Coppler & Mannick, P.C. v. Wakeland

• Decision Date: 20 June 2005
• Docket Number: No. 28,913.,28,913.
• Citation: 2005 NMSC 022,117 P.3d 914
• Parties: COPPLER & MANNICK, P.C., Paul D. Mannick and Kathy P. Mannick, Plaintiffs-Respondents, v. Robin G. WAKELAND, Defendant-Petitioner.
• Court: New Mexico Supreme Court

Page 914

117 P.3d 914

2005 NMSC 022

COPPLER & MANNICK, P.C., Paul D. Mannick and Kathy P. Mannick, Plaintiffs-Respondents, v. Robin G. WAKELAND, Defendant-Petitioner.

No. 28,913.

Supreme Court of New Mexico.

June 20, 2005.

Robin G. Wakeland, Santa Fe, NM, for Petitioner.

Coppler & Mannick, P.C., Paul D. Mannick, Santa Fe, NM, for Respondents.

OPINION

SERNA, Justice.

{1} The Court of Appeals consolidated two related actions, the first involving foreclosure on a judgment lien and the second involving voluntary waste of the foreclosed property. The district court had ruled in the waste proceeding that Defendant Robin G. Wakeland was equitably estopped from asserting her statutory homestead exemption in the foreclosure proceeding. The Court of Appeals affirmed the judgment in the waste proceeding on the question of liability and damages. The Court also determined that the district court erred in finding equitable estoppel but allowed the district court to use its equitable powers to supervise the execution of judgment in order to ensure the satisfaction of judgment in the waste proceeding with the homestead exemption. We granted Wakeland's petition for writ of certiorari to the Court of Appeals on the sole issue of the Court of Appeals' equitable remedy. We affirm but clarify and limit the rationale of the Court of Appeals.

I. Facts

{2} Plaintiffs Paul D. Mannick and Kathy P. Mannick (the Mannicks) filed a foreclosure action in district court on a judgment lien against Wakeland's real property. The underlying judgment supporting the lien, in the amount of $87,895.08 plus interest, was based on Wakeland's intentional tortious acts and bad faith. In its initial judgment, the district court ordered the foreclosure of Wakeland's property and found that Wakeland was not entitled to a homestead exemption. The Court of Appeals, in a memorandum opinion, reversed the district court with respect to the homestead exemption and remanded to the district court with instructions to grant Wakeland her statutory homestead exemption.

{3} In a separate action, Plainiffs Coppler and Mannick, P.C., and the Mannicks filed suit against Wakeland for voluntary waste in relation to the foreclosed property. Wakeland, with knowledge of the foreclosure, had removed permanent fixtures from the foreclosed property, including all heaters, sinks, cabinets, and doors, as well as the water heater, and had damaged the property by making large holes in the walls and covering the windows with varnish. The extensive damage to the property required over $10,000 in repairs. In addition, Wakeland had fraudulently attempted to encumber the water rights of the property.

{4} While the waste action was pending, the district court reviewed the mandate of the Court of Appeals in the foreclosure case and awarded a homestead exemption of $30,000 to Wakeland "subject to the judgment of this Court in" the voluntary waste action. The Court of Appeals reversed this order as an improper set-off against the homestead exemption. The Court remanded for the district court to award the homestead exemption to Wakeland. However, the district court declined to enter judgment on the mandate until the resolution of the waste action.

{5} Following a trial in the waste claim, the district court found that Wakeland's conduct was willful and malicious and committed with the intent to violate the Mannicks' rights under the foreclosure judgment. The court entered judgment in favor of the Mannicks and Coppler and Mannick, P.C., and awarded $34,100 in actual damages and $10,000 in punitive damages. The district court also concluded on the basis of this award, as well as the lack of any other means for Wakeland to satisfy the judgment, that Wakeland was equitably estopped from pursuing her homestead exemption. Noting the binding Court of Appeals' mandate in the foreclosure action to grant a homestead exemption to Wakeland, the district court stated, "Nevertheless, the court finds and concludes that, under these particular and unusual circumstances, it would be unjust and inequitable to allow ... Wakeland to pursue any legal action against [the Mannicks] to recover the $30,000 homestead exemption and that [she] would be unjustly enriched by any such legal action."

