August 23, 2019- Woodmont Paseo, LLC v. New Mexico Utilities, Inc., No. A-1-CA-35611

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IN THE COURT OF APPEALS OF THE STATE OF NEW MEXICO

Court of Appeals of New Mexico
WOODMONT PASEO, LLC, . Filed Bi2si2oi8 9:00 AM
Plaintiff-Appellant, AU. ~£ eof
Mark Reynolds
v. No. A-1-CA-35611
NEW MEXICO UTILITIES, INC.,

and SOUTHWEST WATER CO.,
Defendants-Appellees,
and

ALBUQUERQUE / BERNALILLO
COUNTY WATER UTILITY
AUTHORITY, and GOVERNING
BOARD OF THE ALBUQUERQUE /
BERNALILLO COUNTY WATER
UTILITY AUTHORITY,

Defendants.

APPEAL FROM THE DISTRICT COURT OF BERNALILLO COUNTY
C. Shannon Bacon, District Judge

Hamm French, PLLC
Jason B. Hamm
Midland, TX

for Appellant

Montgomery & Andrews, P.A.
Stephen S. Hamilton

Kari E. Olson

Santa Fe, NM

for Appellees

1 	MEMORANDUM OPINION
2 BOGARDUS, Judge.
3 	{l} 	At issue in this appeal is whether Woodmont Paseo, LLC's (Woodmont)
4 claims 	against New Mexico 	Utilities, 	Inc. 	(NMUI) 	and 	its parent 	company,
5 Southwest Water Co. (SWC), are precluded by the defense ofimpossibility or by the
6 stipulated condemnation judgment (the condemnation judgment) that resulted in
7 acquisition of specified personal and real property that NMUI owned by the
8 Albuquerque Bernalillo County Water Utility Authority (WUA). For the reasons that
9 follow, we reverse the district court's order of dismissal as to NMUI. However, we
10 affirm the district court's dismissal of the claims against SWC.
11 	BACKGROUND
12 {2} 	The 	following 	facts 	are 	taken 	from 	Woodmont's 	complaint 	and 	the
13 	condemnation judgment with incorporated exhibits attached to NMUI' s motion to
14 dismiss.
15 	{3} 	On April 17, 2003, NMUI, a utility company, entered into an agreement with
16 Woodmont's predecessor (the 2003 Agreement) in which NMUI guaranteed water
17 and sanitary sewer service to dwelling units within a planned community known as
18 	The Trails in Albuquerque, New Mexico. In exchange for the services provided to
19 The Trails, Woodmont's predecessor deeded unspecified property within The Trails
20 to NMUI, constructed a regional lift station, and provided oversized system-wide
2

1 transmission and sanitary sewer lines. This agreement was subsequently amended
2 on August 1, 2007 (the 2007 Agreement).
3 {4} 	On January 19, 2007, before the parties executed the 2007 Agreement, the
4 WUA 	initiated a condemnation action against NMUI. 	NMUI 	challenged the
5 condemnation by filing a motion for summary judgment, arguing that the WUA
6 lacked the statutory authority to condemn NMUI's property. After the district court
7 denied the motion, NMUI filed an interlocutory appeal that was denied. NMUI then
8 entered into a settlement with the WUA that resulted in the condemnation judgment,
9 wherein NMUI obtained a judgment for $60,000,000 in exchange for condemnation
10 	of specified real and personal property that it owned. The district court concluded
11 	that "the WUA has the requisite authority to accomplish the acquisition and
12 condemnation contemplated here" pursuant to the Eminent Domain Code, NMSA
13 	1978, Sections 42A-1-1 to -34 (1974, as amended through 2001), and NMSA 1978,
14 	Section 	72-1-10 	(2005), 	and 	entered 	the 	order. 	Neither 	Woodmont 	nor 	its
15 	predecessors were parties to or intervened in the condemnation action, although
16 notice of the condemnation proceeding was provided by publication.
17 	{5} 	On or about April 23, 2015, approximately six years after the condemnation
18 	action was finalized, the WUA informed Woodmont that plans to deliver water
19 within Unit 3A were no longer acceptable and that "water to Unit 3A would be
20 available only with the addition of a new reservoir and associated facilities, all to be
3

