An Ass'n Of Individuals v. The Honorable Denise P. Lindberg

• Decision Date: 27 August 2010
• Docket Number: No. 20090859.,20090859.
• Citation: 238 P.3d 1054
• Parties: The FUNDAMENTALIST CHURCH OF JESUS CHRIST OF LATTER-DAY SAINTS, an association of individuals, Petitioner, v. The Honorable Denise P. LINDBERG, Third District Court Judge, Respondent.
• Court: Utah Supreme Court

238 P.3d 1054

The FUNDAMENTALIST CHURCH OF JESUS CHRIST OF LATTER-DAY SAINTS, an association of individuals, Petitioner, v. The Honorable Denise P. LINDBERG, Third District Court Judge, Respondent.

No. 20090859.

Supreme Court of Utah.

Aug. 27, 2010.

Kenneth A. Okazaki, Stephen C. Clark, Richard A. Van Wagoner, Rodney S. Parker, James C. Bradshaw, Salt Lake City, for petitioner.

Brent M. Johnson, Salt Lake City, for respondent.

Mark L. Shurtleff, Att'y Gen., Annina M. Mitchell, Randy S. Hunter, Timothy A. Bodily, Asst. Att'ys Gen., Salt Lake City, for State of Utah.

Mark L. Callister, Jeffrey L. Shields, Michael D. Stanger, Spencer E. Austin, Mark W. Dykes, Brandon J. Mark, Salt Lake City, for United Effort Plan Trust by Bruce R. Wisan.

Roger H. Hoole, Gregory N. Hoole, Salt Lake City, for Richard Jessop Ream, et al.

Michael D. Zimmerman, Salt Lake City, for Dan Johnson, Merlin Jessop, and William E. Jessop.

Peter Stirba, Meb W. Anderson, R. Blake Hamilton, Salt Lake City, for Hilldale City, Colorado City, and Helaman Barlow.

J. Ryan Mitchell, Salt Lake City, for Harker Dairy, LLC.

Terry Goddard, Att'y Gen., William A. Richards, Chad B. Sampson, Asst. Att'ys Gen., Phoenix, AZ, for State of Arizona.

DURRANT, Associate Chief Justice:

INTRODUCTION

¶ 1 This case concerns the United Effort Plan Trust (“UEP Trust” or “Trust”)-a trust originally formed in 1942 by what petitioners characterize as a fundamentalist religious group that was the predecessor of the Fundamentalist Church of Jesus Christ of Latter-Day Saints. The Trust was modified in 1998 so that it qualified as a charitable trust under Utah law. In 2006, the Utah Third District Court issued an order that modified the Trust again. This order was not appealed or otherwise challenged for nearly three years. In a petition for extraordinary writ, an association of members of the Fundamentalist Church of Jesus Christ of Latter-Day Saints (the “FLDS Association”) ¹ challenges the district court's modification and subsequent administration of this Trust as unconstitutional and in violation of Utah law. We hold that because the FLDS Association has delayed this challenge for nearly three years, and because during this time, many parties have engaged in numerous transactions in reliance on the Trust's modification, the FLDS Association's trust modification claims are barred by the equitable doctrine of laches. We also hold that all of the FLDS Association's remaining claims regarding trust administration, except one, are also barred by laches because they involve the same delay and prejudice as the modification claim. The claim that is notbarred by laches is barred because it is not ripe for adjudication.

BACKGROUND

¶ 2 In 1942, the spiritual leadership of a fundamentalist religious movement called the “Priesthood Work” formed the United Effort Plan Trust. The UEP Trust stated that its purpose was “charitable and philanthropic,” but conditioned membership in the Trust upon “consecration” of real and mixed property to the Trust. For this fundamentalist group-predecessors of the Fundamentalist Church of Jesus Christ of Latter-Day Saints (the “FLDS Church” or “Church”)-consecration was an act of faith whereby members deeded their property to the UEP Trust to be managed by Church leaders. Church leaders, who were also trustees, then used this property to minister to the needs of the members.

¶ 3 In 1986, some Trust property residents sued the UEP trustees for breach of fiduciary duty. The district court rejected those claims, finding that since the UEP Trust was charitable rather than private, the plaintiffs lacked standing to sue. In 1998, we reversed the district court's holding that the Trust was charitable. ² We first noted that charitable trusts differ from private trusts because “ ‘in a private trust[,] property is devoted to the use of specified persons who are designated as beneficiaries of the trust; whereas a charitable trust has as a beneficiary a definite class and indefinite beneficiaries within the definite class, and the purpose is beneficial to the community.’ ” ³ We then found that the UEP Trust was not a charitable trust because it was intended, from its inception, to benefit specified persons, namely the Trust's founders. ⁴

