July 25, 2002

Mayor and Council
City of Santa Fe, NM
Re: Legal Opinion:Las Campanas Water Use

Dear Mayor and Councilors:

Due to interest by Councilors in a second opinion, I have analyzed the agreements defining the City’s legal rights concerning water usage by Las Campanas during the current emergency, which may be considered at a July 31 Executive Session. Based on that legal analysis, and as discussed below, it is my professional opinion that:

(1) Las Campanas is legally bound to comply with the outdoor watering restrictions of the City’s Emergency Water Regulations, and its daily irrigation of two golf courses partly with potable water delivered by the City fails to do so;

(2) Based on the 1987 Lease of Water Facilities between Sangre de Cristo Water Company (hereafter Water Company) and Las Campanas’ predecessor (hereafter Las Campanas), which committed both parties to comply with all municipal and other governmental ordinances or regulations “affecting” the use of the Buckman wells and transmission facilities (9b), the City has a strong legal case to enforce its Water Emergency Regulations insofar as they restrict the use of water delivered to Las Campanas;

(3) If and only if aggressively pursued, a legal action by the City to enforce the plain text of the 1987 Lease would quite probably prevail against Las Campanas and would also create leverage for a settlement on favorable terms. The City’s exposures from potential counterclaims would be minimal because the status quo continues until a favorable court ruling or a favorable settlement providing for more effluent and less water usage by Las Campanas on a permanent basis, and also including Las Campanas in Santa Fe’s Water Budget equation.

DISCUSSION

· As one of the agreed conditions in the 1987 Lease of Water Facilities between Las Campanas and the Water Company, both parties “shall comply with and abide by” all “state, county, municipal” and other governmental ordinances and regulations “affecting the Buckman Facilities and the use thereof”, 9b, which are defined as the Buckman wells and pipeline and other transmission facilities. Reinforcing that condition, both parties further warranted that their “performance” under the 1987 Agreement would not “create any violations of” such provisions. 15b.

· The 1987 Lease also required Las Campanas to share in any water shortage of the Water Company by cutting back its demands proportionally to “similar customers.” 12(b). But that contractual obligation by Las Campanas to the Water Company in no way curtails the legal obligations of the parties to comply with pertinent municipal ordinances.

· Significantly, the 1987 Lease Agreement contains an integration clause stating that the Lease reflects “the full and complete agreement between the parties”, and that “no amendment or modification” of “any term, condition, or otherwise shall be valid unless reduced to writing and signed by the parties”. 32. Furthermore, extrinsic evidence may not contradict the clear terms of a lease, and whether the text of an agreement is clear is a question of law for the court. Memorial Medical Center, Inc. v. Tatsch Construction Co., 129 NM 677, 12 P.3d 431, 438, 441 (2000) (Minzner, C.J.).

· In sum, the plain text of the 1987 Lease Agreement between Las Campanas and the Water Company compels compliance with all City’s ordinances insofar as they “affect” the use of the Buckman wells or transmission facilities for delivering water to Las Campanas. In legal parlance, the word “affecting” with respect to use of the Buckman Facilities signals the broadest scope of compliance so as to include also municipal regulations that restrict water usage delivered by the Buckman facilities. Such coverage is further confirmed because the pertinent text appears in the context of the 1987 Agreement’s several references to water shortage contingencies. 5, 12 (“Emergency Hook-Ins and Sharing of Shortages”).

· The later 1993 Master Plan Development Agreement between Las Campanas and the Santa Fe County Commission, to which neither the City nor the Water Company was a party, cannot retroactively diminish the City’s rights or Las Campanas’ legal obligations to the City that were established six years earlier by the 1987 Lease Agreement.

· As further confirmed by the 1987 Lease Agreement’s integration clause (32), the provisions and conditions of the subsequent 1993 Las Campanas Agreement with the County cannot, as a matter of law or by implication, lessen Las Campanas’ pre-existing 1987 compliance obligations to the City.

· Indeed, the 1993 Master Plan Development Agreement with the County affirmatively provides that Las Campanas “will do nothing to violate the terms of its Lease” with the Water Company. Consolidated Conditions 12. Although the 1993 Agreement preserves Las Campanas’ inherent right to challenge the legal validity of any future ordinance (19), the 1993 Agreement reiterates Las Campanas’ prior contractual obligation to share in shortages with the Water Company, and further assures the County that Las Campanas will curtail its water deliveries to an amount reflecting compliance with any City ordinances allocating or restricting water use. 19(B)(i).

· Furthermore, the 1993 Agreement with the County ensures that if the City adopts a stricter ordinance restricting water use than the County, Las Campanas would “be bound by the more restrictive ordinance, so long as it used Buckman well water and/or water delivered through pipelines developed to deliver water to the City of Santa Fe.” (19(B)(iv)).

· In summary, the conditions of the 1993 Master Plan Development Agreement between Las Campanas and Santa Fe County create additional legal obligations by Las Campanas to Santa Fe County, including water cutbacks if ordained by City or County restrictions. However, the 1993 Development Agreement between Las Campanas and the County cannot, as a matter of law, diminish the City’s preexisting and paramount legal rights under the 1987 Lease to enforce compliance with municipal water restrictions. On the contrary, the City became a third-party beneficiary which can enforce any of the 1993 Agreement’s provisions running in its favor -- either in its capacity as a municipality or as a successor to the Water Company which it acquired in 1995.

