AMKCO, LTD., CO. V. WELBORN, 1999-NMCA-108,
127 N.M. 587, 985 P.2d 757
CASE HISTORY ALERT: affected by
2001-NMSC-012
AMKCO, LTD., CO., a New Mexico limited
liability company;
KEELING PETROLEUM, INC., a New Mexico corporation;
and KEELING DISTRIBUTING, INC., a New Mexico
corporation, Plaintiffs-Appellees
vs.
MICKEY D. WELBORN, a single man, Defendant-Appellant.
COURT OF APPEALS OF NEW MEXICO
1999-NMCA-108, 127 N.M. 587, 985 P.2d 757
APPEAL FROM THE DISTRICT COURT OF LEA
COUNTY. Ralph W. Gallini, District Judge.
Certiorari Granted, No. 25,820, July
30, 1999. Released for Publication August 13, 1999. As Amended.
1 William G.W. Shoobridge, Shoobridge Law
Firm, P.C., Hobbs, NM, for Appellees.
James E. Templeman, Templeman and
Crutchfield, Lovington, NM, for Appellant.
THOMAS A. DONNELLY, Judge. WE CONCUR: A.
JOSEPH ALARID, Judge, RICHARD C. BOSSON, Judge.
AUTHOR: THOMAS A. DONNELLY
{1} Appellees, Amkco,
Ltd., Co., Keeling Petroleum, Inc. and Keeling Distributing, Inc., erected a $
1,250,000 truck stop, store, and travel center in Hobbs, New Mexico. After the
building and related facilities were constructed, Appellees discovered that a
portion of the complex was built on land owned by Appellant and that it
encroached a distance of fifty-eight feet onto the neighboring property.
{2} The trial court
entered a judgment ordering Appellant to convey a fifty-eight-foot strip of property
on which the encroachment was located to Appellees in return for the sum of $
14,700, or alternatively that Appellant deed such strip of property to
Appellees in exchange for a similar piece of land adjoining Appellant's
property on its northern boundary.
{3} Appellant raises
three issues on appeal: (1) whether the trial court erred in applying the
"relative hardship" doctrine and denying Appellant's counterclaim for
ejectment and quiet title; (2) whether the trial court properly fashioned an
alternative equitable remedy that was fair to Appellant; and (3) whether the
trial court erred in finding that the encroachment resulted from a mutually
mistaken state of mind between Appellees and Appellant. We reverse and remand.
{4} In May 1988 Keeling
Petroleum, Inc., controlled by Alfred Keeling and Maritia Keeling, his wife,
purchased a tract of land located at the corner of West Marland Boulevard and
West County Road in Hobbs. After acquiring the property, the corporation
determined that it had purchased more land than was necessary for construction
of a travel center, store, and truck station, and it agreed to keep a tract
which measured 220 feet by 300 feet, and to sell the remainder to Appellant,
who owned other land adjoining the Keelings' property.
{5} The Keelings hired
Richard R. Pettigrew, a professional engineer and surveyor, to prepare a
boundary survey of the property which the corporation agreed to sell to
Appellant. Utilizing this survey, two legal descriptions were prepared, one which
described the property to be sold to Appellant and one which described the
property the corporation intended to retain. Both legal descriptions indicated
that the north fifty-eight feet of the property adjoining Marland Boulevard,
which the corporation retained, was subject to an easement for a highway
right-of-way.
{6} Keeling Petroleum,
Inc. entered into a contract for the sale of the excess property to Appellant
on March 30, 1990. Appellant fulfilled the terms of the purchase agreement and
a special warranty deed was issued to him on June 30, 1997. The Keelings hired
Ken Hovey Design Group to prepare a site plan and layout of the project in
1993. The Keelings also requested that John West Engineering Company perform
additional surveying in 1993. The site plan was completed on September 11,
1993, and the survey was finished on November 8, 1993.
{7} Unknown to the
Keelings, the Ken Hovey Design Group site plan and the John West Engineering
survey placed a portion of the construction site fifty-eight feet south of the
project's north boundary. Construction of the project began in December 1996 by
Keeling Petroleum, Inc., Amkco Ltd., Co., a limited liability company, and
Keeling Distributing, Inc. Each of these entities was controlled by the
Keelings. The general contractor for the project, Lasco Construction Company,
rechecked the survey stakes placed by John West Engineering for the project.
Based on that inspection, the travel center was built within the survey stakes
placed by John West Engineering. Upon completion of the project, Appellees
sought to obtain permanent financing for the facility from Conoco Oil Company
(Conoco). Conoco requested that a new survey be obtained. The new survey
revealed that a portion of the facility substantially encroached on property
owned by Appellant, and the encroachment covered approximately nine percent of
Appellant's remaining usable land.
