Phyllis L. Crowder

1
UNITED STATES BANKRUPTCY COURT
DISTRICT OF NEW MEXICO
In re: 	PHYLLIS CROWDER, 	No. 7-96-10336 ML
Debtor.
MEMORANDUM OPINION RE MOTION FOR PARTIAL SUMMARY JUDGMENT
ON OMNIBUS OBJECTION TO CLAIM OF CATALINA DEVELOPMENT, INC.
THIS MATTER is before the Court on a portion of the Chapter 7 Trustee’s Omnibus
Objection to Remaining Disputed Claims filed on March 21, 2006 (the “Omnibus Objection”)
concerning the Trustee’s objection to Proof of Claim No. 175 filed on September 12, 2000 by
Catalina Development, Inc., Santa Teresa Country Club, LLC and Mesilla Bolson Properties,
LLC (“Mesilla Bolson), (collectively referred to as “Catalina”). Omnibus Objection ¶¶ 69 – 74 (
Doc. 1553). Catalina’s Claim has two components: 1) a claim for the fair market value of two
tracts of real property, one tract allegedly valued at $850,000.00 and the other allegedly valued
at $235,000.00 (the “Real Estate Claim”); and 2) a claim for the amount required to drill water
wells to replace wells that Catalina contends should have been conveyed to it in a settlement
transaction with the Debtor and the Trustee as successor of the Debtor (the “Well Claim”).
On October 6, 2006, the Trustee filed a motion for partial summary judgment as to both
the Real Estate Claim and the Well Claim (the “Motion”); Catalina filed a Response and
Memorandum on October 23, 2006; the Trustee filed a Reply. Docs.1599, 1600, 1601 and 1605.
The Motion will be denied in part because material fact issues preclude summary
judgment on the Real Estate Claim. The Motion will be granted as to the Well Claim. The
following are the Court’s findings of fact and conclusions of law. Fed. R. Bankr. P. 7052.
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1 Santa Teresa Developers was also known as the Santa Teresa Water Company.
Trustee’s Ex. B p. 11.
2
The Crowder Land Development Business
1. In the late 1960's C.L. Crowder Investment Company (“Investment Company”), 100%
owned by the Debtor and her former husband Charles Crowder (“Crowder”), belonged to a
partnership known as Santa Teresa Developers, in connection with the development of 29,000 +
acres of real property in Santa Teresa, New Mexico. Trustee’s Ex. A Crowder Aff. ¶ 2; Trustee’s
Ex. B p. 11.
2. In December 1976 the New Mexico Public Utility Commission issued a certificate of
convenience and necessity (CCN) to Santa Teresa Developers 1 authorizing it to provide water
utility service. Crowder Aff. ¶ 3. Santa Teresa Developers drilled several water wells and built a
water utility infrastructure. Crowder Aff. ¶ 4. The water utility infrastructure consists in part of
Well 6 and a water storage tank, both of which are located on a 2.56 acre tract on the south side
of Airport Road, Santa Teresa, New Mexico. Crowder Aff. ¶ 4.
3. In 1977, Santa Teresa Developers was dissolved, and its assets were transferred to
Investment Company. Trustee’s Ex. B p. 11. In 1979, Investment Company acquired Santa
Teresa Country Club, Inc. (“STCC”), and transferred the utility assets to STCC. Trustee’s Ex. B
p. 12; Trustee’s Ex. E p. In 1986, all of the assets of STCC were conveyed to Investment
Company, which was later liquidated with all of its assets and liabilities distributed to the Debtor
and Crowder individually. Trustee’s Ex. B p. 12; Trustee’s Ex. E p. 4.
4. In 1987 Santa Teresa Services Company (“STSC”), also 100% owned by Debtor and
Crowder, was formed, and in 1988, STSC received a CCN to provide sewer utility services.
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Trustee’s Ex. B p. 14; Trustee’s Ex. E p. 4; Crowder Aff. ¶¶ 8-9. STSC constructed a sewage
treatment plant on a portion of a 15.002 acre tract of land. Crowder Aff. ¶¶ 8-9.
5. The Court will refer to the two tracts of land, upon which water and sewer utility
structures were located, as the “Utility Parcels.”
6. In 1985, Investment Company executed a $5.4 million promissory note (the “ Note”)
that was later acquired by the Resolution Trust Corporation (the “RTC”). The Note was
guaranteed by Crowder and the Debtor and was secured by mortgages on land in Santa Teresa
New Mexico. Crowder Aff. ¶ 6. Catalina acquired the Note from the RTC. Trustee’s Ex. C
(Collins Dep. p. 16 line 22 – p. 17, line 4).
