Court Opinion

ID: 4161231
Source: CourtListenerOpinion
Date Created: 2017-04-18 22:12:52.090433+00
Date Added: 2024-06-11T14:38:18.421636
License: Public Domain

I attest to the accuracy and
                                                                      integrity of this document
                                                                        New Mexico Compilation
                                                                      Commission, Santa Fe, NM
                                                                     '00'04- 15:27:04 2017.04.13

       IN THE COURT OF APPEALS OF THE STATE OF NEW MEXICO

Opinion Number: 2017-NMCA-032

Filing Date: December 29, 2016

Docket No. 34,662

JEFFREY MARTINEZ,

       Petitioner-Appellant/Cross-Appellee,

v.

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

                                         OPINION

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

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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.

BACKGROUND

{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.

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{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

       1
          In the briefing, Wife refers to her interview as a “statement under oath.” In the
district court, the interview was referred to as an “examination under oath” or a “statement
under oath.”

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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

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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. Lastly, Wife argued that Delph did not apply because
her candor and truthfulness to Allstate is not a deliberate tort that failed to benefit the
community.

{17} Husband responded that many of Wife’s “facts” were immaterial because Zinzer
handled the claim related to the property inside of the truck, not the claim regarding damage
to the truck itself. Husband highlighted testimony from Zinzer that Zinzer believed that Wife
was “actively working with [him] to get this claim denied[.]” Husband, again relying on
Delph, argued that the settlement proceeds were not a community asset because Wife’s
wrongful conduct was intended to deny the community a benefit under the Allstate insurance
policy.

{18}    In August 2013 the district court denied Wife’s motion for summary judgment

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regarding the settlement proceeds, finding that, but for Wife’s actions, Allstate would have
had a different take on how to address the claim. It held that because of Wife’s cooperation
and statements to Allstate, Allstate chose to deny Husband’s claim that gave rise to the bad
faith action against Allstate. According to the court, a bad faith claim did not exist before
Wife’s participation, and the bad faith claim arose because of Wife’s willing participation.
Shortly afterward, in October 2013, the case was reassigned to another district court judge
who handled the case up to this appeal.

{19} Husband filed a motion for summary judgment in February 2014 on the Allstate
settlement proceeds. In support of his motion, Husband stated that the district court entered
an order denying Wife’s motion for summary judgment on division of the settlement
proceeds, and Husband specifically outlined the findings of the court. Husband again argued
that Wife’s bad actions prohibited her from claiming a portion of the settlement proceeds.
Alternatively, Husband argued that the settlement proceeds were separate property under
NMSA 1978, Section 40-3-8(A) (1990). In response, Wife did not dispute Husband’s
material facts but argued that those facts were not sufficient to give Husband unfettered
access to the funds. She incorporated by reference her arguments in her motion for summary
judgment as to why the funds should be treated as community property and again disputed
the relevance of Delph. She argued that while she “respectfully disagreed with the [court’s]
determination [on her motion for summary judgment], she did not appeal the determination
because the funds would be the only source available to satisfy a lump sum [spousal support]
award.” She also argued that, even accepting Husband’s contention that the funds were his
separate property by virtue of the court’s ruling on Wife’s motion for summary judgment as
true, the funds could and should be used in granting lump sum spousal support.

{20} During the hearing on spousal support, child support, and the allocation of the
settlement proceeds, before the judge to whom the case was reassigned, Wife’s attorney
indicated that there was no contest as to the nature of the proceeds because “[the original
judge] clearly [set] the money over to [H]usband.” She stated that, although she thought the
prior ruling on the settlement proceeds was “mind-boggling[,]” she did not appeal it because
any lump sum spousal support would “have to come from somewhere if [it was] to be made
at all.” In light of the prior ruling, Wife did not object to the proceeds being treated as
Husband’s separate property based on the expectation that she would be receiving a lump
sum spousal support payment from the proceeds. The court subsequently granted Husband’s
motion for summary judgment on the settlement proceeds essentially on the same grounds
used to deny Wife’s motion for summary judgment, adding a handwritten caveat that the
proceeds not be used pending the court’s decision on spousal support.

