In re Estate of McElveny , 2017 NMSC 24 ( 2017 )

I attest to the accuracy and
integrity of this document
New Mexico Compilation
Commission, Santa Fe, NM
'00'04- 11:48:54 2017.08.16
IN THE SUPREME COURT OF THE STATE OF NEW MEXICO
Opinion Number: 2017-NMSC-024
Filing Date: June 30, 2017
Docket No. S-1-SC-35349
In the Matter of the Estate of Edward K.
McElveny, Deceased,
MICHAEL PHILLIPS, as Personal Representative
of the Estate of Edward K. McElveny,
Petitioner-Respondent,
v.
STATE OF NEW MEXICO, ex rel.
DEPARTMENT OF TAXATION AND REVENUE,
Respondent-Petitioner.
ORIGINAL PROCEEDING ON CERTIORARI
Raymond Z. Ortiz, District Judge
Carmela Starace
Albuquerque, NM
Law Office of Cristy J. Carbon-Gual
Cristy J. Carbon-Gual
Albuquerque, NM
for Petitioner
Hector H. Balderas, Attorney General
Peter Breen, Special Assistant Attorney General
Santa Fe, NM
for Respondent
OPINION
NAKAMURA, Chief Justice.
{1} We hold that the administrative claim filing provisions of the Uniform Unclaimed
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Property Act (UPA), NMSA 1978, §§ 7-8A-1 to -31 (1997, as amended through 2007), are
exclusive and mandatory and that individuals who wish to procure unclaimed property must
exhaust the administrative remedies afforded them by the UPA. Consequently, estate
representatives like Petitioner, Michael Phillips (Phillips), who seek to claim estate assets
held as unclaimed property by Respondent, the New Mexico Department of Taxation and
Revenue (Department), cannot circumvent the UPA’s claim filing provisions by invoking
provisions of the Uniform Probate Code (UPC), NMSA 1978, §§ 45-1-101 to -404 (1975,
as amended through 2016). Although Phillips did not exhaust administrative remedies under
the UPA, it is unnecessary to remand for further administrative proceedings. Two
exceptions to the exhaustion requirement apply. The Department shall release to Phillips the
unclaimed property it has in its custody that belongs to the estate Phillips represents.
I. BACKGROUND
{2} Edward K. McElveny (McElveny) died intestate in 1991. In April 2013, Phillips,
McElveny’s grandson, filed an application with the Santa Fe County Probate Court (Probate
Court) to be informally appointed personal representative (PR) of McElveny’s estate
(Estate). In his application, Phillips noted that the Department had custody of approximately
$70,000 (the Property) that belonged to McElveny and which the Department held as
unclaimed property. Phillips asked the Probate Court to order the Department to release the
Property to him as PR. The Probate Court granted Phillips’ request, appointed him PR, and
ordered the Department to release the Property to him. Phillips then filed an unclaimed
property claim with the Department. Phillips left the claim form blank and attached to the
blank claim form a copy of the Probate Court’s order. In re Estate of McElveny,
2015-NMCA-080, ¶ 3, 355 P.3d 75.
{3} In June 2013, the Department wrote to Phillips, acknowledged receipt of his claim,
but informed Phillips that it was “incomplete.” Phillips responded by letter, protested that
he had submitted all documentation the Department required to process and approve his
claim, asserted that the Department was “bound” by the Probate Court’s order, and requested
confirmation that the Property would be released to him no later than July 28, 2013. The
Department did not reply and did not release the Property to Phillips.
{4} In August 2013, the Probate Court determined that it no longer had jurisdiction over
the probate proceedings as there was “a dispute concerning the distribution of the [E]state.”
The Probate Court transferred the case to the First Judicial District Court.
{5} In September 2013, Phillips filed a motion with the district court asking it to enforce
the Probate Court’s order and to issue sanctions against the Department. The Department
moved to dismiss the proceedings and argued that the district court lacked subject matter
jurisdiction because Phillips failed to exhaust administrative remedies. Phillips responded
and claimed that the exhaustion doctrine was inapplicable because he was “not suing the
Department, i.e.[,] not attempting to obtain subject matter jurisdiction over the Department
for the purpose of stating a claim.” He denied ever having filed an “administrative claim[;]”
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asserted that he attempted to “handle the Decedent’s [E]state through probate court[;]”
argued that, as PR of the Estate, he was “simply trying to fulfill his statutory duties to gather
the [E]state assets . . . [;]” and pointed out that Section 45-1-302(B) of the UPC gives the
district court exclusive jurisdiction to make determinations regarding a decedent’s property
as between the estate and any interested party.
