Palenick v. City of Rio Rancho

I attest to the accuracy and
integrity of this document
New Mexico Compilation
Commission, Santa Fe, NM
'00'05- 17:12:48 2012.02.16
Certiorari Granted, February 6, 2012, No. 33,380
IN THE COURT OF APPEALS OF THE STATE OF NEW MEXICO
Opinion Number: 2012-NMCA-018
Filing Date: November 17, 2011
Docket No. 30,136
JAMES M. PALENICK,
Plaintiff-Appellant,
v.
CITY OF RIO RANCHO,
Defendant-Appellee.
APPEAL FROM THE DISTRICT COURT OF SANDOVAL COUNTY
George P. Eichwald, District Judge
Daniel M. Faber
Albuquerque, NM
for Appellant
Montgomery & Andrews, P.A.
Randy S. Bartell
Holly Agajanian
Santa Fe, NM
for Appellee
Dines & Gross PC
Gregory P. Williams
Albuquerque, NM
for Amicus Curiae N.M. Foundation for Open Government
OPINION
SUTIN, Judge.
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{1} After the City of Rio Rancho (the City) was informed by the New Mexico Attorney
General that its termination of Plaintiff James Palenick as its City Manager violated the
Open Meetings Act (the Act), NMSA 1978, §§ 10-15-1 to -4 (1974, as amended through
2009), the City, in a meeting eleven months after the termination, passed a resolution
attempting to retroactively cure the violation. Plaintiff sued on two counts: Count I, to
enforce the Act, and Count II, for debt and money due under the employment agreement for
the period between the initial termination and the later-attempted cure. We refer to
Plaintiff’s claim for debt and money due as a claim for breach of contract. The district court
dismissed Plaintiff’s claim in Count I seeking to enforce the Act on the ground that the court
lacked subject matter jurisdiction. On Count II, the breach of contract claim, the court
determined that the City violated the Act. The court nevertheless held against Plaintiff on
his breach of contract claim, holding that the City’s cure in the later meeting of its prior
invalid action applied retroactively, resulting in an effective earlier termination. A related
issue is whether Plaintiff waived his contention that the City violated the Act when he
accepted severance benefits, pursuant to his employment agreement, when he was initially
terminated, believing at the time that the City had violated the Act. The district court held
that Plaintiff’s acceptance of the benefits immediately after his termination constituted a
waiver of his breach of contract claim. A further issue involves the district court’s denial
of Plaintiff’s claim under the Act for attorney fees. We hold that the City’s later attempt to
make its invalid termination valid was not effective. We also hold that Plaintiff’s acceptance
of severance benefits did not constitute a waiver of his right to salary and benefits pursuant
to his employment agreement. We further hold that Plaintiff is not entitled to attorney fees
or costs under the Act.
BACKGROUND
{2} Plaintiff and the City signed an employment agreement (the agreement) dated
November 8, 2006, employing Plaintiff as the City Manager at the pleasure of the City’s
governing body and permitting the governing body to terminate Plaintiff with or without
cause. The agreement provided that, if the governing body terminated Plaintiff without just
cause, he would be entitled to receive certain severance benefits, including a cash payment
calculated on his years of service. At a December 13, 2006, meeting at which Plaintiff was
present, the governing body voted to terminate Plaintiff’s employment, and Plaintiff
immediately concluded that the vote had been taken in violation of the Act.
{3} The following day, Plaintiff delivered a letter to the City requesting payment of
severance benefits, based on the governing body’s action to remove him; the demand did not
mention the Act or reserve any rights to later sue the City based on a violation of the Act.
A few days later, Plaintiff clarified his demand in another letter, but this too did not mention
the Act. In a letter sent several days later, the City informed Plaintiff that “effective
December 13, 2006[,] you will no longer be considered [an] active employee”; Plaintiff did
not object to this statement. Plaintiff received severance benefits.
