ECKART v HUBBARD
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No. 14740 IN THE SUPREME COURT OF THE STATE OF MONTANA 1979 FAYEM. ECKART, a woman; MARY (nee Hubbard) SKELTON, a woman; and JOHN HUBBARD, a single man, Plaintiffs and Respondents, RODERICK R. HUBBARD, a single man; et al., Defendants and Appellants. Appeal from: District Court of the Eighth Judicial District, Honorable R. J. Nelson, Judge presiding. Counsel of Record: For Appellants: S. M. Swanberg argued, Great Falls, Montana Roderick R. Hubbard, San Diego, California For Respondents: Burton, Waite & Cruikshank, Great Falls, Montana Charles Cruikshank argued, Great Falls, Montana Submitted: Decided: September 14, 1979 39V 2 2 1979 Mr. Justice John Conway Harrison delivered the Opinion of the Court. This is an action to quiet title to two tracts of land in Cascade County originally owned by Russell C. Hubbard. Defendants Roderick Hubbard and Michael Jean Null are issue of Russell Hubbard's second marriage to Constance E. Hubbard, who later became Constance E. Washburn and is now deceased. Plaintiffs John Hubbard and Mary Skelton are children of Hubbard's third marriage to Faye Hubbard, now Faye Eckart, who is also a plaintiff in this action. Russell C. Hubbard, the father, acquired the two tracts of land in question from his mother by warranty deed dated March 1, 1939. On June 1, 1949, Hubbard conveyed Tract A of the lands by warranty deed to Ann Bladorn and Tract B of the lands by warranty deed to his very close personal friends, Alden and Ina Lohrke. Ann Bladon thereafter came into default on Tract A and, on November 15, at Hubbard's insistence, conveyed that said tract to the Lohrkes. Both deeds to the Lohrkes were made without their knowledge and lacked consideration. Hubbard did not inform Alden Lohrke of the conveyances of the land until approximately two years later when he casually remarked that the Lohrkes owned the land. Lohrke assumed that, since Hubbard's financial condition was "marginal," Hubbard had placed legal title in the Lohrkes' names to protect the land for his own purposes. Lohrke never treated the land as if it were his, only that he had a "bare" or "naked" title. Hubbard paid the taxes on the land, leased it and kept the income from the leases. Prior to Hubbard's conveyances of the two tracts of land to the Lohrkes, several liens attached to the tracts as well as to other property which Hubbard owned. These liens w e r e t h e r e s u l t of t h e t e r m s o f a d i v o r c e d e c r e e between Hubbard and h i s second w i f e Constance. The d e c r e e p r o v i d e d f o r s u p p o r t payments f o r t h e s u p p o r t of t h e c o u p l e ' s two c h i l d r e n , Roderick and Michael J e a n . A s t h e payments became d e l i n q u e n t , l i e n s a t t a c h e d t o Hubbard's l a n d . Some of t h e l i e n s on l a n d o t h e r t h a n t h e two t r a c t s were r e l e a s e d a f t e r t h e divorce. R i c h a r d Eklund, C o n s t a n c e ' s f a t h e r , t e s t i f i e d t h a t Constance r e l e a s e d t h e s e l i e n s on Hubbard's promise t h a t t h e two t r a c t s would be p l a c e d i n t r u s t f o r t h e c h i l dren. The l i e n s on t h e two t r a c t s , however, w e r e n e v e r r e l e a s e d , and a w r i t t e n t r u s t w a s n e v e r drawn. On October 1 8 , 1953, Hubbard m a r r i e d h i s t h i r d w i f e , Faye. T h r e e c h i l d r e