Saul v. Saul ( 2012 )

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1 IN THE COURT OF APPEALS OF THE STATE OF NEW MEXICO
2 L.N. SAUL,
3 Petitioner,
4 v. No. 31,338
5 (consolidated with 31,461)
6 DIANE SAUL,
7 Respondent-Appellee,
8 and
9 BARBARA SAUL,
10 Intervenor-Appellant.
11 and
12 BARBARA SAUL, Successor in
13 Interest to WELLS FARGO
14 BANK, N.A.,
15 Plaintiff-Appellant,
16 v. No. 31,739
17 LIGHTSEY N. SAUL, DIANE L. SAUL,
18 JIM KELLER, and LANETTE KELLER,
19 Defendants-Appellees.
1 APPEAL FROM THE DISTRICT COURT OF EDDY COUNTY
2 Thomas A. Rutledge, J. Richard Brown, and Mark T. Sanchez, District Judges
3 L.N. Saul
4 Carslbad, NM
5 Pro Se Petitioner
6 Max Houston Proctor
7 Hobbs, NM
8 for Appellee
9 Martin, Dugan & Martin
10 W.T. Martin
11 Carlsbad, NM
12 for Appellant
13 MEMORANDUM OPINION
14 VIGIL, Judge.
15 In this opinion we decide three appeals which concern various efforts by
16 Barbara Saul to execute and foreclose on property awarded to Diane Saul in the
17 divorce case between Diane and L.N. Saul, the son of Barbara Saul. The efforts are
18 anchored in a stipulated judgment made by Barbara Saul and her son, L.N. Saul, in the
19 divorce case after Barbara Saul intervened in the divorce case, contending that Diane
20 and L.N Saul were indebted to her. We initially consolidated two appeals, and
2
1 subsequently consolidated the third appeal with the pending appeals. We therefore
2 refer to the appeals as the first appeal, and the second appeal. For the reasons set forth
3 herein, the orders and judgments entered by the district courts in these cases are all
4 affirmed.
5 FIRST APPEAL
6 Facts
7 On April 5, 2007, L.N. Saul (L.N.) filed a petition in the district court seeking
8 a dissolution of marriage from Diane Saul (Diane), alleging that during their marriage,
9 they had acquired community property and obligated themselves to community debts,
10 which should be equitably divided by the court. The case was assigned to Judge
11 Thomas A. Rutledge.
12 On January 14, 2008, L.N.’s mother, Barbara Saul (Barbara), moved to
13 intervene in the divorce action on grounds that she was a creditor of L.N. and Diane,
14 and that as such, she was entitled to property they were seeking to divide in the
15 divorce action. In the complaint in intervention, Barbara alleged that she was seeking
16 repayment for loans she made for several years beginning in 1991 to L.N. and Diane,
17 which were ultimately used to purchase a home and ranch in Loving, New Mexico.
18 Barbara also sought an accounting and damages for conversion, fraud, and restitution
3
1 against both L.N. and Diane. Barbara’s motion to intervene was granted in an order
2 filed on February 21, 2008.
3 Judge Rutledge entered a partial decree dissolving the marriage between L.N.
4 and Diane on June 27, 2008, and reserved jurisdiction over all other matters,
5 “including the division of community property and debts.”
6 Trial on Barbara’s complaint in intervention and all remaining issues pending
7 in the divorce action was held on July 1, 2009. At the commencement of the hearing,
8 L.N.’s attorney tendered a stipulated judgment in which L.N. and Barbara stipulated
9 that Barbara had a judgment against L.N. in the amount of $490,380, earning interest
10 at the rate of 8.75% until fully paid. In the stipulated judgment L.N. and Barbara
11 agreed that beginning in approximately 1998 and continuing through 2003, Barbara
12 loaned L.N. and Diane a total of $490,380, which was ultimately used to purchase the
13 Loving home and ranch. After noting that L.N. could not stipulate whether Diane
14 owed Barbara any or all of that debt, Judge Rutledge approved the stipulated judgment
15 between L.N. and Barbara over Diane’s objection and reserved judgment on whether
16 any or all of the stipulated judgment was a separate debt of L.N. or a community debt.
17 At the conclusion of the evidentiary hearing, Judge Rutledge took all the pending
18 issues under advisement.
