                                                                    FILED
                                                        United States Court of Appeals
                         UNITED STATES COURT OF APPEALS         Tenth Circuit

                                FOR THE TENTH CIRCUIT                       April 17, 2013

                                                                        Elisabeth A. Shumaker
                                                                            Clerk of Court
 PAUL BORDE; FOREST BOSTICK,

           Plaintiffs–Appellants,                            No. 12-2028
 v.                                             (D.C. No. 2:09-CV-1185-WDS-GBW)
                                                              (D.N.M.)
 BOARD OF COUNTY
 COMMISSIONERS OF LUNA
 COUNTY, NEW MEXICO; JOHN
 SUTHERLAND; R. JAVIER DIAZ;
 FRED WILLIAMS, in their individual
 capacities,

           Defendants–Appellees.


                                ORDER AND JUDGMENT*


Before O’BRIEN, HOLLOWAY, and MURPHY, Circuit Judges.



       Plaintiffs in this litigation signed employment contracts and went to work for the

county government of Luna County, New Mexico. The contracts said that Plaintiffs

would receive generous severance payments if they ever were terminated from their jobs.

When Luna County’s Board of County Commissioners voted to terminate the contracts

early and then refused to pay any severance benefits, Plaintiffs sued. The district court

       
         This order and judgment is not binding precedent, except under the doctrines of
law of the case, res judicata, and collateral estoppel. It may be cited, however, for its
persuasive value consistent with Fed. R. App. P. 32.1 and 10th Cir. R. 32.1.
determined that Plaintiffs’ contracts were void under the New Mexico state constitution.

Finding that Plaintiffs had no protected property interest in the severance benefits, the

district court dismissed all of Plaintiffs’ claims. Plaintiffs now appeal the district court’s

decision. Having jurisdiction under 28 U.S.C. § 1291, we AFFIRM the decision of the

district court in all respects.

                                  I.     BACKGROUND

       Plaintiffs–Appellants Paul Borde and Forest Bostick had worked for Luna County

(the County) in various capacities for a number of years before they signed new

employment contracts with the County on February 26, 2008. Mr. Borde was hired as the

County’s Public Works Director, and Mr. Bostick was hired as its Risk

Manager/Emergency Management Coordinator.1 The contracts were identical. Their

initial terms of employment were to be for three years.          The contracts would then

automatically renew for another three years at the end of the initial term, provided that

neither party to the agreement had given notice of nonrenewal at least ninety days before

the expiration of the three-year term.

       Under the employment contracts, Mr. Borde and Mr. Bostick were at-will

employees. See App. at 39, 46 (“The County may terminate the Employee at any time

during the contract.”). But the contracts also said that Mr. Borde and Mr. Bostick would

1
       For reasons not entirely clear, Mr. Bostick “retired” from his position on July 31,
2008 and then contracted to work as a “County Jail Administrator consultant” from
August 1 through November 1, 2008. See App. at 16-17. On November 1, 2008, he then
resumed work as the County’s Risk Manager/Emergency Management Coordinator under
the original terms of his February 26, 2008 contract.
                                            -2-
not go unprotected in the event of termination—far from it.          Section 5(B) of their

contracts contained the following provision:

       In the event of termination during the first year of the contract term, the
       Employee shall receive the balance of the contract compensation amount
       due plus severance pay equal to six (6) months base pay; if terminated
       during the second year, the Employee shall receive the balance of the
       contract compensation due plus severance pay equal to twelve (12) months
       of base pay; if terminated in the third year, the Employee shall receive the
       balance of the contract compensation due plus severance pay equal to
       eighteen (18) months of base pay.

Id.

       Moreover, if the County opted not to renew the contracts at the conclusion of the

three-year term, then Mr. Borde and Mr. Bostick were to “receive severance pay equal to

eighteen (18) months of current base pay.” Id. In addition, Mr. Borde and Mr. Bostick

were entitled to five weeks per year of paid time off. If Mr. Borde or Mr. Bostick were

terminated, they were still entitled under their contracts to receive the value of any paid

time off that had accrued. According to the contracts, the only way that Mr. Borde and

Mr. Bostick would not receive their post-termination severance benefits was if they were

convicted of a felony. Finally, section 10 of the contracts dealt with the manner in which

County funds would be appropriated to pay Mr. Borde and Mr. Bostick:

       [T]he County shall, in the current fiscal year, budget funds to pay for all
       subsequent years of the contract term. If the contract is renewed for an
       additional three (3) year term . . . , the County shall budget funds to pay for
       all years of the contract in the then current fiscal year. Any increase in the
       severance amount arising from cost of living or other changes shall be
       budgeted and allocated in the same year of any such pay increase.

