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Martinez v. Martinez

Court of Appeals of New Mexico

December 29, 2016

JEFFREY MARTINEZ, Petitioner-Appellant/Cross-Appellee,
ANGELA MARTINEZ, Respondent-Appellee/Cross-Appellant.

         APPEAL FROM THE DISTRICT COURT OF SANTA FE COUNTY Matthew J. Wilson, District Judge

          The Zamora Law Firm D. Diego Zamora Santa Fe, NM Wray & Girard PC Katherine A. Wray Albuquerque, NM for Appellant

          The Okon Law Firm Christa M. Okon Santa Fe, NM for Appellee


          JONATHAN B. SUTIN, Judge

         {1} Husband Jeffrey Martinez and Wife Angela Martinez were divorced in May 2011. In the years following the divorce, the parties have engaged in a protracted and bitter dispute over alleged violations relating to court orders, spousal support, child support, property division, and attorney fees. Husband appeals (1) a contempt order entered by the district court in connection with enforcement of a spousal support award to Wife and awarding attorney fees to Wife, (2) the admission of certain evidence during the hearing on spousal support, and (3) the denial of Husband's request for additional time to file proposed findings of fact and conclusions of law and a motion to reconsider. Wife cross-appeals a grant of summary judgment denying her community property interest in settlement proceeds Husband obtained in an insurance bad faith action that alleged the mishandling of a claim involving community property insured with community funds.

         {2} We reverse and remand based on Wife's cross-appeal and hold that the district court erred in categorizing the settlement proceeds as Husband's separate property. Because our decision regarding the cross-appeal necessarily impacts the parties' respective finances, we similarly reverse the spousal support award and remand for further proceedings. Although our reversal obviates the need to address Husband's first and third issues on appeal, we address these arguments regarding certain discretionary matters for clarity on remand.


         {3} Because our opinion focuses primarily on Wife's claim that she is entitled to a share of the settlement proceeds as community property, we limit our recitation of the facts in this background section to those necessary for narrative clarity and to address the relevant issues. Additional facts will be discussed throughout as needed.

         {4} Husband filed for divorce from Wife in April 2010. In the months following Husband's filing, the parties made numerous allegations against each other. Husband alleged, among other averments, that Wife violated the temporary domestic order (1) when she took Husband's clothes to Goodwill, (2) when Wife and the parties' son allegedly assaulted Husband's parents, and (3) when Wife and their children broke a television and left it outside of the marital residence. Wife alleged, among other averments, that Husband (1) abused her and their children, (2) removed community property from the marital home while she and the children were not present, and (3) misconstrued the altercation between their son and Husband's parents and that, in fact, their son was defending himself and Wife.

         {5} During this same tumultuous time frame, in June 2010, Husband's truck, which was community property, was destroyed in a fire. Husband made a claim with Allstate Insurance Company, which was denied. Thereafter, Husband filed a bad faith claim against Allstate, see State Employees Credit Union v. Martinez and Martinez v. Allstate Insurance Co., No. D-101-CV-2011-00694, which ultimately settled on September 7, 2011.

         {6} During the course of this case, Wife had numerous attorneys and, at times, appeared pro se. When appearing pro se, Wife struggled to comply with the Rules of Evidence and Rules of Civil Procedure, and the district court attempted to explain concepts and otherwise accommodate Wife when possible. An initial merits hearing spanned four days, in part to give Wife an opportunity to review documents and consult with an attorney.

         {7} After a hearing in May 2011, the district court entered a decree of dissolution of marriage and entered an order on the distribution of community assets, community personal property, child support, and spousal support. In the order, filed in June 2011, the court addressed the marital residence, college fund accounts, certain debts and offsets, tax refunds, when the parties may respectively claim their minor son as a dependent, and a retirement account. The court took under advisement the child support and spousal support issues.

         {8} In July 2012 Wife filed a motion to impose a constructive trust on insurance proceeds and to set child and spousal support. In the motion, Wife addressed a $250, 000 insurance check from Allstate in settlement of Husband's bad faith claim and for damage to his truck. Wife argued that the truck was community property, that the settlement proceeds were community property, and that one-half of those proceeds should have been awarded to her. She sought a constructive trust for one-half of the insurance proceeds, minus attorney fees, and requested that those funds be placed in the court registry. In her motion, Wife also sought spousal and child support awards in appropriate amounts and asked that those awards be retroactive.

         {9} In response to Wife's motion, Husband argued that Wife "actively conspired with Allstate and, as a result, her conduct, in part, played a significant part in the decision by Allstate to wrongfully deny [Husband's] property damage claim under his Allstate automobile policy." Husband accused Wife of committing "deceptive actions against the community" as evidenced by a letter from Allstate to Wife regarding Husband's claim. In the letter, Allstate employee Bruce Zinzer sent Wife a copy of an inventory submitted by Husband with a note to Wife that stated, "Let me know what you think." Husband also asserted that Wife, when interviewed by Allstate's counsel regarding Husband's insurance claim, [1] stated that Husband was making a fraudulent claim for personal property damages. Husband argued that Wife's conduct was aimed at denying the community the benefit of insurance coverage under the Allstate policy, and thus she should not be rewarded with any interest in the proceeds.