Bankruptcy, Catalina’s Claim and the Settlement
7. Debtor filed this bankruptcy proceeding under Chapter 11 of the Bankruptcy Code on
January 26, 1996. The Debtor and Crowder were married as of the filing date. On June 4, 1999,
the case was converted to Chapter 7.
8. On April 7, 1997, Crowder filed a Chapter 11 bankruptcy proceeding, No. 11-97-
11981, which was dismissed and closed on October 11, 2000.
9. After Catalina filed a motion to lift the stay, Catalina, the Debtor and Crowder entered
into a settlement agreement. (the “Letter Agreement”). Trustee’s Ex. D.
10. The Letter Agreement specifically required the Debtor
to convey by Special Warranty Dee [sic] and Bill of Sale all of the real property marked
in Red on the map . . . (hereinafter, the “Red Lands”);
to convey by Special Warranty Deed and/or Bill of Sale all assets (including cash and
accounts receivable) making up the business known as the Santa Teresa Country Club;
to convey by Special Warranty Deed fee simple title to the water rights to 2000 acre feet
of water and fee simple title to well number 24 . . . . this provision shall not be construed
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to entitle [Catalina] to more than 2,000 acre feet of water rights. . . .”
Trustee’s Ex. D. ¶¶ 3 (a) – (c).
11. Gregory Collins (“Collins”)is Catalina’s owner and is a member of Mesilla Bolson,
Catalina’s third party designee to receive title to the property under the Letter Agreement.
Catalina’s Ex. D Collins Aff. p. 3. Based on information from Crowder as to which parcels
Crowder and Debtor owned, Collins prepared the map referred to in the Letter Agreement
showing parcels 1 through 20 circled in red ink, which were referred to as the Red Lands. A title
search was not performed before the map was prepared. Collins Aff. p. 1.
12. In its Claim, Catalina asserts that under the Letter Agreement, an order entered by
this Court in October 1999 (the “October 1999 Order”), and an order entered by this Court in
August 2000 (the “August 2000 Order”), it has a claim for the fair market value of several
parcels within the Red Lands that should have been conveyed to it on August 8, 2000. The Claim
specifically references Parcels 1, 6, 9, 11, 12, and 20. The Utility Parcels, not initially
mentioned in the Claim, are identified as Parcels 7 and 15 in the Letter Agreement.
13. The Well Claim asks for the amount required to replace water wells numbered 2, 17,
19, 24 and 32 that Catalina contends should have been, but were not, conveyed to it as assets of
STCC.
14. On October 11, 2000, the Trustee responded to the Real Estate Claim and the Well
Claim and admitted that Catalina received only an undivided one-half interest in Parcels 9, 11,
12, and 20 but disputed the amount required to compensate Catalina for these parcels. The
Trustee denied that Catalina failed to receive all of Parcel 1 and asserted that Parcel 6 was never
property of the estate. Catalina’s claims regarding these parcels are not currently before the
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2 City of Sunland Park v. Santa Teresa Services Co. et al., 134 N.M. 243, 248, 75 P.3d
843, 848 (N.M.Ct.App. 2003).
5
Court; however, Catalina’s claim for the value of the Utility Parcels is now the focus of the
dispute.
City of Sunland Park Condemnation Action
15. On August 16, 1996, two months after the Letter Agreement was executed, the City
of Sunland Park, New Mexico (the “City”) filed a condemnation action in state district court,
Dona Ana County, New Mexico (the “state court”) to obtain both real and personal property
used in STSC’s operation of the water and sewer utilities. First Amended Petition, Trustee’s
Ex. I Parts 1-3; Trustee’s Ex. F.2
16. Catalina intervened in the condemnation action, and filed an answer, but did not
assert its right to receive the Utility Parcels under the Letter Agreement. Trustee’s Ex. F at ¶¶ 14
and 80.
17. On May 2, 1997, counsel for the City sent a letter to all counsel of record attaching
property descriptions of the condemned real property. Trustee’s Ex. G (the “Condemnation
Letter”). Well Nos. 6, 8 and 19 were included in the property described in the Condemnation
Letter. Trustee’s Ex. G. The Condemnation Letter also states the following:
It is important to note that the City is not necessarily condemning a fee interest in the
properties . . . . The City is condemning STSC’s entire interest in these properties, which
may be less that a fee interest, and is not condemning any interest held by Charles or
Phyllis Crowder in these properties.
Trustee’s Ex. G.
18. On February 7, 2000, the state trial court ruled that Catalina lacked standing to
participate in the valuation trial. In response, Catalina asserted that Mesilla Bolson had an
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ownership interest in Wells 8 and 19 because those wells were located on the Red Lands and
were used by STCC to irrigate the golf course. The state court denied this claim, and the New
Mexico Court of Appeals affirmed the ruling. Trustee’s Exs. F and G.