{6} In February 2014, the district court entered an order in which it concluded that it had,
as Phillips argued, exclusive jurisdiction under Section 45-1-302 of the UPC “to make
determinations regarding a decedent’s property as between [an] estate and any interested
party.” The court concluded that the Probate Court’s order should “be given full effect” and
ordered the Department to release the Property to Phillips.
{7} In a subsequent order filed in March 2014, the court issued a $3,000 sanction against
the Department for refusing to comply with the Probate Court’s order to release the Property
to Phillips. And in a still later order filed in April 2014 (but entered nunc pro tunc to the
February 2014 order) the court issued the following additional findings and conclusions:
Phillips “did not make an administrative claim to the Department and the Department never
denied an administrative claim”; Phillips merely used the Department’s claim form to deliver
the Probate Court’s order; and exhaustion of administrative remedies is not required where
a litigant is merely trying to enforce an existing probate court order in district court. The
Department appealed.
{8} The Department argued again in the Court of Appeals that the district court did not
have jurisdiction to intervene and order the Department to release the Property to Phillips
because Phillips failed to exhaust his administrative remedies. The Court was not persuaded
and concluded that the claim filing provisions of the UPA were not exclusive and mandatory
but merely “permissive.” In re McElveny, 2015-NMCA-080, ¶¶ 11-13. Having concluded
that the UPA’s claim filing provisions are not exclusive, the Court determined that Phillips
was not required to exhaust administrative remedies under the UPA. Id. ¶ 17. The Court
affirmed the district court’s order directing the Department to release the Property to
Phillips. Id. ¶ 19. After the Court of Appeals issued its opinion, Phillips filed a motion for
attorneys’ fees as prevailing party under Rule 12-403 NMRA in which he requested
approximately $12,500. The Court of Appeals granted his motion.
{9} The Department filed a petition for a writ of certiorari with this Court. We granted
the petition, exercising our jurisdiction under Article VI, Section 3 of the New Mexico
Constitution and NMSA 1978, § 34-5-14(B) (1972) to determine whether a litigant seeking
unclaimed property must exhaust administrative remedies with the Department. To resolve
this issue, we must first address whether the claim filing provisions of the UPA are
exclusive. See State ex rel. Norvell v. Ariz. Pub. Serv. Co., 1973-NMSC-051, ¶ 31, 85 N.M.
165, 510 P.2d 98 (“‘Exhaustion’ applies where a claim is cognizable in the first instance by
an administrative agency alone; judicial interference is withheld until the administrative
process has run its course.” (internal quotation marks and citations omitted)).
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II. DISCUSSION
A. Standard of Review
{10} Whether the claim filing provisions of the UPA are exclusive and whether
individuals seeking unclaimed property must exhaust administrative remedies are both
questions of statutory interpretation. See Lion’s Gate Water v. D’Antonio, 2009-NMSC-057,
¶ 24, 147 N.M. 523, 226 P.3d 622 (“The exclusivity of any statutory administrative remedy
turns on legislative intent.” (internal quotation marks and citation omitted)); see also Patsy
v. Bd. of Regents of State of Fla., 457 U.S. 496, 501 (1982) (“[T]he initial question whether
exhaustion is required should be answered by reference to congressional intent . . . .”). “The
meaning of language used in a statute is a question of law that we review de novo.” Cooper
v. Chevron U.S.A., Inc., 2002-NMSC-020, ¶ 16, 132 N.M. 382, 49 P.3d 61.
B. Exclusivity
{11} To determine whether the administrative procedures of the UPA are exclusive, we
must examine “the comprehensiveness of the administrative scheme, the availability of
judicial review, and the completeness of the administrative remedies afforded.” Lion’s Gate
Water, 2009-NMSC-057, ¶ 24 (internal quotation marks and citation omitted). “An
exclusive and comprehensive administrative process is one that provides for a plain,
adequate, and complete means of resolution through the administrative process to the
courts.” Id. (internal quotation marks and citations omitted).
{12} The Court of Appeals concluded that the administrative procedures of the UPA are
not exclusive and reached this conclusion by focusing on Section 7-8A-15. In re McElveny,
2015-NMCA-080, ¶¶ 10-13. The Court noted that Section 7-8A-15(a) provides that “[a]
person . . . claiming property paid or delivered to the administrator may file a claim on a
form prescribed by the administrator and verified by the claimant[,]” and observed that
“may” is ordinarily understood as permissive. In re McElveny, 2015-NMCA-080, ¶¶ 10-11.