4
1 Barbara filed the stipulated judgment in the district court that very day on July
2 1, 2009, as well as a transcript of judgment with the Eddy County Clerk, naming
3 Diane as the judgment debtor. On July 8, 2009, Barbara recorded an amended and
4 corrected transcript of judgment with the Eddy County Clerk, which correctly named
5 L.N. as the judgment debtor. The only property which L.N. and Diane owned in Eddy
6 County was the Loving home and ranch.
7 On July 15, 2009, Judge Rutledge issued a letter setting forth his decision.
8 Addressing Barbara’s complaint in intervention, Judge Rutledge determined that the
9 debt claimed by Barbara was barred by the statute of limitations, and it was disallowed
10 in its entirety. Also, in his letter, Judge Rutledge addressed the Wells Fargo suit. We
11 discuss this suit at length below in the second appeal. It relates to a note payable to
12 Wells Fargo Bank secured by a mortgage and security agreement all signed by L.N.
13 and Diane regarding the cattle operation operated on the Loving property. Barbara
14 purchased the loan from Wells Fargo in June 2008, for the amount due and then she
15 liquidated the cattle securing the obligation. Judge Rutledge determined that after
16 Barbara’s repossession and sale of the cattle, L.N. and Diane owed her a community
17 debt in the amount of $4,783.73, not including interest, costs, and possible attorney
18 fees. The community assets were also divided.
5
1 The formal order dividing community property was filed on September 3, 2009.
2 Pertinent to this appeal, Diane was awarded the Loving home and ranch as her sole
3 and separate property. Further, the order declares that Barbara’s claim against Diane
4 is barred by the statute of limitations and that Barbara’s claim against L.N. “is
5 confirmed” as “Judgment has been entered against [L.N.] with the consent of [L.N.’s]
6 attorney and [Barbara’s] attorney.” Finally, the order provides that in connection with
7 the Wells Fargo suit, L.N. and Diane owed a community debt of $4,783.73, exclusive
8 of interest, costs, and possible attorney fees. This debt, now owed to Barbara, was
9 ordered equitably divided between L.N. and Diane.
10 On the basis of the stipulated judgment against L.N., Barbara filed a separate
11 complaint to foreclose judgment lien on March 22, 2010, naming both Diane and L.N.
12 as defendants. Barbara alleged that on July 1, 2009, she obtained a judgment against
13 L.N. in the amount of $490,380, that she recorded a transcript of judgment against
14 L.N., and that as of the date the transcript of judgment was filed, L.N. owned an
15 undivided community interest in the Loving home and ranch. Accordingly, she
16 alleged she was entitled to foreclose on the interest L.N. held in the Loving home and
17 ranch as of the date the transcript of judgment was filed.
6
1 In response to Barbara’s complaint to foreclose judgment lien, Diane filed a
2 motion for relief from judgment or order pursuant to Rule 1-060(B)(6) NMRA in the
3 divorce case before Judge Rutledge. The motion recites the history of the divorce case
4 and alleges it was not Judge Rutledge’s intention to have the judgment lien taken
5 against L.N. by Barbara to attach to any property awarded to Diane. For relief, Diane
6 asked that the court order that she be relieved from the stipulated judgment and that
7 it not attach to any and all property awarded to her, or in the alternative, that the court
8 amend the order dividing community property to specifically state that the stipulated
9 judgment did not attach to any property awarded to Diane, including community
10 property awarded to her as her sole and separate property.
11 A hearing was held on Diane’s motion on February 8, 2011. At the hearing,
12 Judge Rutledge said his intent in approving the stipulated judgment against L.N. in
13 favor of Barbara was that the judgment only reach that property awarded to L.N. as
14 his separate property in the divorce case. Judge Rutledge further noted that “because
15 of the way pleadings were filed, the court’s intent was not met.” Judge Rutledge
16 therefore asked, “ Why shouldn’t I be entering, at a minimum, a nunc pro tunc [order]
17 making my division of community property and community debts effective prior to
18 the filing of the judgment, stipulated judgment, confessed judgment?”
7
1 Following arguments, Judge Rutledge noted that when the divorce action was
2 filed, a temporary domestic order was filed, which prohibited either party from
3 incurring any debts or liabilities on the community property. The order was filed
4 pursuant to Rule 1-121 NMRA, which directs that with certain exceptions, in all
5 domestic actions, the court shall issue a temporary domestic order substantially in the
6 form approved by the Supreme Court, and states in pertinent part:
7 Do not incur unreasonable or unnecessary debts. Any debt which does
8 not contribute to the benefit of both spouses or the minor children of the
9 parties which is incurred after you have separated, may be the separate
10 debt of the party who incurs the debt.
11 See Domestic Relations Form 4A-100(B) NMRA (approving mandatory forms to be
12 used by attorneys in domestic relations cases); Domestic Relations Form 4A-112
13 NMRA (approved temporary domestic order form). Thus, Judge Rutledge concluded
14 that because he ruled that the debt to Barbara was extinguished by the statute of
15 limitations, if Barbara’s arguments were legally correct that the stipulated judgment
16 against L.N. reached Diane’s property, then L.N. violated the temporary domestic
17 order by stipulating to the judgment. Judge Rutledge succinctly explained:
18 The court’s position is very simple[.] If the debt is not legally
19 enforceable against the community, neither member of the community
20 can by their individual action without the acquiescence agreement,
21 whatever of the other party, other spouse, create a debt, resurrect that
8
1 debt against the community, because that debt is dead as to that
2 community.
