Gurbachan S. Khosa, Respondent, vs. Julie A. Crandall, n/k/a Julie Sweers, Appellant, Jane Doe, et al., Defendants.

Gurbachan S. Khosa, Respondent, vs. Julie A. Crandall, n/k/a Julie Sweers, Appellant, Jane Doe, et al., Defendants. A04-2487, Court of Appeals Unpublished, September 20, 2005.

This opinion will be unpublished and

may not be cited except as provided by

Minn. Stat. § 480 A. 08, subd. 3 (2004).

 

STATE OF MINNESOTA

IN COURT OF APPEALS

A04-2487

 

Gurbachan S. Khosa,

Respondent,

 

vs.

 

Julie A. Crandall, n/k/a Julie Sweers,

Appellant,

 

Jane Doe, et al.,

Defendants.

 

Filed September 20, 2005

Affirmed

Wright, Judge

 

Dakota County District Court

File No. C3-04-6087

 

 

John T. Burns, Jr., Burns Law Office, 115 Midway Bank Building, 14300 Nicollet Court, Burnsville, MN  55306 (for appellant)

 

Sharon K. Hills, Severson, Sheldon, Dougherty & Molenda, P.A., 7300 West 147th Street, Suite 600, Apple Valley, MN  55124 (for respondent)

 

 

            Considered and decided by Peterson, Presiding Judge; Wright, Judge; and Forsberg, Judge.*

U N P U B L I S H E D   O P I N I O N

WRIGHT, Judge

            Respondent sued appellant to establish an interest in a house titled in appellant's name in which the parties had lived as unmarried cohabitants before their relationship ended.  After a bench trial, the district court ruled that respondent had an equitable interest in the house, determined its value, and ordered it sold and the proceeds divided.  Appellant moved for amended findings.  The district court granted appellant's motion to allow her to buy out respondent's share but otherwise denied relief.  Appellant contends that the district court erred when it (a) failed to apply the clear-and-convincing-evidence standard; (b) determined that the parties had an oral agreement to buy the house together; and (c) determined the value of the property.  We affirm.

FACTS

            Appellant Julie Crandall and respondent Gurbachan Khosa lived together during their 10-year relationship.  Before moving into the house that is the subject of this lawsuit, they lived in a mobile home in Oronoco owned by Crandall.  For a short time thereafter, they lived in boarding rooms in the Twin Cities area and later in an apartment Crandall rented in Apple Valley.  Khosa consistently contributed a fixed amount for expenses and rent.

            While living in the apartment, the parties looked for a house together.  At trial, they disputed whether they intended to purchase it together.  The house was purchased for $129,000, and the down payment was $20,000 plus $3,066 in closing costs.  Crandall used $10,000 from her own funds and an additional $10,000 that she received from her parents for the down payment.   Khosa subsequently gave $10,000 to Crandall's parents.

            Title to the house was placed in Crandall's name alone.  The parties testified as to their understanding of why Khosa's name was not on the title.  Khosa testified that he was told that, due to his poor credit rating, they would not receive financing if his name were on the title.  He explained that Crandall told him that, in order to contribute, he would have to give her parents $10,000.  They in turn would give the money to her as a gift to be used for the down payment.  Crandall and her parents testified that Khosa did not want his name on the title or an ownership interest in the house because he wanted to keep his assets hidden from his former wife and he wanted Crandall to have the security of a house.

            After purchasing the house, each party paid $750 each month into their joint checking account, from which the mortgage and other expenses were paid.  At trial, Crandall asserted that Khosa's contributions were merely rent.  But she acknowledged that she never claimed the rent as income on her tax returns, that she never provided Khosa with a renter's-credit form for his taxes, and that when she received a tax refund, she put it into the joint account.  While living together, the parties made a number of improvements, including putting on a new roof and gutters, recarpeting the basement, and replacing appliances.  These improvements were paid for with funds from the joint checking account.  The mortgage was refinanced in 2001, and the parties used the cash payout to replace the windows on the home.