{8} After Appellees
discovered the encroachment, they notified Appellant and sought to purchase the
area affected by the encroachment. Appellant, however, declined to sell such
property. In a further effort to persuade Appellant to sell the strip of
property, Appellees purchased a fifty-eight-foot strip of property adjoining
the south side of Appellant's property and offered to trade that parcel for the
area affected by the encroachment.
{9} After failing to
negotiate a purchase or land exchange, Appellees filed suit seeking a
declaratory judgment as to the rights of the parties, seeking an order
requiring Appellant to convey the strip of property for a reasonable fair
market price, or for the award of other equitable relief. Alternatively,
Appellees also sought reformation of the contract and deed conveying the land
purchased by Appellant, alleging that the deed delivered to Appellant was the
result of a surveyor's error. At trial, Appellees subsequently abandoned their
claim for reformation. Appellant filed a counterclaim for ejectment and to
quiet title to the property owned by him.
{10} Following trial,
the trial court adopted findings of fact and conclusions of law determining,
among other things, that Appellees "unknowingly constructed a 58-foot
encroachment onto [Appellant's] property in good faith reliance of a
survey"; that Appellant saw "the construction of . . . [the] Travel
Center and was unaware of any encroachment until he was advised by [Appellees]
after construction was complete"; "the
{*590}
encroachment occurred because [Appellees] and [Appellant] had a mutually
mistaken state of mind as to where their boundary line actually ran and
justifiably relied upon mistaken survey stakes"; "the encroachment
was not constructed in willful disregard of the property rights of
[Appellant]"; and that Appellees "took reasonable steps to ascertain
the boundary between their land and that of [Appellant]." The trial court
also found that "the cost of the removal of the encroachment by
[Appellees] and resulting damages would be disproportionate to any damage
caused to [Appellant's] property"; that Appellant's "property rights
will not be irreparably injured by the denial of an order to remove the
existing encroachments"; and that Appellees' "Travel Center will be
irreparably injured and not viable" if removal of the encroachment was
ordered, and removal of the encroachment would eliminate Appellees'
"ability to sell diesel fuel and would require removal of improvements
costing . . . $ 188,837.00 to construct."
{11} Based upon its
findings of fact and conclusions of law, the trial court entered a judgment
ordering Appellant to convey to Appellees the area encroached upon in return
for the sum of $ 14,700, or alternatively to elect to accept a deed for
replacement property in exchange for other property of Appellees. The trial
court also awarded Appellees the sum of $ 3,600.03 for their taxable costs.
{12} We jointly
discuss Appellant's first and second issues asserted on appeal. Appellant
argues that the trial court erred in ordering him to convey a portion of the
property owned by him to Appellees in return for the sum of $ 14,700, or
alternatively ordering that he convey a portion of his property to Appellees in
exchange for a tract of land owned by Appellees. Appellant asserts that the
area ordered to be conveyed to Appellees comprises a substantial portion of his
remaining total usable land and that the circumstances shown here do not
warrant compelling him to convey his property under the trial court's
application of the equitable "relative hardship" doctrine. Appellant
argues, among other things, that Appellees failed to provide the Ken Hovey
Design Group with a copy of the 1990 Pettigrew survey and that this factor
contributed to the failure of the Ken Hovey Design Group and John West
Engineering to correctly place the encroaching portion of Appellees'
improvements within land retained by them.
{13} On appeal, we
review a decision of the trial court granting or denying equitable relief for
abuse of discretion.
See Navajo Academy, Inc. v. Navajo United Methodist
Mission Sch., Inc.,
109 N.M. 324, 330,
785 P.2d 235, 241 (1990) (standard
of review for order enjoining landlord from evicting tenant from premises until
tenant had reasonable opportunity to locate a new facility held not abuse of
discretion);
Wolf & Klar Cos. v. Garner,
101 N.M. 116, 118,
679 P.2d
258, 260 (1984) (application of doctrines of "clean hands" or other
equitable defenses is entrusted to sound discretion of trial court);
Padilla
v. Lawrence,
101 N.M. 556, 562,
685 P.2d 964, 970 (grant or denial of
equitable relief rests within sound discretion of trial court).
{14} Generally, the
remedy for alleviating an encroachment is the issuance of an injunction
ordering removal of the encroaching structure.
