Agua Fria v. Rowe

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 Please see Rule 12-405 NMRA for restrictions on the citation of unpublished memorandum opinions.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. 1 IN THE COURT OF APPEALS OF THE STATE OF NEW MEXICO 2 AGUA FRIA SAVE THE OPEN SPACE 3 ASSOCIATION, an unincorporated 4 association, 5 Plaintiff-Appellant, 6 v. NO. 32,350 7 JAMES C. ROWE, and 8 C & S RESORT PROPERTIES, INC., 9 Defendants-Appellees. 10 APPEAL FROM THE DISTRICT COURT OF LINCOLN COUNTY 11 Jerry H. Ritter, District Judge 12 Alex Chisholm 13 Albuquerque, NM 14 for Appellant 15 Adam D. Rafkin, P.C. 16 Adam D. Rafkin 17 Ruidoso, NM 18 for Appellees 19 MEMORANDUM OPINION 20 GARCIA, Judge. 1 {1} Plaintiff, Agua Fria Save the Open Space Association, appeals from the district 2 court’s judgment in favor of Defendants following our decision to remand for further 3 proceedings in Agua Fria Save the Open Space Ass’n v. Rowe, 2011-NMCA-054 , 149 4 N.M. 812 , 255 P.3d 390 (Agua Fria I). In Agua Fria I, we held that the district court 5 erred in granting partial summary judgment in favor of Defendant Rowe because the 6 meaning of certain language contained in a restrictive covenant—specifically, the 7 extinguishment provision—was ambiguous as applied to a particular tract of land. Id. 8 ¶¶ 17, 25. We remanded for further proceedings with instructions that Plaintiff could 9 present evidence regarding the circumstances surrounding the adoption of the 10 extinguishment provision and the original developers’ purpose and intent with respect 11 to the tract of land at issue. Id. ¶¶ 25, 28. Defendant C & S Resort was added as an 12 additional party when the case was remanded. The district court ruled in favor of 13 Defendants on remand and Plaintiff appeals from that decision. We affirm. 14 BACKGROUND 15 {2} This dispute concerns the possible development of residential townhomes on 16 a 7.23 acre tract of land known as the Country Club Tract located in the Agua Fria 17 Subdivision in Ruidoso Downs, New Mexico (the Subdivision). Id. ¶ 2. The 18 Subdivision is subject to restrictive covenants recorded with the Lincoln County clerk 19 by the original developers on July 7, 1954. Id. Section 3(B) of the restrictive [2] 1 covenants describes the Country Club Tract as follows: 2 The Country Club Tract may be used for a hotel and/or club house and 3 commercial activities for profit, which generally accompany such 4 establishments, such as restaurants, bars, rooms and halls for dancing, 5 tennis courts, swimming pools, fishing, boating and other athletic events 6 and activities operated in connection with such hotel or club house only. 7 Section 4(b) of the restrictive covenants, which concerns amendment or 8 extinguishment of the restrictive covenants, states in pertinent part: 9 Provided, however, that at any time hereafter any of said covenants or 10 restrictions in whole or in part . . . may be alleviated, [amended], released 11 or extinguished as to any block or tract by written instrument duly 12 executed, acknowledged and recorded by three fourths of the owners of 13 said block or tract voting according to front foot holding, each front foot 14 counting as one vote . . . . 15 {3} After Defendant Rowe commenced development of the Country Club Tract, 16 Plaintiff filed a complaint in district court seeking to enforce the restrictive covenants 17 and enjoin Defendant from developing the Country Club Tract. Defendant Rowe 18 claimed that he had extinguished the restrictive covenants with respect to the Country 19 Club Tract pursuant to Section 4(b). The district court granted partial summary 20 judgment in favor of Defendant Rowe, concluding that he had properly extinguished 21 the restrictive covenants with respect to the Country Club Tract. The issue of whether 22 the homeowners in the Subdivision had been induced to purchase land based on the 23 original developers’ representations that the Country Club Tract would remain open 24 space was tried to the jury, and the jury found in favor of Defendant Rowe. Plaintiff [3] 1 appealed to this Court, arguing, among other things, that the district court erred in 2 concluding that Defendant Rowe had extinguished the restrictive covenants with 3 respect to the Country Club Tract. 