Institution v. Nmmi Alumni Ass'n, Inc.

KIEHNE, Judge.

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

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 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.

{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 funds in NMMI's custody. The Association appeals from the district court's ruling and its imposition of a constructive trust.

{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 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 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)).

{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 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.

{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 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.

{38} We affirm the district court's judgment.

/s/ _________

EMIL J. KIEHNE, Judge

/s/ _________
J. MILES HANISEE
, Judge /s/ _________
JULIE J. VARGAS
, Judge