Tunis v. Country Club Estates Homeowners Associations, Inc.
| Decision Date | 07 February 2019 |
| Docket Number | No. A-1-CA-35931,A-1-CA-35931 |
| Parties | JOE TUNIS, SHIRLEY WHEELER, JOHN EWERT, and PATTY SALESSES, Plaintiffs-Appellants, v. COUNTRY CLUB ESTATES HOMEOWNERS ASSOCIATIONS, INC., Defendant-Appellee. |
| Court | Court of Appeals of New Mexico |
This memorandum opinion was not selected for publication in the New Mexico Appellate Reports. Please see Rule 12-405 NMRA for restrictions on the citation of unpublished memorandum opinions. Please also note that this electronic memorandum opinion may contain computer-generated errors or other deviations from the official paper version filed by the Court of Appeals and does not include the filing date.
APPEAL FROM THE DISTRICT COURT OF LUNA COUNTY
Scott Hulse P.C.
R. Glenn Davis
Las Cruces, NM
Henry J. Paoli
El Paso, TX
for Appellants
Cervantes Scherr Legate
K. Joseph Cervantes
Las Cruces, NM
L. Helen Bennett, P.C.
L. Helen Bennett
Albuquerque, NM
for Appellee
{1} This is the second time that this case has been appealed to this Court. See Tunis v. Country Club Estates Homeowners Ass'n Inc., 2014-NMCA-025, 318 P.3d 713 (Tunis I). In this second appeal, we address whether the district court erred in denying Plaintiffs' attorney fees incurred in pursuing their indemnification claim, sometimes called "fees on fees," and whether Plaintiffs are entitled to attorney fees on appeal. We reverse the district court's order precluding Plaintiffs' claim for attorney fees incurred in prosecuting their claim for indemnity and remand this issue to the district court for its consideration and determination of such attorney fees. In light of our holding, we also remand to the district court for its consideration and determination of Plaintiffs' attorney fees on appeal. Last, Plaintiffs' request for exemption for any potential future assessment of attorney fees imposed by Defendant is not ripe and we therefore decline to address it.
{2} Because of the complex procedural background, we first set forth that background as those previous proceedings lay the rippling foundation that has given rise to the appellate issues at hand.
{3} In December 2007 the Defendant Country Club Estates Homeowners Association (the Association) by its then-President, John Ewert, filed a complaint for declaratory judgment to determine which of the two competing boards was the duly elected board. The Association, a non-profit corporation, by its then president, Ewert, sought a declaration that the Association's governing board was the board headed by Ewert (the Ewert Board), rather than a purportedly newly elected board headed by Pamela Fletcher (the Fletcher Board). Id. ¶¶ 2, 6. The Ewert Board was unsuccessful and the Fletcher Board was determined to be the governing board. In the same action, the Fletcher Board requested attorney fees against the individual members of the Ewert Board. Id. ¶¶ 2, 7. Although the district court initially entered an order imposing personal liability on the Ewert Board, it subsequently entered an order relieving the individual members of the Ewert Board of personal liability and ordered the Association to pay the Fletcher Board's attorney fees. Id. ¶ 8. Neither party appealed this order. Id. We refer to this as the "declaratory judgment action."
{4} Following the conclusion of the declaratory judgment action, Plaintiffs, who are some of the former members of the Ewert Board, filed an action against the Association for money damages to compensate them for attorney fees theyincurred in the declaratory judgment action. Tunis I, 2014-NMCA-025, ¶ 2. Specifically, pursuant to the indemnification clause contained in the Association's bylaws, Plaintiffs sought $28,724.72 in attorney fees incurred to defend themselves against the Fletcher Board's pursuit of fees against them. Id. ¶ 9. The Association moved to dismiss Plaintiffs' complaint claiming it was barred by the doctrine of res judicata. Id. ¶ 1. The district court agreed and dismissed Plaintiffs' complaint. Id. ¶¶ 1, 14. Plaintiffs appealed.
{5} This Court in Tunis I limited its review to the interpretation and application of the indemnification provision of the bylaws, concluding there were issues of fact that defeated the Fletcher Board's motion for summary judgment. Id. ¶¶ 29, 30. This Court remanded the matter to the district court for further proceedings.