See Heaton v. Miller,
74
N.M. 148, 154,
391 P.2d 653, 657 (1964);
Sproles v. McDonald,
70 N.M.
168, 174-75,
372 P.2d 122, 126-27 (1962);
see also Urban Site Venture II
Ltd. Partnership v. Levering Assocs. Ltd. Partnership, 340 Md. 223, 665
A.2d 1062, 1065 (Md. 1995) (hereafter
Urban Site Venture). A mandatory
injunction is an injunction which compels some positive action by the person or
persons enjoined.
See State ex rel. Corbin v. Portland Cement Ass'n, 142
Ariz. 421, 690 P.2d 140, 144 (Ariz. Ct. App. 1984). In
Sproles, however,
our Supreme Court recognized that in cases involving encroachments the district
court should weigh the relative hardships likely to result from the issuance of
a mandatory injunction. 70 N.M. at 175, 372 P.2d at 127. The
Sproles
Court reversed the district court's order directing the removal of certain
fences and directed that the court weigh the competing interests and equities
of the parties before ordering the removal of such improvements. The Court in
Sproles
quoted from William Q.
{*591} de
Funiak's
Handbook of Modern Equity § 25, at 43 (2d ed. 1956), noting:
"The doctrine or rule [balancing of equities] is
sometimes stated to be that the court will weigh the loss, injury, or hardship
resulting to the respective parties from granting or withholding equitable
relief; that if the loss resulting to the plaintiff from denying the equitable
relief will be slight as compared to the loss or hardship caused to the
defendant if the injunction is granted, the equitable relief will be denied.
The plaintiff is left to pursuit of damages as his remedy."
Sproles, 70 N.M. at 174, 372 P.2d at 126.
{15} In
Heaton
our Supreme Court affirmed on appeal a decision of the district court ordering
the defendants to remove a dwelling house, and water, sewer, and gas lines that
encroached on property owned by the plaintiff. The Court, although agreeing
with the district court that the facts therein warranted the issuance of a
mandatory injunction, reiterated, however, that in appropriate cases where
equity warrants, the court may deny the issuance of an injunction. The Court
quoted with approval from 1 Am. Jur. 2d
Adjoining Landowners § 131, at
779, stating:
"While the right to a mandatory injunction [for
removal of encroachments] under proper circumstances is firmly established, the
injunction may be refused because of the absence of proper circumstances, or
especially because of inequitable incidents. It is impossible[, however,] to
lay down any general rule that will determine every specific case. . . ."
Heaton, 74 N.M. at 156, 391 P.2d at 658; see also
Cunningham v. Gross, 102 N.M. 723, 725, 699 P.2d 1075, 1077 (1985) (stating
that in ascertaining whether injunctive relief should be granted, court may
balance equities and hardships).
{16} Professor Dan B.
Dobbs, in 1
Dobbs Law of Remedies § 5.104(4), at 816 (2d ed. 1993),
aptly summarized the contrasting principles involved in balancing the equities
in encroachment cases. Dobbs observes:
Balancing Hardships. The dominant approach in
the encroachment cases is to balance the relative hardships and equities and to
grant or deny the injunction as the balance may seem to indicate. If the
injunction is denied, the plaintiff is left with defendant's encroaching
structure partly on his land and he will be entitled to damages in lieu of the
injunction. If the hardship of removal is not too great, a mandatory injunction
will issue to require removal, leaving the plaintiff in complete possession.
Guiding Policies. Courts seem mainly moved by
two central considerations. First, no one should be permitted to take
land of another merely because he is willing to pay a market price for it. This
would amount to a private eminent domain . . . .
Second, although private eminent domain cannot
be sanctioned, neither extortion nor economic waste that may be entailed in
destroying a structure is desirable. If the encroachment can be removed only by
destroying a part of the defendant's large building, but the harm it does to
the plaintiff is quite small, the mandatory injunction would compel economic
waste or else put the plaintiff in position to demand an unconscionably high
price to let the building stay in place. Conscionability and economic arguments
may combine to disfavor this kind of result. These two general principles point
in different directions; it is this fact that prompts courts to seek resolution
through a balancing of hardships and equities.
{17} As recognized by
this Court, and depending on the facts and circumstances, injunctions may be
drastic remedies which should issue only in extreme cases where there is
evidence of compelling necessity and only where there is a showing of
irreparable injury for which there is no adequate and complete remedy at law.
See
Padilla, 101 N.M. at 562, 685 P.2d at 970;
see also State ex rel. State
Tax Comm'n v. First Judicial Dist. Ct.,
69 N.M. 295, 300,
366 P.2d 143, 146
(1961) (holding that issuance of injunction is not a matter of right; issuance
is proper only in sound discretion of court when remedy at law is not
adequate);
Scott v. {*592} Jordan,
99 N.M. 567, 572,
661 P.2d 59, 64 ("Injunctions are harsh and drastic
remedies . . . .").