The Court then noted that the word “shall,” a mandatory term, appears in Section 7-8A-
15(b), In re McElveny, 2015-NMCA-080, ¶ 12, and deduced that the juxtaposition of “may”
and “shall” suggests that “may” must be understood as permissive in light of the fact that it
appears in close proximity to a mandatory term. Id. ¶¶ 11-12; see also Thriftway Mktg.
Corp. v. State, 1992-NMCA-092, ¶ 9, 114 N.M. 578, 844 P.2d 828 (“Where the terms ‘shall’
and ‘may’ have been juxtaposed in the same statute, ordinarily it must be concluded that the
legislature was aware of and intended different meanings.” (citation omitted)). Given the
plain meaning of the term “may” and its proximity to a mandatory term, the Court was
persuaded that our Legislature intended for Phillips to have discretion. In re McElveny,
2015-NMCA-080, ¶ 13. He could “either file a claim with the Department under Section 7-
8A-15(a) or invoke the jurisdiction of the district court under Section 45-1-302(B).” In re
McElveny, 2015-NMCA-080, ¶ 13. We understand this interpretive approach, but do not
agree with it in this instance.
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{13} The primary objective in statutory construction is to determine and give effect to
legislative intent. Bradbury & Stamm Constr. Co. v. Bureau of Revenue, 1962-NMSC-078,
¶ 10, 70 N.M. 226, 372 P.2d 808 (“[A]ll rules of statutory construction are but aids in
arriving at the true legislative intent.” (citation omitted)). “The question whether a statutory
requirement is mandatory or merely directory is answered by looking to the intent of the
statute.” Stokes v. Tatman, 1990-NMSC-113, ¶ 10, 111 N.M. 188, 803 P.2d 673. The Court
of Appeals arrived at its conclusion regarding legislative intent by focusing narrowly on the
words “may” and “shall.” Our focus is broader; we must construe the entire statute as a
whole so that all of its provisions are considered in relation to one another and so that all
parts are given effect. Regents of Univ. of N.M. v. N.M. Fed’n of Teachers,
1998-NMSC-020, ¶ 28, 125 N.M. 401, 962 P.2d 1236; State v. Herrera, 1974-NMSC-037,
¶ 8, 86 N.M. 224, 522 P.2d 76 (“We attempt to construe statutes so that meaning and effect
will be given to every part thereof.”). Looking to the statute as a whole points us towards
a conclusion diametrically different than that reached by the Court of Appeals.
{14} Section 7-8A-7 directs the Department to keep records related to unclaimed property,
including records of the identity of the last known owner. Section 7-8A-7(B)(2). The
Legislature’s decision to require the Department to possess the information necessary to
most effectively decide unclaimed property matters suggests that the Legislature intended
the Department to decide these matters in the first instance. Cf. Groendyke Transp., Inc. v.
N.M. State Corp. Comm’n, 1984-NMSC-067, ¶ 27, 101 N.M. 470, 684 P.2d 1135 (“[T]he
special knowledge and experience of state agencies should be accorded deference.” (internal
quotation marks and citation omitted)).
{15} Section 7-8A-10(b) instructs that the state “assumes custody and responsibility for
the safekeeping of the [unclaimed] property.” As the custodian of unclaimed property, the
Department has a duty to ensure that unclaimed property is returned only to rightful owners.
See 1 Am. Jur. 2d Abandoned, Lost, and Unclaimed Property § 44 (explaining that the UPA
is “custodial in nature” and that “[t]he objectives of the [UPA] are to protect unknown
owners by finding them and restoring their property to them . . . .”); 30A C.J.S. Escheat §
12 (“Under a statute such as the [UPA], the state takes custody of unclaimed property and
has full use of it until the rightful owner comes forward to claim it.”). Because our
Legislature imposed a duty upon the Department to ensure unclaimed property is returned
only to rightful owners, the Legislature must have intended the Department to have some
responsibility in determining who the rightful owners of unclaimed property might be. And
if the Legislature intended the Department to have this responsibility, it must have intended
the Department to exercise this responsibility in the first instance as administrative agencies
do not review district court determinations. Construing the UPA to permit some entity other
than the Department to make these first instance determinations would frustrate legislative
intent. See State v. Young, 2004-NMSC-015, ¶ 9, 135 N.M. 458, 90 P.3d 477 (observing that
statutes should be construed so as to facilitate their operation and achieve the Legislature’s
goals, and rejecting the defendants’ proposed construction on grounds that it would frustrate
legislative intent).
