Case Name: ANCHOR EQUITIES, LTD., Plaintiff-Appellant, v. PACIFIC COAST AMERICAN and James J. Kelly, Plaintiffs-Appellees, v. SUNWEST FINANCIAL SERVICES, INC., Sunwest Bank of Raton, N.A., United States Fire Insurance Co., Shirley Koenig, Title Services, Inc., Title Escrows, Inc., Alan Edward Clare, the underwriting members of Lloyd's of London, Don Arthur d/b/a Don Arthur Insurance Agency, and Dwight Tope Insurance Agency, Inc., Defendants-Appellees
Court: Supreme Court of New Mexico
Jurisdiction: New Mexico
Decision Date: 1987-05-11
Citations: 105 N.M. 751
Docket Number: No. 16672
Parties: ANCHOR EQUITIES, LTD., Plaintiff-Appellant, v. PACIFIC COAST AMERICAN and James J. Kelly, Plaintiffs-Appellees, v. SUNWEST FINANCIAL SERVICES, INC., Sunwest Bank of Raton, N.A., United States Fire Insurance Co., Shirley Koenig, Title Services, Inc., Title Escrows, Inc., Alan Edward Clare, the underwriting members of Lloyd’s of London, Don Arthur d/b/a Don Arthur Insurance Agency, and Dwight Tope Insurance Agency, Inc., Defendants-Appellees.
Judges: SCARBOROUGH, C.J., SOSA, Senior J., and RANSOM, J., concur.
Reporter: New Mexico Reports
Volume: 105
Pages: 751–755

Head Matter:
737 P.2d 532
ANCHOR EQUITIES, LTD., Plaintiff-Appellant, v. PACIFIC COAST AMERICAN and James J. Kelly, Plaintiffs-Appellees, v. SUNWEST FINANCIAL SERVICES, INC., Sunwest Bank of Raton, N.A., United States Fire Insurance Co., Shirley Koenig, Title Services, Inc., Title Escrows, Inc., Alan Edward Clare, the underwriting members of Lloyd’s of London, Don Arthur d/b/a Don Arthur Insurance Agency, and Dwight Tope Insurance Agency, Inc., Defendants-Appellees.
No. 16672.
Supreme Court of New Mexico.
May 11, 1987.
Rehearing Denied June 4, 1987.
James M. Kennedy, P.C., James M. Kenndey, Albuquerque, for appellant.
Keleher & McLeod, Robert Conklin, Albuquerque, for Don Arthur.
Montgomery & Andrews, Robert J. Mroz, Helen L. Stirling, Albuquerque, for US Fire Ins.

Opinion:
OPINION
WALTERS, Justice.
Appellee United States Fire Insurance Company (USFI) issued a comprehensive dishonesty, disappearance, and destruction policy to defendant Title Escrow, Inc. That policy, or fidelity bond, was purchased by Title Escrow in compliance with the Escrow Company Act. NMSA 1978, § 58-22-2 to 33 (Repl.Pamp.1986).
In June 1985, appellant Anchor Equities, Ltd. (Anchor) transferred $80,254.00 into Title Escrow's trust account. The purpose of the transfer was to provide permanent financing for and improvements on real estate owned by plaintiff James Kelly. (Neither Title Escrow nor Kelly is a party to this appeal.)
Anchor alleged in its complaint that the owner and sole employee of Title Escrow misappropriated and absconded with the funds which it had deposited into Title Escrow's trust account.
Without having first brought suit against Title Escrow or its owner/employee, Anchor asserted a direct cause of action against USFI as issuer of the fidelity bond. Obviously, the insured owner/employee did not, and probably would not, seek recovery on the bond for her own defalcation. USFI answered the complaint, and raised the affirmative defense of failure to state a claim upon which relief could be granted. The trial court granted USFI's motion to dismiss.
Anchor appeals and raises the following issue: Does a fidelity bond, procured by force of legislative enactment, inure to the benefit of the public so as to permit an injured party, other than the named insured, to bring a direct cause of action for damages against the bond issurer?
