7TH JUDICIAL DISTRICT COURT

SIERRA COUNTY NM
FILED IN MY OFFICE
3n612A16 8:54:41 AM
MARY MORA
DISTRICT COURT CLERK
SEYENTH JUDICIAL DISTRICT COURT lsl Mary Mora 31162416
COUNTY OF SIERRA
STATE OF NEW MEXICO

HOT SPRINGS LAND DEVELOPMENT, LLC,

A New Mexico Limited Liability Company, and
HOT SPRINGS MOTORPLEX DEVELOPMENT, LLC,
A New Mexico Limited Liability Company,
Plaintiffs,

v. No. D-721 -CV-2014-00073

CITY OF TRUTH OR CONSEQUENCES,

A New Mexico Municipality,
Defendant.

ORDER GRANTING JOINT MOTION TO STAY

THIS MATTER, having come before the Court on Parties' Joint Motion to Stay, and

THIS COURT, having considered the Motion, FINDS THAT the Motion is well-taken, and

should be GRANTED.

IT IS THERFORE ORDERED THAT all matters in the above-referenced matter will be

stayed and the hearings set for March 16,2016, March 30, 2016 and April 20,2016 herein will

be vacated.

Dated:

Judge, Seventh Judiciai District Court

Submitted by:

Luis G. Stelzner
Jaime L. Dawes
STELZNER, WINTER, WARBURTON, FLORES,
SANCHEZ, & DAWES, P.A.
P.O. Box 528
Albuquerque, New Mexico
I gs(0stel zrJerl arv. eorn
jd(g)stelznerlaw.com

Approved telephonically on 3 I l4l2Afi by :

Robyn Hoffman
P.O. Box 836
Tijeras, New Mexico 87059

James P. Sullivan
BR.ENNAN & SULLIVAN, P.A.
128 East DeVargas
Santa Fe, New Mexico 87501
 JUDTCTAL DTSTRtCT COURIi
SIERRA COUNTY NM
FiLED rN MY OFFiCq
911512016 2:23'.47 PM
MARY MORA
DISTRICT COURT CLER4
{

SEYENTH JIIDICIAL DISTRICT COURT lsl Mary Mora 911512016';

E

COIINTY OF SIERRA f,

i
STATE OF NEW ME)ilCO i

HOT SPRINGS LAND DEYELOPMENT, LLC,

A New Mexico Limited Liabilify Company, and
HOT SPRINGS MOTORPLEX DEyELOPMENT, LLC
A New Mexico Limited Liability Company,

Plaintiffs,
Ys. No. D-721-CY-2014-00073

CITY OF TRUTH OR CONSEQIIENCES,

A New Mexico Municipality,

Defendant.

PLAINTIF'X'S' MOTION TO ENX'ORCE SETTLEMENT AGREEMENT

COME NOW Hot Springs Land Development,LLc, and Hot Springs Motorpiex

Development, LLC (col1ectively, Hot Springs), by and through their attoineys, Stelzrer, Winter,
'Warburton,
Flores, Sanchez & Dawes, P.A., and move to enforce the settlement agreement

reached by the parties during mediation. As grounds for this Motion, Hot Springs states:

I. INTRODUCTION

This matter concerns Hot Spings' planned development of the City of Truth or

Consequences' municipal airport and surrounding area. As part of its developrnent efforts, Hot

Springs dealt extensively with the City and entered into multiple agleements with the City. Over

a course of years, Hot Springs expended considerable funds, had iand annexed into the City, and

took signiflcant action in flrrtherance of its deveiopment plans and agteements with the City.

The City, in contrast, made muitlple misrepresentations, delayed, interfered with Hot Springs'

deveiopment plans, and breached its agreements. Hot Springs was ultimately forced to initiate
this action, in which it asserted multiple claims for breach of contract, and a claim for breach of

the implied covenant of good faith and fair dealing.

The City now attempts to back out of yet another agreement. On March 11 , 2A15, the

parties attended a mediation conducted by the Honorable Wendy E. York, and were fortunately

able to reach an agreement resolving this matter. That agreement contemplated that the City

would pay amonetary settiement to Hot Springs, and consent to the annexation of Hot Springs'

property into another jurisdiction of Hot Springs' choice. The parlies executed a memorandum

of the setllement, at the mediation. A copy of that letter agrcement is attached hereto as

Exhibit A.

Hot Springs understands that the City Commission approved the agteement following the

mediation, and the City has never taken the position that the parties failed to enter into a

setLlement agreement at the mediation. Nonetheless, during the course of Hot Springs' efforts to

memorialize the parties' agreemenl in vniting the City has obstructed the parties' agreement,

and has refused to perforrn it. Indeed, the City expressly refused to provide assurance regarding

its commitment to the settiemeat agreement. See Email from Jaime Dawes to RobynHoffman

(April 29,2076), and attached proposed assurance letter, attached hereto as Exhibit B; Email

from Robyn Hoffrnan to Jaime Dawes (1VIay 13, 201A, aftached hereto as Exhibit C.

As justification for its refusal to perform, the City has raised unwaranted concerns

regarding the propriety of ailowing Hot Springs' property to be annexed into another jurisdiction.

Notwithstanding the City's Commission's approval of the settlement agreement, the City now

speculates that it might lack authority to "deann.*'lHo, Springs' property. Any mistake by the

City as to its authority to perform the settlement agleement would, however, not permit the City

to rescind the parties' settlement agreement. And the Crty's purported concem is in any event
unfounded. Hot Spings merely seeks to have its property annexed into the nearby municipality

of Elephant Butte. Such arurexation is expressly allowed by applicable New Mexico 1aw, even

though the property is currently part of the Cify of Truth or Consequences. Because Elephant

Butte is willing to annex property at issue, there is no need for the City to "deannex" it.

The issue of authority to deannex is accordingly nothing more than a distraction that the

City has used to interfere with the settlement agreement. The Court should not permit such

interference, but rather, should enforce the parties' settlement agreement.

II. TIIE COURT SIIOTILD ENFORCE TIIE PARTIES' SETTLEMENT

AGRTEMENT.