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{16} Section 7-8A-15(b) is significant in a way not contemplated by the Court of Appeals.
It provides that “the administrator shall allow or deny” claims for unclaimed property. Id.
The “administrator” is “the [Department], the secretary of [the Department] or any employee
of the [D]epartment who exercises authority lawfully delegated to him by the secretary[.]”
Section 7-8A-1(1). If the administrative procedures of the UPA are not exclusive, and if
some individual or tribunal other than those specified by the UPA may resolve whether a
claimant seeking unclaimed property should or should not be granted that property, then
Section 7-8A-15(b) would be rendered a nullity. See Sec. Trust v. Smith, 1979-NMSC-024,
¶ 11, 93 N.M. 35, 596 P.2d 248 (“[A] statute should not be construed in such a way as to
nullify certain of its provisions.”). In other words, if the Department “shall allow or deny
claims,” then the Department must adjudicate those claims.
{17} Section 7-8A-16(A) establishes an appellate process by which the Department’s
decisions regarding unclaimed property may be appealed to district court. Section 7-8A-
16(B) addresses the appellate rights of claimants whose claims have “not been acted upon
within ninety days” after filing with the Department. They “may maintain an original action
to establish the claim in the district court for the first judicial district, naming the
administrator as a defendant.” Id. We must construe the UPA in such a way that the
procedural directives of the statutory scheme are given full effect. Herrera,
1974-NMSC-037, ¶ 8. Under the Court of Appeals construction, a claimant can bypass the
Department altogether, adjudicate the unclaimed property matter in the first instance in
district court, and ignore Sections 7-8A-16(A) and (B). Moreover, a claimant could proceed
in whichever judicial district court has venue under the UPC. See § 45-3-201(A)
(establishing venue requirements for probate proceedings). This is inconsistent with Section
7-8A-16(B) which specifies the judicial district in which certain claims must be brought.
{18} Our review of these provisions leads us to conclude that our Legislature intended the
UPA’s administrative process to be exclusive and mandatory. The administrative process
the varying provisions of the UPA establishes is plain, adequate, and complete. That process
includes mechanisms that permit claim filing, identifies the entity responsible for deciding
claims, and specifies how appeals to district court shall occur. Section 7-8A-16(A)-(B)
Even if the Court of Appeals is correct that the term “may” is inescapably permissive, it is
possible to accept this fact while still concluding that our Legislature intended Section 7-8A-
15(a) to be mandatory. “May” does not necessarily connote that other, alternative avenues
exist to pursue unclaimed property apart from filing a claim with the Department. “May”
means only that a potential claimant may elect to file a claim with the Department or may
elect not to file a claim and forego any attempt to procure unclaimed property. Accord
Lucero v. Bd. of Regents of Univ. of N.M., 2012-NMCA-055, ¶ 15, 278 P.3d 1043
(interpreting the term “may” in the grievance provisions of an employee handbook as
permissive but only to the extent that the term denotes that an employee may file a grievance
or may elect to not file a grievance and forego the grievance process, accept the disciplinary
decision, and decline to challenge the disciplinary action). We find nothing in the UPC that
causes us to doubt our conclusion that the administrative process of the UPA is exclusive.
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{19} Phillips was not acting in accordance with his statutory obligations under the UPC
when he sought and obtained an order from the Probate Court directing the Department to
release the Property to him. Contra In re McElveny, 2015-NMCA-080, ¶ 9. Phillips could
not simply take control of the Property upon his appointment as PR as the Department had
custody of the Property as unclaimed property. Phillips could, of course, procure the
Property by filing a claim with the Department and by establishing that the Property is Estate
property. But this is a form of adjudication in which the Probate Court has no authority to
engage.
