Board of Educ., Gadsden Independent School Dist. No. 16 v. James Hamilton Const. Co.

• Decision Date: 20 December 1994
• Docket Number: P,No. 16,No. 15267,16,15267
• Parties: , 98 Ed. Law Rep. 1037 BOARD OF EDUCATION, GADSDEN INDEPENDENT SCHOOL DIST. NO. 16, and Gadsden Independent School Dist.etitioner-Appellant, v. JAMES HAMILTON CONSTRUCTION CO., Respondent-Appellee.
• Court: Court of Appeals of New Mexico

Page 556

891 P.2d 556

119 N.M. 415, 98 Ed. Law Rep. 1037

BOARD OF EDUCATION, GADSDEN INDEPENDENT SCHOOL DIST. NO. 16 and Gadsden Independent School Dist. No. 16 Petitioner-Appellant, v. JAMES HAMILTON CONSTRUCTION CO., Respondent-Appellee.

No. 15267.

Court of Appeals of New Mexico.

Dec. 20, 1994.

[119 N.M. 416] Beverly J. Singleman, Hubert & Hernandez, P.A., Las Cruces, for petitioner-appellant.

Jeffrey A. Dahl, Clayton E. Crowley, Lamb, Metzgar, Lines & Dahl, P.A., Albuquerque, for respondent-appellee.

OPINION

BLACK, Judge.

In September 1991, James Hamilton Construction Company (Buyer) hired an experienced land developer to determine the feasibility of constructing a residential housing subdivision in Santa Teresa, New Mexico. On December 20, 1991, Buyer signed a document captioned "Agreement For Sale and Purchase of Land" (the Agreement) with the owners of a twenty-eight-acre parcel in Santa Teresa (the Property), Charles and Phyllis Crowder and William Ikard (Sellers).

On May 26, 1992, Gadsden Independent School District No. 16 (the School District) filed a condemnation action on thirteen of the twenty-eight acres subject to the Agreement. In January 1993, the district court entered a stipulated partial judgment awarding Sellers $130,000 as just compensation for the condemned thirteen acres. After a bench trial, the district court held that the Agreement was a binding executory contract, that Buyer had an interest in the land at the time of the taking, and that Buyer was entitled to $180,350 as compensation for its development costs prior to the taking. We reverse.

I. FACTS

The focus of the case is on the Agreement executed by Buyer and Sellers. Under the Agreement, Buyer covenants that it will "comply with all of the laws, rules and regulations of Dona Ana County, New Mexico, pertaining to the subdivision and development of land ... and further to meet the standards and specifications for the installation of water and sewer services of the Santa Teresa Services Company." In addition, Buyer "agrees to provide public street access through the Property to the Sellers' adjoining property." The only other covenant advanced by Buyer is as follows:

Sellers agree to sell and Buyer agrees to purchase the Property for Ten Thousand and No/100 Dollars ($10,000.00) per acre, for a total price of Two Hundred Eighty Thousand and No/100 Dollars ($280,000.00), for the 28-acre parcel subject to the satisfaction of the terms and conditions as are hereinabove and hereinafter set forth. In the event the certified survey to be made by the Sellers increases or decreases the number of acres in the Property, the total purchase price will then be determined by multiplying the actual acreage or fraction thereof by $10,000.00.

The Agreement also gives Buyer forty days from the date of execution, December 20, 1991, "to complete its due diligence effort and verify to its satisfaction all matters pertaining to the Property and to review and approve or reject all matters pertaining to this transaction." Significantly, the Agreement also made provisions for the establishment of an escrow. The escrow paragraph provided that Buyer and Sellers will "consummate this transaction or Buyer may elect to withdraw from this Agreement as provided for in the Letter of Escrow Instructions hereinabove referred to."

The Letter of Escrow Instructions (Instructions), which is incorporated in the Agreement, is also dated December 20, 1991, and indicates that Sellers are depositing three special warranty deeds naming Buyer as grantee. The Instructions also provide that Buyer is to deposit escrow funds as follows:

A. On or before forty (40) days of the date hereof, Buyer may deposit with you, as Escrow Agent, the sum of Twenty-eight Thousand and No/100 Dollars ($28,000.00).

B. On or before forty (40) days of the date hereof, Buyer may also deposit with you a Declaration of Covenants and Restrictions, together with a letter executed by Sellers approving this Declaration of Covenants and Restrictions.

C. On or before six (6) months of the date hereof[,] Buyer may deposit with you, as Escrow Agent, an additional Sixty-six Thousand and No/100 Dollars ($66,000.00).

D. On or before nine (9) months of the date hereof [,] Buyer will deposit with you, as Escrow Agent, an additional Ninety-three Thousand and No/100 Dollars ($93,000.00).