Chapter 7 Trustee’s Enforcement of Settlement and Transfer of Utility Parcels
19. On July 29, 1999, a few months after the Debtor’s case was converted to Chapter 7,
the Chapter 7 Trustee filed a motion to enforce the Letter Agreement, which the Court granted in
October 1999 (the “October 1999 Order”). In the October 1999 Order, however, the Court also
made the following findings:
1) that at the time of the 1996 Letter Agreement, the Debtor was not in possession of her
own records, . . . evidencing the state of title to real property in which she had an interest;
2) that the Debtor and Catalina both believed that all of the Red Lands were jointly
owned by the Debtor and Crowder when in fact, certain portions of the Red Lands were
owned by the Debtor and Crowder together with third parties; and
3) that certain portions of the Letter Agreement cannot be complied with because of the
mutual mistake of fact regarding the ownership of portions of the Red Lands . . .
Catalina’s Ex. G p. 2.
20. The October 1999 Order allowed Catalina to waive its rights under the Letter
Agreement in return for a claim for the value of the “that portion of the Red Lands and other
property that was contemplated to be conveyed pursuant to the Letter Agreement but which will
not be received, . . .” Catalina Ex. G p. 3. Catalina filed a Notice of Election in which it elected
to waive “those provisions of the Letter Agreement that cannot be complied with, . . .” Catalina’s
Ex. H.
21. By March 2000, after the parties failed to reconcile the amount of Catalina’s claim
under the October 1999 Order, the Trustee filed a Motion to Compel Closing asking for court
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intervention. Catalina’s Ex. K, Trustee’s Motion to Compel Closing Doc. 988.
22. Consequently, the Court issued an order (the “August 2000 Order”) allowing
Catalina to assert a monetary claim “for the fair market value of each real property interest in the
Red Lands, and a claim for the fair market value of any other asset making up the business of
Santa Teresa Country Club, that was not conveyed by Trustee that Catalina contends should
have been conveyed pursuant to the Letter Agreement . . .” August 2000 Order p.10.
23. On August 8, 2000, the Trustee executed and delivered to Catalina a Special
Warranty Deed, which conveyed all of the parcels of property listed in the Letter Agreement,
including the Utility Parcels. Trustee’s Ex. P. Catalina’s counsel prepared the Special Warranty
Deed using legal descriptions from a title insurance company. Response Ex. C Ainsa Aff. p. 1.
Judgment Valuing the Assets Condemned
24. In April 2000, a few months prior to the conveyance of the Red Lands to Catalina, a
jury valued the condemned property at $2,000,000 (the “Valuation Judgment”). The state trial
court determined that the condemned assets included Wells Nos. 6, 8, 19, 30 and 31; and all
interests of STSC in land in fee or lesser interests including easements, however acquired, on
which the assets are located. Trustee’s Ex. Q ¶¶ 1, 5.
25. In December 2004, the New Mexico Court of Appeals affirmed the Valuation
Judgment, and on December 4, 2004 the Trustee executed deeds conveying the Utility Parcels to
the City. Trustee’s Ex. F; Catalina’s Ex. E.
26. Catalina asserts that the deeds to the City clouded its title to the Utility Parcels and
asks the Court to require the Trustee to either clear title or pay Catalina the value of the Utility
Parcels.
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3 Fed. R. Civ. P. 56(c), made applicable to bankruptcy proceedings by Fed. R. Bankr. P.
7056.
8
The Well Claim And The Well Use Agreement
27. The Letter Agreement required the Debtor “to convey by Special Warranty Deed fee
simple title to the water rights to 2000 acre feet of water and fee simple title to well number 24 . .
. . this provision shall not be construed to entitle [Catalina] to more than 2,000 acre feet of water
rights. . . .” Trustee’s Ex. D. ¶¶ 3 (c).
28. Under the August 2000 Order, the Trustee is required to convey to Catalina’s
designee fee simple title to Well 24 and to “enter into a Well Use Agreement with Catalina, or its
assigns . . .” August 2000 Order at ¶ E.
29. On August 8, 2000, the Trustee and STCC entered into a Well Use Agreement
allowing STCC to use water wells labeled the Trustee’s “Shared Wells” (Wells 4, 17, 32 and 33).
30. In the Well Use Agreement, the Trustee acknowledged that Well No. 24 does not
have the capacity to produce 2000 acre feet per annum of water; that the Shared Wells and Well
No. 24 had been historically used to irrigate the Golf Courses and that STCC needs the Shared
Wells to properly irrigate the golf courses. Trustee’s Ex. O p. 1.
