N.M. Military Inst. v. NMMI Alumni Ass'n , 2019 NMCA 8 ( 2018 )

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integrity of this document
New Mexico Compilation
Commission, Santa Fe, NM
'00'05- 11:07:55 2019.02.08
IN THE COURT OF APPEALS OF THE STATE OF NEW MEXICO
Opinion Number: 2019-NMCA-008
Filing Date: October 22, 2018
Docket No. A-1-CA-35621
NEW MEXICO MILITARY INSTITUTE,
Plaintiff-Appellee,
v.
NMMI ALUMNI ASSOCIATION, INC.,
a New Mexico non-profit corporation,
Defendant-Appellant.
APPEAL FROM THE DISTRICT COURT OF CHAVES COUNTY
Jane Shuler Gray, District Judge
Hinkle Shanor, LLP
Richard E. Olson
Parker B. Folse
Roswell, NM
for Appellee
Keleher & McLeod, P.A.
Jeffrey A. Dahl
Michael G. Smith
Albuquerque, NM
for Appellant
OPINION
KIEHNE, Judge.
{1} The New Mexico Military Institute (NMMI) sued the New Mexico Military
Institute Alumni Association, Inc. (the Association), claiming that the Association
breached its contractual obligation to maintain a proper financial accounting system and
also alleging that the Association was NMMI’s agent. NMMI asked that the Association
be made to turn over donations it received while acting as NMMI’s agent. After a bench
trial, the district court found that the Association had not breached its contractual
obligations to NMMI, but it also found that the contract between the Association and
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NMMI was terminable at will, that the Association was NMMI’s agent, and that NMMI
had legally terminated the contract and revoked the Association’s authority to act as its
agent. Based upon its latter findings, the district court imposed a constructive trust over
donations that the Association received while acting as NMMI’s agent.
{2} The Association appeals, claiming that: (1) NMMI lacked standing to bring its
claims against the Association; (2) the district court’s ruling that the contract was
terminable at will should be reversed because NMMI did not raise that theory until after
trial; (3) the district court’s agency determination was not supported by substantial
evidence; (4) imposition of a constructive trust was improper; and (5) requiring the
Association to turn over donations that it received to NMMI violated the donors’ intent.
We hold that NMMI had standing, we affirm the district court’s agency finding and the
imposition of the constructive trust, and we reject the Association’s claim that the
constructive trust violates the donors’ intent. Because we conclude that NMMI had a
right to terminate its agency relationship with the Association regardless of the existence
of the contract between them, we do not reach the questions of whether the contract was
terminable at will or whether NMMI appropriately terminated the contract.
BACKGROUND
{3} NMMI is a state-funded school that provides students with up to four years of
high school and two years of junior college instruction. The Association is a non-profit
corporation whose purpose, as stated in its articles of incorporation, is “to promote the
interest and welfare of [NMMI]. . .; to afford a permanent means of contact between
[NMMI] and its alumni; to create, establish and maintain scholarships and student loan
funds; and to collect and administer trust funds and endowments for the use and benefit
of [NMMI]; and to do generally any and all things which may be deemed advisable,
necessary or desirable in the interest of the [NMMI], its students and faculty.” The
Association’s bylaws also describe its purposes as being, among other things, “[t]o
promote the interest and welfare of the [NMMI,]” to “foster[] lifelong connections
between its Alumni and [NMMI,]” and to “help establish and maintain scholarships, in
conjunction with the New Mexico Military Institute Foundation (the NMMI Foundation),
for deserving cadets to attend [NMMI.]”
{4} The Association was incorporated in 1964 and was originally staffed by NMMI
employees. In 1993 the Association and NMMI entered into a Memorandum of
Agreement (MOA), and the staffers handling alumni communication and coordination
left the employment of NMMI and became employees of the Association. The
employees’ duties did not change. NMMI continued to provide office space and utilities
to the Association free of charge. The Association staff also used NMMI phone lines and
email servers, and used “@nmmi.edu” email addresses.
