Guest v. Allstate Ins. Co.

Decision Date17 February 2009
Docket NumberNo. 27,253.,27,253.
PartiesSuzanne GUEST and the Guest Law Firm, P.C., Plaintiffs-Appellees/Cross-Appellants, v. ALLSTATE INSURANCE COMPANY, Defendant-Appellant/Cross-Appellee.
CourtCourt of Appeals of New Mexico

VIGIL, Judge.

{1} Defendant Allstate Insurance Company (Allstate) appeals, challenging the jury award of compensatory damages and punitive damages to Plaintiffs Suzanne Guest and the Guest Law Firm, P.C. (Guest). Guest cross-appeals, challenging the trial court action in reducing the punitive damages award and refusing to award attorney fees. We affirm in part, reverse in part, and remand for a new trial on the issue of damages.


{2} This case arises from Guest's representation of Allstate in an uninsured motorist (UM) claim. In March 1997, Jamie Deveney and Travis Durham (the Durhams), were involved in an automobile accident with an uninsured driver and made a UM claim against Allstate under Deveney's automobile insurance policy. Allstate referred the case to a law firm, and the case was assigned to Ms. Guest. In 1998, Ms. Guest formed her own firm, the Guest Law Firm, P.C., where she continued to work on the Durham matter.

{3} In 2001, following the conclusion of their UM claim, the Durhams filed suit, (Durham I), alleging a number of claims in connection with the handling of their UM claim. Guest was named as a defendant, along with Allstate. Guest contacted Allstate and demanded that Allstate defend and indemnify her. According to Guest's testimony at trial, she informed Allstate representatives that if Allstate did not defend and indemnify her she would no longer be in a position to represent Allstate due to a conflict of interest. Allstate agreed to provide Guest with a defense and engaged an attorney to represent her. The Durham I litigation was soon thereafter dismissed without prejudice.

{4} A few months later, the Durhams filed a new complaint, (Durham II) in which they expanded on the allegations in the Durham I litigation. The Durhams asserted claims against Guest in her role as arbitration counsel for Allstate alleging violations of the New Mexico Insurance Code, aiding and abetting a violation of a fiduciary duty, unjust enrichment, malicious abuse of process, malicious defense, and prima facie tort. The claims were based on the underlying premise that deceptive claims handling practices were conducted pursuant to Allstate's aggressive national CCPR (claims core process redesign), DOLF (defense of litigated files), and SFXOL (settle for X or less) policies and procedures.

{5} Allstate, however, refused to defend Guest against the Durham II claims. As a result, Guest contacted her malpractice carrier and it retained an attorney to represent her. Guest and her attorney met with Allstate's counsel and demanded that Allstate continue to defend Guest. Allstate refused. Following Allstate's refusal to defend, Guest returned all of Allstate's cases (making up eighty-five percent of Guest's practice), with the exception of two cases that were at a stage at which their return would be too prejudicial, and declined to accept any more cases from Allstate. Ten days later, Guest's attorney wrote Allstate demanding that Allstate reconsider its position and resume Guest's defense. Allstate did not respond. Guest closed her law practice in November 2002, and moved to Phoenix.

{6} In early 2003, Guest's malpractice carrier went into receivership and stopped paying for her attorney's services. Guest again contacted Allstate and demanded that Allstate resume its obligation to defend and indemnify her. Although Allstate denied it had a continuing obligation, it agreed to provide Guest a defense, and engaged an attorney to represent her.

{7} In January 2004, Allstate began to pursue a global settlement with the Durhams, and on March 19, 2004, Allstate told Guest to settle on terms it had negotiated, or it would withdraw her defense. Guest refused to enter into the settlement agreement, which included a release of all claims she might have against the Durhams and their counsel. Allstate eventually stopped paying for Guest's defense and Guest again obtained her own counsel.

{8} In June 2005, Guest filed suit against the Durhams' counsel and Allstate. The trial court granted summary judgment in favor of the Durhams' counsel, and we affirmed in Guest v. Berardinelli, 2008-NMCA-144, ¶ 40, 145 N.M. 186, 195 P.3d 353, cert. denied 2008-NMCERT-009, 145 N.M. 257, 196 P.3d 488. The trial court also granted summary judgment in favor of Allstate on all of Guest's claims except for Guest's breach of contract, breach of the implied covenant of good faith and fair dealing, and prima facie tort claims, and this case proceeded to trial. The jury found in favor of Guest and awarded compensatory and punitive damages. Following post-trial motions, the trial court reduced the amount of punitive damages. Allstate filed this appeal and Guest cross-appealed.