4 {4} In Agua Fria I, we concluded that the extinguishment provision is ambiguous 5 as applied to the Country Club Tract. 2011-NMCA-054, ¶ 17 . The provision could be 6 interpreted as applying to the Country Club Tract because it applies to “any block or 7 tract” and the Country Club Tract is a tract. See id. Alternatively, it could be 8 interpreted as not applying to the Country Club Tract because it requires owners to 9 vote according to front foot holding and thus seems to contemplate a subdivided block 10 or tract, which the Country Club Tract is not. See id. We rejected a rule of strict 11 construction and held that the intent of the parties controls the interpretation. Id. ¶ 24. 12 We concluded that summary judgment was improperly granted and remanded to the 13 district court for consideration of the intended meaning of the extinguishment 14 provision at the time of its adoption. Id. ¶ 25. 15 {5} Following our decision in Agua Fria I, a bench trial was held in the district 16 court. Plaintiff presented evidence supporting its interpretation of the extinguishment 17 provision as inapplicable to the Country Club Tract. The district court rejected 18 Plaintiff’s interpretation and entered judgment in favor of Defendants. Plaintiff 19 appeals from this decision. [4] 1 DISCUSSION 2 {6} Plaintiff contends the district court erred in concluding that the extinguishment 3 provision applies to the Country Club Tract. [BIC 11] Plaintiff also contends the 4 district court erred in entering judgment in favor of Defendants because Defendants 5 did not introduce any evidence supporting its interpretation of the extinguishment 6 provision. [BIC 19] We review the district court’s factual findings for an abuse of 7 discretion and its legal conclusions de novo. See Ponder v. State Farm Mut. Auto. Ins. 8 Co., 2000-NMSC-033 , ¶ 7, 129 N.M. 698 , 12 P.3d 960 ; see also Sabatini v. Roybal, [9] 2011-NMCA-086, ¶ 6 , 150 N.M. 478 , 261 P.3d 1110 (“Whether a district court has 10 correctly construed a restrictive covenant is a question of law which we review de 11 novo.”). 12 {7} Plaintiff concedes that there is no direct evidence regarding the intended 13 meaning of the extinguishment provision at the time of its adoption. Plaintiff argues, 14 however, that the original developers must have intended for the Country Club Tract 15 to be exempt from the extinguishment provision because the original plat and 16 restrictive covenants designated the Country Club Tract as open space and the 17 developers advertised the Subdivision by promoting the lake and open space. To 18 support its argument, Plaintiff introduced into evidence pictures of the Country Club 19 Tract at the time lots were sold by the original developers; newspaper advertisements [5] 1 promoting the lake and stream located on the Country Club Tract; and multiple deeds 2 conveying lots in the Subdivision. 3 {8} Consistent with this evidence, the district court specifically found that the 4 developers advertised the lots on the Subdivision as “includ[ing] a private lake for 5 swimming and fishing.” However, the district court was not persuaded that the 6 developers intended for the Country Club Tract to be exempt from the extinguishment 7 provision. The district court concluded that Plaintiff’s evidence did not resolve the 8 ambiguity and interpreted the extinguishment provision in favor of free enjoyment of 9 the property, consistent with its plain language. The district court reasoned that “[t]he 10 mechanism of voting ‘according to front foot holding’ logically can be exercised by 11 a sole owner of a tract.” 12 {9} We perceive no abuse of discretion in the district court’s factual findings and 13 no error in its legal conclusions. Where language contained in a restrictive covenant 14 is ambiguous, we apply our standard rules of interpretation. See Sabatini, 2011- 15 NMCA-086, ¶ 12. First, “[w]e must give the words in a restrictive covenant their 16 ordinary and intended meaning.” Id. Next, “[w]e construe the language strictly in 17 favor of the free enjoyment of the property and against restrictions, but not so strictly 18 as to create an illogical, unnatural, or strained construction.” Id. (internal quotation 19 marks and citation omitted). Finally, “we will not read restrictions into covenants by [6] 1 implication.” Id. (internal quotation marks and citation omitted). 