n were born of t h i s m a r r i a g e , two o f whom s u r v i v e d : John, born March 1, 1955, and Mary, born on J u l y 4 , 1956. Hubbard d i e d i n t e s t a t e on A p r i l 3 , 1972, i n Cascade County, s u r v i v e d by h i s w i f e Faye and f o u r c h i l d r e n . Prior t o h i s d e a t h , he informed Alden Lohrke on a t l e a s t two o c c a s i o n s t h a t he had hoped t h e two t r a c t s of l a n d would go t o h i s children. One o f t h e s e c o n v e r s a t i o n s took p l a c e a p p r o x i m a t e l y two o r t h r e e y e a r s a f t e r Hubbard conveyed t h e l a n d t o t h e Lohrkes. 1972. The o t h e r t o o k p l a c e between 1970 and Lohrke t e s t i f i e d t h a t t h e f i r s t w a s a c a s u a l , " o f f t h e c u f f " remark i n which Hubbard d i d n o t s p e c i f i c a l l y i d e n t i f y what h e meant by " h i s c h i l d r e n . " Knowing Hubbard r a t h e r w e l l , Lohrke f e l t t h a t t h e t e r m m i g h t be r e p r e s e n t a t i v e o f a c l a s s and i n c l u d e d n o t o n l y h i s p r e s e n t b u t any future children. With r e s p e c t t o t h e second c o n v e r s a t i o n , Lohrke u n d e r s t o o d Hubbard t o mean a l l f o u r of h i s c h i l d r e n . On May 1 8 , 1973, Hubbard's son R o d e r i c k , who i s a p r a c t i c i n g a t t o r n e y i n San Diego, o b t a i n e d w i t h o u t c o n s i d e r - a t i o n from Alden Lohrke two q u i t c l a i m d e e d s r e g a r d i n g t h e land. H e a l s o i n s t i t u t e d proceedings f o r t h e probate of t h e e s t a t e of I n a Lohrke, who had d i e d i n t e s t a t e on J u n e 1 3 , 1966. The p r o c e e d i n g s were i n s t i t u t e d f o r t h e p u r p o s e of c l e a r i n g up t h e l e g a l t i t l e t o t h e l a n d , s i n c e t h e Lohrkes' d a u g h t e r , Linda R u s s e l l , had a c q u i r e d a n i n t e r e s t i n t h e l a n d upon h e r m o t h e r ' s d e a t h . Linda, i n t u r n , q u i t c l a i m e d h e r i n t e r e s t i n t h e two t r a c t s of l a n d t o Roderick w i t h o u t c o n s i d e r a t i o n o n J u n e 1 4 , 1973. The Lohrkes t r a n s f e r r e d t h e l a n d s t o Roderick w i t h t h e u n d e r s t a n d i n g t h a t t h e t r a n s f e r s w e r e b e i n g made f o r t h e b e n e f i t of a l l f o u r c h i l d r e n . Roderick, o f h i s own v o l i t i o n , a c q u i r e d t h e l a n d i n t r u s t f o r the four children. I n a response t o a telephone c a l l from Faye c o n c e r n i n g t h e l a n d , Roderick w r o t e : "There i s n o t much I c a n do as l o n g a s t h e t i t l e i s i n A l d e n ' s name; t h e r e f o r e I s u g g e s t t h a t Alden t r a n s f e r h i s i n t e r e s t i n t h e p r o p e r t y t o me I w i l l hold t h e property i n t r u s t f o r the children." ... Sometime l a t e r , however, Roderick changed h i s p o s i t i o n with r e s p e c t t o t h e land. Instead of holding t h e land i n t r u s t f o r a l l f o u r c h i l d r e n , Roderick c l a i m e d t h e l a n d f o r h i m s e l f and Michael J e a n because of t h e l i e n s f o r s u p p o r t payments on which h i s f a t h e r had been d e l i n q u e n t . Roderick i n s i s t s t h a t , a t t h e t i m e o f t h e conveyances from t h e Lohrkes t o h i m s e l f , he w a s unaware of t h e e x i s t e n c e o f t h e liens. When he became aware o