Summary Judgment Is Not Appropriate On The Real Estate Claim
The Trustee asks the Court to grant summary judgment because the pleadings,
depositions, answers to interrogatories, and admissions on file, together with the affidavits, if
any, show that there is no genuine issue as to material facts and the Court should deny Catalina’s
Real Estate Claim and its Well Claim as a matter of law. 3
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4 See Republic Res. Corp. v. ISI Petroleum West Caddo Drilling Program 1981, 836
F.2d 462, 465 (10th Cir.1987)( "We construe a settlement stipulation in the same manner as a
contract to determine how it should be enforced.").
5 See State ex rel. State Highway and Transportation Dept. v. Garley, 111 N.M. 383, 388,
806 P.2d 32, 37 (1991) (“A mistake sufficient to reform a contract is present when the parties
assume that a contract expressed their intention, whereas in fact it said something else.”).
6 Twin Forks Ranch, Inc. v. Brooks, 120 N.M. 832, 835, 907 P.2d 1013, 1016 (N.M.App.
1995), appeal after remand, 125 N.M. 674, 964 P.2d 838 (1998) (“Twin Forks II”).
7 Twin Forks II, 125 N.M. 674, 678, 964 P.2d 838, 842 (1998) (finding that evidence was
insufficient to show that parties, who were unaware of water rights appurtenant to land
conveyed, intended to exclude such water rights from the conveyance); Collier v. Sage, 51 N.M.
147, 150, 180 P.2d 242, 243 (1947) (stating that to prove a right to reform an instrument for
mutual mistake, “the proof must be of the clearest and most satisfactory character.”); Pacheco v.
Martinez, 97 N.M. 37, 636 P.2d 308, 314 (N.M. App. 1981) (“. . . the burden of proof upon the
party seeking reformation must be sustained by evidence that is satisfactory, clear and
convincing.”).
9
Reformation of the Letter Agreement Based On Mutual Mistake
The Trustee argues that the Debtor, Crowder and Catalina did not intend to include the
Utility Parcels in the Red Lands as defined in the Letter Agreement and that the Letter
Agreement should be reformed for mutual mistake. Catalina would then have no claim to the
value of those parcels. Catalina argues that fact issues preclude summary judgment.
A contract may be reformed under New Mexico contract law 4 when the contract does not
express what was really intended by the parties. 5 A court may consider extrinsic evidence that a
writing did not express the true agreement of the parties.6 The party requesting reformation,
however, must show with clear and convincing evidence that the agreement as written was not
the agreement intended.7 Here, the Trustee has the burden to prove by clear and convincing
evidence that at the time the parties entered into the Letter Agreement, none of them intended to
include the Utility Parcels in the Red Lands.
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8 Crowder’s testified that he “never understood or intended that land used by STSC for its
current and future infrastructure would be conveyed to Catalina[,]” and “[w]ith the exception of
the real estate associated with the Santa Teresa Country Club, it was my intent to convey only
vacant, undeveloped parcels as consideration for the 1996 Letter Agreement.”
See Crowder Aff. ¶ 13-14.
The Debtor testified at the September 29, 1999 hearing on the Motion to Compel closing
as follows:
Q: What did you understand you were going to be left with after this property was deeded
to Mr. Collins?
A: . . . it was my understanding we would be left with any of the land that we needed to
operate our Services Company from and our sewer plant and our water rights which are
associated with the actual wells, . . .
Trustee’s Ex. S Transcript of Proceedings p. 55, line 20 – p. 56 line 21.
9 Q: [by Mr. DeYoung] Did Mr. Crowder tell you he was conveying – he would convey
to you land owned by Santa Teresa Services Company?
A: No.
Q: Was it your intent to purchase land owned by Santa Teresa Services Company?
A: No.
Trustee’s Ex. D Collins 2006 Dep. at p. 23 lines 25 – p. 24 line 6.
10
The Trustee argues that both the Debtor and Crowder testified that they intended to
transfer only the real and personal property owned by STCC and some additional parcels of
vacant land, and that they did not intend to transfer any of the property belonging to STSC.8
Crowder testified that he considered the Utility Parcels to be STSC property, which he never
intended to convey to Catalina. The Court agrees with the Trustee that the record shows a mistake
on the part of the Debtor and Crowder; however, the Trustee must also show that the undisputed
facts prove that Collins, on behalf of Catalina, also did not intend to include the Utility Parcels in
the Red Lands.
The Trustee points to Collins’s 2006 deposition in which he stated he did not intend to
purchase land owned by STSC, to argue that Collins did not intend to acquire the Utility Parcels.9
In addition, the Trustee argues that Collins must not have intended to acquire the Utility Parcels
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10 Collins affidavit states
I was aware of the fact that the sewer treatment plant operated by [STSC] was
located on a portion of Red Land Parcel 7. I was also aware that Well 6 and a
water tower were located on Red Land Parcel 15. However, I was also aware of
the fact that Charles L. Crowder and Phyllis L. Crowder owned Parcel 7 and
Parcel 15 [the Utility Parcels] and could convey these parcels to me.
