Pielhau v. State Farm Mut. Auto. Ins. Co.

• Decision Date: 23 September 2013
• Docket Number: No. 31,899.,31,899.
• Citation: 314 P.3d 698
• Parties: Allen PIELHAU and Desiri Pielhau, Individually and as Personal Representatives of the Estate of Jared Pielhau, their deceased son, Plaintiffs–Appellees, v. STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY, Defendant–Appellant.
• Court: Court of Appeals of New Mexico

314 P.3d 698

Allen PIELHAU and Desiri Pielhau, Individually and as Personal Representatives of the Estate of Jared Pielhau, their deceased son, Plaintiffs–Appellees,

v.STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY, Defendant–Appellant.

No. 31,899.

Court of Appeals of New Mexico.

Sept. 23, 2013.

The Law Offices of James A. Branch, Jr., L.L.C. James A. Branch, Albuquerque, NM, for Appellees.

Guebert Bruckner P.C., Terry R. Guebert, Albuquerque, NM, for Appellant.

OPINION

BUSTAMANTE, Judge.

{1} In the companion cases of Jordan v. Allstate Insurance Co., 2010–NMSC–051, 149 N.M. 162, 245 P.3d 1214 and Progressive Northwestern Insurance Co. v. Weed Warrior Services, 2010–NMSC–050, 149 N.M. 157, 245 P.3d 1209, our Supreme Court set detailed and mandatory procedures to be followed in order for an insured's rejection of uninsured motorist (UM) coverage to be effective. In Jordan, our Supreme Court held that its ruling—and thus the procedure described in the two cases—would be given full retroactive effect. 2010–NMSC–051, ¶ 29, 149 N.M. 162, 245 P.3d 1214. In 2011, relying on Jordan and Weed Warrior, the Plaintiffs Pielhau sought UM coverage equal to the liability limits they carried on three vehicles they owned when their son died in an auto accident. The district court granted the Pielhaus' motion for summary judgment on the UM coverage issue.

{2} The dispositive issue is whether the Pielhaus' current action is barred by concepts of claim preclusion as a result of litigation they pursued against State Farm in 2004 arising out of the same tragic accident. Concluding that claim preclusion does apply, we reverse.

BACKGROUND

{3} Jared Pielhau, the Pielhaus' son, died in a single car accident in 2004. The vehicle he was riding in was uninsured. The Pielhaus owned five vehicles, each covered with liability insurance policies issued by State Farm that were in effect at the time of the accident and which covered Jared.

{4} In 2004, the Pielhaus sought UM coverage under two of the State Farm policies. The Pielhaus sued State Farm for denying their request to “stack” coverage under two of the policies and also sued State Farm agent Mary Neal for negligent misrepresentation, claiming she failed to properly advise them concerning uninsured/underinsured motorist coverage on each vehicle. The 2004 case was ultimately settled through a “release of claims” between the parties and dismissal with prejudice on motion by the Pielhaus.

{5} The Pielhaus' other three vehicles were various Chevrolet models, each covered by a separate State Farm policy. Plaintiffs Pielhau rejected UM coverage under each of the three Chevrolet policies, and so far as the record reveals, the Piehlhaus did not seek to enforce UM coverage as to them in 2004. They first sought UM coverage under the Chevrolet policies in 2011, which request eventually led to this appeal.

{6} When State Farm failed to respond to the Pielhaus' 2011 demand for equalized UM coverage within the time specified, the Pielhaus filed suit seeking declaratory judgment, damages for breach of contract, and punitive damages under several tort-based theories. The Pielhaus moved for partial summary judgment on the declaratory judgment and breach of contract claims, arguing that their rejection of UM coverage in the three Chevrolet policies was invalid and the policies should be reformed under Jordan and Weed Warrior. The district court granted the motion after briefing and a hearing, and the Pielhaus voluntarily dismissed all other claims against State Farm. State Farm timely appealed. Additional facts are provided as pertinent to our discussion.

DISCUSSION

{7} State Farm makes four arguments on appeal. First, it maintains that the Pielhaus' claims are barred by claim preclusion ¹ because they arise from the same transaction as those in the 2004 litigation. Second, it argues that the claims are barred by the prior settlement and release. Third, it contends that the claims are barred because they were filed outside of the policies' six-year time limit for bringing claims.² Finally, it vaguely argues that refusal to enforce the contract-based time limit for claims in the policies violates the United States and New Mexico constitutions. Because we find the first argument persuasive and dispositive, we do not reach State Farm's other arguments.

