July 13, 2016 – Marvin Armijo v. City of Espanola, No. 34,083

IN THE COURT OF APPEALS OF THE STATE OF NEW MEXICO
Opinion Number:
Filing Date: 	JULY 13, 2016
NO. 34,083
MARVIN ARMIJO,
Plaintiff-Appellee,
v.
CITY OF ESPAÑOLA,
Defendant-Appellant.
APPEAL FROM THE DISTRICT COURT OF RIO ARRIBA COUNTY
Francis J. Mathew, District Judge
Serra & Garrity, P.C.
Diane Garrity
Santa Fe, NM
Kegel Law Offices
Margaret Kegel
Santa Fe, NM
for Appellee
Miller Stratvert P.A.
Virginia Anderman
Albuquerque, NM
for Appellant

OPINION
ZAMORA, Judge.
{1} 	Appellant, the City of Española (the City), appeals from a judgment in favor of
Plaintiff, Marvin Armijo. After the City’s grievance board determined that the City
had just cause to terminate Armijo, Armijo appealed the grievance board’s decision
in district court. While that appeal was pending, Armijo also filed a separate complaint
against the City in district court alleging breach of contract and breach of the implied
covenant of good faith and fair dealing. The district court entered a judgment in favor
of Armijo on the breach of contract claim. The administrative appeal was dismissed
by the district court.
{2} 	The City appeals from the district court’s judgment, arguing that: (1) Armijo’s
breach of contract claim was barred by the doctrine of claim preclusion; (2) the district
court erred in allowing Armijo to bring a claim for breach of implied employment
contract because Armijo had not yet exhausted his administrative remedies; and (3)
the district court erred in considering issues related to the collective bargaining
agreement between the City and the police union. We hold that Armijo was barred
from bringing the separate claim for breach of contract in the district court and
reverse.

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BACKGROUND
{3} 	In 2008 Armijo was employed as a police officer for the City. In September
2008 Armijo received a payroll deposit, which included a miscellaneous payment in
the amount of $2,399.52. In the spring of 2009, the unexplained deposit came to light
during an audit of the City’s payroll records. The City’s finance director discovered
unexplained payroll disbursements. Concerning Armijo’s miscellaneous payment,
Armijo’s supervisor determined that Armijo was authorized to receive $958.49 of the
$2,399.52 due to a retroactive pay increase. However, the remaining $1,441.03 was
considered an unauthorized overpayment. In July 2009, Armijo was terminated for
failing to report and repay the overpayment.
{4} 	Armijo appealed pursuant to the City’s grievance policy. Following a hearing,
a grievance board hearing officer upheld the decision to terminate Armijo’s
employment. In November 2009, Armijo appealed that decision to the district court
pursuant 	to 	Rule 	1-074 	NMRA 	(governing 	appeals 	to 	the 	district 	court 	of
administrative agency decisions when there is a statutory right to appeal).
{5} 	In August 2011 Armijo filed this separate action against the City for, among
other things, breach of contract. In June 2012 Armijo amended his complaint alleging
breach of implied contract and breach of the covenant of good faith and fair dealing.
Twice the district court denied motions by the City to stay the proceedings in the

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breach of contract suit due to the pending administrative appeal. Following a trial on
the merits, the district court found that the City breached its implied contract with
Armijo by failing to provide correct notice regarding his hearing rights, and by failing
to follow its internal policies, which required the City to initiate an internal affairs
investigation. The district court entered judgment in favor of Armijo on the breach of
contract claim and awarded Armijo approximately $40,000 in lost wages and $10,000
in consequential damages.
{6} 	Armijo filed a motion for reinstatement in the pending administrative appeal,
arguing that the district court’s judgment in the contract action was binding in the
administrative appeal under the doctrine of issue preclusion. In his motion, Armijo
seeks reinstatement to his former position as well as restoration of his retirement
benefits and lost wages. The City is appealing the district court’s judgment in favor
of Armijo on his contract claim.
DISCUSSION
Claim Preclusion
{7} 	As a preliminary matter we briefly address the City’s argument that we must
determine whether Armijo exhausted his administrative remedies before we can
determine whether Armijo’s contract claim is barred under the doctrine of claim
preclusion. The City asserts that Armijo’s administrative remedies have not been