            In August 2003, Crandall obtained a harassment restraining order against Khosa, the parties' relationship ended, and this lawsuit followed.

            After a bench trial, the district court found that the parties had an oral agreement that Khosa's contributions would give him an interest in the home.  It ruled that a constructive trust existed and awarded Khosa a half interest in the house.  The district court valued the house at $201,000 based on a 2004 appraisal.  The district court then ordered the house sold and the proceeds divided.

            Crandall moved for amended findings.  The district court denied the motion, except that it allowed Crandall to buy out Khosa's interest rather than requiring her to sell the house.  This appeal followed.

D E C I S I O N

I.

            As an initial matter, we address the standard of proof that the district court applies in making its decision and our standard of review of the district court's decision.  A district court must "be persuaded by clear and convincing evidence that the imposition of a constructive trust is justified to prevent unjust enrichment."  In re Estate of Eriksen, 337 N.W.2d 671, 674 (Minn. 1983).  Crandall first argues that, because the district court did not explicitly refer to the "clear and convincing evidence" standard in its findings, the district court failed to apply this standard.  There is no authority requiring a district court to explicitly state the standard of proof that it applied; and that the district court did not refer to the clear-and-convincing standard explicitly in its decision does not render the decision erroneous.  We also note that Crandall did not raise with the district court the absence of a reference to the evidentiary standard, which ordinarily precludes our consideration of the issue on appeal.  Thiele v. Stich, 425 N.W.2d 580, 582 (Minn. 1988).

            The parties agree that the clear-and-convincing standard should be applied to the ultimate determination of whether a constructive trust should be imposed.  They disagree, however, as to whether the clear-and-convincing standard or a preponderance-of-the- evidence standard applies to proof of the underlying facts.

             "In an ordinary civil action the plaintiff has the burden of proving every essential element of his case, including damages by a fair preponderance of the evidence."  Wick v. Widdell, 276 Minn. 51, 53-54, 149 N.W.2d 20, 22 (1967).  "The preponderance of the evidence standard requires that to establish a fact, it must be more probable that the fact exists than that the contrary exists."  City of Lake Elmo v. Metro. Council, 685 N.W.2d 1, 4 (Minn. 2004).  In contrast, the clear-and-convincing standard of proof "requires more than a preponderance of the evidence but less than proof beyond a reasonable doubt.  Clear and convincing proof will be shown where the truth of the facts asserted is ‘highly probable.'"  Weber v. Anderson, 269 N.W.2d 892, 895 (Minn. 1978).

            Khosa cites the statement from the Minnesota Supreme Court in Eriksen that the district court must "be persuaded by clear and convincing evidence that the imposition of a constructive trust is justified to prevent unjust enrichment."  337 N.W.2d at 674.  He argues that this statement shows that the clear-and-convincing-evidence standard applies only to the ultimate determination of whether a constructive trust exists, not to the findings of fact on which the decision is based.  But the Eriksen court made no statement regarding the standard of proof to be applied to the underlying facts, and Khosa has cited no other authority in support of his theory.  In any event, in similar cases we have applied the clear-and-convincing standard to the underlying factual findings of the district court.  See e.g., In re Estate of Savich, 671 N.W.2d 746, 752 (Minn. App. 2003); Rock v. Hennepin Broad. Assocs., Inc., 359 N.W.2d 735, 740 (Minn. App. 1984).  Thus, we conclude that the underlying facts, as well as the ultimate determination of whether a constructive trust exists, must be proved by clear and convincing evidence.

