May 31, 2012 – Will Ferguson & Associates, Inc. v. Ted Gengler, No. 30,855

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IN THE COURT OF APPEALS OF THE STATE OF NEW MEXICO
Opinion Number:

Filing Date: May 31, 2012
NO. 30,855

WILL FERGUSON & ASSOCIATES, INC.
a domestic for profit corporation,

Plaintiff-A ppellee,

V.

TED GENGLER,
Defendant: A ppellant.

APPEAL FROM THE DISTRICT COURT OF BERNALILLO COUNTY
Valerie A. Huling, District J udge

Will Ferguson & Associates
Jeffrey S. Trespel
Albuquerque, NM

for Appellee

Alex Chisholm
Albuquerque, NM

for Appellant

OPINION
SUTIN, Judge.
{1} 	This is a battle between a sophisticated, experienced lawyer, Ted Gengler, who
retained Will Ferguson & Associates, Inc. (Ferguson), a sophisticated, experienced
law firm, pursuant to a contingency fee agreement, to recover insurance proceeds from
an insurer that denied Gengler’s claim for benefits under an accidental death and
dismemberment policy after his wife died. After Ferguson was retained, the insurer
paid Gengler’s claim. 	Ferguson sued Gengler for unpaid attorney fees under the
contingency fee agreement and Ferguson received a jury verdict in its favor. Gengler
appeals from the judgment on the verdict in favor of Ferguson.
{2} 	The parties differed on the applicability of an exemption statute, NMSA 1978,
§ 42-10-3 (1937). 	This statute provides an exemption that protects debtors under
certain circumstances from creditors who seek recovery of indebtedness from the
debtor’s insurance proceeds, unless the debtor has assigned the proceeds to the
creditor in writing. 	Id. 	Gengler asserts that the district court erred in failing to
determine that Ferguson was precluded under Section 42-10-3 from collecting a fee
where the agreement did not contain a specific assignment by Gengler of recovered
insurance proceeds. 	He then faults the court for its rulings, based on the court’s
interpretation of the statute, excluding evidence and refusing a tendered instruction.

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We hold that the district court did not err in any regard, and we affirm the judgment
on the jury verdict.
BACKGROUND
{3} 	Gengler’s wife died from a gunshot wound to her chest. Gengler sought life
insurance proceeds from the standard life insurance policy from Prudential Life
Insurance Company (Prudential), which Prudential paid. Prudential refused to pay
Gengler under the accidental death and dismemberment policy (the policy) based on
an exclusion for self-inflicted wounds and intoxication. Gengler hired Ferguson to
represent him in an unfair practices case against Prudential. The parties entered into
a contingency fee agreement. The agreement required Gengler to pay a contingency
fee to Ferguson of one-third of amounts recovered upon achievement of a settlement
and recovery of insurance proceeds. 	After Ferguson performed some service on
Gengler’s behalf, Prudential settled in the amount of the entirety of the policy, plus
interest.
{4} 	When Gengler refused to pay Ferguson’s fees and costs, Ferguson filed the
present action asserting breach of contract. Gengler counterclaimed. A jury returned
a verdict of $14,731.85 in favor of Ferguson and awarded nothing to Gengler on his
counterclaim. The district court’s judgment for Ferguson included the language that
Ferguson “is entitled to recover its costs as provided by law.” Gengler appealed.

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DISCUSSION
{5} 	Section 42-10-3 states that payments from insurance policies:
shall in no case be liable to attachment, garnishment[,] or legal process
in favor of any creditor of the person whose life is so insured or who is
protected by said contract, or who receives or is to receive the benefit
thereof, nor shall it be subject to in any other manner to the debts of the
person whose life is so insured, or who is protected by said contract or
who receives or is to receive the benefit thereof, unless such policy,
contract[,] or deposit be taken out, made or assigned in writing for the
benefit of such creditor.
This section appears in Article 10 of Chapter 42 of the New Mexico Statutes
Annotated, which contains New Mexico’s exemption statutes. Section 42-10-3 is one
of several statutes that set out various exemptions. See NMSA 1978, §§ 42-10-1 to
-13 (1887, as amended through 2012); In re Portal, 2002-NMSC-011, ¶¶ 7, 11-12,
132 N.M. 171, 45 P.3d 891 (referring to Section 42-10-3 as providing a state statutory
exemption for an insurance payment).
Standard of Review
{6} 	We review the meaning of statutes de novo. Cooper v. Chevron U.S.A., Inc.,
2002-NMSC-020, ¶ 16, 132 N.M. 382, 49 P.3d 61. Gengler’s issues all rest on the
district court’s interpretation of Section 42-10-3. 	Gengler argues that the plain
language of Section 42-10-3 requires the conclusion that it precludes Ferguson’s
recovery.

