Johnson & Danley v. State ( 2009 )

1 This memorandum opinion was not selected for publication in the New Mexico Reports. Please
2 see Rule 12-405 NMRA for restrictions on the citation of unpublished memorandum opinions.
3 Please also note that this electronic memorandum opinion may contain computer-generated
4 errors or other deviations from the official paper version filed by the Court of Appeals and does
5 not include the filing date.
6 IN THE COURT OF APPEALS OF THE STATE OF NEW MEXICO
7 JOHNSON & DANLEY CONSTRUCTION
8 CO., INC., a New Mexico corporation and
9 MEADOW VALLEY CONTRACTORS, INC.,
10 a Nevada corporation,
11 Plaintiffs-Appellees/Cross-Appellants,
12 v. NO. 29,575
13 THE STATE OF NEW MEXICO ex rel.
14 NEW MEXICO DEPARTMENT OF
15 TRANSPORTATION f/k/a New Mexico
16 State Highway and Transportation
17 Department,
18 Defendant-Appellant/Cross-Appellee.
19 APPEAL FROM THE DISTRICT COURT OF OTERO COUNTY
20 Jerry H. Ritter, Jr. , District Judge
21 Law Office of Jane B. Yohalem
22 Jane Bloom Yohalem
23 Santa Fe, NM
24 for Appellees/Cross-Appellants
25 Sutin, Thayer & Browne, P.C.
26 C. Shannon Bacon
1 Kerry Kiernan
2 Albuquerque, NM
3 for Appellant/Cross-Appellee
4 MEMORANDUM OPINION
5 WECHSLER, Judge.
6 Defendant, in its appeal, and Plaintiffs, in their cross appeal, assert that the
7 district court erred in issuing an order modifying the settlement agreement between
8 the parties. Defendant argues that the district court erred by failing to enforce the
9 agreement as written and by supplying additional terms that it believed had been
10 omitted by the parties. [Def.’s DS 18-27] Plaintiffs argue that, based on the parties’
11 past use of language and course of dealings, the district court should have interpreted
12 the agreement to mean that Defendant would pay the full amount of any gross receipts
13 taxes owed on the settlement, in addition to the stated settlement amount. [Pls.’ DS
14 14-15] In this Court’s notice of proposed summary disposition, we proposed to
15 reverse and to hold that nothing in the agreement required Defendant to pay any
16 amounts above the $10 million provided for in the settlement agreement. Defendant
17 timely responded with a memorandum in support. Plaintiffs have responded with a
18 memorandum in opposition, pursuant to the grant of an extension of time. We have
19 considered Plaintiffs’ arguments, and as we are not persuaded by them, we reverse and
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1 hold that the agreement should be enforced as written.
2 I. The Agreement Is Not Ambiguous
3 The settlement agreement provided that:
4 The NMDOT will pay, and J&D and MVCI . . . will accept, the total sum
5 of Ten Million and no/100 dollars ($10,000,000) as complete, full and
6 final settlement and resolution of all claims, demands, causes of action,
7 judicial orders, change order requests, pay requests, pay applications or
8 other additional payment or compensation of any kind or description . .
9 . arising out of or in anyway [sic] connected with the construction . . .
10 commonly referred to collectively as the Alamogordo Relief Route
11 Projects, and any claims arising there from, said amount to be allocated
12 and divided by and between J&D and MVCI and any others claiming
13 through either of them as J&D and MVCI . . . separately decide and
14 agree without further involvement or liability on the part of the NMDOT.
15 ....
16 No other claim for money due or owed, extra time, reimbursement,
17 damages, changes, payment or other recompense of any kind or
18 description shall survive this settlement, it being the express intent of
19 J&D, MVCI and NMDOT to fully, finally and forever resolve any
20 liability on the part of the NMDOT to J&D and/or MVCI and any other
21 person or entity claims by or through them arising out of CN 1970 and
22 CN 3650.
23 [RP 3998, 3999] The district court concluded that on its face, this language was
24 unambiguous in setting Defendant’s settlement obligation at $10 million. [RP 4118]
25 In our notice of proposed summary disposition, we proposed to conclude that the
3
1 language was unambiguous and that no evidence was presented regarding the parties’
2 negotiations, use of language, or course of dealing that would create an ambiguity.