Id. at 41, 48.
                                            -3-
      Mr. Borde and Mr. Bostick worked for the County for about sixteen months after

entering into the employment agreements. On June 23, 2009, the County’s Board of

County Commissioners voted to terminate Mr. Borde and Mr. Bostick’s employment

contracts by a 2–1 vote.2 Neither Mr. Borde nor Mr. Bostick had been convicted of a

felony.   Defendants R. Javier Diaz and Fred Williams cast their votes in favor of

terminating the contracts. Mr. Borde and Mr. Bostick were not given any notice that their

contracts would be discussed at the County Commissioners’ meeting, and they did not

have an opportunity to be heard on the matter. After the vote, County Manager (and

Defendant) John Sutherland called Mr. Borde and Mr. Bostick to tell them that their

contracts had been terminated, effective immediately. He also informed them that the

County was not going to pay their severance benefits under the contracts.3 Mr. Borde

and Mr. Bostick both made demands for payment of their severance, but their calls went

unheeded by the County.

      On December 18, 2009, Mr. Borde and Mr. Bostick brought this lawsuit against


2
      In their complaint, Mr. Borde and Mr. Bostick allege the County Commissioners
voted to “terminate” their employment contracts. Defendants prefer to say that the
County Commissioners “voided” the contracts. Because at this stage of litigation we
must take all of a plaintiff’s well-pleaded material allegations as true, see Initiative &
Referendum Inst. v. Walker, 450 F.3d 1082, 1089 (10th Cir. 2006) (en banc), we refer to
the County Commissioners’ vote as “terminating” the contracts.
3
       Under the contracts, Mr. Borde and Mr. Bostick were entitled to receive both
severance pay and accrued paid time off. Because there is no meaningful distinction in
this case between the severance pay and the paid time off, we will simply refer to the
amount claimed by Mr. Borde and Mr. Bostick as “severance.”
                                         -4-
the Board of County Commissioners (in effect, against the County) and against

Commissioners Diaz and Williams and County Manager Sutherland in their individual

capacities. Their complaint contained both federal and state-law claims. First, Mr. Borde

and Mr. Bostick alleged two claims under 42 U.S.C. § 1983 against all defendants: (1)

denial of substantive due process, based on the deprivation of their property interest in

either continued employment or severance pay; and (2) denial of procedural due process,

based on the deprivation of their property interest without the opportunity to be heard in a

meaningful time and manner. In conjunction with the § 1983 claims, Mr. Borde and Mr.

Bostick also asserted a separate claim against the County under the Monell doctrine, see

Monell v. Dep’t of Social Servs., 436 U.S. 658 (1978), which in some instances extends §

1983 liability to municipalities and other units of local government. Their fourth claim

was against the County, for breach of contract. In their fifth and final claim, Mr. Borde

and Mr. Bostick alleged the County had violated a New Mexico statute, N.M. Stat. Ann.

§ 50-4-4, which requires an employer to remit unpaid wages to a discharged employee

within a fixed amount of time.

       The parties agreed to proceed before a magistrate judge. See 28 U.S.C. § 636(c);

Fed R. Civ. P. 73. Initially, Defendants Diaz, Williams, and Sutherland sought dismissal

of the claims against them, arguing that their conduct constituted legislative activity

entitling them to absolute immunity. The district court denied their motion, and we

affirmed that ruling on interlocutory appeal in an unpublished opinion. See Borde v. Bd.

of Cnty. Comm’rs, 423 F. App’x 798 (10th Cir. 2011). Defendants also filed (1) a motion
                                            -5-
for judgment on the pleadings under Fed. R. Civ. P. 12(c) on the claim for breach of

contract, and (2) a motion to dismiss the § 1983 claims under Fed. R. Civ. P. 12(b)(6) for

failure to state a claim on which relief could be granted. The district court first ruled on

the motion for judgment on the pleadings.        Finding that the employment contracts

violated the New Mexico state constitution by creating an unconstitutional debt, the

district court held the contracts were void and granted judgment on the pleadings on the

breach-of-contract claim.

       In light of this ruling, Defendants argued that because the employment contracts

were void from the outset, Mr. Borde and Mr. Bostick never had a protected property

interest in their severance pay. Mr. Borde and Mr. Bostick countered by asserting that

even if the contracts were void, they still had a protected property interest in their

severance benefits stemming from the Luna County Personnel Ordinance, which contains

certain provisions governing termination and grievance procedures for some of the

County’s employees. In brief, Mr. Borde and Mr. Bostick contended that in the absence

of a valid employment contract, they became Luna County employees subject to the

procedural safeguards afforded by the County’s Personnel Ordinance. Mr. Borde and

Mr. Bostick sought leave to amend their complaint to include a new § 1983 claim based

on their purported rights under the Personnel Ordinance, along with a new state-law

claim for breach of implied contract.4


4
      The proposed amended complaint did not include a separate § 1983 claim against
the County based on Monell liability. In their briefing, Mr. Borde and Mr. Bostick clarify
                                           -6-
       The district court agreed with Defendants and dismissed the § 1983 claims for

failure to state a claim on which relief could be granted. The district court further denied

Mr. Borde and Mr. Bostick leave to amend their complaint, reasoning that any

amendment would be futile. Lastly, the district court declined to exercise supplemental

jurisdiction over the remaining state-law claim, which was based on the County’s alleged

violation of N.M. Stat. Ann. § 50-4-4. This timely appeal followed.