{5} The Association and NMMI entered into a series of agreements between 1993 and
2013. The first was the 1993 MOA referenced above. In 2001 the Association and NMMI
entered into a new MOA (the 2001 MOA). They entered into a third MOA in 2012 (the
2012 MOA). The 2001 MOA contained a number of affirmative covenants requiring the
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Association to do a number of things unless excused in writing by NMMI. These
included maintaining the Association’s status as a 501(c)(3) corporation; maintaining the
composition of the membership of its board of directors in accordance with its bylaws;
employing an executive secretary selected by its board of directors; and retaining
advisory and other professional services as deemed necessary to perform its primary
function of supporting NMMI; serving as the primary repository of records relating to
NMMI alumni; providing NMMI publications to alumni, cadets, and patrons; maintaining
a database with continued updates of all alumni to be used by NMMI for fundraising
programs; and receiving donations and disbursing those funds in conformity with any
conditions imposed by the donors and in accordance with NMMI rules and regulations
governing financial aid to cadets.
{6} The 2012 MOA contained the same affirmative covenants. The 2012 MOA also
contained language stating that NMMI had reviewed the Association’s articles and
bylaws and “found them acceptable” and that any proposed amendments would be
provided to NMMI for consideration and comment. All three MOAs contained provisions
obligating the Association to manage, document and track its financial activity and
provide financial information to NMMI. The 1993 and 2001 MOAs contained language
stating that the Association was not NMMI’s agent. The 2012 MOA, however, did not
contain this language and did not say anything about whether an agency relationship
existed between the parties.
{7} NMMI, the Association, and the NMMI Foundation, a non-profit foundation that
provides primarily financial support to NMMI, provided financial support to the
Association, and holds scholarship funds for students of NMMI, also entered into an
“Alliance Agreement” to coordinate fundraising efforts. The Alliance Agreement
outlined the duties of each party relating to fundraising. This agreement required that the
Association supply an annual budget to the Alliance Committee, a group made up of
representatives from the NMMI Foundation, NMMI, and the Association for approval.
{8} The Association held funds given to it by donors for the purpose of providing
scholarships to NMMI students. Some of these funds had donor-imposed restrictions. The
scholarship committee, which consisted of representatives from NMMI, the Association,
and the NMMI Foundation, met each February to award scholarships from those funds.
Students seeking scholarships would contact NMMI’s financial aid office, and if a
scholarship was awarded to a student using the Association’s funds, NMMI would bill
the Association at the end of the academic year.
{9} In July 2009, NMMI hired a new president and superintendent, Major General
Jerry Grizzle. General Grizzle reviewed the agreements between NMMI and the
Association that were then in force, including the 2001 MOA and the Third Amended
Alliance Agreement. General Grizzle believed that the 2001 MOA was outdated and
wanted to update it to reflect “current processes, procedures, titles.” General Grizzle also
became concerned about the Association’s operations and believed it was “in violation of
every condition” in the 2001 MOA. Beginning in 2010, General Grizzle had discussions
with successive board presidents of the Association about his concerns. General Grizzle’s
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primary concern was his belief that the Association was not complying with the MOA’s
provisions governing financial accounting and management of its finances. These efforts
resulted in the parties signing the 2012 MOA.
{10} The Association, however, still did not provide any audited financial statements to
NMMI, and it appeared to General Grizzle that the Association was not likely to file a
timely, audited tax return. Thus, on February 21, 2013, NMMI’s Board of Regents sent a
letter to the Association stating that it intended to terminate the 2012 MOA because the
Association had not maintained an adequate financial accounting system and had not
provided NMMI with a copy of its annual audit, and asking it to cure these problems
within thirty days. The Association did not respond to this letter. In April 2013, NMMI
sent a final notice to the Association that it was terminating the relationship between
NMMI and the Association. On this same date, NMMI removed the Association from its
offices on NMMI property.
{11} NMMI brought suit against the Association in June 2013 claiming that the
Association breached its contractual obligation to maintain an adequate financial
accounting system, and that the Association was in possession of funds that it received on
behalf of NMMI while acting as NMMI’s agent. It asked the district court to: freeze the
Association’s accounts; prohibit the Association from using NMMI’s name, logos, and
trademarks; impose a constructive trust on funds in the Association’s custody; appoint a
receiver; order the Association to account for funds it received while an agent of NMMI;
and order the Association to transfer all funds received for the benefit of NMMI or its
cadets to an appropriate custodian.