{21} After the court took evidence de novo from the parties on the matter of spousal
support in August 2014, the court, in November 2014, ordered that Husband pay Wife a
lump sum of $42,000 in spousal support, less amounts previously paid, plus $1,000 per
month until further order of the court. In December 2014 the district court declined to stay
its order awarding spousal support or to grant an extension for Husband to file a motion for
reconsideration and requested findings of fact and conclusions of law. In March 2015 the

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district court entered an order of contempt after granting Wife’s motion to show cause for
Husband’s failure to comply with the court’s order for spousal support. Also, in March 2015,
the court ordered Husband to pay $10,000 in attorney fees and costs in addition to the
attorney fees previously paid by Husband. This appeal followed.

DISCUSSION

I.     The Settlement Proceeds

{22} As already indicated, we begin by addressing Wife’s cross-appeal because the
designation of the settlement proceeds as separate or community property necessarily
impacts the appropriateness of the district court’s spousal support award, which should be
based in part on the parties’ relative assets and needs. See NMSA 1978, § 40-4-7(E)(2), (4),
(6), (7) (1997) (stating that when determining spousal support, the court must consider, in
relevant part, “the current and future earnings and the earning capacity of the respective
spouses[,]” “the reasonable needs of the respective spouses[,]” “the amount of the property
awarded or confirmed to the respective spouses,” and “the type and nature of the respective
spouses’ assets”).

{23} The standard of review in this case is complicated. We note that the orders from
which Wife appeals are related to summary judgment as to the Allstate settlement proceeds,
which we review de novo. See Beggs v. City of Portales, 2009-NMSC-023, ¶ 10, 146 N.M.
372, 210 P.3d 798. In general, we review the district court’s equitable distribution of assets
and liabilities for abuse of discretion. See Arnold v. Arnold, 2003-NMCA-114, ¶ 6, 134 N.M.
381, 77 P.3d 285. However, even when the appellate courts “review for an abuse of
discretion, our review of the application of the law to the facts is conducted de novo.
Accordingly, we may characterize as an abuse of discretion a discretionary decision that is
premised on a misapprehension of the law.” N.M. Right to Choose/NARAL v. Johnson, 1999-
NMSC-028, ¶ 7, 127 N.M. 654, 986 P.2d 450 (alteration, internal quotation marks, and
citations omitted). Additionally, while the district court has broad discretion to divide
community property, the threshold question of whether settlement proceeds are community
property is a question of law that we review de novo. See Arnold, 2003-NMCA-114, ¶ 6
(“[T]he threshold question of whether [the h]usband’s accumulated vacation leave and sick
leave are community property is a question of law, which we review de novo.”).

{24} As we more fully discuss later in this opinion, the district court erred as a matter of
law in misapprehending and misapplying Delph to the facts of this case and in determining
that the settlement proceeds were separate and not community property. Wife, as a co-
insured, responded to Allstate’s investigative questioning. Nothing in the record, including
the court’s findings, shows or permitted a rational, reasonable inference that in doing so
Wife acted with a malicious or otherwise tortious wrongful intent or motive to deprive the
community of a community asset.

A.     The Parties’ Arguments

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{25} We focus on Wife’s argument on cross-appeal that as a matter of law her conduct did
not deprive her of her community interest in the settlement proceeds.

{26} In arguing that insurance and community property law support her right to share in
the bad faith settlement proceeds, Wife points to case law addressing community interests
in insurance proceeds. See Harris v. Harris, 1972-NMSC-005, ¶¶ 8, 10, 83 N.M. 441, 493
P.2d 407 (holding that “the policy itself, including the right to receive the sum named therein
. . . was community property during coverture” and that “[d]ecedent[-husband], being the
owner of half of the policies, had the right to dispose of his half interest in the proceeds as
he pleased”); Hickson v. Herrmann, 1967-NMSC-083, ¶¶ 8, 18, 77 N.M. 683, 427 P.2d 36
(holding that an insurance policy on the life of the parties’ minor child bought with
community funds during the marriage, though the husband continued to make payments on
the policy after divorce, was community property and noting that while “[t]he proceeds were
not paid during marriage[,] . . . the right to the proceeds was obtained during marriage[, and
that] right was not changed and was not divided upon the divorce”); In re Miller’s Estate,
1940-NMSC-021, ¶ 12, 44 N.M. 214, 100 P.2d 908 (holding that “the proceeds of an
insurance policy obtained after marriage and payable to the estate of the husband is
community, because [it was] paid for out of the community funds”); Dydek v. Dydek, 2012-
NMCA-088, ¶¶ 42, 59, 62, 288 P.3d 872 (holding that the former wife had a sufficient
interest in the husband’s bad faith claim to justify her request for the court’s appointment of
a receiver but did not address whether a bad faith action was separate or community
property). Wife argues that “insurance law generally holds [that] insurance proceeds arising
from a policy owned by both parties belong to the parties equally.” She asserts that “because
the truck and policy insuring it were both community assets, any recovery for bad faith
claims handling likewise derived from the breach by Allstate of a contractual duty owed to
the community and should therefore be deemed a community asset.”