3 On May 4, 2011, Judge Rutledge filed the order for relief from judgment and
4 order nunc pro tunc, the amended order dividing community property nunc pro tunc,
5 and the stipulated judgment nunc pro tunc (2011 Orders). Barbara appeals from these
6 orders in No. 31,338.
7 Following entry of the 2011 Orders, Diane filed a motion to dismiss Barbara’s
8 judgment lien on the Loving house and ranch, and Judge Rutledge granted the motion
9 over Barbara’s objection. Barbara appeals from this order in No. 31,461. We
10 consolidated these appeals into No. 31,338.
11 Analysis
12 In this appeal, Barbara mounts several challenges to the legal validity of the
13 2011 Orders. These arguments are grounded on the fact that she filed the stipulated
14 judgment on July 1, 2009, before the formal order dividing community property was
15 filed on September 3, 2009. She therefore argues: (1) that Judge Rutledge had no
16 legal authority to limit her right as a creditor of L.N. to execute on his interest in the
17 community property; (2) that Judge Rutledge had no legal authority to “usurp” her
18 statutory right to execute on the residence, which was owned as community property
19 because the stipulated judgment is a community debt, and even if the debt is deemed
9
1 L.N.’s separate debt, he had no authority to “usurp” her statutory right to execute on
2 L.N.’s community interest in the residence; (3) that Judge Rutledge lacked legal
3 authority to modify the judgment because Diane waived her statutory right to assert
4 that the residence was not subject to the stipulated judgment; and (4) that Judge
5 Rutledge in effect changed the stipulation made by Barbara and L.N. in the stipulated
6 judgment, and he lacked legal authority to do so.
7 Thus, the first question we answer is whether Judge Rutledge committed
8 reversible error in modifying the stipulated judgment pursuant to Rule 1-060(B)(6)
9 NMRA. Rule 1-060(B) sets forth, in Subsections (B)(1)-(5), grounds on which a court
10 may grant relief from a final judgment, order, or proceeding. Subsection (B)(6) then
11 states that the district court may grant such relief for “any other reason justifying relief
12 from the operation of the judgment.” Id. Relief is available under Subsection (B)(6)
13 only for reasons other than those enumerated in Subsections (B)(1)-(5). Resolution
14 Trust Corp. v. Ferri, 120 N.M. 320, 324, 901 P.2d 738, 742 (1995). Further, since
15 Subsection (B)(6) does not provide a set of criteria for granting relief, our common
16 law precedent has concluded that it “provides a reservoir of equitable power to do
17 justice in a given case, but it is limited to instances where there is a showing of
18 exceptional circumstances.” Meiboom v. Watson, 2000-NMSC-004, ¶ 31, 128 N.M.
101 536, 994 P.2d 1154 (internal quotation marks and citation omitted). “Exceptional
2 circumstances means facts or things out of the ordinary bearing upon a central fact.”
3 Mendoza v. Mendoza, 103 N.M. 327, 332, 706 P.2d 869, 874 (Ct. App. 1985). In
4 Foundation Reserve Ins. Co. v. Martin, 79 N.M. 737, 740, 449 P.2d 339, 342 (Ct.
5 App. 1968), we quoted with approval the following language from 7 Moore, Federal
6 Practice, ¶60.27[1], at 295 (2d ed. 1968):
7 Like Rule 60(b) generally, Clause (6) should be liberally applied to
8 situations not covered by the preceding five clauses so that, giving due
9 regard to the sound interest underlying the finality of judgments, the
10 district court, nevertheless, has power to grant relief from a judgment
11 whenever, under all the surrounding circumstances, such action is
12 appropriate in the furtherance of justice.
13 (Internal quotation marks omitted).
14 In answering whether Judge Rutledge committed reversible error in modifying
15 the stipulated judgment under Rule 1-060(B)(6), our analysis is limited to determining
16 whether the ruling constitutes an abuse of discretion. Meiboom, 2000-NMSC-004, ¶
17 29. We do not substitute our judgment for the judgment exercised by Judge Rutledge,
18 unless there has been a clear abuse of discretion, and before reversal is warranted, “it
19 must be shown that the court’s ruling exceeds the bounds of all reason or that the
20 judicial action taken is arbitrary, fanciful, or unreasonable.” Id. (alteration, internal
11
1 quotation marks, and citation omitted). With these standards in mind, we now turn
2 to our analysis.
3 As we have already noted, when the stipulated judgment was presented for
4 approval, the trial on Barbara’s claim was pending, as well as a determination of the
5 community assets and debts, and their equitable division. Judge Rutledge noted that
6 L.N. could not stipulate to any debt Diane might owe to Barbara, and he reserved
7 judgment on whether the stipulated judgment was a separate debt of L.N. or a
8 community debt. These reservations notwithstanding, Barbara filed the judgment that
9 same day, and she subsequently contended, and continues to assert on appeal, that by
10 doing so, she deprived Judge Rutledge of his right to decide the very issues that were
11 before him: what were the community assets and debts, and how should they be
12 apportioned, which included determining whether Diane and L.N. owed Barbara a
13 debt, and if so, whether it was a community debt or a separate debt.
