Charley v. Franklin Capital

1 This memorandum opinion was not selected for publication in the New Mexico Reports. Please 2 see Rule 12-405 NMRA for restrictions on the citation of unpublished memorandum opinions. 3 Please also note that this electronic memorandum opinion may contain computer-generated 4 errors or other deviations from the official paper version filed by the Court of Appeals and does 5 not include the filing date. 6 IN THE COURT OF APPEALS OF THE STATE OF NEW MEXICO 7 ANITA R. CHARLEY and RITA CHARLEY, 8 individually and on behalf of all persons 9 similarly situated, 10 Plaintiffs-Appellants, 11 v. NO. 28,876 12 FRANKLIN CAPITAL CORPORATION, 13 a Utah corporation, 14 Defendant-Appellee. 15 APPEAL FROM THE DISTRICT COURT OF BERNALILLO COUNTY 16 Ted C. Baca, District Judge 17 Offices of Feferman and Warren 18 Richard N. Feferman 19 Albuquerque, NM 20 Malakoff & Brady, P.C. 21 Michael P. Malakoff 22 Pittsburgh, PA 23 for Appellants 24 Allan L. Wainwright, P.A. 25 Allan L. Wainwright 26 Albuquerque, NM 1 Severson & Werson 2 Jan T. Chilton 3 John B. Sullivan 4 Mark D. Lonergan 5 San Francisco, CA 6 for Appellee 7 MEMORANDUM OPINION 8 CASTILLO, Judge. 9 Anita and Rita Charley (Plaintiffs), representatives in a class action lawsuit 10 against Defendant, Franklin Capital Corporation (Franklin), appeal from the district 11 court’s decision granting summary judgment in favor of Franklin on Plaintiffs’ claims 12 of breach of contract, Unfair Practices Act (UPA), NMSA 1978, Sections 57-12-1 to 13 -26 (1967, as amended through 2009) violations, and other claims. 14 I. BACKGROUND 15 Plaintiffs purchased motor vehicles from various New Mexico vehicle dealers 16 and financed those purchases through uniform retail installment contracts (RICs). 17 Franklin purchased Plaintiffs’ RICs from the vehicle dealers. 18 The RICs required Plaintiffs to maintain vehicle insurance and specified that 19 if Plaintiffs failed to comply with this condition, Franklin was permitted to purchase, 20 or force place, “such” or “similar” insurance as that which Plaintiffs were obligated [2] 1 to maintain under the RICs. The RICs provided that the cost of force-placed insurance 2 would be borne by Plaintiffs and would be added to the principal due under the RICs. 3 Plaintiffs did not obtain insurance despite having received Insurance Reminder 4 Notices (IRNs). Accordingly, Franklin force-placed “Lienholders Minimum 5 Protection Insurance” (LMPI). The LMPI coverage extended for the life of the RICs. 6 Plaintiffs failed to make installment payments and defaulted on the RICs. Their 7 vehicles were repossessed and sold at auction. Because the LMPI coverage extended 8 through the life of the RICs and Plaintiffs’ vehicles were repossessed and sold before 9 the RICs terminated, Plaintiffs were entitled to refunds for unearned premiums. 10 Franklin calculated those refunds using the Rule of 78s and deducted the refunds 11 from the outstanding principal balances. 12 On October 4, 2000, Plaintiffs filed a complaint alleging breach of contract, 13 violation of the UPA, and other claims not at issue in this appeal. Specifically, 14 Plaintiffs claimed that Franklin breached the RICs by force placing LMPI and also by 15 calculating the unearned premium refunds using the Rule of 78s. Plaintiffs alleged 16 Franklin violated the UPA by misrepresenting the type of insurance that would be 17 forced placed in the event that Plaintiffs failed to maintain insurance. In December 18 2007, Plaintiffs moved for summary judgment. Franklin filed a cross-motion for 19 summary judgment in February 2008. In July 2008, the district court issued an order [3] 1 granting Franklin’s motion for summary judgment, denying Plaintiffs’ motion for 2 summary judgment, and dismissing Plaintiffs’ case with prejudice. 3 II. DISCUSSION 4 A. Standard of Review 5 Plaintiffs appeal from the district court’s order in favor of Franklin on the 6 parties’ cross-motions for summary judgment. “Summary judgment is appropriate 7 where there are no genuine issues of material fact and the movant is entitled to 8 judgment as a matter of law.” Weise v. Washington Tru Solutions, L.L.C., [9] 2008-NMCA-121, ¶ 2 , 144 N.M. 867 , 192 P.3d 1244 (internal quotation marks and 10 citation omitted). Plaintiffs assert that “Franklin has not satisfied its burden of 11 demonstrating an absence of genuine issues of material fact.” This position conflicts 12 with the position taken by Plaintiffs in their opposition to Franklin’s cross-motion for 13 summary judgment wherein they stated that there are “few material factual disputes 14 between the parties” and requested that summary judgment be entered in their favor. 