                               II.    STANDARD OF REVIEW

       This court applies the same standard of review to a motion for judgment on the

pleadings under Fed. R. Civ. P. 12(c) as it does to a motion to dismiss for failure to state

a claim under Fed. R. Civ. P. 12(b)(6).5 Atl. Richfield Co. v. Farm Credit Bank, 226 F.3d

1138, 1160 (10th Cir. 2000). In either case, our review is de novo. Id. In conducting our


that they were not asserting a separate claim of liability against the County by invoking
Monell, but rather “intended only to give notice that they claimed the actions of the
Defendants constituted the official policies of Luna County.” Appellants’ Br. at 23-24
n.2. Because we find that Mr. Borde and Mr. Bostick had no property interest entitled to
the protections of due process, it is not necessary for us to apply Monell analysis to the
County’s actions in terminating the employment contracts.
5
       In the typical course of litigation, a party will file a motion to dismiss under Fed.
R. Civ. P. 12(b)(6) for failure to state a claim upon which relief can be granted either
before filing an answer or with the answer itself. See Jacobsen v. Deseret Book Co., 287
F.3d 936, 941 n.2 (10th Cir. 2002). “If the defendant makes the motion after filing the
answer, the motion should generally be treated as a motion for judgment on the
pleadings.” Id. In this case, Defendants first filed their answer, then filed their motion
for judgment on the pleadings, and afterward filed their 12(b)(6) motion. Because we
apply the same standard of review when evaluating 12(b)(6) motions and motions for
judgment on the pleadings—and because our decision is the same regardless of the finer
procedural distinctions—we will keep the designations used by the parties in their
pleadings.
                                              -7-
review, “[w]e must accept as true all well-pleaded factual allegations in a complaint and

view these allegations in the light most favorable to the plaintiff.” Rosenfield v. HSBC

Bank, USA, 681 F.3d 1172, 1178 (10th Cir. 2012) (internal quotation marks omitted); see

also Park Univ. Enters., Inc. v. Am. Cas. Co. of Reading, Pa., 442 F.3d 1239, 1244 (10th

Cir. 2006) (stating that, in reviewing a grant of judgment on the pleadings, a court will

“accept all facts pleaded by the non-moving party as true and grant all reasonable

inferences from the pleadings in favor of the same”).

       Fed. R. Civ. P. 12(d) requires that “[i]f . . . matters outside the pleadings are

presented to . . . the court, the motion must be treated as one for summary judgment.”

“The failure to convert a 12(b)(6) motion to one for summary judgment where a court

does not exclude outside materials is reversible error unless the dismissal can be justified

without considering the outside materials.” GFF Corp. v. Assoc. Wholesale Grocers,

Inc., 130 F.3d 1381, 1384 (10th Cir. 1997). Notwithstanding these commands, our court

has acknowledged that when a document is not incorporated by reference or attached to

the complaint, but “is referred to in the complaint and is central to the plaintiff's claim, a

defendant may submit an indisputably authentic copy to the court to be considered on a

motion to dismiss.” Id. Although Mr. Borde and Mr. Bostick did not attach copies of the

employment contracts to their complaint, they refer to the contracts in their complaint

and, indeed, the contracts are central to their claims. In addition, Defendants attached

authentic copies of the contracts to their motion for judgment on the pleadings. For these

reasons, we will treat Defendants’ 12(b)(6) and 12(c) motions as properly presented.
                                             -8-
       We review a denial of leave to amend for abuse of discretion. Minter v. Prime

Equip. Co., 451 F.3d 1196, 1204 (10th Cir. 2006). “Although Fed. R. Civ. P. 15(a)

provides that leave to amend shall be given freely, the district court may deny leave to

amend where amendment would be futile.” Jefferson Cnty. Sch. Dist. No. R-1 v. Moody’s

Investor’s Servs., Inc., 175 F.3d 848, 859 (10th Cir. 1999). We consider a proposed

amendment to be futile “if the complaint, as amended, would be subject to dismissal.”

Id.

       This case also requires us to interpret a provision of the New Mexico state

constitution. The precise issue before us—whether the type of multiyear employment

contract entered into by the County with Mr. Borde and Mr. Bostick is valid under New

Mexico law—has not been squarely resolved by a reported opinion of the New Mexico

Supreme Court or of lower courts within the state in their opinions presented to us. In a

case such as this one,

       [w]here no controlling state decision exists, [we] must attempt to predict
       what the state’s highest court would do . . . . [We] may seek guidance from
       decisions rendered by lower courts in the relevant state, appellate decisions
       in other states with similar legal principles, district court decisions
       interpreting the law of the state in question, and the general weight and
       trend of authority in the relevant area of law. Ultimately, however, the
       Court’s task is to predict what the [New Mexico] [S]upreme [C]ourt would
       do. Our review of the district court's interpretation of state law is de novo.

Coll v. First Am. Title Ins. Co., 642 F.3d 876, 886 (10th Cir. 2011) (quoting Wade v.