            As to the proper standard of review on appeal, the parties assert, and we agree, that findings of fact will not be set aside unless they are clearly erroneous.  Minn. R. Civ. P. 52.01; Spiess v. Schumm, 448 N.W.2d 106, 108 (Minn. App. 1989); Ferguson v. Shea, 374 N.W.2d 575, 576-77 (Minn. App. 1985).  "An appellate court will not overrule a trial court's factual findings unless, upon a review of the entire evidence, the appellate court is left with a definite and firm conviction that a mistake has been made."  In re Estate of Beecham, 378 N.W.2d 800, 802 (Minn. 1985).  We give deference to the district court in judging the credibility of a witness at trial, Minn. R. Civ. P. 52.01, because when the trial court has the "advantage of observing the witnesses and judging their credibility on a firsthand basis," its findings possess "a certain integrity not contained in the written record alone."  Hollom v. Carey, 343 N.W.2d 701, 704 (Minn. App. 1984).

            When the district court's decision is governed by a preponderance-of-the-evidence standard, we review the record for substantial evidence that this evidentiary burden was met.  In re Welfare of D.T.J., 554 N.W.2d 104, 107 (Minn. App. 1996) (addressing termination of parental rights).  "We require a different quantum of ‘substantial evidence' on appeal before we may uphold a decision for a case where a ‘clear and convincing' burden of proof applies in the district court."  Id. at 107-08.  Consequently, the burden of proof must be considered when determining whether there was substantial evidence to support the decision.  Id. at 108.  Indeed, "while this court will give some deference to the trial court, it will closely inquire into the sufficiency of the evidence to determine whether the evidence is clear and convincing."  In re Welfare of Clausen, 289 N.W.2d 153, 156 (Minn. 1980).

            Finally, the imposition of a constructive trust is an equitable remedy.  Dietz v. Dietz, 244 Minn. 330, 334, 70 N.W.2d 281, 285 (1955).  "Granting equitable relief is within the sound discretion of the trial court.  Only a clear abuse of that discretion will result in reversal."  Nadeau v. Ramsey County, 277 N.W.2d 520, 524 (Minn. 1979).  An abuse of discretion may occur when the findings are unsupported by the evidence or the law is applied improperly.  Pikula v. Pikula, 374 N.W.2d 705, 710 (Minn. 1985).

II.

            We next consider whether the district court's findings and conclusions are clearly erroneous, taking into account the clear-and-convincing-evidence standard of proof as discussed above.

            Generally, an interest in land must be created by a written instrument.  Minn. Stat. § 513.04 (2004).  Minnesota law prohibits unmarried parties who live together from acquiring rights in each other's property in contemplation of sexual relations unless there is a written agreement.  Minn. Stat. § 513.075 (2004).  Without such a written agreement, the courts are without jurisdiction to hear claims to such rights.  Minn. Stat. § 513.076 (2004).  These statutes apply when the cohabiting parties' sole consideration for a contract was their "contemplation of sexual relations . . . out of wedlock."  Eriksen, 337 N.W.2d at 674.

            All claims based on an unwritten agreement between cohabiting, unmarried couples, however, are not barred.  In re Estate of Palmen, 588 N.W.2d 493, 496 (Minn. 1999).  The prohibitions set forth in sections 513.075 and 513.076 "were not intended to apply to the facts . . . where the claimant does not seek to assert any rights in the property of a cohabitant but to preserve and protect her own property, which she acquired for cash consideration wholly independent of any service contract related to cohabitation."  Eriksen, 337 N.W.2d at 674.  In such a case, a district court may impose a constructive trust even when there is no writing to satisfy the statute of frauds by operation of law.  Dietz, 244 Minn. at 334, 70 N.W.2d at 285; Freundschuh v. Freundschuh, 559 N.W.2d 706, 711 (Minn. App. 1997), review denied (Minn. Apr. 24, 1997).  A constructive trust is an equitable remedy imposed to prevent unjust enrichment.  Dietz, 244 Minn. at 334, 70 N.W.2d at 285.  It "does not set aside the title of property, but instead proceeds on the theory that the title is held in trust for someone else to whom it rightfully belongs."  Freundschuh, 559 N.W.2d at 711.