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exhausted since the administrative appeal is still pending in district court. The City
argues that because the issues raised in Armijo’s contract claim are the same as the
issues raised in the pending administrative appeal, the district court should not have
allowed Armijo to proceed with his contract claim until a final decision was issued in
the administrative appeal. Armijo contends that his administrative remedies were
exhausted once the grievance board’s decision was issued, citing the City’s personnel
handbook, which provides that the grievance board’s decision is the final step in the
administrative process.
{8} 	We 	need 	not 	decide 	whether 	or 	at 	what 	point 	Armijo 	exhausted 	his
administrative remedies because, for the purposes of claim preclusion, the grievance
board’s decision is considered a final judgment. See Shovelin v. Cent. N.M. Elec.
Coop., Inc., 1993-NMSC-015, ¶ 12, 115 N.M. 293, 850 P.2d 996 (holding that a court
may apply claim preclusion to decisions of administrative or quasi-judicial bodies
acting within the scope of their authority); Chavez v. City of Albuquerque, 1998-
NMCA-004, ¶ 19, 124 N.M. 479, 952 P.2d 474 (holding that a decision by the city’s
grievance board was a final judgment for purposes of precluding a municipal
employee’s subsequent contract claim).
{9} 	Our application of claim preclusion in this case focuses instead on whether
Armijo has had a full and fair opportunity to litigate issues arising out of his claims.

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See Kirby v. Guardian Life Ins. Co. of Am., 2010-NMSC-014, ¶ 61, 148 N.M. 106,
231 P.3d 87 (“[Claim preclusion] precludes a claim when there has been a full and fair
opportunity to litigate issues arising out of that claim.” (internal quotation marks and
citation omitted)). The purpose of applying claim preclusion “is to protect individuals
from multiple lawsuits, to promote judicial economy, and to minimize the possibility
of inconsistent judgments.” Moffat v. Branch, 2002-NMCA-067, ¶ 14, 132 N.M. 412,
49 P.3d 673. A party asserting claim preclusion “must establish that (1) there was a
final judgment in an earlier action, (2) the earlier judgment was on the merits, (3) the
parties in the two suits are the same, and (4) the cause of action is the same in both
suits.” Potter v. Pierce, 2015-NMSC-002, ¶ 10, 342 P.3d 54.
{10} 	There is no question that the parties in the administrative action and the contract
action are the same. And as we previously discussed, for the purposes of claim
preclusion, the grievance board decision is a final judgment on the merits. Thus, at
issue here is whether the cause of action is the same in both proceedings. To answer
this question “we apply the transactional test from the Restatement (Second) of
Judgments § 24(2) (1982).” 	Chavez, 1998-NMCA-004, ¶ 22. “This approach
disregards the specific legal theories or claims that were or were not invoked in a prior
action[.]” Moffat v. Branch, 2005-NMCA-103, ¶ 17, 138 N.M. 224, 118 P.3d 732.
Instead, we “engage in a pragmatic assessment of the transaction, with a ‘transaction’

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being described as a natural grouping or common nucleus of operative facts.” Id.
(internal quotation marks and citation omitted).
{11} 	Here, the operative facts of both actions are centered around the terms and
conditions 	of 	Armijo’s 	employment 	and 	the 	circumstances 	surrounding 	his
termination. As the basis for his contract claim, Armijo asserted that the City, through
its policies and procedures, created an implied contract, and that the City breached the
implied contract when it failed to follow its own policies and procedures during the
disciplinary and termination process. Specifically, Armijo claimed that the City
dismissed him without just cause and that the City breached its implied contract with
him by: failing to address his claim that he thought the money was properly deposited
in connection with a retroactive pay differential; failing to conduct an internal
investigation concerning the deposit; failing to notify him of the deposit discrepancy
before initiating discipline; failing to follow its progressive discipline policy; and
failing to recognize that he repaid the City for the overpayment.
{12} 	The decision of the grievance board hearing officer is of record; however, the
record on appeal does not contain a record of the grievance board hearing. The
decision indicates that the hearing officer considered the propriety of Armijo’s
termination, as well as the City’s adherence to its disciplinary policies and procedures.
The hearing officer specifically found that Armijo’s termination was imposed for just