{9} On appeal, Allstate challenges both the jury determination of its liability and its award of damages. Specifically, Allstate raises five issues on appeal: (1) whether there was an enforceable contract; (2) whether, if an enforceable contract existed, Allstate violated its terms by withdrawing Guest's defense; (3) whether it was error to submit the issue of prima facie tort to the jury; (4) whether the trial court abused its discretion in admitting certain testimony and documentation; and (5) whether the compensatory and punitive damage awards are supported by substantial evidence. In her cross-appeal, Guest argues that: (1) the trial court erred by reducing the jury award of punitive damages, and (2) the trial court erred by not permitting Guest to recover attorney fees. We address each of these issues below.

A. The trial court did not err by submitting the existence of a contract to the jury and the jury determination is supported by substantial evidence.

{10} Allstate challenges the trial court denial of its motion for a directed verdict and submission of whether there was a contract to the jury. Allstate argues that there was no evidence that could, as a matter of law, establish that Guest provided consideration for the alleged contract to defend and indemnify her and, as a result, the trial court erred by submitting the contract claim to the jury. We review the trial court ruling on Allstate's directed verdict motion de novo. See Hedicke v. Gunville, 2003-NMCA-032, ¶ 9, 133 N.M. 335, 62 P.3d 1217. Allstate further argues that, to the extent Guest asserts her consideration was to make herself available to work on Allstate's cases, the agreement lacked mutuality, because Guest had no obligation to comply with this promise, and Allstate had the right to terminate Guest's representation at any time. This argument raises an issue of law which is also subject to de novo review. See Piano v. Premier Distrib. Co., 2005-NMCA-018, ¶ 8, 137 N.M. 57, 107 P.3d 11.

{11} Our Supreme Court held in C.E. Alexander & Sons, Inc. v. DEC Int'l, Inc.:

It is the province of the trial court to determine all questions of law, including the legal sufficiency of any asserted claim or defense. If the evidence fails to present or support an issue essential to the legal sufficiency of an asserted claim, the right to jury trial disappears. It is fundamental that the evidence adduced must support all issues of fact essential to the maintenance of a legally recognized and enforceable claim. Otherwise, there can be no basis in fact for the claim, and it must be dismissed as a matter of law.

112 N.M. 89, 93, 811 P.2d 899, 903 (1991) (internal quotation marks and citation omitted). However, "`[w]hen the existence of a contract is at issue and the evidence is conflicting or permits more than one inference, it is for the finder of fact to determine whether the contract did in fact exist.'" Eckhardt v. Charter Hosp. of Albuquerque, Inc., 1998-NMCA-017, ¶ 39, 124 N.M. 549, 953 P.2d 722 (quoting Garcia v. Middle Rio Grande Conservancy Dist., 99 N.M. 802, 807, 664 P.2d 1000, 1005 (Ct.App.1983), overruled on other grounds by Montoya v. AKAL Sec., Inc., 114 N.M. 354, 357, 838 P.2d 971, 974 (1992)); see also Segura v. Molycorp, Inc., 97 N.M. 13, 18, 636 P.2d 284, 289 (1981).

{12} "Ordinarily, to be legally enforceable, a contract must be factually supported by an offer, an acceptance, consideration, and mutual assent." Hartbarger v. Frank Paxton Co., 115 N.M. 665, 669, 857 P.2d 776, 780 (1993). Consideration is essential to the enforcement of a contract, see Romero v. Earl, 111 N.M. 789, 791, 810 P.2d 808, 810 (1991), and "consists of a promise to do something that a party is under no legal obligation to do or to forbear from doing something he [or she] has a legal right to do." Heye v. Am. Golf Corp., 2003-NMCA-138, ¶ 12, 134 N.M. 558, 80 P.3d 495. In order to constitute consideration, a promise must be binding. "When a promise puts no constraints on what a party may do in the future—in other words, when a promise, in reality, promises nothing—it is illusory, and it is not consideration." Id. Furthermore, "[a] valid contract must possess mutuality of obligation," meaning that "both sides must provide consideration." Bd. of Educ. v. James Hamilton Constr. Co., 119 N.M. 415, 420, 891 P.2d 556, 561 (Ct.App.1994).

{13} Where a contract leaves it entirely optional for one of the parties to perform, the contract is not founded on mutual promises and is, generally, not binding or...

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