Bonilla v. Centex Constr. of New Mexico, Ltd.

ROBERTO J. BONILLA AND ALICIA BONILLA, husband and wife;

JOHN R. JR. AND NANCY J. BRENNA, husband and wife, DELINDA CHAVEZ,

an individual; SARA AND TAYLON L. CHESSER,

husband and wife; SHANNON AND ADELA C. DAVIS,

husband and wife; RONALD S. FABER, an individual;

ESEQUIEL J. AND ANGELA S. GABALDON, husband and wife;

ROBERT AND LEANE L. GURRY, husband and wife;

TOBY AND APRIL HALL, husband and wife;

MICHAEL AND DENISE A. KEMP, husband and wife;

EDWARD S. AND ROSA D. MARTINEZ, husband and wife;

JOSE AND LILIA E. MORALES, husband and wife;

KEVIN W. MUNDORFF AND CYNTHIA R. RIENHARDT,

trustee of the RIENHARDT Revocable Trust; JOSEPH G.

AND THERESA PHILLIPS, husband and wife; YAMIL R. QUINONES-RIVERA,

an individual; MANUELA D. RODRIGUEZ, an individual; JULIE E. RONGONE,

an individual; JOSEPH AND RUTH R. SAAVEDRA, husband and wife;

AUGUSTINE SANCHEZ, an individual;

RAYMOND L. SAYER, an individual; CHAD SESSLER,

an individual, JESSE T. AND LILLIAN B. SIMS, husband and wife;

LYNDON J. AND TINA THOMASON, husband and wife;

EVELYN M. THORNE, an individual; EDDIE WEATHERINGTON, an indivdual; STEPHEN R.

AND MELBA J. WHITE, husband and wife, Plaintiffs, v. CENTEX CONSTRUCTION OF NEW MEXICO, a Delaware limited liability company;

CENTEX HOMES, a Michigan corporation; CENTEX REAL ESTATE CONSTRUCTION COMPANY,

a New Mexico limited liability company;

CENTEX HOMES, a Nevada general partnership;

CENTEX REAL ESTATE CORPORATION,

a Nevada corporation; JOHN DOES I-X and their spouses;

WHITE CORPORATION I-X; BLACK PARTNERSHIP I-X;

and GRAY LIMITED LIABILITY COMPANIES I-X, Defendants,

and

CENTEX CONSTRUCTION OF NEW MEXICO,

LLC, a Delaware limited liability company;

CENTEX HOMES, a Nevada General Partnership;and CENTEX REAL ESTATE CORPORATION,a Nevada corporation, Defendants/Third-Party Plaintiffs-Appellees, v. ASPEN CONCRETE, LLC; COTTEN CONCRETE, INC.;

CUSTOM GRADING, INC.; JIM THE BUILDER, INC.;

L & S PLUMBING PARTNERSHIP, LTD.;

PREMIER CONCRETE, LLC; PRIORITY PLUMBING AND HEATING, INC.;

PYRAMID CONCRETE CONTRACTORS, INC.;

WRIGHT CONNECTION PLUMBING, LLC;

VINYARD & ASSOCIATES, INC.; CURB SOUTH, LLC;

JOHN DOES I-X and JANE DOES I-X and their spouses;

WHITE CORPORATION I-X; BLACK PARTNERSHIP I-X

and GRAY LIMITED LIABILITY CORPORATION I-X, Third-Party Subcontractor Defendants-Appellants,

and

AMERISURE INSURANCE COMPANY; BITUMINOUS CASUALTY CORPORATION;

CINCINNATI INSURANCE COMPANY; EMPLOYERS MUTUAL CASUALTY COMPANY;

FREESTONE INSURANCE COMPANY

f/k/a DALLAS NATIONAL INSURANCE COMPANY; LEXINGTON INSURANCE COMPANY;

MARYLAND CASUALTY COMPANY; MOUNTAIN STATES MUTUAL CASUALTY COMPANY;

MOUNTAIN STATES INDEMNITY COMPANY;

OHIO CASUALTY INSURANCE COMPANY;

SOUTHERN VANGUARD INSURANCE COMPANY;

DOE INSURANCE COMPANY NO. 1;

DOE INSURANCE COMPANY NO. 2; DOE INSURANCE COMPANY NO. 3, Third-Party Insurance Defendants.

No. 34,751

COURT OF APPEALS OF THE STATE OF NEW MEXICO

March 1, 2016

This memorandum opinion was not selected for publication in the New Mexico Appellate Reports. Please see Rule 12-405 NMRA for restrictions on the citation of unpublished memorandum opinions. Please also note that this electronic memorandum opinion may contain computer-generated errors or other deviations from the official paper version filed by the Court of Appeals and does not include the filing date.

APPEAL FROM THE DISTRICT COURT OF VALENCIA COUNTY

James L. Sanchez, District Judge

Carpenter & Hazlewood Delgado & Bolen, P.C.

Mark A. Holmgren

Tempe, AZ

for Plaintiffs

Michael J. Craddock

Dallas, TX

for Defendants/Third-Party Plaintiffs

Riley Shane & Keller, P.A.

Mark J. Riley

Tiffany L. Sanchez

MacDonnell Gordon

Albuquerque, NM

Law Offices of Bruce Collins

Robert Bruce Collins

Julie Koschitial

Audra Davie

Holly Rene Harvey

Albuquerque, NM

Butt, Thornton & Baehr, P.C.

Martin Diamond

Albuquerque, NM

for Third-Party Subcontractor Defendants

Doughty Alcaraz & DeGraw, P.A.