1 100% developer funded." Woodmont valued the cost of this new requirement at
2 $4,000,000. Several months later, NMUI and SWC notified Woodmont that they had
3 no obligation to perform under the 2003 and 2007 Agreements and were not liable
4 for the costs of the additional facilities required by the WUA.
5 	{6} 	Woodmont then filed the complaint at issue that included claims for breach of
6 contract and for declaratory judgment against NMUI and SWC. 1 NMUI and SWC
7 did not file an answer to Woodmont' s complaint. Instead, they filed a motion to
8 dismiss pursuant to Rule 1-012(B)(6) NMRA. NMUI and SWC attached a copy of
9 the condemnation judgment to their motion. Following a hearing on the motion, the
10 district court granted NMUI and SWC's motion and dismissed the claims against
11 	them on the following grounds: (1) the defense of impossibility barred Woodmont's
12 claims because the WUA had taken NMUI's assets and real property, including the
13 	well sites and easements bargained for under the 2003 and 2007 Agreements; (2) the
14 condemnation judgment contained language that precluded Woodmont' s claims
15 	when it or its predecessors failed to join the condemnation proceedings; and (3)
16 Woodmont did not plead a claim against SWC because it was not a party to the 2003
I
1
The complaint also made claims against the WUA and its governing board.
The WUA and its governing board are not parties to this appeal, nor are the claims
against them at issue here.
4

1 and 2007 Agreements and its only tie to the litigation was the fact that it was a parent
2 company to NMUI.
3 DISCUSSION
4 	{7} 	The aforementioned grounds were identified in the district court's oral ruling
5 	on the motion to dismiss. See State v. Morris, 1961-NMSC-120,, 5, 69 N.M. 89,
6 364 P.2d 348 ("An oral ruling by the [district court] is not a final judgment. It is
7 merely evidence of what the court had decided to do but [it] can change such ruling
8 at any time before the entry of judgment."). The district court's written order of
9 	dismissal did not indicate any grounds for dismissal. Therefore, we base our analysis
10 on the district court's oral ruling because the parties' arguments rely on it and it does
11 	not conflict with its written ruling. Jeantete v. Jeantete, 1990-NMCA-138,, 11, 111
12 N.M. 417, 806 P.2d 66 ("On appeal, the reviewing court may consider the [district]
13 	court's verbal comments in order to clarify or discern the basis for the order or action
14 	of the court below.").
15 	{8} 	Woodmont argues that the district court erred in dismissing its claims against
16 NMUI and SWC because: (1) it pleaded valid claims for breach of contract and
17 declaratory judgment; 	(2) 	its 	claims 	were 	not 	precluded 	by 	the 	defense 	of
18 impossibility; and (3) the condemnation judgment stipulated to by NMUI ~nd the
19 WUA did not bar its claims. Woodmont also argues that SWC is liable as the'parent
5

1 company ofNMUI under the contract between Woodmont and NMUI; therefore, the
2 district court erroneously dismissed its claims against SWC.
3 {9} 	NMUI and SWC provide no argument as to whether Woodmont's complaint
4 states claims for breach of contract and declaratory judgment. Rather, their argument
5 focuses on whether Woodmont's claims are barred by the defense of impossibility
6 and whether the condemnation judgment bars Woodmont's request for breach of
7 contract damages.
8 I. 	Standard of Review
9 {10} 	NMUI and SWC moved under Rule 1-012(B)(6) to dismiss Woodmont's
10 complaint for failure to state a claim. In their motion, NMUI and SWC asked that
11 	the district court take judicial notice, pursuant to Rule 	11-201 NMRA, of the
12 condemnation judgment that was attached to the motion. In response to NMUI and
13 	SWC's motion, Woodmont filed a memorandum in opposition in which it did not
14 object to or argue against the district court takingjudicial notice of the condemnation
15 judgment.
16 	{11} 	During the hearing on the motion, the district court questioned whether
17 consideration of information outside of the pleadings would convert NMUI and
18 	SWC's motion to dismiss into a motion for summary judgment under Rule 1-056
19 NMRA. NMUI and SWC argued that the district court could treat the motion as a
20 motion to dismiss if it took judicial notice of the condemnation judgment. See Rule
6