{20} Probate courts are creatures of statute and their powers are entirely derived from
statute. In re Hickok’s Will, 1956-NMSC-035, ¶ 30, 61 N.M. 204, 297 P.2d 866; Curtis
Hillyer, Bancroft’s Probate Practice § 16-17, at 38-39 (2d ed. 1950) (observing that probate
proceedings are “statutory” and that “such courts are creatures of the law and limited in their
jurisdiction”); cf. Caron v. Old Reliable Gold Min. Co., 1904-NMSC-016, ¶ 9, 12 N.M. 211,
78 P. 63 (same). The authority of New Mexico’s probate courts derives from the UPC. In
re Estate of Harrington, 2000-NMCA-058, ¶ 15, 129 N.M. 266, 5 P.3d 1070. Under the
UPC, probate courts may preside over and may act only in informal probate proceedings.
Section 45-1-302(C). Informal probate proceedings are nonadjudicatory. American Law
Institute, Uniform Probate Code Practice Manual Volume 1, § 2, at 21 (2d ed. 1977); cf.
Hillyer, supra, § 27, at 70 (“It is thoroughly established that in probate proceedings title to
property as between the estate, the heirs or devisees, and a third person may not be tried.”).
The Probate Court could not adjudicate whether Phillips was entitled to the Property because
it is not empowered to adjudicate. Thus, the Probate Court’s order commanding the
Department to release the Property to Phillips was “nugatory” and is vacated. See Hillyer,
supra, § 28, at 74 (“Acts of the [probate] court in excess of the powers conferred upon it are
nugatory and have no binding effect . . . .”).
{21} While Section 45-1-302(B) of the UPC grants district courts sitting in probate general
civil jurisdiction, In re Harrington, 2000-NMCA-058, ¶¶ 17-20, the UPA (which was
enacted after the UPC) specifically delegated to the Department authority to adjudicate
unclaimed property matters in the first instance and provides claimants dissatisfied with the
Department’s determination a path to seek review in district court. Section 7-8A-15(a), -16.
A conferral of specific authority trumps any previous conferral of general authority. See
State v. Cleve, 1999-NMSC-017, ¶ 17, 127 N.M. 240, 980 P.2d 23 (discussing the canon of
statutory construction known as the general/specific statute rule). Accordingly, we reject
the assertion that Section 45-1-302(B) “unambiguously grants jurisdiction to the district
court to do exactly what it did here.” In re McElveny, 2015-NMCA-080, ¶ 9. The district
court did not have jurisdiction to determine in the first instance that the Property was Estate
property and circumvent the claim filing and appellate provisions of the UPA. In addition,
the district court could not simply enforce the Probate Court’s order as the Probate Court had
no authority to order the Department to release the Property to Phillips. The district court’s
order directing the Department to relinquish the Estate property to Phillips is vacated.
C. Exhaustion
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{22} “The doctrine of administrative exhaustion arose as a way to coordinate the roles of
the administrative and judicial branches, both of which are charged with regulatory duties.”
Lobato v. State Env’t Dep’t, 2012-NMSC-002, ¶ 12, 267 P.3d 65. The requirement that
administrative remedies must be exhausted originates from two different sources: statutes
and the common law. U.S. Xpress, Inc. v. N.M. Taxation & Revenue Dep’t,
2006-NMSC-017, ¶ 12, 139 N.M. 589, 136 P.3d 999. The contours and rigidity of the
requirement differ greatly depending upon which of these two sources the exhaustion
requirement flows and, therefore, exhaustion is best thought of as “two distinct legal
concepts.” Avocados Plus Inc. v. Veneman, 370 F.3d 1243, 1247 (D.C. Cir. 2004).
{23} “If a statute explicitly requires a party to exhaust particular remedies as a prerequisite
to judicial review . . . the statutorily mandated exhaustion requirements are jurisdictional.
A court cannot excuse a petitioner from complying with an explicit and detailed statutory
duty to exhaust administrative remedies.” II Richard J. Pierce, Jr., Administrative Law
Treatise, § 15.2, at 1219-20; cf. Am. Fed’n of State v. Bd. of Cty. Comm’rs of Bernalillo Cty.,
2016-NMSC-017, ¶ 14, 373 P.3d 989 (“If a statute creates a right and provides that only a
specific class of persons may petition for judicial review of an alleged violation, then the
courts lack the jurisdiction to adjudicate that alleged violation when the petition is brought
by a person outside of that class.”). “The common law duty[, on the other hand,] is flexible
and pragmatic. It is subject to several judge-made exceptions.” II Pierce, supra, § 15.2, at
1219. This non-jurisdictional form of exhaustion is firmly established and serves important
functions which have been cataloged by the United States Supreme Court and leading
treatises. See McKart v. United States, 395 U.S. 185, 193-95 (1969); see also II Pierce,
supra, § 15.2, at 1222. Several of these functions are discussed in the analysis that follows.