E. On or before nineteen (19) months of the date hereof[,] Buyer will deposit with you, as Escrow Agent, an additional Ninety-three Thousand and No/100 Dollars ($93,000.00). This amount may be increased or decreased to reflect the purchase price of $10,000 per acre or fraction thereof for the actual acreage reflected in the final accepted survey of the Property.

The Instructions then direct the escrow agent to do the following:

In the event, within forty (40) days of the date hereof, Buyer has accepted the terms and conditions of the Agreement identified herein as Item No. 2, and has deposited $28,000.00 with you, as Escrow Agent, you are to maintain this escrow. In the event Buyer fails to deposit the funds or notifies you that it does not intend to close this transaction, you are to return the documents deposited with you to the parties causing them to be deposited with you and cancel this escrow.

There is no dispute that Buyer did not deposit any funds in escrow within the forty days referenced in the Agreement and Instructions. Indeed it is undisputed that at the time of trial in August 1993, more than eighteen months after the execution of the Agreement and attached Instructions, Buyer had never tendered any money for the Property.

The district court found that Buyer completed its due diligence studies and decided to develop the Property as a residential subdivision. To that end, Hamilton searched the title, performed soil testing, did a traffic impact analysis, and worked with an engineer to determine what governmental approvals would be necessary. The Agreement also required the Crowders, as owners of the Santa Teresa Services Company, to issue a commitment to supply water and sewer to the Property. However, Santa Teresa Services was unable to provide water and sewer due to the refusal of the New Mexico Environmental Improvement Division to issue a permit for liquid waste discharge for the subdivision. The testimony was that Charles Crowder therefore suggested that Buyer not deposit any money into escrow until the sewage issue was "cleared up."

Despite the failure to make any payments into escrow, Buyer proceeded to file its application for subdivision approval with Dona Ana County in April 1992. Buyer, however, stopped all work on the subdivision upon being served with the petition for condemnation in June 1992. Buyer then had the Property replatted, minus the thirteen acres condemned by the School District, and decided that the development costs per lot on the remaining land would be too high for the type of subdivision Buyer had envisioned.

The district court found that "[i]f property at the development stage of Hamilton's project were to be marketed, land, hard costs, and soft costs (development costs) and a profit would be recoverable." The district court further found that, at the time the condemnation was filed, Buyer had "direct project costs expended (excluding the land) of approximately One Hundred Sixty-Two Thousand, Four Hundred Sixteen Dollars ($162,416.00)." After adding interest, the district court entered a judgment in favor of Buyer in the amount of $180,350.00.

II. STANDARD OF REVIEW

The parties argue over what interest Buyer had in the Property, if any, under the terms of the Agreement and Instructions at the time of the condemnation taking. "[W]hen the issue to be determined rests upon the interpretation of documentary evidence, this Court is in as good a position as the trial court to determine the facts and draw its own conclusions...." City of Raton v. Vermejo Conservancy Dist., 101 N.M. 95, 103, 678 P.2d 1170, 1178 (1984). Therefore, "an appellate court is not bound by a trial court's [legal] interpretation of a written document, where the interpretation rests solely upon the wording of the document." Ortiz v. Lane, 92 N.M. 513, 518, 590 P.2d 1168, 1173 (Ct.App.1979) (Hernandez, J., specially concurring); see also Schueller v. Schueller, 117 N.M. 197, 199, 870 P.2d 159, 161 (Ct.App.1994) (stating that district court interpretation is not binding on appellate court).

III. WHEN THE AGREEMENT IS READ TOGETHER WITH THE ESCROW INSTRUCTIONS, HAMILTON MAKES NO BINDING PROMISES AND PROVIDES NO CONSIDERATION.

The School District argues that the Agreement was not a binding contract because Buyer failed to make any payment into escrow. Under the terms of the Agreement as it incorporates the Instructions, we agree.

The Agreement refers to "the Letter of Escrow Instructions, a copy of which is attached hereto and made a part hereof." In addition to the fact that the Agreement expressly incorporates the Instructions, when two such documents refer to each other, they are properly construed together. Master Builders, Inc. v. Cabbell, 95 N.M. 371, 373- 74, 622 P.2d 276, 278-79 (Ct.App.1980), cert. denied, 95 N.M. 426, 622 P.2d 1046 (1981). When these two documents are read together, it is clear that Buyer did not provide any consideration under the Agreement and was not legally obligated to perform under its terms. The Agreement thus provided Buyer no legal interest in the Property at the time of the taking.

Buyer argues that the Agreement is an executory contract. The School District maintains that the Agreement, when read with the incorporated Instructions, is no more than an option. "Executory contracts are those contracts on which performance remains due to some extent on both sides." In re Priestley, 93 B.R. 253, 258 (Bankr.D.N.M.1988). An option to purchase is a contract where the property owner gives another the privilege of buying property within a specific time on terms...