Clay v. N.M. Title Loans, Inc.

Full title: Harry CLAY, individually and as the natural father of Bre Clay and Austin…

Court: Court of Appeals of New Mexico.

Date published: Sep 20, 2012


On March 5, 2010, Borrower signed a loan agreement (Agreement) with Lender in which he agreed to pay $3,177.84 for a loan of $2400. He agreed to use his 1999 Dodge Ram truck as collateral to secure the loan. The Agreement included an arbitration provision purporting to apply to “any claim, dispute or controversy between you and us that in any way arises from or relates to this Agreement or the Motor Vehicle … securing this Agreement.” Borrower did not pay back the loan when it was due on April 5, 2010. On the evening of May 21, 2010, two employees of Certified Adjusters attempted to repossess the truck on behalf of Lender. The parties dispute the details of the encounter but not the two essential facts: (1) Borrower resisted Certified Adjusters’ attempts to take the vehicle; and (2) one of Certified Adjusters’ employees, Ryan Browning, shot Borrower while Borrower’s daughter watched. As a result, Borrower is unable to walk.

Borrower filed a twelve-count complaint against Lender, Certified Adjusters, and Ryan Browning, alleging tort claims including negligence per se, negligent hiring and retention, breach of duty during ultra-hazardous activity, loss of consortium, negligent infliction of emotional distress, and breach of non-delegable duty. He also alleged a breach of contract by Lender. After providing written notice of intent to compel arbitration, Lender filed a motion and memorandum to stay litigation and compel arbitration in district court. The district court found that the arbitration provision in the Agreement was substantively unconscionable, “both as a matter of public policy and due to an impermissible ‘escape hatch’ clause” and, therefore, unenforceable. It also found, in the alternative, that the applicability of the arbitration provision to Borrower’s claims was ambiguous. Since it was ambiguous, the district court “[c]onstru[ed], as it must, this ambiguity against the drafter of the contract, [Lender, and found] that [Borrower’s] allegations do not fall within the scope of the arbitration provision.”



We affirm in part, reverse in part, and remand for further proceedings consistent with this Opinion. The district court’s ruling as to the scope of the arbitration provision is affirmed as to all claims except the breach of contract claim. With the exception of his breach of contract claim, Borrower’s claims are not subject to the arbitration provision of the Agreement because they are not within the scope of issues contemplated by the parties when they agreed to arbitrate disputes related to the Agreement and because it is against public policy to require claims so extraneous to the purpose of the Agreement to be subject to its requirements. The district court’s ruling as to the unconscionability of the “escape hatch” clause is affirmed, but we reverse the decision to strike the entirety of the arbitration provision. Instead, that clause alone is struck and the remainder of the arbitration provision is unchanged. We remand to the district court for determination of whether the nonarbitrable claims should be stayed pending resolution of the breach of contract claim.


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