Rivera v. Am. Gen. Financial Serv. Inc.

Citation259 P.3d 803,2011 -NMSC- 033,150 N.M. 398
Decision Date27 July 2011
Docket NumberNo. 32,340.,32,340.
PartiesKim RIVERA, Plaintiff–Petitioner,v.AMERICAN GENERAL FINANCIAL SERVICES, INC., a/k/a American General Finance, Inc., American Security Insurance Company, a/k/a American Security Group, Linda Callahan, and Jane Doe, Defendants–Respondents.
CourtSupreme Court of New Mexico

OPINION TEXT STARTS HERE

Martinez, Hart & Thompson, P.C., Bruce Evan Thompson, Albuquerque, NM, Public Justice, P.C., F. Paul Bland, Jr., Melanie Hirsch, Washington, DC, Treinen Law Office, Robert Dale Treinen, Albuquerque, NM, for Petitioner.Rodey, Dickason, Sloan, Akin & Robb, P.A., Charles K. Purcell, Albuquerque, NM, for Respondents.Michael B. Browde, Albuquerque, NM, Law Office of William E. Snead, William E. Snead, Albuquerque, NM, for Amicus Curiae, New Mexico Trial Lawyers Association.Modrall, Sperling, Roehl, Harris & Sisk P.A., Kenneth L. Harrigan, Albuquerque, NM, for Amici Curiae, American Financial Services Association and Consumer Bankers Association.

OPINION

DANIELS, Chief Justice.

{1} We granted certiorari in this case to review a Court of Appeals opinion upholding a district court's order compelling arbitration of Petitioner Kim Rivera's claims against a title loan lender, American General Financial Services, Inc., and its affiliated insurance agency, American Security Insurance Company. We base our reversal of those decisions on our holding that the arbitration provisions in the title loan contract cannot be enforced because the involvement of the now-unavailable National Arbitration Forum (NAF) to arbitrate contract disputes was an integral requirement of the parties' agreement. Although no longer technically necessary to our disposition of this appeal, we correct the analysis in the published opinion of the Court of Appeals that imposes an overly narrow construction on New Mexico's unconscionability jurisprudence and misapplies this Court's holding in Cordova v. World Finance Corp. of N.M., 2009–NMSC–021, 146 N.M. 256, 208 P.3d 901.

I. BACKGROUND

{2} On August 15, 2000, Rivera obtained a car title loan from American General in the amount of $6,517 in cash plus $1,931 in life, disability, and unemployment insurance premiums. As collateral, Rivera gave American General the title to her 1995 truck, which had a value of $15,500 at the time.

{3} The form title loan contract used by American General is three pages long. The first page includes the particularized data about Rivera's loan, including figures for payments, interest, and principal, inserted in preprinted blanks. Preprinted language at the bottom of the page explicitly requires that “ARBITRATION WILL BE CONDUCTED PURSUANT TO THE RULES OF THE [NAF].” Page two includes nine preprinted provisions, including repayment rules, default provisions, and a requirement that the borrower must maintain physical damage insurance on the collateral. Page three, titled “ARBITRATION PROVISIONS,” specifies again that [a]rbitration will be conducted under the rules and procedures of the [NAF] or successor organization” and provides additional arbitration rules and procedures. Page three also details claims covered by and excluded from the arbitration agreement. The binding arbitration agreement encompassed “any and all claims” that Rivera could conceivably have against American General, including,

without limitation, all claims and disputes arising out of, in connection with, or relating to [Rivera's] loan from Lender today or any previous loan from Lender (including all amendments, modifications and refinancings); any previous retail installment sales contract or loan assigned to Lender; all documents, actions, or omissions relating to this or any previous loan or retail installment sales contract; whether the claim or dispute must be arbitrated; the validity of the Arbitration Provisions, [Rivera's] understanding of them, or any defenses as to the enforceability of the Loan Agreement or the Arbitration Provisions; any negotiations between [Rivera] and lender; any claim or dispute based on the closing, servicing, collection, or enforcement of any transaction covered by the Arbitration Provisions; any claim or dispute based on an allegation of fraud or misrepresentation; any claim or dispute based on or arising under any federal or state statute or rule; any claim or dispute based on a contract or an alleged tort; and any claim for injunctive or equitable relief.