{12} The district court held a one-week bench trial. Most of the evidence and argument
focused on the Association’s allegedly inadequate accounting system, but the parties also
tried the issue of whether the Association was NMMI’s agent. After the trial, the district
court issued an initial set of findings of fact and conclusions of law, finding that the
Association acted as NMMI’s agent, that the Association did not breach the 2012 MOA,
and that NMMI had improperly terminated the 2012 MOA. The district court then issued
a judgment and order, imposing a constructive trust over funds in the Association’s
custody, and stating that because the Association was NMMI’s agent, it had a duty to
convey these funds to NMMI or the NMMI Foundation if NMMI so directed. After post-
trial motions filed by both parties, the district court issued supplemental findings of fact
and conclusions of law, reiterating that the Association had acted as NMMI’s agent, and
stating that “NMMI, as the principal, [could] terminate the Association’s authority to act
as its agent for any reason.” The district court also found that the 2012 MOA was
terminable at will. The court issued an amended judgment reiterating its agency finding
and the creation of a constructive trust over funds in NMMI’s custody. The Association
appeals from the district court’s ruling and its imposition of a constructive trust.
DISCUSSION
A. NMMI had standing to sue the Association
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{13} New Mexico’s standing doctrine requires litigants to allege that “(1) they are
directly injured as a result of the action they seek to challenge[,] (2) there is a causal
relationship between the injury and the challenged conduct[,] and (3) the injury is likely
to be redressed by a favorable decision.” ACLU of N.M. v. City of Albuquerque, 2008-
NMSC-045, ¶ 1, 144 N.M. 471, 188 P.3d 1222. Whether a party has standing presents a
question of law that we review de novo. Id. ¶ 6.
{14} Here NMMI alleged in its complaint that the Association acted as its agent, that
“[a]lumni and others have made numerous and substantial monetary contributions to the
Association on the condition, both express and implied, that those funds directly benefit
NMMI,” and that because the relationship between NMMI and the Association had been
terminated, the Association should not be allowed to retain control over funds that were
intended to benefit NMMI. These claims allege an injury to NMMI in the form of loss of
access to and control over funds intended to support its students and programs.
{15} NMMI further alleged that it had demanded the return of the funds, but that the
Association had not responded to the demand, and apparently could not or would not act
on the demand because its board had split into two factions with contrary aims. These
allegations were sufficient to allege a causal connection between NMMI’s loss of access
to and control over the funds and the Association’s unwillingness or inability to return the
funds to NMMI, despite its obligation to do so as NMMI’s agent. See, e.g., Moser v.
Bertram, 1993-NMSC-040, ¶ 6, 115 N.M. 766, 858 P.2d 854 (stating that an “agent
stands in a fiduciary relationship with his or her principal, a position of great trust and
confidence commanding the utmost good faith”); Restatement (Third) of Agency § 8.01
(Am. Law Inst. 2006) (“An agent has a fiduciary duty to act loyally for the principal’s
benefit in all matters connected with the agency relationship.”). Finally, a favorable
decision would redress NMMI’s alleged injury by giving it control over funds that the
Association had raised on NMMI’s behalf.
{16} The Association claims, however, that NMMI failed to prove that it suffered any
injury because the district court rejected NMMI’s claim that it violated the 2012 MOA.
The Association acknowledges NMMI’s argument that as its agent, “the Association
must return property that it can no longer rightfully possess after the termination of the
agency relationship[,]” but asserts that NMMI lacks standing because: (1) NMMI failed
to prove that it suffered any injury; (2) NMMI failed to offer evidence “that would
suggest that the Association was not the proper party to hold and administer the funds
under its control”; (3) “no language in the MOA . . . suggest[s] that [NMMI] is the proper
owner or trustee of the Association’s funds”; and (4) “[t]here is also no law on point that
holds that an agent must disgorge its own property to a principal absent any breach of
fiduciary duty.”