f them, he c o n t e n d s t h a t he informed Alden Lohrke of t h e l i e n s and t h a t Lohrke a g r e e d t h a t t h e l a n d s h o u l d be R o d e r i c k ' s and Michael J e a n ' s . Lohrke, on t h e o t h e r hand, d e n i e s t h e s e t h i n g s . Roderick a d m i t s t h a t h e t o o k no a c t i o n of any k i n d t o e n f o r c e t h e l i e n s f o r t h e d e l i n q u e n t s u p p o r t payments when he s e r v e d a s t h e e x e c u t o r of h i s m o t h e r ' s e s t a t e i n 1973. H e explained t h a t he d i d n o t t a k e any a c t i o n b e c a u s e Lohrke p u r p o r t e d l y a g r e e d t o t h e v a l i d i t y of h i s m o t h e r ' s l i e n s and t o t h e f a c t t h a t t h e l a n d w a s h i s and Michael J e a n ' s . P l a i n t i f f s brought t h i s a c t i o n i n D i s t r i c t Court t o q u i e t t i t l e t o t h e two t r a c t s of l a n d , c l a i m i n g t h a t t h e y had a n i n t e r e s t i n t h e i r ownership. Defendants claimed s o l e ownership of t h e l a n d on t h e b a s i s t h a t Hubbard c r e a t e d a c o n s t r u c t i v e o r r e s u l t i n g t r u s t f o r them i n s a t i s f a c t i o n of d e l i n q u e n t s u p p o r t payments under t h e d i v o r c e d e c r e e between Hubbard and h i s second w i f e . A t t r i a l w i t h o u t j u r y on J u l y 1 0 , 1978, t h e D i s t r i c t C o u r t made t h e f o l l o w i n g f i n d i n g s : t h a t no t r u s t was c r e - a t e d by t h e conveyances o f t h e two t r a c t s from Hubbard t o t h e Lohrkes; t h a t i t was i m m a t e r i a l whether a t r u s t w a s c r e a t e d b e c a u s e l e g a l t i t l e t o t h e p r o p e r t y v e s t e d i n Hubb a r d ' s e s t a t e upon h i s d e a t h and, under t h e laws o f i n t e s t a c y , Faye became e n t i t l e d t o o n e - t h i r d of t h e p r o p e r t y and t h e c h i l d r e n s h a r e d e q u a l l y i n t h e r e m a i n d e r ; and, t h a t c o l l e c t i o n on t h e d e l i n q u e n t s u p p o r t payments was b a r r e d by t h e s t a t u t e of l i m i t a t i o n s . From t h i s judgment, appellants appeal. The s i n g l e i s s u e p r e s e n t e d f o r r e v i e w i s whether t h e r e w a s s u f f i c i e n t e v i d e n c e t o s u p p o r t t h e h o l d i n g t h a t no t r u s t was c r e a t e d by t h e conveyances from Hubbard t o t h e Lohrkes and t h a t t h e p r o p e r t y remained i n Hubbard's i n t e s t a t e e s t a t e . Our a t t e n t i o n i s f i r s t drawn t o t h e k i n d s of t r u s t s t h a t may be c r e a t e d i n t h i s s t a t e . Montana s e p a r a t e s t r u s t s i n t o two c l a s s e s : v o l u n t a r y t r u s t s , o t h e r w i s e known a s e x p r e s s t r u s t s , and i n v o l u n t a r y t r u s t s , o t h e r w i s e known a s implied t r u s t s . S e c t i o n 72-20-101, MCA; P l a t t v. P l a t t ( 1 9 5 9 ) , 134 Mont. 474, 480, 334 P.2d 722, 727. The most d i s t i n g u i s h i n g c h a r a c t e r i s t i c between t h e two classes o f t r u s t s i s t h a t v o l u n t a r y o r e x p r e s s t r u s t s depend f o r t h e i r c r e a t i o n upon a c l e a r and d i r e c t e x p r e s s i o n o f i n t e n t by t h e trustor. I n v o l u n t a r y o r i m p l i e d t r u s t s a r i s e by o p e r a t i o n o f l a w and a r e concerned w i t h i m p l i e d o r presumed i n t e n t , o r a r e n o t concerned w i t h i n t e n t a t a l l . ed., S71, p. supra. 