{27} Wife then argues that even if her communications to Allstate contributed to Allstate’s
denying payment as to the truck, she is entitled to a community property share in the
settlement funds because community property assets are divisible without regard to a
respective spouse’s fault. She relies on Medina v. Medina, 2006-NMCA-042, ¶ 13, 139 N.M.
309, 131 P.3d 696, which held that injecting “an element of moral fault into the rules
governing the distribution of community property on divorce might be inconsistent with
New Mexico’s system of no-fault divorce.” Wife also argues that Husband’s reliance on
Delph is misplaced because it is factually distinct from the present case. Specifically, she
argues that the co-insured spouse’s deliberate act of destruction in Delph is different from
her warning Allstate as to Husband’s dishonesty.

{28} In response, Husband contends the settlement funds are his separate property under
Section 40-3-8(A) but that, even if the funds are community property, community property
is subject to equitable division. He also argues that the no-fault divorce concept is unrelated
to community property division. Husband argues that the cases relied upon by
Wife—Harris, Hickson, and In re Miller’s Estate—are distinguishable from the present case
because they involved life insurance policies whose proceeds were anticipated by the

                                              8
insurance contract, as opposed to car insurance. He also argues that Dydek is inapplicable
because this Court did not decide whether the bad faith claim in that case was separate or
community property, and because, in this case, Wife actively participated with Allstate to
defeat Husband’s claim. According to Husband, Wife received her community interest in the
insurance policy (i.e., one-half the value of the vehicle), but the settlement proceeds were
separate property because the settlement was finalized after the entry of the divorce decree.

{29} As to his “equitable division” point, Husband argues that should we determine that
the Allstate proceeds are community property, equity must be taken into account, and we
must determine that, based on equitable considerations, Wife is not entitled to any part of
the beneficial resolution of the insurance claim. He relies on Delph and the equitable
underpinnings of Delph to support his assertion that to permit Wife to benefit from her
wrongdoing and receive a share of the settlement funds in any form of an award in the
divorce action would be contrary to and thwarts New Mexico public policy. He also
responds to Wife’s no-fault divorce argument by arguing that no-fault divorce is unrelated
to post-petition spousal behavior. According to Husband, Wife conflated the “fault” of the
parties in the dissolution of the marriage and the equitable fault the district court assigned
to Wife for her post-petition role in defeating Husband’s insurance claim. Husband
acknowledges that pre-divorce-petition behavior does not impact the division of community
property, but argues that Wife’s post-petition behavior should be considered in the equitable
balance for spousal support.

B.      Analysis

{30} We agree with Wife that the law regarding community property supports her
assertion that the settlement proceeds are community property. In determining whether Wife
is entitled to a portion of the settlement proceeds as community property, it is useful to begin
by establishing that the settlement proceeds are presumptively community property and that
the statutes do not support Husband’s argument that the proceeds are separate property.

{31} “Community property” is defined as “property acquired by either or both spouses
during marriage which is not separate property.” Section 40-3-8(B). “Separate property” is
defined, in relevant part, as “property acquired by either spouse before marriage or after
entry of a decree of dissolution of marriage[.]” Section 40-3-8(A)(1). In New Mexico,
“[p]roperty acquired during marriage by either husband or wife, or both, is presumed to be
community property.” NMSA 1978, § 40-3-12(A) (1973). “The party asserting that property
acquired during marriage is separate bears the burden of presenting evidence that would
rebut the presumption by a preponderance of the evidence.” Hodges v. Hodges, 1984-
NMSC-031, ¶ 6, 101 N.M. 67, 678 P.2d 695.