{17} These arguments lack merit. The premise of the Association’s arguments is that
NMMI needed to demonstrate that the Association committed some breach of duty, or
caused some harm, to justify NMMI’s decision to terminate the agency relationship. But
as we will explain at further length in response to the Association’s substantial evidence
claim, NMMI was entitled to terminate the Association’s status as its agent for any
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reason or no reason. The Association was therefore obligated to turn over to NMMI all
donations that it had collected on NMMI’s behalf, even if its conduct was faultless. Here,
NMMI sufficiently demonstrated that it had standing by alleging and proving that the
Association was its agent, that the agency relationship had been terminated, and that
nevertheless the Association would not or could not turn over to NMMI the donations
that it had collected on NMMI’s behalf. We therefore conclude that NMMI had standing
to pursue its claims against the Association. See Am. Fed’n of State, Cty. & Mun.
Employees, Council 18 v. Bd. of Cty. Comm’rs, 2016-NMSC-017, ¶ 32, 373 P.3d 989
(holding that injury-in-fact requirement to obtain standing is satisfied where the plaintiff
“show[s] that [it] is imminently threatened with injury, or, put another way, that [it] is
faced with a real risk of future injury, as a result of the challenged action or statute”
(internal quotation marks and citation omitted)).
B. The district court’s determination that the Association was acting as
NMMI’s agent is supported by substantial evidence
{18} The Association next claims that substantial evidence does not exist to support the
district court’s finding that the Association acted as NMMI’s agent, because there was no
evidence that NMMI exercised the degree of control over the Association required to
support the existence of an agency relationship. We disagree.
{19} “On appeal, we will not disturb a finding of agency if [it is] supported by
substantial evidence.” Gallegos v. Citizens Ins. Agency, 1989-NMSC-055, ¶ 17, 108
N.M. 722, 779 P.2d 99. “Substantial evidence is such relevant evidence that a reasonable
mind would find adequate to support a conclusion.” State ex rel. King v. B & B Inv. Grp.,
Inc., 2014-NMSC-024, ¶ 12, 329 P.3d 658 (internal quotation marks and citation
omitted). “[W]hen considering a claim of insufficiency of the evidence, the appellate
court resolves all disputes of facts in favor of the successful party and indulges all
reasonable inferences in support of the prevailing party.” Las Cruces Prof’l Fire Fighters
v. City of Las Cruces, 1997-NMCA-044, ¶ 12, 123 N.M. 329, 940 P.2d 177.
{20} “An agent is one authorized by another to act on his behalf and under his control.”
Hansler v. Bass, 1987-NMCA-106, ¶ 28, 106 N.M. 382, 743 P.2d 1031. Whether an
agency relationship exists is a question of fact to be determined “from all of the facts and
circumstances of the case, together with the conduct and communications between the
parties.” Brown v. Cooley, 1952-NMSC-083, ¶ 8, 56 N.M. 630, 247 P.2d 868. The
existence of an agency relationship does not depend on the name that the parties use to
describe their relationship. See Chevron Oil Co. v. Sutton, 1973-NMSC-111, ¶ 4, 85 N.M.
679, 515 P.2d 1283 (stating that “the majority rule is that the manner in which the parties
designate a relationship is not controlling, and if an act done by one person on behalf of
another is in its essential nature one of agency, the one is the agent of the other,
notwithstanding he is not so called”).
{21} Here, the Association does not dispute that it acted on NMMI’s behalf, but claims
that NMMI did not exercise sufficient control over the Association to render the
Association its agent. In determining whether an agency relationship exists, the “principal
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consideration” is “the control, or right to control” the agent’s conduct. Shaver v. Bell,
1964-NMSC-255, ¶ 16, 74 N.M. 700, 397 P.2d 723. The principal, however, need not
control, or have a right to control, all aspects of the agent’s activities. “Thus, a person
may be an agent although the principal lacks the right to control the full range of the
agent’s activities, how the agent uses time, or the agent’s exercise of professional
judgement.” Restatement (Third) of Agency § 1.01 cmt. c (Am. Law Inst. 2006).