         {10} Husband's arguments related to the insurance proceeds dispute rested primarily on Delph v. Potomac Insurance Co., 1980-NMSC-140, 95 N.M. 257, 620 P.2d 1282. In Delph, the husband and the wife owned a residence as community property. Id. ¶ 1. The residence was insured, and both the husband and the wife were named on the policy. Id. The wife moved out of the residence and sought a dissolution of marriage. Id. ¶ 2. The wife was granted a divorce and was awarded the residence. Id. However, prior to entry of the divorce decree, the husband intentionally set fire to the residence. Id. ¶ 3. The wife sought to recover proceeds under the insurance policy for damages caused by the fire, but the insurer refused to pay her, contending that "[the] husband's arson constituted 'fraud' by the 'insured' and that the policy coverage was vitiated by the fraud." Id. ¶ 4. The wife brought suit against the insurer, the district court granted summary judgment in favor of the insurer, and the wife appealed. Id. ¶ 5. On appeal, our Supreme Court considered "whether the intentional burning of a community residence by one spouse will bar recovery by an innocent spouse under a fire insurance policy issued to the community." Id. ¶ 6.

         {11} In resolving the question on appeal, the Court in Delph first held that the residence as well as the insurance policy were community property. Id. ¶ 9. The Court, however, noted that "New Mexico courts have segregated out the interests of spouses in community property when it has been necessary to do so in order to avoid injustice." Id. ¶ 10. Because the parties' interests were capable of being segregated, the Court held that "both logic and justice mandate[d] that the [wife] should be entitled to recover up to one-half of the policy limits in order to compensate for the damages resulting from the fire." Id. ¶ 11. The Court stated that in New Mexico a "spouse who commits a separate tort is individually liable for damages arising out of the tort and that the separate (or segregable) assets of the innocent spouse may not be reached to satisfy the liability arising out of the tort." Id. ¶ 13. In deciding whether the husband's act of arson was a "community" or "separate" tort, the Delph Court considered "whether the act in which the spouse was engaged at the time of the tort was one which was of actual or potential benefit to the community." Id. ¶ 14. According to the Court, "[i]f it was of benefit, the tort is a 'community' tort, and thus a community debt. If the activity in which the tortfeasor spouse was engaged was of no benefit to the community, the tort is a 'separate' tort and thus a separate debt." Id. Ultimately, the Court held that the husband did not engage in an act that could be of benefit to the community, and thus his responsibility for the fraud was separate. Id. While the husband's actions could void his own interest in the policy, his fraud "[did] not void the policy as to [the wife]." Id.

         {12} Husband argued that Delph controlled the issue in this case because Wife's alleged scheming with Allstate could not be construed to benefit the community. He argued that Wife had a bad motive, and her sole purpose in "surreptitiously communicating" with Allstate was to harm Husband. Husband's position was that Wife's actions voided her interest in the Allstate policy, and thus voided her interest in the settlement proceeds.

         {13} In her reply, Wife admitted that she informed Allstate of Husband's practice of forging documents, but also asserted that Husband had initially told authorities that Wife and/or the parties' sons were responsible for having damaged the truck. She argued that because neither party was ultimately found to have caused the loss to the property and because Wife did not commit a tort, Delph did not apply.

         {14} The district court issued an order on Wife's motion regarding the settlement proceeds in November 2012. The court found that the truck was a community asset but did not have sufficient information regarding whether Wife's conduct contributed to Allstate's decision to deny Husband's property damage claim. The court continued taking the matter of spousal support under advisement pending a decision regarding the Allstate proceeds. At the same time, the court stated that "[a]s a separate issue and regardless of whether [Wife] has a right to share in the Allstate proceeds, the [c]ourt is not foreclosing spousal support, pending testimony of [Wife's] treating doctors as to her physical condition and her ability to earn income."

         {15} Thereafter, in May 2013, Wife filed a motion for summary judgment on division of the Allstate settlement funds. Wife set out fifty-four statements of fact. Among those facts were the following. The truck was bought with community funds, was insured with community funds, and both Husband and Wife were named insureds. Bruce Zinzer, the Allstate employee who handled the personal property damage aspect of the claim, reached out to Wife because she was a named insured. When asked about Husband's reputation for honesty, Wife gave her "candid opinion of [Husband's] historical lack of truthfulness, based on examples from her life with [Husband]." Allstate provided Wife with Husband's inventory of items in the truck, and Wife informed Allstate that some of the items would not have been in the truck and that others did not have the value claimed by Husband. When asked by Allstate's attorney, Mark Klecan, during an examination under oath about Husband's reputation for honesty, Wife answered the question by referencing "police reports and an event involving [Husband's] lying to his probation officer." When asked for any other examples or instances of Husband's reputation for honesty or truthfulness, Wife referenced instances where Husband allegedly stole inventory from his employers. Although Klecan stated under oath that Wife's position was the primary reason for the delay in payment, Zinzer did not believe that Wife's input caused the denial of the claim. Wife also highlighted a number of other errors and omissions by Allstate in handling the claim, including Allstate's failure to hire a fire investigator, failure to independently obtain the police report, and failure to respond to Husband's attorney's letters.

         {16} Further, Wife denied playing a significant role in Allstate's denial of the claim and argued that it would be against public policy to force her to unconditionally support Husband's claims in order to be entitled to her share of the proceeds, even when she suspected Husband's claim to be fraudulent. She also argued that Allstate denied the claim because it suspected fraud based on Husband's actions and that any bad faith claims handling by Allstate was largely due to Allstate's failure to adhere to accepted claims-handling protocols in a timely manner. ...

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