IN RE NORWEST BANK OF NEW MEXICO, NA

• Decision Date: 10 September 2003
• Docket Number: No. 22,697.,22,697.
• Citation: 80 P.3d 98,134 N.M. 516
• Parties: In the Matter of NORWEST BANK OF NEW MEXICO, N.A., succeeded in interest by Wells Fargo Bank New Mexico, N.A., Acting as Trustee for Various Trusts. Laree Perez Losey, Petitioner-Appellee, v. Norwest Bank of New Mexico, N.A., succeeded in interest by Wells Fargo Bank New Mexico, N.A., in its corporate capacity and acting in its capacity as Trustee of the Jerry B. Losey Revocable Trust, as Amended in its Entirety dated October 3, 1995, Respondent-Appellee, Jill Losey Edelman and Jamie Losey, Objectors-Appellants.
• Court: Court of Appeals of New Mexico

80 P.3d 98

134 N.M. 516

In the Matter of NORWEST BANK OF NEW MEXICO, N.A., succeeded in interest by Wells Fargo Bank New Mexico, N.A., Acting as Trustee for Various Trusts.

Laree Perez Losey, Petitioner-Appellee, v. Norwest Bank of New Mexico, N.A., succeeded in interest by Wells Fargo Bank New Mexico, N.A., in its corporate capacity and acting in its capacity as Trustee of the Jerry B. Losey Revocable Trust, as Amended in its Entirety dated October 3, 1995, Respondent-Appellee, Jill Losey Edelman and Jamie Losey, Objectors-Appellants.

No. 22,697.

Court of Appeals of New Mexico.

September 10, 2003.

Certiorari Denied November 3, 2003.

Jerry Wertheim, John Wentworth, Carol A. Clifford, John V. Wertheim, Jones, Snead, Wertheim, Wentworth & Jaramillo, P.A., Santa Fe, NM, for Petitioner-Appellee.

W. Spencer Reid, Thomas C. Bird, Kurt Wihl, Meghan R. Dimond, Keleher & McLeod, P.A., Albuquerque, NM, for Respondent-Appellee.

Dennis E. Jontz, Ross L. Crown, Thomas P. Gulley, Jontz, Dawe, Gulley & Crown, P.C., Albuquerque, NM, for Objectors-Appellants.

Certiorari Denied, No. 28,297, November 3, 2003.

OPINION

CASTILLO, Judge.

{1} This appeal presents us with questions regarding approval of a mediated settlement of a derivative action brought by one beneficiary against a trust with four beneficiaries. The mediated settlement provides for distribution of all settlement proceeds to the one plaintiff beneficiary. Based on the particular facts of this case, we affirm the trial court's approval of the settlement.

I. BACKGROUND

{2} We begin by identifying the parties to this case. Laree Perez Losey (Perez Losey), is the widow of Jerry B. Losey (Losey), who died in a plane crash in June 1996. Perez Losey is the stepmother of Losey's three adult children: Jill Losey Edelman, Jamie Losey, and Gary Losey. At the time of his death, certain of Losey's assets were held in the Jerry B. Losey Revocable Trust (Trust) with Norwest Bank of New Mexico, N.A., now Wells Fargo Bank New Mexico, N.A., (Bank), named as trustee. The Trust beneficiaries are Perez Losey and the three children. After the death of Losey, Perez Losey and the three children litigated the allocation of the assets of his estate, including those held by the Trust. On October 23, 1997, the parties reached a "Settlement Agreement and Release" (settlement agreement and release), which provided for the resolution of issues and claims among the parties, including Perez Losey's claims to the assets of the Trust. At the same time, Perez Losey and the three children entered into an "Agreement on Future Claims" (future claims agreement) concerning claims they might have against certain parties, including the Bank, regarding the sale of Losey's business assets. The future claims agreement stated that if agreed upon by all four parties, they would pursue the enforcement of the claims, in which case expenses and recovery would be divided 25% to Perez Losey and 75% to the three children. The settlement agreement and release and the future claims agreement are referred to together as the 1997 agreements.

{3} Almost two years later, in September 1999, Perez Losey brought a breach of fiduciary duty action in the form of a derivative suit against the Bank, as trustee, for financial losses to herself and the other Trust beneficiaries, who are the three children. The basis of the claim was the allegation that the Bank had sold the primary asset of the Trust, Zuni Rental, Inc., for less money than it was worth and without proper consideration for the interests of the Trust's beneficiaries. The action was brought pursuant to the Uniform Probate Code (Code), which governs trust proceedings. See NMSA 1978, § 45-7-201 (1975). Perez Losey did not request any relief for the Trust. In its May 3, 2000, motion to dismiss, the Bank challenged Perez Losey's capacity to represent the three children in a derivative action. Perez Losey agreed that her prayer for relief should be amended to reflect that she was seeking compensation only for her losses, not for the losses of the Children, resulting from the Bank's alleged breach of fiduciary duty. The trial court entered an order on June 12, 2000, amending by interlineation the prayer for relief to reflect this stipulation.