15 “[W]here the parties agree to have the trial court decide a case on cross-motions for 16 summary judgment and where neither party claims that disputed facts exist, this Court 17 will review the case as presented by the parties and decide it one way or the other.” 18 Farmington Police Officers Ass’n v. City of Farmington, 2006-NMCA-077, ¶ 33 , 139 19 N.M. 750 , 137 P.3d 1204 (Pickard, J., specially concurring in part and dissenting in [4] 1 part). 2 Moreover, Plaintiffs do not point to any issues of fact that need to be decided 3 by a fact finder. Rather, their arguments focus on the legal effect of the language in 4 the RICs. We agree with Franklin and review Plaintiffs’ claims de novo because their 5 resolution turns on the interpretation of contractual and statutory language. See Salas 6 v. Mountain States Mut. Cas. Co., 2007-NMCA-161, ¶ 8 , 143 N.M. 113 , 173 P.3d 35 7 (“Our review in this case is de novo for two reasons: the parties have no dispute about 8 the material facts, but they do dispute the legal effect of those facts; and in 9 determining the legal effect of the undisputed material facts, we must interpret and 10 give effect to the . . . contract.”), remanded, 2009-NMSC-005 , 145 N.M. 542 , 202 11 P.3d 801 . 12 B. Plaintiffs’ Arguments 13 Plaintiffs challenge the district court’s order on three grounds. First, they claim 14 that Franklin breached the RICs by force placing LMPI. Second, they assert that 15 Franklin breached the RICs by utilizing the Rule of 78s to calculate the unearned 16 premium refunds. Third, Plaintiffs argue that the district court erred in granting 17 summary judgment in Franklin’s favor as to their UPA claim because, according to 18 Plaintiffs, Franklin violated the UPA by misrepresenting the type of insurance 19 Franklin would force place in the event that Plaintiffs failed to maintain insurance. [5] 1 We address each argument in turn. 2 1. Force-placed LMPI 3 The RICs provide specific guidance as to the type of insurance Plaintiffs were 4 obligated to maintain: 5 Debtor agrees to keep the Property insured at its own expense 6 against fire, theft, transportation, collision and such other risks as Seller 7 or assignee shall designate; such insurance shall be for an amount not 8 less than the balance due under this Contract and shall be in force so long 9 as any part thereof remains unpaid; such insurance is to be placed in 10 insurance companies acceptable to Seller or assignee and loss thereon is 11 to be paid to Seller or assignee Debtor as their interests may appear. 12 Debtor hereby requests and authorizes Seller or assignee at Seller’s or 13 assignee’s option and without obligation to do so, to pay the premiums 14 either for such insurance or similar insurance protecting Seller or 15 assignee only, adding same to principal balance then owing or by an 16 advance which constitutes additional indebtedness and is secured 17 hereunder and payable in additional installments secured hereunder and 18 payable in additional installments due on this Contract. The policies 19 therefor shall be held by Seller or assignee until this Contract is fully 20 performed. 21 In addition, the RICs required Plaintiffs “to keep the motor vehicle . . . insured for its 22 full value against loss or damage and with a loss payable endorsement in our favor. 23 YOU MAY OBTAIN YOUR REQUIRED INSURANCE FROM ANY COMPANY 24 ACCEPTABLE TO US; HOWEVER, THE DEDUCTIBLE UNDER YOUR POLICY 25 CANNOT EXCEED $500.” 26 Citing this language, Plaintiffs argue that Franklin breached the RICs because 27 Franklin was not authorized to force place LMPI as it is not “such” or “similar” [6] 1 insurance as that which Plaintiffs were required to maintain under the RICs. Plaintiffs 2 claim that LMPI differed from the type of insurance they were required to maintain 3 on three grounds. 