{32} Husband argues that, regardless of Wife’s involvement in the bad faith claim, the
settlement proceeds are separate property because he actually received the proceeds
approximately four months after the divorce decree was entered, and thus the property was
separate under Section 40-3-8(A)(1). However, Husband’s characterization of the settlement

                                               9
proceeds as separate property under the statute is inaccurate under New Mexico law. As
highlighted by Wife, insurance proceeds that are paid as a result of a policy that is
community property, where that policy was paid for with community funds, are community
property. See Russell v. Russell, 1990-NMCA-080, ¶¶ 3, 12, 111 N.M. 23, 801 P.2d 93
(holding that, in the context of the wife’s personal injury claim and recovery for medical
expenses, “the community has an interest in the proceeds of the policy as well as in any
recovery from the tortfeasor”); see also Harris, 1972-NMSC-005, ¶¶ 6, 9 (holding that “[a]n
insurance policy and rights incident thereto (including a right to the proceeds) is property”
and noting the parties’ agreement that “since the insurance policies were acquired with
community funds, they therefore became community property”); Hickson, 1967-NMSC-083,
¶¶ 3, 10, 22 (holding that the divorced wife “owned the right to receive the proceeds of [a
policy insuring the life of the parties’ minor child] as community property” even though the
minor child died after the parties were divorced, the husband was named as the first
beneficiary in the policy, and the husband paid the premiums from the policy from his
separate funds after the divorce); In re Miller’s Estate, 1940-NMSC-021, ¶ 30 (“The policy
of insurance, being acquired subsequent to marriage was unquestionably community
property. It was kept alive by the payment of the premiums with community funds, and the
proceeds resulting from such contract . . . remain as community property to be distributed
as such.”).

{33} Allstate’s alleged bad-faith-claim handling occurred while the parties were married
and impacted both parties, who undisputedly had a community interest in the truck. Thus,
the settlement proceeds are presumptively community property. With the understanding that
the settlement proceeds are presumptively community property, we turn our focus to
Husband’s position that, regardless of our interpretation of the property as community or
separate property under the statutes, the settlement proceeds are nevertheless separate under
Delph. Husband argues that, per Delph, Wife is not entitled to any portion of the settlement
proceeds because she did not act to benefit the community when she told Allstate that
Husband was dishonest. We hold that Delph is distinguishable from the present case and
does not form a basis for overcoming New Mexico’s presumption in favor of community
property. And we hold that the district court erred in denying Wife’s community property
interest in the settlement proceeds.

{34} As indicated earlier in this opinion, in Delph, the husband intentionally set fire to the
property, prior to entry of the divorce decree. 1980-NMSC-140, ¶ 3. The specific issue
presented on appeal was “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. The Court held that it was clear that both the residence and the
insurance policy were community property. Id. ¶ 9. However, the law in New Mexico also
clearly states that “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. Because the husband’s
arson could not be construed to be a benefit to the community, the responsibility for the
fraud was separate rather than community and could not be used to void the entire insurance

                                               10
policy. Id. ¶ 14.

