City of Rio Rancho v. AMREP Southwest Inc.

• Decision Date: 16 September 2011
• Docket Number: Docket No. 32,489,Docket No. 32,486,Opinion Number: 2011-NMSC-037
• Parties: CITY OF RIO RANCHO, Plaintiff-Respondent, v. AMREP SOUTHWEST INC., Defendant-Petitioner. CITY OF RIO RANCHO, Plaintiff-Respondent and Cross-Petitioner, v. CLOUDVIEW ESTATES, LLC, Defendant-Petitioner and Cross-Respondent.
• Court: New Mexico Supreme Court

CITY OF RIO RANCHO, Plaintiff-Respondent,
v.
AMREP SOUTHWEST INC., Defendant-Petitioner.
CITY OF RIO RANCHO, Plaintiff-Respondent and Cross-Petitioner,
v.
CLOUDVIEW ESTATES, LLC, Defendant-Petitioner and Cross-Respondent.

Opinion Number: 2011-NMSC-037
Docket No. 32,486
Docket No. 32,489

SUPREME COURT OF THE STATE OF NEW MEXICO

Filing Date: August 22, 2011
Dated: September 16, 2011

ORIGINAL PROCEEDING ON CERTIORARI
Louis P. McDonald, District Judge

Lastrapes, Spangler & Pacheco, P.A.
Matthew M. Spangler
Jenica J. Jacobi
Rio Rancho, NM

for Petitioner

Montgomery & Andrews, P.A.
Randy S. Bartell
Sharon T. Shaheen
Santa Fe, NM

for Respondent

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ORIGINAL PROCEEDING ON CERTIORARI
Louis P. McDonald, District Judge

Foster, Rieder & Jackson, P.C.
J. Douglas Foster
Travis G. Jackson
Albuquerque, NM

for Petitioner and Cross-Respondent

Montgomery & Andrews, P.A.
Randy S. Bartell
Sharon T. Shaheen
Santa Fe, NM

for Respondent and Cross-Petitioner

Dave Thomas & Associates, P.C. David H. Thomas III
Albuquerque, NM

R. S. Radford
Sacramento, CA

for Amicus Curiae
Pacific Legal Foundation

OPINION

CHÁVEZ, Justice.

{1} In 1985, at the behest of the City of Rio Rancho, Amrep Southwest Inc. recorded a plat for the Vista Hills West Unit 1 (VHWU1) subdivision, granting the City a drainage easement over ten acres identified as Parcel F. In 2004, Amrep sold Parcel F to the Mares group in fee simple, subject to the drainage easement. Mares in turn sold it to Cloudview Estates in fee simple, subject to the same recorded drainage easement. Cloudview asked the City to vacate the drainage easement and subdivide the parcel into thirty lots. The City declined because it found that the City and Amrep had originally intended to perpetually dedicate Parcel F as open space.

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{2} Even if the City and Amrep intended Parcel F to be open space, what effect does the recorded plat designating Parcel F as a drainage easement have on Cloudview's subsequent purchase of Parcel F? Cloudview contends that the recorded plat controls because it was not aware of any unrecorded interests the City had in Parcel F, making Cloudview a good faith purchaser whose ownership is subject only to the City's drainage easement. In addition, Cloudview contends that the City's decision not to vacate the easement and approve Cloudview's subdivision plan was arbitrary and contrary to law, ultimately entitling Cloudview to reasonable compensation because the City deprived Cloudview of any economically beneficial use of the land.

{3} The City responds that Cloudview is not a good faith purchaser because (1) the drainage easement over the entirety of the ten-acre parcel grants fee title to the City because such an easement is a dedication of land for public use under NMSA 1978, Section 3-20-11 (1973); (2) the City has fee title by adverse possession because the City openly possessed the land and had color of title by virtue of the plat; and (3) a drainage easement on the entirety of a ten-acre parcel is the type of ambiguity that should have put Cloudview on notice that it had to diligently investigate whether the City had a claim to title to the land greater than a drainage easement. Finally, the City seeks equitable relief against Amrep for having sold Parcel F in fee simple, despite Amrep's promises to the City and VHWU1 lot purchasers that Parcel F would remain open space in perpetuity.

{4} We conclude that Cloudview is a good faith purchaser whose fee-title ownership interest is subject only to the City's drainage easement for three reasons. First, the plat does not specifically designate Parcel F for public use, and therefore fee title was not conveyed to the City under Section 3-20-11. Second, the City does not have color of title for purposes of adverse possession because the grant of an easement is not the equivalent of granting fee title. Third, the recorded plat unambiguously grants to the City an easement for the specific purpose of drainage, thereby extinguishing any unrecorded interests and relieving Cloudview, which was a subsequent purchaser without knowledge of the unrecorded interests, from its duty to diligently investigate whether the City had other adverse claims to the property title.