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cause and in accordance with the City’s personnel rules. The questions addressed by
the hearing officer overlap with the questions addressed in Armijo’s contract action
in that their disposition requires an examination of the facts surrounding Armijo’s
termination and of the City’s personnel policies. Accordingly, we conclude that the
claims arose from the same transaction.
{13} 	Where “two actions are the same under the transactional test and all other
elements are met, [claim preclusion] bar[s] a subsequent action [if] the plaintiff could
and should have brought the claim in the former proceeding.” Potter, 2015-NMSC-
002, ¶ 15. Claim preclusion “is a judicial creation ultimately intended to serve the
interests of justice.” Kirby, 2010-NMSC-014, ¶ 65. The essence of claim preclusion
is the parties’ full and fair opportunity to litigate the issues. Brooks Trucking Co. v.
Bull Rogers, Inc., 2006-NMCA-025, ¶ 11, 139 N.M. 99, 128 P.3d 1076.
{14} 	Claim preclusion “reflects the expectation that parties who are given the
capacity to present their entire controversies shall in fact do so.” Id. (internal quotation
marks and citation omitted). Our application of claim preclusion “does not depend
upon whether the claims arising out of the same transaction were actually asserted in
the original action, as long as they could have been asserted.” Id. ¶ 10 (internal
quotation marks and citation omitted). In the present case, Armijo’s contract claim
was based on his assertions that the City failed to follow the policies and procedures

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set forth in its personnel handbook. These issues were within the purview of the
grievance board hearing officer. Armijo was able to raise his contract claims during
the grievance board proceeding, and “in the interest of judicial economy [he] should
have done so.” 	Chavez, 1998-NMCA-004, ¶ 28; 	see Mascarenas v. City of
Albuquerque, 2012-NMCA-031, ¶¶ 27-28, 274 P.3d 781 (recognizing that claim
preclusion bars a claim that the plaintiff could have and should have asserted in a prior
action).
{15} 	Armijo argues that he could not have asserted his contract claim before the
grievance board because the board’s hearing officer was limited in what it could
consider. We disagree. Based on the record before us it appears that the City’s
personnel policy handbook requires the hearing officer to submit findings of fact and
a decision to the human resources director within ten days of the closure of the
grievance hearing record. According to the handbook, “[t]he [h]earing [o]fficer may
take one of the following actions: [(1) a]ccept the [d]epartment [d]irector’s decision;
[(2) m]odify the [d]epartment [d]irector’s decision; [(3) r]eject the [d]epartment
[d]irector’s decision.” Nothing in the record indicates that the hearing officer is
precluded from considering all of the facts and arguments available to Armijo in his
breach of contract claims.

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{16} 	We reject Armijo’s contention that Deflon v. Sawyers, 2006-NMSC-025, 139
N.M. 637, 137 P.3d 577, and State ex rel. Peterson v. Aramark Correctional Services,
LLC, 2014-NMCA-036, 321 P.3d 128, are analogous to this case and are instructive
concerning the applicability of claim preclusion to employment claims. Both Deflon
and Peterson are distinguishable. In both cases, claim preclusion was not applied
because the parties in the first and subsequent actions were not the same. See Deflon,
2006-NMSC-025, ¶ 27 (“Because privity does not exist between the present
[d]efendants and the defendant in the federal lawsuit, [claim preclusion] does not bar
[the p]laintiff’s state court lawsuit.”); Peterson, 2014-NMCA-036, ¶ 33 (holding that
claim preclusion did not apply where the “[p]laintiff’s capacity in the two lawsuits
differed”). As a result, an analysis of the remaining claim preclusion elements was
unnecessary. See Peterson, 2014-NMCA-036, ¶ 33 (explaining that unless all four
elements are met, claim preclusion does not bar a subsequent lawsuit; consequently,
the parties’ remaining claim preclusion arguments are not considered). Analyzing the
elements of issue preclusion, which are distinct from the elements of claim preclusion,
the courts in both Deflon and Peterson determined that the plaintiffs’ claims were not
precluded since the relevant issues to the subsequent actions were not litigated or
necessarily decided in the prior actions. See Deflon, 2006-NMSC-025, ¶ 27; Peterson,
2014-NMCA-036, ¶ 49.