262; s e c t i o n 72-20-103, B o g e r t on T r u s t s , 5 t h MCA; P l a t t v. Platt, Both k i n d s of t r u s t s , however, must be e s t a b l i s h e d by e v i d e n c e which i s c l e a r , c o n v i n c i n g , and p r a c t i c a l l y f r e e from d o u b t . F i r s t N a t i o n a l Bank of Twin B r i d g e s v . S a n t ( 1 9 7 3 ) , 1 6 1 Mont. 376, 386, 506 P.2d 835, 841; B a r r e t t v. Zenisek ( 1 9 5 7 ) , 132 Mont. 229, 238, 315 P.2d 1001, 1006. Here a p p e l l a n t s s e e k t o have a t r u s t d e c l a r e d r e l a t i n g t o c e r t a i n real property. Montana s t a t u t e s a l l o w b o t h classes o f t r u s t s t o b e c r e a t e d w i t h r e s p e c t t o r e a l property. I n v o l u n t a r y t r u s t s may be c r e a t e d , f o r example, when a c o u r t i m p l i e s o r presumes an i n t e n t t o c r e a t e a t r u s t o r s i m p l y d e c l a r e s , employing t h e p r i n c i p l e s o f e q u i t y , t h a t t h e t r u s t s h a l l be s a i d t o e x i s t . Nothing e l s e i s r e q u i r e d . V o l u n t a r y t r u s t s , however, depend upon a w r i t t e n i n s t r u m e n t for their creation. S e c t i o n 72-24-102, MCA, p r o v i d e s : "No t r u s t i n r e l a t i o n t o r e a l p r o p e r t y i s v a l i d u n l e s s c r e a t e d o r d e c l a r e d by: " (1) a w r i t t e n i n s t r u m e n t , s u b s c r i b e d by t h e t r u s t e e o r by h i s a g e n t t h e r e t o a u t h o r i z e d by writing; " ( 2 ) t h e i n s t r u m e n t under which t h e t r u s t e e claims t h e e s t a t e a f f e c t e d ; o r " ( 3 ) o p e r a t i o n o f law. " I t i s clear t h a t t h e D i s t r i c t C o u r t was c o r r e c t i n h o l d i n g t h a t an e x p r e s s t r u s t w a s n o t c r e a t e d . Neither p a r t y i n t r o d u c e d e v i d e n c e o f a w r i t t e n document i n which a t r u s t w a s created o r declared. What w a s i n t r o d u c e d , r a t h e r , w a s s i m p l y t e s t i m o n y t h a t Hubbard had conveyed c e r t a i n l a n d t o t h e Lohrkes which w a s l a t e r e x p l a i n e d by a n o r a l s t a t e ment. Approximately two y e a r s a f t e r t h e conveyances, Hub- b a r d c a s u a l l y remarked t o Lohrke t h a t t i t l e t o t h e l a n d was i n L o h r k e ' s name and t h a t Hubbard wanted t h e l a n d t o go t o h i s children. These a c t s a r e n o t s u f f i c i e n t t o c r e a t e a voluntary o r express t r u s t involving r e a l property. The p o s s i b i l i t y r e m a i n s , however, t h a t a n i n v o l u n t a r y t r u s t w a s created. Involuntary t r u s t s r e l a t i n g t o real p r o p e r t y a r i s e by o p e r a t i o n o f l a w and a r e of two k i n d s , r e s u l t i n g and c o n s t r u c t i v e . P l a t t , supra. Constructive t r u s t s s p r i n g from f r a u d , m i s t a k e , undue i n f l u e n c e , t h e v i o l a t i o n of a t r u s t , o r o t h e r wrongful a c t s . supra. Platt, C o n s t r u c t i v e t r u s t s o c c u r where t h e p a r t i e s have e x p r e s s e d no i n t e n t t o create a t r u s t , n o r d o e s t h e c o u r t presume t h a t any i n t e n t e x i s t e d . Rather, t h e c o u r t c r e a t e s t h e t r u s t t o work a n e q u i t a b l e r e s u l t . p. 263. S e c t i