{6} Wakeland appealed the judgment in the waste action and the district court's failure to award the homestead exemption in the foreclosure action. The Court of Appeals consolidated the appeals on its own motion. Among other issues, the Court of Appeals addressed the district court's application of equitable estoppel to the homestead exemption. Mannick v. Wakeland, No. 24,078, ¶¶ 27-33, ___ N.M. ___, 117 P.3d 919, 2005 WL 1901684 (N.M.Ct.App. Aug. 24, 2004). The Court determined that the district court improperly relied on equitable estoppel because of the absence of deceptive conduct, false representation, or concealment of material facts by Wakeland.¹ Id. ¶¶ 30-33. Nonetheless, the Court of Appeals noted the egregiousness of Wakeland's conduct and the inherent injustice of allowing Wakeland to benefit from her malicious acts. Id. ¶¶ 34-35. The Court of Appeals reviewed comparable homestead exemptions in other states and observed that New Mexico's homestead exemption, by not having the type of limits imposed in other states, is more susceptible to abuse and "makes our creditors especially vulnerable to the debtor who uses the homestead exemption as a perpetual shield of assets." Id. ¶ 37. As a result, the Court invoked the district court's inherent equitable power "to do justice." Id. ¶ 34. In the initial appeals of the foreclosure action, the Court had rejected the notion of a set-off based on a judgment in the voluntary waste proceeding. The Court indicated that a set-off would be equivalent to a garnishment of the homestead exemption, which was prohibited by this Court's opinion in Laughlin v. Lumbert, 68 N.M. 351, 353-54, 362 P.2d 507, 509-10 (1961). In the present appeal, however, the Court of Appeals stated that the district court could use its equitable supervisory powers to ensure that Wakeland receive her homestead exemption and be required to satisfy the judgment in favor of the Mannicks simultaneously. Mannick, No. 24,078, ¶¶ 38, ___ N.M. ___, 117 P.3d 919, 2005 WL 1901684. The Court indicated that the district court could accomplish this outcome "through the appointment of a limited receiver or through an offset to the waste judgment." Id. Although the Court of Appeals acknowledged that its remedy in the present appeal "may appear similar to a garnishment, the extraordinary circumstances of this case require equitable intervention to assure that justice is done." Id. The Court did not view this remedy as inconsistent with its earlier orders in the foreclosure action because, at that time, "the waste case had not yet been litigated." Id.

II. Equitable Remedies Applied to a Homestead Exemption

{7} The Legislature has provided for "a homestead of thirty thousand dollars ($30,000) exempt from attachment, execution or foreclosure by a judgment creditor and from any proceeding of receivers or trustees in insolvency proceedings and from executors or administrators in probate." NMSA 1978, § 42-10-9 (1993). In Laughlin, we addressed the question of whether "money claimed exempt from execution ... and still in the hands of a Special Master appointed by one court is subject to garnishment to satisfy a judgment recovered in another court in this state." 68 N.M. at 352, 362 P.2d at 508. This Court observed that "[t]he general rule applied almost universally is to the effect that absent statutes providing otherwise, property of a debtor in custodia legis is not subject to garnishment." Id. at 353, 362 P.2d at 509.

[I]t seems to us that the result would be rather anomalous if upon an exemption being granted appellant in one case, the money determined to be exempt was held to be immediately subject to garnishment in another action. The money being exempt under the statute, it was not subject to garnishment or if successfully garnisheed could be claimed exempt....

Id. at 354, 362 P.2d at 509.

{8} The district court's attempted set-off and the Court of Appeals' remedy in the present appeal, which effectively garnishes the exemption through a receivership or a set-off in order to satisfy another judgment, is in direct conflict with this authority. We do not believe that the general equitable power of the district court, upon which the Court of Appeals relied for its remedy, provides sufficient authority by itself to distinguish this case from Laughlin. "It is a basic maxim that equity is ancillary, not antagonistic, to the law. Equitable relief is not available when the grant thereof would violate the express provision of a statute." Dep't of Transp. v. Am. Ins. Co., 268 Ga. 505, 491 S.E.2d 328, 331 (1997) (footnote, quotation marks, and quoted authority omitted). The general equitable power of the district court cannot overcome the public policy established by the Legislature in Section 42-10-9. See T.F. v. B.L., 442 Mass. 522, 813 N.E.2d 1244, 1253-54 (2004) ("It is a maxim that equity follows the law as declared by a statute.... Equity is not an all-purpose judicial tool by which the `right thing to do' can be fashioned into a legal obligation possessing the legitimacy of legislative enactment.") (quotation marks and quoted authority omitted); see also Sims v. Sims, 1996-NMSC-078, ¶ 30, 122 N.M. 618, 930 P.2d 153 ("[O]nly if a statute so provides with express language or necessary implication will New Mexico courts be deprived of their inherent equitable powers.").

{9} "The purpose of a homestead exemption is to benefit the debtor." Morgan Keegan Mortgage Co. v. Candelaria, 1998-NMCA-008, ¶ 7, 124 N.M. 405, 951 P.2d 1066. Its goal is to "prevent families from becoming destitute as the result of misfortune through common debts which generally are unforeseen." Laughlin, 68 N.M. at 354, 362 P.2d at 509-10 (...