4 a. Specified perils versus comprehensive insurance 5 According to Plaintiffs, the RICs only require that they maintain “specified 6 perils insurance” and because LMPI is comprehensive coverage, it is not “such” or 7 “similar” insurance as that which they were required to maintain under the RICs. 8 Plaintiffs rely on the following language in the RICs to support their position that the 9 RICs only require that they maintain specified perils insurance, i.e., that the debtor 10 agrees to keep the property insured at its own expense against “fire, theft, 11 transportation, collision.” However, Plaintiffs fail to direct us to any authority 12 discussing specified perils insurance and similarly fail to cite any authority to support 13 their claim that this language refers to that type of insurance. See ITT Educ. Servs., 14 Inc. v. Taxation & Revenue Dep’t, 1998-NMCA-078, ¶ 10 , 125 N.M. 244 , 959 P.2d 15 969 (stating that this Court will not consider propositions that are unsupported by 16 citation to authority). 17 Additionally, Plaintiffs’ argument that this language only required them to 18 maintain specified perils insurance ignores the reality that it was not possible for 19 Plaintiffs to purchase specified perils insurance during all relevant times related to [7] 1 these proceedings. It is undisputed that the only way Plaintiffs could have fulfilled 2 their obligations to maintain insurance under the RICs was to purchase comprehensive 3 insurance. 4 Plaintiffs argue that “the practical realities of satisfying a contractual 5 obligation” should not influence the manner in which the contract is interpreted. Our 6 law holds otherwise. See Stock v. Grantham, 1998-NMCA-081, ¶ 17 , 125 N.M. 564 , [7] 964 P.2d 125 (refusing to adopt an interpretation of a contract where that 8 interpretation “would require a party to perform an act that both parties must have 9 known to be impossible at the time the contract was executed”); see also Johnson v. 10 Yates Petroleum Corp., 1999-NMCA-066, ¶ 21 , 127 N.M. 355 , 981 P.2d 288 11 (“[R]ules of contract construction prohibit an absurd interpretation of contract 12 terms[.]”). Accordingly, we agree with the district court’s legal conclusion that 13 Franklin complied with its contractual obligations by purchasing the same type of 14 insurance available for purchase by Plaintiffs. 15 Franklin contends that there is yet another ground upon which we may reject 16 Plaintiffs’ assertion that it was not authorized to force place comprehensive coverage. 17 Franklin points out that the RICs required Plaintiffs to maintain insurance “against 18 fire, theft, transportation, collision and such other risks as Seller or assignee shall 19 designate.” (Emphasis added.) According to Franklin, it designated through the IRNs [8] 1 that Plaintiffs were required to furnish comprehensive coverage. We neither accept 2 nor reject this contention. We concluded above that Franklin complied with the terms 3 of the RICs by force placing comprehensive insurance and therefore we need not 4 address whether or not Franklin specifically designated that Plaintiffs were required 5 to maintain comprehensive insurance. 6 b. $500 versus $250 deductible 7 Plaintiffs next argue that LMPI, which has a $250 deductible, is not “such” or 8 “similar” insurance as that which they were obligated to maintain under the RICs 9 because the RICs specified that Plaintiffs were only required to maintain insurance 10 with a maximum deductible of $500. We disagree. 11 The RICs specified that Plaintiffs could purchase insurance from any insurance 12 provider acceptable to Franklin provided that “THE DEDUCTIBLE UNDER YOUR 13 POLICY CANNOT EXCEED $500.” The import of this language is obvious: the 14 RICs set a maximum deductible level which specified the minimum acceptable level 15 of insurance Plaintiffs were obligated to maintain. The RICs are silent as to the 16 minimum acceptable deductible or the maximum level of insurance Plaintiffs were 17 permitted to maintain. 