AMKCO, LTD., CO. v. Welborn

• Citation: 21 P.3d 24,2001 NMSC 12,130 N.M. 155
• Decision Date: 22 March 2001
• Docket Number: No. 25,820.,25,820.
• Parties: AMKCO, LTD., CO., a New Mexico limited liability company, Keeling Petroleum, Inc., a New Mexico corporation, and Keeling Distributing, Inc., a New Mexico corporation, Plaintiffs-Petitioners, v. Mickey D. WELBORN, a single man, Defendant-Respondent.
• Court: Supreme Court of New Mexico

21 P.3d 24

130 N.M. 155

2001 NMSC 12

AMKCO, LTD., CO., a New Mexico limited liability company, Keeling Petroleum, Inc., a New Mexico corporation, and Keeling Distributing, Inc., a New Mexico corporation, Plaintiffs-Petitioners, v. Mickey D. WELBORN, a single man, Defendant-Respondent.

No. 25,820.

Supreme Court of New Mexico.

March 22, 2001.

Shoobridge Law Firm, P.C., William G.W. Shoobridge, Hobbs, NM, for Petitioners.

Templeman & Crutchfield, James E. Templeman, Lovington, NM, for Respondent.

OPINION

FRANCHINI, Justice.

{1} Petitioners Amkco, Ltd., Keeling Petroleum, Inc., and Keeling Distributing, Inc., appeal from a Court of Appeals' opinion requiring Petitioners to remove a portion of a gas station that was constructed on a fifty-eight foot strip of land belonging to Respondent Welborn. In so doing, the Court of Appeals reversed the trial court's application of the relative hardship doctrine. We now reverse the Court of Appeals and remand to the trial court to allow Respondent to choose one of three remedies.

FACTS AND PROCEDURE

{2} Petitioners are entities controlled by Keeling, a fuel distributor in Hobbs, New Mexico. On May 10, 1988, Petitioners acquired a rectangular plot of land measuring 330 by 660 feet on which they planned to build a truck stop or convenience center. After determining that they would only need a 220 by 330 foot tract of land upon which to build the truck stop, Petitioners sold the remainder of the original plot of land to Respondent Welborn for $37,500. As part of the sale, Richard Pettigrew, a professional surveyor, conducted a boundary survey of the two tracts. That survey revealed that a 220 by fifty-eight foot strip of land retained by Petitioners was subject to a highway right-of-way easement. Apparently, although Petitioners received a copy of the Pettigrew survey, they did not notice the easement. Thus, when Petitioners retained the 220 by 330 foot parcel of land, only a 220 by 278 foot area of that parcel was available for development.

{3} In 1993, as Petitioners prepared to build what would be a Conoco Travel Center, they requested a site plan of the project from Ken Hovey Design Group and a survey from John West Engineering. Ignorant of the fact that a 220 by fifty-eight foot strip of Petitioners' property was occupied by the highway easement, the surveyors mistakenly assumed that the southern edge of the highway represented the northern boundary of the property. Both the site plan and the survey positioned Petitioners' plot fifty-eight feet south of its actual boundaries, resulting in a fifty-eight foot encroachment onto Respondent's land.

{4} Neither Petitioners nor Respondent detected the encroachment until after the travel station was completed. In order to obtain financing for the $1,250,000 project, Petitioners requested another survey in 1997. That survey revealed the fifty-eight foot encroachment onto Respondent's land. The fifty-eight by 220 foot encroachment represents roughly nine percent of Respondent's total plot.

{5} After learning of the encroachment, Petitioners immediately notified Respondent. Petitioners have since offered to purchase the strip of land for $14,700, which, according to a certified appraiser, represents the value of the encroached property. Alternatively, Petitioners purchased a strip of land measuring fifty-eight by 330 feet located adjacent to, and with the same frontage as, Respondent's property, and offered to exchange this tract of land for the smaller parcel of encroached property. Respondent declined both offers.

{6} Having failed to resolve the issue out of court, Petitioners sought a declaratory judgment defining the rights of the parties and requiring Respondent to convey the land for its reasonable value or imposing alternative equitable relief. Respondent filed a counterclaim for ejectment and asked that the court quiet title to his property. Following a bench trial, the trial court ruled in favor of Petitioners, concluding that ejecting Petitioners from the land would cause "irreparable, unconscionable damage" while the existing encroachment only causes Respondent "nominal damage." Accordingly, the trial court ordered Respondent to convey the strip of land in question to Petitioners in exchange for its fair market value or the replacement plot. In support of its ruling, the court found, among other things, that: (1) the Petitioners' encroached onto Respondent's land "unknowingly" and "in good faith reliance" on a survey; (2) Respondent did not notice the encroachment despite the fact that he witnessed the construction on his land; (3) the encroachment occurred as a result of a "mutually mistaken state of mind" by the parties; (4) the cost of removal of the encroachment would be disproportionate to the damage sustained by Respondent's property and would be unconscionable in light of the unintentional nature of the encroachment and the enormous cost of removal; and (5) while Respondent's property rights are not irreparably injured by the encroachment, removal of the encroachment would irreparably injure Petitioners, rendering the travel station unviable.