A. The Law Favors Enforcement of Settlement Agreements

"The historical and current public policy of this state is to favor the settlement of disputed

claims. This policy applies to the settlement of lawsuits." Gonzales v. Atnip,1984-NMCA-128,

\ l, 692 P .2d L343 (internal citation omitted). "The settlement of a iawsuit will be enforced by
the courts." Gonzales,1984-NMCA-128, lT 1, "A trial court has the power to summarily

enforce a setllement agreement entered into by the litigants while the litigation is pending before

rt." The Gates Corp. v. Banda Chemical Indus.,4 Fed. Appx. 676,682 (10th Cit. 2001); see also

Starry. Roche,33 Fed. App.432,433 (1Oth Ck.2002). AldwhenapartyseeksreliefAoma

settlement, it bears the burden of persuasion when another seeks to enforce it. Gonzales, 1984-

NMCA-128,1T 1.

Enforcement of a settlement agreement is proper even if the parties intended to later

reduce it to wliting or memorialize the agreement in a more formal writing. See Brockrnqn v,

Sweetwater County Scltool Dist, No. l,1gg4 U,S. App. LEXIS 10095, *7 (101h Cir. 1994)

('Neither party indicated at any time that the settiement was not final until reduced to writing,

Theretbre, we agree with the district court that the oral settlement agreement was enfotceable
notwithstanding the absence of a written agreemenl."); Taylor v. Gordon Flesch Co.,793 F.2d,

858, 862 (7th Cfu. 1986) (although parties exchanged written drafts of the settlement agreement,

oral agreement was enforceable-there was no indication that their agrcement was conditioned

on the acceptance of a written version of the agreement).

B. Any Mistake By The City As To Its Authority Would Not Allow It To

Rescind The Seftlement Agreement.

The Court should apply the sound authority favoring enforcement of settlement

agreements here to require the City to abide by its agreement. The City has never d.enied that the

parties reached that agreement, but nonetheless refuses to take action to comply with it,

purportedly concerned as to whether it has authority to 'odeannex" properLy from its boundaries.

The City attempts to support its concem with a highly equivocal opinion letter authored by

attorney John L. Appel, which is attached hereto as Exhibit D. As discussed in more detaii

below, that letter fa1ls far short of calling into question the City's ability to abide by the

setflement agreement. But importantly, even if lv{r. Appel's letter raised serious concerns

regarding the City's authority to "deannex," it would not provide a means for the City to avoid

the settlement agreement.

The parties' settlement agreement was not contingent upon the City obtaining a legal

opinion supporting its authority to dearurex the properfy. The City's post-settlement questions

regarding its authority at most suggest it could have entered into the agrcement under the

mistaken impression that the iaw would more-cleariy support its power to deannex the properfy.

But a mistake-whether mutual or unilateral----only prov]des grounds for rescission of a contract

if the party seeking rescissj.on did not bear the risk of the mistake.

In Tytin Forlrs Ranch v. Broolcs,1995-NMCA-128,907 P.2d 1013, the New Mexico

Court of Appeais applied provisions of the Restatement (Second) of Contracts concenring

unilateral and mutuai mistakes, observing that aparty may obtain reiief in the fonn of rescission

of a contract only if that parff dtdnot bear the risk of that mistake, ,See 1995-NMCA-128, ':Tl[ 8-

I i. in that case, the affected pafiy was not, as a mattet of law, entitied to rescission on the basis

of unilateral or mutua1 mistake because it bore the risk of the rnistake. Id. \It 10-11,

Such is the case here. The City is clearly the party most aware of its powers and any

constraints on its authority, and therefore, bore the risk of any ambiguity in its power to deannex

Hot Springs' propecy or consent to its annexation into another jurisdiction. The City

consequently cannot avoid the settlement agreement even if it entered into the agreement under

the mistaken assumption that it could deannex the property, See Twin Forla Ranclt, 7995-

NMCA-128,'lT,1T i o-1 1.

C. The City IIas Not Demonstrated That It Cannot Perform The Agreement

The City's newfound concern about its authority to deannex, whether genuinel or simply

a means to back out of the settlement agreement, does not affect the validity of the agreement.

Rather, "la]n agreement of settiement will not be set aside just because it later prov-es to have

been unwise or unfortunate for one party to enter into the agreement." See Montano v. New

Mexico Real Estate Approisers 8d.,2009-NMCA009, n 12,200P.23d 544,547. Having entered

into the agreement, "the parties are bound by its provisions and must accept both the burdens and

benefits of the contract." Id. If one of those burdens is facing hypothetical challenges concerrring

the propriety of its approval of annexation of the properly into another julisdiction, then that is a

burden the City must bear. And an order enforcing the parties' negotiated agreement wiil of

LfUe City has never suggested that any individual or entity has any interest in or motivation to challenge
deannexation ofthe properf at issue.
course reduce or eliminate the potential for, and potential success of, those hypothetical

challenges.

It is by no means clear, however, that the City faces any such burden. Mr. Appel's letter

does not demonstrate that the City lacks authority to perform the settlement agreement. Instead,

the letter suggest that the City should, at a minimum, have included additional provisions in the

agreement, such as requirlng consent of potentialiy affected political subdivisions, requiring Ho1

Springs "to pay its share of taxes" to suppott any bonds issued by the City during the time that

Hot Springs' lands were within the City's boundaries, and allowing the Crty to "deterrnine

whether the reduction in taxable land area could be considered a violation of fany] bond

covenants." SeeLetter from Joha L. Appel to Juan A. Fuentes, City Manager (Apri1 5,2016),

Exhibit D, at 5. But again, the City is bound by the provisions of the agreement it entered-

and those provisions do not include any of the contingencies advocated by Mr, Appel. See

Montano, 2009-NMCA009, lJ 1 2.