o n 72-20-111, B o g e r t , s u p r a , S71, MCA, p r o v i d e s : "One who g a i n s a t h i n g by f r a u d , a c c i d e n t , m i s t a k e , undue i n f l u e n c e , t h e v i o l a t i o n o f a t r u s t , o r o t h e r wrongful a c t i s , u n l e s s h e h a s some other o r b e t t e r r i g h t thereto, an involuntary t r u s t e e of t h e t h i n g g a i n e d f o r t h e b e n e f i t o f t h e p e r s o n who would have o t h e r w i s e have had i t . " The e v i d e n c e h e r e f a i l s t o s u p p o r t t h a t a c o n s t r u c t i v e t r u s t w a s c r e a t e d by t h e conveyances from Hubbard t o t h e Lohrkes. I n no way may i t be s a i d t h a t Alden Lohrke g a i n e d t h e p r o p e r t y by a wrongful a c t . Lohrke and Hubbard w e r e l o n g t i m e f r i e n d s who had g r e a t c o n f i d e n c e and t r u s t i n e a c h other. Lohrke d e s c r i b e d Hubbard a s " c l o s e t o b e i n g a younger brother." Hubbard v o l u n t a r i l y t r a n s f e r r e d t h e p r o p e r t y t o Lohrke w i t h o u t h i s knowledge b e c a u s e Hubbard was c o n f i d e n t t h a t it would be " i n good hands." The D i s t r i c t C o u r t w a s c o r r e c t , t h e r e f o r e , i n h o l d i n g t h a t no c o n s t r u c t i v e t r u s t existed. A r e s u l t i n g t r u s t o c c u r s where, a s a r e s u l t o f c e r t a i n acts, a c o u r t f i n d s t h a t t h e r e i s an implied i n t e n t t o c r e a t e a t r u s t and imposes a t r u s t t o a c h i e v e a n e q u i t a b l e result. U s u a l l y r e s u l t i n g t r u s t s i n v o l v e c a s e s where t h e p a r t i e s have used ambiguous l a n g u a g e which t h e c o u r t cons t r u e s a s showing a t r u s t i n t e n t , o r where t h e p a r t i e s have e x p r e s s e d no i n t e n t t o c r e a t e a t r u s t by words, b u t have performed a c t s from which t h e c o u r t i n f e r s t h a t a t r u s t w a s intended. B o g e r t , s u p r a , 871, p. 2 6 2 . Where a n e x p r e s s t r u s t f a i l s and t h e c o u r t f i n d s a r e s u l t i n g t r u s t , the t r u s t property i s returned t o t h e s e t t l o r , o r h i s s u c c e s s o r s i n i n t e r e s t i f he i s d e a d , p r o v i d e d t h a t t h e s e t t l o r h a s n o t e x p r e s s l y o r i m p l i e d l y made a d i f f e r e n t d i s p o s i t i o n o f t h e e q u i t a b l e i n t e r e s t under t h e trust. "Where a n e x p r e s s p r i v a t e t r u s t i s c r e a t e d g r a t u i t o u s l y and i t f a i l s f o r any r e a s o n , a problem a r i s e s a s t o t h e d i s p o s i t i o n of t h e t r u s t prope r t y . S h a l l t h e t r u s t e e be a l l o w e d t o r e t a i n it f o r h i s own b e n e f i t ? . U s u a l l y t h e o n l y defensible r e s u l t i s t o return the property t o the s e t t l o r s o r h i s successors . .. . . "The c o u r t s d e c l a r e t h i s r e t u r n t o t h e s e t t l o r , o r i f h e i s dead, t o h i s s u c c e s s o r s i n i n t e r e s t , and t h e y o f t e n d o it on t h e t h e o r y o f a r e s u l t ing t r u s t . .. "Thus, i f a s e t t l o r o f a p r i v a t e t r u s t t r a n s f e r s t o named t r u s t e e s , property i n t e r vivos as a g i f t , b u t f a i l s t o d e s c r i b e t h e b e n e f i c i a r i e s a t a l l o r d e s c r i b e s them i n a n u n c e r t a i n . the