{35} The holding in Delph cannot be used to deny Wife’s community interest in the
settlement proceeds because the circumstances here are entirely different from the
circumstances in Delph. In Delph, the Court considered the impact of an intentional tort on
an innocent spouse. In this case, there was no ruling that Wife committed an intentional tort,
or for that matter, any tort. Although the district court opined in a hearing that Wife’s actions
“may be tantamount to” the tort of interference with contractual relations, there was never
an argument or ruling that Wife actually tortiously interfered with Husband’s contract. In
fact, Husband failed to present evidence or elicit necessary findings that would support a
tortious interference with contract claim, which would require proof in relevant part that
“[t]here . . . be some voluntary conduct on the part of [Wife],” Bynum v. Bynum, 1975-
NMCA-005, ¶ 7, 87 N.M. 195, 531 P.2d 618 (internal quotation marks and citation omitted),
and that “the contract interference [was] without justification or privilege[.]” M & M Rental
Tools, Inc. v. Milchem, Inc., 1980-NMCA-072, ¶ 17, 94 N.M. 449, 612 P.2d 241 (internal
quotation marks and citation omitted); see also Lenscrafters, Inc. v. Kehoe, 2012-NMSC-
020, ¶ 40, 282 P.3d 758 (stating that a plaintiff seeking to prove tortious interference with
contract must prove that “the defendant induced the breach without justification or privilege
to do so”). There is also no finding by the district court that Wife acted “either with an
improper motive or by use of improper means[,]” as required for a tortious interference with
contract claim. Ettenson v. Burke, 2001-NMCA-003, ¶ 14, 130 N.M. 67, 17 P.3d 440. To the
contrary, the evidence presented indicated that, in expressing her opinion as to Husband’s
dishonesty, Wife was responding to questions posed by Allstate about Husband’s credibility
and reputation for honesty and truthfulness. Allstate also sent a copy of Husband’s inventory
to Wife, and she was specifically told to let Allstate know what she thought about the
inventory. She was correct to answer those questions as a co-insured and was required to
give her honest and accurate answers as an individual who was duly sworn under oath. See
NMSA 1978, § 30-25-1 (2009) (identifying “perjury” as a fourth degree felony and
consisting of “making a false statement under oath”); 14 Steven Plitt et al., Couch on
Insurance § 199:3 (3d ed. 2016) (“Most insurance policies, whether they are liability or
indemnity policies, include what is commonly referred to as a ‘cooperation clause.’ In
instances where a policy does not include such a clause, one has been implied in law.”
(footnotes omitted)).

{36} Additionally, despite Husband’s assertions that Wife’s accusations were false, there
was no evidence or finding by the district court that her responses to Allstate’s questions
were dishonest or inaccurate. There is no evidence in the record that Wife volunteered
information that was harmful to Husband before she was asked to give information, as a co-
insured. There is no evidence from which the district court could reasonably infer, find, or
conclude that Wife did anything more than cooperate, as she was required to do, or that she
gave information beyond the information required in response to Allstate’s questions in
connection with its investigation of possible fraud.

{37}    Although Husband argued to the district court that Wife “actively conspired with

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Allstate[,]” that her conduct was aimed at getting Husband’s claim denied, and that she had
a bad motive, the district court issued no findings as to Wife’s motive. There was nothing
in the record, aside from Allstate’s speculation, to affirmatively establish that Wife
conspiratorially, with an improper motive, acted with an intent to deny a benefit to the
community. The district court did find that “but for” Wife’s actions, Allstate would have had
a different take on how to address the claim and that the bad faith claim arose because of
Wife’s input; however, those findings do not, on their own, prove intentional, tortious
conduct. Because there was no evidence or findings that would indicate that Wife’s conduct
was intentional and tortious, unlike in Delph, Delph is not analogous, does not apply, and
cannot be relied upon to deny Wife her community interest in the settlement proceeds.

{38} Husband essentially is asking this Court to look at Delph so broadly that any time a
spouse fails to act for the benefit of the community, that spouse’s interest in the community
property is at risk. But vague notions of wrongful conduct by a spouse cannot be the test for
determining whether a spouse’s interest in community property should be voided. Delph
applies in instances in which a spouse is proved to have intentionally and tortiously caused
damage to community property. We do not approve of an expansion of Delph which would
allow a party to generally allege that a spouse behaved badly, absent proof of an intentional
tort, and then use those allegations to effectively void the spouse’s interest in community
property. To affirm and approve of such a broad use of Delph would almost certainly, in the
oft-quoted words of former New Mexico Governor Bruce King, “open up a whole box of
Pandoras.”

{39} Because neither the statutes nor Delph provides a basis under which to deny Wife’s
community interest in the settlement proceeds, Husband has failed to overcome the
presumption in favor of community property. Hodges, 1984-NMSC-031, ¶ 6 (“The party
asserting that property acquired during marriage is separate bears the burden of presenting
evidence that would rebut the presumption by a preponderance of the evidence.”). We
therefore hold that the district court erred in denying Wife’s community share of the
settlement proceeds.

II.    Remaining Matters Within the District Court’s Discretion

{40} Because we reverse and remand on the ground that the settlement proceeds were
improperly determined to be separate property, we choose not to address Husband’s
arguments on appeal regarding spousal support and the district court’s rejection of a time
extension. As indicated earlier, because the settlement proceeds are community property and
not separate property, the relative assets of the parties are likely to be viewed differently on
remand, and the proceeds are likely to be allocated differently. Thus, the spousal support
awarded by the district court will likely need to be re-evaluated.