18 Plaintiffs interpret the fact that the RICs only set a maximum and not a 19 minimum acceptable deductible level as a constraint on the form of insurance Franklin [9] 1 was permitted to force place. Plaintiffs argue that Franklin could not force place 2 insurance with a $250 deductible because Plaintiffs were not mandated to purchase 3 this level of insurance. Plaintiffs misconstrue the authority granted to Franklin under 4 the RICs. 5 The RICs permitted Franklin to force place “such” or “similar” insurance as that 6 which Plaintiffs were obligated to maintain. Plaintiffs were obligated to maintain 7 insurance with a maximum deductible of $500. Franklin force-placed insurance with 8 a deductible of $250, an amount under the maximum deductible of $500 and therefore 9 an acceptable amount of insurance under the RICs. Consequently, we reject 10 Plaintiffs’ contention that Franklin breached the RICs by force placing LMPI because 11 the deductible under that policy was $250. 12 c. Multi-year versus annual policies 13 Finally, Plaintiffs claim that LMPI is not “such” or “similar” insurance as that 14 which they were obligated to maintain under the RICs because LMPI was a multi-year 15 policy. Plaintiffs claim that individuals seeking to purchase insurance cannot 16 purchase multi-year policies in New Mexico but may only purchase renewable annual 17 insurance policies. Therefore, according to Plaintiffs LMPI is not “such” or “similar” 18 insurance. 19 This claim appears to be based on an incorrect interpretation of the terms of the [10] 1 RICs. The RICs specified that Plaintiffs were obligated to maintain insurance “so 2 long as any part [of the balance due under the RICs] remains unpaid.” The LMPI 3 remained in force through the life of the RICs; exactly the period of time during which 4 Plaintiffs were required to maintain insurance. Whether the insurance could be 5 purchased only annually or for the life of the RIC is not the relevant measure. The 6 RIC required that the insurance remain in force during the life of the RIC, and this is 7 what the LMPI achieved. Accordingly, we reject Plaintiffs’ contention that Franklin 8 breached the RICs by force placing LMPI because it was a multi-year policy. We 9 proceed to Plaintiffs’ next argument. 10 2. The Rule of 78s 11 Plaintiffs contend that the district court erred in granting summary judgment as 12 to their claim that Franklin breached the RICs by using the Rule of 78s to calculate the 13 unearned premium refunds. We provide additional facts related to this claim. 14 When Franklin purchased the LMPI policies, it paid for those policies in full. 15 Franklin passed those costs along to Plaintiffs, charging them in full for placement of 16 the LMPI. Those policies extended through the life of the RICs. Plaintiffs defaulted 17 on their RICs before the financing period ended and their cars were repossessed and 18 sold. Therefore, Franklin was entitled to a partial refund as to the portion of the multi- 19 year LMPI policies that were no longer needed and Plaintiffs were, in turn, entitled [11] 1 to refunds from Franklin for unearned premiums. Franklin computed Plaintiffs’ 2 refunds using the Rule of 78s and deducted the amount calculated under this method 3 from the outstanding principal balances owed by each Plaintiff. 4 Plaintiffs argue that Franklin’s decision to use the Rule of 78s to calculate the 5 refunds allowed Franklin to retain a disproportionate portion of the unearned 6 premiums. Plaintiffs further claim that Franklin should have used an alternative 7 method of computation. 8 Plaintiffs concede that the RICs do not address how the refunds should have 9 been calculated. Nonetheless, they claim that no provision of the RICs authorized 10 Franklin to use the Rule of 78s, and at least one provision of the RICs expressly 11 prohibits Franklin from imposing prepayment penalties. Neither of these arguments 12 are persuasive. 13 We first address the fact that the RICs are silent as to the method for calculating 14 unearned premiums. Plaintiffs cite State v. Jade G., 2007-NMSC-010, ¶ 16 , 141 N.M. 15 284, 154 P.3d 659 , in support of their contention that Franklin could not utilize the 16 Rule of 78s to calculate the unearned premiums because the RICs did not specifically 17 allow for this method of calculation. In Jade G., our Supreme Court discussed the 18 “Children’s Code Basic Rights provision,” NMSA 1978, Section 32A-2-14 (2003). 