. . .
[The Title] Commitments showed that Charles L. Crowder and Phyllis L.
Crowder owned Red Land Parcels 7 and 15.
Catalina’s Ex. D pp. 2-3.
11
or he would have caused Catalina to assert this right in the condemnation action. Instead, after
Catalina was allowed to intervene, it did not assert its right to receive the Utility Parcels under the
Letter Agreement. And, after the state court determined that Catalina lacked standing to
participate in the valuation trial, Catalina asserted a claim of ownership of only two water wells,
Wells 8 and 19, neither of which were located on the Utility Parcels.
Catalina asserts that a factual dispute prevents the Court from finding that Collins did not
intend to acquire title to the Utility Parcels. In a 2007 affidavit made subsequent to Collins’
deposition, Collins asserts that despite his intention not to acquire STSC property, the Utility
Parcels were never owned by STSC and at the time of the Letter Agreement, he knew that the
Debtor and Crowder individually held title to the Utility Parcels. Catalina’s Ex. D Collins Aff. p.
2.10 Catalina also argues that it did not need to assert its right to receive the Utility Parcels in the
condemnation action because the metes and bounds description of the Utility Parcels were not
attached to the condemnation petition, and the Condemnation Letter confirms that the City did not
intend to acquire the land owned in fee by the Debtor and Crowder. Thus, the Utility Parcels
were available for conveyance to Catalina despite the condemnation of the STSC utility assets.
Collins Aff. p. 2. With respect to the Debtor’s and Crowder’s intentions, Catalina argues that the
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11 Notably, the focus of the hearing in 1999 on the Motion to Enforce, at which the map
was used as an exhibit, was to correct the mutual mistake of the parties as to the fee simple
ownership of Parcels 6, 9, 11, 12 and 20, and not as to the Utility Parcels.
12 The party moving for summary judgment has the burden of showing the absence of a
genuine issue as to any material fact. Weir v. Anaconda Co., 773 F.2d 1073, 1079 (10 th Cir.
1985) (recognizing that in the Tenth Circuit, a movant must be viewed in the light most
favorable to the opposing party and that the movant must demonstrate entitlement to summary
judgment beyond a reasonable doubt.).
13 See Lake Hefner Open Space Alliance v. Dole, 871 F.2d 943, 945 (10 th Cir. 1989)
(noting that non moving party must show the presence of a triable fact).
14 See Kimberly, Inc. v. Hays, 88 N.M. 140, 537 P.2d 1402, 1406 (1975)(finding that one
party’s knowledge of mistake in acreage of property and failure to disclose the variance in
acreage amount to other party, who had no knowledge of difference, justified reformation of
note, mortgage and deed for unilateral mistake), citing Wright v. Brem, 81 N.M. 410, 467 P.2d
736 (1970) and Morris v. Merchant, 77 N.M. 411, 423 P.2d 606 (1967).
12
map clearly showed the Utility Parcels as part of the Red Lands. The map was used throughout
the negotiation, execution and enforcement of the Letter Agreement, and according to Catalina, if
the Debtor and Crowder did not want to convey those parcels, they would have objected to the
map. See Catalina Ex. C, Ainsa Aff. p. 2. The Trustee maintains that instead, the map merely
illustrates the mistake, and the fact that the Trustee did not object at the enforcement hearings is
insufficient to create a fact issue as to whether the parties intended to include the Utility Parcels in
the Red Lands.11 When the Court considers all of the evidence and the reasonable inferences from
the evidence in the light most favorable to Catalina,12 the Court concludes that Catalina has raised
material fact issues sufficient to defeat summary judgment based on mutual mistake. 13
Reformation of the Letter Agreement Based On Unilateral Mistake
The Trustee also contends that under New Mexico law, the Court may reform the Letter
Agreement based on a unilateral mistake by the Debtor and Crowder if the Court also finds that
Catalina engaged in fraudulent or inequitable conduct.14 The Trustee asserts that the undisputed
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15See Catalina’s Ex. G at ¶ 4; Collins Aff. p. 1.
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facts show that Catalina acted either inequitably or in bad faith.