{6} On remand, Plaintiffs filed an amended complaint alleging breach of contract and promissory estoppel, and seeking indemnification for the attorney fees they incurred in defending against the attorney fees claim made by the Fletcher Board in the declaratory judgment action. Plaintiffs contended that, pursuant to the provision in the Association's bylaws, the Association must pay Plaintiffs' attorney fees incurred not only in the declaratory judgment action but also for the appeal in Tunis I and subsequent trial on remand. Following a bench trial, the district court found Plaintiffs were entitled to attorney fees incurred only in the declaratoryjudgment action totaling $28,724.72. The district court found that as of June 18, 2008 and on remand, it had entered an order confirming the declaration that the Fletcher Board members were the duly elected and governing board members of the Association and Plaintiffs were no longer board members performing as directors or officers of the Association. The district court also found that because Plaintiffs did not appeal this 2008 determination, they were no longer performing in their capacities as directors or officers of the Association; therefore, they could not be indemnified for any actions after June 18, 2008. We refer to this stage of the case as the "remand proceeding."
{7} In this appeal, Plaintiffs argue that the Association is obligated under the indemnity provision of its bylaws to indemnify them for attorney fees incurred in the declaratory judgment action, Tunis I, and the remand proceeding based on their roles as former members of the Association's Board of Directors. We agree.
{8} Plaintiffs also contend that the district court erred in failing to exempt them from any potential assessments by the Association to pay for the attorney fees owed by the Association to Plaintiffs. We conclude that the Plaintiffs' potential assessment exemption is premature. As a result, this issue is not ripe and we decline to address it.
I. Plaintiffs Can Recover Attorney Fees for Bringing Their Indemnification Claim in Tunis I and the Remand Proceeding
{9} Our review in this case is a matter of contract interpretation. In the absence of ambiguity, which the parties here do not assert, "the interpretation of language in a contract is an issue of law which we review de novo." Krieger v. Wilson Corp., 2006-NMCA-034, ¶ 12, 139 N.M. 274, 131 P.3d 661. We review the award or denial of attorney fees for an abuse of discretion. N.M. Right to Choose/NARAL v. Johnson, 1999-NMSC-028, ¶ 6, 127 N.M. 654, 986 P.2d 450.
{10} "New Mexico adheres to the so-called American rule that, absent statutory or other authority, litigants are responsible for their own attorney[] fees." Montoya v. Villa Linda Mall, Ltd, 1990-NMSC-053, ¶ 6, 110 N.M. 128, 793 P.2d 258. Likewise, in the insurance context, New Mexico adheres to the general rule that attorney fees for prosecuting indemnification claims are not recoverable. Jackson Nat'l Life Ins. Co. v. Receconi, 1992-NMSC-019, ¶¶ 51, 53, 113 N.M. 403, 827 P.2d 118. However, freedom of contract allows exceptions to these general rules if the parties so contract. See Montoya, 1990-NMSC-053, ¶ 6 (); United Wholesale Liquor Co. v. Brown-Forman Distillers Corp, 1989-NMSC-030, ¶ 14, 108 N.M. 467, 775 P.2d 233 (). NMSA 1978, Section 53-8-26 (1987) of the Nonprofit Corporation Act gives nonprofit corporations, such as the Association, the power to indemnify its officers and directors. And bylaws, such as those at issue in this case, can be used to provide such indemnification, as they are binding contracts on the association and its members. See Yedidag v. Roswell Clinic Corp., 2015-NMSC-012, ¶ 46, 346 P.3d 1136 ().
{11} Plaintiffs contend that the district court erred by precluding their claim for attorney fees incurred in prosecuting the claim for indemnity in Tunis I and the remand proceeding. In response, the Association argues that New Mexico law bars recovery of attorney fees for pursuing enforcement of indemnification. Defendant relies on Jackson National Life Insurance Co., and numerous out of state cases to support its assertion.
{12} Jackson National Life Insurance Co., however, is not helpful to Defendant. In that case, the indemnity clause in the agency agreement between the parties provided that "the agent shall indemnify the company for any expenses, costs, causes of action, and damages resulting from or growing out of any unauthorized act or transaction by him or his employees." 1992-NMSC-019, ¶ 52. Our Supreme Court stated "as a general rule, an indemnitee is entitled to recover its reasonable attorney[] fees incurred in defense of the claim indemnified (but not those incurredin establishing the right of indemnity) as part of its damages." Id. ¶ 51. Applying that rule, the court held that under the agency agreement, Jackson National Life Insurance Co., was entitled to recover from its agent reasonable costs in bringing the declaratory action, but not the costs incurred in seeking indemnification from the agent. Id. ¶ 53. The court remanded the case so the district court could "estimate as best it can the expenses for which [the agent] must indemnify Jackson [National Life...
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