            Crandall initially contends that the district court expressly refused to base its findings on credibility, citing comments that the district court made in a posttrial hearing disparaging the parties' credibility.  Despite these comments, the parties presented conflicting testimony that resulted in genuine issues of material facts that the district court had to resolve.  In doing so, the district court was required to, and did, make credibility determinations.  See Minn. R. Civ. P. 52.01.

              Crandall argues that the district court failed to apply the clear-and-convincing-evidence standard to the facts and that the findings, which are clearly erroneous, are not supported by clear and convincing evidence.  She challenges the determination that the parties had an oral agreement to purchase the home, as well as the underlying facts.  Khosa testified that they had agreed to purchase the house together, while Crandall testified that they had not.  The district court ultimately credited Khosa's testimony but based it not only on the determination of credibility but also on underlying facts, many of which were undisputed.

            Crandall challenges the finding that Khosa negotiated the price of the house and that she was not present when this occurred.  There is conflicting testimony in the record on this specific fact, and the district court did not clearly err in crediting Khosa's testimony.  Indeed, most of the facts regarding the steps taken to purchase the house are undisputed.  First, the parties agreed that they looked at a number of houses together before deciding to buy the house at issue.  They agreed that they found it while visiting another property during an open house, at which time they met a realtor who was the father-in-law of the owner of the house that they ultimately bought.  Finally, Khosa testified, and Crandall acknowledged, that they both participated in at least some of the negotiation of the purchase price.

            Next, Crandall challenges the finding that Khosa's contribution of $10,000 to the down payment showed that he had an ownership interest and that he ultimately paid half of the $23,066.15 due at closing.  Again, we note that certain facts are undisputed as to $20,000 of the down payment.  It is undisputed that Khosa paid $10,000 to Crandall's parents after they gave Crandall $10,000 for the down payment.  At trial, the parties stipulated to this fact.  Crandall acknowledged that she told Khosa that, because he was not related to Crandall by blood or marriage, she could not accept $10,000 as a gift for the down payment.  Instead, the payment would have to go through her parents.

            Crandall testified that Khosa gave the $10,000 payment to her (through her parents) to eliminate her need to pay private mortgage insurance.  She argues that she knew nothing of the arrangement that Khosa would pay her parents $10,000 until after the closing.  We note that she testified that it was shortly before closing that she knew her parents were giving her $10,000 and that they had an agreement with Khosa.  Crandall also cites her parents' testimony that Khosa gave the money to her parents because he wanted to take care of their daughter and that he did not want his name on the title.  In contrast, Khosa testified that the parties had agreed to pay $20,000 as a down payment and that they would each contribute $10,000.  On these facts, it was not clearly erroneous for the district court to conclude that Khosa paid $10,000 to Crandall's parents because he was contributing that amount to pay half of the down payment. 

            Crandall also challenges the district court's determination that Khosa's payment of $750 per month into the parties' joint checking account, from which mortgage, utilities, and home-improvement expenses were paid, was an indication of joint ownership.  Crandall maintains that this monthly payment was merely a rental contribution.  In support of this position, she relies on the fact that the parties had established a joint checking account used to pay household expenses when they were living in the apartment before they purchased the home.  She also argues that Khosa paid a larger amount when they moved to the house because the cost of housing had increased, not because of joint ownership.  But Crandall admitted that, during this time, she never claimed the rental payments as income on her tax return or gave Khosa a renter's refund form.  She also acknowledged that she deposited the tax refunds that she received into the parties' joint checking account.  Khosa testified that they agreed to each deposit $750 per month into the checking account from which household expenses could be paid as part of their joint-ownership agreement.

            Crandall also argues that, based on the bank-account statements, she contributed more than Khosa did during the time they lived in the house.  But both parties testified that each party contributed $750 each month into the joint checking account.

            Finally, Crandall disputes the finding that Khosa's name was not on the title "because his poor credit rating would have prevented them from getting a loan."  She cites her testimony and that of her father as evidence that Khosa did not want to be on the title because he wanted to hide his assets from his former wife.  To the contrary, Khosa testified that his name was not on the title because Crandall told him that they would not be able to obtain a loan because of his bad credit.  So Crandall advised him to contribute by giving her parents $10,000, and they in turn would give the money to her.