The record shows that the Debtor did not have access to her property records, and that
Collins prepared the map of the Red Lands based on Crowder’s representations as to which
parcels out of several parcels, he and the Debtor owned.15 The Trustee asserts that he relied on
the accuracy of the property descriptions from a title commitment acquired by Catalina, which
were attached to the Special Warranty Deed prepared by Catalina’s counsel. The Trustee asks the
Court to draw the inference that Collins purposefully included the Utility Parcels in the Red
Lands knowing that the Debtor and Crowder did not intend to convey them. The evidence,
however, shows that Collins prepared the map of the Red Lands based on information from
Crowder himself. At most, the Trustee has only shown that Catalina had the opportunity to act
inequitably, not that it did. The Trustee adds that during the condemnation action, Catalina knew
that real property and personal property assets of the utility, were the subject of the
Condemnation Action, yet Catalina never informed the Trustee prior to the 2004 conveyance of
the Utility Parcels to the City that the Trustee had previously conveyed the same parcels to
Catalina in 2000. And, Catalina explains its failure to assert a claim in the condemnation action
by claiming reliance on the Condemnation Letter in which the City’s attorney states that the City
was not condemning fee title to property owned by the Debtor and Crowder. Catalina’s
explanations of its actions regarding Collins’ inclusion of the Utility Parcels in the map of the
Red Lands and of its failure to assert a claim in the condemnation action require the Court to
judge credibility. Catalina has raised fact issues as to whether its conduct was inequitable or in
bad faith, the Court cannot grant summary judgment reforming the Letter Agreement on the basis
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16 See Buck v. Mountain States Investment Corp., 76 N.M. 261, 264, 414 P.2d 491, 493
(1966) (“It is well established in this jurisdiction, and generally, that a court of equity may grant
reformation of a contract where either by mutual mistake of the parties, or through mistake on
the part of one party and fraud or inequitable conduct on the part of the other party, the written
instrument drafted to evidence a contract fails to express the real agreement and intentions of the
parties.”).
17 Crown Life Ins. Co. v. Candlewood, Ltd., 112 N.M. 633, 637, 818 P.2d 411, 415 (1991)
(quoting H. McClintock, Handbook of the Principles of Equity § 90, at 243-44 (2d ed. 1948)).
14
of unilateral mistake.
Alternatively, the Trustee contends that under New Mexico law, reformation is available
to correct a unilateral mistake when the party seeking reformation can show hardship in excess of
the benefit or the reasonable expectation of the other contracting party.16 In Crown Life Ins., the
New Mexico Supreme Court stated
Even where the [unilateral] mistake was not in any way due to the conduct of the other
party, and the latter did not know a mistake was being made, equity may cancel the
contract if its enforcement will inflict on the party seeking rescission hardship out of all
proportion to the value of the other party's justifiable expectation interest.17
The Trustee argues that Catalina’s claim of 1.85 million for the value of the Utility Parcels will
cause severe financial hardship on the estate and ultimately, the creditors of the estate, and that
this hardship is proportionately greater than the value Catalina expected to receive in the
settlement. The Trustee, however, has not sufficiently shown how these values impose a
disproportional hardship to the estate or a disproportionate benefit to Catalina. Thus, fact issues
also preclude summary judgment reforming the Letter Agreement under this theory.
Summary Judgment Is Appropriate On The Well Claim
Catalina asserts that under the Letter Agreement, Debtor was required to convey to
Catalina all assets of STCC, which included Wells 2, 17, 19 and 32 (hereinafter, referred to as the
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18 Mr. Collins concedes that Well No. 8 was owned by STSC and abandons the argument
as to Well No. 8. Catalina Ex. D Collins Aff. at p. 4.
19 Proof of Claim No. 175 states, “At the Closing [of the Letter Agreement], the Trustee
conveyed only Well 24 to Santa Teresa. Wells 2, 17, 19, and 32 are also assets of Santa Teresa
Country Club and should have been conveyed.” Proof of Claim No. 175 at p. 9, ¶ 17. Collins
testified, “Catalina was supposed to be transferred all of the assets of [STCC] and Wells 2, 17,
19, and 32 were part of these assets.” Collins Aff. pp. 4-5
20 The state trial court concluded,
The court finds there is no genuine issue of material fact regarding ownership of
wells 8 and 19 and the ownership claim asserted by [CDI] and Messilla Bolson
15
“Four Wells”). 18 Catalina reasons that since the Four Wells had been used to irrigate the STCC
golf courses, they were assets of STCC and should have been conveyed to it. Collins Aff. p. 4. 19
Catalina asserts a claim for the amount necessary to cover the “cost to drill wells to replace the
wells that were not conveyed. . . . The total cost is approximately $798,462.26 to [sic] adjustment
for Well 2 which is not in working condition.” Proof of Claim No. 175 at pp. 9-10 ¶¶ 16 – 19.
The Letter Agreement provided
. . . C[atalina] shall be conveyed by Special Warranty Deed and/or bill of sale all
assets (including cash and accounts receivable) making up the business known as the
Santa Teresa Country Club, . . .