1 1-012(B). At the hearing, Woodmont did not argue that NMUI and SWC's motion
2 to dismiss would become a motion for summary judgment if the district court were
3 to take judicial notice of the condemnation judgment, nor did it object to the district
4 court ruling under the motion to dismiss standard. Based on the condemnation
5 judgment and other factors, the district court granted NMUI and SWC's Rule 1-
6 012(B)(6) motion and dismissed the case.
7 	{12} 	Because we understand the district court to have taken judicial notice of the
8 condemnation judgment and because the parties do not contest the issue, we treat
9 NMUI and SWC's motion as a motion to dismiss.2 Accordingly, we review de novo
10 the district court's decision to dismiss this case for failure to state a claim under Rule
11 	1-012(B)(6). Delfino v. Griffo, 2011-NMSC-015,, 9, 150 N.M. 97, 257 P.3d 917.
12 "A motion to dismiss for failure to state a claim ... tests the legal sufficiency of the
13 	complaint[.]" Derringer v. State, 2003-NMCA-073,, 5, 133 N.M. 721, 68 P.3d 961.
14 "In reviewing a district court's decision to dismiss for failure to state a claim, we
15 	accept all well-pleaded factual allegations in the complaint as true and resolve all
16 doubts in favor of sufficiency of the complaint." Delfino, 2011-NMSC-015, , 	9
17 (internal quotation marks and citation omitted). "A motion to dismiss may be granted
I
2
No party to this appeal argues that the district court erred in deciding the
motion under the standard for a motion to dismiss. See State ex rel. Human Servs.
Dep't v. Staples (In re Doe), 1982-NMSC-099, ,, 3, 5, 98 N.M. 540,650 P.2d 824
(noting that an appellate court should not reach issues that the parties have failed to
raise in their briefs).
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1 if it is evident that the plaintiff cannot obtain relief under any set of facts alleged in
2 the complaint or if the facts on the face 	of the complaint clearly support an
3 affirmative defense to the relief sought." Sanders v. Estate ofSanders, 1996-NMCA-
4 	102, 16, 122 N.M. 468, 927 P.2d 23 (citations omitted).
5 II. 	Woodmont's Complaint States a Claim for Breach of Contract
6 {13} 	In order to establish a breach of contract claim, a party must show that (1)
7 there was a contractual obligation; (2) the opposing party breached the contract; and
8 (3) the breach resulted in damages. Armijo v. Wal-Mart Stores, Inc., 2007-NMCA-
9 120, 134, 142 N.M. 557, 168 P.3d 129. While NMUI and SWC concede that there
10 was 	a 	contractual 	obligation, 	the 	complaint 	also 	alleges 	that 	Woodmont's
11 	predecessors entered into agreements with NMUI and under the agreement NMUI
12 agreed to provide services to The Trails in exchange for deeded property, which
13 	satisfies the first element. As to the second element, the complaint alleges that NMUI
14 breached the contract by not "performing under [the 2003 and 2007 [A]greements
15 	and/or not assuming any costs for work required by the [WUA]." As to the final
16 element, the complaint alleges that Woodmont had suffered damages as a result of
17 the breach. Based on these allegations, we conclude that Woodmont's complaint
18 	sufficiently states a claim of breach of contract against NMUI.
8