{41} Although we do not address Husband’s arguments regarding spousal support, for the
sake of clarity and guidance on remand, we address Husband’s arguments that (1) the district
court abused its discretion when it allowed additional, de novo proceedings after Wife failed

                                              12
to offer evidence during the initial merits hearing on spousal support; (2) the district court
abused its discretion when it admitted Dr. Amer’s testimony and when it relied on that
testimony in coming to the conclusion that Wife could not work; and (3) the district court
improperly awarded attorney fees. The parties agree that we review these points for abuse
of discretion. See Riggs v. Gardikas, 1967-NMSC-120, ¶ 8, 78 N.M. 5, 427 P.2d 890 (stating
that the district court’s decision to not re-open a case and hear additional evidence is
reviewed for abuse of discretion); Roark v. Farmers Grp., Inc., 2007-NMCA-074, ¶ 20, 142
N.M. 59, 162 P.3d 896 (recognizing that the admission of evidence is reviewed for abuse of
discretion); Garcia v. Jeantette, 2004-NMCA-004, ¶ 15, 134 N.M. 776, 82 P.3d 947 (“The
decision whether to grant or deny a request for attorney fees rests within the sound discretion
of the district court.”). An abuse of discretion occurs when “the court’s ruling exceeds the
bounds of all reason” or “is arbitrary, fanciful, or unreasonable.” Clark v. Clark, 2014-
NMCA-030, ¶ 8, 320 P.3d 991 (internal quotation marks and citation omitted).

A.      Additional Proceedings

{42} Husband argues that it was error for the district court to permit additional discovery
and take new evidence concerning Wife’s health condition more than a year after the initial
trial on the merits. Husband argues that Wife’s pro se status did not entitle her to a second
chance at offering evidence and argues that the second trial constituted an abuse of discretion
because there had been no change in circumstances relating to Wife’s health between the
first and second trials. Husband also argues that, after improperly reopening the proceedings,
the court arbitrarily refused to consider the whole record to determine spousal support.
Husband highlights statements by the judge who initially presided over the case regarding
Wife’s “signs of malingering to influence [the] court and to avoid being present at hearings
scheduled by [the] court and for which she had proper notice.” Husband argues that the
district court did not consider “all relevant factors” relating to the reopening of the evidence
as outlined in Sena v. New Mexico State Police, 1995-NMCA-003, ¶ 12, 119 N.M. 471, 892
P.2d 604, including the reasons for Wife’s failure to present or obtain the evidence at trial,
the prejudice to Husband, the delay in the proceedings, the importance of the evidence to
Wife, and whether reasons existed to deny the request for more discovery and evidence. He
argues that the court abused its discretion when it refused to listen to and incorporate the
previous record when Wife was pro se.

{43} While it is true that pro se parties are held to the same standards as represented
litigants, we conclude there was no abuse of discretion in this case. See Woodhull v. Meinel,
2009-NMCA-015, ¶ 30, 145 N.M. 533, 202 P.3d 126 (holding that pro se litigants “will not
be treated differently than litigants with counsel”). Here, the district court neither re-opened
a case per Sena, 1995-NMCA-003, ¶ 12, modified an existing award per Section 40-4-
7(B)(2)(a), nor provided a new trial as contemplated under Rule 1-059 NMRA. Here, the
original judge chose not to rule on spousal support and instead took the matter under
advisement. Thus, because spousal support had not been awarded, the newly assigned judge
could revisit the issue. Husband glosses over the fact that the district court had continuing
jurisdiction over support issues, and the court specifically declined to issue a ruling on

                                              13
support until evidence was presented from Wife’s treating doctors regarding her physical
condition and ability to earn income.

{44} Similarly, the district court did not abuse its discretion when it decided to take new
evidence and not listen to the trial that occurred in 2011. “An abuse of discretion occurs
when the ruling is clearly against the logic and effect of the facts and circumstances of the
case. We cannot say the trial court abused its discretion by its ruling unless we can
characterize it as clearly untenable or not justified by reason.” State v. Layne, 2008-NMCA-
103, ¶ 6, 144 N.M. 574, 189 P.3d 707 (internal quotation marks and citation omitted). In this
case, the judge, to whom the case was reassigned, appears to have questioned his ability to
determine the veracity of the witnesses based on a recording and informed the parties that
he would review the evidence from the beginning. Both parties were given the opportunity
to present evidence. Husband fails to show how the court’s decision is clearly untenable or
not justified by reason, and we hold that the court did not abuse its discretion.