The parties' agreement similarly did not include a contingency addressing the essence of

Ml. Appei's letter: that "there is no clear authority for . . . de-annexation" and "quite possibly

the courts could determine that no such authorif exists." See Appel Letter at 1. Yet, even

making the questionable assumption that the agreement assumed authority on the part of the City

to "deannex," Mr. Appel's letter does not demonstrate that the City lacks such aulhorif , lndeed,

Mr. Appel's opinion begins with the observation that "New Mexico simply has no statutes

reiating to de-arinexation. of lands from a municipalrty." Appel Letter at2. Mr. Appel argues

fi'om that absence of express authority that the City may not have the power to deanlex Hot

Springs' property.
 In support of his opinion, Mr, Appel proclaims that "Courts in other states have

commonly declined to find [an] implied local power" to deannex, derived from the power to

annex, citing just one 1958 decision fi'om Ohio. See Appel Letter atZ. \/tt. Appel

acknowledges, however, that "[t]here is a line of Nebraska cases in which the Supreme Court of

that state has considered petitions for 'disconnection' of iands . . . &om municipalities, allowing

the action to be brought 'either under statute or colnmon 1aw."' Id. Arrdthat authority supports
deannexation here, where Hot Springs seeks to annex its undeveloped land receiving no

significant services from the City into another jurisdiction. See Kuebler v, Kearney, 39 N.'!Y,2d

415,418 Q.ieb, 1949) ('when an actioa is brought, either under a statute or at common law, to

remove agricultural lands from within the corporate limits of a city or vi11age, on the basis that

justlce and equity require that it be discornected therefrom, il is sufficient to show that the lands

sought to be removed have no unity or cornmunity of interest with such city or village and

receive few, if any, benefits by reason thereof ').

1\4r. Appel also argues that the City at best could deannex the property it annexed thlough

the petition method set forth in NMSA 1978 $ 3-7-17, but not the properby annexed through

involvement of the Municipal Boundaly Commissio t, See Appel Letter at 4. The premise of

this argument being that there is an absence of express authority for the Municipal Boundary

Commission to undo what it has done.2 tr4r. Appel notably cites no authority holding that a

statutoty delegation of power to act does not include the power to teverse action. And the

delegation of authority to the Municipal Boundary Cornmission is not in any event so limited.

, The City has simultaneously argued that the agreement to deannex did not include ploperty annexed
through the Municipal Boundary Commission. Hot Springs maiatains that all its property shbuld be
annexed into another jurisdiction. But the City camot argue both that the agteement did not pertain to the
property annexed through the Municipal Boundary Commission, and that the Commission's supposed
lack of authority to undo the annexation supports its positiori that the deannexation cannot be performed.
See Cig of Albuquerque y, State Municipal Boundary Commission, 2002-NMCA-024,[12,47

P.3d 933 ("The state legislature has the power to create and to desh"oy municipal corporations,

and to enlarge or diminish their boundaries, with or without consent oieither the municipalities

or the affected residents. . . . The legislature delegated its authority to determine municipal

boundaries to the Commission."); Piedrav. State Trans. Comm'n, 2008-NMCA-089, li 17, 188

P,3d 106 ("The authority of an administrative agency is not limited to those poweffi expressly

granted by statute, but inciudes all powers that may be fairly implied therefrom,") (intemal

ellipsis omitted).

Accordingly, if }dr. Appel's letter is intended by the City to excuse its non-performance,

it fails miserably in doing so-the highiy equivocal opinion fa1ls fm short of establishing that the

Clty in fact lacks authority to deannex Hot Springs' property.

D. New Mexico Law Authorizes Annexation Of IIot Springs' Property Into

Another Jurisdiction.

Moreover, the goal of the portion of the settlement agreement concerning deamexation

was for Hot Spr{ngs to have the property a:rnexed into the nealby municipality of Elephant

Butte.3 Hot Springs has entered into discussions wilh Elephant Butte in that regard, and

Elephant Butte has expressed a willingness and ability to annex the property. See Letter from

Andrew pinzen, City Manager of Elephant Butte to Bing Kearney (August 15,2076), attached

hereto as Exhibit E. Hot Springs is prepared ready and able to pursue that annexation. See

Afftdavlt of Bing Kearney, attached hereto as Exhibit F.

a
l4r. A.ppel's letter assurnes that the property would be deannexed such that it would be in an
unincorporated area ofSierra County, and based onthat assumption, includes sorne discussion about
needing consent of Sierra County. New Mexico Statute $ 3-7-3 permits annexation by the Cif of
Elephant Butte without consent of Siena County.
 Elephant Butte may altnex the properly without any l'deannexation" by the City of Truth

or Consequences. Thus, to the extent there is any merit to the CIT's contention that
it tikely

lacks authority to deannex the property, the Coud can reform the parlies' agleement to
require

the Cif to merely support the annexation of the property into another
jurisdiction . See Twin

Forlrs Ranch,1995-NMC A-128, fl 11 (refonaation is a remedy for mutual mistake).

In stark contrast to the absence of law on which the City relies to support its argument

conceming deannexatj.on, there is applicable New Mexico 1aw that would pemit the city of

provides:
Elephant Butte to annex the properly at issue, New Mexico statute Section 3-7-1(B)

Territory may be annexed to a municipalrty by any one of the three methods of

annexatlon provided for in Sections 3-7-5 throudb3-7-18 NMSA 1978 except
where iimitations of annexation are provided by law'

Only one statute places a limitation on the abiliry of a municipality to annex

ten'itory located within another jurisdiction. In particuiar, NMSA 1978 $ 3-J -3 , entitled

"Limitati.on on annexation" ptovides:

No municipaiity may altnex teritory within the boundary of another municipality

or tenitory within a class A county with a population of more than three hundred
thousand persons unless approved by the board of county commissioners for that
county.

Statutes such as this one are to be liberally construed. Leavell v. Town of Texico,1957-NMSC-

to
0g1, T 5, 316 P,2d247 ("The power to create and to destroy municipal corporations, and

enlarge or diminish their boundaries is universaliy heid to be solely and exclusively the exercise

of legislative power." Such statutes ale to be libera11y construed in favor of the municipaiity. ' , .

of the municipality's action.").

