QUALITY CHIROPRACTIC v. Farmers Ins. Co.

• Decision Date: 14 June 2002
• Docket Number: No. 22,439.,22,439.
• Citation: 51 P.3d 1172,132 N.M. 518
• Parties: QUALITY CHIROPRACTIC, PC, Plaintiff-Appellant, v. FARMERS INSURANCE COMPANY OF ARIZONA, Defendant-Appellee.
• Court: Court of Appeals of New Mexico

51 P.3d 1172

132 N.M. 518

QUALITY CHIROPRACTIC, PC, Plaintiff-Appellant, v. FARMERS INSURANCE COMPANY OF ARIZONA, Defendant-Appellee.

No. 22,439.

Court of Appeals of New Mexico.

June 14, 2002.

Alexander A. Wold, Jr. Alexander Wold & Associates, P.C. Albuquerque, NM, for Appellant.

Amina Quargnali-Linsley Miller, Stratvert & Torgerson, P.A. Albuquerque, NM, for Appellee.

OPINION

PICKARD, Judge.

{1} Plaintiff, a chiropractic clinic, provided treatment to a patient who suffered injuries in a car accident. The patient signed a document granting Plaintiff an "assignment and lien" in any proceeds that he received from claims arising out of the accident. The patient later reached a settlement agreement with the driver and Defendant, the driver's insurer, without providing for payment to Plaintiff. Plaintiff brought suit against Defendant, seeking to enforce its assignment rights in the proceeds of the settlement. The district court granted Defendant's motion for summary judgment. Plaintiff urges us to allow an injured accident victim to assign the proceeds of any judgment or settlement from a personal injury claim and to enforce such assignment against an insurance company that has already paid the victim. We decline to do so, and we therefore affirm the judgment of the district court.

FACTS

{2} The patient was involved in a collision with another driver. He did not have insurance and could not afford to pay for medical treatment. When he sought treatment from Plaintiff, he signed a document titled "Irrevocable Lien and Assignment." The document contained the following language:

I hereby irrevocably authorize and direct any person or entity who is or may become obligated to pay money to me or to pay money on my behalf as a result of any claims arising from the above accident (including my attorney, my insurance company, and any other insurance company) to pay directly to Quality Chiropractic, PC from the proceeds of any settlement, judgment or verdict arising from my claims such sums as may be due and owing to Quality Chiropractic, PC for medical goods and services provided to me as a result of this accident, and to withhold such sums from payment of any settlement, judgment or verdict to me. I hereby further give a lien and assignment on my claims to Quality Chiropractic, PC against any and all proceeds of any settlement, judgment, or verdict.

I fully understand that I am directly and fully responsible to Quality Chiropractic, PC for all medical bills submitted by Quality Chiropractic, PC for goods and services provided to me and that this agreement is made solely for the additional protection of Quality Chiropractic, PC. In consideration for this agreement, Quality Chiropractic, PC agrees to await full payment on its bills, and to provide medical information about my treatment and condition to me and my attorney. I further understand the payment of my bills is not contingent on my recovery of any settlement, judgment, or verdict on my claims.

{3} Plaintiff twice sent a copy of the document to Defendant. It also sent notes and bills to Defendant every two weeks updating the patient's treatment progress. The final bill reflected $1,388.10 in charges. The patient met with Defendant to settle his claim against the other driver. When Defendant asked about Plaintiff's bills, the patient indicated that he would pay Plaintiff out of the settlement funds. Defendant and the patient agreed to settle the claim for $2,800. The patient never paid Plaintiff for its services.

{4} Plaintiff filed a complaint against Defendant in district court, claiming that Defendant had an obligation to honor the written assignment. Plaintiff and Defendant filed cross-motions for summary judgment. The district court denied Plaintiff's motion and granted summary judgment in favor of Defendant, and Plaintiff appealed to this Court.

DISCUSSION

{5} The question on appeal is whether an assignment of the proceeds from a personal injury claim is enforceable in New Mexico against a third-party obligor. Summary judgment is appropriate when there are no genuine issues of material fact and the movant is entitled to judgment as a matter of law. Self v. United Parcel Serv., Inc., 1998-NMSC-046, ¶ 6, 126 N.M. 396, 970 P.2d 582. We review questions of law de novo. Id.

{6} "An `assignment' is a transfer of property or some other right from one person (the `assignor') to another (the `assignee')...." 6 Am.Jur.2d Assignments § 1 (1999); see Benton v. Albuquerque Nat'l Bank, 103 N.M. 5, 10, 701 P.2d 1025, 1030 (Ct.App.1985)

. A creditor can assign its interest in an existing debt owed to it. 6 Am.Jur.2d Assignments § 33 (1999); see Time Fin. Corp. v. Johnson Trucking Co., 23 Utah 2d 115, 458 P.2d 873, 875 (Utah 1969). The debtor, or obligor, must then pay the debt to the assignee, not the assignor. 6 Am.Jur.2d Assignments § 140 (1999). This is routinely done with loans or credit card debt that is transferred from one bank to another. Generally, the consent of the obligor is not required. Restatement (Second) of Contracts § 280 cmt. d; § 323 cmt. a (1981); 6 Am.Jur.2d Assignments § 20 (1999). An obligor with notice of an assignment is required to pay the assignee. Romero v. Earl, 111 N.M. 789, 790, 810 P.2d 808, 809 (1991). After receiving notice of the assignment, the obligor cannot lawfully pay the amount assigned either to the assignor or to its other creditors, and if the obligor does make such a payment, it does so at its peril, because the assignee may enforce its rights against the obligor directly. See Herzog v. Irace, 594 A.2d 1106, 1108 (Me.1991).