2 {10} We agree with the district court that these rules of construction support 3 Defendants’ position that the extinguishment provision applies to the Country Club 4 Tract. This interpretation gives the words “any block or tract” their ordinary meaning, 5 as applying to any tract. It allows for free enjoyment of the property in a way that is 6 not illogical, unnatural, or strained. And it does not require us to read into the 7 extinguishment provision an intent that was different than the language used by the 8 original developers of the subdivision.1 9 {11} Plaintiff cites Knight v. City of Albuquerque, 1990-NMCA-067 , 110 N.M. 265 , [10] 794 P.2d 739 , in support of its position, but that case is inapposite. In Knight, we held 11 that the district court did not err in issuing a declaratory judgment delineating the 12 boundaries of a golf course and limiting the use of that property to a golf course, park, 13 or similar open space. Id. ¶¶ 1, 5. There, it was undisputed that: “(1) the original 14 developers . . . used the golf course as a selling tool . . . and (2) plaintiffs relied on the [1] 15 We note that our holding is consistent with our Supreme Court’s decision in 16 Cree Meadows, Inc. v. Palmer, 1961-NMSC-086 , ¶ 8, 68 N.M. 479 , 362 P.2d 1007 . 17 In Cree Meadows, the Supreme Court addressed restrictive covenants worded in the 18 same way as the restrictive covenants here, involving a subdivision similar to the one 19 here, involving a similar country club tract and including an identical extinguishment 20 provision. Id. ¶¶ 3-8 (holding that the extinguishment provision applied to the tract 21 designated as the “Country Club Tract” but did not apply to the area denominated as 22 a “golf course.”) [7] 1 continued existence of the golf course in purchasing their properties from the 2 developer.” Knight, 1990-NMCA-067 , ¶ 2. These issues were disputed in the present 3 case, were decided against Plaintiff in the jury trial, and are not the subject of this 4 appeal. The only issue that remained following our decision in Agua Fria I concerned 5 the intent of the original developers with respect to the extinguishment provision. [6] 2011-NMCA-054, ¶ 25 . Plaintiff was unable to produce any direct evidence regarding 7 the intent of the developers and we agree with the district court’s resolution of the 8 ambiguity in the extinguishment provision. 9 {12} Though Plaintiff does not identify it as a separate issue, Plaintiff also argues 10 that the district court erred in entering judgment in favor of Defendants because 11 Defendants did not present any evidence supporting its interpretation of the 12 extinguishment provision. Plaintiff contends that where, as here, a contractual 13 provision is ambiguous, both parties bear the burden of proof. We do not believe that 14 Defendants were required to introduce any additional evidence supporting its position. 15 See Trujillo v. Sonic Drive-In/Merritt, 1996-NMCA-106 , ¶ 20, 122 N.M. 359 , 924 16 P.2d 1371 (leaving the decision regarding additional evidence and argument on 17 remand, if any, to the discretion of the district court). Our remand in Agua Fria I 18 specifically invited Plaintiff to introduce evidence supporting its interpretation of the 19 ambiguous extinguishment provision and Plaintiff was unable to present sufficient [8] 1 evidence to convince the factfinder. The district court correctly reviewed all the 2 evidence and resolved the ambiguity by applying the appropriate rules of construction. 3 It was not error to rule in favor of Defendants without receiving further evidence to 4 support Defendants’ position. See Phelps Dodge Tyrone, Inc. v. N.M. Water Quality 5 Control Comm’n., 2006-NMCA-115, ¶ 37 , 140 N.M. 464 , 143 P.3d 502 (recognizing 6 that on remand the same result may be reached by the factfinder and it may take 7 additional evidence, in its discretion, as it deems reasonable and necessary). As 8 discussed above, we perceive no error in the district court’s reasoning or the result it 9 reached. 10 CONCLUSION 11 {13} We affirm the district court’s judgment in favor of Defendants. 12 {14} IT IS SO ORDERED. 13 ________________________________ 14 TIMOTHY L. GARCIA, Judge [9] 1 WE CONCUR: 2 _________________________________ 3 JAMES J. WECHSLER, Judge 4 _________________________________ 5 M. MONICA ZAMORA, Judge