TEAGUE-STREBECK MOTORS v. CHRYSLER INS., No. 18,684.

Docket NºNo. 18,684.
Citation127 N.M. 603, 985 P.2d 1183
Case DateMarch 08, 1999
CourtCourt of Appeals of New Mexico

985 P.2d 1183
127 N.M. 603

TEAGUE-STREBECK MOTORS, INC., and Sidney Strebeck, Plaintiffs-Appellees-Cross Appellants,
v.
CHRYSLER INSURANCE COMPANY, Defendant-Appellant-Cross Appellee

No. 18,684.

Court of Appeals of New Mexico.

March 8, 1999.

On Motion for Rehearing June 10, 1999.

Certiorari Denied July 27, 1999.


985 P.2d 1185
Brian P. Brack, Clovis, Ron Morgan, Shannon A. Parden, Ron Morgan, Attorney, Limited,
985 P.2d 1186
Albuquerque, for Plaintiffs-Appellees-Cross Appellants

Sarah M. Singleton, Carolyn A. Wolf, Montgomery & Andrews, P.A., Santa Fe, Corbin Hildebrandt, The Roehl Law Firm, P.C., Albuquerque, Edward D. Chapin, Gregory S. Tavill, Chapin, Fleming & Winet, San Diego, CA, for Defendant-Appellant-Cross Appellee.

Certiorari Denied, No. 25,827, July 27, 1999.

OPINION

HARTZ, Chief Judge.

{1} This is another in a seemingly endless stream of cases in which an insurance agent has promised more coverage than is provided in the policy. The insurance at issue in this case was for an automobile dealership about to be purchased from a bankrupt corporation. A fire destroyed dealership property and some customer vehicles on the premises. One matter not contested on this appeal is whether the insurer, Chrysler Insurance Company (Chrysler), is bound by the representations of its agent. But there remains a good deal to argue about. On appeal Chrysler contends that (1) the district court erred in adding Mills-Strebeck Autoplex, Inc. (Mills-Strebeck), as a plaintiff after expiration of the limitations period set forth in the insurance contract, (2) the district court erred in awarding damages for bad faith handling of the insurance claim, (3) Mills-Strebeck did not have an insurable interest in the destroyed property, and (4) the award was excessive because it did not take into account the economic interests of third parties in the property. In addition, the Plaintiffs, Teague-Strebeck Motors, Inc. (Teague-Strebeck), and Mills-Strebeck, have cross-appealed. They contend that the district court erred (1) in awarding damages based on the actual cash value of the destroyed property rather than the replacement cost; (2) in setting an inadequate post-judgment interest rate; (3) in not awarding treble damages under the Unfair Practices Act, NMSA 1978, §§ 57-12-1 to -22 (1967, as amended through 1995); and (4) in not awarding punitive damages. We affirm, except in two respects. We remand to determine whether Mills-Strebeck had an insurable interest in the dealership property and, if so, the extent of that interest. Also, we agree with Plaintiffs that a higher post-judgment interest rate should be provided for bad-faith damages.

I. BACKGROUND

{2} On May 4, 1993, Tucumcari Chevrolet-Geo, Inc., filed for protection under Chapter 11 of the United States Bankruptcy Code. In late June 1993 the president of the corporation negotiated two agreements with Sidney Strebeck, who had interests in several New Mexico automobile dealerships. Under a purchase agreement (the Purchase Agreement) Strebeck agreed to acquire the dealership "free and clear of all liens and encumbrances" for $50,000. Under a management agreement (the Management Agreement) Strebeck agreed to operate the dealership prior to closing of the Purchase Agreement. Strebeck and Steve Mills began operating the dealership at the beginning of July. They organized Mills-Strebeck to own the dealership, with Strebeck owning 75% of the stock and Mills owning 25%. Strebeck assigned to Mills-Strebeck his rights under the Purchase Agreement and the Management Agreement.

{3} On July 15, 1993, a fire destroyed almost all the structures and inventory of the dealership, except new car inventory. At that time neither Mills-Strebeck nor Strebeck personally had paid anything to Tucumcari Chevrolet-Geo. Also, no pleadings had been filed in bankruptcy court to obtain authorization of the sale of assets outside the ordinary course of business, as required by the Bankruptcy Code, 11 U.S.C. § 363 (1994). A motion to authorize the sale was not filed until July 30, 1993, two weeks after the fire. An unsecured creditor and the United States Trustee filed objections to the motion. The bankruptcy court never held a hearing on the motion nor acted upon it. Instead, the court ordered that the case be converted to a Chapter 7 proceeding, and it appointed an estate trustee. On April 25, 1994, the estate trustee filed a Report of No Distribution and Notice of Abandonment of Assets, which included the statement: "I have neither received any property nor paid any money on