EMCASCO Ins. Co., 483 F.3d 657, 665-66 (10th Cir. 2007)) (internal quotation marks

and citations omitted) (alterations in original).

                                              -9-
                                   III.   DISCUSSION

       There are two principal issues before us on appeal. First, Mr. Borde and Mr.

Bostick assert that the district court erred in finding their employment contracts were

void ab initio because they violate the New Mexico state constitution. Second, Mr.

Borde and Mr. Bostick argue that even if their contracts are void, they still possess a

protected property interest in their severance benefits that entitles them to compensation

from the County.

                                            A.

        We first turn to the question whether the contracts are valid under New Mexico

law. Mr. Borde and Mr. Bostick challenge the district court’s determination that the

terms of their employment contracts with the County violated article IX, section 10 of the

New Mexico state constitution. “A county in New Mexico is the creation of the state and

derives all of its powers therefrom.” Allstate Leasing Corp. v. Bd. of Cnty. Comm’rs, 450

F.2d 26, 28 (10th Cir. 1971) (citing Dow v. Irwin, 157 P. 490, 491 (N.M. 1916)). Article

IX, section 10 of the New Mexico state constitution limits the purposes for which a New

Mexico county can accumulate debt. It also prescribes the steps a county must take

before it can properly incur a debt.

       Article IX, section 10 is entitled “County indebtedness.” Its terms provide:

       No county shall borrow money except for the following purposes:

       A. erecting, remodeling and making additions to necessary public
       buildings;

                                           -10-
       B. constructing or repairing public roads and bridges and purchasing capital
       equipment for such projects;
       C. constructing or acquiring a system for supplying water, including the
       acquisition of water and water rights, necessary real estate or rights-of-way
       and easements;
       D. constructing or acquiring a sewer system, including the necessary real
       estate or rights-of-way and easements;
       E. constructing an airport or sanitary landfill, including the necessary real
       estate;
       F. acquiring necessary real estate for open space, open space trails and
       related areas and facilities; or
       G. the purchase of books and other library resources for libraries in the
       county.

       In such cases, indebtedness shall be incurred only after the proposition to
       create such debt has been submitted to the registered voters of the county
       and approved by a majority of those voting thereon. No bonds issued for
       such purpose shall run for more than fifty years. * * *

A New Mexico county may thus acquire debt only in limited, carefully enumerated

circumstances—largely     relating   to   the   creation   and   maintenance    of     county

infrastructure—and then only after the debt proposal has been submitted to and approved

by the county’s voters.

       The New Mexico courts have consistently interpreted “debt,” as contemplated

under the state constitution, as “an unconditional obligation to pay.” Allstate, 450 F.2d at

29. In an early decision, the New Mexico Supreme Court observed that

       [t]he idea of a “debt” in the constitutional sense is that an obligation has
       arisen out of contract, express or implied, which entitles the creditor
       unconditionally to receive from the debtor a sum of money, which the
       debtor is under a legal, equitable, or moral duty to pay without regard to
       any future contingency.



                                           -11-
Seward v. Bowers, 24 P.2d 253, 253 (N.M. 1933); see also State ex rel. Capitol Addition

Bldg. Comm’n v. Connelly, 46 P.2d 1097, 1100 (N.M. 1935) (same). In the present case,

the district court found that the County’s employment contracts with Mr. Borde and Mr.

Bostick created a monetary obligation that fell within the parameters of “debt” under

New Mexico law. Because the debt created by the employment contracts did not satisfy

the requirements of article IX, section 10, the district court held the agreements were

unconstitutional and therefore void ab initio.

       The district court based its ruling in large part on the reasoning found in two

decisions of the New Mexico Supreme Court: Hamilton Test Systems, Inc. v. City of

Albuquerque, 704 P.2d 1102 (N.M. 1985), and Montano v. Gabaldon, 766 P.2d 1328

(N.M. 1989).     In both Hamilton and Montano, the New Mexico Supreme Court

invalidated agreements entered into between local government units and private parties

because the contracts at issue gave rise to debt, without voter approval, that was

impermissible under the state constitution.        The common thread running through

Hamilton and Montano is that a New Mexico political subdivision had committed itself

to making payments out of its tax revenues in future fiscal years, without the prior

approval of voters. In both cases, the New Mexico Supreme Court held the agreements

violated the state constitution. For the same reason, the district court in this case ruled

that Mr. Borde’s and Mr. Bostick’s employment contracts were likewise made in

violation of the New Mexico state constitution. We agree.


                                            -12-
      Mr. Borde and Mr. Bostick were to be employed for three years under their

contracts with the County. Their employment terms would then automatically renew for

another three years, unless one of the parties gave timely notice otherwise. The contracts

stated that if either Mr. Borde or Mr. Bostick were terminated in his first year of

employment, he would receive six-months’ worth of his base pay as severance; if

terminated in his second year, twelve-months’ worth; if terminated in his third year,

eighteen-months’ worth. Upon termination, Mr. Borde and Mr. Bostick would also be

entitled to receive the balance of their salary that would have been paid to them had they

completed the full three-year term of employment. In addition, they would obtain the

benefit of up to five weeks of paid time off. Finally, if the County decided not to renew

their contracts after three years, Mr. Borde and Mr. Bostick would still get a payment

equal to eighteen months of current base pay.