14 Further, when Judge Rutledge heard Diane’s Rule 1-060(B)(6) motion, he noted
15 that because of the way the pleadings were filed, his intent was not met, and he asked
16 whether he should not, at a minimum, enter an order nunc pro tunc making the
17 division of the community property and debts effective prior to the filing of the
18 stipulated judgment. After hearing arguments, Judge Rutledge filed the order for
12
1 relief from judgment and order, nunc pro tunc. Therein, he finds that Diane is entitled
2 to relief from the stipulated judgment between L.N. and Barbara under Rule 1-
3 060(B)(6) because of exceptional circumstances which exist because: (1) Barbara filed
4 and transcribed the stipulated judgment against L.N. during the divorce proceedings,
5 and she now claims she has a lien and judgment against the property awarded to
6 Diane; (2) the court ruled that there was no community debt owed by Diane or L.N.
7 to Barbara because the statute of limitations had expired on any claim she had against
8 Diane and L.N.; (3) the court approved the stipulated judgment only for the specific
9 purpose of allowing Barbara to execute on property awarded to L.N. in the order
10 dividing community property; (4) the court had ordered that any judgment taken
11 against L.N. by Barbara was to attach only to any property awarded to L.N. in the
12 order dividing community property; and (5) Barbara subsequently filed a separate
13 complaint to foreclose the stipulated judgment against property awarded to Diane in
14 the order dividing community property, an action which was designed to circumvent
15 that order. Because of these exceptional circumstances, Judge Rutledge concluded,
16 the stipulated judgment between Barbara and L.N. should be amended, nunc pro tunc,
17 setting forth that it is a personal judgment against L.N.; that only the property awarded
18 to L.N. in the order dividing community property and separate property owned by him
13
1 was subject to the judgment lien; and that none of the property awarded to Diane in
2 the order dividing community property was subject to the judgment lien.
3 The effect of the order modifying the stipulated judgment pursuant to Rule 1-
4 060(B)(6) nunc pro tunc was to make the stipulated judgment operative after entry of
5 the order dividing community property. The stipulated judgment was amended
6 accordingly as was the order dividing community property. Specifically, the amended
7 stipulated judgment directs:
8 No judgment shall be awarded against [Diane] as a result of this
9 Stipulated Judgment or Stipulated Judgment Nunc Pro Tunc, by and
10 between [Barbara and L.N.], and no property whether separate or
11 community awarded to [Diane] as set forth in the Order Dividing
12 Community Property Nunc Pro Tunc shall be subject to this judgment.
13 Consistent with the foregoing, the amended order dividing community property
14 orders:
15 The Stipulated Judgment and Amended Stipulated Judgment Nunc Pro
16 Tunc, taken by [Barbara] against [L.N.] shall attach only to the sole and
17 separate property of [L.N.] or the property awarded to him in the
18 Amended Order Dividing Community Property, Nunc Pro Tunc, only.
19 The Stipulated Judgment against [L.N.] taken in favor of [Barbara] shall
20 not attach to [Diane] personally or any property awarded to her in this
21 original or Amended Order Dividing Community Property, Nunc Pro
22 Tunc, or any separate property given to her as a gift or inherited by her,
23 or owned by her prior to marriage.
14
1 We cannot conclude that Judge Rutledge abused his discretion in this matter.
2 The stipulated judgment was approved under certain conditions. However, when
3 Barbara filed and transcribed the stipulated judgment before Judge Rutledge ruled on
4 the matters pending before him, she effectively changed the conditions under which
5 the stipulated judgment was approved. This amounts to exceptional circumstances.
6 Further, the sequence in which the pleadings were filed would result in an unintended
7 foreclosure of the Loving home and ranch awarded to Diane as her sole and separate
8 property. This is also an exceptional circumstance justifying use of Rule 1-060(B)(6).
9 See Hopkins v. Hopkins, 109 N.M. 233, 241, 784 P.2d 420, 428 (Ct. App. 1989)
10 (concluding that foreclosure of a family home resulting from a former husband’s
11 failure to pay second and third mortgages constituted exceptional circumstances to
12 justify modifying a final divorce decree). Amending the orders to accurately reflect
13 the conditions under which the stipulated judgment was approved cannot be
14 considered an abuse of discretion.