{8} The doctrine of claim preclusion “ensures finality, advances judicial economy, and avoids piecemeal litigation.” Bank of Santa Fe v. Marcy Plaza Assocs., 2002–NMCA–014, ¶ 14, 131 N.M. 537, 40 P.3d 442. It “applies equally to [bar] all claims arising out of the same transaction, regardless of whether they were raised at the earlier opportunity, as long as they could have been raised.” Chaara v. Lander, 2002–NMCA–053, ¶ 20, 132 N.M. 175, 45 P.3d 895. “Res judicata applies if three elements are met: (1) a final judgment on the merits in an earlier action, (2) identity of parties or privies in the two suits, and (3) identity of the cause of action in both suits.” Rosette, Inc. v. United States Dep't of the Interior, 2007–NMCA–136, ¶ 33, 142 N.M. 717, 169 P.3d 704. Because the Pielhaus do not contest the second element—that the parties are identical in the two suits—we focus on the first and third elements. We review the district court's application of claim preclusion de novo. Moffat v. Branch, 2005–NMCA–103, ¶ 10, 138 N.M. 224, 118 P.3d 732.

{9} We determine that the first element is satisfied. During the hearing on the Pielhaus' motion for partial summary judgment, the district court questioned the Pielhaus' counsel on whether claim preclusion was appropriate:

District Court: On the issue of res judicata, ... I do think [the Pielhaus] have some issue about whether an issue could have been raised in the prior case. But you also—it requires a decision on the merits, and I don't think any of those—that prior case was decided on the merits, was it?

Pielhaus' Counsel: No, I don't believe so, Your Honor.

District Court: They were settled.

Pielhaus' Counsel: They were settled and dismissed. And I think for those reasons—

District Court: There may be some issues with the settlement agreement ... but I honestly don't see how res judicata or collateral estoppel would apply.

At the end of the hearing, the district court stated, “I'm not deciding the other things about ... res judicata.” Yet the final judgment it entered states that “State Farm's claims that the [Pielhaus'] claims are barred by the doctrines of [r]es [j]udicata and/or [c]ollateral [e]stoppel are denied[.]”

{10} “[A] dismissal with prejudice is an adjudication on the merits for purposes of res judicata.” Hope Cmty. Ditch Ass'n v. N.M. State Eng'r, 2005–NMCA–002, ¶ 10, 136 N.M. 761, 105 P.3d 314. In Kirby v. Guardian Life Insurance Company of America, the Supreme Court stated the reasoning behind this rule:

A dismissal with prejudice is an adjudication on the merits only to the extent that when a claim has been dismissed with prejudice, the ... element of res judicata (a final valid judgment on the merits ) will be presumed so as to bar a subsequent suit against the same defendant by the same plaintiff based on the same transaction. If this were otherwise, plaintiffs could simply ignore dismissals and file the same claim as many times as they wished, so long as the claim never progressed to a determination of the substantive issues.

2010–NMSC–014, ¶ 66, 148 N.M. 106, 231 P.3d 87.

{11} We note that this rule applies to preclude claims (claim preclusion/res judicata), but not issues (issue preclusion/collateral estoppel). See State ex rel. Martinez v. Kerr–McGee Corp., 1995–NMCA–041, ¶ 14, 120 N.M. 118, 898 P.2d 1256 (“[S]ettlements and consent judgments are not normally considered fertile ground for issue preclusion.”). This distinction is based on the fact that issue preclusion requires that the issue was “actually litigated” and “necessarily determined” in the first suit, whereas claim preclusion does not so require. Compare Reeves v. Wimberly, 1988–NMCA–038, ¶ 8, 107 N.M. 231, 755 P.2d 75 (stating the elements required for issue preclusion, including that “the ultimate facts or issues were actually litigated; and ... the issue was necessarily determined”), with Rosette, Inc., 2007–NMCA–136, ¶ 33, 142 N.M. 717, 169 P.3d 704 (stating the elements required for claim preclusion).

{12} Thus, a dismissal of a suit pursuant to settlement of a claim is final and preclusive as to related claims, but not necessarily preclusive of issues that might arise in different suits, unless those issues were actually litigated and judicially decided. See Pope v. Gap, Inc., 1998–NMCA–103, ¶ 27, 125 N.M. 376, 961 P.2d 1283 (“[T]his Court has previously expressed its disfavor of relying on consent judgments for collateral estoppel purposes, given the absence of the requisite litigation and necessary judicial determination of the issues covered by the judgment.”); In re Picacho Hills Util. Co., No. 11–13–10742 TL, 2013 WL 1788298 at *3 n. 6 (Bankr.D.N.M. Apr. 26, 2013) (“Consent judgments are res judicata in New Mexico. However, such judgments generally are not entitled to collateral estoppel effect where the issues involved are not actually adjudicated, and [the district] judge's role in signing the judgment is only ministerial.” (citations omitted)).

{13} Here, the 2004 case was settled and dismissed with prejudice by agreement of the parties and thus was an “adjudication on the merits” sufficient for claim preclusion to apply. The first element is satisfied.

{14} We next address the remaining element of claim preclusion: whether the cause of action in the two suits is the same. “In deciding what constitutes a cause of action for res judicata purposes, we apply the transactional approach from the Restatement (Second) of Judgments [Section] 24.” Rosette, Inc., 2007–NMCA–136, ¶ 33, 142 N.M. 717, 169 P.3d 704. Using this approach, we focus on the underlying facts rather than the legal theories relied on in the...