MAHAFFEY v DeLEEUW

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No. 12995 I N THE SUPREME COURT OF THE STATE OF M N A A OTN 1975 T E M MAHAFFEY, a s Guardian o f t h e HL A E s t a t e s o f VALARIE and VAUGHN DeLEEUIJ, M N E DeLEEAbJ and BEVERLY DeLEEUW , OT i n d i v i d u a l l y and a s A d m i n i s t r a t r i x of t h e E s t a t e o f TIEMAN DeLEEVrd, Deceased, P l a i n t i f f s and Respondents, -vs - ANNIE DeLEEUW, Defendant and A p p e l l a n t . Appeal from: D i s t r i c t Court o f t h e T h i r t e e n t h J u d i c i a l D i s t r i c t , Honorable C h a r l e s Luedke, Judge p r e s i d i n g . Counsel o f Record: For Appellant : Moses, Kampfe, T o l l i v e r and Wright, B i l l i n g s , Montana D. Frank Kampfe argued, B i l l i n g s , Montana For Respondents : James J. Palmersheim argued, B i l l i n g s , Montana Submitted: Decided : Filed: *, /' Clerk September 29, 1975 ' M r . J u s t i c e John Conway Harrison d e l i v e r e d t h e Opinion of t h e Court. This i s an appeal from a judgment of t h e d i s t r i c t c o u r t , Yellowstone County, Hon. Charles Luedke, presiding. The i s s u e here i s whether t h e r e was s u f f i c i e n t c r e d i b l e evidence t o support t h e d i s t r i c t c o u r t ' s f i n d i n g s of f a c t , conc l u s i o n s of law and judgment ordering defendant t o reconvey c e r t a i n r e a l property t o h e r deceased s o n ' s e s t a t e and h e i r s a t law. She appeals. Defendant t a k e s i s s u e with t h e c o u r t ' s f i n d i n g of f a c t No. 10 and conclusions of law Nos. 2 , 3 , and 4 , b u t t h e p r i n c i p a l i s s u e i s w h e t h e r ' t h e r e was s u f f i c i e n t evidence t o support t h e d i s t r i c t c o u r t ' s decision. Defendant Annie DeLeeuw i s t h e mother of Tieman DeLeeuw, H e r e i n a f t e r he w i l l be r e f e r r e d t o a s Tim. deceased. T i m married Thelma Jean Mahaffey i n 1946, they had t h r e e c h i l d r e n , Montey, and twins Vala-rie and Vaughn. November 1966. The marriage ended i n divorce i n T i m was l a t e r married f o r a s h o r t time t o a woman named Ginger, which was terminated by an annulment paid f o r by Annie, h i s mother. O February 18, 1970 he married Beverly, n t h e a d m i n i s t r a t r i x of h i s e s t a t e and one of respondents here. This marriage terminated with ~ i m ' sdeath i n June 1971. During Thelma and ~ i m ' smarriage they developed s e v e r a l businesses and acquired both business and r e s i d e n t i a l p r o p e r t i e s . T i m e s t a b l i s h e d and operated a p r i v a t e garbage hauling business f o r t h e B i l l i n g s suburban a r e a not having municipal s e r v i c e s . year they operated a l a r g e Christmas t r e e business. Each Much of t h e financing of t h e s e businesses was through ~ i m ' smother, Annie. Thelma worked i n ~ i m ' so f f i c e answering t h e telephone and handling t h e books. From t h e very beginning of t h e i r business ventures they employed James Hoffman, a licensed public accountant, f o r t h e i r bookkeeping and accounting records and t a x matters. Sometime ,in 1965 T i m and Thelma separated and i n 1966 she f i l e d f o r a divorce r e q u e s t i n g p a r t i t i o n of a l l r e a l property and an e q u i t a b l e d i v i s i o n of a l l property, both r e a l and personal t h a t t h e p a r t i e s had acquired during t h e marriage. Immediately a f t e r t h e divorce and p a r t i t i o n a c t i o n was f i l e d , Annie f i l e d a debt a c t i o n a g a i n s t both of them a l l e g i n g some $50,000 of p r e e x i s t i n g indebtedness. Negotiations between t h e p a r t i e s r e s u l t e d i n an agreement i n November 1966, i n which Annie completely r e l e a s e d and discharged t h e o b l i g a t i o n of Thelma. She dismissed t h e debt a c t i o n w i t h p r e j u d i c e , being f u l l y s e t t l e d on t h e merits. Thelma and T i m s e t t l e d t h e i r property d i f f e r e n c e s by p a r t i t i o n i n g one of t h e i r p r o p e r t i e s , a 14 a c r e t r a c t c a l l e d t h e "Rims" property, w i t h Thelma r e c e i v i n g t h e family home and 8 a c r e s and T i m r e c e i v i n g 6 a c r e s . Thelma a l l e g e s t h a t she withdrew h e r p a r t i t i o n a c t i o n on a l l t h e rest of t h e property and quitclaimed t h e same t o Tim with t h e understanding t h a t i t remain a s s e c u r i t y f o r t h e i r children. There i s nothing i n w r i t i n g t o t h i s e f f e c t . The divorce followed with T i m making support payments i n t h e amount of $160 per month f o r t h e t h r e e c h i l d r e n . P l a i n t i f f s ' complaint o r i g i n a l l y requested t h a t f i v e s e p a r a t e p a r c e l s of land be reconveyed, b u t i n p r e t r i a l discovery i t was learned t h a t t h e "Cabin" property and t h e " ~ e i g h t s " o r I1 Shop" property had been s e t t l e d between T i m and Annie and t h a t only t h r e e p r o p e r t i e s were a t i s s u e : #I. Lots 5,6 and 7 , B 1 . 