[A]nd every reasonable presumption is given to the vatidity
may
And interestingly, untii a 2003 amendment, this provision merely stated: "No municipality

annexterritorywithintheboundaryof anothermunicipality." SeINMSA 1978 $ 3-7-3 (2002)'

 Accordingly, the Legislature has removed aprohibition against annexation of terdtory in

another judsdiction, and now expressly a11ows municipalities to annex territory within the

boundary of another jurisdiction. That authority is not statutorily limited, except in the case of

class A counties or municipalities with populations greater than three hundred thousand persons.

Neither Sierra County nor the City of Truth or Consequences has a population even approaching

300,000 persons, and Siena County is not a class A county.

Thus, there is no statutory restriction on the ability of another municipality to annex

ter:ritory included in the City of Truth or Consequences, Because $ 3-7-1 expressly allows

annexation in the absence of any restriction, Elephant Butte clearly has the authority to annex the

properfy. The City can certainly support the arnexation of Hot Springs' properfy into the city of

Elephant Butte,4 and doing so is at least implicitly required by the setdemeat agreement. When

asked by Hot Springs to affirm its commiknent to the settlement agreement, and to support

annexation into Elephant Butte, however, the City refused to do so. See Email from Jaime

Dawes to Robyn Hoffrnan (Aprii 29 ,2016), and attached proposed assurance letter, attached

hereto as Exhibit B; Email frorn Robyn Hoffinan to Jaime Dawes, attached hereto as Exhibit C.

The City accordingly not only is improperly refusing to honor the settlement agreement, but also

is overtly obstructing Hot Springs' efforts to accomplish the annexation into another

municipality.

UI. CONCLUSION

The City's excuse for failing to perform the parfies' settlement agreement fails on multiple

grounds. The City cannot demonstrate that it in fact lacks the power to deannex Hot Springs'

properLy, and is bound by the agreement even if that authority is questionable. Furthermore, its

a
Even if the City owned the propedry, its consent would be sufficient to a1low the property to be annexed
by Elephant Butte. See NMSA 1978 g 3-7-4.

10
,

performance of the agreement does not depend on any formal action to deannex the property, but

instead, mereiy requires ccnsent to the annexation of the properfy into another jurisdiction-an

action that is expressly allowed by New Mexico iaw, The Court should accordingly compel the

City to comply with the settlement agreement.

Respectfully Submitted,

/s/ Jaime L. Dawes

Luis G. Stelzner
Jaime L. Dawes
STELZNE& WINTER, WARBURTON,
FLORES, SANCHEZ & DAWES, P.A.
P. O. Box 528
Albuquerque,NM 87103
Teleptrone: (505) 938-777 0
lgs@stelznerlawcom
jd@stelznerlaw.com
I HEREBY CERTIFY thatthe
foregoing was served electronically
through the Seventh Judicial District
Court's electronic fi1e and serve system
to the following:

RobynHoffinan
Robyn Hoffinan, Esq. LLC
P.O. Box 836
Tijeras, New Mexico 87059
Email : thehofinanlawoffice@.gmai1. com

James P. Sullivan
Brennan & Sullivzrn, P.A.
128 East DeVargas
Santa Fe, New Mexico 87501
Email: i amie@brerursull.com

on the 15th day of September,2016.

/s/ Jaime L. Dawes

JAIME L. DAWES
S:\TXILIB\15043!dotiqs\Hot Springs Motiotr Etrforce Scttlemot AJftfteil\motioo b enforce ssttlere* agrEmqtt firal,dofr

11
a

Hot Springs LandDevelopment, LLC

And Hot Springs Motorplex Development
LLC,
cAsE NO.CY 2A74-00473
Plaintiffs,
YS,
City ofTruth or Consequences,
STIPULATION FOR SETTLEMENT

Defendant,

This case having comebefole Wendy Yolkfor a mediation, aadthe parties having confen:ed, it

is hereby stiprilated that this matter is deemed settied pulsuant to the foilowing telms and conditions:

1, This settlement is contingent upon defendant deannexing plaintiffs' fee simple pilopetty,

whioh was annexed oa August 8, 2008. If the property is deannexed, defendant will pay to

plainti{fs andto their.attomey the total sum of $100,000.00. If the ploperty is deannexed,

there wil1be a full settlement aad con:promise of this acticn and a release and discharge of

any and all claims and causes of action made in this action, and a lelease and dischalge of

any and all claims aad oauses of action arising out of the events ol incidents refefled to in

the pleadings in this action'

Z. The parties will sgbmit ajoint motion to vacate pending hearings and stay the procee'1jngs

until the deafflexation plocess is complete.

3, There is no admission of liability.

4, The parties agree thatthis is a ftll settlement and compramise of the action and agree fhat

it shall fully and forpver dischalge and release ail claims and causes of aotion, rphether

now knovrn or now unknown, which the parties have against one aaother,

EXHIBIT
 suoh clairns and
ro+ or nerease of alr
standard
fl*thu ag(ee to siga a mutual of
5 , The parties
to
.a
dofsndaat a standard
foru
deliver
a$oe to sign and
and plaintiffs
.ause$ of action of $100'000'
deannexation andpayment
of the aotionupon
Dismissal withpieJudioe
costs'
fees aud court
wiil bear its own attorneys'
6. Each parry

Date: 3/1L/16
a

Frorn: Jaime Dawes

Sent: Friday, April 29, 201,611,:44 AM
To: Robyn Hoffman (thehoflmanlawoffice@smail,com)<thehoffmanlawoffice@gmail.com>
Cc: lgs@stelzneriaw.com; Ja mie Sullivan <iamie@brennsull.com>
Subject: Hot Springs v. Truth or Consequences

Robyn,

ln light of the issues the City has raised regarding annexation of Hot Springs' land into another
jurisdiction, Hot Springs has developed some concern regarding the City's compliance with the
settlement agreement. Hot Springs is accordingly hoping that the City can provide assurance that it is
committed to carrying out the agreement. ln that regard, attached for your review is a letter Hot
Springs would like the City Manager to execute providing assurance regarding the City's compliance with
the settlement agreement.