985 P.2d 1187
account of this estate except exempt property[.]"

{4} Strebeck had begun his business relationship with Chrysler in 1990, when he acquired coverage through Rodell Rudel, a field underwriting and sales manager for Chrysler. Although there was no corporate link between the various Strebeck automobile dealerships, the policy listed Teague-Strebeck (a dealership owned by Strebeck and Cleve Teague) as the named insured, with the remaining dealerships listed as additional insureds under a master policy. Chrysler charged one premium for the policy, which was paid by Teague-Strebeck; Teague-Strebeck then submitted claims on behalf of itself and the other dealerships. Sometime prior to March 23, 1993, Rudel told Cleve Teague that if Strebeck acquired a new dealership, there would be full coverage for a period of up to 90 days; Teague conveyed that representation to Strebeck.

{5} After the July 1993 fire Chrysler contested the property-loss claims on the ground that Strebeck and his corporations had no insurable interest in the property. There were also disputes regarding coverage under the Garagekeepers Legal Liability (GKLL) provision of Teague-Strebeck's policy. GKLL coverage, roughly speaking, provides liability insurance with respect to customer vehicles that are damaged while being serviced at the dealership. Chrysler eventually covered claims for damages to customer vehicles, but the district court determined that Chrysler improperly delayed those payments and awarded $75,000 for injuries to the business reputation of Mills-Strebeck as a result of Chrysler's bad faith adjustment of the claims.

II. ADDING MILLS-STREBECK AS A PLAINTIFF

{6} The original complaint was filed on November 3, 1994. It named Teague-Strebeck and Strebeck individually as the plaintiffs. Mills-Strebeck did not become a party until January 8, 1997, the day before trial. The motion to amend the complaint to add Mills-Strebeck as a plaintiff had been filed two days earlier. Strebeck was dismissed as a plaintiff by the district court at the conclusion of trial testimony. Ultimately, the court entered judgment in favor of Mills-Strebeck.

{7} Chrysler contends that the district court erred in permitting the amendment adding Mills-Strebeck as a plaintiff and in concluding that the amendment related back to the filing of the original complaint. If the amendment did not relate back, according to Chrysler, Mills-Strebeck's claim is barred by the provision in the insurance policy that states: "No one may bring a legal action against us under this Coverage Part unless... [t]he action is brought within two years after the date on which the direct physical loss or damage occurred." The loss occurred more than two years before Mills-Strebeck was added as a plaintiff.

{8} We believe that the issue before us is governed by our recent decision in Crumpacker v. DeNaples, 1998-NMCA-169, 126 N.M. 288, 968 P.2d 799. Crumpacker's suit against the defendants arose out of surgery performed in 1992. In 1994 she filed for bankruptcy. The bankruptcy case closed in August 1996. In the meantime, in February 1996 Crumpacker had filed her suit against the defendants. She had never disclosed in the bankruptcy proceeding her cause of action against the defendants or the fact that she had initiated litigation. In May 1997 Crumpacker filed a motion to add the bankruptcy trustee as the real party in interest. The trial court denied the motion and granted the defendants summary judgment.

{9} We reversed, ordering the trial court to allow the amended complaint. We relied on Rule 1-017(A) NMRA 1998, the final sentence of which states:

Where it appears that an action, by reason of honest mistake, is not prosecuted in the name of the real party in interest, the court may allow a reasonable time for ratification of commencement of the action by, or joinder or substitution of, the real party in interest; and such ratification, joinder or substitution shall have the same effect as if the action had been commenced in the name of the real party in interest.

We held that Crumpacker had made an "honest mistake" within the meaning of Rule 1-017(A). Crumpacker, ¶ 28. We rejected the

985 P.2d 1188
defendants' argument that Rule 1-015(C) NMRA 1998 prohibits relation back when the new plaintiff is added after expiration of the period of limitations. See id. ¶¶ 22-37. Rule 1-015(C) reads
Relation back of amendments. Whenever the claim or defense asserted in the amended pleading arose out of the conduct, transaction or occurrence set forth or attempted to be set forth in the original pleading, the amendment relates back to the date of the original pleading. An amendment changing the party against whom a claim is asserted relates back if the foregoing provision is satisfied and, within the period provided by law for commencing the action against him, the party to be brought in by amendment:
(1) has received such notice of the institution of the action that he will not be prejudiced in maintaining his defense on the merits; and
(2) knew or should have known that, but for a mistake concerning the identity of the proper party, the action would have been brought against him.