{22} In New Mexico, our case law has not required a particularly invasive level of
control to support a finding that a principal-agent relationship exists. For example, in
Shaver, a plaintiff who was injured after slipping in a puddle of gasoline at a service
station sued both the actual operators of the station (Bass and Hendrix) and the man who
had leased the station and sold gasoline to them (Bell) for negligence. Bell argued that
Bass and Hendrix were not his agents because he could not control their operation of the
gas station, and he obtained summary judgment on that basis. Shaver, 1964-NMSC-255,
¶ 1. Our Supreme Court reversed, holding that a dispute of fact existed about whether
Bass and Hendrix were Bell’s agents, although Bell did not control their day-to-day
activities, where: (1) Bell provided “certain specified equipment” to the station; (2) Bell
provided advertising for the station and paid its utilities; (3) Hendrix and Bass agreed to
purchase gasoline sold by Bell; (4) Bell employed a “[s]tation [s]upervisor” to check on
the station every week or two; and (5) Bell “sometimes suggested the price at which the
gasoline should be sold, as well as ways to increase the business of the station, [although]
these were suggestions only.” Id. ¶¶ 3, 25-26. Similarly, in Chevron Oil, our Supreme
Court held that an issue of fact existed about whether Chevron, who had leased a gas
station to a man named Sharp, but did not control his day-to-day operations, was in a
principal-agent relationship where Chevron required Sharp to promote Chevron’s
products, to remain open for certain hours, and to meet minimum standards of cleanliness
and order, and where Chevron provided Sharp with gasoline, advertising, and uniforms,
and allowed his customers to pay with Chevron credit cards. 1973-NMSC-111, ¶ 7. And
in Gallegos, our Supreme Court held that an insurance agency was in a principal-agent
relationship with an insurance salesman where the salesman had access to the insurance
agency’s office building and rate books, solicited business for the insurance agency, and
received price information from the insurance agency to relay to his customers. 1989-
NMSC-055, ¶ 18.
{23} We conclude that substantial evidence supported the district court’s finding that
NMMI exercised sufficient control over the Association to place them in a principal-
agent relationship. First, there was abundant evidence to support the existence of a close
relationship between NMMI and the Association, and that the donations it solicited were
for the benefit of NMMI and its students. The district court found that “[t]he Association,
as an affiliated entity, has provided support to NMMI by raising funds on behalf of
NMMI that were intended to benefit NMMI and its cadets[,]”; that “[t]he Association
solicited donations on behalf of NMMI,”; that “[o]n behalf of NMMI, the Association
created and established endowments, including those for scholarships, intended to benefit
[the Association],”; and that the Association “solicited and raised funds to promote and
help fund NMMI’s] annual homecoming festivities,” to “offset and support the costs of
various NMMI programs and cadet activities[,]” and to “create and establish professorial
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endowments at NMMI.” All three MOAs, the Association’s by-laws, and the
Association’s articles of incorporation described the Association’s purposes as promoting
the interest and welfare of NMMI and collecting and administering trust funds and
endowments for the use and benefit of NMMI. The 2001 and 2012 MOAs specified that
the Association would serve as the primary repository of records relating to alumni for
NMMI. The Association’s scholarship funds were solicited on behalf of NMMI’s
students.
{24} There was also substantial evidence of NMMI’s power to control the
Association’s fundraising activities. The district court found that as an “affiliated entity
with NMMI, the Association has been permitted to use the name ‘NMMI’ in its corporate
title and allowed the use of NMMI’s name and marks in its letterhead”; that “[u]ntil
NMMI declared the [2012 MOA] to be terminated, the Association’s office was located
on the campus of NMMI”; up until the 2012 MOA, all previous MOAs stated that the
Association was not an agent of NMMI; and that “[a]ll three MOAs required the
Association to undertake several commitments[,]” including the maintenance of an
adequate financial accounting system and submission to annual audits. Any changes to
the Association’s bylaws and its articles of incorporation required NMMI approval. The
2001 and 2012 MOAs also required the Association to do a number of things, “unless
excused by [NMMI] in writing,” including maintaining its existence as a tax-exempt
organization, employing an executive secretary, organizing its staff and retaining
advisory and other professionals services as it deemed necessary.” These provisions
indicate a level of control on the part of NMMI, as they outline the basic structure and
organization that the Association was to have and make clear where the Association had
authority to exercise its own professional discretion.