            The district court, in making these findings, was presented with many undisputed facts.  These undisputed facts, together with the additional facts found by the district court, are supported by clear and convincing evidence.

            Taking these facts as found by the district court, we next consider whether the district court abused its discretion in ultimately imposing a constructive trust.  As the district court found, the facts in the case before us are remarkably similar to those in Eriksen.  There, the unmarried cohabitants agreed to purchase the property together but placed title in the man's name because the woman was still married and feared she would lose her welfare benefits.  Eriksen, 337 N.W.2d at 672.  They shared equally in the mortgage payments and other expenses.  Id. When the man died, the woman brought the action to establish a half interest in the house.  Id.  The Minnesota Supreme Court affirmed the imposition of a constructive trust and the award to the woman of a half interest in the property.  Id.

            Crandall distinguishes Eriksen on the ground that there were compelling reasons there that the cohabitant not be on the title, namely, that she was married.  She then argues that the case is similar to Hollom.  In Hollom, we held that sections 513.075 and 513.076 applied and that Eriksen was distinguishable.  343 N.W.2d at 704.  But the facts in Hollom are distinguishable.  First, the disputed property was not purchased jointly by both parties but had always been owned by one of the parties; second, there was never a clear understanding between the parties that the property would be jointly owned; and third, there were no extenuating circumstances justifying the lack of a written agreement between the parties.  Id.

            As in Eriksen, and in contrast to Hollom, the district court here first found that both parties paid equally in the purchase of the property, mortgage payments, home improvements, and utilities.  Second, the district court found that Khosa's name was not on the property because the parties believed they would not have been able to obtain a mortgage due to his bad credit rating.  Third, the district court found that there was an oral agreement that the parties would own the property jointly.  The district court concluded that, although no written agreement between the parties existed, based on Khosa's course of performance and his testimony, an oral agreement existed that his cash contributions would give him an interest in the home.  On this record, the district court's findings are not clearly erroneous, and its imposition of a constructive trust is not an abuse of discretion.

III.

            Crandall also challenges the district court's finding that the value of the property in July 2003 was $201,000.  The district court based this determination on a July 2004 appraisal.  Crandall contends that this valuation was clearly erroneous.  She notes that the parties purchased the property in 1999 for $129,000 and that Crandall testified at trial that the property was worth less than $200,000 in August 2003.  The district court sought additional evidence as to the value of the house from the parties, but they did not provide any.  The only appraisal evidence before the district court was the 2004 appraisal, and the district court's valuation is not clearly erroneous when it is based on the only current evidence available to it.

            Crandall maintains that the district court erred in failing to consider documentary evidence that she produced in her motion for amended findings.  We disagree.  A party may move for amended findings on the files and exhibits before the district court.  Minn. R. Civ. P. 52.02.  A motion for amended findings may not be based on newly discovered evidence that is not part of the record.  Otte v. Otte, 368 N.W.2d 293, 299 (Minn. App. 1985).  Instead, a claim of newly discovered evidence should be brought in a motion for a new trial.  See id.; Minn. R. Civ. P. 59.01(d).

            Crandall sought to introduce evidence to the district court regarding a second mortgage that Crandall secured after Khosa left the house, which contained another valuation of the property.  Khosa requested this information through discovery, and the district court ordered Crandall to produce it for trial.  But she did not do so.  At the hearing on the motion for amended findings, the district court indicated that it would not give Crandall another opportunity to submit evidence regarding the second mortgage and that its decision must be based on the evidence that was before it at trial.  The district court did not err in declining to consider this evidence produced for the first time in the motion for amended findings.

            Affirmed.

* Retired judge of the Minnesota Court of Appeals, serving by appointment pursuant to Minn. Const. art. VI, § 10.