3 In their memorandum in opposition, Plaintiffs assert that the contract language is in
4 fact ambiguous and that the evidence establishes that the parties intended that
5 Defendant would pay gross receipts taxes in addition to the $10 million. Plaintiffs
6 begin their argument by asserting that a portion of the $10 million settlement amount
7 is properly characterized as a payment for construction services for tax purposes.
8 [Pls’. MIO 3-7] Plaintiffs rely on several federal tax cases for this proposition. [Pls.’
9 MIO 4, 6 n.3] We do not necessarily disagree; that simply is not the issue before us,
10 so we make no determination as to whether and, if so, what portion of, the $10 million
11 payment is taxable as a payment on the construction contract. We merely indicated
12 in our notice of proposed summary disposition that an agreement to settle a lawsuit
13 serves a different purpose than would an undisputed payment on the underlying
14 contract and that we did not believe that a course of dealing as to payments on the
15 underlying contract should control our interpretation of the settlement agreement. In
16 our notice, we pointed out that Plaintiffs cited no authority contrary to this
17 proposition, and as Plaintiffs still have not done so, we may presume that none exists.
18 See In re Adoption of Doe, 100 N.M. 764, 765, 676 P.2d 1329, 1330 (1984)
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1 (indicating that when a party cites no authority in support of a proposition, we may
2 presume that no such authority exists); see also Hennessy v. Duryea,
3 1998-NMCA-036, ¶ 24, 124 N.M. 754, 955 P.2d 683 (“Our courts have repeatedly
4 held that, in summary calendar cases, the burden is on the party opposing the proposed
5 disposition to clearly point out errors in fact or law.”).
6 Furthermore, even if we were to consider the fact that Defendant was obligated
7 to pay the gross receipts taxes on payments received under the underlying construction
8 contracts, we still do not believe that this creates any ambiguity in the settlement
9 agreement. Plaintiffs do not point to anything in the language of the agreement itself
10 that is actually ambiguous—even in light of such a prior course of dealing. Plaintiffs
11 suggest that the ambiguous term in the contract is the term that the payment is “full
12 and final.” [Pls.’ MIO 14] We do not find this argument persuasive. There is simply
13 nothing in this term of the agreement that would suggest that Defendant had agreed
14 to pay an amount above the $10 million figure. Although Plaintiffs rely on various
15 instances in the past in which Defendant has been responsible for paying gross
16 receipts taxes, Plaintiffs cannot connect this past conduct with any term of the current
17 contract to suggest that there is any ambiguity in the settlement agreement regarding
18 an additional payment of gross receipts taxes on top of the $10 million settlement sum.
5
1 II. The Agreement Contains No Provisions that Relate to the Payment of
2 Gross Receipts Taxes
3 Rather than an ambiguous term in the contract, it seems that what Plaintiffs are
4 really pointing to is silence on the issue of gross receipts taxes: Plaintiffs state that
5 “[a]lthough the settlement agreement specifies that it is intended to resolve all
6 liability, and provides for a ‘full and final’ settlement, the language of the settlement
7 agreement does not mention gross receipts taxes.” [Pls.’ MIO 9 (emphasis added)]
8 Plaintiffs call this failure to mention the taxes “silence” on the issue, something that
9 “is not included . . . or otherwise mentioned,” and an “absence.” [Pls.’ MIO 9]
10 Therefore, we must determine whether this silence requires that Defendant be
11 responsible for any payments for gross receipts taxes on the settlement.
12 A. The Agreement Does Not Contain the Type of Omitted Term that May Be
13 Supplied by the Courts
14 In our notice of proposed summary disposition, we proposed to conclude that
15 the agreement’s silence on the issue of gross receipts taxes was not the sort of
16 omission of a material contract term that would justify the addition of a term by the
17 courts. In light of the undisputed fact that the parties never discussed gross receipts
18 taxes during their negotiations, we indicated that we did not see how Plaintiffs’
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1 unarticulated desire to have Defendant pay additional amounts would create a material
2 omission in the agreement, as this was not a case in which a term that is essential to
3 a determination of the parties’ rights and responsibilities under the contract has been
4 left out. Cf. Smith v. Galio, 95 N.M. 4, 7, 617 P.2d 1325, 1328 (Ct. App. 1980)
5 (holding that when contract is silent as to the time for performance, a reasonable time
6 will be implied by the district court). We pointed out that Plaintiffs cited no authority
7 to suggest that an express term covering gross receipts taxes is necessary in a
8 settlement agreement such as this one or that the agreement was unreasonable or could
9 not be carried out in the absence of such a term. See In re Adoption of Doe, 100 N.M.