¶ 4 In response to our decision, Rulon Jeffs, the sole surviving founder and beneficiary of the 1942 Trust, acting for himself and also in his capacity as president and Corporation Sole of the FLDS Church, along with the other trustees, executed the “Amended and Restated Declaration of Trust of the United Effort Plan” (the “1998 Restatement”). It is not disputed that the 1998 Restatement of the 1942 UEP Trust qualifies as a charitable trust. It broadened the class of beneficiaries beyond the founders of the Trust to all of those who “consecrate their lives, time[ ], talents, and resources to the building and establishment of the Kingdom of God on Earth under the direction of the President of the [FLDS] church.” The 1998 Restatement provided that “in the event of termination of this Trust, whether by the Board of Trustees or by reason of law, the assets of the Trust Estate at that time shall become the property of the Corporation of the President of the [FLDS Church].”

¶ 5 In 2004, then-FLDS Church president, Warren Jeffs, the Trust, and the FLDS Church were sued in two separate tort actions: the first action alleged child sexual abuse, assault, and fraud primarily against Warren Jeffs; the second alleged civil conspiracy, fraud, breach of fiduciary duties, and other torts against Warren Jeffs, the FLDS Church, and the Trust. Rodney Parker of the law firm of Snow, Christensen & Martineau served as attorney for the Trust and the FLDS Church in these actions until he withdrew because his clients insisted upon a course of conduct with which he fundamentally disagreed, and because his clients had discharged him. Warren Jeffs, as controlling trustee, did not appoint a substitute attorney to defend the Trust in the litigation, leaving the Trust vulnerable to default judgments against it.

¶ 6 With this concern in mind, Mr. Parker filed motions in the district court asking the court to give notice to the Utah Attorney General (“Utah AG”) and the Trust land residents before entering a default judgment against the Trust. In response, the Utah AG petitioned the district court for (1) removal of the trustees for breach of fiduciary duty; (2) an order compelling Warren Jeffs and theother trustees to appear and file an inventory, final report, and accounting of the administration of the Trust; and (3) appointment of a special fiduciary to serve until new trustees were appointed. The Utah AG's petition was filed in May 2005. Personal service was made on those trustees who could be found. Trustees who could not be served personally were served via substitute service. Publications were made where Trust participants resided.

¶ 7 In a June 2005 preliminary injunction, the district court suspended the trustees and appointed a special fiduciary for the Trust. The special fiduciary's powers and authority were outlined in various district court orders. The district court gave the special fiduciary authority to act on behalf of the Trust. The district court also ordered the suspended trustees to prepare an accounting, deliver records, and cooperate with the fiduciary, but the suspended trustees failed to comply with this order. The district court asked the special fiduciary to prepare a memorandum identifying issues the court needed to address before appointing new trustees. Ultimately, the special fiduciary expressed concern in a memorandum filed with the district court that the Trust needed to be reformed if new trustees were to be appointed.

¶ 8 On December 13, 2005, the district court entered an order that concluded the Trust could be reformed so that the special fiduciary could administer the Trust to meet the “just wants and needs” of the beneficiaries according to neutral, nonreligious principles. The district court cited Utah Code section 75-7-413 as its authority to use the doctrine of cy pres to modify the Trust. Cy pres is a common-law doctrine, now adopted by statute in Utah Code section 75-7-413, that courts may apply when a charitable purpose of a trust “becomes unlawful, impracticable, impossible to achieve, or wasteful.” ⁵ Rather than allowing the Trust to fail in these situations, under the common law, courts would apply the trust “ ‘to other charitable objects lawful in their character, but corresponding, as near as may be to the original intention of the [settlor].’ ” ⁶ The Utah Code's similar language allows a court faced with a trust whose purpose has become “unlawful, impracticable, impossible to achieve, or wasteful ... to modify or terminate the trust by directing that the trust property be applied or distributed ... in a manner consistent with the settlor's charitable purposes.” ⁷

¶ 9 The district court listed two reasons for using cy pres to reform the Trust. First, the court found that the trustees had breached their fiduciary duties of loyalty and prudent trust administration. Second, it found several Trust provisions to be “fundamentally flawed and unworkable.”

¶ 10 The following three principles guided the district court's reformation of the Trust: First, the court would attempt to preserve the Trust's charitable intent. Second, the court would only give effect to the Trust's legitimate and legal purposes. Finally, the court would employ “neutral principles of law.”

¶ 11 To meet its first goal of preserving the Trust's charitable intent, the district court had to first identify that intent. It characterized the 1998 Restatement as having at least two purposes: first, the Trust was to advance the religious doctrines and goals of the FLDS Church; and second, the Trust was to provide for the just wants and needs of the FLDS Church members. The FLDS Association characterizes each of these goals...