15 Having resolved the principle issue raised in the first appeal, we summarily
16 address Barbara’s remaining arguments. Barbara asserts that Judge Rutledge’s intent
17 was irrelevant and that when he relied on his intent to enter the orders appealed from,
18 he was required to recuse himself because he became a witness in the case. We reject
15
1 these assertions. A judge is entitled to amend a judgment to more clearly reflect the
2 judge’s intent and to ensure that his purpose is fully implemented. See In re Estates
3 of Hayes, 1998-NMCA-136, ¶ 15, 125 N.M. 820, 965 P.2d 939 (discussing Rule 1-
4 060(A)). A judge may even initiate relief from a judgment under Rule 1-060 on his
5 own motion. Desjardin v. Albuquerque Nat’l Bank, 93 N.M. 89, 91, 596 P.2d 858,
6 860 (1979). Finally, there is no indication in the record that any party wanted Judge
7 Rutledge to testify about a disputed evidentiary fact.
8 Barbara’s final argument in this first appeal is that because she filed her notice
9 of appeal on May 24, 2011, Judge Rutledge had no jurisdiction to enter the order
10 releasing the judgment lien on July 1, 2011. We reject this assertion as well. See Kelly
11 Inn No. 102 v. Kapnison, 113 N.M. 231, 241, 824 P.2d 1033, 1043 (1992) (“It is clear,
12 though, that a pending appeal does not divest the trial court of jurisdiction to take
13 further action when the action will not affect the judgment on appeal and when,
14 instead, the further action enables the trial court to carry out or enforce the judgment.”
15 (emphasis omitted)).
16 SECOND APPEAL
17 Facts
16
1 While the divorce action was still pending, a separate action was filed by Wells
2 Fargo Bank N.A. against L.N. and Diane on June 12, 2008, alleging that a promissory
3 note secured by a mortgage on their Loving house and ranch and an agricultural
4 security agreement in all of their livestock was in default. Herein, we refer to this as
5 the Wells Fargo suit. Wells Fargo sought the amount owed under the note, interest,
6 attorney fees, and to foreclose the mortgage and exercise its rights as a secured
7 creditor in the livestock. Judge J. Richard Brown was assigned to preside over the
8 Wells Fargo suit.
9 Effective on July 25, 2008, Barbara purchased the promissory note, mortgage,
10 and security agreement from Wells Fargo Bank, and Wells Fargo Bank assigned the
11 note, mortgage, and security agreement to Barbara. The purchase price was the total
12 amount owed under the promissory note as of that date in the amount of $400,202.36.
13 Barbara was substituted as Plaintiff in the Wells Fargo suit, and as the secured creditor
14 of L.N. and Diane, Barbara repossessed their cattle and sold them at auction on
15 August 13, 2008, for the total sum of $397,718.44. This left a balance owed on the
16 promissory note in the amount of $4,763.73, with interest accruing at the rate of
17 11.75% per annum from August 13, 2008.
17
1 On July 15, 2009, the same day that Judge Rutledge issued his letter decision
2 in the divorce case declaring that Barbara’s complaint in intervention was barred by
3 the statute of limitations and that the Loving house and ranch were awarded to Diane
4 as her sole and separate property, Barbara filed a motion in the Wells Fargo suit to
5 amend the complaint. She alleged that as purchaser and assignee of the note,
6 mortgage, and security agreement, she “stands in the shoes” of Wells Fargo as Lender
7 under the loan documents. Accordingly, she asserted, the mortgage and agricultural
8 security agreement secured payment of the $490,380 stipulated judgment made by her
9 and L.N. in the divorce case, which she filed on July 1, 2009. This was based on a
10 “dragnet” clause in the mortgage and an identical clause in the agricultural security
11 agreement signed by both Diane and L.N. which states:
12 In addition to the Note, this Mortgage secures all obligations, debts, and
13 liabilities, plus interest thereon, of either Grantor or Borrower to Lender,
14 or any one or more of them, as well as all claims by Lender against
15 Borrower and Grantor or any one or more of them, whether now existing
16 or hereafter arising, whether related or unrelated to the purpose of the
17 Note, whether voluntary or otherwise, whether due or not due, direct or
18 indirect, determined or undetermined, absolute or contingent, liquidated
19 or unliquidated, whether Borrower or Grantor may be liable individually
20 or jointly with others, whether obligated as guarantor, surety,
21 accommodation party or otherwise, and whether recovery upon such
22 amounts may be or hereafter may become barred by any statute of
23 limitations, and whether the obligation to repay such amounts may be or
24 hereafter may become otherwise unenforceable.
18
1 Barbara contended Diane and L.N. were therefore jointly and severally obligated to
2 her for the balance on the original Wells Fargo Note in the amount of $4,763.73, plus
3 interest at the rate of 11.75% per annum from August 13, 2008, plus the amount of the
4 stipulated judgment against L.N. in the amount of $490,380, plus interest at the rate
5 of 8.75% from July 1, 2009. Barbara further contended that she had a judgment lien
6 against the Loving house and ranch by virtue of the stipulated judgment and transcript
7 of judgment she had filed. Over Diane’s objection, Barbara’s motion to amend the
8 complaint was granted.