. . .
The Letter Agreement also required the conveyance of
. . . fee simple title to the water rights to 2000 acre feet of water and fee simple title to well
number 24 . . . . this provision shall not be construed to entitle [Catalina] to more than
2,000 acre feet of water rights. . . .
Collins testified that at the time the Letter Agreement was executed, Crowder told him
that Well 24 would irrigate both golf courses and that no other wells were used to water
the golf courses and were assets of [STCC]. This statement was false. I now know that
other wells were used to water the golf courses and were assets of [STCC].”
Preclusive Effect of State Court Decision Regarding Wells 8 and 19
The Trustee argues that the state court in the Condemnation Action20 denied Catalina’s
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Properties is without merit. . . . Catalina also relies on the [Letter] Agreement . . .
This settlement agreement letter does not state that the water rights and wells 8
and 19 are included as part of the agreement. The only reference in this
agreement to water rights and wells . . . expressly states Catalina will receive
2000 acre feet of water rights and fee simple title to well 24. There is no mention
of well number 8 or well number 19.
Trustee’s Ex. M (Letter Ruling by 13th Judicial Court, Dona Ana County, New Mexico).
21 Trustee’s Ex. F (City of Sunland Park, 134 N.M. at 248, 75 P.3d at 848).
22 See In re Putvin, 332 B.R. 619, 624 (10th Cir. BAP 2005) (“Under the Rooker-Feldman
doctrine, a federal court cannot overturn state court factual findings.”); State v. Bishop, 113 N.M.
732, 734, 832 P.2d 793, 795 (N.M. App. 1992) (“For collateral estoppel to apply, . . .: (1) the
party against whom collateral estoppel is asserted must be the same party or be in privity with
the party to the original action; (2) the subject matter or the cause of action in the two suits must
be different; (3) the ultimate facts or issues must have been actually litigated; and, (4) the issue
must have been necessarily determined.”).
23 Catalina has also dropped its claim to Well 8.
24 In re Weinraub, 361 B.R. 586, 593 (Bankr. S. D. Fla. 2007) (finding under Rooker-
Feldman doctrine that prior state court order of eviction does not preclude determination of
claims by debtor in bankruptcy court that creditor violated TILA).
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claim to ownership of Wells 8 and 19, and the decision was affirmed on appeal. 21 The Trustee
points to the following findings affirmed by the appellate court: 1) that Wells 8 and 19 were not
mentioned in the Letter Agreement and 2) that Wells 8 and 19 cannot be considered assets of
STCC merely because they were used to irrigate the STCC golf course. The Trustee asserts that
either the Rooker-Feldman or collateral estoppel doctrines preclude relitigation of Catalina’s
claim that any of the Four Wells should have been conveyed. 22 This Court agrees that Catalina is
precluded from revisiting the state court determinations regarding Wells 8 and 19. 23 However,
because the ownership of Wells 2, 17 and 32 was not before the state court, this Court is not
precluded under the Rooker-Feldman doctrine from considering Catalina’s claim to these wells. 24
In the condemnation action, Catalina argued that it owned Wells 8 and 19 because they
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25 State v. Bishop, 113 N.M. 732, 734, 832 P.2d 793, 795 (N.M. App. 1992), quoting
Silva v. State, 106 N.M. 472, 474, 745 P.2d 380, 382 (1987).
26 See Bettini v. City of Las Cruces, 82 N.M. 633, 635, 485 P.2d 967, 969 (1971)(citing
doctrine of expressio unius est exclusio alterius which states “[w]here authority is given to do a
particular thing and the mode of doing it is prescribed, it is limited to be done in that mode; all
other modes are excluded.”).
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were physically located within the “exterior boundaries of the real property conveyed to it . . .”
134 N.M. at 260. The Trustee contends that because Catalina is making the same argument as to
Wells 2, 17 and 32, thus, Catalina is precluded under the doctrine of collateral estoppel from
making a claim here to compensation for those wells. Collateral estoppel bars the “relitigation of
issues actually and necessarily decided in a prior suit.”25 Because the state court did not decide
the ownership of Wells 2, 17, and 32, and did not consider whether these wells were within the
boundaries of the STCC lands or whether they were assets of STCC, Catalina is not barred from
asserting that these wells should have been conveyed, but were not. Catalina is not precluded
from asserting that the Letter Agreement required the Trustee to convey Wells 2, 17, and 32 in
addition to Well 24 under either by Rooker-Feldman of collateral estoppel doctrines.