· Las Campanas’ overriding and pre-existing legal obligation under the 1987 Lease Agreement to comply with pertinent City ordinances restricting water usage is further recognized by Exhibit C of the 1993 Master Plan Development Agreement. With respect to compliance with state and county regulations and ordinance standards, several conditions were deemed “redundant” because Las Campanas “always must comply with regulations and ordinances as a matter of law.” June 1991 County DRC Letter, 10, 11. Because Las Campanas “must comply with all state and local ordinances and regulations as a matter of law,” an express “condition does not add to or detract from that requirement.” October 1991 County DRC Letter, 8, 9.

· In light of the foregoing, therefore, the City can best enforce compliance with the outdoor water restrictions of its 2002 Water Emergency Regulations by aggressively pursuing an action for declaratory judgment and/or injunction under Code Section 25-5.9 to effectuate the legal rights and obligations on the face of the 1987 Lease of Water Facilities between Las Campanas and the Water Company which was subsequently acquired by the City.

· A targeted lawsuit brought by the City to enforce its legal rights under 9b of the 1987 Lease of Water Facilities, which binds Las Campanas to “comply with and abide by” the ordinances restricting City-delivered water usage, avoids confusion as to City’s and the County’s legal rights and also as to the contractual obligations by Las Campanas for Water Company shortage sharing. A separate Count (or, if feasible, a separate Complaint) can seek to enforce the County’s legal rights under the conditions of the 1993 Master Development Plan Agreement with the County -- including curtailment by Las Campanas of water usage calculated under the stricter of City or County ordinances. Above all, the pleading of separate legal claims by the City and by the County would dispel the confusions and complications which arise from trying to read the wordy provisions of the entirely distinct 1987 and 1993 agreements together.

· Any legal action should follow formal notification by the City of non-compliance by Las Campanas, along with a demand for a commitment to future compliance with City Water Emergency Regulations -- contingent on a favorable court ruling.(Subsequent negotiations may include a tender of City effluent beyond the 400,000 GPD currently delivered for greening the golf courses. ) Courts are loath to rule on abstract legal questions in the absence of an actual, current, and ripe controversy between the parties. The foregoing steps reconfirm that the June 5, 2002 Agreement between the City and Las Campanas, which caps potable water delivery and provides City effluent to Las Campanas, does not moot all then outstanding legal controversies although it expressly preserves all and waives no legal rights by either party. (City Council Special Meeting, June 4, 2002, Minutes pp. 2-8). A written compliance request, if resisted by Las Campanas, creates the requisite actual and current legal controversy to be adjudicated by the Court -- even prior to any anticipatory total golf course watering ban, except with effluent, under Stage 4 of the Water Emergency Regulations which may never materialize. See, Sanchez v. City of Santa Fe, 82 N.M. 322, 481 P.2d 401, 403 (1971) (interests “must be real and adverse” and issue must be “ripe”; developer’s refusal to comply with ordinance creates “actual controversy” under Declaratory Judgments Act).

· To be sure, other contractual provisions could be raised by the City, as the Water Company’s successor, including mandatory water shortage sharing. 1987 Lease Agreement 12b. However, a more targeted controversy focused on non-compliance by Las Campanas with the City’s Emergency Water Regulations is most likely to prevail -- particularly in light of admissions by Las Campanas’ House Counsel at the City Council’s May 23 Special Meeting that Las Campanas, in the words of paragraph 9b, will “abide by” and “following any City ordinances that are imposed when it comes to conservation and restriction.” (Minutes p.29). Such a focus would also dramatize the continuing diversion by Las Campanas of over 500,000 gallons of drinking water daily for greening its two 18-hole golf course--which is equivalent to the daily water usage of over 4,000 Santa Fe homes, of over 8,000 homes’ reduction of their daily water usage by 50%, or of the daily water savings from over 25,000 retrofits under Santa Fe’s Water-Wise conservation program.

· In short, the contrast between the drought sacrifices by citizens who carry dishwater to keep their shrubs alive and the misuse of drinking water for greening Las Campanas’ two golf courses would encourage a just decision by the Court in favor of the people of Santa Fe.

· If aggressively pursued at early preliminary injunction hearings to compel water cutbacks by Las Campanas, such a targeted action would exert strong leverage for a favorable settlement saving water and mandating effluent for golf course irrigation. Conversely, the filing of a City complaint with no aggressive follow-up would provide legal cover for Las Campanas to keep on misusing City-delivered water for greening its two golf courses, with no cap after the effluent for water trade with the City ends on September 30, 2002, and then go on for years like the endless Aamodt tribal water rights litigation.

Respectfully submitted,

Frederick M. Rowe

BIOGRAPHICAL SUMMARY
FREDERICK M. ROWE

Military: World War II, Private to Captain, Military Intelligence (1943-1947)