Robert M. Doughty III

Monica Sedillo

Albuquerque, NM

for Third-Party Defendant Curb South LLC

MEMORANDUM OPINION

ZAMORA, Judge.

{1} Third-party Defendant Curb South appeals the district court's order compelling Curb South to participate in arbitration proceedings. We issued a notice proposing to summarily affirm, and Curb South has filed a memorandum opposing such affirmance. We have carefully considered the arguments raised in the memorandum, but we continue to believe the district court's decision was correct, as we discuss below.

{2} In response to our notice of proposed summary disposition, Curb South makes two main arguments. First, Curb South contends Centex did not properly invoke the arbitration clause contained in the contract, and in fact waived the arbitration issue asa result of conduct engaged in during the litigation. Second, Curb South argues that the requirements of NMSA 1978, Section 44-7A-11 (2001), have not been met, and the district court therefore erred in consolidating the Centex/Curb South arbitration with a different arbitration proceeding between Centex, the Homeowner Plaintiffs, and possibly other parties.

{3} In support of the first argument Curb South contends that Centex merely indicated an intent to invoke the arbitration clause, and never actually invoked it. Curb South points out that Centex failed to demand arbitration against Curb South in its first amended complaint, even though it demanded arbitration with respect to other third-party defendants. [RP Vol. 3, 582-86] [MIO 6] Centex also omitted Curb South from a motion for arbitration filed against other parties in the case, three months after filing the first amended complaint. [RP Vol. 6, 1573-77] Thus, Curb South argues in essence that Centex waived any right to arbitration that it might have had under the parties' contract. We disagree.

{4} Centex filed its first amended complaint, bringing a third-party claim against Curb South for the first time, on June 11, 2014. [RP Vol. 3, 571] Three and one-half months later, on September 25, 2014, Centex sent a letter to Curb South, setting out the terms of the arbitration provision contained in the parties' contract and asking if Curb South would agree to arbitrate under a modified version of that provision. [RPVol. 7, 1961-62] Centex then, on November 4, 2014, filed a pleading arguing that the arbitration provision is mandatory, and stating that Centex had formally demanded mediation, a required prerequisite to arbitration under the contract's provision, and intended to "continue to follow any conditions precedent to arbitration." [RP Vol. 8, 1979-82] These actions sufficiently informed Curb South that Centex was invoking the permissive arbitration provision contained in the parties' contract.

{5} As Curb South points out, however, there is a question as to whether Centex waived its right to invoke the arbitration provision, due to its conduct during the litigation. When a party initiates or participates in litigation, as Centex did here, and only later attempts to invoke an arbitration provision, the possibility of a waiver arises and we must determine whether such a waiver has occurred. See, e.g., Am. Fed'n of State, Cty. & Mun. Emps. v. City of Albuquerque, 2013-NMCA-049, 299 P.3d 441. Our analysis begins with a presumption in favor of arbitration and against waiver; that presumption is so strong that "all doubts as to whether there is a waiver must be resolved in favor of arbitration." Id. ¶ 10 (internal quotation marks and citation omitted). The party opposing arbitration will only be granted relief if it can show it was prejudiced by the other party's actions; the type of prejudice involved normally consists of trial preparation that is undertaken due to the belief that the other party does not intend to make a demand for arbitration. Id. ¶¶ 10, 20. A primaryconsideration is the extent to which the party now seeking arbitration had already invoked the machinery of the judicial system, and in doing so provoked reliance by the other party on the fact that the case would be litigated in court rather than arbitrated. Id. ¶¶ 10-12, 17-19.

{6} The mere instigation of litigation does not automatically constitute any invocation of the judicial machinery. Id. ¶ 27; see Wood v. Millers Nat'l Ins. Co., 1981-NMSC-086, ¶ 7, 96 N.M. 525, 632 P.2d 1163. Instead, a "point of no return" is reached if the party wishing to compel arbitration, here Centex, invokes the district court's discretionary power on a question other than the arbitration issue. See Wood, 1981-NMSC-086, ¶ 7. That point may also be reached where a party extensively utilizes discovery procedures that are not available in the arbitration process, and only demands arbitration after the desired discovery has been obtained. See Bd. of Educ. Taos Mun. Schs. v. The Architects, Taos, 1985-NMSC-102, ¶ 13, 103 N.M. 462, 709 P.2d 184. Instances in which a party has been found to have waived arbitration by invoking the judicial machinery include cases in which the party unsuccessfully filed a motion to dismiss and only then demanded arbitration, see Wood, 1981-NMSC-086, ¶¶ 6-7; engaged in extensive discovery over a period of several months, when the scope of discovery would have been much more limited in arbitration, see The Architects, 1985-NMSC-102, ¶ 13; and requested a preliminary injunction andunsuccessfully litigated that request through the hearing stage, see AFSCME, 2013-NMCA-049, ¶ 19. On the other hand, where nothing of consequence occurred in the litigation prior to the demand for arbitration, and the "judicial waters had not been tested" because no hearings had been held and the case was not at issue, our Supreme Court held that arbitration had not been waived. Bernalillo Cty. Med. Ctr. Emps' Ass'n v. Cancelosi, 1978-NMSC-086, ¶¶ 7, 12, 92 N.M. 307, 587 P.2d 960.

{7} The facts of this case are much more akin to those presented by Cancelosi than to the facts of The Architects, Wood, or AFCSME. In the three-and-one-half months that passed from the time Centex brought Curb South into the case to the time it gave notice to Curb South that arbitration would be an issue between the parties, Centex filed no...