10 at 765, 676 P.2d at 1330. Therefore, we proposed to hold that the district court erred
11 in supplying terms for which the parties had not bargained and to which they had not
12 agreed.
13 In response, Plaintiffs do not argue that a term regarding gross receipts taxes
14 is material to the contract such that the parties cannot carry out their obligations under
15 it unless the courts supply such a term. [Pls.’ MIO 17-18] Instead, Plaintiffs suggest
16 that the silence on the issue of gross receipts taxes should be understood to mean that
17 Defendant intended to agree to pay gross receipts taxes on the portion of the
18 settlement that could be characterized as a payment on the construction contract in
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1 addition to the $10 million settlement amount. [Pls.’ MIO 10-18] In effect, Plaintiffs
2 are asking this Court to find that this term is an implied term of the contract based on
3 the parties’ intent as evidenced by their past conduct. See Estate of Griego ex rel.
4 Griego v. Reliance Standard Life Ins. Co., 2000-NMCA-022, ¶ 21, 128 N.M. 676, 997
5 P.2d 150 (“A contract includes not only the promises set forth in express words, but,
6 in addition, all such implied provisions as are indispensable to effectuate the intention
7 of the parties and as arise from the language of the contract and the circumstances
8 under which it was made.”). Plaintiffs assert that the value of the construction
9 contract payments was $750,000 and that, under the prior course of dealing (and under
10 Defendant’s standard specifications for highway construction contracts) Defendant
11 would pay the gross receipts taxes on this amount, even if the construction contract
12 was silent on the issue of taxes. [Pls.’ MIO 5, 10]
13 We decline to find that such a term is implied. Courts generally enforce
14 contracts as written, and we are reluctant to add terms to an agreement unless the term
15 is truly necessary or it is clear that the parties actually intended that the term be
16 included. See Estate of Griego ex rel. Griego, 2000-NMCA-022, ¶ 21 (“A court may
17 have to imply terms in a contract when to do otherwise would render the contract
18 absurd and meaningless.”); Twin Forks Ranch, Inc. v. Brooks, 1998-NMCA-129, ¶ 20,
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1 125 N.M. 674, 964 P.2d 838 (stating that courts are unwilling to rewrite contracts to
2 add terms unless the evidence is clear and convincing that the added term was what
3 the parties actually intended and agreed upon). This case does not present such a
4 circumstance. We find nothing in the record to suggest that the parties actually agreed
5 or intended to agree to settle the claim for any more than the stated $10 million. We
6 note that the district court did not believe that the parties agreed to do what Plaintiffs
7 suggest either, as the district court found there was no meeting of the minds on gross
8 receipts taxes and as its added terms did not require Defendant to pay gross receipts
9 taxes on the $750,000, and instead only required Defendant to pay gross receipts taxes
10 in the event that any amount of the settlement above $750,000 was taxed as a payment
11 on the construction contract. [RP 4118]
12 If Plaintiffs wanted to add an additional term requiring Defendant to pay gross
13 receipts taxes in addition to the $10 million settlement payment, they should have
14 raised this issue during negotiations in order to seek to reach an agreement with
15 Defendant on the matter. See WXI/Z Sw. Malls Real Estate Liab. Co. v. Mueller,
16 2005-NMCA-046, ¶ 22, 137 N.M. 343, 110 P.3d 1080 (“[The defendants/assignors
17 of the lease at issue] were free to insist on a notice requirement or any other condition
18 or limitation in their guaranty, but having failed to do so, this Court will not write such
9
1 a condition in after the fact.”). We hold that the district court erred in supplying terms
2 that were neither negotiated by the parties nor necessary to make up for any omission
3 in the agreement that was actually negotiated, and we decline to find any other implied
4 terms regarding the payment of gross receipts taxes.
