This summary was computer-generated without any editorial revision. It is not official, has not been checked for accuracy, and is NOT citable.
Facts
The State Investment Officer purchased 75,000 shares of Schlumberger, Inc., later discovering it was incorporated in the Netherlands Antilles, contrary to New Mexico law. The Attorney General deemed the purchase illegal, and the stock was sold at a loss of approximately $1.2 million. The state alleged that Dean Witter, its investment adviser, recommended the purchase despite knowing legal limitations. Additionally, the state sought recovery from three insurers under public employee blanket bonds for unfaithful performance by the Investment Officer (paras 2-4).
Procedural History
- District Court of Santa Fe County: Granted summary judgment in favor of the three insurers and Dean Witter, dismissing the state's claims (para 1).
Parties' Submissions
- Plaintiff-Appellant (State of New Mexico): Argued that the time-to-sue provisions in the insurance contracts violated public policy, that Dean Witter breached its contractual and fiduciary duties, and that there were material factual disputes regarding causation, negligent misrepresentation, and fraud (paras 6-7, 17-18, 30-39).
- Defendants-Appellees (Insurers): Asserted that the time-to-sue provisions were enforceable and that the state failed to file claims within the contractual period (paras 5-6, 11-14).
- Defendant-Appellee (Dean Witter): Contended that it had no duty to ensure compliance with constitutional investment restrictions, that its contract did not create a fiduciary relationship, and that the state failed to establish causation or actionable misrepresentation (paras 27-39).
Legal Issues
- Do the time-to-sue provisions in the insurance contracts violate public policy?
- Was Dean Witter liable for breach of contract, breach of fiduciary duty, negligent misrepresentation, or fraud?
- Did the state's failure to file a timely notice of appeal preclude its claims against Dean Witter?
Disposition
- The Supreme Court of New Mexico affirmed the summary judgment in favor of the insurers.
- The court reversed the summary judgment in favor of Dean Witter and remanded the case for trial (para 40).
Reasons
Per Baca J. (Sosa C.J. and Franchini J. concurring):
Time-to-Sue Provisions: The court held that the contractual time-to-sue provisions were enforceable and did not violate public policy. The state failed to demonstrate that the provisions were unconscionable or that the insurers were estopped from asserting them. The time-to-sue period began when the illegal act was discovered, not when the stock was sold (paras 6-14).
Dean Witter's Liability: The court found material factual disputes regarding Dean Witter's contractual obligations, fiduciary duties, and potential misrepresentation. It held that the contract required Dean Witter to provide lawful investment advice and that a fiduciary relationship existed due to the trust and confidence placed in the adviser. The exculpatory clause in the contract did not shield Dean Witter from liability for fraud (paras 17-39).
Notice of Appeal: The court upheld the lower court's discretion in allowing the state to file a late notice of appeal, finding the circumstances sufficiently unique to excuse the delay (paras 15-16).