Best regards,

Jaime L. Dawes
Stelzner, Winter, Warburton, Flores, Sanchez & Dawes, P.A.
3O2 8th Street NW, Suite 200
Albuquerque, New Mexico 871A2
(sos) e3e-7770
(sos) 938-7781
id @stelznerlaw.com
www.stelzneriaw.com

CONFIDENTiALITY NOTICE: The information contained in this e-mail message may contain privileged or
confidential information intended for the use of the Individual or entity named above. If the reader of this
message is not the intended recipient, or the employee or agent responsible to deliver it to the intended recipient,
you are hereby notified that any dissemination, distribution or copying of this communication is strictly
prohibited. lf you have received this communicatjon in error, immediately notifl7 the sender by telephone at 505-
938-777A and return the original message to the sender and Stelzner, Winter, Warburton, Flores, Sanchez &
Dawes, P.A,

EXHIBIT
Bing Keamey
Nick Lamorielio

c/o Luis G. Stelzner

Stelzner, Winter, Warburton, Flores, Sanchez & Dawes, P.A.
P, O, Box 528
Albuquerque, NM 87i03
lgs@stelznerlaw.com

Re: Hot Spdngs Land Deveiopment, LLC et al. v. City of Truth or Consequences

Dear Mr. Kearney and Mr. Lamolj.ello:

On behalf of the City Commission of Truth or Consequences, please 1et this letter assure

Hot Springs Land Development and Hot Springs Motorplex (collectively, HSLD) that the City of

Truth or Consequences is fi.r11y and whole-heartedly in support of the Settlement Agreement

entered into by the City of Truth or Consequences wilh Hot Springs Land Development

Corporation on March 71,2A16, with the assistance of Wendy York as mediator. The City

Commission very much wants to execute that Settlement Agreement and bring an end to this

litigation. In that regard, the City Commission has approved the Settlement Agreement, thus

removing the only contingency.

Oa behalf of the City Commission of Truth or Consequences, please let this letter serve

as assurance that the City of Truth or Consequences will perform its part of the Settlement

Agreement which it has entered into with Hot Springs Development Corporation. The City of

Truth or Consequences has received $200,000 fiom HSLD, and in exchange will retain $i00,000

of the $200,000 as a settlement which all parties believe is in the best inlerest of the City and

HSLD. The City of Truth of Consequences will fully support the annexatjon of the propeffy

described. in Exhibit A to the Settiement Agreernent into another jurtsdiction. The City of Truth
or Consequences fi:rtber agree$ to act in good faith at ali times andto fir1ly support the removal

of this properJy fromthe City of Truth or Consequences jurisdiction.

CITY MANAGER
From : Robyn Hoffm an [m a ilto :thehoffma nlawoffice @gma il. com]
Sent: Friday, May 13, 2016 10:21AM
To: Luis Stelzner <LG5@S!elZ!eIl-Bw.9q_!q>; Jaime Dawes <id@$SiZned_a_!U.co-E>
Cc: Jamie Sullivan <iamie@brennsull.com>; Kerrie Allen <.8elfjt@-blen-!!Ulko.!1>
Subject: HOT SPRINGS v T or C: Proposed letter re: Settlement Agreement

Jaime and Luis,

We have confered with the City Manager, and he is not comfortable signing the letter which you
proposed in you e-mail of April 29,2016. As, I have previously indicated, the matter of
annexationldeannexation appears to be impossible under the current state of New Mexico
law. You have not provided anylegal analysis to the contrary.
If you wouid like to submit another proposal for settlement of the litigation which does not entaii
annexation/dearrnexation, we will present it to the City Commission at their next meetiag on
May 24.
Piease 1et me know how you wish to proceed.
Thank you.
Robyn

Robyn Hofftnan, Esq., LLC

Attorney at Law
P.O. Box 836
Tijeros, New Mexico 87059
(sqs) 280 49s0

exHtelT
!o
!
d
 C0PPLER LAW FIRM, P.C.
A PROFESSIONAL CORPORATION

FRAi\x R".C0PPLER r\TTORNII'S AND COUNSELORS AT L,t]Y TELEPHONE

Grn,rr,n A. Coppr-un* 645 DON CASPARAVENUE (sos) e88-s6s6
Jorri\ L. A?PEL SANTA F'E, NE\Y I\{EXICO 8?505
I(,frt Cot l,len TELECOI'IER
Tuolr.rs R. LoG,tN (s0si 988-s70d

* also licensed in Te.ras

Aplil5, 2016

PRIYILEGED ATTORNEY-CLIENT COMMUNICATION

alld
PRIYILEGED COMMUNICATI ON REGARDING C OMPROMISE NE GOTATIONS
UNDER RULE 11-408(A.)(2) NMRA

Via e-rnnil attachment

Juau A. Fuentes, City Managel
City of Tnrth or Consequences
505 Sims Stteet
Trutir ol Conseqnences, NM 87901

Re: Legal Consirlerations Regarding Pcssible "De-Annetation" of Laatls Previously

Anncxcd by the City
Onr No.: 4130.03

Dear Mr'. Fuentes:

I'his leLter provides off opinion regarding the legal circumstances and corrsideratiotts
relating to a possible "de-annexatior:." (also in l,arious states described as "sepailation" or
"detacilnenf' or "disconrrection') of lands owned by Hot Springs Land Developrnent (*HSLII')
which \\rcr'e annexed into the City of Tnrth or Consequences (tlre "Cif/') in 2003 and 2008. We
conclude that there is no clcar authorify for such tle-annexation, quite possibly the courts
could determine that no such authorify exists, and eyen if it does exist Urere are a number of
procerlural and contractual issues thaf woukl need to be addressed before such e de-
anncxation could be accompllsherl.

We need to emphasize, at the outset that this appeam to be a matter of fu'st impression ir
New Mexico, and it is difficult to predict (a) whethel a conrt of conrpetent jurisdiction, if presented
lvith tlre qnestion, nonld flnd that there is aly autlrority at all for srich a de-amexation, or (b) if
so, lvirat procedures u,ould be necessary to accornplish it. We arc not aware of any prior
detaclur:ents or de-aunexations of lands fl'orn rvithin municipal boundaties in New lvlexico (as
distinct fl'om disincorporation of the nlrnicipality in its entiretl.), and our lcsealch has not
identifled any Newlvlexico cases involving such an effort.

