State Farm General Ins. Co. v. Clifton

• Decision Date: 18 October 1974
• Docket Number: No. 9931,9931
• Citation: 1974 NMSC 81,86 N.M. 757,527 P.2d 798
• Parties: STATE FARM GENERAL INSURANCE COMPANY, Plaintiff-Appellee, v. Doris M. CLIFTON, Defendant-Appellant.
• Court: New Mexico Supreme Court

Page 798

527 P.2d 798

86 N.M. 757

STATE FARM GENERAL INSURANCE COMPANY, Plaintiff-Appellee, v. Doris M. CLIFTON, Defendant-Appellant.

No. 9931.

Supreme Court of New Mexico.

Oct. 18, 1974.

Gallagher & Ruud, Albuquerque, for defendant-appellant

Klecan & Roach, James T. Roach, Albuquerque, for plaintiff-appellee.

OPINION

McMANUS, Chief Justice.

The plaintiff, State Farm General Insurance Company (hereinafter called 'the Company'), brought an interpleader action alleging that it was the insurer of a residence in the amount of five thousand dollars ($5,000), and requested a determination of entitlement to the proceeds of the policy between the contract sellers and the contract buyers under a real estate contract for the sale of said residence located in Albuquerque, New Mexico. The parties to the contract were Mr. and Mrs. Richard C. Clifton, as sellers, and Mr. and Mrs. Bensslow Baca, as buyers. Mrs. Clifton, then being divorced, filed a counterclaim against the Company for punitive and general damages alleging, in general, unreasonable delay in payment of the loss. The punitive claim was dismissed, and the claim for general damages proceeded to the jury.

The proceeds of the policy, in the sum of five thousand dollars ($5,000), were awarded to Mrs. Clifton.

The damaging fire occurred on April 25, 1970. The interpleader action was filed April 5, 1971. Mrs. Clifton obtained her husband's interest in the subject property by divorce decree and a quitclaim deed. The real estate contract in escrow between the Cliftons and the Bacas was terminated by default in payments. The documents recorded in the County Clerk's office in Bernalillo County on March 25, 1971, showed four parties with an interest in the property.

The appellants offer two points on appeal, the first of which reads:

'The trial court erred in granting a directed verdict.'

Appellants claim entitlement to go to the jury on a theory of breach of contract or on a tort theory for unreasonable delay in paying the proceeds of the insurance contract. As to the aspect of recovery based on breach of contract, damages recoverable under this theory are those damages contemplated by the parties at the time of making the contract. Mitchell v. Intermountain Casualty Company, 69 N.M. 150, 364 P.2d 856 (1961); Annot. 47 A.L.R.3d 314 (1973). None of the claimed damages were the natural and foreseeable consequences of the claimed breach, and, thus were not within the contemplation of the parties. Therefore, we hold that an action based on breach of contract does not lie. This leads us to decide whether or not an action in tort will lie, based on unreasonable delay by the Company in making payment. This tort, although not specifically recognized before in New Mexico, is alluded to in Mitchell, supra. In determining whether an action will lie in this instance, we rely on the guidelines set out in Mitchell, supra, where we quoted from Milledgeville Water Co. v. Fowler, 129 Ga. 111, 58 S.E. 643 (1907), stating, at 69 N.M. p. 154, at 364 P.2d p. 859:

"Mere breach of a contract cannot be converted into a tory by showing that failure to perform upon the part of the one committing the breach had resulted in great inconvenience, trouble, annoyance, and hardship to the other party to the contract.'

'Mere delay or failure of the insurer in making the repairs or disputing the extent of the insurer's obligation under its contract does not give rise to a tort action. * * *'

In the cause before us, the insurance policy was assigned to the Bacas under the real estate contract with Richard Clifton as the named mortgagee. Between August 1, 1969, and March 25, 1971, the only records available reflect that four parties had an interest in the property by virtue of the real estate contract. No change in that status was shown until the latter date, when all of the deeds in escrow were recorded. To add to the confusion, there were recorded a special warranty deed from the Bacas to the Cliftons and, as well, a warranty deed from the Cliftons to the Bacas. In addition, the quitclaim deed from Clifton to Mrs....