We found inapplicable the portion of the Rule relating to new parties because it does not apply to a new plaintiff but only to a "`party against whom a claim is asserted.'" Crumpacker, ¶ 25 (quoting Rule...

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22 practice notes
  • ALLIANCE HEALTH v. NATIONAL PRESTO INDUS., No. 23,301.
    • United States
    • New Mexico Court of Appeals of New Mexico
    • March 29, 2005
    ...of negligence." (internal quotation marks and citation omitted)); Teague-Strebeck Motors, Inc. v. Chrysler Ins. Co., 1999-NMCA-109, ¶ 16, 127 N.M. 603, 985 P.2d 1183 (noting in dicta several theories of misrepresentation from which damages may arise, including promissory estoppel), overrule......
  • Two Old Hippies, LLC v. Catch the Bus, LLC, No. CIV 10–0459 JB/RLP.
    • United States
    • United States District Courts. 10th Circuit. District of New Mexico
    • August 18, 2011
    ...the intent to deceive, and in such cases triple damages would not be unwarranted.”); Teague–Strebeck Motors, Inc. v. Chrysler Ins. Co., 127 N.M. 603, 621, 985 P.2d 1183, 1201 (Ct.App.1999) (“[A]n award of treble damages under the Unfair Practices Act is discretionary. NMSA 1978, Section 57–......
  • Buke, LLC v. Cross Country Auto Sales, LLC, No. 32,559.
    • United States
    • New Mexico Court of Appeals of New Mexico
    • June 25, 2014
    ...act of an agent), abrogated on other grounds as recognized by Teague–Strebeck Motors, Inc. v. Chrysler Ins. Co., 1999–NMCA–109, 127 N.M. 603, 985 P.2d 1183; Ulibarri Landscaping Material, Inc. v. Colony Materials, Inc., 1981–NMCA–148, ¶ 15, 97 N.M. 266, 639 P.2d 75 (“One may infer affirmanc......
  • Yumukoglu v. Provident Life & Acc. Ins. Co., No. CIV. 99-1245 BBWWD.
    • United States
    • United States District Courts. 10th Circuit. District of New Mexico
    • February 2, 2001
    ...standard for punitive damages in breach of insurance cases to require an "evil motive or culpable mental state" in addition to bad faith. 127 N.M. 603, 621, 985 P.2d 1183, 1201 (N.M.Ct.App.1999). This is in contrast to the existing Uniform Jury Instruction on the availability of punitive da......
  • Request a trial to view additional results
22 cases
  • ALLIANCE HEALTH v. NATIONAL PRESTO INDUS., No. 23,301.
    • United States
    • New Mexico Court of Appeals of New Mexico
    • March 29, 2005
    ...(internal quotation marks and citation omitted)); Teague-Strebeck Motors, Inc. v. Chrysler Ins. Co., 1999-NMCA-109, ¶ 16, 127 N.M. 603, 985 P.2d 1183 (noting in dicta several theories of misrepresentation from which damages may arise, including promissory estoppel), overruled on other groun......
  • Two Old Hippies, LLC v. Catch the Bus, LLC, No. CIV 10–0459 JB/RLP.
    • United States
    • United States District Courts. 10th Circuit. District of New Mexico
    • August 18, 2011
    ...the intent to deceive, and in such cases triple damages would not be unwarranted.”); Teague–Strebeck Motors, Inc. v. Chrysler Ins. Co., 127 N.M. 603, 621, 985 P.2d 1183, 1201 (Ct.App.1999) (“[A]n award of treble damages under the Unfair Practices Act is discretionary. NMSA 1978, Section 57–......
  • Buke, LLC v. Cross Country Auto Sales, LLC, No. 32,559.
    • United States
    • New Mexico Court of Appeals of New Mexico
    • June 25, 2014
    ...act of an agent), abrogated on other grounds as recognized by Teague–Strebeck Motors, Inc. v. Chrysler Ins. Co., 1999–NMCA–109, 127 N.M. 603, 985 P.2d 1183; Ulibarri Landscaping Material, Inc. v. Colony Materials, Inc., 1981–NMCA–148, ¶ 15, 97 N.M. 266, 639 P.2d 75 (“One may infer affirmanc......
  • Yumukoglu v. Provident Life & Acc. Ins. Co., No. CIV. 99-1245 BBWWD.
    • United States
    • United States District Courts. 10th Circuit. District of New Mexico
    • February 2, 2001
    ...for punitive damages in breach of insurance cases to require an "evil motive or culpable mental state" in addition to bad faith. 127 N.M. 603, 621, 985 P.2d 1183, 1201 (N.M.Ct.App.1999). This is in contrast to the existing Uniform Jury Instruction on the availability of punitive d......
  • Request a trial to view additional results

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