{4} Perez Losey, however, continued to claim the action was a derivative action brought on behalf of the Trust and for the benefit of its beneficiaries. The Bank persisted in opposing the derivative claims and requested they be stricken from the final pretrial order. After a hearing held June 1, 2001, the trial court ultimately decided that "from the very beginning what had to be implicit in this action is a derivative action by [Perez Losey]." The trial court issued an order to that effect on June 12, 2001. In the same order, the trial court concluded that the three children were not indispensable parties to the suit. Finally, the order specifically reserved, until the end of trial, any determination regarding the extent to which the three children "shall be entitled, if at all, to the rights and benefits from any award against [the Bank] in this action."

{5} Trial on the merits began on June 11, 2001. After ten days of trial, Perez Losey and the Bank entered into two days of mediation, after which they reached a settlement agreement (mediated settlement). The mediated settlement called for the Bank to pay Perez Losey an amount of money in full settlement of all claims that were made or could have been made in the lawsuit. Perez Losey filed a motion seeking the trial court's approval of the mediated settlement. She argued that under trust law, where one beneficiary of a trust "consents to an act of the trustee that is in breach of trust, such beneficiary is precluded by consent from holding the trustee liable for a loss resulting from the breach of trust, but the other beneficiaries can hold the trustee liable." Perez Losey alleged that the Children had consented to the Bank's sale of Zuni Rental, which sale formed the basis of Perez Losey's contention that the Bank had breached its fiduciary duty. Therefore, Perez Losey maintained the Children were not entitled to any proceeds from the mediated settlement.

{6} In response to Perez Losey's motion for approval of the mediated settlement, the three children filed a motion in opposition. They argued that the mediated settlement was reached without their participation in the mediation and that it ignored any interest they might have in the claim. They requested that the trial court disapprove the settlement or, in the alternative, that the trial court award them 75% of the settlement amount, according to the terms of their earlier agreement on future claims. The trial court conducted a two-day hearing on the matter on August 13 and 14, 2001, followed by entry of findings and conclusions. Concluding that the motion in opposition was a formal request for intervention, the trial court denied the request as untimely. The trial court found that Perez Losey had expended a good deal of money on prosecuting the claim; that she and the trial court had given the three children a number of opportunities to join the lawsuit; that the three children have no right to the settlement amount; and that they are bound by the mediated settlement. The trial court entered a decree approving the mediated settlement shortly thereafter.

{7} Only two Trust beneficiaries, Jill and Jamie (Children), appeal the trial court's approval of the mediated settlement. Gary, a third beneficiary, joined in the objection to the mediated settlement below but is not a party to this appeal. The Children advance four arguments on appeal: (1) that they were entitled to object to the mediated settlement under Rule 1-023.1 NMRA 2003, governing derivative actions by shareholders, and were not required to intervene under Rule 1-024 NMRA 2003, relating to intervention; (2) that Perez Losey, after having brought a derivative claim, should not be permitted to reach the mediated settlement solely on her own behalf; (3) that given the earlier contracts between Perez Losey and the Children, the Children were entitled to 75% of the mediated settlement award; and (4) that the Bank violated its fiduciary duty to the Children when it reached the mediated settlement with Perez Losey. We address these arguments in turn.

II. DISCUSSION

{8} The parties do not dispute on appeal that Perez Losey's suit was derivative. At oral argument, the Bank, which had vigorously contested the derivative nature of the suit, informed us that at the time the case was settled, the trial court had ruled that the suit was derivative, and the parties mediated and settled the case on that basis. New Mexico law is silent on whether a beneficiary of a testamentary trust may bring a derivative action. Accordingly, we assume, without deciding, that such a derivative action is permissible.

A. Rule 1-023.1: "Derivative Actions by Shareholders" and Rule 1-024: "Intervention"

{9} The trial court concluded that the Children's objection to the mediated settlement was a motion to intervene under Rule 1-024, which the trial court denied as untimely. The core of the Children's argument is that they are entitled to object to the mediated settlement under Rule 1-023.1 and that Rule 1-024 does not apply to this action. The Children, in essence, ask us to determine which of the two rules the trial court should have applied.

{10} Perez Losey contends that this argument was not preserved, since the Children failed to provide the trial court with legal authority for the argument. Perez Losey misreads our holding in Martinez v. New Mexico State Engineer Office, 2000-NMCA-074, ¶ 46, 129 N.M. 413, 9 P.3d 657. Providing the trial court with citation to authority is not a requirement for preservation. See id. An issue is preserved if the appellant "fairly invoked a ruling of the trial court on same grounds argued on appeal." Id. The Children preserved the issue in their...