{25} The 2012 MOA also required the Association to provide NMMI publications to
alumni, provide and maintain a database with continued updates of all alumni, and to
receive and disburse scholarship funds in conformity with all conditions imposed by the
donors and in accordance with NMMI rules governing financial aid to cadets. Students at
NMMI had to apply for Association-administered scholarships through NMMI’s
financial aid office, and the Association provided the scholarship funds for students to
NMMI.
{26} This evidence established that NMMI exercised at least as much, if not more,
control over the Association as did the principals in Shaver, Chevron Oil, and Gallegos.
To be sure, the Association pointed to contrary evidence, such as the testimony of its past
president, John Phinizy, and its former executive secretary, David Romero, that NMMI
did not control the Association’s actions; NMMI’s audited financial statements, which
appeared to disclaim any ability to control the Association’s daily operations; and
statements in the 1993 and 2001 MOAs that explicitly disclaimed a principal-agent
relationship between NMMI and the Association. But on substantial evidence review,
“[t]he question is not whether substantial evidence exists to support the opposite result,
but rather whether such evidence supports the result reached.” Sandoval v. Baker Hughes
Oilfield Operations, Inc., 2009-NMCA-095, ¶ 41, 146 N.M. 853, 215 P.3d 791 (internal
quotation marks and citation omitted). Having concluded that the evidence was sufficient
8
to support the district court’s finding that the Association acted as NMMI’s agent, we
affirm that finding.
C. NMMI had the power to terminate its agency relationship with the
Association, regardless of whether the 2012 MOA was terminable only for
cause, and the district court’s imposition of the constructive trust was proper
{27} The Association vigorously argues that NMMI could only terminate the 2012
MOA for cause, and given that the district court found that the Association did not violate
the 2012 MOA, NMMI suffered no injury that would entitle it to end the parties’
relationship or justify the imposition of a constructive trust requiring that it transfer the
scholarship funds in its possession to NMMI. The Association also argues that the district
court’s post-trial finding that the 2012 MOA was terminable at will cannot justify the
order requiring it to turn over its scholarship funds to NMMI, and should be reversed,
because NMMI did not raise the terminable-at-will theory until after trial concluded.
Moreover, the Association argues that even if the district court’s agency finding was
supported by the evidence, that “would not justify the transfer of funds to [NMMI].” The
Association therefore asks this Court to reverse the district court’s judgment and “order
the immediate return of the funds” to the Association. In response, NMMI argues that
because the Association was its agent, it therefore could end its agency relationship
regardless of whether the 2012 MOA was terminable only for cause, and even if the
Association complied with all of its obligations to NMMI. Whether NMMI as principal
could terminate its agency relationship with the Association without cause presents a
question of law that we review de novo. See Bank of N.Y. Mellon v. Lopes, 2014-NMCA-
097, ¶ 6, 336 P.3d 443 (“We review issues of law de novo.”).
{28} Although the parties have not cited any New Mexico cases that have directly
addressed the issue, the overwhelming, if not unanimous, weight of authority is that a
principal has the power to terminate an agency relationship at any time and for any
reason, even if the principal and agent have signed a contract providing that their
relationship is irrevocable or may be terminated only for cause. The Restatement
(Second) of Agency § 118 (Am. Law Inst. 1958) states that “[a]uthority terminates if the
principal or the agent manifests to the other dissent to its continuance[,]” and Comment b
to this section explains that “[t]he principal has power to revoke and the agent has power
to renounce, although doing so is in violation of a contract between the parties.” A
principal or agent who terminates the relationship in violation of such a contract may still
be subject to liability to the other party for breach of contract. Restatement (Second) of
Agency § 118 cmts. b, c. There is an exception to this rule where the agent’s authority is
a “power given as security[,]” Restatement (Second) of Agency § 138 (Am. Law. Inst.