      Mr. Borde and Mr. Bostick began their terms of employment on February 26,

2008. On June 23, 2009, they were terminated. That is to say, the termination came in

the second year of their employment. Mr. Borde and Mr. Bostick allege that, based on

their contractual severance provision, they “should have been paid for the remaining

twenty (20) months and three (3) days of the contract term, plus an additional twelve (12)

months, for a total of thirty-two (32) months and three (3) days,” plus the value of their

accrued paid time off. App. at 18-19. Although the parties do not discuss the amount of

Mr. Borde and Mr. Bostick’s compensation in their briefing, it appears from the record

that they both received monthly pay of $7475.00. See App. at 76.
                                          -13-
       The district court correctly found the employment contracts created a “debt” for

the County that violates article IX, section 10 of the New Mexico state constitution. The

contracts impose on the County an obligation to pay significant sums of money as

severance to Mr. Borde and Mr. Bostick in the event of termination or nonrenewal of

their contracts. The problem is that, in committing to pay sizeable compensation to Mr.

Borde and Mr. Bostick in the years following the formation of the contracts, the County

has bound itself to make expenditures beyond the fiscal year in which the contracts were

made. In other words, by entering into the contracts the County obligated itself to pay

some amount of money at a future time, even though the County might not have the

funds for payments in those future years. The New Mexico Supreme Court says this is

not allowed: “An agreement that commits the county to make payments out of general

revenues in future fiscal years, without voter approval, violates the New Mexico

Constitution . . . .” Montano, 766 P.2d at 1329.

       The New Mexico courts favor a “broad interpretation of indebtedness.” Id. at

1330. In Montano, the New Mexico Supreme Court traced the origins of its “expansive

definition” of constitutional debt to the time of the framing of the state constitution. Id.

The New Mexico Supreme Court “will assume that the framers were familiar with similar

constitutional provisions from other states and their judicial interpretation when they

drafted the New Mexico Constitution.” Id. at 1329. New Mexico entered the Union in

1912. The recently ended previous century had seen widespread borrowing and rampant

defaults by state and local governments across the country. In an effort to curb these
                                           -14-
excesses, many states adopted debt limitations of the kind later ensconced in the New

Mexico state constitution. See id. (noting that “these constitutional provisions were

primarily a response to the heavy borrowing and subsequent default, engaged in by many

states”); see also In re Constitutionality of Ch. 280, Or. Laws 1975, 554 P.2d 126, 129

(Or. 1976) (recounting how in the 1870s “many states also began limiting by

constitutional provisions the ability of local government entities—which had gone deeply

into debt primarily to finance the railroad expansion—to incur debts”); Jon Magnusson,

Lease-Financing by Municipal Corporations As a Way Around Debt Limitations, 25 Geo.

Wash. L. Rev. 377, 381 (1957) (“Local debt increased rapidly until the business crisis of

1873 brought about many municipal defaults caused by excessive debt. The solution for

fiscal irresponsibility was again found in constitutional provisions limiting debt-incurring

powers.”). With this historical and interpretive framework in mind, we hold that the

County’s employment contracts with Mr. Borde and Mr. Bostick created debt that was

invalid under New Mexico’s constitution.

       “‘What are debts? In defining these terms it has been declared that the language

of the Constitution is exceedingly broad, and should not receive a narrow or strained

construction . . . .’” Montano, 766 P.2d at 1329 (quoting 1 J. Dillon, Law of Municipal

Corporations § 193 (5th ed. 1911)). The Hamilton case serves as a paradigm of the way

in which New Mexico courts treat the issue of unconstitutional debt. In Hamilton, the

City of Albuquerque contracted with the plaintiff, Hamilton Test Systems, to run an

inspection program for motor-vehicle emissions for a five-year period. 704 P.2d at 1103.
                                           -15-
Hamilton would collect an inspection fee from the owner of each vehicle, keep a portion

of the money as a “base fee,” and then turn the remainder over to the City. Id. at 1103-

04. At the end of each year, if Hamilton retained an amount in fees greater than the

contract price, then the difference would be credited to the City. Id. at 1104. But if

Hamilton retained a lesser amount, then the City was to make up the difference. Id.

(“Thus the City was obligated to pay Hamilton at the end of each year for services

performed that year, if the amount retained by Hamilton as ‘base fees’ during that year

fell short of the contract price for the year.”). The contract also provided that Hamilton

would receive certain compensation—including severance pay—if the City terminated

the contract early. Id.