Although the arbitration provisions require Rivera to arbitrate any claims she may have against American General, the arbitration provisions exempt from binding arbitration certain claims that the Lender might have against Rivera:

[Rivera] cannot elect to arbitrate Lender's self-help or judicial remedies including, without limitation, repossession or foreclosure, with respect to any property that secures any transaction described under the definition of “Covered Claims.” In the event of a default under those transactions, Lender can enforce its rights to [Rivera's] property in court or as otherwise provided by law, and [Rivera] cannot require that Lender's actions be arbitrated.

{4} Because Rivera did not provide American General with proof of physical damage insurance, American General obtained from its own affiliate, American Security, twelve months of “creditor-placed insurance” for Rivera's truck and added an additional $2,197 insurance premium to the balance of the loan. The insurance policy covered direct and accidental loss of or damage to the truck. In the case of loss or damage, the insurance contract stated that American Security would, subject to a deductible, pay the lesser of (1) the cost of repairing or replacing the truck, (2) the unpaid balance of Rivera's loan, or (3) the actual cash value of the truck immediately prior to the loss or damage.

{5} According to Rivera's district court complaint, after an accident in 2000 that left her truck unusable, neither American General nor American Security ever adjusted the claim, even though Rivera immediately made a claim for the loss of her truck, personally went to American General's office multiple times, and filled out several claim forms and proof-of-loss forms.

{6} Rivera alleged that American General continued to send her monthly billing statements and that she continued to submit payments. When Rivera finally defaulted on the loan, American General notified credit reporting bureaus of her delinquency and hired a law firm to recover the remaining debt from her. Although Rivera never repaid the loan in full, in August 2004, nearly four years after her truck was destroyed, American General mailed the truck title back to Rivera in an unmarked envelope without any cover letter or explanation.

{7} In September 2006, Rivera filed suit against Defendants American General and American Security in the Second Judicial District Court, alleging breach of contract, breach of the covenant of good faith and fair dealing, insurance bad faith, breach of fiduciary duty, fraud, constructive fraud, and violations of statutory protections in the Insurance Practices Act, the Unfair Trade Practices Act, and the federal Fair Credit Reporting Act. Defendants removed the case to the United States District Court and filed a motion to compel arbitration. After Rivera voluntarily dismissed her only federal claim, the federal court remanded the case back to state court. In April 2008, the Second Judicial District Court granted Defendants' motions to compel arbitration and stay the judicial proceedings.

{8} Rivera appealed the order compelling arbitration to the Court of Appeals, which rejected her contentions that (1) the arbitration clause was substantively unconscionable, (2) the arbitration clause was procedurally unconscionable, (3) American General's promise to arbitrate was illusory, (4) equitable relief was inappropriate because of American General's unclean hands, and (5) American Security, which was neither a party to nor mentioned in the arbitration agreement, had no right as a third-party beneficiary to enforce the arbitration provisions. Rivera v. Am. Gen. Fin. Servs., Inc., 2010–NMCA–046, ¶¶ 1, 6, 10, 16, 19–20, 148 N.M. 784, 242 P.3d 351.

{9} Rivera also raised a new issue before the Court of Appeals in a motion for rehearing. After this case had been submitted to the Court of Appeals, the NAF, in response to a lawsuit filed by the Minnesota Attorney General challenging NAF's suspect ties to the consumer loan and debt collection industries, stipulated to a consent judgment in which the NAF agreed not to administer, process or [i]n any manner participate” in any arbitration of consumer disputes after July 24, 2009. Rivera argued that the NAF's unavailability rendered the arbitration provisions in American General's form title loan contract unenforceable. The Court of Appeals denied the motion for reconsideration.

{10} Rivera argues in this Court that the arbitration provisions are unenforceable because (1) arbitration before the NAF was integral to the agreement to arbitrate but is now impossible and (2) the arbitration agreement is unconscionable under Cordova, 2009–NMSC–021, 146 N.M. 256, 208 P.3d 901. In addition to opposing Rivera's arguments on their merits, Defendants make a procedural claim that her petition for writ of certiorari was untimely. We (1) reject Defendants' untimeliness arguments, (2) hold on the merits that the arbitration provisions are unenforceable because of the unavailability of the NAF to perform as contemplated in the parties' agreement, and (3) correct the Court of Appeals' overly narrow construction of our holding in Cordova.

II. DISCUSSIONA. Rivera's Certiorari Petition Was Timely Filed.

{11} Defendants take the position that we should decline to reach the merits of Rivera's appeal because she arguably was late in filing her petition for writ of certiorari. The time limits for filing a petition for writ of certiorari with this Court are found in Rule 12–502(B) NMRA:

The petition for writ...

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