Opinion ID: 168824
Heading Depth: 3
Heading Rank: 1

Heading: Application of the Uniform Trust Code

Text: 38 When exercising diversity jurisdiction, we apply state law with the objective of obtaining the result that would be reached in state court. Perlmutter v. U.S. Gypsum Co., 4 F.3d 864, 869 (10th Cir. 1993). The district court correctly turned its attention to New Mexico's Uniform Trust Code, N.M. Stat. Ann. §§ 46A-1-101 through 46A-11-1104, which went into effect during the pendency of this action. 2003 N.M. Laws, ch. 122, § 1-101. The UTC applies to all trusts created before, on or after its effective date, N.M. Stat. Ann. § 46A-11-1104(A)(1), and to judicial proceedings concerning trusts commenced before its effective date, unless the court finds that application of a particular provision of the [UTC] would ... prejudice the rights of the parties, in which case the particular provision of the [UTC] does not apply and the superseded law applies, id. § 46A-11-1104(A)(3). Except to the extent the UTC or other New Mexico statutes modify it, [t]he common law of trusts and principles of equity supplement the [UTC]. Id. § 46A-1-106. 39 We assume, as did the district court, that the 1948 Declaration of Trust created a valid trust with Mr. Luthy as the trustee and Paul Butt, Sr., as one of the beneficiaries. When Mr. Butt the elder passed on, Mr. Butt the younger inherited his beneficial interest. If we were also to assume, as the did the district court, that the trust did not fail upon Mr. Luthy's death, then upon that instance a vacancy in the trusteeship occur[red]. Id. 46A-7-704(A)(5) (A vacancy in a trusteeship occurs if: ... a trustee dies.). The UTC provides that [a] vacancy in a trusteeship must be filled if the trust has no remaining trustee, id. 46A-7-704(B), in the following order of priority: (1) by a person designated in the terms of the trust to act as successor trustee; (2) by a person appointed by unanimous agreement of the qualified beneficiaries; or (3) by a person appointed by the court, id. at 46A-7-704(C)(1)-(3). The district court found that none of these methods of appointment occurred at any time following Mr. Luthy's death and therefore held that the Bank never assumed trusteeship and had no fiduciary duty to Mr. Butt. 40 Carrying forward the assumption that the trust survived Mr. Luthy's death, nothing in the record conflicts with the district court's ultimate factual finding: at no time were any of the proper means of appointing a successor trustee under the UTC pursued by any party to this relationship. Mr. Butt is surely correct, however, that if under New Mexico law in 1948 (when the trust was created) or 1963 (when Mr. Luthy died) the Bank would have automatically acceded to trusteeship, then the district court's legal conclusion was erroneous. The UTC, after all, explicitly states that where its application would prejudice the parties, superceded law applies. Id. § 46A-11-1104(A)(3). And if prior law would have rendered the Bank a fiduciary of Mr. Butt, then the UTC's nullification of that status would certainly be prejudicial to the trust beneficiaries. But Mr. Butt fails to direct to us to any law, extant at the time of the formation of the trust or Mr. Luthy's death, that supports his assertions. Instead, he reproduces a hodgepodge of provisions from New Mexico's 1953 code, none of which shed even the faintest light on the questions in this case. 10 Nor has our independent review of New Mexico law uncovered any statutory or case law that is contrary to the provisions of the UTC. Indeed, it appears that the UTC, rather than contracting the methods by which a successor trustee may be appointed, expanded the options available under prior law. Compare Restatement (Second) of Trusts § 108 (1959) (providing for appointment of a new trustee by a proper court or by the person, if any, who by the terms of the trust is authorized to appoint a trustee), 11 with N.M. Stat. Ann. § 46A-7-704(C) (providing for appointment of a new trustee to a vacant trusteeship by the court, by a person designated in the terms of the trust to act as successor trustee, or by a person appointed by unanimous agreement of the qualified beneficiaries). Consequently, we find no merit to Mr. Butt's argument that trust law from years gone by renders his fiduciary duty claim any more sound that it appears under the UTC. 41 But even accepting that the Bank never acceded to trusteeship, the district court's analytical stopping point is a curious one. If the trust marched on into the future but no trustee administered it, what then was the status of the trust these past forty-four years? The UTC provides no answer to this question, nor, it appears, does New Mexico case law. A generally accepted common law principle, which supplements the UTC, see N.M. Stat. Ann. § 46A-1-106, instructs that [u]pon the death of a sole trustee who has devised or bequeathed the trust property, the title to the trust property passes subject to the trust to the devisee or legatee, unless it is otherwise provided by the terms of the trust. Restatement (Second) of Trusts § 105; see also George Gleason Bogert et al., Bogert's Trusts and Trustees § 529 (rev.2d ed.2005) (collecting cases). But the devisee is not permitted to administer the trust unless by the terms of the trust he is so authorized, and if he is not so authorized, a new trustee will be appointed. Restatement (Second) of Trusts § 105 cmt. a. Perhaps the Bank, as testamentary trustee of the Luthy estate, obtained title to the trust property but not authority to administer the trust. This is a puzzle, like a car without a driver. We believe the simpler and more straightforward way to analyze this case is to conclude that the trust terminated at Mr. Luthy's death. 42