ECI v. City of Santa Fe, 20,549.

• Decision Date: 21 November 2001
• Docket Number: No. 20,549.,20,549.
• Citation: 2002 NMCA 3,131 N.M. 450,38 P.3d 891
• Parties: ENVIRONMENTAL CONTROL, INC., Plaintiff-Appellant, v. CITY OF SANTA FE, a municipal subdivision, Ron Curry, individually and as City Manager of the City of Santa Fe, Cindy Padilla-Cessarich, individually and as Director of the Solid Waste Management Division, Defendants-Appellees.
• Court: Court of Appeals of New Mexico

38 P.3d 891

131 N.M. 450

2002 NMCA 3

ENVIRONMENTAL CONTROL, INC., Plaintiff-Appellant, v. CITY OF SANTA FE, a municipal subdivision, Ron Curry, individually and as City Manager of the City of Santa Fe, Cindy Padilla-Cessarich, individually and as Director of the Solid Waste Management Division, Defendants-Appellees.

No. 20,549.

Court of Appeals of New Mexico.

November 21, 2001.

Certiorari Denied January 7, 2002.

Mariana G. Geer, Randolph B. Felker, Felker, Ish, Ritchie & Geer, P.A., Santa Fe, NM, for Appellant.

Carl J. Butkus, Gary J. Cade, Butkus, Gay & Jahner, P.C., Albuquerque, NM, Peter Dwyer, Santa Fe, NM, for Appellees.

Randall D. Van Vleck, Santa Fe, NM, for Amicus Curiae New Mexico Municipal League, Inc.

Certiorari Denied, No. 27,263, January 7, 2002.

OPINION

CASTILLO, Judge.

{1} Environmental Control, Inc. (ECI) appeals the dismissal of its complaint against the City of Santa Fe (the City) and two of its employees challenging an ordinance that prohibits commercial collection of all garbage within the city limits. We affirm.

BACKGROUND

{2} ECI is a refuse collection disposal company headquartered in Santa Fe, New Mexico. ECI and its predecessors-in-interest have collected refuse within the City for approximately twenty-four years. From at least the early 1980s, the City divided its solid waste into two categories: Class 1 and Class 2 garbage. It reserved unto itself the exclusive right to gather and collect Class 1 garbage and allowed commercial collection of some types of Class 2 garbage.

{3} ECI first filed suit against the City in 1984 when the City originally proposed to amend its garbage ordinance to eliminate commercial collection of Class 2 garbage. ECI's predecessor-in-interest sought a restraining order to prevent the implementation of the ordinance and was granted a preliminary injunction. Litigation ensued and finally, in 1989, the parties entered into a settlement agreement (Settlement Agreement) containing a number of provisions, one of which allowed ECI to engage in the collection of all classes of garbage including Class 2 for a minimum of four years. ECI no longer collects Class 1 garbage but continues to collect Class 2 garbage. In 1993 ECI and Allied Waste Industries, Inc. merged. Prior to the consummation of the sale, the parties requested and received approval for the merger as required by the Settlement Agreement.

{4} In 1996 the City passed two ordinances relating to its refuse disposal system. The first authorized the issuance of revenue bonds (bond ordinance). During the discussion at the August 14, 1996, council meeting at which the bond ordinance was passed, ECI's operating general manager asked about the effect of the bond ordinance language on ECI's hauling of Class 2 garbage. The city staff told him that the bond covenant language would not prohibit ECI from hauling Class 2 garbage. Four months after passage of the bond ordinance, the City published notice of its intent to adopt a second ordinance, the 1996 Solid Waste Ordinance. This ordinance removed any distinction between classes of garbage thereby prohibiting private hauling of Class 2 garbage within the city limits. ECI did not attend the meeting at which the ordinance was passed because it contends the City did not give ECI individual notice, and it was unaware that the City was considering an ordinance that would eliminate the commercial collection of Class 2 garbage. In early 1997 the City informed ECI that effective April 1, ECI would no longer be permitted to collect Class 2 garbage within the city limits. Shortly thereafter, Councillor Montano asked that an amendment to the 1996 Solid Waste Ordinance be drafted to allow private hauling of Class 2 garbage but withdrew his request at the same meeting because of procedural problems. No similar amendment was ever considered by the city council.

{5} ECI objected to the 1996 Solid Waste Ordinance and filed suit against the City for civil rights violations pursuant to 42 U.S.C. § 1983 (Count I), breach of contract (Count II), breach of covenant of good faith and fair dealing (Count III), inverse condemnation (Count IV), and estoppel (Count V). ECI's position is that it should be able to continue collecting Class 2 garbage or to be compensated for the taking of its business. The City responded by filing motions to dismiss. Relying primarily on the language and effect of the Settlement Agreement, the district court granted the City's motions and dismissed the case. We affirm.