{24} “A mere reference to the duty to exhaust administrative remedies conferred in an
agency organic act is not enough to create a statutory duty to exhaust particular remedies.”
II Pierce, supra, § 15.3, at 1245. “A statute creates an independent duty to exhaust only
when it contains ‘sweeping and direct’ statutory language indicating that there is
no . . . jurisdiction prior to exhaustion . . . .” Id.; see, e.g., U.S. Xpress, 2006-NMSC-017,
¶¶ 6-15 (concluding that statutory exhaustion applicable in light of the fact that the
Legislature clearly expressed its intent “to require that tax refund claims proceed according
to the requirements of the Tax Administration Act.”). There is no direct and unequivocal
statement in the UPA requiring exhaustion of administrative remedies. Nevertheless, we
conclude that non-jurisdictional exhaustion is required for prudential reasons.
{25} The reasons for applying “the exhaustion doctrine in cases where the statutory
requirement of exclusivity is not so explicit, are not difficult to understand.” McKart, 395
U.S. at 193. First, “[t]he agency, like a trial court, is created for the purpose of applying a
statute in the first instance.” Id. at 193-94. As we have already shown, our Legislature
intended for the Department to decide unclaimed property matters in the first instance.
Second, “[c]ertain very practical notions of judicial efficiency come into play as well.” Id.
at 195. Because the Department is required to keep records of last known owners, it is best
positioned to determine who is entitled to unclaimed property and who is not. If exhaustion
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were not required and if a claimant could proceed initially before some tribunal other than
the Department, time and effort might be expended unnecessarily attempting to resolve
questions the Department is uniquely situated to address. Third, “it is generally more
efficient for the administrative process to go forward without interruption than it is to permit
the parties to seek aid from the courts at various intermediate stages.” Id. at 194. The
Department’s initial reticence to Phillips’ claim might have dissipated had he simply
submitted a completed claim form. This thought must remain speculation, however, because
Phillips declined to pursue the administrative process with the Department to its end.
Fourth, “frequent and deliberate flouting of administrative processes could weaken the
effectiveness of an agency by encouraging people to ignore its procedures.” Id. at 195.
Phillips accused the Department of a pattern and practice of needlessly withholding
unclaimed property from rightful owners. We make no judgment about the merits of this
accusation and make note of it only to illuminate that there are claimants who would prefer
not to proceed before the Department. If the preferences of claimants governed, the
Legislature’s statutory scheme and the autonomy of the Department could be undermined.
Lastly, unnecessary duplication and conflicts may arise if exhaustion is not mandated.
Whitney Nat’l Bank in Jefferson Par. v. Bank of New Orleans & Trust Co., 379 U.S. 411,
422 (1965). The Department declined to relinquish the Property to Phillips and that decision
was never appealed. Instead, Phillips asked the district court to decide the very issue that
he initiated administrative proceedings to resolve. In effect, two tribunals came to
conflicting conclusions in independent proceedings about the same matter. This is
problematic, but this difficulty is easily remedied by requiring exhaustion. For these
reasons, we conclude that Phillips was required to exhaust administrative remedies with the
Department. But this conclusion in no way precluded Phillips from simultaneously initiating
probate proceedings nor does it empower the Department to adjudicate probate matters.
{26} When—as in the present case—an individual seeks to be appointed PR of an estate
and then seeks to procure estate assets existing as unclaimed property for purposes of estate
settlement and distribution, two lines of inquiry are opened. First, should this individual be
appointed PR? Second, does the unclaimed property belong to the estate the PR represents?
These are distinct and independent questions. The first must be resolved by the probate and
district courts in probate proceedings under the provisions of the UPC. The second must be
addressed by the Department under the provisions of the UPA. The probate proceedings and
unclaimed property proceedings may proceed simultaneously and in parallel. Each
adjudicative body is responsible for discrete determinations essential to one goal—the
settlement and distribution of the estate. Explaining how these general principles apply in
this case will aid comprehension of our conclusion.