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{4} In September 2007, the Attorney General informed the City that, because of
discussions regarding Plaintiff’s employment status that predated the meeting on December
13, 2006, the City violated the Act in terminating Plaintiff’s employment at that meeting and
that the violation invalidated the governing body’s action terminating Plaintiff. These
discussions, referred to in the Attorney General’s letter, took place among certain City
officials that included the mayor, deputy mayor, and various city councilors. At a meeting
on November 14, 2007, the governing body adopted a resolution to address the Attorney
General’s concerns. In part, the resolution stated that “[i]f at all relevant, any and all prior
actions undertaken in terminating [Plaintiff’s] employment with the City and set forth in
writing are hereby ratified and approved.” By this resolution, the governing body intended
to ratify and approve its prior action terminating Plaintiff’s employment effective December
13, 2006.
{5} On December 14, 2007, Plaintiff sent a letter to the City stating, among other things,
that his termination was invalid as reflected in the Attorney General’s findings. Plaintiff
filed suit against the City in January 2008. In Count I, Plaintiff sought “a judgment for
violation of the . . . Act” by issuing an injunction invalidating the termination, awarding
attorney fees and costs under Section 10-15-3(C), and such other relief as the court deemed
proper. In Count II, he asserted a claim for debt and money due on the grounds that the City
had violated the Act; his termination was invalid; he remained employed under the
agreement; and he was entitled to unpaid salary and benefits, interest, attorney fees, and
costs based on the City’s continuous breach of the agreement.
{6} In April 2009, the court entered an order dismissing Plaintiff’s Count I with prejudice
on the ground that the court did not have subject matter jurisdiction over the claim. The
district court did not explain its rationale for holding that it lacked subject matter
jurisdiction. Plaintiff does not argue on appeal that the court erred in dismissing Count I.
Accordingly, we do not address or discuss the propriety of this order.
{7} In its findings of fact and conclusions of law entered in October 2009, the court not
only confirmed the dismissal of Count I, but it also dismissed Count II (breach of contract).
The dismissal of Count II was based on the court’s conclusion of law that the meeting on
December 13, 2006, terminating Plaintiff’s employment violated the Act, but that the City’s
resolution adopted at its November 14, 2007, meeting “retroactively ratified, rectified, and
approved its prior action on December 13, 2006[,] terminating [Plaintiff’s] employment and
cured any alleged violations of the . . . Act.” The district court also found and concluded
that, upon his termination in December 2006 and demand for severance benefits, Plaintiff
elected to receive and did receive his severance benefits and that his “election to proceed
with his demand for severance [was] a waiver of any and all rights to claim a breach of the
[e]mployment [a]geement based on violations of the . . . Act.” Count II was also dismissed
with prejudice. Following a hearing on Plaintiff’s motion for a new trial, the court entered
a final judgment in favor of the City.
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{8} Plaintiff contends on appeal that his termination could have been effective only as
of the date of the corrective action taken by the City on November 14, 2007, that he was
employed by the City and entitled to his salary and benefits until that time, and that he did
not waive his right to the salary and benefits he sought. He also contends that he is entitled
to costs and reasonable attorney fees permitted under the Act.
The Retroactive Cure Issue
{9} We review questions of interpretation of statutes de novo. State v. Rivera, 2004-
NMSC-001, ¶ 9, 134 N.M. 768, 82 P.3d 939. Public entities can cure violations of the Act.