39, Orig.. .Town, B i l l i n g s 82. NE 114 NE 114, Sec. 29 R. #3. 26E T r a c t 1,Cert. Survey 1085 "Office property" $14,536 "~lue Creek" "Rims 9,642 " The record c l e a r l y i n d i c a t e s t h a t a s t o a l l f i v e p r o p e r t i e s Annie gave e i t h e r p a r t i a l o r complete f i n a n c i a l a s s i s t a n c e t o T i m ' s e f f o r t s t o purchase t h e property. As t o t h e above t h r e e p r o p e r t i e s , f o r t h e purposes of t h i s opinion w e w i l l n o t e here t h a t they were both pre and post 1966, t h e d a t e of t h e property s e t t l e m e n t heretofore referred to. The "Blue Creek" property involving 40 a c r e s was purchased by T i m and Thelma i n 1960. Although i t was i n T i m and ~ h e l m a ' s name, t h e p z ~ h a s emoney of $4,000 was advanced by Annie. Tim was unable t o pay Annie and on August 9, 1968, by deed, T i m and Thelma t r a n s f e r r e d t h e property t o Annie. Since t h a t d a t e , she has paid t h e t a x e s on t h a t property. The ' l ~ i m s " c o n s i s t i n g of 14.6 a c r e s , was purchased i n 1954. Although Thelma was vague on where t h e money came from t o purchase t h i s property, t h e record i n d i c a t e s t h a t Annie sold an apartment house t o r a i s e t h e money f o r T i m t o make t h i s purchase. None of t h i s was r e p a i d t o Annie, and T i m and Thelma t r a n s f e r r e d by warranty deed 5.67 a c r e s of t h i s property t o Annie on August 9, 1968. The remainder of t h e 14.6 a c r e s had been conveyed t o Thelma by t h e property settlement of 1966. The t h i r d piece o f property i s what i s r e f e r r e d t o a s t h e "Office Property". This property was purchased i n 1951 by T i m and t h e record i n d i c a t e s t h a t over t h e period of purchasing t h i s property T i m became delinquent i n h i s payments and had t o c a l l on h i s mother t o h e l p make t h e s e payments. I n 1966, T i m borrowed $6,500 from Annie with t h e "Office Property" a s c o l l a t e r a l and a mortgage pursuant t o t h i s arrangement was f i l e d . Neither t h e down payment, any i n t e r i m payments, nor i n t e r e s t had been paid a t t h e time of ~ i m ' sdeath, except t h e s m of $650. u This property was conveyed t o Annie by warranty deed on August 9, 1968. With t h i s background a s t o t h e t h r e e p a r c e l s of property i n q u e s t i o n , we now r e t u r n t o t h e November 1, 1966, out-of-court s e t t l e m e n t between Annie, Tim and Thelma and how i t a f f e c t e d T i m and Annie's f i s c a l operations a f t e r t h a t date. By t h a t agreement Thelma was r e l i e v e d of any f i s c a l o b l i g a t i o n s , but T i m assumed t h e o b l i g a t i o n s t o h i s mother. convey t h e T i m was required by t h e agreement t o 11 Shop" property t o Annie; t o pay a l l t h e remaining mortgage o b l i g a t i o n s ; and t o pay Annie $100 per month u n t i l t h e mortgage terminated. H e f a i l e d t o pay e i t h e r t h e mortgage o r t h e $100 per month, r e s u l t i n g i n cash disbursements by Annie of over $10,000. O November 29, 1966, T i m signed a promissory n o t e along n w i t h t h e mortgage, and received $6,500 f o r t h e "Office" property. This sum never was repaid. Shortly t h e r e a f t e r i n 1967, Annie paid ~ i m ' ssecond wife, Ginger, t h e sum of $1,300 f o r what appears t o be a s e t t l e m e n t i n an annulment of t h e second marriage. During t h e two years a f t e r t h e divorce from Thelma through 1968, i t appears from checks introduced a t t h e t r i a l and o t h e r records introduced t h a t Annie financed Tim i n amounts a l l e g e d t o range from $30,000 t o $50,000. I n l a t e 1968, an agreement was made between T i m and Annie, previously noted, where T i m