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{17} 	Here, issue preclusion has not been raised. As to claim preclusion, there is no
question that the parties are the same; therefore, an analysis of the elements was
required. Having considered those elements, we conclude that claim preclusion does
apply; that the issues raised in an administrative appeal and in the contract claim arise
from the same transaction; and that Armijo had a full and fair opportunity to litigate
his contract claim in the grievance proceeding.
{18} 	To the extent that Armijo relies on Madrid v. Village of Chama, 2012-NMCA-
071, 283 P.3d 871, for the proposition that he may seek redress for the City’s failure
to provide procedural protections during the grievance board proceeding, we are not
persuaded. Madrid is both factually and procedurally distinguishable from the present
case.
{19} 	In Madrid, the plaintiff was discharged from his employment with the Village
of Chama. Id. ¶ 2. The plaintiff requested a post-termination hearing in order to
contest the allegations that led to his termination. Id. The appeal hearing was treated
by the Village Council as a pre-termination hearing. Id. The next day, a letter was
issued stating that the plaintiff was terminated at that time, even though the plaintiff
had been terminated approximately one week prior and had not received any income
from the Village since then. Id. The plaintiff then appealed the second termination

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decision, and a post-termination hearing was conducted. Id. ¶ 3. The Village Council
voted in favor of discharging the plaintiff from his position. Id.
{20} 	The plaintiff did not appeal that decision to the district court. Id. Instead, he
filed a complaint for breach of implied contract, breach of the covenant of good faith
and fair dealing, and wrongful discharge. Id. ¶ 4. Without a hearing, the district court
granted the Village’s motion to dismiss the complaint pursuant to Rule 1-012(B)(6)
NMRA. Madrid, 2012-NMCA-071, ¶¶ 4-5. The plaintiff appealed to this Court. Id.
The relevant question in Madrid was whether the district court had jurisdiction to hear
the claims brought in an original complaint rather than in a Rule 1-075 NMRA appeal.
Madrid, 2012-NMCA-071, ¶ 5. We concluded that the applicable ordinance in that
case did not preclude the plaintiff from seeking compensatory damages in a separate
contract claim. Id. ¶ 11. Our decision was based on the fact that the ordinance “d[id]
not state what administrative remedies [we]re afforded to an aggrieved employee, and
it contain[ed] no express language that the remedies [we]re or [we]re not exclusive.”
Id. And unlike the City’s personnel policies at issue in this case, the ordinance at issue
in Madrid did not provide for the modification of an adverse employment action. Id.
{21} 	Here, Armijo was afforded the opportunity to seek modification of the decision
to terminate his employment. He has also availed himself of the opportunity to appeal
the grievance board’s decision pursuant to Rule 1-074, which is the appropriate

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procedural mechanism for challenging an administrative decision. See Paule v. Santa
Fe Cty. Bd. of Cty. Comm’rs, 2005-NMSC-021, ¶ 26, 138 N.M. 82, 117 P.3d 240
(stating that in reviewing administrative decisions, reviewing courts must determine
“whether the administrative agency acted fraudulently, arbitrarily or capriciously;
whether the agency’s decision is supported by substantial evidence; or whether the
agency acted in accordance with the law”). However, Armijo also filed this contract
claim in a separate proceeding in a different tribunal, which arose out of the same
transaction. Then, after obtaining a favorable ruling on his contract claim, Armijo
attempted to use the district court’s judgment to preclude an adverse ruling in the
administrative appeal.
{22} 	This is precisely the type of situation that the doctrine of claim preclusion seeks
to avoid. See Moffat, 2002-NMCA-067, ¶ 14 (“The purpose of our application of
[claim preclusion] is to protect individuals from multiple lawsuits, to promote judicial
economy, and to minimize the possibility of inconsistent judgments.”); cf. Smith v.
City of Santa Fe, 2007-NMSC-055, ¶¶ 1, 24, 142 N.M. 786, 171 P.3d 300 (holding
that a declaratory judgment action cannot be used “to circumvent established
procedures for seeking judicial review of a municipality’s administrative decisions”
and recognizing “no sound judicial policy for allowing a party aggrieved by an
administrative decision to forego [sic] an available avenue of judicial review only to

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allow that same party to initiate judicial review in another form at some future date
that no one can predict or rely upon with any certainty. Indeed, the efficient
administration of justice requires just the opposite”). Armijo could have and should
have brought all his claims related to his termination before the hearing officer in the
interest of judicial economy.
CONCLUSION
{23} 	For the foregoing reasons we conclude that claim preclusion barred Armijo’s
breach of contract claim. We reverse.
{24} 	IT IS SO ORDERED.
M. MONICA ZAMORA, Judge
WE CONCUR:
JAMES J. WECHSLER, Judge
MICHAEL D. BUSTAMANTE, Judge