Wells Fargo Bank, N.A. v. City of Gallup

Decision Date08 September 2011
Docket NumberNo. 29,198.,29,198.
Citation150 N.M. 706,2011 -NMCA- 106,265 P.3d 1279
PartiesWELLS FARGO BANK, N.A. as Indenture Trustee; Delaware Trust Company, N.A., as Owner Trustee of the ACLC Business Loan Receivable Trust 1998–2, acting through Amresco Commercial Finance, LLC, as Servicing Agent; and ACFI 1998–2, LLC, an Idaho limited liability company, Plaintiffs–Appellants, v. CITY OF GALLUP, Defendant–Appellee,andHans J. Pircher, Individually; Grand Gal, Inc.; and Taxation and Revenue Department of the State of New MEXICO, Defendants.
CourtCourt of Appeals of New Mexico

OPINION TEXT STARTS HERE

Holland & Hart, LLP, Mark F. Sheridan, Jacqueline E. Davis, Santa Fe, NM, for Appellants.

Jane B. Yohalem, Santa Fe, NM, R. David Pederson, Gallup, NM, for Appellee.

OPINION

OPINION VIGIL, Judge.

{1} District courts have discretion under Rule 1–060(B) NMRA to grant relief from final judgments. In this foreclosure action, the district court exercised this discretion to address an issue of first impression: whether a lodger's tax lien under Section 3–38–18.1 of the Lodgers' Tax Act, NMSA 1978, §§ 3–38–13 to –24 (1969, as amended through 2000), has statutory priority over a previously filed deed of trust lien (deed of trust). We hold that the district court did not abuse its discretion, and we agree with its legal conclusion that the lodger's tax lien has a statutory priority over the deed of trust. In addition, the district court concluded that a utility lien filed by the City was entitled to priority over the Bank's deed of trust lien. As to this issue, the Bank concedes that under the operative statutes the City's utility lien is entitled to priority. However, it argues that since the City did not assert its priority before the final judgment was filed and that there are no grounds which justified reopening the judgment under Rule 1–060(B), that we should reverse as to this issue as well. We reject this argument because the district court did not abuse its discretion in granting relief from the final judgment under Rule 1–060(B). We therefore affirm.

BACKGROUND

{2} This appeal arises out of an action brought by the Bank to foreclose on a promissory note secured by a deed of trust on a motel located in Gallup, New Mexico. The City was named as a defendant because it had recorded liens on the property for delinquent lodger's taxes and utility service charges. The City not only did not dispute that its liens were junior and inferior to the Bank's deed of trust, but affirmatively stated that it was “informed and believes [that the liens] are junior and inferior to the [d]eed of [t]rust.” The Bank filed an unopposed motion for summary judgment seeking foreclosure judgment and a declaration that its rights to the property were superior to those of the City. The Bank prepared a foreclosure judgment, approved by the City, which ordered that the property be sold to satisfy the Bank's judgment and further declared that the City's liens were junior and inferior to the Bank's deed of trust. The foreclosure judgment, being approved by all the parties, was filed by the district court.

{3} The parties then stipulated to the entry of an amended foreclosure judgment (final judgment), which was again approved by the City as to form. The final judgment was also approved by all the parties and was filed by the district court. The final judgment ordered that the judicial sale of the property would be postponed so that a sale to the Navajo Nation could be pursued, and it corrected the amount owed to the Bank and the redemption rights of the obligor under the note. The Navajo Nation Tribal Council had approved the purchase of the property in a special session, but it was subsequently vetoed by the Navajo Nation's president. If the sale to the Navajo Nation had taken place, the City claims that it would have resulted in sufficient funds to pay the claims of all the parties, including the City's. The final judgment also reiterated that the City's liens were junior and inferior to the deed of trust.

{4} Sixty-five days after entry of the final judgment, the City filed a motion under Rule 1–060(B)(1) and (6), seeking to correct the final judgment. The City asserted that the final judgment was legally incorrect because its lodger's tax and utility liens had statutory priority over the deed of trust pursuant to NMSA 1978, Sections 3–36–1 and –2 (1981), and Section 3–38–18.1(B). Moreover, the City stated that it had inadvertently failed to assert the priority status of the liens because it believed its claim would be paid in its entirety from the sale of the property to the Navajo Nation. According to the City, once the sale to the Navajo Nation failed, it became apparent that a judicial sale would not provide enough money to pay all the claims and that the City's priority to payment had become critical. The Bank opposed the motion on various grounds, which we subsequently discuss.

{5} The district court agreed with the City that its liens had statutory priority over the Bank's deed of trust, and it ruled that the City's motion would be granted without specifying whether the motion was granted under Rule 1–060(B)(1) or (6). A formal order was entered that granted the City's Rule 1–060(B) motion and further ordered that the City's lodger's tax and utility liens had statutory priority over the deed of trust. The Bank appeals.