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In interpreting a statute, a court not only looks to the plain
meaning of the language employed, but also to the object of the
legislation. Statutes are to be read in a way that facilitates their operation
and the achievement of their goals. Thus, our interpretation of statutes
must be consistent with legislative intent, and our construction must not
render a statute’s application absurd, unreasonable, or unjust. Section
42-10-3 is an exemption statute. As such, we construe its plain language
liberally. 	Liberal construction is necessary to promote the humane
policy of preventing families from becoming destitute as the result of
misfortune through common debts which generally are unforeseen.
In re Portal, 2002-NMSC-011, ¶ 5 (alterations, internal quotations marks, and
citations omitted.) 	“In interpreting a statute, a court not only looks to the plain
meaning of the language employed, but also to the object of the legislation.” Gordon
v. Gordon, 2011-NMCA-044, ¶ 8, 149 N.M. 783, 255 P.3d 361 (internal quotation
marks and citation omitted).
Section 42-10-3 Does Not Apply to Ferguson
{7} 	Gengler’s argument derives from a syllogism he has constructed.
[Major premise: 	Under] the statute[,] no creditor has a right to any
proceeds from a life insurance policy unless the creditor has an
assignment in writing from the beneficiary. 	Minor premise: 	The
Ferguson fee agreement did not contain any language of assignment
concerning the proceeds from the life insurance policy. 	Conclusion:
Ferguson has to file a complaint for bad faith and achieve some
settlement figure above the insurance proceeds to collect it[’s] one[-]
third fee.
Gengler’s syllogism fails. His premises are faulty.

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{8} 	We see no reasonable basis, and Gengler supplies none, on which to interpret
Section 42-10-3 to require attorneys to contain in a contingency fee agreement the
specific language Gengler requires of assignment of the insurance proceeds where the
client, here Gengler, retains the attorney to specifically recover those proceeds.
Gengler provides no authority for his position, and he sets out no persuasive argument
showing that the Legislature intended this exemption statute to cover attorney- fee
contracts under these circumstances. Gengler also fails to establish how, under the
circumstances here, his construction of the statute will promote the policy set out by
In re Portal.
{9} 	Interestingly, Gengler makes the statement that “[a]t the time [he] entered into
the fee agreement[,] it was his understanding that [Section] 42-10-3 required
Ferguson’s fee agreement to contain some language of assignment if Ferguson
intended to include the life insurance proceeds as a pool of funds it could collect
from.” 	Gengler somehow believes that this assists his position; this statement,
however, tends to reflect an attempt to create an illusory contract—one that would
permit Gengler to assert Section 42-10-3 to preclude Ferguson’s collection of its fee.
The district court ruled in favor of Ferguson regarding the application of Section 42-
10-3, and the jury did not agree with Gengler’s understanding of the language in the
agreement.

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{10} 	The agreement at issue gave clear and fair notice to Gengler that Ferguson was
entitled to a percentage of the recovery. 	The contingency fee agreement did not
establish any debtor/creditor relationship at the time the agreement was signed. Any
such relationship depended on the outcome at a later time. 	A debt obligation may
never have come about. Ferguson was not in creditor status until it earned its fee and
sought payment. Gengler received the insurance proceeds and transmuted them. At
no time did Ferguson attempt to attach or lien the funds recovered. Ferguson sought
in its complaint and at trial simply to recover fees for monies due and promised under
contract. Any issue in regard to whether Gengler breached the agreement or whether
the agreement (outside of Gengler’s Section 42-10-3 argument) was enforceable was
tried to a jury and decided against Gengler.
{11} 	We hold that the district court did not err in its view of the applicability of
Section 42-10-3 to Ferguson’s breach of contract claim and that the court did not err
as to the evidentiary and instruction rulings that stemmed from that view.
CONCLUSION
{12} 	We affirm.
{13} 	IT IS SO ORDERED.
__________________________________
JONATHAN B. SUTIN, Judge

WE CONCUR:

JAMES J. WECHSLER, Judge

TIMOTHY L. GARCIA, Judge