B.     Medical Testimony

{45} Husband next argues that the testimony offered by Wife’s treating physician about
her condition and level of disability was admitted without foundation and did not support a
finding that her medical condition caused her inability to earn income. He argues that
“[e]xpert testimony founded upon mere surmise, guess[,] or conjecture is not substantial to
support a finding of fact.” Fitzgerald v. Fitzgerald, 1962-NMSC-028, ¶ 2, 70 N.M. 11, 369
P.2d 398. He then argues that, in general, “to have adequate foundation, a medical expert
must testify to a reasonable medical probability regarding causation.” In support of his
position, Husband looks to case law regarding the “reasonable degree of medical
probability” standard in negligence and workers’ compensation cases that require plaintiffs
to establish a causal connection between the defendant’s act or omission and the medical
harm. See, e.g., Alberts v. Schultz, 1999-NMSC-015, ¶ 29, 126 N.M. 807, 975 P.2d 1279;
Baer v. Regents of the Univ. of Cal., 1999-NMCA-005, ¶¶ 21-22, 126 N.M. 508, 972 P.2d
9; Medina v. Original Hamburger Stand, 1986-NMCA-107, ¶¶ 1-3, 105 N.M. 78, 728 P.2d
488. Husband generally acknowledges that lay testimony is acceptable to establish the
medical condition of a spouse in support proceedings, see Russell v. Russell, 1984-NMSC-
010, ¶¶ 7, 10, 101 N.M. 648, 687 P.2d 83, but argues that this Court should apply a
reasonable medical probability standard to a medical professional’s testimony when that
professional is offered to establish a causal link between a medical diagnosis or condition
and an inability to work. Importantly, Husband is not disputing the existence of Wife’s
medical conditions or the ability of her treating physician, Dr. Amer, to testify about those
conditions. Rather, Husband focuses on the fact that Dr. Amer did not say Wife’s medical
conditions caused her to be unable to work with a “reasonable [degree of] medical
probability.”

{46} Husband’s arguments are unconvincing. Two of Husband’s cited cases focus on
what medical experts must opine in order to establish causation in negligence cases. Alberts,
1999-NMSC-015, ¶ 29 (“If testimony is introduced to establish proximate cause, the

                                             14
evidence thus introduced must show to a reasonable degree of medical probability that the
defendant’s negligence caused the loss of the chance of a better result.”); Baer, 1999-
NMCA-005, ¶¶ 21-22 (addressing the standard in proving proximate cause in a medical
negligence case). The third case cited by Husband interprets a provision of the Workers’
Compensation Act that specifically requires that “where the defendants deny that an alleged
disability is a natural and direct result of the accident, the workman must establish that
causal connection as a medical probability by expert medical testimony.” Medina, 1986-
NMCA-107, ¶¶ 1-3 (internal quotation marks and citation omitted).

{47} In this case, neither liability based on medical negligence nor benefits under the
Workers’ Compensation Act is at issue. Here, Dr. Amer did not opine as to whether an injury
was caused by a particular act of negligence or an accident that occurred during employment.
Dr. Amer’s testimony about Wife’s functional limitations for the purposes of a spousal
support calculation is notably different from a medical expert giving an opinion about what
caused a patient’s medical decline. We decline to extend Husband’s proposed negligence
standard to instances where the testifying provider is not opining as to the cause of a party’s
injury, but rather is simply describing limitations associated with a particular patient’s illness
and treatment. The district court did not abuse its discretion when it did not apply the
reasonable medical probability standard as requested by Husband.

