Leitch et al v. Castillo et al

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF NEW MEXICO
JOHN N. LEITCH and
DIANE G. LEITCH,
Plaintiffs,
v. 	No. 1:25-cv-0101 DLM/KK
REGGIE CASTILLO and
LORRAINE Y. CASTILLO,
Defendants.
MEMORANDUM OPINION AND ORDER
The parties to this lawsuit—Plaintiffs John and Diane Leitch and Defendants Reggie and
Lorraine Castillo—are litigating a dispute related to a promissory note. On August 20, 2025, the
parties engaged in a settlement conference and successfully resolved all claims. The Settlement
Agreement requires that, on the Castillos’ payment of a sum certain, the Leitches will return their
interest in an Arizona LLC to the Castillos. The Castillos made payment, but a dispute has arisen
regarding the “effective date” of the Leitches’ transfer of interest. For the reasons herein, the Court
DENIES AS MOOT the request to enforce the settlement agreement and DENIES the requests
for attorneys’ fees.
I. 	Background
On August 20, 2025, the parties executed a Settlement Agreement that resolves all claims
related to the subject of this litigation. (See Doc. 39-1 ¶ 1.) The Settlement Agreement requires the
Castillos to pay $100,000 to the Leitches within 14 days of the agreement. (See id. ¶ 2(A).) “The
Leitches, upon payment, [agreed to] return to the Castillos all of the Leitches’ interest in LR II
LLC, an Arizona LLC.” (Id. ¶ 2(C).) The parties further agreed that “[t]he Castillos will be
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responsible for any accounting or tax returns of LR II LLC.” (Id.) The Settlement Agreement
specifies that it “contains the entire agreement between the parties . . . .” (Id. ¶ 8.)
The Castillos made the $100,000 payment. (See Docs. 39 at 2; 40 at 4.) On September 16,
2025, counsel for the Castillos (Benjamin Feuchter) emailed a proposed Assignment and Transfer
of Membership Interest (LR II, LLC) to counsel for Plaintiffs (Albert Thiel, Jr.). (See Docs. 39 at
2; 39-2.) The proposed Transfer provided:
For good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, John Leitch and Diane Leitch hereby convey, assign, and
transfer all of their right, title, and interest in and to their 50% membership interest
in LR II, LLC, an Arizona limited liability company, to Reggie Castillo and
Lorraine Castillo, effective as of the later date set forth below.
(Doc. 39-2. at 2.) Thiel responded with his own version of the Transfer, making the transfer of
interest effective on January 1, 2024, “so the Leitches have no tax entanglements.” (See Docs. 39-
3 at 1; 39-4 at 4.) Counsel then engaged in a back-and-forth regarding which draft more closely
aligned with the Settlement Agreement. (See Doc. 39-5.)
On September 17, 2025, Thiel emailed a revised proposed Transfer, signed by the Leitches,
that provides:
Pursuant to the terms of a settlement agreement dated 8/20/25 in Nick and Diane
Leitch vs Reggie and Lorraine Castillo 1:25-cv-00101-DLM-KK, John Leitch and
Diane Leitch hereby return all of their right, title, and interest in their 50%
membership interest in LR II, LLC, an Arizona limited liability company, to Reggie
Castillo and Lorraine Castillo.
(Doc. 39-6.) Feuchter characterized the new draft as an attempt “to inject an ambiguity into the
process about the effective date of the transfer of the LLC interest.” (Doc. 39-7 at 1.) On September
18, 2025, the Castillos filed the Motion to Enforce Settlement and for Sanctions. (Doc. 39.)
II. 	The September 17, 2025 Transfer language is adequate.
“This Court has authority to enforce settlement agreements reached by litigants in pending
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litigation.” Got Prods. LLC v. Zepto LLC, No. 1:18-cv-0893 RB/LF, 2020 WL 495379, at *2
(D.N.M. Jan. 30, 2020) (citing United States v. Hardage, 982 F.2d 1491, 1496 (10th Cir. 1993)).
“Settlement agreements are contracts and issues regarding their ‘formation and construction . . .
are resolved by applying state contract law.’” Id. (quoting Shoels v. Klebold, 375 F.3d 1054, 1060
(10th Cir. 2004)). “New Mexico public policy encourages the enforcement of settlement
agreements.” Id. (quoting Stoller v. Roossein, No. 6:04-cv-0311 JH/RLP, 2006 WL 8444543, at
*2 (D.N.M. Jan. 25, 2006)).