1 III. 	Woodmont's Complaint States a Claim for Declaratory Judgment
2 	{14} 	The Declaratory Judgment Act (the Act), NMSA 1978, §§ 44-6-1 to -15
3 (1975), provides the district court with the "power to declare rights, status[,] and
4 other legal relations whether or not further relief is or could be claimed." Section 44-
5 6-2. As an interested person under the 2003 and 2007 Agreements, Woodmont was
6 entitled pursuant to the Act to "have determined any question of construction or
7 validity arising under the ... contract ... and obtain a declaration of rights, status[,]
8 or other legal relations thereunder." Section 44-6-4. Furthermore, the Act provides
9 that "[a] contract may be construed either before or after there has been a breach
10 thereof." Section 44-6-5. Therefore, because it alleges that there was controversy
11 	concerning the enforceability 	of the contracts and the parties' 	responsibilities
12 thereunder, 	we 	conclude that Woodmont's 	complaint also 	states 	a claim for
13 	declaratory judgment.
14 IV. 	NMUI Has Not Established the Defense of Impossibility
15 	{15} 	Having concluded that Woodmont's complaint states claims for breach of
16 contract and declaratory judgment, we tum to whether the defense of impossibility
17 has been established. Woodmont argues that NMUI is precluded from using the
18 	defense of impossibility because NMUI has failed to take any action to perform its
19 duties under the agreements. NMUI contends that "the taking of all of NMUI's
20 tangible and intangible assets and real property, 	including the well sites and
9

1 easements 	bargained 	for 	under 	the 	2003 	and 	2007 	[A]greements[,] 	made 	it
2 impossible for NMUI to comply with the 2003 and 2007 [A ]greements to provide
3 water and sewer service to the property owned by [Woodmont's] predecessor."
4 Without further explanation, NMUI argues that the requirements for the defense of
5 impossibility are satisfied.
6 	{16} 	As an initial matter, NMUI also contends that Woodmont failed to preserve
7 its argument that NMUI is precluded from using the defense of impossibility. See
8 Rule 12-321(A) NMRA ("To preserve an issue for review, it must appear that a
9 ruling or decision by the trial court was fairly invoked."). However, Woodmont
10 argued in opposition of dismissal of its claims on impossibility grounds, which was
11 	sufficient to preserve the issue for appeal. See Gracia v. Bittner, 1995-NMCA-064,
12 ,r 18, 120 N.M. 191,900 P.2d 351 (stating "the preservation requirement should be
13 	applied with its purposes in mind, and not in an unduly technical manner to avoid
14 reaching issues that would otherwise result in reversal").
15 	{17} 	The defense of impossibility requires "that (1) a supervening event made
16 performance on the contract [impossible;] (2) the non-occurrence of the event was a
17 basic assumption on which the contract was based[;] (3) the occurrence of the event
18 was 	not 	[NMUI's] 	fault[;] 	and 	(4) 	[NMUI] 	did not 	assume 	the 	risk :of the
19 occurrence." Summit Props., Inc. v. Pub. Serv. Co. ofN.M, 2005-NMCA-090, ,r 32,
'·
20 	138 N.M. 208, 118 P.3d 716. In order to grant NMUI and SWC's motion to dismiss,
10

1 the facts established by the complaint and the condemnation judgment must clearly
2 support the defense of impossibility. See Sanders, 	1996-NMCA-102, ,r 6. Upon
3 review, we conclude that the facts established by those documents offer no such
4 support.
5 {18} 	We need only analyze the second and last elements 	of the defense 	of
6 impossibility to 	reach our conclusion. 	On their face, 	the 	complaint and the
7 condemnation 	judgment 	provide 	no 	evidence 	that 	the 	2003 	and/or 	2007
8 Agreement( s) were based on an assumption that condemnation of the deeded
9 property would not occur. Similarly, the complaint _and the condemnation agreement
10 do not provide any evidence that the parties contemplated who assumed the risk of
11 	condemnation, nor do they establish that NMUI did not assume the risk of the
12 condemnation under the 2003 and/or 2007 Agreement(s). 	Because the complaint
13 	and the condemnation agreement do not contain facts necessary to establish the
14 elements of this defense, NMUI is not entitled to dismissal based on the defense of
15 	impossibility.
16 v.
17
18 {19}
The Condemnation Judgment Does Not Preclude Woodmont's Claim for
Damages
Because we conclude that the ·district court erred in granting NMUI and
19 	SWC's motion to dismiss under the defense of impossibility, we next cbnsider
'
20 whether the district court erred in concluding that the condemnation judgment
21 	precluded 	Woodmont's 	claims 	because 	it. failed 	to 	join 	the 	condemnation
11