We hold, particularly under the circumstances of this case, that it does, and we reverse the trial court's order dismissing USFI as a party defendant.
The law governing a direct cause of action against an insurer has been addressed by this Court previously. See Lopez v. Townsend, 37 N.M. 574, 25 P.2d 809 (1933); Breeden v. Wilson, 58 N.M. 517, 273 P.2d 376 (1954); England v. New Mexico State Highway Comm'n, 91 N.M. 406, 575 P.2d 96 (1978).
In England, we articulated the following three-part test for determining whether a direct cause of action will be permitted against an insurer:
1) Was the insurance procured by force of legislative enactment?
2) Does the benefit from the purchase of the insurance coverage inure to the benefit of the public? and,
3) Is there anything in the language of the statute which negates the idea of joinder of an insurance company?
England, at 408-409, 575 P.2d at 98-99.
USFI urges under Ronnau v. Caravan Int'l Corp., 205 Kan. 154, 468 P.2d 118 (1970) (cited with approval in New Mexico Livestock Bd. v. Dose, 94 N.M. 68, 73, 607 P.2d 606, 611 (1980)), that the England test should not apply to this case because Lopez and its progeny were concerned with direct actions against or joinder of liability insurers, not of fidelity bond issuers.
Ronnau is not helpful in the present case because it did not deal with a statute mandating insurance coverage designed to protect the money or property of the public. We do not consider it significant that this is a fidelity bond since, as we stated in England, "when insurance coverage is mandated by the Legislature the only time an insurer cannot be joined as a party defendant is when the statute which requires the purchase of insurance negates the idea of such joinder." (Emphasis added.) England, 91 N.M. at 408, 575 P.2d at 98. Section 58-22-10 contains no language that would negate the idea of joinder. We see no reason why England should not control.
NMSA 1978, Section 58-22-10 (Repl.Pamp.1986), mandates that all escrow companies be "covered by an employee dishonestly bond insuring the escrow company against loss of money or negotiable securities." Therefore, the insurance that Title Escrow purchased was procured by force of legislative enactment, and the first requirement of the England test is met.
With reference to England's second requirement, USFI maintains that the legislatively-required interest to be protected by the purchase of the fidelity bond is the interest of the insured company itself from the dishonest acts of its employees so that the insured company can continue as a going concern.
We noted in Breeden that it is a "meaningless search [to determine whether the coverage inures to the benefit of the public] since the only possible legislative authority to pass such acts or purpose for passing such acts is the protection of the public." Breeden, 58 N.M. at 524, 273 P.2d at 380. With regard to fidelity insurance for escrow companies, however, the legislature clearly stated the purpose of the Escrow Company Act in Section 58-22-2, that "[i]t is the intent of the legislature that the large and growing escrow industry be supervised and regulated by the financial institutions division of the commerce and industry department in order to protect the citizens of the state.'' (Emphasis added.) This language leaves no room for doubt that the purchase of the fidelity bond inures to the benefit and protection of the public.
Finally, the third prong of the England test requires that there be nothing in the language of the statute which negates the idea of joinder of the insurance company. If the language of a statute is not specific on allowance of a direct action, "the construction placed upon the language [will be] based largely upon public policy as it is envisaged by the particular court." Breeden, at 522, 273 P.2d at 378.
Section 58-22-10 does not specifically allow a direct action against an insurer; nevertheless, the language of Section 58-22-10 does not in any way negate the joinder of the insuring company as a defendant, and the policy behind the statute, i.e., protection of the public, together with the rule of England, clearly support a direct action against an insurer.
Consequently, under the holding of England, and particularly under the circumstances of the instant case, the trial court's order dismissing USFI as a party defendant must be reversed, and the matter remanded for reinstatement of the complaint.
The costs of this appeal are assessed against USFI. SCRA 1986, 12-403.
IT IS SO ORDERED.
SCARBOROUGH, C.J., SOSA, Senior J., and RANSOM, J., concur.
STOWERS, J., dissents.