1958), but that does not apply here.
{29} The Restatement (Third) of Agency § 3.10 (Am. Law Inst. 2006) similarly states
that “[n]otwithstanding any agreement between the principal and agent, an agent’s actual
authority terminates . . . if the principal revokes the agent’s actual authority.” Comment b
to this section also states that the principal’s power to revoke an agent’s authority “is not
extinguished because an agreement between principal and agent states that the agent’s
9
actual authority shall be irrevocable or shall not be revoked except under specified
circumstances[,]” although exercising that power “may constitute a breach of contract.”
Comment b further explains that “[t]he rationale for the power to revoke . . . is that
agency is a consensual relationship.” The power to revoke is justified because an agent
with authority “holds ongoing power to act with adverse consequences for the
principal[,]” and thus a principal should not be compelled to accept the services of an
agent that has lost the principal’s confidence. Restatement (Third) of Agency § 3.10 cmt.
b. The principal may, however, still be liable for breach of contract if it has wrongfully
terminated an agent’s authority (except that specific performance is not a remedy
available to the agent). Id.
{30} Case law from other jurisdictions confirms application of these general principles,
and the Association has not cited any authority to the contrary. See, e.g., Gov’t Guarantee
Fund of Republic of Finland v. Hyatt Corp., 95 F.3d 291, 300 (3d Cir. 1996) (stating that
agency relationship is ordinarily terminable even if the parties agreed the relationship
could not be terminated); Woolley v. Embassy Suites, Inc., 278 Cal. Rptr. 719, 724 (Ct.
App. 1991) (stating that “[i]t is a cardinal principle of agency law that a principal who
employs an agent always retains the power to revoke the agency”); Ireland v. Wynkoop,
539 P.2d 1349, 1362 (Colo. App. Ct. 1975) (reversing portion of injunction that
purported to prevent principal from terminating agent’s authority, noting that principal
has the power to terminate an agency relationship at any time, even in breach of a
contract).
{31} Because the district court found that the Association was NMMI’s agent (a
finding that we have already held was supported by substantial evidence), it follows that
NMMI could terminate the Association’s authority to act as its agent without cause, even
if the 2012 MOA could only be terminated for cause, and despite the district court’s
finding that the Association did not breach the 2012 MOA. While we are sympathetic
with the Association’s protests that it did not breach any duty to NMMI, mismanage any
of its funds, or give NMMI any cause to terminate their relationship, the law is clear that
NMMI needed no cause to terminate the Association’s status as an agent. The
Association further argues that allowing NMMI to terminate their relationship without
cause violates New Mexico law requiring the enforcement of contracts, because the 2012
MOA only allows termination for cause. But as we have stated, the law allows a principal
to terminate an agent’s authority to act regardless of any agreement to the contrary. If the
Association believed that NMMI breached the 2012 MOA by terminating the
relationship, the Association could have asserted a breach of contract counterclaim in the
district court, but it did not do so.
{32} Because NMMI had the power to terminate its agency relationship with the
Association, it follows that the district court properly imposed a constructive trust
requiring the Association to turn over funds it solicited on NMMI’s behalf while acting as
NMMI’s agent. “The imposition of a constructive trust is an equitable remedy . . . within
the broad discretion of the district court.” In re Estate of Duran, 2003-NMSC-008, ¶ 35,
133 N.M. 553, 66 P.3d 326. “A constructive trust will be imposed to prevent unjust
10
enrichment that would result if the person having the property were permitted to retain
it.” Id. ¶ 34 (internal quotation marks and citation omitted).