1 proceedings. During the hearing, the district court indicated that res judicata and
2 collateral estoppel were not applicable, but indicated that law of the case may apply.
3 From the record, we are unable to determine which of the preclusion doctrines, if
4 any, the district court ultimately relied upon in its ruling.
5 	{20} 	On 	appeal, 	neither party 	advances 	any 	argument 	under the 	preclusion
6 doctrines. Instead, the parties' arguments focus on whether Woodmont's claim for
7 damages under breach of contract could only be satisfied through the condemned
8 property or the condemnation award. In relevant part, the condemnation judgment
9 provides that
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the defendants named herein under the style of "All Unknown Owners
or Claimants of the Property Involved" by their failure to file an Entry
of Appearance, Answer, or otherwise plead, are wholly in default and
hereby adjudged in default. As such; defendants "All Unknown Owners
or Claimants of the Property Involv.ed" have no interest in the premises
condemned herein and thus are not entitled to any portion of the award
granted herein; and each of the defendants is barred and estopped
forever from claiming any portion of the real estate condemned herein
or any portion of the award granted herein other than as specifically
designated to them in this Judgment.
20 Woodmont contends that its complaint does not make any claim as to the condemned
21 	property or the condemnation award, but is instead seeking damages for NMUI' s
22 alleged breach. NMUI and SWC contend that Woodmont's breach of contract claim
23 	is a guise to recover a portion of the condemnation award.
24 	{21} 	These 	arguments 	do 	not 	address 	the 	legal 	sufficiency 	of Woodmont's
25 	complaint and instead focus on whether Woodmont would be able to execute any
12

1 judgment it was to receive in this case. Such a consideration is improper in ruling on
2 NMUI and SWC's motion to dismiss. See Derringer, 2003-NMCA-073,, 5 ("A
3 motion to dismiss for failure to state a claim . . . tests the legal sufficiency of the
4 complaint[.]"). 	Therefore, 	to 	the 	extent that the 	district 	court relied 	on this
5 consideration when determining the legal sufficiency of Woodmont's complaint, it
6 did so in error. Because the parties do not advance any other arguments related to
7 preclusion and we are unable to determine which, if any, doctrines of preclusion the
8 district court relied on, we do not address preclusion any further.
9 VI. 	The District Court Properly Dismissed the Claims Against SWC
10 {22} 	Woodmont argues that the funds received from the condemnation proceeding
11 	were transferred to SWC and, because of this, SWC benefited from NMUl's breach
12 	of contract, establishing a right to seek damages against SWC. Woodmont cites no
13 	legal authority in its briefing to support this cop.tention. See Curry v. Great Nw. Jns.
14 	Co., 2014-NMCA-031, , 28, 320 P.3d 482 ("Where a party cites no authority to
15 	support an argument, we may assume no such authority exists."). Therefore, we
16 	affirm the district court's dismissal of the claims against SWC.
17 CONCLUSION
18 	{23} 	We reverse the district court's order dismissing Woodmont's claims against
19 NMUI and remand for further proceedings consistent with this opinion. We. affirm
20 the district court's dismissal of the claims against SWC.
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24; ITISSO ORDERED.

Lisboos Gorttd

KRISTINA BOGARDUS, Judge

WE CONCTUR:

Mee ae

M. MONICA ZAMO

AD

BRIANA H. ZAMORA, Judge

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