{5} We also agree that the City's decision declining to vacate the drainage easement was arbitrary and contrary to law because the City relied on an unrecorded open space easement in declining Cloudview's application. However, because we remand to the City to reconsider Cloudview's application to subdivide Parcel F and vacate the drainage easement, we conclude that Cloudview's inverse condemnation claim is premature.

{6} Finally, we hold that genuine issues of material fact exist with respect to the City's unjust enrichment claim against Amrep, making summary judgment on that count inappropriate.

I. PROCEDURAL BACKGROUND

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{7} After purchasing Parcel F, Cloudview submitted a preliminary plat to the City's Planning and Zoning Board, seeking to subdivide the parcel into thirty lots. The Planning and Zoning Board approved the plat and subdivision. However, after receiving citizen objections, the City Council remanded the approval back to the Planning and Zoning Board for its reconsideration. Cloudview filed another application with the Planning and Zoning Board that included a request for the City to vacate the drainage easement on Parcel F. This time the Planning and Zoning Board did not grant the application because it concluded that the drainage easement implicitly granted the City the right to use Parcel F as open space. The City's Governing Body affirmed the Planning and Zoning Board, adopting verbatim the Planning and Zoning Board's decision and declining to vacate the easement. The Governing Body stated that "the protection of Parcel F as open space provides a valued public use originally made a condition of the development of [VHWU1] that should be continued."

{8} Cloudview timely sued the City in federal district court, alleging due process and equal protection violations and seeking judicial review of the City's decision to decline to vacate the easement. On October 6, 2006, the federal district court dismissed the complaint without prejudice, concluding that the case was not ripe for decision.

{9} Four days before the dismissal, on October 2, 2006, the City sued Amrep and Cloudview in state district court. The City sought to quiet title to Parcel F, contending that fee title to Parcel F was vested in the City. In the alternative, the City sought a declaratory judgment that the City owns a permanent open space easement over the entirety of Parcel F that cannot be vacated and with which no form of development is compatible. The City also sought equitable relief to prevent the unjust enrichment of Amrep and Cloudview that would arise from the development of Parcel F, despite Amrep's promises to the City that Parcel F would be maintained as open space. Cloudview filed a counterclaim seeking reversal of the City's decision not to vacate the drainage easement and for reasonable compensation, alleging in a claim of inverse condemnation that the City's decision deprived Cloudview of any economically beneficial use of Parcel F.

{10} Amrep and Cloudview subsequently filed motions for summary judgment on the City's quiet title claim and the City's request for a declaration that it had a perpetual open space easement. The district court found that the City's only property interest in Parcel F was a drainage easement and that Cloudview was a good faith purchaser for value of Parcel F without knowledge or constructive notice of any adverse interest of the City that is greater than the City's drainage easement. The district court therefore granted partial summary judgment to Amrep and Cloudview, dismissing with prejudice the City's quiet title and declaratory judgment claims.

{11} The district court also granted Cloudview's motions for partial summary judgment on Cloudview's counterclaims. The district court reversed the City's administrative decision not to vacate the drainage easement as "contrary to law and not supported by substantial evidence." The district court granted summary judgment to Cloudview on its inverse condemnation claim based on the City's refusal to vacate a portion of the easement.

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{12} On appeal from the district court, the Court of Appeals reversed summary judgment on the City's quiet title and declaratory judgment claims, concluding that the district court erred by relying solely on the recorded final plat and refusing to consider extrinsic evidence of "what the City and Amrep actually intended by the designation of a drainage easement over the entirety of Parcel F." City of Rio Rancho v. Amrep Sw., Inc., 2010-NMCA-075, ¶¶ 1-2, 15, 148 N.M. 542, 238 P.3d 911. The Court of Appeals also reversed the district court's grant of summary judgment in favor of Cloudview on its counterclaims, concluding that the City's decision was in accordance with the law and supported by substantial evidence. City of Rio Rancho v. Cloudview Estates, LLC, No. 29,510, slip op. at 5 (N.M. Ct. App. June 11, 2010). With respect to the inverse condemnation claim, the Court of Appeals found that there are genuine issues of material fact regarding the nature and extent of the easement over Parcel F. Id. at 19-20. The Court of Appeals explained that "Cloudview purchased the property as a good faith purchaser for value without notice but subject to the easement over the entirety of Parcel F." Id. at 19.

{13} Amrep and Cloudview petitioned this Court for certiorari, and the City filed a conditional cross-petition challenging Cloudview's good faith purchaser status and the timeliness of Cloudview's request for judicial review of the City's administrative decision. We granted each party's petition for writ of certiorari and affirm the Court of Appeals in part and reverse in part.

II. DISCUSSION

A. Cloudview Is a Good Faith Purchaser of Parcel F and Owns Parcel F Subject to...