9 In her answer, Diane asserted that at the time the Wells Fargo complaint was
10 filed, the only debt owed was to Wells Fargo in the principal amount of $367,613.84,
11 plus accrued interest in the amount of $20,565.95 as of May 28, 2008, at the rate of
12 11.75% per annum, plus costs and attorney fees; that the stipulated judgment was
13 entered into by Barbara and L.N. for the purpose of circumventing Judge Rutledge’s
14 ruling in the divorce action; that no debt was owed to Barbara by L.N. and Diane
19
1 because her complaint was barred by the statute of limitations; that Barbara was
2 attempting to “bootstrap” the stipulated judgment amount onto the Wells Fargo debt
3 after the fact; and that Barbara’s claim was barred under the doctrines of waiver,
4 estoppel, unclean hands, the statute of limitations, and res judicata or collateral
5 estoppel.
6 On May 12, 2010, Diane filed a motion for summary judgment, in the Wells
7 Fargo suit. The motion was supported by her affidavit stating that: (1) at the time
8 Wells Fargo filed the suit, the principal amount owed was $367,613.84, plus accrued
9 interest in the amount of $20,565.95 as of May 28, 2008, at the rate of 11.75% per
10 annum, plus costs and attorney fees; (2) on July 25, 2008, Barbara was assigned any
11 and all of the rights of Wells Fargo, and she foreclosed and sold the collateral; (3) in
12 a letter dated July 15, 2009, Barbara made a demand in the amount of $4,763.73 as the
13 full and final amount owed on the original note, plus accrued interest; (4) on July 29,
14 2009, Diane paid Barbara’s attorney a check (dated July 28, 2009) in the amount of
15 $5,000 in full and final settlement of the foreclosure, which was still being held and
16 not negotiated; (5) at the time of the foreclosure and sale of the collateral, there was
17 no other indebtedness owed to Wells Fargo, nor did Wells Fargo have any other
20
1 judgment against Diane and L.N.; (6) the July 1, 2009 stipulated judgment of
2 $490,380 was taken against L.N. as his sole and separate debt, and Diane was held
3 harmless for the stipulated judgment debt; (7) there was no nexus or connection
4 between the Wells Fargo debt and the stipulated judgment; and (8) the stipulated
5 judgment was made for the purpose of circumventing the judgment entered by Judge
6 Rutledge in the divorce case.
7 Barbara responded and filed a cross motion for summary judgment. Pertinent
8 to our decision herein, Barbara admitted to receiving Diane’s check dated July 28,
9 2009, in the amount of $5,000; asserted that the amount of interest earned on the
10 Wells Fargo note was $536.74; and that the check was therefore insufficient by
11 $300.47. Diane paid Barbara the additional sum of $400 on December 6, 2010, thus
12 satisfying the deficiency. (She therefore actually overpaid $55.22).
13 On November 22, 2010, Judge Brown issued a letter decision granting Diane’s
14 motion for summary judgment and denying Barbara’s motion for summary judgment.
15 Judge Brown reasoned that on the basis of Ruidoso State Bank v. Castle, 105 N.M.
16 158, 730 P.2d 461 (1986), the dragnet clause in the Wells Fargo loan documents did
17 not capture the stipulated judgment between Barbara and L.N. Barbara filed a motion
18 to reconsider to which Diane responded. Judge Brown filed an order granting Diane’s
21
1 motion for summary judgment on March 1, 2011, and recused himself from deciding
2 Barbara’s motion to reconsider. The Wells Fargo case was thereupon reassigned to
3 Judge Rutledge and, at Barbara’s request, Judge Rutledge recused himself. The case
4 was finally assigned to Judge Mark T. Sanchez.
5 Ultimately Judge Sanchez entered a final judgment. Pertinent to this appeal, the
6 final judgment denied Barbara’s motion for reconsideration; determined that Diane
7 had overpaid Barbara $55.22, which she was entitled to recover; made no award of
8 attorney fees; and to the extent any motions or claims for relief remained outstanding,
9 they were denied except as set forth to the contrary in the judgment. Barbara appeals
10 from this final judgment as well.
11 Analysis
12 The primary issue we address in the second appeal is whether Judge Brown
13 properly granted Diane’s motion for summary judgment and denied Barbara’s motion
14 for summary judgment. The material facts surrounding this issue are undisputed, and
15 our review is de novo. See Harris v. Vasquez, 2012-NMCA-110, ¶ 9, 288 P.3d 924.
16 Judge Brown reasoned that on the basis of Ruidoso State Bank, the dragnet
17 clause in the Wells Fargo loan documents do not capture the stipulated judgment
18 between Barbara and L.N. We therefore first explore its holding.