{7} Plaintiff also describes its purported interest in the patient's settlement proceeds as a "medical lien." An assignment creates an equitable lien in favor of the assignee. See Kahnt v. Jones McKeen Mercantile Co., 32 N.M. 537, 540, 260 P. 673, 674 (1927) ("Equity has ... long recognized that a debtor may make an assignment or appropriation of a particular fund which will give rise to a lien upon it in favor of his creditor."); Hernandez v. Suburban Hosp. Ass'n, Inc., 319 Md. 226, 572 A.2d 144, 148 (1990) (indicating that assignment vests equitable title in assignee). The ultimate question, however, is whether the document signed by the patient created a valid assignment. Plaintiff does not claim that it can assert a statutory or common law lien against the patient's settlement. Cf. New Mexico Hospital Liens Act, NMSA 1978, §§ 48-8-1 to-7 (1961 as amended through 1995) (authorizing hospitals to assert a lien on any future judgments when treating uninsured accident victim). As Defendant notes, the legislature did not include independent physicians and health care providers within the purview of the Hospital Liens Act. To avoid confusion, we describe Plaintiff's claim as one to enforce an assignment, not a lien.

Background

{8} In medieval times, the common law prohibited the assignment of any "chose in action." See Max Radin, Maintenance by Champerty, 24 Cal. L.Rev. 48, 54 (1935). All litigants were prohibited from assigning the rights to their cause of action. As this rule became unworkable, courts carved out exceptions, and eventually allowed assignments in commercial disputes. See Picadilly, Inc. v. Raikos, 582 N.E.2d 338, 340 (Ind.1991)

. Personal injury claims, however, remained unassignable. See Berlinski v. Ovellette, 164 Conn. 482, 325 A.2d 239, 241-42 (1973),

overruled on other grounds by Westchester Fire Ins. Co. v. Allstate Ins. Co., 236 Conn. 362, 672 A.2d 939 (1996); Restatement (Second) of Contracts § 317 cmt. c (1981); 6 Am. Jur.2d Assignments § 64 (1999). A trio of early New Mexico decisions recognized the common law rule prohibiting the assignment of personal injury claims, although none directly addressed that particular issue. See Young v. N.M. Broad. Co., 60 N.M. 475, 479, 292 P.2d 776, 779 (1956) (holding that the owner of a television repair shop could maintain a cause of action on behalf of the company after accepting an assignment of all rights in the partnership from his former business partner), criticized on other grounds by Reed v. Melnick, 81 N.M. 608, 611, 471 P.2d 178, 181 (1970); Parker v. Beasley, 40 N.M. 68, 79, 54 P.2d 687, 693-94 (1936) (holding that heirs to land could bring an action to enforce a covenant in the warranty deed); Kandelin v. Lee Moor Contracting Co., 37 N.M. 479, 490, 24 P.2d 731, 737 (1933) (analyzing employer's right of reimbursement under worker's compensation statute).

{9} One justification for the common law rule was that personal injury claims did not survive the death of the victim. See Gregory v. Lovlien, 174 Or.App. 483, 26 P.3d 180, 181-82 (2001)

(discussing historical connection between survivability and assignability); Parker, 40 N.M. at 72, 54 P.2d at 689 (same). Some jurisdictions abandoned the prohibition on the assignment of personal injury claims once their legislatures passed survivorship statutes allowing personal injury claims to descend to a personal representative. See, e.g., Wells v. Edwards Hotel & City Ry. Co., 96 Miss. 191, 50 So. 628, 629 (1909) (representing an early case); Picadilly, Inc.,

582 N.E.2d at 340-41 (containing a more modern rationale).

{10} The main concern, however, was that assignment of personal injury claims would lead to unscrupulous trafficking in litigation as a commodity. Common law courts were concerned with the practices of champerty and maintenance. "Champerty is the intermeddling of a stranger in the litigation of another, for profit, and maintenance is the financing of such intermeddling." Groce v. Fid. Gen. Ins. Co., 252 Or. 296, 448 P.2d 554, 558 (1968). Champerty was a practice somewhat akin to the modern day class action. A litigant would consolidate small land claims in order to create a larger estate. See Radin, supra, at 60-61. In exchange for fronting the costs of litigation, the lead plaintiff took an interest in any land recovered (becoming a "tenant by champart," or partial...