DISCUSSION

I. Standard of Review

{6} In reviewing a motion to dismiss for failure to state a claim under Rule 1-012(B)(6) NMRA 2001, we take the well-pleaded facts alleged in the complaint as true and test the legal sufficiency of the claims. Blea v. City of Espanola, 117 N.M. 217, 218, 870 P.2d 755, 756 (Ct.App.1994); Envtl. Improvement Div. v. Aguayo, 99 N.M. 497, 499, 660 P.2d 587, 589 (1983). We review rulings on such motions de novo, accepting all well-pled factual allegations as true and resolving all doubts in favor of the sufficiency of the complaint. Wallis v. Smith, 2001-NMCA-017, ¶ 6, 130 N.M. 214, 22 P.3d 682. Under this standard of review only the law applicable to such a claim is tested, not the facts which support it. Envtl. Improvement Div.,99 N.M. at 499,660 P.2d at 589. Because the Settlement Agreement provides the principal basis for the decision in this case, first we will review its terms and then we will address ECI's arguments.

II. 1989 Settlement Agreement

{7} ECI attached a copy of the Settlement Agreement to the complaint as Exhibit B. At the core of the Settlement Agreement is language permitting ECI to collect all classes of garbage as defined in the city's ordinance for a minimum period of four years from the date this lawsuit is dismissed. The lawsuit was dismissed in April 1990. ECI and Robert Haspel, its sole shareholder, were required to obtain approval by the City for any sale, transfer, or alienation of the majority ownership and control of ECI. The City, without admitting any liability, agreed to pay ECI and Haspel $100,000. In addition, the Settlement Agreement authorized the City to "enact whatever ordinances or regulations its legal counsel determines are necessary to put the terms and conditions of [the] agreement into effect." There are other terms regarding a number of requirements not germane to this appeal. ECI correctly states that the Settlement Agreement does not contain express provisions specifying a maximum term, a termination date for the agreement, or a specific method of termination. As to the ordinances in question, ECI acknowledges in its brief in chief that the 1984 ordinance had "exactly the purpose and effect" as the 1996 Solid Waste Ordinance which is the subject of the present lawsuit.

III. Constitutional Arguments (Count I and Count IV)

{8} ECI makes three basic constitutional claims in Counts I and IV of its complaint. In urging reversal, ECI first argues that the City has taken its property, specifically ECI's customers and the revenues they generate, without just compensation. U.S. Const. amend. V, XIV, XV; N.M. Const. art. II, § 20; 42 U.S.C. § 1983 (1996). In the alternative, ECI argues that the City has effectively condemned its property thus, entitling ECI to damages. N.M. Const. art. II, § 20; NMSA 1978, §§ 42-8-1 to -29 (1907, as amended through 1975). ECI also asserts that its Fourteenth Amendment due process rights were violated: it claims a violation of substantive process rights because the Solid Waste Ordinance, to the extent it eliminates the private hauling of Class 2 garbage, is arbitrary and capricious and is not a valid exercise of police power; it claims a violation of procedural due process rights because passage of the 1996 Solid Waste Ordinance deprived it of property without notice and opportunity to be heard. U.S. Const. amend. XIV; N.M. Const. art. II, § 18.

{9} All of ECI's constitutional arguments are dependent on a determination that the operation of its garbage collection business within the city limits is considered property for purposes of constitutional analysis. Recognizing this essential nexus, ECI cites to a number of out-of-state cases standing for the proposition that an interest in a business and the revenues it generates are property to which constitutional protections apply. See Kimball Laundry Co. v. United States, 338 U.S. 1, 11, 15-16, 69 S.Ct. 1434, 93 L.Ed. 1765 (1949)

(concluding that governmental taking of Laundry's trade routes, e.g., customer lists and continued patronage, required just compensation); Young v. Bd. of Pharmacy, 81 N.M. 5, 9, 462 P.2d 139, 143 (1969) (recognizing that right to engage in a profession or business is a constitutionally protected property interest); Roberts v. Bd. of Embalmers & Funeral Directors, 78 N.M. 536, 538, 434 P.2d 61, 63 (1967) (stating that the right to practice a profession or vocation is a property right); State of Texas v. Thompson, 70 F.3d 390, 392-93 (5th Cir. 1995) (determining that plaintiff had a property interest in operation of aerial applicator business cognizable in a Section 1983 claim); Cowan v. Corley, 814 F.2d 223, 227-28 (5th Cir.1987) (holding that an operator of a wrecker business had a protectable property interest in his business); Coeur D'Alene Garbage Serv. v. City of Coeur D'Alene, 114 Idaho 588, 759 P.2d 879, 882 (1988) (holding that the city's elimination and usurpation of the garbage company's customers was a taking, entitling the garbage company to just compensation).

{10} While ECI's general statement of the law is correct, it fails to recognize that its right to continue operating a garbage collection business within the City is subject to the terms of the Settlement Agreement, thus, distinguishing it from the cases cited. ECI's right to collect all types of garbage within the City expired in April 1994, at the conclusion of "a minimum period of four years" from the dismissal of the lawsuit...