Aragon v. Rio Costilla Co-op. Livestock Ass'n

• Decision Date: 06 June 1991
• Docket Number: No. 19026,19026
• Parties: Maria Susan Vera ARAGON, et al., Petitioners-Appellants, v. RIO COSTILLA COOPERATIVE LIVESTOCK ASSOCIATION, Bert Quintana, Alonso H. Martinez, Bill Vigil, Fidel Martinez and Gustavo Vallejos, Jr., Respondents-Appellees.
• Court: New Mexico Supreme Court

Page 1300

812 P.2d 1300

112 N.M. 152

Maria Susan Vera ARAGON, et al., Petitioners-Appellants, v. RIO COSTILLA COOPERATIVE LIVESTOCK ASSOCIATION, Bert

Quintana, Alonso H. Martinez, Bill Vigil, Fidel

Martinez and Gustavo Vallejos, Jr.,

Respondents-Appellees.

No. 19026.

Supreme Court of New Mexico.

June 6, 1991.

[112 N.M. 153] Tapia & Campos, Lorenzo E. Tapia, Albuquerque, Charles Solomon, Santa Fe, Arturo G. Ortega, Albuquerque, for petitioners-appellants.

Harl D. Byrd, Santa Fe, for respondents-appellees.

OPINION

RANSOM, Justice.

This suit involves a claim that certain land which is the major asset of a cooperative livestock association is subject to an express, resulting, or constructive trust for the benefit of plaintiffs. After the first phase of a trifurcated trial, the court found that no trust was intended for the benefit of plaintiffs, nor was there such evidence of fraud, wrongful or unconscionable conduct, or breach of any duty owed to plaintiffs that would justify the imposition of a trust. The court entered final judgment against plaintiffs.

On appeal, plaintiffs assert that the trial court erred by failing to declare either an express or a resulting trust.¹ They also claim that the trial court erred in deciding issues reserved for the later phases of the trial, and they request this Court to remand the case with instructions to consider those issues. The order trifurcating the trial provided that Phase I was to "determine the issue of whether or not a trust was created." Phase II was to determine "whether or not the plaintiffs are some of the beneficiaries of said trust." Phase III was reserved for the trial of "all other issues, legal and factual, as to whether defendants have breached their fiduciary duties, mismanaged and misappropriated the assets of the defendant cooperative and the nature of the relief and/or damages to which the plaintiffs may be entitled." We find substantial evidence in the record to affirm the decision of the district court in its refusal to declare either an express or resulting trust. However, we remand the cause for the district court to consider potential Phase III issues.

Facts. During the Great Depression years of the late 1930's, families who had settled along the Costilla and Ute Creek river valleys within a portion of the old Sangre de Cristo Land Grant in northern New Mexico organized to acquire the land where they lived and that they used for subsistence agricultural purposes. These persons principally lived in the villages of Costilla and Amalia. The land they sought to acquire, totalling roughly 125,000 acres, then belonged to General Thomas Campbell of the Costilla Land Development Company. Only a very few of the residents of this area had legal title to any of the land they occupied or used. Since about 1905 when the land company had acquired title to this portion of the original grant, the local residents had been engaged in numerous lawsuits with the company over water, timber, and grazing rights, and over title to individual land holdings.

The declining economic conditions among the residents, due in part to the lack of a land base, attracted the attention of the federal government. The Farm Security Administration (FSA) of the Department of Agriculture made a study of conditions in the area and proposed that the federal government assist the residents by reestablishing a balanced farming and stockraising economy, an economy that increasingly had been disrupted by the large-scale commercial operations of the land company. For the purpose of acquiring the land owned by Campbell, the FSA proposed to make a loan to an association to be composed of approximately 175 families. Accordingly, the Rio Costilla Cooperative Livestock Association was formed, and with the assistance of the FSA the Association was able to acquire the land in 1942. The Association bought title to the land from Campbell and executed a mortgage to the FSA in return for a purchase-price loan of $136,500. In 1953 the Association sold a portion of the land and paid off the mortgage.

Plaintiffs, certain individuals who lived in this area in 1942, or who are descendants of those who did, brought this suit in 1979 seeking a declaration that the Association held title to the acquired land in trust for their benefit or in the alternative to have the land declared theirs as tenants in common. Plaintiffs argue that, as a matter of law, a trust was created or resulted for the benefit of all of the people of Costilla and Amalia, including their heirs and descendants, who were residents in 1942.