{48} Furthermore, although Husband argues on appeal that Dr. Amer was testifying as an
expert witness under Rule 11-702 NMRA, the nature of the testimony highlighted by
Husband suggests that in this particular case, and as to his particular statements about Wife’s
disability, Dr. Amer was testifying as a lay witness under Rule 11-701 NMRA. To lay a
foundation for the admission of Rule 11-701 testimony, the witness must be shown to have
“first-hand information” that is “rationally connected to the opinion formed.” Sanchez v.
Wiley, 1997-NMCA-105, ¶ 17, 124 N.M. 47, 946 P.2d 650. Here, Wife’s counsel elicited
testimony from Dr. Amer that he was Wife’s treating physician and was familiar with her
medical condition, history, and treatment, such that he had first-hand knowledge of those
issues. Dr. Amer was not tendered as an expert witness, and the district court only allowed
him to testify as to conditions for which he was treating Wife, despite Wife’s attempts to
elicit broader testimony. We hold that Dr. Amer’s testimony was appropriate under Rule 11-
701 and that the “reasonable medical probability” standard that applies to medical experts
in medical negligence and workers’ compensation cases does not apply.

{49} Russell, which considered non-expert testimony about a spouse’s medical situation
during support proceedings, is instructive. In Russell, the district court accepted the wife’s
testimony as to her state of health, which included a “recent history of serious medical
problems including toxic shock syndrome, respiratory failure and cardiac arrest.” 1984-
NMSC-010, ¶ 6. Our Supreme Court determined that allowing the wife’s testimony was not
an abuse of discretion because the testimony constituted appropriate non-expert testimony,
and the district court had “ample opportunity to observe and question the witness and make
a determination as to her credibility and knowledge.” Id. ¶¶ 7-10. Here, as in Russell, the
testimony offered by Wife and Dr. Amer regarding Wife’s medical conditions and disability

                                               15
was based on their perception and was helpful in determining a fact at issue. See Rule 11-701
(A), (B). While Dr. Amer did testify that he felt Wife was 100 percent disabled and could
not reliably hold down a job, that opinion was based on his knowledge about Wife’s
functional physical limitations.

C.     Attorney Fees

{50} “The decision whether to grant or deny a request for attorney fees rests within the
sound discretion of the district court.” Garcia, 2004-NMCA-004, ¶ 15. “Thus we review the
district court’s ruling on attorney fees only for an abuse of discretion.” Id. To award fees in
a domestic relations proceeding, the court must consider relevant factors presented by the
parties, including: (1) “disparity of the parties’ resources, including assets and incomes”;
(2) “prior settlement offers”; (3) “the total amount of fees and costs expended by each party,
the amount paid from community property funds, any balances due and any interim advance
of funds ordered by the court”; and (4) “success on the merits.” Rule 1-127 NMRA. “In
determining whether to award attorney fees, a showing of economic disparity, the need of
one party, and the ability of the other to pay, has been characterized as the primary test in
New Mexico.” Quintana v. Eddins, 2002-NMCA-008, ¶ 33, 131 N.M. 435, 38 P.3d 203
(internal quotation marks and citation omitted); see also Alverson v. Harris, 1997-NMCA-
024, ¶ 26, 123 N.M. 153, 935 P.2d 1165 (“The most important factor the trial court considers
in deciding whether to award attorney fees is economic disparity between the parties.”
(internal quotation marks and citation omitted)).

{51} Husband argues that the district court abused its discretion in awarding attorney fees
to Wife because the court did not consider the factors outlined in Rule 1-127. Here, there is
no doubt that there was a substantial economic disparity. Wife had minimal assets and
income. Although she initially attempted to proceed pro se, she ultimately incurred over
$41,000 in attorney fees. Husband had more income and had even more income when
considering the settlement proceeds. However, given our holding that the settlement
proceeds are community property, the disparity between the parties’ resources will likely
change, and thus the parties’ ability to pay may have changed. We therefore remand the issue
of attorney fees for further consideration. See Klinksiek v. Klinksiek, 2005-NMCA-008, ¶ 29,
136 N.M. 693, 104 P.3d 559 (“We have partially affirmed and partially reversed the district
court order. Under these circumstances, while we affirm the award of attorney fees, we hold
that it is appropriate for the district court to reconsider the amount of the attorney fees.”).

CONCLUSION

{52} The district court’s ruling regarding the insurance settlement proceeds is reversed,
and the matter is remanded for further proceedings in accordance with this opinion.

{53}   IT IS SO ORDERED.

                                               ____________________________________

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                                    JONATHAN B. SUTIN, Judge

WE CONCUR:

____________________________________
MICHAEL E. VIGIL, Chief Judge

____________________________________
LINDA M. VANZI, Judge

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