22
1 Ruidoso State Bank considered how to interpret a dragnet clause which is
2 substantially similar to the one before us in this case. 105 N.M. at 159-60; 730 P.2d
3 at 462-63. Our Supreme Court first said, “dragnet clauses do not, as a matter of law,
4 secure all debts between parties[.]” Id. at 160, 730 P.2d at 463. Further, “[a]side
5 from the actual language of the provision, construction should focus on the intent of
6 the parties as evidenced by the circumstances surrounding the mortgage and the nexus
7 between the mortgage and the notes involved.” Id. Thus, Ruidoso State Bank, requires
8 us to determine whether the parties to the loan documents (Wells Fargo on the one
9 hand, and L.N. and Diane, on the other) intended the Wells Fargo loan documents to
10 capture this future debt—the stipulated judgment between L.N. and Barbara. To do
11 so, we examine the circumstances surrounding the mortgage and the nexus between
12 the mortgage and the stipulated judgment. Finally, Ruidoso State Bank, instructs us
13 how to construe the dragnet clause: “Dragnet clauses which purport to secure all
14 debts, past, present, and future, between parties to a security agreement generally are
15 disfavored and thus strictly construed.” Id. at 160, 730 P.2d at 463. We therefore
16 reject Barbara’s assertion that Clovis National Bank v. Harmon, 102 N.M. 166, 692
23
1 P.2d 1315 (1984), only requires that we look to the language of the dragnet clause.1
2 As Ruidoso State Bank notes, the issue in Clovis National Bank was whether
3 substantial evidence supported the decision of the district court in that case that
4 dragnet clauses in mortgages signed before and after the note at issue captured that
5 note. See Ruidoso State Bank, 105 N.M. at 160, 730 P.2d at 463. The issue before us
6 in this case is whether, given the undisputed facts, summary judgment was properly
7 granted to Diane and not to Barbara. To answer this question we now turn to the
8 analysis mandated by Ruidoso State Bank.
9 The Wells Fargo loan documents containing the dragnet clause were signed on
10 December 1, 2006. The promissory note was in the amount of $450,000, which was
11 secured by a mortgage and agricultural security agreement. The agricultural security
12 agreement secured payment of the promissory note ($450,000), and the mortgage
13 which contains the dragnet clause at issue created a lien not to exceed $900,000.
14 Other than the loan documents themselves, the record does not set forth the
15 circumstances surrounding the note, mortgage, and security interest or their purpose.
1
15 We also decline Barbara’s invitation to follow In re Lewis, 212 B.R. 82716 (Bankr. E.D. Va. 1997) and Vidalia Production Credit Ass’n. v. Durrence, 94 S.E.2d
17 609 (Ga. Ct. App. 1956), as these cases construe dragnet clauses contrary to Ruidoso
18 State Bank.
24
1 We also have before us the following undisputed facts: (1) on June 27, 2008,
2 L.N. and Diane were divorced; (2) effective on July 25, 2008, Barbara purchased the
3 note, mortgage, and security agreement from Wells Fargo Bank, and Barbara was
4 substituted as the plaintiff in the Wells Fargo suit; (3) as the secured creditor of L.N.
5 and Diane, Barbara repossessed their cattle and sold them at auction on August 13,
6 2008, leaving a balance owed on the promissory note in the amount of $4,763.73, with
7 interest accruing at the rate of 11.75% per annum from August 13, 2008; (4) Barbara
8 intervened in the divorce case between L.N. and Diane, asserting they owed her a
9 community debt; (5) following a trial on the merits on Barbara’s complaint in
10 intervention, Judge Rutledge determined in a letter dated July 15, 2009, which was
11 formalized in the order dividing community property filed on September 3, 2009, that
12 the debt claimed by Barbara was barred by the statute of limitations and it was
13 disallowed in its entirety; (6) nevertheless, L.N. and Barbara stipulated that L.N. owed
14 Barbara $490,380, and they stipulated that Barbara have judgment against L.N. in this
15 amount, earning interest at the rate of 8.75% until fully paid. The stipulated judgment
16 was approved subject to conditions by Judge Rutledge on July 1, 2009; (7) on July 15,
17 2009, Barbara made a demand in the amount of $4,763.73 as the full and final amount
25
1 owed on the original note, plus accrued interest; and (8) there was no nexus or
2 connection between the Wells Fargo debt and the stipulated judgment.
3 On the basis of the foregoing undisputed facts, we agree with Judge Brown that
4 properly interpreted under the mandate of Ruidoso State Bank, the parties to the loan
5 documents did not intend the dragnet clause in the Wells Fargo loan documents to
6 capture a future debt such as the stipulated judgment between L.N. and Barbara.
7 Barbara was not a party to the original loan documents and there is simply no nexus
8 or connection between the debts evidenced by the Wells Fargo loan documents and
9 the stipulated judgment between Barbara and L.N. There is nothing in this record
10 indicating that the parties to the loan documents could have even foreseen the scenario
11 which is now before us, let alone that they would anticipate capturing a stipulated
12 judgment obtained in these circumstances. We therefore affirm Judge Brown’s order
13 that granted Diane’s motion for summary judgment and denied Barbara’s motion for
14 summary judgment as well as Judge Sanchez’s final order denying Barbara’s motion
15 for reconsideration.