{7} Respondent appealed the trial court's ruling. The Court of Appeals reversed, holding that because the encroachment was "significant," the trial court abused its discretion in ordering Respondent to convey the encroached upon land and erred in refusing to grant an injunction requiring the removal of the structure. See Amkco, Ltd. v. Welborn, 1999-NMCA-108, ¶ 24, 127 N.M. 587, 985 P.2d 757

. The Court also reversed the trial court's finding that the encroachment resulted from a mutually mistaken state of mind between both parties. See id. ¶ 26. On appeal, Petitioners argue that the Court of Appeals improperly refrained from applying the "relative hardship doctrine," which demands that a court determine whether the equities and costs facing each party warrant removal of the encroachment or some other equitable remedy.

THE DOCTRINES OF IRREPARABLE HARM AND RELATIVE HARDSHIP

{8} We review a trial court's decision to grant or deny equitable relief for abuse of discretion. See Navajo Academy, Inc. v. Navajo United Methodist Mission Sch., Inc., 109 N.M. 324, 330, 785 P.2d 235, 241 (1990)

. "An abuse of discretion occurs when the ruling is clearly against the logic and effect of the facts and circumstances of the case. We cannot say the trial court abused its discretion by its ruling unless we can characterize it as clearly untenable or not justified by reason." State v. Woodward, 121 N.M. 1, 4, 908 P.2d 231, 234 (1995).

{9} Encroachments such as the one presently in question often result in the issuance of an injunction ordering its removal. See Heaton v. Miller, 74 N.M. 148, 154, 391 P.2d 653, 657 (1964)

. Injunctive relief is an extraordinary remedy that is not a matter of right, but which rests in the sound discretion of the trial court, to be exercised according to the facts and circumstances of each case. See Hobbs v. Town of Hot Springs, 44 N.M. 592, 595, 106 P.2d 856, 858 (1940). When an encroachment occurs by accident, the issuance of an injunction requiring removal of the encroaching structure has traditionally depended on the application of two doctrines. Under the "irreparable harm rule," an injunction to remove a structure issues only when the injury suffered by the plaintiff cannot be repaired by legal remedy. See Hines Corp. v. City of Albuquerque, 95 N.M. 311, 313, 621 P.2d 1116, 1118 (1980) (noting that "injunctions are granted to prevent irreparable injury for which there is no adequate and complete remedy at law"); Kennedy v. Bond, 80 N.M. 734, 738, 460 P.2d 809, 813 (1969); Heaton, 74 N.M. at 154,

391 P.2d at 657 (holding that in a suit for ejectment, "[t]he usual theory upon which the injunction is granted is the inadequacy of the remedy at law"); see generally 1 Dan B. Dobbs, Law of Remedies § 2.5(2) (2d ed.1993) (describing the factors courts have considered in determining whether legal remedies are adequate and discussing the application of those factors in various types of cases). Under the "relative hardship" or "balancing of equities" doctrine, the decision to remove the encroachment depends on a balancing of the hardships that removal or failure to remove would inflict on each party. See Hines Corp.,

95 N.M. at 313,

621 P.2d at 1118 ("The court is allowed to, and in some situations should weigh equities and hardships."); Sproles v. McDonald, 70 N.M. 168, 174-76, 372 P.2d 122, 126-28 (1962) (applying the balancing of equities doctrine); see generally Dobbs, supra, § 5.10(4) (describing the factors and policies courts have considered when applying the relative hardship doctrine). While these doctrines are not in direct opposition, our cases have not defined the relationship between them. Compare Kennedy, 80 N.M. at 738,

460 P.2d at 813 (applying the irreparable harm doctrine but not balancing the relative hardships) with Sproles, 70 N.M. at 174-76,

372 P.2d at 126-28 (applying the relative hardship doctrine but not engaging in an irreparable harm analysis). Even cases invoking both doctrines fail to explain the relationship between the two or what result would stem from a case in which the plaintiff satisfies one but not the other doctrine. See, e.g., Hines Corp.,

95 N.M. at 311,

621 P.2d at 1118.

{10} We conclude that state law prescribes a two-part test to determine the propriety of injunctive relief for encroachments. The first part of the test is a threshold question. The party seeking the injunction must show that it will suffer irreparable harm if the court denies injunctive relief. Failing the first part of the test ends the inquiry, and the injunctive relief must be denied. See State v. City of Sunland Park, 2000-NMCA-044, ¶ 18, 129 N.M. 151, 3 P.2d 128 (citing Padilla v. Lawrence, 101 N.M. 556, 562, 685 P.2d 964, 970 (Ct.App.1984), and Hill v. Community of Damien of Molokai, 1996-NMSC-008, ¶ 51, 121 N.M. 353, 911 P.2d 861, for ...