A. In New Mexico, there is no statutory author{fy for de-anuexafion of lands from a

nrunicipalitS,.

EXHlBM

f;O
t.

PRTVILE GED C OMIVI.UNICATTON Juan A, Fuentes

April5,20l6
Page 2

Uulike flany states, Ner,v Mexico simply has ro statutes relating to de-annexation of iands
fi'onr a mrudcipality. Cf 2 Eugene McQullin, The Law of Municipal Corporations $$ 7.39.13 to
7.39,18 (3{ ed., 2006 rer,.) (with nurnerous citations to decisiorts in jrnisdictions providing such
statr$ory autholity). Because there is no Nelv Mexico statutory atttholization for a municipality to
de-annex terr{tory, {t strong orgument coaV be made that there is no such rttthorlty. The City
here is not a chatter or "home rule" nrunicipality. The general rule is tirat non-clurter
municipalities Lave only tirose legislative porrers exprcssly delogated to thern by the legislature or
included aurong the general police powers that are necessary to provide for the public health, safety
and .welfare. See Aparlnm v. ?{/ilsort, 1974-NMSC-0'7!,86 N.M. 516, 525 P.zd 876; New
tuIexicnnsfor Free Entey, u City of Sonto Fe, 2006-NMCA-007, 138 N.M, 785,726 P.3d 1i49
(refleciing ihat "a lrome rule nrunicipality uo longer has to look to the legislaturc for a grant of
pox,eL to act, but only looks to legislative enacturents to see if any express lirnitaticns have been
piaced on tireir powu to aei.")

We have found no Nerv Mexico cases deciding wlrether there is an irnplied power to de-
annex ten'itory that may be iruputed fi'om the explicit powels to annex ten'itory that are fotrnd in
Chapter 3, Articie 7, NMSA 1978, either fol nr.unicipalities in general or ever for home rule
rnruricipalities, Courts ir:. other states have conulonly declined to find such an implied loca1 power,
holding that the matter is one of state-wide significance ancl therefore one tirat must be addlessed
bythe state legislahrre. Thus the Ohio Sripreme Court, notiug that the detachnrent of teuitory floru
a rnunicipaiity rnould inevitably result itr a modification of tlre boundaries ot responsibilities of
other political subdivisions of tire sfate,lreld:

fllhe detaclunent of tertitory flom a rnr:nicipality is not a sribject rvhich

fails within the sphere of iocal self-goveulnent zurd to be Ieft to the rvhirns of each
munici.pality, but is a matter rvlrich rcquires the establishment of a urifoun
procedure throtrghout the state and is exclusively rvithin the coatrol of the General
Assembly.

Yiltugeof Beachwoot{v, Bd, afElectiorts afCuythoga Cowtqt,148N,E.2d 921,923 (Ohio i958).

Consequently, we consider it likeiy that a New Mexico coutt if presented with the
question, could find that there is no authority for de-annexation or cletasirment of teuitoly fi'orn a
muriicipality, shott of a general or special act of the Nelv Mexico legislatue.

B. There is limited persuastve authorify for a possible'rcommon larv" or equltable polYer

of rIe-annexation.

In a few cases, state courts have found a mttrdcipal power for de-anttexatiou of lands, at
Ieast upon the application of the landowner, rvithout necessariiy relying on specifio statutory
authority. There is a line of Neblaska cases in which ihe Supreme Coult of that state has
considered petitions for the "disconnection" of lands, genela.lly agr'icttltuml 1ands, fl'om
nritnicipalities, allolving tire action to be brotight "either rurder a statrrte ot at comttton law,"
PRIYILEGED COMIVITJNICATION Juan A. Iuentes
April 5, 2016
Page 3

I{ueblerv, Cltlt otKennrcjt,39 N.V/,zd 415,418 (Neb. 1949). Ho$'ever: tlre Coutt's analysis
appears generally based on equitable plinciples and the Nebraska statutes rather than coilrnron 14u.,
the determination of whetlrer a particular "discorurection" slrould be pernritted being based on
wlrether 'Jristice and equit5," so requile. Kuelsler,39 N.W,2d at 41?-18; Shelton Gtoin & SapplS,
Co, v, Yilkge of Sheltort, 134 N,W.2d 815, 816-17 (l'{eb. 1965); Dugttt v, Village of Greel4t,
295 N.W.2d 115, i17 (Neb, 1980), NotablS despite rcference to actions brougirt rurder the
colnrnofl law, the Neblaska Corirt in these cases also relies on a statrtory provision ploviding, in
pertiuent part, that "[i]f the corut flnds in favot' of the petitiorer or petitioners 01' any of them and
thatjustice and equify require that such tenitory, 01'any partthereof, not less tltan trventy acres be
disconnected fi'orn said eity, it shal1 enter a decree accordingly." I{uebler,39 N.W.zd at 417,
quottngNeb. Rev. Stat, $ 17-414 (1943). Elo$.eyer, tlre Coufi goes on to opine:
*[T]he statute
above referred to does not provide an exclusive remedy for disconnecting ten'itory fi'otn a city or
village. Such relief may oil proper pleading and proof be ganted by the district coult in the
exercise of the genelal chancely and eonmon law po'wers confelred upon it by the Constitittion."
Kaebler,39 N.Wzd at 417.