General trust principles. Since plaintiffs relied upon multiple theories of trust, we briefly review trust principles:

--Express trusts. The Restatement (Second) of Trusts defines an express trust as a fiduciary relationship with respect to property, subjecting the person holding title to the property to equitable duties to deal with the property for the benefit of another person, which arises as a result of a manifestation of an intention to create it. Restatement (Second) of Trusts Sec. 2 (1957) [hereinafter Restatement]. For our purposes, the significance of the general definition lies in the requirement of a manifestation of an intention to create the trust. In this regard, either written or spoken words, or conduct, will suffice, and no particular form of words or conduct is necessary. Id. at Sec. 24; accord Ward v. Buchanan, 22 N.M. 267, 270, 160 P. 356, 357 (1916). "Express trusts are those which are created by the direct and positive acts of the parties, by some writing, or deed, or will, or by words, either expressly or impliedly evincing a desire to create a trust." Id.

Significantly, the declaration and creation of a trust in land falls under the English statute of frauds, see An Act for Prevention of Frauds and Perjuries, 1677, 29 Car. 2, ch. 3, Sec. 7 (Am.Jur.2d Desk Book, Doc. No. 116 (1962)), which is part of our common law. Alvarez v. Alvarez, 72 N.M. 336, 341, 383 P.2d 581, 584 (1963). Thus, while an express trust in real estate need not be created in writing, some memorandum manifesting and proving the trust must exist. See, e.g., Eagle Mining & Imp. Co. v. Hamilton, 14 N.M. 271, 91 P. 718 (1907) (express trust proved by recognition of trust in correspondence between parties). The failure of an oral trust in land by virtue of the effect of the statute of frauds may result in the imposition of a constructive trust under certain circumstances, see Restatement Secs. 44, 45, or may result in the duty to reconvey title to the settlor under NMSA 1978, Section 46-2-13 (Repl.Pamp.1989).

--Resulting trusts. A resulting trust differs from an express trust in the manner of its creation. It arises when a person makes a disposition of property under circumstances which raise an inference that such person does not intend that the party taking or holding the property should also have the beneficial interest therein, and where the inference is not rebutted and the beneficial interest is not otherwise disposed of. Restatement Sec. 404; accord Bassett v. Bassett, 110 N.M. 559, 566, 798 P.2d 160, 167 (1990). Since the person who holds title to the property is not entitled to the beneficial interest, the property "springs back or results," to the person who made the original disposition or to that person's estate. Watson Truck & Supply Co. v. Males, 111 N.M. 57, 59, 801 P.2d 639, 641 (1990). In the case of a resulting trust it is not necessary to show that the settlor manifested any intention to create a trust. It is necessary to show the absence of any intention to give the beneficial interest to the transferee. In that case the settlor presumably intends to retain the beneficial interest, or it may be inferred that the settlor would have formed such an intention had the settlor foreseen certain future events. See Restatement Ch. 12, Topic 4, Introductory Note at 392.

A resulting trust arises in three general types of circumstances. The first two situations involve the failure of an express trust or when the performance of a trust does not exhaust the trust estate. See Bassett, 110 N.M. at 566, 798 P.2d at 167. The third situation, the one plaintiffs argue is relevant to this case, is where property is purchased and the purchase price is paid by one who directs that the vendor convey the property to another person. Id.; see also Restatement Sec. 440. In this third situation the inference that arises from the circumstances of the disposition is that the one who paid the purchase price presumably intended to retain the beneficial interest. Restatement Ch. 12, Topic 4, Introductory Note at 392. Nevertheless, an inference that the transferee was not intended to have the beneficial interest may be rebutted by showing that the payor intended to make a loan of the purchase price to the transferee. Restatement Sec. 445. In this situation the result is the same whether the lender pays the vendor directly or the transferee pays the purchase price after receiving the funds from the lender. See id. comment a.

--Intention-enforcing trusts. Express trusts and resulting trusts both are said to be intention-enforcing trusts. An express trust is created only if the settlor manifests an intention to create it; a resulting trust arises where circumstances raise an inference that the settlor does not intend that the person taking or holding title shall have the beneficial interest. Restatement Sec. 1 comment e; 5 A. Scott & W. Fratcher, The Law of Trusts Sec. 404.1 (4th ed. 1989).

[112 N.M. 156] --Constructive trusts. A constructive trust, on the other hand, except to the extent it may arise out of an express trust or the attempt to create one, is not imposed to effectuate the intention of the parties, but is imposed to prevent the unjust enrichment that would result if the person having the property were permitted to retain it. Id. at Secs. 404.2, 462.1. The circumstances where a court might impose such...