See, e.g., Bd. of Educ. of Santa Fe Pub. Sch. v. Sullivan, 106 N.M. 125, 125, 740 P.2d 119,
119-20 (1987) (stating that the board was entitled to correct the procedural defect of failing
to comply with the Act); Kleinberg v. Bd. of Educ. of Albuquerque Pub. Sch., 107 N.M. 38,
44, 751 P.2d 722, 728 (Ct. App. 1988) (recognizing that “the procedural defect could be
corrected through a reinstatement of the termination proceedings”). But no authority in New
Mexico supports the City’s attempt to retroactively make the prior invalid action valid and
effective as of the date it was taken. Section 10-15-3(A) plainly states that no board action
is valid if the action is not taken in accordance with Section 10-15-1. No provision in the
Act states or implies that, when a public entity acts to “cure” an invalid employment
termination by taking a later action, the later action can be applied retroactively. To permit
retroactive application not only removes incentive to comply with the Act in employment
termination circumstances, it undermines the Act and essentially renders Section 10-15-3(A)
meaningless. We cannot see in the Act any purpose or balancing of interests that should bar
Plaintiff from seeking relief despite the City’s violation. We hold that the district court erred
in determining that the City’s November 14, 2007, resolution retroactively rectified, ratified,
and approved the invalid December 13, 2006, action taken in violation of the Act thereby
making the termination valid and effective as of December 13, 2006.
The Waiver Issue
{10} The issue of waiver here is one of law that we review de novo. Concerned Residents
of Santa Fe N., Inc. v. Santa Fe Estates, Inc., 2008-NMCA-042, ¶ 22, 143 N.M. 811, 182
P.3d 794 (reviewing an issue of waiver de novo).
{11} We have difficulty affirming the district court’s determination that Plaintiff waived
his right to any salary and benefits because he demanded and received a severance payment
when he was first terminated, believing at the time that the City had violated the Act. There
appears, indeed, at least at first glance backwards, to be an irreconcilable inconsistency in
permitting a terminated employee to have severance benefits but also demand salary. Yet,
looking back, we are convinced that the circumstances do not permit a determination of
waiver or relinquishment of a known right or waiver by estoppel. There appears to be no
dispute that had Plaintiff been validly terminated on December 13, 2006, he would have
been entitled to the severance benefits he received. There appears to be no question that,
upon his termination on November 14, 2007, he was entitled to severance benefits if he had
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not already received them. Thus, under one or the other of the termination actions taken by
the City, it was liable for severance benefits. Under these circumstances, we see no basis
upon which Plaintiff should be barred on a waiver or estoppel ground from seeking relief
under Count II.
The City’s Argument That the District Court was Right for the Wrong Reason
{12} The City argues that, notwithstanding the court’s determination that the City violated
the Act, Plaintiff could not prevail because he failed to prove an essential element of his
breach of contract claim, namely, that the City violated the Act. The City argues that
Plaintiff “did not . . . explain the facts and circumstances surrounding the alleged . . .
violation or otherwise [show] how the [Act] was actually violated.” Thus, according to the
City, we should affirm the district court’s dismissal of Plaintiff’s breach of contract claim
on the ground that it was right even if its reasoning was mistaken. See Tsosie v. Found.
Reserve Ins. Co., 77 N.M. 671, 676, 427 P.2d 29, 32 (1967) (stating that “[a] court will not
be reversed when it has arrived at the correct result for a wrong reason”). We reject this
argument. The City did not appeal the district court’s determination that the City violated
the Act. Nor has the City cited any authority that supports its attempt to collaterally
undermine that determination by attempting to show that it lacked a sufficient evidentiary
basis. Thus, we see no basis on which the City can argue that the violation was never
proved.
{13} We note, as well, that immediately after the evidence closed, at the point the court
initially indicated that the Act had not been violated, Plaintiff sought a new trial. The
request was based on the fact that he did not present evidence of the City’s violation of the
Act because of an earlier court ruling that the sole issue to be tried was whether the City’s
cure had retroactive effect. Plaintiff points out that before trial, the court limited the issue
at trial to that relating to retroactivity and, therefore, Plaintiff did not concentrate on
evidence establishing the violation. We also note that Plaintiff argues that the facts relating
to the violation were before the court in the summary judgment proceedings before trial, that
the facts were undisputed, and that evidence was also presented during trial.
