | 01 March 1988 |
| Docket Number | No. 10308,10308 |
| Parties | FARMERS INSURANCE GROUP OF COMPANIES, Plaintiff-Appellant, v. Raymond MARTINEZ, Defendant-Appellee. |
| Court | Court of Appeals of New Mexico |
Plaintiff Farmers Insurance Group of Companies (insurer) appeals the trial court's order dismissing insurer's complaint against defendant Raymond Martinez (tortfeasor). The dismissal was based on res judicata principles. We reverse the order of dismissal and remand for an evidentiary hearing.
The chronology giving rise to this appeal is as follows: Katherine Barreras (insured) filed suit against tortfeasor for damages arising from an automobile accident. The suit was dismissed with prejudice after insured notified the trial court that she desired to dismiss the case and would not appear at the scheduled trial. Later, insurer filed suit against tortfeasor. This suit joined insured as a party plaintiff and claimed damages resulting from the same automobile accident. Insurer alleged it had paid insured for the damages she suffered in the accident and that as a result, had become subrogated to any rights insured may have had against tortfeasor.
Tortfeasor filed a motion to dismiss, claiming insured's prior action against him was res judicata with respect to insurer and insured's claims against tortfeasor in the second suit. Insurer then dismissed insured from its lawsuit, but opposed the motion to dismiss. The trial court granted tortfeasor's motion to dismiss, ruling that insured's prior action against tortfeasor barred insured's subsequent action against him.
Three calendar notices have been filed in this appeal. Our third calendar notice proposed to reverse and remand to the trial court for an evidentiary hearing. The calendar notice also stated that it appeared that if the facts had been put before the trial court at all, it was in the form of argument of counsel and not evidence. Such argument alone cannot provide the basis for dismissing a case. See Phillips v. Allstate Ins. Co., 93 N.M. 648, 603 P.2d 1105 (Ct.App.1979). Tortfeasor did not file a memorandum in opposition to our third calendar notice.
Insurer's asserted right to recover from tortfeasor is based on the concept of subrogation. Subrogation, whether created by contract or by operation of law, is an equitable remedy and equitable principles control its application. State Farm Mut. Auto. Ins. Co. v. Foundation Reserve Ins. Co., 78 N.M. 359, 431 P.2d 737 (1967). A subrogation case based on facts as found in this appeal is properly analyzed under the law governing such claims and not under ordinary res judicata principles. In considering what effect an insured's settlement with a tortfeasor may have on the insurer's subrogation rights, courts have applied a three-pronged test incorporating equitable principles. The same test should apply to situations, as here, where insured dismissed her lawsuit against tortfeasor voluntarily. The effect of such action is the same; the tortfeasor may be released from all liability potentially arising from the incident upon which the lawsuit is based. Thus, we will apply the test to this appeal.
If an insured settles with a tortfeasor before an insurer has paid damages to the insured, the insurer's subrogation rights are destroyed and the settlement is a bar to a suit by the insurer against the tortfeasor. March v. Mountain States Mut. Casualty Co., 101 N.M. 689, 687 P.2d 1040 (1984). If an insured files suit against, and settles with, the tortfeasor after receiving payment from the insurer, and the tortfeasor had knowledge of that...
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