16 Having resolved the major issue raised in this appeal, we return to the
17 remaining questions. First, Barbara asserts that Judge Sanchez erred in refusing to
18 award her attorney fees incurred in collecting under the mortgage and collecting the
26
1 deficiency under the note. We agree with Barbara that this decision is reviewed for
2 an abuse of discretion. See Dean v. Brizuela, 2010-NMCA-076, ¶ 11, 148 N.M. 548,
3 238 P.3d 917. In this regard, the district court made findings that while Barbara may
4 have been entitled attorney fees from August 29, 2008 to December 6, 2010, “[t]he
5 court does not wish to speculate about the amount of attorney fees to which [Barbara]
6 is entitled, and the proof seems to be fraught with difficulty.” Moreover, Barbara’s
7 counsel confirmed that the legal expenses and fees incurred by Barbara “cannot
8 properly be segregated by cause number, or even category because all of the fees are
9 inextricably intertwined.” The burden was on Barbara to segregate the fees charged
10 to which she was entitled or to demonstrate that work performed on claims that she
11 was not entitled to receive attorney fees for was “inextricably intertwined” with the
12 work that she was entitled to be compensated for. Id. ¶ 14. We also note that Judge
13 Sanchez also ruled:
14 The Holder [Barbara] and the Maker [Diane] may by November 8, 2011,
15 submit revised affidavits in support of awards of attorney fees; affidavits
16 and argument in opposition to awards of attorney fees shall be due by
17 November 15, 2011. The parties should however bear in mind the
18 rulings made by the court.
19 However, Barbara did not take advantage of this additional opportunity to segregate
20 the recoverable fees. The record supports the findings of Judge Sanchez, and we
27
1 perceive no abuse of discretion on his part in refusing to award Barbara’s attorney
2 fees.
3 Finally, Barbara asserts that she was entitled to a judgment against Diane in the
4 amount of $5,300.47, plus interest and that Judge Sanchez committed reversible error
5 in awarding Diane judgment against Barbara in the amount of $55.22. Barbara asserts
6 that when Diane tendered her check in the amount of $5,000 it was not “unqualified,”
7 and since more than $5,000 was owed at that time, she properly refused the tender.
8 Furthermore, she asserts, the subsequent $400 check, purportedly representing the
9 balance paid in full, was returned to Diane’s counsel. Barbara asserts that since the
10 undisputed evidence proved that as of July 28, 2009, the amount owed under the note
11 was $5,300.47, the purported tenders were properly refused, resulting in the balance
12 not being paid, she is entitled to judgment under the note in the amount of $5,300.47,
13 plus interest. Largely for the same reasons, Barbara argues that it was improper for
14 Judge Sanchez to conclude that Barbara overpaid the amount owed under the note in
15 the amount of $55.22 and erred in granting Diane a judgment for this amount.
16 We reject these arguments. On July 15, 2009, Barbara demanded payment in
17 the amount of $4,763, plus interest as the full amount owed, and Diane tendered a
18 check on July 28, 2009, in the amount of $5,000. Barbara now says she rejected the
28
1 tender because it was insufficient by $300.47. However, she never told Diane that the
2 payment was rejected for this reason. Furthermore, Barbara moved to amend the
3 Wells Fargo suit on July 15, 2009, asserting that as the assignee of the Wells Fargo
4 loan documents, she was entitled to foreclose on the stipulated judgment with L.N. in
5 the amount of $490,380. Thus, a tender of $5,300.47 by Diane was not necessary, as
6 such a tender would have been futile under the circumstances. See Carmichael v.
7 Rice, 49 N.M. 114, 118-119, 158 P.2d 290, 293 (1945) (stating that where it is clear
8 that a tender need not be made where it is clear that if it is offered, it will be rejected).
9 Judge Sanchez found that as of July 27, 2009, the balance owed on the note
10 (including interest) was $5,297.40 and that after the payment of $5,000 on July 28,
11 2009, Barbara was owed $297.47, plus interest, for a total of $344.78. Further, after
12 the $400 payment on December 6, 2010, Judge Sanchez concluded that Diane
13 overpaid the amount due by $55.22. These factual findings are supported by
14 substantial evidence, and they are not disputed. Judge Sanchez also ordered, “[t]o the
15 extent that any checks issued by or on behalf of [Diane] have become stale or
16 otherwise incapable of negotiation, [Diane] may issue checks anew or make payment
17 in any lawful manner on [Barbara’s] return of stale or non-negotiable checks to
18 [Diane] or her attorney.” We therefore affirm this order as well.
29
1 CONCLUSION
2 For the reasons expressed herein, all of the orders, judgments, and decrees
3 entered by the district court in the respective cases on appeal are affirmed.
4 IT IS SO ORDERED.
5 ________________________________
6 MICHAEL E. VIGIL, Judge
7 WE CONCUR:
8 _________________________________
9 CELIA FOY CASTILLO, Chief Judge
10 _________________________________
11 JAMES J. WECHSLER, Judge
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