Under tire Nebraska "conrmon law" or eqtritable approach, "disconnection" or de-

annexation of ialcls may be peuuitted upon the colr1t's consideration of whether "the lands are
exclusively agricnlhual, the existence or lonexistence of a nnit;, or conrmunity of interest with
sucir city or villagq the benefits, if any, received fiom the city 01' village, and tlre effect u1:on the
corrrl:actness of tlre city or village by tlie resulting change of its corporate lirnits." Dugtrn,295
N.W,2d at 717, (tuotitlg Shelton Grnin & Sapply Co. 134 N.W,2d at 816 (syllabt:s of the Coutt).
Thus, the Nebraska courts will geuerally permit de-aunexation of agrtcultural lands teceiving few
or no nmnicipal services, llrt rvill deny de-annexation if the lands are not exclusively aglicultrnnl
or are receiving (or at least have available) significani urunicipal utility and othel services. .9ee
Kuebler,39 N.W.2d at 417^18 (disconnection peunitted); Drlgw,295 N.W,2d at 116-17
(disconnection denied where lands were lot exclnsively agricultutal and benefitted fi'om the
availabilit5, of si gn i ficar{ nrsnicipal selvices),

C. Possible argurnents that de-annexation should be pellritted in the present case.

In the present oase, an argument could be made that de-atnexation of HSLD lands should
be peulitted and recognized because it is at the specific reqnest of the landowners, only ihose
landowners will be dilectly affected, the properties are exclusively unimproved range lands, and
at the present tirue the lands are receiving only limited City services (poiice, fire plotection and
en1e1'gel1cy services, lirnited elech'ical services ayailable but not being used).

Since the de-annexation rvorild be proposed in the cortext of setiler:rerrt of pending

litigation, the District Conrt could possibly be requested to for:aally applove and order tlie de-
aurexation ofHSLD lauds inrelia[ce o11a theory that such judicial power exists underthe com11ol1
law, citing the Nebraska cases mentioned above. As with tlreNebraska cases> the argrinrent could
be nrade that the lands are rcceiviirg limited benefils, if any, fi'orn their inclusion in tlie City, and
therefore justice and equit), rec$tire that de-annexation be pernritted,
PRTWLEGED C OMMUNICATION Juan A. Ftrentes
April 5, 2016
Page 4

Again, we nrust ernphasize that the success of such arguments for de-annexation based on
equitable considerations is by oo means certain. Therc is no presently recognized "common law"
po\\rer of de-annexation i.n Nerv Mexico, it is questionable rvhetllel' the Disttict Court rryould
recognize srrch a porF/el'j and it is also questionabie ra4rether it rvordd be tecognized by a higher
court ifaccepted by the District Court but challenged in a separate action or on appeal.

D. Procedural and other mflttcrs thnt ryoultl neecl to be taken into account if de-
annexafion is atternpterl.

Even assnming that a "conrmon law" ol implied power of de-aonexation can be found to
exist, it appears to ris that tirere are very significant prtccedut'al obstacles to effecting a de-
amexation of the HSLD lauds. These obstacles are particnlady high lvith rcspect to tlte 2003
amexation.

2003 Annexation: Tlrc 2003 annexation was accomplished by tlre Municipal Eoundary
Conrnrission method. ,See NMSA t978, $$ 3-7-11ti:rougii 3-7-16. The lvftrnioipal Boundary
Conunission entered its Order of Amexation for the territoiy involved, after a heating on the
merits,onJuly3,2003, ItappealstoustirattheOrdelofAmexationcouldberevokedorrcversed
only by an action ofthe Municipal Boundary Comrnissior, emd tltere is no stotutoty ct$horityfor
tht Mutticipal Bounr{nry Cotturrission to enter such rttt oriler. Since the Murricipal Boundaty
Cornmission is a cteahrte of statrte, it has only the powers granted to it by the legislatr:re, and they
nrust be shictly construed. The City liaving (very reasonably) used the Mudcipal Bcunclary
Commission method to accomplish the 2003 annexation, it appears to us that the City and tlre
prcsentlandowrers are borilrd by the 2003 decision and the Municipai Boundary Cotnmission has
no powff to reverse it. Frrtlreunore, since the 2003 annexation irvolved a significant land area
ral subsequettly acqufued by HSLD (apparently inclndirrg the nrunicipal airport), the goal of de-
annexing HSLD latds witlrout affecting lands olned by oihers, as to the 2003 annexatiou, camrot
be accomplished merely b), a reversal of tire oi'iginal action. It miglrt be possible to petition for an
amended order of the Mnnicipal Bonndar;, Comrissionthatwould change lhe area of the oliginal
annexation so as to exclude the lands subsequently acqriired by i-ISLD, assumfurg that the
lemainder' (non-I-ISLD lands) is still corrtignous rvith tlre City boundaries as the5. existed before
tire 2003 zuurexation. However, n e think tire Municipal Borurdary Corrunission might reasonably
conclnde tlut it has no statrfiory power to entff such an amended ordel having the effect of de-
amrexing lands some thirteen yearc after they were originaily incorporatsd furto the City.

2008 Annexntion: It
appeats, based on the docunrents we have avaiiable to us, that the
2008 arurexation rvas accomplished by the petiliou nrethod set forth in NMSA 1 978, $ 3-7 -17 , and
invoived only lalds olvned at the time by I{SLD ot an associated entity uuder the same
management, Assmning that therc exists a comnron-law ol implied nrrinicipal polvel of de-
ar:nexation (,tee extea<led discussion above), therr it lvotiid appeal that a petition of the larrdouner
ancl an ordlrance of tlte City Cornmission de-annexing tlre lands would be procednrally sufficient
PRTYILEGED COMMT]NrcATION Juan A, Fuentes
Aplil5,20l6
Page 5

to acconrplish a de-amrexatiorl of tlre lauds amexed in 2008, so iong as there is no legaL challenge
tc the action.

Othcr polifical subdivisionsl At the very least, if auy de-annexation is attenrpted, it will
be necessary to have the approral (implicii or explicit) of Sierra County fol suc,h actiott, because
upon de-annexation tire responsibility for services plesently pror.ided by the City in tire area (at
least police, fire protection and emergency services) will devolve ou the County. Also, if tlie City
is preseirtly uairtaining roads in tlte area, then the parties wili have to ensrue that Sierra County
is tvilling to take over such maintenance, or else tire City will have to enter into a merrroratrdrun of
rurclerstanding or joint po\Ters agreement nnder s.hich the City nill coutinue to nraintainthe roads
(and possibly provicle other seruices) even though the area is no longer rvithin the City bou*daries.