{27} Phillips correctly initiated proceedings under the UPC to be appointed PR and
correctly initiated administrative proceedings under the UPA by filing a claim with the
Department as PR of the Estate. The district court’s determinations that Phillips did not file
a claim with the Department and that the Department did not deny a claim submitted by
Phillips are not supported by substantial evidence. See Getz v. Equitable Life Assurance
Soc’y of U. S., 1977-NMSC-018, ¶ 14, 90 N.M. 195, 561 P.2d 468 (findings not supported
9
by substantial evidence cannot be sustained on appeal). There is no genuine dispute that
Phillips filed a claim with the Department and that the Department rejected that claim. In
re McElveny, 2015-NMCA-080, ¶ 3. Phillips went awry when he asked the Probate Court
to order the Department to release the money to him and when he asked the district court
sitting in probate to enforce the Probate Court’s order. These requests irreparably entangled
two distinct proceedings. If Phillips was dissatisfied with the Department’s decision in the
UPA proceedings, he was obligated to exhaust administrative remedies and appeal that
decision under the applicable appellate provision of the UPA. He did not.
D. Exceptions to Exhaustion
{28} If the UPA contained an express and unequivocal exhaustion requirement, we would
be required to remand this matter to the Department so that the administrative proceedings
could be brought to their conclusion. See I.N.S. v. Orlando Ventura, 537 U.S. 12, 16 (2002)
(“Generally speaking, a [reviewing court] should remand a case to an agency for decision
of a matter that statutes place primarily in agency hands.”). But because exhaustion is
required in this case not for statutory, jurisdictional reasons but for prudential, non-
jurisdictional reasons, we have discretion. See Rodrigues v. Donovan, 769 F.2d 1344, 1348
(9th Cir. 1985) (“The judicially-created exhaustion doctrine does not limit jurisdiction;
rather, it permits courts to decide whether to exercise jurisdiction.”); see also Lobato,
2012-NMSC-002, ¶ 12 (“A rigid adherence to administrative exhaustion is not required in
circumstances where the doctrine is inappropriate.”).
{29} The Department rejected Phillips’ claim because it was “incomplete,” and offered
three justifications for this conclusion: (1) Phillips failed to submit documentation “showing
that the [P]roperty . . . would devolve to [him] alone under the applicable law of heirship[;]”
(2) a “[q]uitclaim [d]eed” Phillips submitted was illegible; and (3) “the application should
be made directly to [the Department] as unclaimed property custodian rather than probate.”
Because the Department cited these specific grounds as the basis for its decision, we need
not remand this particular matter for further administrative proceedings. Two exceptions to
the exhaustion requirement apply in this case.
{30} “A party to administrative proceedings need not exhaust administrative remedies
when the agency has clearly acted in excess of its statutory authority.” 5 Jacob A. Stein et
al., Administrative Law § 49.02[3], at 49-107 (2015). The Department’s first justification
is not legally valid as it constitutes action beyond the scope of the Department’s authority.
Phillips was not required to submit documentation to the Department showing that the
Property would devolve to him alone under our probate laws. The Department had only two
questions before it: Is Phillips the lawfully appointed PR of the Estate? Does the Property
belong to the Estate? “There is no factual dispute that the [P]roperty belongs to the Estate
. . .[,]” In re McElveny, 2015-NMCA-080, ¶ 18, and Phillips did not apply to the Department
in his individual capacity but as PR of the Estate and there has never been any doubt that
Phillips was lawfully appointed PR. Who ultimately receives the Property (or portions of
it) once Phillips settles and distributes the Estate’s assets is a probate question, and nothing
10
in the UPA suggests that our Legislature intended to empower the Department to involve
itself in or decide probate matters. These matters are governed by the UPC and lie beyond
the scope of the Department’s statutory authority. Indeed, the very fact that the UPA
expressly authorizes an “estate” to file a claim for unclaimed property indicates that our
Legislature anticipated that estate representatives appointed in independent proceedings
under the UPC might find it necessary to apply with the Department to obtain estate assets
held by the Department as unclaimed property. See § 7-8A-15(a) (stating that a “person”
may file a claim with the Department for unclaimed property); Section 7-8A-1(12) (defining
the term “person” as used in the UPA to include an “estate”). These provisions do not
suggest that our Legislature ever intended for the Department to make judgments about the
propriety of a probate appointment or how estate assets should be distributed. We need not
remand to permit Phillips an opportunity to submit to the Department documentation about
who will ultimately receive shares of the Property as the Department has no authority to
require Phillips to provide this documentation.
{31} A litigant’s failure to exhaust administrative remedies can be excused if exhaustion
would be futile. Lobato, 2012-NMSC-002, ¶ 12; II Pierce, supra, § 15.2, at 1229-30.
