Gallup Westside Development, LLC v. City of Gallup
2004 NMCA 010, 135 N.M. 30, 84 P.3d 78 (2003)
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Rule of Law:
A developer does not acquire vested rights in a development project if the initial governmental approval was expressly conditional and the developer has not substantially changed their position in reliance on that approval. The mere purchase of land after the associated development agreement has expired does not constitute a substantial change in position.
Facts:
- In 1975, the City of Gallup (City) approved final plats for the Mentmore East subdivision, which included Unit 3.
- The City and the original developers executed an Assessment Procedure Agreement (APA) for Units 1, 2, and 3, which was set to expire in twenty years, on March 10, 1995.
- The APA stated that plat approval was expressly conditioned on the developers' compliance with the agreement's terms, and that the City could vacate the plats for non-compliance.
- Development proceeded on other units, but aside from some initial grading and utility installation in the 1970s, Unit 3 remained undeveloped.
- In 1996, one year after the APA had expired, Gallup Westside Development, LLC (Westside) acquired title to the 135 lots in Unit 3.
- In 1996, Westside requested a site development review to begin developing Unit 3.
- The City proposed extending the expired APA but required amendments to bring the project into compliance with current standards, including requirements for a park, sidewalk installation, and relocation of utilities, which Westside opposed.
Procedural Posture:
- The City of Gallup's Planning and Zoning Commission (PZC) approved a 1997 Letter Agreement that extended but amended the expired APA with new conditions.
- Westside did not sign the agreement and later proposed its own version, which the PZC denied, reaffirming its approval of the 1997 Letter Agreement.
- Westside, as appellant, appealed the PZC's decision to the City Council, which acted as appellee and affirmed the PZC's decision.
- Westside appealed to the district court, which remanded the case to the City for a de novo hearing due to a technical recording issue.
- After the new hearing, the City again affirmed the PZC's decision.
- Westside and HCI (Developers), as appellants, appealed again to the district court.
- The district court, sitting as an appellate court, reversed the City's decision and issued a writ of mandamus ordering the City to approve an extension of the 1975 APA without the new amendments.
- The City of Gallup, as appellant, appealed the district court's order to the Court of Appeals of New Mexico (this court).
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Issue:
Do developers have vested rights in a subdivision development under an expired agreement, precluding a city from imposing new conditions reflecting current regulations as part of an extension to that agreement?
Opinions:
Majority - Castillo, Judge
No, the developers do not have vested rights that would preclude the City from imposing new conditions. To establish vested rights, a developer must satisfy a two-pronged test: (1) approval by a regulatory body and (2) a substantial change in position in reliance on that approval. The Developers fail both prongs. The first prong is not met because the 1975 plat approval was expressly conditional upon compliance with the APA, which gave the City the power to vacate the plat. An approval subject to revocation cannot create a vested right. The second prong is not met because the Developers did not substantially change their position in reliance on the 1975 approval. The primary expenditure was the purchase of the land, which occurred after the APA had already expired, and the mere purchase of land, by itself, does not constitute substantial reliance. Because the Developers have no vested rights, the City is not required to extend the APA under its original 1975 terms and is free to negotiate new terms that reflect current regulations.
Analysis:
This decision reinforces the strict, two-part test for establishing vested rights in development projects under New Mexico law. It clarifies that conditional government approvals, a common tool in land use regulation, do not confer vested rights until those conditions are satisfied. The ruling protects a municipality's authority to update its health, safety, and zoning regulations and apply them to long-dormant projects, preventing developers from indefinitely relying on outdated standards. By rejecting the purchase of land alone as 'substantial reliance,' the case sets a high bar for developers claiming to be grandfathered in under old rules, particularly when a development agreement has an explicit expiration date.