DISCUSSIONI. The City's Rule 1–060(B) Motion Was Timely Filed

{6} Asserting that the district court granted the City's motion based on a legal error pursuant to Rule 1–060(B)(1), the Bank contends that the district court had no jurisdiction to do so. Assuming this argument presents a question of jurisdiction, we address the merits. See Rule 12–216(B) NMRA (providing that jurisdiction challenges may be raised for the first time on appeal); see also Smith v. City of Santa Fe, 2007–NMSC–055, ¶ 10, 142 N.M. 786, 171 P.3d 300 ([I]t is incumbent upon the appellate Court to raise jurisdictional questions sua sponte when the court notices them.”). We review this issue de novo. Armijo v. Pueblo of Laguna, 2011–NMCA–006, ¶ 9, 149 N.M. 234, 247 P.3d 1119 (stating that the “determination of whether jurisdiction exists is a question of law which an appellate court reviews de novo”).

{7} The Bank argues from language in Resolution Trust Corporation v. Ferri, 120 N.M. 320, 901 P.2d 738 (1995), and Deerman v. Board of County Commissioners, 116 N.M. 501, 864 P.2d 317 (Ct.App.1993), that all Rule 1–060(B)(1) motions asserting legal error must be filed within the time permitted for an appeal. Ferri, 120 N.M. at 323, 901 P.2d at 741; Deerman, 116 N.M. at 506, 864 P.2d at 322. Since the City's motion was filed sixty-five days after the final judgment, the Bank asserts that it was untimely. See Rule 12–201(A)(2) NMRA (stating that a notice of appeal must be filed within thirty days after the filing of the final judgment). We disagree.

{8} The Bank asks this Court to read Ferri and Deerman as preventing all Rule 1–060(B)(1) motions after the time permitted for an appeal has lapsed. However, we do not read Ferri and Deerman so broadly. These authorities hold that a Rule 1–060(B)(1) motion cannot be filed after the period permitted for a direct appeal has lapsed only when the motion is used as a substitute for a direct appeal or as a means of circumventing the time period allowed for a direct appeal. See Ferri, 120 N.M. at 323, 901 P.2d at 741 (stating that Rule 1–060(B) should not be used as a substitute for appeal nor as a means of circumventing the appeals process); Deerman, 116 N.M. at 506, 864 P.2d at 322 (stating that it is well-settled in New Mexico law that Rule 1–060(B)(1) is not to be used as a substitute for appeal).

{9} However, in this case, the City could not have filed a direct appeal of the amended judgment at the time it was filed by the district court because it was based upon a stipulation by the parties. The City never asked the district court to rule on the applicability of Section 3–38–18.1 until it filed the Rule 1–060(B)(1) motion. As a result, before the motion, the City was unable to appeal the priority issue to this Court. See Rule 12–216(A) (stating that to preserve a question for review, a party must “fairly invoke” a ruling by the district court); Diversey Corp. v. Chem–Source Corp., 1998–NMCA–112, ¶ 14, 125 N.M. 748, 965 P.2d 332 (stating that this Court will not address arguments not preserved for review). Therefore, the district court's consideration of the City's motion was not used to circumvent the appeals process.

{10} Assuming the City's motion was granted under Rule 1–060(B)(1), we hold that the City's motion was timely. See Rule 1–060(B)(6) (stating that motions requesting relief from a judgment pursuant to Rule 1–060(B)(1) must be filed within one year of the judgment).

II. The District Court Did Not Abuse Its Discretion in Reopening the Case

{11} The Bank argues that the district court abused its discretion in granting the City's motion because it characterizes the alleged error in the judgment as resulting from judicial error, which the Bank argues falls outside the ambit of “mistake” under Rule 1–060(B)(1). We are not persuaded. See Koppenhaver v. Koppenhaver, 101 N.M. 105, 108, 678 P.2d 1180, 1183 (Ct.App.1984) (“Precise nomenclature for the motion seeking relief from the finality of a judgment is not controlling; the court must look to the substance of the relief sought.”).

{12} The ultimate issue before us is whether the district court abused its discretion in amending the final judgment whether it was granted under either Rule 1–060(B)(1) or (6). See Click v. Litho Supply Co., 95 N.M. 419, 420, 622 P.2d 1039, 1040 (1981) (“Relief under Rule [1–0]60 is discretionary with the trial judge and will be reviewed only for an abuse of that discretion.”). It is well-settled that to reverse the district court's ruling on a Rule 1–060(B) motion under the abuse-of-discretion standard, the district court's ruling must be “arbitrary, fanciful,...

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