Yates Exploration, Inc. v. Valley Improvement Ass'n

773 P.2d 350, 108 N.M. 405
CourtNew Mexico Supreme Court
DecidedMay 4, 1989
Docket17790
StatusPublished
Cited by6 cases

This text of 773 P.2d 350 (Yates Exploration, Inc. v. Valley Improvement Ass'n) is published on Counsel Stack Legal Research, covering New Mexico Supreme Court primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Yates Exploration, Inc. v. Valley Improvement Ass'n, 773 P.2d 350, 108 N.M. 405 (N.M. 1989).

Opinion

OPINION

SCARBOROUGH, Justice.

This suit involves a dispute between a group of persons owning certain subdivision lots, the civic association organized to represent them and the development corporation associated with the subdivisions. The lots were purchased in anticipation of rising residential and commercial development in an area which remains essentially unimproved and unoccupied. Defendant and third-party plaintiff, Valley Improvement Association, Inc. (VIA) appeals from the district court the dismissal of its third-party complaint against appellee Horizon Corporation (Horizon). We affirm.

Factual Background. Plaintiffs in the underlying class action lawsuit are past and present owners of lots in two subdivisions located in Valencia County, New Mexico. The lots were platted and promoted by Horizon, a land development corporation. VIA is the successor in interest to Horizon Communities Improvement Association (HCIA), a New Mexico nonprofit corporation formed in 1969, with Horizon’s involvement, and intended to be a civic organization representing the lot owners. HCIA was charged with “promotpng] the common good and social welfare” of the subdivision landowners. Until about 1983 one or more Horizon officers or representatives served as members of the HCIA/VIA board of directors.

After the formation of HCIA, Horizon deeded all of the subdivision lots to HCIA who in turn deeded the properties back to Horizon subject to certain indentures. Then, between 1969 and 1981, Horizon sold thousands of individual lots subject to the indentures which empowered HCIA/VIA to assess and collect annual charges on each lot. The collected funds were to be used for the benefit of the subdivisions.

Plaintiffs in the underlying suit allege that while funds in excess of $15,000,000 have been collected by HCIA/VIA, only negligible amounts have actually been used to benefit the properties. Apparently little or no utility services, buildings, or improved roads exist within the two subdivisions which remain undeveloped. The directors of HCIA/VIA are said to have used the funds unlawfully. The assessment methods themselves are said to be irrational and arbitrary. Enforcement action by HCIA/VIA is said to be selective.

At the same time HCIA/VIA has filed foreclosure actions upon hundreds of landowners for nonpayment of the assessments. Also, a large number of the lots have been sold by the State of New Mexico for unpaid taxes. The plaintiffs claim there is little, if any, market for the resale of these lots due, in large part, to the continued existence of the indentures. The plaintiffs allege the directors of VIA have so manipulated the association meetings and elections that the voting power of the membership is illusory leaving the members with no effective way to eliminate or change the assessments other than legal action.

In their complaint against VIA, the plaintiffs listed a number of potential remedies including: the dissolution of VIA; an accounting for all of the assessments VIA has received; the invalidation of the indentures; turning over the assessment funds to the plaintiffs, to a trustee, or to another nonprofit corporation formed under the direction of the court; the return of foreclosed upon properties to their former owners; and enjoining VIA from paying the attorney fees of its officers and directors in this or related suits.

The plaintiffs did not join the original development corporation, Horizon, in this suit. In a separate action, the Federal Trade Commission (FTC) in May 1981, found that Horizon’s representations to the public that its land was an excellent, financially risk-free, short-term investment were false, misleading and deceptive, and in violation of federal law. The FTC severely restricted further promotion and sales by Horizon and ordered that Horizon spend not less than $45,000,000 for improvements in the subdivisions within twenty years. In calling for the dissolution of VIA in the present suit, the plaintiffs restate the findings of the FTC, recall the central role of HCIA and the indentures in Horizon’s sales program, and make the statement that Horizon’s actions are attributable “by operation of law” to HCIA/VIA. Dissolution is also requested on the basis of VIA’s failure of purpose, and due to changed circumstances.

The district court denied VIA’s motion to join Horizon as a necessary party to this action. Later VIA proceeded to name Horizon as a defendant in a third-party complaint seeking contribution, indemnity, and any other available form of relief from Horizon. The third-party complaint was dismissed on Horizon’s motion.

Impleader under SCRA 1986, 1-014(A). The issue on appeal is whether VIA stated a third-party claim against Horizon under Rule 1-014(A) of the New Mexico Rules of Civil Procedure. Rule 1-014(A) permits a defendant to implead a person “who is or may be liable to him for all or part of the plaintiff's claim against him.” SCRA 1986, 1-014(A). To come within the scope of Rule 1-014(A), the third-party’s potential liability must in some way be dependent upon the outcome of the main claim against the defendant. 6 C. Wright & A. Miller, Federal Practice and Procedure § 1446 (1971) (discussing Fed.R.Civ.P. 14, the federal counterpart to SCRA 1986, 1-014); United States v. Olavarrieta, 812 F.2d 640 (11th Cir.1987); Southeast Mortgage Co. v. Mullins, 514 F.2d 747 (5th Cir.1975). Traditionally, derivative or secondary liability to the defendant, on the basis of indemnity, contribution, or some other theory, is considered to be essential. Grain Dealers Mutual Insurance Co. v. Reed, 105 N.M. 586, 734 P.2d 1269 (1987); see also 6 C. Wright & A. Miller, Federal Practice and Procedure § 1446 (1971). We have, however, relaxed the traditional rule in negligence suits in order to allow the continued impleader of concurrent tortfeasors whose liability for contribution was abolished with the adoption of comparative negligence. Tipton v. Texaco, Inc., 103 N.M. 689, 712 P.2d 1351 (1985) (allocation of comparative negligence among concurrent tortfeasors assures the complete disposition of the underlying suit).

Still, the requirement that the third-party’s potential liability be dependent upon the outcome of the main claim remains the general rule and the central concept involved in third-party practice. The rule was not intended to be used to resolve every controversy between the defendant and a third-party which may have some relationship with the transaction at issue in the original complaint. Grain Dealers, 105 N.M. at 587, 734 P.2d at 1271; see also First Nat’l Bank of Santa Fe v. Espinoza, 95 N.M. 20, 618 P.2d 364 (1980) (dismissal proper where third-party complaint introduced only collateral issues not dependent upon resolution of issues in main claim). Nor does the rule create any new right of action. Impleader is only a procedural device.

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Bluebook (online)
773 P.2d 350, 108 N.M. 405, Counsel Stack Legal Research, https://law.counselstack.com/opinion/yates-exploration-inc-v-valley-improvement-assn-nm-1989.