The Tenth Circuit typically only requires an evidentiary hearing “where material facts
concerning the existence or terms of an agreement to settle are in dispute . . . .” Hardage, 982 F.2d
at 1496 (citations omitted). Here, there is no dispute that the parties entered into a binding
settlement agreement. (See, e.g., Doc. 39-1; 39 at 1 (noting that “the parties reached a settlement
at a mediation”); 40 at 9 (noting that “[n]either party is asking that the settlement not be
enforced”).) The only dispute is when the transfer of the Leitches’ interest in LR II, LLC becomes
effective.
“In contract interpretation, ‘[New Mexico courts] give force and effect to the intent of the
parties.’” W. Albuquerque Land Holdings, LLC v. Westland Partners, LLC, 557 P.3d 1032, 1045
(N.M. Ct. App. 2024) (quoting Bachmann v. Regents of Univ. of N.M., 496 P.3d 604, 609 (N.M.
Ct. App. 2021)). Courts “derive the parties’ intent ‘from the language employed by them; and
where such language is not ambiguous, it is conclusive.’” Id. (quoting ConocoPhillips Co. v.
Lyons, 299 P.3d 844, 852 (N.M. 2013)). Here, the relevant contract provision states:
A. 	The Castillos will . . . pay One Hundred Thousand Dollars ($100,000) to
the Leitches in good and negotiable funds within 14 days of this agreement.
. . .
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C. 	The Leitches, upon payment, will return to the Castillos all the Leitches’
interest in LR II LLC, an Arizona LLC. The Castillos will be responsible for any
accounting or tax returns of LR II LLC.
(Doc. 39-1 ¶ 2(A), (C).) The Court finds no ambiguity: the Settlement Agreement explicitly states
that the Leitches will return their interest to the Castillos upon payment. There is no language
suggesting or explicitly authorizing a retroactive transfer, as first proposed by the Leitches.
The revised Transfer, however, specifies that the Leitches “return all of their right, title,
and interest in their 50% membership interest in LR II, LLC” to the Castillos “[p]ursuant to the
terms of [the] settlement agreement . . . .” (See Doc. 39-6 at 2.) The Court finds that this revised
language adequately tracks the requirements of the Settlement Agreement. The Castillos ask the
Court to enforce the “unconditional conveyance” of the Leitches’ transfer of interest. (See Doc. 39
at 5.) The revised Transfer, signed by the Leitches on September 17, 2025, provides the relief the
Castillos seek. Accordingly, the Leitches have fulfilled their obligation, and there is no current
dispute. To the extent the parties ask the Court to provide a ruling on some future hypothetical
question about tax liability, the Court declines to do so.
Finally, both parties ask the Court to award attorneys’ fees for this motion. (See Docs. 39
at 5; 40 at 9.) The Castillos accuse the Leitches of bad faith in trying to make the transfer
retroactive. (See Doc. 39 at 5.) The Leitches, on the other hand, note that the Castillos refused to
accept the revised proposed Transfer and filed a needless motion despite the absence of a live
controversy. (See Doc. 40 at 7–9.) The Court agrees that a simple phone call between counsel or
to United States Magistrate Judge Khalsa would have obviated this motion. Motion practice also
could have been avoided had counsel complied with Judge Khalsa’s order setting the settlement
conference, in which she required that “defense counsel . . . include a proposed form of release
with [the] counteroffer.” (See Doc. 22 at 3.) In short, the Court denies both requests for attorneys’
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fees, as the parties are equally at fault for the filing of this motion.
IT IS THEREFORE ORDERED that the Court DENIES AS MOOT the Motion to
Enforce Settlement Agreement (Doc. 39), as the Castillos have already received the requested
relief;
IT IS FURTHER ORDERED that the Court DENIES the parties’ requests for attorneys’
fees.
IT IS FURTHER ORDERED that the motion hearing set for December 3, 2025, is
VACATED;
IT IS FURTHER ORDERED that the parties shall file closing documents, including a
joint motion to dismiss and a proposed order sent to MartinezChambers@nmd.uscourts.gov, no
later than December 3, 2025.
_______________________________________
DAMIAN L. MARTINEZ
UNITED STATES MAGISTRATE JUDGE
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