       As it happened, the City terminated the contract early, and Hamilton sued to

recover the difference between the collected base fees and the contract price owed to him

by the City. Id. The New Mexico Supreme Court refused to enforce the agreement,

holding that the City, by entering into the contract with Hamilton, had contracted an

impermissible “debt” under article IX, section 12 of the New Mexico state constitution.6

Id. at 1105. The court reasoned that “any agreement by which a municipality obligates

itself to pay out of tax revenues, and commits itself beyond revenues for the current fiscal

year, falls within the terms of the constitutional debt restriction.” Id. at 1104.


6
       Article IX, section 12 deals with New Mexico cities, towns, and villages; Article
IX, section 10 applies to New Mexico counties. Although these two sections contain
slight differences of terminology, they are plainly designed to ward off the same ill: the
accumulation of excessive debt by units of local government.
                                           -16-
       The contract at issue in Hamilton violated the state constitution because it

potentially obligated the City to, in effect, subsidize Hamilton’s business losses during

any year of the five-year contract.       This sum could not be ascertained—let alone

budgeted for by the City—in a single fiscal year. In essence, the contract created a

looming debt obligation for the City that, if triggered, could drain its tax revenues years

after the contract first came into existence, without ever giving the City’s voters a say in

the matter.

       In this case, Mr. Borde and Mr. Bostick argue their employment contracts are

saved from the infirmity that invalidated the agreement in Hamilton because section 10 of

their contracts states that “the County shall, in the current fiscal year, budget funds to pay

for all subsequent years of the contract term.” App. at 41, 48. This argument has surface

appeal. But, for reasons explained below, we are not persuaded.

       Several years after deciding Hamilton, the New Mexico Supreme Court again

faced the issue of the validity of debt in Montano. There, a different New Mexico county

had signed a lease-purchase agreement with a private corporation for the construction of

a new jail. 766 P.2d at 1328. The lease required the county to make semiannual rent

payments to the private contractor over a twenty-year period. Id. at 1328-29. At the end

of that period, the county would acquire ownership of the jail facility and reacquire

ownership of the property where the jail stood. Id. at 1329. The lease agreement also

featured a provision that permitted “termination of the lease at the end of any fiscal year

should the Board of County Commissioners not appropriate sufficient funds to pay the
                                            -17-
rent.” Id. But, if the county terminated the lease, the private contractor “would acquire

permanent title to the land and the jail facility.” Id.

       The New Mexico Supreme Court held that the agreement violated article IX,

section 10. The court stated that “once the County accepted this lease, it would be

obligated to continue making rental payments in order to protect a growing equitable

interest in the facility.” Id. at 1330. In short, the county had yoked itself to “the type of

future economic commitment that requires the arrangement be approved by the voters.”

Id. We believe the employment contracts in this case contain the same constitutional

flaws that defeated the agreements in Hamilton and Montano. The overall effect of the

employment contracts is to obligate the County to expend public funds in future years for

future services. This is improper under article IX, section 10 of the New Mexico state

constitution.

       Mr. Borde and Mr. Bostick claim their contracts avoid the Hamilton problem

because section 10 of their agreements requires the County to budget enough money in

the current fiscal year to pay for every subsequent year of the contracts. They are correct

insofar as the employment contracts’ language has apparently been worded in an effort to

fit within the letter of New Mexico law. But artful drafting is not enough to salvage Mr.

Borde’s and Mr. Bostick’s severance benefits. As previously noted, Mr. Borde’s and Mr.

Bostick’s contracts provided for, inter alia, (1) three years of paid employment; (2) three

additional years of paid employment upon renewal of the contracts; (3) severance pay

equal to eighteen months of base pay in the event of nonrenewal; (4) incrementally
                                             -18-
increasing severance pay in the event of termination during the initial term of the

contracts; (5) five weeks of annual paid time off; and (6) periodic cost-of-living increases

to both the base pay and severance.

       Section 10 of Mr. Borde and Mr. Bostick’s employment contracts simply states

that “the County shall, in the current fiscal year, budget funds to pay for all subsequent

years of the contract term.” App. at 41, 48. The section goes on to say that, if the

contract is renewed for another three years, then the County must again “budget funds to

pay for all years of the contract in the then current fiscal year.” Id. The contract also

provides that “[a]ny increase in the severance amount arising from cost of living or other

changes shall be budgeted and allocated in the same year of any such pay increase.” Id.

       In considering this contractual provision, our focus must be on what the County is

actually budgeting in the current fiscal year. A plain reading of the contracts’ section 10

reveals that neither the base-pay amount for a second three-year term nor any cost-of-

living adjustment to the severance amount can be budgeted in the fiscal year in which the

contract was made. Presumably, the severance penalty for nonrenewal would not be

budgeted in the first instance, either. And it is ambiguous at best whether the maximum

amount of severance-pay liability during the initial employment term—the equivalent of

eighteen months of base pay—is also to be included in the budget for the County’s

current fiscal year. All told, a plain reading of Mr. Borde’s and Mr. Bostick’s contracts

makes clear that the County has incurred debt that necessarily burdens future tax

revenues in future years.
                                           -19-
       Even if the County had somehow managed to provide for every financial

obligation and contingency in the initial fiscal year, the employment contracts would still

be unconstitutional because they also bind the County to a forbidden “future economic

commitment” under Montano. 766 P.2d at 1330. In Montano, the county had the power

to terminate its lease-purchase agreement at the end of any fiscal year where it lacked

sufficient funds to continue paying rent.      Id. at 1329.    But the court in Montano

recognized that this was never a realistic option because the price of termination for the

county would be the loss of the jail facility and its land. Id. In other words, the cost of

terminating the contract was too onerous to make doing so a financially viable option for

the county. That meant the county was stuck with a twenty-year economic commitment

that was never approved by the county’s voters, as the state constitution requires.