Ct{, rlebt: To tlre extent tirat the Crty has issued bonrls duling tlre time lhat tlre HSLD
lands were wittrin the City boundaries, HSLD xrculd be obligated to pay its shate of taxes to
sr:pport the bonds. (a) As to revenue boncls supported by gross receipts taxes, n'e understatd tirat
Urere is no economic activity presentiywithiltlie HSLD atea, so this s,otrld not constittte grounds
for a challenge that other'taxpa;'ers will be negatively affected by any decreaseri revellues.
HoweveL, (b) as to general obligatious supported by ad l'alorern properfy taxes (lf any), the
City sholrl<i examine tlre bond tlanscript (particular{y tlre cot enatrts in tlre bold ordinance and tlrc
borid purchase agreenlent) to deternriue whetirer the reduction in taxable laud area could be
considered a violation ofthe bond coveflants, leadiug to either a technical defarrlt on the bonds or
the leed to obtain approval fium tlre purchasers of the bonds. Also, thele is the possibility of a
successf.rl chalienge by other taxpayers claiming that tlreir rates will incrcase because of the
rednced tax base after tfie HSLD lands are lenoved. This could setve os on wennefor rny (i1y
ttxptlltsy to ckollenge s d*nntevttion of the HSLD lands, possibly rtith success, even if ull lhe
otlter issues refutirtg to lhe de-sttne-tiliotr ctrn be oyetcofile. Such a taxpal'er lara'srrit could thus
beconre the avenue to chalienge the de-annexation based ou lack of statutory or recognized
cornlnon-lar.r, authority for such a nl[nicipal action in New Mexico, ol' possibly on otlier theories,

E. Conclusions.

Taking all of the foregoing into account, we conclttde that:

(1) There is no cleat Nerv Mexico autlrolity fol rle-atrnexatiori of lands by a mttrricipality, and
quite possibly a court presented with the question would find that such de-anuexation is
not legally possible under present iaw.

a) Proceduralln such rle-annexation ir: the present case could only be accompiished upon
agreenrent :nitir Sieua Cotmty and, as to the lands annexed in 2003, b), seeking and
obtaining a revised order of tlre Municipal Boundary Cornmissiol approving a lesser
annexation that does not include the lands subsequently acquired 1ry HSLD'
P1UYILEGED C OMMUNICATION Juan A. Fuentes
April 5, 2016
Page 6

(3) Given the foregoing, ule connot conclude tvith anlt {tigft level of probttbilily that le-
nnn*ration af HSLD lanis ns proposer{ is either legily pemdssible or proctically
feasible, Flowever', that conclusion does not preclude the possibility of seeking au act of
the legislature providing statutory authority for de-annexationutdel conditions that rvould
permitthe City to de-annex the I-ISLD lartds,

Very truly youls,

COPPLER LAW FIRM, P.C.

ffi/htu(
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frrr;L.Appet
cc: RobynHoffliiar,Escl.
Jarnes P, Sullivan, Esq.
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EXHIBIT
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 CITY OF ELEPHANT BUTTE
P. O. Box 1080
Elephant Butte, New Mexico 87935
(s75) 744-4892 ext. 104
FAX (57s) 744-4493

To Whomit May Concetn:

This letter is intended to serve fomral notice that the City of Elephant Bulte would be interested
in annexing the property ou$sntly owned by Hot Springs Land Development, LLC G{SLD)
pending the following caveats:

r That the land in question provide a contiguous border or tlre opportunity to become
contiguous to the City of Elephant Butte
That the infi'astructr.i:re needed to support the land bs provided by HSLD
r That HSLD provides and plans for the land use of saidproperty

Should these points be agreed upon by HSLD, the City of Elephaflt Butte would be open to
eirtering into discussions with them regarding possible annexaXioa.

If you have any questions rclating to this letter or its contents, piease do not hesitate to contact
me at (575) 7444892 ext, 104 or via email at qitvmanaeerfEcitvofelephantbutte.com.

RespectfullR

kM&**
City Manager
,

SEYENTI{ JUDICIAL DISTBICT COURT

COUNTY Of'SIERTRA
STATE 03 NEIM MEXICO

HOT SPRINGS LAND DEYELOPMEI\M, LLC,

ANew Mexico Limited Lialility Company, and :
IIOT SPRTNGS MOTORPLEX DEYELOP}rcNT. LI,C
A New Mexico Limited Liabilify Company,

Plaintiffs,
Ys. No. D_721-Cy_1014_000?3
CITY OF TRUTE OR CONSEQUENCES,
A Ne'n Mexico Municipality,

Defendant.

A{FIpAYrr o,.F'

Bing Keamey, deposes and states as follows;

1, I am over the age of eigl:feen and have personal knowledge of the matter* stut d in this
affidavit.

2. I am tle Authorized Representative of Hot spdngs Land Development (i{sLD).

3. In furtherance of the settlement agreementbetweenllslD andthe City of Truth or

Consequences, HSLD has begrm disoussions with the City of Elephant

Butte concerning

annexation of land owned by HSLD into the city of Elephant Butta,

4. The City of Elephant Butte has expressed a wiliiagaess to annex HSLD,s property.

5' h August 2016, the Ciff of Elepha:rt Butte, through its City Manager, sent I{SID fonnal
notice of iis interest in annexing IISLD,s pl.operty.

6. Inthatnotice, the City of ElephantButte indicatedthat it would like to aanexthe

property provided that (1) the property is or will become contiguous to the City of

EXHIBIT
I30
c
 Elephant Butte; (2) HSLD provide the infiastructure needed to
support the land; and (3)

HSLD plans forthe use of thepropeffy,

7' HSLD is wiliing and ableto satisfy theso conditions, and. intends to pursue annexation of
its proper{y into the Ciff of Elephaat Butte.

Further dfiant sayeth naught.

STAM OF PLORIDA )
)
COTINTY OF HILLSBOROUGH
)

subssribed and sworn to me on this 7ffi day of septemb et, 2076,by

Bing Kearney.