usual r e s u l t i s t h a t t h e property way r e s u l t s t o t h e s e t t l o r i f he i s l i v i n g , o r t o t h e s u c c e s s o r s of t h e s e t t l o r who would t a k e t h e k i n d o f p r o p e r t y which was t h e s u b j e c t m a t t e r o f t h e t r u s t . " B o g e r t , s u p r a , 875, pp. 281-282. ... .. I n t h i s c a s e it w a s p o s s i b l e f o r t h e D i s t r i c t C o u r t t o have d e c l a r e d a r e s u l t i n g t r u s t on b e h a l f of d e f e n d a n t s and/or p l a i n t i f f s . An i n t e n t t o c r e a t e a t r u s t c o u l d have been i m p l i e d from t h e c i r c u m s t a n c e s s u r r o u n d i n g t h e conveyances. Hubbard's s t a t e m e n t t h a t h e wanted t h e p r o p e r t y t o go t o h i s " c h i l d r e n " c o u l d a l s o have been r e g a r d e d a s s u f f i c i e n t l y d e f i n i t e t o i n c l u d e h i s c h i l d r e n as a c l a s s o r h i s c h i l d r e n a t t h e t i m e o f t h e conveyances. However, t h e D i s t r i c t C o u r t h e l d i n s t e a d t h a t i t was i m m a t e r i a l whether a t r u s t w a s c r e a t e d b e c a u s e t i t l e t o t h e p r o p e r t y v e s t e d i n Hubbard's e s t a t e upon h i s d e a t h and, under t h e l a w s o f i n t e s t a c y , Faye became e n t i t l e d t o onet h i r d of t h e p r o p e r t y and t h e c h i l d r e n s h a r e d e q u a l l y i n t h e remainder. The D i s t r i c t C o u r t d i d n o t e r r i n r e n d e r i n g s u c h a holding. W have s e e n , f o r t h e a f o r e m e n t i o n e d r e a s o n s , t h a t e t h e D i s t r i c t C o u r t c o u l d n o t have d e c l a r e d e i t h e r a n e x p r e s s t r u s t o r a c o n s t r u c t i v e t r u s t was c r e a t e d . The circum- s t a n c e s f a c i n g t h e c o u r t l e f t open o n l y t h e p o s s i b i l i t i e s of a r e s u l t i n g t r u s t o r t h a t no t r u s t e x i s t e d . Whatever a l t e r - n a t i v e s o r d e v i c e s a v a i l a b l e t o t h e c o u r t , t h e r e s u l t was t h e same. I f no t r u s t e x i s t e d , t h e p r o c e e d s had t o r e t u r n t o Hubbard o r h i s p r o b a t e e s t a t e . I f a r e s u l t i n g t r u s t was imposed, t h e p r o p e r t y r e s u l t e d t o Hubbard o r , i f he was dead, t o h i s successors i n i n t e r e s t . I n t h i s sense, there- f o r e , i t w a s i m m a t e r i a l whether a t r u s t w a s c r e a t e d . The p r o p e r t y had t o be r e t u r n e d t o Hubbard's e s t a t e . W e hold, therefore, t h a t t h e r e w a s s u f f i c i e n t evidence t o support t h e holdings of t h e D i s t r i c t Court t h a t t h e r e w a s no t r u s t c r e a t e d and t h a t t h e t r u s t p r o p e r t y be r e t u r n e d t o Hubbard's e s t a t e t o be d i s t r i b u t e d a c c o r d i n g t o t h e laws o f intestacy. Accordingly, w e d i r e c t t h e D i s t r i c t Court t o r e q u i r e t h a t Roderick Hubbard, p r e s e n t l y h o l d i n g t i t l e t o t h e two t r a c t s o f l a n d by q u i t c l a i m d e e d from Alden Lohrke, t a k e a l l a c t i o n s and e x e c u t e a l l i n s t r u m e n t s n e c e s s a r y t o r e t u r n t h e p r o p e r t y t o Hubbard's e s t a t e . Judgment a f f i r m e d . W e concur: Chief J u s t i c e ,' / J u s t i c e s
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