{33} As an agent, the Association owed fiduciary duties to its principal, NMMI. Hydro
Res. Corp. v. Gray, 2007-NMSC-061, ¶ 40, 143 N.M. 142, 173 P.3d 749 (stating that
“agency is a fiduciary relationship, whereby the agent is required to act only in the
interest of the principal”). As part of its fiduciary duty, the Association was required to
respect NMMI’s interest in the donations that it solicited on NMMI’s behalf. See
Restatement (Third) of Agency § 8.12 (Am. Law Inst. 2006) (stating that an agent has a
duty “not to deal with the principal’s property so that it appears to be the agent’s
property” and “to keep and render accounts to the principal of money or other property
received or paid out on the principal’s account”). Once NMMI terminated the
Association’s status as an agent, it was required to turn over those funds to NMMI. See
Restatement (Third) of Agency § 8.05 cmt. b (Am. Law Inst. 2006) (“A former agent
who continues to possess property of a principal has a duty to return it and to comply
with . . . management and record-keeping rules[.]”). It would therefore have been unjust
for the district court to allow the Association to retain those funds in the face of NMMI’s
demand for their return. The district court therefore acted within its discretion by
imposing the constructive trust.
D. The Association’s claim that the district court’s imposition of a constructive
trust violated the donors’ intent and New Mexico testamentary law lacks
merit
{34} The Association’s final claim is that the district court’s constructive trust violated
the intent of donors who made testamentary gifts to the Association to be administered by
the Association. We hold that this claim is meritless.
{35} As discussed above, the district court’s imposition of the constructive trust was
based on its finding that the Association was NMMI’s agent, and on its conclusion that
NMMI, as principal, was entitled to terminate the agency relationship and require the
Association, as its agent, to turn over all funds that it received while acting as NMMI’s
agent. The Association claims that it is nevertheless entitled to keep the funds that it
received and solicited on NMMI’s behalf because the donors intended that the
Association should be in charge of administering and distributing those funds. In support
of this claim, the Association cites In re Cable Family Trust, 2010-NMSC-017, 148 N.M.
127, 231 P.3d 108 and In re Estate of Seymour, 1979-NMSC-069, 93 N.M. 328, 600 P.2d
274 for the legal principle that a donor “may do as he or she wishes with his or her
money” and that courts should therefore strive to give effect to a donor’s intent. The
Association, relying on Schwarzkopf v. American Heart Association, 541 So. 2d 1348
(Fla. Dist. Ct. App. 1989) and National City Bank of Michigan/Illinois v. Northern
Illinois University, 818 N.E.2d 453 (Ill. App. Ct. 2004), also argues that a court “has no
authority to alter the terms of a decedent’s will, even if there is evidence that there is a
more cost effective and efficient means of operation.”
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{36} The Association’s arguments, however, do not grapple with the district court’s
actual ruling or demonstrate that it was wrong. We have no quarrel with the principle that
courts should attempt to give effect to the intent of donors or testators with respect to the
disposition of their assets, or with the Association’s reliance on Cable and Seymour for
that general proposition. But the district court found that the funds at issue here were
donated to the Association in its capacity as an agent for NMMI, and that NMMI was
therefore entitled to demand that they be turned over to it. The Association has cited no
authority for the proposition that where an agent receives or solicits funds on behalf of its
principal, it is entitled to keep those funds, even in the face of a demand from its principal
for their return, merely because the donor intended that the agent be the one to administer
the funds. Accordingly, the Association has failed to demonstrate that the district court
erred. See In re Adoption of Doe, 1984-NMSC-024, ¶ 2, 100 N.M. 764, 676 P.2d 1329
(“We assume where arguments in briefs are unsupported by cited authority, counsel after
diligent search, was unable to find any supporting authority.”).
{37} Similarly, we also have no reason to dispute the principle that a court may not
modify a will or gift merely because there’s a more efficient way of distributing the
funds. But the district court’s decision was not based on efficiency concerns, and the
Association’s argument and authority on this point are therefore irrelevant. Accordingly,
we reject the Association’s challenge to the district court’s order directing it to turn over
funds that it received while acting as NMMI’s agent.
CONCLUSION
{38} We affirm the district court’s judgment.
{39} IT IS SO ORDERED.
________________________________
EMIL J. KIEHNE, Judge
WE CONCUR:
_______________________________________
J. MILES HANISEE, Judge
_______________________________________
JULIE J. VARGAS, Judge
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