Futility, as an exception to exhaustion requirements, applies where “the agency has
deliberately placed an impediment in the path of a party, making an attempt at exhaustion
a useless endeavor.” 5 Stein, supra, § 49.02[4], at 49-116 to 49-118. The futility exception
to exhaustion applies in light of the second and third justifications offered by the Department
for its decision.
{32} We cannot see how the second justification offered by the Department—a quitclaim
deed Phillips submitted was illegible—can have any bearing on whether Phillips is the
lawfully appointed PR of the Estate and whether the Property, a sum of money, is Estate
property. See Deed, Black’s Law Dictionary (10th ed. 2014) (defining “quitclaim deed” as
“[a] deed that conveys a grantor’s complete interest or claim in certain real property but that
neither warrants nor professes that the title is valid.”). The third justification offered by the
Department is not entirely clear. We understand the Department to be asserting that Phillips
wrongly assumed that he could submit the Probate Court order directing the Department to
release the Property to him in place of a completed unclaimed property claim form. While
we agree with the Department that a claimant seeking unclaimed property must complete the
claim form “prescribed” by the Department, Section 7-8A-15(a), there is no genuine dispute
that the Property is Estate property and that Phillips is the PR of the Estate. Thus, we cannot
see what the Department would have gained from requiring Phillips to complete the form.
Courts and administrative tribunals alike should not sacrifice the efficient administration of
the law at the service of empty formalism. Neither the second nor third justification
illuminates some principle that explains the Department’s long held opposition to Phillips’
claim. What we see is needless adversity. Accordingly, remanding for further proceedings
is futile.
{33} It is unnecessary to remand this matter for further administrative proceedings. The
Department shall release the Property to Phillips.
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E. Sanctions and Attorneys’ Fees
{34} The district court imposed a $3,000 sanction on the Department because it failed to
“act in accordance with the [Probate] Court[’s] Order” to release the Property to Phillips.
As already noted, the Probate Court did not have authority to order the Department to release
the Property to Phillips and the Department was not required to comply with this aspect of
the Probate Court’s order. Thus, the imposition of the $3,000 sanction was an abuse of
discretion and is vacated. See Gonzales v. Surgidev Corp., 1995-NMSC-047, ¶ 33, 120 N.M.
151, 899 P.2d 594 (stating that a district court’s award of monetary sanctions is reviewed for
an abuse of discretion).
{35} The Court of Appeals awarded Phillips attorneys’ fees as prevailing party on appeal.
See Rule 12-403(A) NMRA (“Unless otherwise provided by law, the appellate court may,
in its discretion, award costs to the prevailing party on request.”); Rule 12-403(B)(3)
(“Allowable costs may include . . . reasonable attorney fees for services rendered on appeal
in causes where the award of attorney fees is permitted by law.”). This ruling cannot stand
given our discussion. We agree with the Department that the UPA claim filing provisions
are exclusive and mandatory and that Phillips was required to exhaust administrative
remedies. But we also agree with Phillips that the Department acted outside its statutory
authority in denying Phillips’ claim and agree that the Department must release the Property
to him without any further delay. Both parties have prevailed on certain issues and,
therefore, neither party is entitled to an award of costs as “prevailing party” under Rule 12-
403. See N.M. Right to Choose/NARAL v. Johnson, 1999-NMSC-028, ¶ 33, 127 N.M. 654,
986 P.2d 450 (“We also conclude that neither party is entitled to recover allowable costs
[under Rule 12-403(A)] . . . because the Court ruled in favor of each party on one issue . . . .
Thus, there is no prevailing party . . . .”).
III. CONCLUSION
{36} We reach the same conclusion as the Court of Appeals, but arrive at this end by a
different course. The Court of Appeals’ opinion is reversed to the extent that its analysis and
conclusions diverge from ours. The sanctions imposed upon the Department by the district
court are vacated as is the award of attorneys’ fees granted by the Court of Appeals in favor
of Phillips. The Department shall release the Property to Phillips without delay, and we
remand this matter to the Department for this sole purpose.
{37} IT IS SO ORDERED.
____________________________________
JUDITH K. NAKAMURA, Chief Justice
WE CONCUR:
____________________________________
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PETRA JIMENEZ MAES, Justice
____________________________________
EDWARD L. CHÁVEZ, Justice
____________________________________
CHARLES W. DANIELS, Justice
____________________________________
BARBARA J. VIGIL, Justice
13