       Under the employment contracts in this case, Mr. Borde and Mr. Bostick were

owed increasing amounts of severance pay the longer they stayed in their jobs. If they

were terminated, they would also receive the balance of their regular base pay under the

contracts. And even if the County simply chose not to renew their contracts after three

years, Mr. Borde and Mr. Bostick were still entitled to receive eighteen months of salary.

The district court commented that the severance provisions acted to “financially

handcuff, and thereby control, the future decisions made by the County.” App. at 102.

The metaphor is apt. Simply put, the contracts, as drafted, made it too expensive for the

County to do anything but keep Mr. Borde and Mr. Bostick employed for a long time.

The contracts coerced the County—and, more importantly, its taxpayers—to keep paying
                                           -20-
for years to come.    In order for the contracts to avoid entanglement with a future

economic commitment, the County must have had the ability to “at any time recede

without involving any financial liability in so receding.” State Office Bldg. Comm’n v.

Trujillo, 120 P.2d 434, 446 (N.M. 1941). Here, it was never feasible for the County to

“recede” from the agreement without incurring substantial financial liability. This makes

the contracts invalid under the principles underlying Montano.

      The New Mexico Supreme Court has emphasized that “an obligation is no less a

‘debt’ merely because it is contingent upon the future provision of services.” Hamilton,

704 P.2d at 1105. Mr. Borde’s and Mr. Bostick’s employment contracts fall within New

Mexico’s “intended broad interpretation of indebtedness.” Montano, 766 P.2d at 1330.

As debt, their multiyear employment agreements plainly fail to satisfy any of the

specifically enumerated debt-creation purposes outlined in article IX, section 10 of the

state constitution. And the contracts surely never met with the approval of the County’s

voters. Finally, the contracts represent a future economic commitment that the County

was not at liberty to create. Applying New Mexico law, we conclude the employment

contracts violate article IX, section 10 of the New Mexico state constitution.7 As such,


7
        The parties also ask us to consider whether the employment contracts violate (1) a
provision of New Mexico law known as the Bateman Act, N.M. Stat. Ann § 6-6-11, and
(2) a common-law rule prohibiting local governing bodies from binding their successors
in office. Having determined the employment contracts are unconstitutional under New
Mexico law, we do not need to reach these other issues. We also caution that today’s
order and judgment should not be interpreted as declaring that any multiyear employment
contract of a New Mexico political subdivision presumptively violates the debt
provisions of the New Mexico state constitution. That question is not before us. We
                                            -21-
the contracts are “null and void.” Shoup Voting Mach. Corp. v. Bd. of Comm’rs, 256

P.2d 1068, 1071 (N.M. 1953) (holding a county’s ten-year contract for voting machines

void for “incurring an indebtedness which is forbidden by the Constitution”). The district

court did not err in granting judgment on the pleadings to the County on the breach-of-

contract claim.

                                             B.

       The County had no constitutional authority to enter into the employment contracts

with Mr. Borde and Mr. Bostick in these circumstances, and those contracts were void ab

initio. It is black-letter law that a void contract “is not a contract at all” and “is void of

legal effect.” Restatement (Second) of Contracts § 7 cmt. a (1981). Under New Mexico

law, “damages are unavailable as relief to a party to an illegal contract.” Dacy v. Vill. of

Ruidoso, 845 P.2d 793, 798 (N.M. 1992). In their complaint, Mr. Borde and Mr. Bostick

have alleged the County violated their rights to due process by acting arbitrarily in

terminating the contracts and by not providing them notice and an opportunity to be heard

prior to their termination. They argue the County’s actions deprived them of a protected

property interest in receiving severance pay under the contracts. Their argument is not

well taken.

       The employment contracts were made in violation of the state constitution and

thus were void from the outset. This means the agreements the County made with Mr.


simply hold that the specific employment contracts at issue in this case cannot be
reconciled with the requirements of article IX, section 10 of the state constitution.
                                            -22-
Borde and Mr. Bostick are wholly unenforceable. Indeed, it is as if the contracts—and

their expansive severance provisions—never existed at all as a matter of law. Mr. Borde

and Mr. Bostick do not have a protected property interest arising from the terms of a void

contract, and the district court was correct in granting the County’s Rule 12(b)(6) motion

to dismiss their due process claims.8

       But Mr. Borde and Mr. Bostick also have a second line of argument. They say

that, even granting that their employment contracts are void and unenforceable, they also

have a right to their severance that independently arises under the Luna County Personnel

Ordinance. The terms of the Personnel Ordinance apply to regular, full-time County

employees. Under the Personnel Ordinance, the regular County employees may be

terminated only for cause.     In the event of termination, employees are entitled to

grievance procedures and must also be compensated for their unused paid time off.