19 Jade G., 2007-NMSC-010 , ¶ 1. The Court compared statutory language regarding [12] 1 exceptions for the admissibility of statements made by children. Id. ¶ 16. In one 2 section admissibility is allowed, but there is no mention of an exception in another 3 section. The Court presumed this omission was intentional. In the case before us, we 4 have a contract—not a statute. If we were to accept Plaintiffs’ argument, the section 5 regarding a method of calculating the reimbursement would mean Plaintiffs could 6 challenge any methodology. While the analysis in Jade G. makes sense in light of the 7 facts and statutory language in that case, we do not have the same analogy in the case 8 before us. 9 As to prepayment language, we do not see that these provisions have any 10 bearing on unearned insurance premiums or whether the Rule of 78s was an 11 appropriate way to compute Plaintiffs’ refunds. Rather, these provisions preclude 12 Franklin from imposing monetary penalties where Plaintiffs paid the RICs balances 13 in full ahead of schedule. 14 Plaintiffs also cite the Motor Vehicle Sales Finance Act (MVSFA), NMSA 15 Sections 58-19-1 through -14 (1959, as amended through 2001), and argue that two 16 provisions therein prohibit Franklin from utilizing the Rule of 78s to compute the 17 refunds. Plaintiffs cite Section 58-19-9, which authorizes use of the Rule of 78s in 18 computing refund credits where the buyer in a retail installment contract pays the debt 19 under the contract in full and claim that because the MVSFA approves use of the Rule [13] 1 of 78s in one context, the use of the Rule of 78s in any other context is disallowed. 2 This argument is premised on an overstatement of the significance of legislative 3 silence. See City of Albuquerque v. N.M. Pub. Serv. Comm’n, 115 N.M. 521 , 529, 854 4 P.2d 348 , 356 (1993) (stating that “courts should avoid giving positive legal effect to 5 legislative silence”). 6 Plaintiffs then cite Section 58-19-7(A)(1), which directs that a retail installment 7 contract “shall be completed as to all essential provisions prior to its signing by the 8 buyer” and argue that because Franklin failed to include terms allowing it to use the 9 Rule of 78s to refund unearned premiums for force-placed insurance, it was precluded 10 from utilizing this method. We reject this contention. Plaintiffs have failed to provide 11 any guidance or authority as to whether the method of calculating unearned insurance 12 premium refunds is, in fact, an essential term. See ITT Educ. Servs., Inc., [13] 1998-NMCA-078, ¶ 10 (stating that this Court will not consider propositions that are 14 unsupported by citation to authority). 15 We conclude that the district court did not err in granting summary judgment 16 in favor of Franklin as to Plaintiffs’ claim that Franklin breached the RICs by using 17 the Rule of 78s to calculate unearned premium refunds. 18 C. UPA Claims 19 Finally, Plaintiffs contend that Franklin was not entitled to summary judgment [14] 1 as to their claim that Franklin violated the UPA. The first of three elements Plaintiffs 2 must satisfy to prove a violation of the UPA is that Franklin “made an oral or written 3 statement, a visual description or a representation of any kind that was either false or 4 misleading.” Lohman v. Daimler-Chrysler Corp., 2007-NMCA-100, ¶ 5 , 142 N.M. 5 437, 166 P.3d 1091 . Plaintiffs claim that Franklin misrepresented the fact that (1) 6 they were required to buy comprehensive insurance rather than specified perils 7 insurance; (2) they were required to purchase an insurance policy with a deductible 8 of $250 rather than a $500 deductible; (3) Franklin could force place a multi-year 9 insurance policy; and (4) refunds derived from unearned premiums associated with 10 the force-placed insurance would be calculated using the Rule of 78s. 11 These alleged misrepresentations are the very arguments we addressed and 12 rejected above. Franklin was authorized under the RICs to force place comprehensive, 13 multi-year insurance with a $250 deductible and was authorized to calculate the 14 unearned premium refunds using the Rule of 78s. Accordingly, we hold that Plaintiffs 15 have failed to demonstrate that Franklin committed any misrepresentations, and we 16 therefore reject Plaintiffs’ claim that the district court erred in granting summary 17 judgment in Franklin’s favor as to Plaintiffs’ UPA claim. 18 III. CONCLUSION 19 For the foregoing reasons, we affirm. [15] 1 IT IS SO ORDERED. 2 ________________________________ 3 CELIA FOY CASTILLO, Judge 4 WE CONCUR: 5 __________________________________ 6 RODERICK T. KENNEDY, Judge 7 __________________________________ 8 ROBERT E. ROBLES, Judge