5 B. Plaintiffs’ Unarticulated Expectation that Defendant Would Pay the Gross
6 Receipts Taxes in Addition to the $10 Million Settlement Amount Does Not
7 Control the Meaning of the Contract
8 Plaintiffs rely on Pope v. Gap, Inc., 1998-NMCA-103, ¶ 13, 125 N.M. 376, 961
9 P.2d 1283, to argue that even if the parties did not actually agree that Defendant would
10 pay gross receipts taxes on top of the settlement amount, Defendant is bound by
11 Plaintiffs’ expectation that Defendant would do so because Defendant should have
12 known that Plaintiffs would think that silence on the issue meant that Defendant
13 would pay the taxes, and Plaintiffs had no reason to know that Defendant would not
14 interpret the contract in this way. [Pls.’ MIO 16-17] In Pope, this Court applied the
15 principle that when parties disagree about the terms of a contract, “[t]he
16 manifestations of the parties are operative in accordance with the meaning attached
17 to them by one of the parties if . . . that party has no reason to know of any different
18 meaning attached by the other, and the other has reason to know the meaning attached
19 by the first party.” Id. (first alteration in original) (internal quotation marks and
10
1 citation omitted).
2 We conclude that this principle does not require that the agreement be
3 interpreted in light of Plaintiffs’ unstated expectation. In our notice of proposed
4 summary disposition, we pointed out that the prior practice of the parties with respect
5 to settlement agreements had been to include an express provision stating that
6 Defendant would be responsible for gross receipts taxes when the parties intended
7 Defendant to pay them in addition to the settlement amount itself. Plaintiffs respond
8 that this is not the only evidence of the parties’ past practice with respect to
9 settlements, since in two previous settlements, there was no discussion of who would
10 pay the gross receipts taxes, and Defendant paid them. [Pls. MIO 12-13] We note
11 that these two previous “settlements” are not negotiated settlement agreements and,
12 instead, reflect Defendant’s internal administrative resolution of claims. [RP 4064-65,
13 4081, 4088] These dispute resolutions did not involve the settlement of a lawsuit and
14 did not require a negotiated settlement agreement. Therefore, we do not believe that
15 these resolutions shed light on the issue of whether either of the parties would
16 interpret silence in a settlement agreement regarding any additional payments of gross
17 receipts taxes to mean that Defendant would make an additional payment of the gross
18 receipts taxes on top of the settlement amount. The only negotiated settlement
11
1 agreement between the parties shows that when the parties agree that Defendant will
2 pay the gross receipts taxes in addition to a base amount to settle the lawsuit , the
3 parties include an express provision in their agreement so providing. [RP 4094]
4 Based on this evidence, Plaintiffs had a reason to know that Defendant was likely to
5 believe that it would only pay gross receipts taxes on top of the settlement amount if
6 it expressly agreed to do so as part of the settlement agreement. Pope does not require
7 that Plaintiffs’ unstated expectation be enforced.
8 III. On Remand
9 Defendant asks this Court to instruct the district court to enter a particular
10 factual finding and conclusion of law on remand. [Def.’s MIS 6] Defendant is
11 apparently concerned about two factual findings made by the district court regarding
12 the amount of the $10 million settlement payment that should be characterized as a
13 payment for construction services. [Def.’s MIS 4-5 n.1] We decline to state any
14 opinion on these factual findings as they were not challenged on appeal in Defendant’s
15 docketing statement, see Stueber v. Pickard, 112 N.M. 489, 491, 816 P.2d 1111, 1113
16 (1991) (stating that an unchallenged finding of the district court is binding on appeal),
17 and we will not instruct the district court on the particular findings and conclusions
18 it should enter on remand.
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1 IV. Conclusion
2 Accordingly, for the reasons stated in this opinion and in our notice of proposed
3 summary disposition, we reverse and remand for entry of an order consistent with this
4 opinion.
5 IT IS SO ORDERED.
6 _______________________________
7 JAMES J. WECHSLER, Judge
8 WE CONCUR:
9 _____________________________
10 CYNTHIA A. FRY, Chief Judge
11 _____________________________
12 ROBERT E. ROBLES, Judge
13