Martin v. Franklin Capital Corp.

• Decision Date: 16 September 2008
• Docket Number: No. 27,369.,27,369.
• Citation: 195 P.3d 24,2008 NMCA 152
• Parties: Gerald T. MARTIN and Juana M. Martin, individually and on behalf of all persons similarly situated, Plaintiffs-Appellants, v. FRANKLIN CAPITAL CORPORATION, a Utah corporation licensed to do business in New Mexico, Defendant. and Century-National Insurance Company, a California corporation, Defendant-Appellee.
• Court: Court of Appeals of New Mexico

195 P.3d 24

2008 NMCA 152

Gerald T. MARTIN and Juana M. Martin, individually and on behalf of all persons similarly situated, Plaintiffs-Appellants, v. FRANKLIN CAPITAL CORPORATION, a Utah corporation licensed to do business in New Mexico, Defendant. and Century-National Insurance Company, a California corporation, Defendant-Appellee.

No. 27,369.

Court of Appeals of New Mexico.

September 16, 2008.

Office of Feferman and Warren, Richard N. Feferman, Albuquerque, NM, Malakoff, Doyle & Finberg, P.C., Michael P. Malakoff, Pittsburgh, PA, for Appellants.

Sutin, Thayer & Browne, P.A., Jay D. Hertz, Albuquerque, NM, for Appellee.

OPINION

FRY, Judge.

{1} Plaintiffs in this class action case (Borrowers) appeal from the district court's order granting summary judgment in favor of Defendant Century National Insurance (Century) on Borrowers' allegations of tortious interference with contract. Borrowers argue that a genuine issue of material fact exists as to whether Century intentionally interfered with retail installment contracts between Borrowers and another defendant who is not a party to this appeal, Franklin Capital Corporation (Franklin), and thus that summary judgment was inappropriate. We affirm.

BACKGROUND

{2} This case arose in the context of motor vehicle financing loans. Borrowers, who are members of a class certified by the district court, purchased motor vehicles from New Mexico motor vehicle dealers and financed the purchases by executing retail installment contracts. Franklin purchased the retail installment contracts from the motor vehicle dealers. Under the terms of the retail installment contracts, Borrowers were required to maintain insurance on the vehicles. If a borrower failed to maintain the requisite coverage, the retail installment contract provided that Franklin could purchase insurance on the borrower's vehicle. The parties refer to this insurance as "force-placed insurance."

{3} Franklin purchased master policies from Century that named Franklin as the insured and provided insurance to cover Franklin's interest in every vehicle Franklin financed or refinanced. These policies provided that coverage for each vehicle would be automatically effective "at any time thereafter the interests of [Franklin] are not covered by other specific insurance." Franklin also entered into a contract with Century whereby Century provided follow-up and record maintenance services on the retail installment contracts Franklin owned. Under this contract, Century agreed to send notices to borrowers reminding them of their obligation to purchase insurance and, if a borrower failed to provide proof of insurance, Century sent notices that insurance had been purchased on the borrower's behalf and that the premium for the insurance had been added to the borrower's loan balance.

{4} Borrowers alleged that the force-placed insurance was different from and more expensive than the insurance they were required to purchase under the retail installment contracts. Among other differences, Borrowers maintained that the retail installment contracts required a maximum deductible of $500 and coverage for specified perils, while the force-placed insurance provided a deductible of $250 and comprehensive coverage, both of which resulted in a more expensive premium. Borrowers asserted claims against Franklin and Century.

{5} Borrowers alleged that Century tortiously interfered with Borrowers' retail installment contracts by inducing Franklin to purchase the more extensive insurance and to add the excess premiums to Borrowers' loan balances. The district court granted summary judgment in favor of Century. On appeal, Borrowers argue that the district court erred in granting summary judgment in favor of Century because Borrowers established that genuine issues of material fact exist on the elements of tortious interference with contract. We present additional facts below as necessary for our analysis.

DISCUSSION

{6} We review summary judgment under a de novo standard of review. Fikes v. Furst, 2003-NMSC-033, ¶ 11, 134 N.M. 602, 81 P.3d 545. A party is entitled to summary judgment if the party can demonstrate that "there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Rule 1-056(C) NMRA. "Summary judgment may be proper even though some disputed issues remain, if there are sufficient undisputed facts to support a judgment and the disputed facts relate to immaterial issues." Fikes, 2003-NMSC-033, ¶ 11, 134 N.M. 602, 81 P.3d 545 (internal quotation marks and citation omitted). An issue of fact is "material" if the existence (or non-existence) of the fact is of consequence under the substantive rules of law governing the parties' dispute. See Farmington Police Officers Ass'n v. City of Farmington, 2006-NMCA-077, ¶ 17, 139 N.M. 750, 137 P.3d 1204 (discussing materiality in the context of a dispute over the interpretation of a collective bargaining agreement). If the movant establishes a prima facie case that summary judgment should be granted, the burden shifts to the party opposing the motion to show a reasonable doubt that no genuine issue of fact exists. Fikes, 2003-NMSC-033, ¶ 11, 134 N.M. 602, 81 P.3d 545.