The Attorney Fees Issue
{14} The circumstances relating to the attorney fee issue are a bit confusing. As we
discussed in the background section of this Opinion, the district court dismissed Count I of
Plaintiff’s complaint with prejudice for lack of subject matter jurisdiction. That claim sought
relief under the Act based on the City’s violation of the Act. Plaintiff has not challenged that
dismissal on appeal. Yet, at trial on the breach of contract claim, the court considered
whether the City violated the Act. At the close of trial, the court stated that, based on the
evidence before the court, “there [was] insufficient evidence to show that there was a
violation of the . . . Act.” But in its findings of fact and conclusions of law, the court
concluded that “[t]he City’s action resulting from the December 13, 2006[,] meeting
concerning [Plaintiff’s] termination was in violation of the . . . Act.” Then, in its order
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denying Plaintiff’s motion for a new trial, the court found that the City violated the Act when
it terminated Plaintiff on December 13, 2006.
{15} The City argues that, because the court dismissed Plaintiff’s Count I claim under the
Act for failure to comply with jurisdictional requirements, Plaintiff cannot successfully
assert entitlement to attorney fees or costs under the Act. Distinguishing wrongful
employment termination jurisprudence from that involving enforcement of the Act, the City
also argues that Plaintiff cannot recover attorney fees or costs for enforcement of the Act
because, although premised on a violation of the Act, Plaintiff’s breach of contract claim was
not an action to enforce the Act. Plaintiff argues that the court ultimately determined that
the City violated the Act, that this issue was part of Plaintiff’s claim for relief, and that the
court’s determination was sufficient to bring Plaintiff within the Act’s allowance of attorney
fees and costs. The City did not appeal the court’s ruling that the City violated the Act.
{16} We resolve this enigmatic issue against Plaintiff. In his complaint, Plaintiff sought
attorney fees and costs in Count I expressly and specifically pursuant to Section 10-15-3(C)
of the Act. While he also asked for attorney fees and costs in his breach of contract claim,
Plaintiff did not mention entitlement to the fees and costs under the Act. In briefing the
subject matter jurisdiction issue, he distinguished his enforcement claim and his breach of
contract claim, with the following argument, which was his sole argument on the merits of
the issue:
As [Plaintiff] argued when he opposed [the City’s] first motion for
summary judgment, his complaint contains claims for violation of the . . . Act
and debt and money due. [Plaintiff] seeks damages for breach of his
employment contract under Count II, Debt and Money Due. He seeks
attorney fees and costs, but no damages, under the . . . Act. The [c]ourt
should again reject the lack of subject matter jurisdiction argument.
Under the law of this case as established in the court’s rulings, and given the peculiar
circumstances and unattacked ruling on subject matter jurisdiction, we determine that, while
the court could properly determine that the City violated the Act when considering Plaintiff’s
claim for breach of contract, having dismissed Count I with prejudice, the court could not
properly enforce the Act by awarding attorney fees and costs under the Act.
CONCLUSION
{17} We reverse the district court’s dismissal of the breach of contract claim in Count II
and remand for further proceedings on whether Plaintiff is entitled under the employment
agreement to salary and benefits for any period following December 13, 2006, and if so, for
a determination of the amount he is entitled to receive. We affirm the district court’s denial
of Plaintiff’s request for attorney fees and costs.
{18} IT IS SO ORDERED.
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____________________________________
JONATHAN B. SUTIN, Judge
WE CONCUR:
____________________________________
MICHAEL D. BUSTAMANTE, Judge
____________________________________
MICHAEL E. VIGIL, Judge
Topic Index for Palenick v. City of Rio Rancho, No. 30,136
AE APPEAL AND ERROR
AE-RR Right for Any Reason Doctrine
AE-SR Standard of Review
CP CIVIL PROCEDURE
CP-WA Waiver
CN CONTRACTS
CN-BR Breach
EL EMPLOYMENT LAW
EL-AF Attorney Fees
EL-TE Termination of Employment
GV GOVERNMENT
GV-MU Municipalities
GV-OA Open Meetings Act
ST STATUTES
ST-IP Interpretation
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