The Clear Language of the Letter Agreement Requires Conveyance Of Only
Well 24
Catalina argues that because the Letter Agreement required Debtor to convey all assets of
STCC, and since the Four Wells were used to irrigate the STCC golf courses, those wells should
have been conveyed to Catalina as assets of STCC. The Trustee makes several arguments in
response. First, the Trustee argues that the plain language of the Letter Agreement requires the
conveyance of only one well, necessarily excluding all other wells.26 Next, the Trustee argues
that the wells could not be considered assets of STCC merely because they were used to irrigate
the golf courses. Finally, the Trustee argues that water wells in general were not included in the
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27 See Maralex Res., Inc. v. Gilbreath, 134 N.M. 308, 318, 76 P.3d 626, 636 (2003)
(“Where general words follow an enumeration of persons or things of a particular and specific
meaning, the general words are not construed in their widest extent but are instead construed as
applying to persons or things of the same kind or class as those specifically mentioned.”).
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categories of STCC assets described in the Letter Agreement, therefore, any additional water
wells were not considered assets of STCC. 27
The Court agrees with the Trustee that the Letter Agreement requires the Debtor to convey
only one well, Well 24, thus the Trustee is under no obligation to convey the additional Four
Wells to Catalina. By specifically naming only Well 24, the Letter Agreement necessarily
excluded any other named wells. Even though the Letter Agreement requires the Debtor to
convey Well 24 and the water rights to 2000 acre feet of water per annum, and although the
parties stipulated that Well 24 cannot deliver 2000 acre feet of water per annum, this does not
mean that the Debtor was under obligation to transfer additional wells along with the water rights.
Thus, under the plain language of the Letter Agreement, the Trustee is under no obligation to
convey the Four Wells.
Alternatively, the Trustee argues that the additional Four Wells were not required to be
conveyed to Catalina because “water wells” were not included in the general categories of STCC
assets to be conveyed. Those categories are as follows: 1) cash and accounts receivable; 2)
buildings; 3) all real property making up STCC; 4) the tennis courts and 5) the golf course.
Contract law dictates that only items of the same type as, or similar to, the listed categories can be
included in the general meaning of a term, here the “assets of STCC,” and because water wells
were not included in those categories, the Letter Agreement cannot be construed to include wells
other than the single specified well, Well 24. The Court agrees that under this alternative theory,
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28 National Old Line Inc. Co. v. Brown, 107 N.M. 482, 484, 760 P.2d 775, 777 (1988).
29 Gutierrez v. Sundancer Indian Jewelry, Inc., 117 N.M. 41, 51, 868 P.2d 1266, 1276
(N.M.App. 1993), citing Bennett v. Kisluk, 112 N.M. 221, 223, 814 P.2d 89, 91 (1991) (J. Hartz,
dissenting).
30 Id.
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Catalina cannot make a claim for the value of the Four Wells.
Even if the Letter Agreement could be interpreted to require conveyance of additional
wells, Catalina’s execution of the Well Use Agreement (Trustee’s Ex. O) acts as an accord and
satisfaction of any right to additional wells. Under accord and satisfaction, a party may discharge
an obligation under a contract by substituting another agreement for the obligation and
performing the substituted agreement.28 As a matter of public policy, courts presume that when
parties have settled a dispute they “intended a complete accord and satisfaction of their respective
claims against each other arising out of the facts underlying the explicitly settled dispute.” 29 The
burden to rebut this presumption is on the party asserting that a settlement does not apply to all
issues between the parties. 30
The Well Use Agreement provides STCC with the exclusive right to use several “shared
wells” described as Well Nos. 4, 17, 32 and 33 (the “Shared Wells”) as long as the combined
capacities of the Trustee’s Shared Wells and Well No. 24 is less than 2000 acre feet of water per
annum. Catalina presents no evidence that the Well Use Agreement did not satisfy the parties’
dispute over the conveyance of additional wells. Therefore, the Trustee, by entering in to the
Well Use Agreement, has fully performed the requirements of the Letter Agreement; and
Catalina, by the same token, accepted the substituted performance. Therefore, summary judgment
in favor of the Trustee is appropriate on the Well Claim, and Catalina has no claim for the value
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of Wells 2, 17, 19 and 32.
An appropriate Order will be entered.
MARK B. McFEELEY
UNITED STATES BANKRUPTCY JUDGE
Copies to:
Douglas R. Vadnais
Timothy J. DeYoung
Attorneys for Trustee
Bank of America Centre
500 Fourth Street NW, Suite 1000
Albuquerque, NM 87103-2168
Frank Ainsa
Attorney for Catalina
5809 Acacia Circle
El Paso, TX 79912
Leonard Martinez-Metzgar
Asst. United States Trustee
P.O. Box 608
Albuquerque, NM 87103
Daniel J. Behles
Attorney for Debtor
225-A Cynthia Loop, NW
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