{7} The elements of intentional interference with a contract are

(1) [the defendant] had knowledge of the contract; (2) [the p]laintiff was unable to fulfill [its] contractual obligations; (3) [the defendant] played an active and substantial part in causing [the p]laintiff to lose the benefits of the contract; (4) [the p]laintiff suffered damages resulting from the breach; and (5) [the defendant] induced the breach without justification or privilege to do so.

Deflon v. Sawyers, 2006-NMSC-025, ¶ 16, 139 N.M. 637, 137 P.3d 577. The plaintiff must "prove that the defendant acted with either an improper motive or improper means," and the improper motive or improper means must be used in persuading the person to breach the contract, "but the improper motive need not be the sole motive." Fikes, 2003-NMSC-033, ¶¶ 20, 22, 134 N.M. 602, 81 P.3d 545. If the defendant interfered in some way with the plaintiff's contract, "[t]he inquiry, in the end, should be to determine the [defendant's] primary motivation for the interference. If it was primarily improper, then the [defendant] has no privilege. If it was primarily proper, then liability should not attach." Id. ¶ 23.

{8} For purposes of its motion for summary judgment and this appeal, Century does not contest the first and second elements of Borrowers' claim. Century admits that the insurance product it sold to Franklin did not comport with the retail installment contracts and that this Court may assume that Franklin breached the retail installment contracts when it charged Borrowers for the coverages it had purchased. It does not appear that Century contests the fourth element, that Borrowers suffered damages as a result of the breach. However, Century argues that it disproved the remaining elements of Borrowers' claim by establishing that it did not play an active and substantial role in causing the breach and that it did not induce the breach without justification or privilege because it did not act with improper motive or through improper means. We agree.

Borrowers Did Not Introduce Evidence That Century Played an Active Role in Causing Borrowers to Lose the Protection of Their Contracts

{9} Borrowers maintain that Century's active role in Franklin's breach of the retail installment contracts is evidenced by Century's failure to offer Franklin an insurance product that would comport with the insurance requirements of the retail installment contracts, despite Century's knowledge of those requirements. Borrowers submitted evidence that the only product Century offered to Franklin was for a longer term and had a lower deductible than required by the retail installment contracts, provided comprehensive rather than perils coverage, and provided for a less favorable refund of premiums. More important, according to Borrowers, Century induced Franklin to force-place and charge Borrowers for non-compliant coverage "by offering to shoulder the vast bulk of the burden [Franklin] would otherwise have to carry in developing and running" the follow-up system that Century contracted to provide for Franklin. The system identified borrowers who had not purchased insurance, sent notices to those borrowers that contained misrepresentations about the insurance required, and sent Franklin notices of premium add-ons once insurance was force-placed. Borrowers argue that this system was crucial to Franklin, which was a newly formed finance company that was unsophisticated in the area of force-placed insurance.

{10} We are not persuaded that this evidence suggests or gives rise to an inference that Century played an active role in inducing Franklin to breach its retail installment contracts with Borrowers. Our Supreme Court has stated that "[c]ontracting with a party with knowledge of a prior inconsistent contract between that party and another is not according to the better view, the equivalent of inducement or persuasion." Wolf v. Perry, 65 N.M. 457, 461, 339 P.2d 679, 681 (1959); see Gallup Elec. Light Co. v. Pacific Improvement Co., 16 N.M. 86, 96, 113 P. 848, 851 (1911) (quoting with approval a New Jersey case stating that "[i]t would ... be a difficult proposition to maintain that persons not parties to such a contract ... are liable to an injunction in equity, at the suit of the covenantee, restraining them from merely aiding or abetting the covenantee in the violation of this contract" (internal quotation marks and citation omitted)).

{11} In this case, even if Century knew that the master policies it offered to Franklin provided more extensive coverage than the retail installment contracts Franklin had with Borrowers, there is no evidence to suggest that Century induced Franklin to charge Borrowers a cost for the...