{18} In
Urban Site
Venture the Maryland Court of Appeals discussed the circumstances wherein a
court sitting in equity could refuse to issue a mandatory injunction ordering
the removal of an encroaching structure. There, the court, quoting from
Easter
v. Dundalk Holding Co., 199 Md. 303, 86 A.2d 404, 405 (Md. 1952), stated:
"It is an accepted rule that where a landowner,
by innocent mistake, erects a building which encroaches on adjoining land, and
an injunction is sought by the owner of the land encroached upon, the court
will balance the benefit of an injunction to the complainant against the
inconvenience and damage to the defendant, and where the occupation does no
damage to the complainant except the mere occupancy of a comparatively
insignificant part of his lot, or the building does not interfere with the
value or use of the rest of his lot, the court may decline to order the
removal of the building and leave the adjoining landowner to his remedy at law.
Hasselbring v. Koepke, 263 Mich. 466, 248 N.W. 869, 873, 93 A.L.R. 1170
[(1933)]; Mary Jane Stevens Co. v. First National Building Co., 89 Utah
456, 57 P.2d 1099, 1126 [(1936)]."
Urban Site Venture, 665 A.2d at 1065 (emphasis added).
{19} In challenging
the trial court's application of the balancing of equities or relative hardship
doctrine in the instant case, Appellant, relying in part on
Christensen v.
Tucker, 114 Cal. App. 2d 554, 250 P.2d 660, 665 (Cal. Ct. App. 1952),
points out the magnitude of the encroachment here and argues that the trial
court's order directing him to convey the property in question was
unreasonable.
Cf. Nitterauer v. Pulley, 401 Ill. 494, 82 N.E.2d 643, 649
(Ill. 1948) ("Where the encroachment is slight and unintentional, and the
cost of removal great . . . the court will ordinarily decline to compel a
removal and will leave the complaining party to his remedy at law.");
Pradelt
v. Lewis, 297 Ill. 374, 130 N.E. 785, 787 (Ill. 1921) (holding if
encroachment is
slight and unintentional, owner will ordinarily be left
to legal remedies).
See generally L.C. Warden, Annotation,
Mandatory
Injunction to Compel Removal of Encroachments by Adjoining Landowner, 28
A.L.R.2d 679 (1953). We agree with Appellant that under the circumstances shown
here, an encroachment not of inches but of fifty-eight feet, the order
directing him to convey a portion of his property to Appellees was an abuse of
discretion.
{20} Some courts that
have considered factual situations analogous to that presented here have
declined to compel a landowner to convey property that has been encroached upon
to the party responsible for the encroachment because the granting of such
relief is tantamount to enforcing a private right of eminent domain.
See,
e.g.,
Urban Site Venture, 665 A.2d at 1065 ("'No court has
authority to compel the owner of land to surrender his property to another
person, lacking the power of eminent domain, in exchange for a sum of money . .
. .'" (quoting
Lichtenberg v. Sachs, 213 Md. 147, 131 A.2d 264, 267
(Md. 1957)));
Goulding v. Cook, 422 Mass. 276, 661 N.E.2d 1322, 1324
(Mass. 1996) ("Where the encroachment is not for a public use, the taking
may not be justified at all.");
Cross v. McCurry, 859 S.W.2d 349,
354 (Tenn. Ct. App. 1993) (stating court is without authority to order
landowner to execute deed to adjoining property owner who built building which
partially encroached on landowner's property);
Tyree v. Gosa, 11 Wash.
2d 572, 119 P.2d 926, 930 (Wash. 1941) (same).
{21} In balancing the
equities, few courts have gone so far as to issue a mandatory injunction
ordering an innocent landowner to convey a
substantial portion of
property encroached upon to a party who is responsible for the encroaching
structure.
See Feinzig v. Ficksman, 42 Mass. App. Ct. 113, 674 N.E.2d
1329, 1333 (Mass. App. Ct. 1997) (holding if encroachment is entitled to
equitable exception from rule requiring removal, encroachment should be minimal
in nature);
Tyree, 119 P.2d at 930 (observing that review of cases in
which courts have applied the doctrine of balancing of the equities, most of
the cases dealt with instances where an encroachment projected a few inches on
the land of another);
see also Restatement (Second) of Torts § 941 cmt.
c, at 583-84
{*593} (1979) (citing
hypothetical example which would be deemed de minimis where protruding portion
of building extended only four inches above tenth floor of high rise structure).