       The nub of Mr. Borde and Mr. Bostick’s argument on this score is that, in the

absence of an enforceable employment contract, they instead became regular, full-time

employees of the County. In this capacity, the terms of their employment were governed


8
        After the district court ruled the employment contracts were void, Mr. Borde and
Mr. Bostick then argued that the County had violated the state’s Open Meetings Act,
N.M. Stat. Ann. §§ 10-15-1 to -4, when it terminated the contracts. Mr. Borde and Mr.
Bostick claimed that, by failing to adhere to the Act’s requirements, the County’s
termination was not a valid action, and thus the contracts remained in force until the
district court declared them void some two years later. This argument misses the mark.
The contracts were void from the moment of their inception, not from the time of the
judicial decree affirming the contracts were made in violation of the state constitution.
Because it is not relevant to our holding in this case, we need not make any determination
about whether the County complied with the Open Meetings Act.
                                             -23-
by the Personnel Ordinance. Thus, they could be terminated only for cause, after notice

and a hearing. These procedural protections, in turn, gave rise to a protected interest in

their employment and its concomitant benefits. In line with this new argument, Mr.

Borde and Mr. Bostick sought to amend their complaint by adding both a § 1983 claim

and a state-law implied-contract claim arising under the Personnel Ordinance.9 The

district court rejected their arguments and denied them leave to amend on the grounds of

futility. Again, we agree with the district court’s rationale.

       New Mexico is an “employment-at-will” state: “The general rule in New Mexico

is that an employment contract is for an indefinite period and is terminable at the will of

either party . . . .” Hartbarger v. Frank Paxton Co., 857 P.2d 776, 779 (N.M. 1993).

Significantly, “[a]n at-will employment relationship can be terminated by either party at

any time for any reason or no reason, without liability.” Id. Mr. Borde and Mr. Bostick

insist that, if they were not working for the County under the unconstitutional

employment contracts, then they must have instead been working as for-cause employees

subject to the protections of the Personnel Ordinance. This argument ignores the general,

default rule of at-will employment in New Mexico. Mr. Borde and Mr. Bostick have not

cited any authority—and we have not located any—supporting the proposition that, once

an employment contract is held void, the erstwhile employee’s status is somehow


9
       In their proposed amended complaint, Mr. Borde and Mr. Bostick newly allege
that they have a liberty interest in their professional reputations based on the Personnel
Ordinance. This claim is legally indistinguishable from their previous arguments on due
process and thus fails for the same reasons.
                                             -24-
transmuted into that of a for-cause employee entitled to a full range of procedural

protections.

       Our caselaw leads us to the contrary conclusion. In previous cases involving a

void employment contract in an employment-at-will state, we have held that the

terminated employee simply became an employee at will. See Alderfer v. Bd. of Trs. of

Edwards Cnty. Hosp. & Healthcare Ctr., 261 F. App’x 147, 152-53 (10th Cir. 2008)

(“Because no valid fixed-term employment contract existed, no breach of contract

occurred. Moreover, in the absence of a fixed-term employment contract, [the plaintiff]

was an at-will employee.”) (applying Kansas law); Figuly v. City of Douglas, 76 F.3d

1137, 1142 (10th Cir. 1996) (“Since the contract was voidable and was in fact declared to

be void by the new city council, plaintiff became an employee at will. . . . Under this

circumstance, the court properly found that he had no protected property interest in

continued employment.”) (applying Wyoming law). Ultimately, “[t]he absence of a

protected property interest compels the conclusion that the procedural due process

safeguards are inapplicable.” Farthing v. City of Shawnee, Kan., 39 F.3d 1131, 1136

(10th Cir. 1994).

       Lacking an enforceable employment contract, Mr. Borde and Mr. Bostick became

at-will employees, with no protected property interest in their employment or its

attendant benefits. The district court properly granted the County’s motion to dismiss for

failure to state a claim upon which relief can be granted. Further, the district court did


                                          -25-
not abuse its discretion in denying Mr. Borde and Mr. Bostick leave to amend their

complaint. The proposed amendments would have been futile.

       Finally, we note that today’s order and judgment should not be read as endorsing

the business dealings of the County. And we understand that the result for Mr. Borde and

Mr. Bostick might appear harsh. But, in this case, the paramount interest to be protected

is that of the County’s taxpayers, as commanded by the New Mexico state constitution.

Following New Mexico law, the decisions of this circuit, and other persuasive authority,

we conclude that Mr. Borde and Mr. Bostick had neither a valid employment contract nor

a protected property interest in their severance benefits.

                                      IV.    CONCLUSION

       For the foregoing reasons, we AFFIRM the judgment of the district court in all

respects.

                                                   Entered for the Court



                                                   William J. Holloway, Jr.
                                                   Circuit Judge




                                            -26-