Here, the fifty-eight-foot encroachment amounted to approximately nine percent
of Appellant's remaining usable land. Under these circumstances, the
encroachment cannot be considered minimal or de minimis in nature. We have
found no authority supporting the compelled conveyance of such a substantial
portion of land.
{22} In considering a
claim of ejectment, the trial court, in the exercise of its equitable power,
may consider the equities as shown by the facts presented by the parties. The
court may consider, for example, whether the invaded landowner's remedy of
ejectment is inadequate because of the impracticability of a sheriff executing
a writ of possession. The court, after balancing the equities, may decline to
issue an order compelling the removal of an encroaching structure where the
encroachment is
slight, the mistake is innocent, and the damages to the
encroaching party tip the equitable scales are substantial and the benefit to
the injured party are insubstantial.
{23} As observed by
Richard R. Powell,
Powell on Real Property § 68.09[2][a], at 68-39
(1998), if the court determines, after balancing the equities, that an order
compelling the removal of the encroachment should not be issued, the court may,
when appropriate, award damages to the injured party "as a substitute for
removal." In such case, Powell observes that the encroachment constitutes
a trespass and an award of damages may be appropriate. In that event:
Damages for trespass are either temporary or
permanent. Temporary damages are awarded to supplement an order of removal
(injunction or ejectment). They are designed to make the victim whole by
compensating that victim for the consequences of the encroachment. . . .
If the court permits a wrongful encroachment to
continue, it generally awards permanent damages. Permanent damages are measured
by the diminution in value of the victim's land caused by the trespass.
Id. § 68.09[2][b], at 68-39 to 68-40 (footnote
omitted).
{24} As discussed
above, the extent of the encroachment in the present case cannot fairly be
described as minimal; instead, the degree of encroachment here can only be
characterized as significant. In view of the extensive nature of the
encroachment and the absence of any conduct on the part of Appellant contributing
to the encroachment, we conclude that the trial court erred in ordering
Appellant to convey to Appellees the portion of the land owned by Appellant on
which the encroachment occurred and that it was error to deny removal of the
encroachment.
{25} Here, Appellant
sought the remedy of ejectment. Ejectment is a proper remedy for the removal of
an encroachment on the land of another, where a party is legally entitled to
possession of the premises, the party has been wrongfully ousted from
possession of the land in question, and possession of the realty has been
wrongfully detained.
See NMSA 1978, §§
42-4-1, -2 (1907).
See
generally 2 C.J.S.
Adjoining Landowners § 46, at 46 (1972).
{26} Appellant also
argues that the trial court erred in adopting a finding of fact determining
that the encroachment resulted from a mutually mistaken state of mind between
Appellees and Appellant. We agree. Nothing in the record indicates that
Appellant did anything that led Appellees to misconstrue the proper boundary
between the parties or to condone the encroachment. Even when the record is
construed in a light most favorable to Appellees, at best it may be inferred
that both Appellees and Appellant were unaware of the encroachment until after
the structure was completed. Under these circumstances, the finding adopted by
the trial court could not provide a valid basis for validating the
encroachment.
{27} Finally, we
address Appellees' protest that ejectment and removal of their encroachment
constitute impermissible economic waste. We readily acknowledge some harm will
result to Appellees from dismantling
{*594} and
removal of the encroachment. But that fact alone cannot justify use of the
courts to require a conveyance of this magnitude to Appellees. We note the
absence here of any benefit to the public of the kind that traditionally
justifies a forcible taking of private property. If Appellees do not wish to
"waste" their investment, then as this Court has said in the past
under somewhat analogous circumstances, "nothing forbids [Appellees] from
negotiating with [Appellant] to waive its right to compel removal of the
building."
Cafeteria Operators, L.P. v. Coronado-Santa Fe Assocs.,
1998-NMCA-5, P23,
124 N.M. 440, 448,
952 P.2d 435. The fact that a "court[
] injunction provides [Appellant] with a very strong bargaining position,"
is no grounds for denying Appellant the sole use and possession of his own
private property, particularly when that bargaining position is simply a
natural consequence of Appellees' own mistake.
See id.
{28} Because we
determine that the trial court erred in ordering Appellant to convey the area
owned by him and which was encroached upon to Appellees, and the degree of the
encroachment was extensive in nature, we reverse the order granting such relief
and remand for entry of an order requiring removal of the encroachment.
{29} The trial court's
judgment awarding costs and directing Appellant to convey the area upon which
Appellees'
structure and improvements have encroached in consideration of
payment in the sum of $ 14,700, or alternatively directing the conveyance of
realty in exchange for a deed to property owned by Appellees, is reversed, and
the cause is remanded for further proceedings consistent herewith.
THOMAS A. DONNELLY, Judge