i n an e f f o r t t o s e t t l e with h i s mother, conveyed over t o Annie t h e f i v e p a r c e l s of land. This settlement was handled by Attorney Charles F. Moses and h i s testimony i n d i c a t e d t h a t i t was a business t r a n s a c t i o n , voluntary on t h e p a r t of both p a r t i e s , with no undue i n f l u e n c e , fraud o r d e c e i t involved by e i t h e r party. M r . Moses, who drew up t h e agreement, made no r e f e r e n c e t o any t r u s t agreement o r any p o s s i b l e reconveyance of t h e property. I t was a f i n a l agreement t o s e t t l e a debt s i t u a t i o n between t h e p a r t i e s and i n t h e record we can f i n d no proof of any f o r c e , coercion o r undue i n f l u e n c e on t h e p a r t of Annie i n t h i s t r a n s a c t i o n . From t h a t d a t e on Annie paid a l l t h e property t a x e s , due and p a s t due, and from t h a t d a t e t o t h e t i m e of ~ i m ' sdeath Annie continued t o help T i m i n h i s business. Defendant a l l e g e s t h e d i s t r i c t c o u r t e r r e d i n i t s conclusion^ of law. W agree. e Conclusion No. 4 found t h a t a " r e s u l t a n t t r u s t " was c r e a t e d by t h e conveyances with t h e defendant a s a c o n s t r u c t i v e trustee. Section 86-210, R.C.M. 1947, provides: 11 Involuntary t r u s t r e s u l t i n g from fraud, e t c . One who gains a t h i n g by fraud, a c c i d e n t , mistake, 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 , i s , u n l e s s he has some o t h e r o r b e t t e r r i g h t t h e r e t o , an involuntary t r u s t e e of t h e t h i n g gained, f o r t h e b e n e f i t of t h e person who would o t h e r wise have had i t . 11 From t h e reading of s e c t i o n 86-210, i t i s obvious t h a t i f we a r e t o s u s t a i n t h e d i s t r i c t c o u r t by imposing a c o n s t r u c t i v e t r u s t on t h e s e p r o p e r t i e s , then fraud must be found. This t h e t r i a l c o u r t f a i l e d t o do and we n o t e t h a t n e i t h e r t h e pleadings nor proof show a f i n d i n g of an "accident", fluence", "mistake", "undue " 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 " a s t o come w i t h i n t h e provisions of s e c t i o n 86-210. I n McReynolds v. McReynolds, 147 Mont. 476, 482, 414 P.2d 531, a c a s e involving t r a n s f e r s of property w i t h i n a family, J u s t i c e C a s t l e s sa.id: "Just a s t h e w r i t t e n statements of t h e defendants were n o t admissible t o vary t h e t e r m s of t h e deeds, n e i t h e r a r e t h e i r o r a l statements. Where t h e r e i s nothing ambiguous o r u n c e r t a i n i n t h e terms of a deed i t speaks f o r i t s e l f , and par01 evidence tending t o show a p r i o r o r contemporaneous o r a l agreement o r t a c i t understanding with r e s p e c t t o t h e terms of t h e conveyance i s inadmissible. I I I n Bodine v. Bodine, 149 Mont. 29, 39, 422 P.2d 650, t h i s Court s a i d : "The deed h e r e must be construed a s i t i s w r i t t e n . W can n e i t h e r put words i n t o t h e deed which a r e n o t e t h e r e , n o r can we put a c o n s t r u c t i o n on words c o n t r a r y t o t h e i r obvious meaning. 23 Am.Jur.2d Deeds, $161, pp. 209-210." I n i t s f i n d i n g s of f a c t Nos. 5 and 10 and i t s conclusion of law No. 3, t h e c o u r t found t h a t t h e r e e x i s t e d between Annie and Tim, "a mutual r e l a t i o n s h i p of confidence, t r u s t and f i n a n c i a l t r a n s a c t i o n s unique t o c l o s e , personal i n t r a - f a m i l y t i e s . " As a r e s u l t of t h i s t r u s t r e l a t i o n s h i p , according t o t h e c o u r t , Annie induced Tim t o t r a n s f e r c e r t a i n p r o p e r t i e s t o her. The record does n o t support e i t h e r t h e f i n d i n g s o r t h e conclusion of law. This Court i n McReynolds i s i n accord with a u t h o r i t y t h a t a c o n f i d e n t i a l r e l a t i o n s h i p between g r a n t o r and g r a n t e e who a r e r e l a t i v e s i s not s u f f i c i e n t enough t o f i n d undue i n f l u e n c e on t h e p a r t of t h e Mollendorf v. Derry, 95 Idaho 1, 501 P.2d 199; Dickey v. grantee. Clarke, 65 Idaho 247, 142 P.2d 597. Under Montana law and t h e f a c t s h e r e , we hold t h e d i s t r i c t c o u r t e r r e d i n i t s f i n d i n g s of f a c t and conclusions of law t h a t defendant induced h e r son t o t r a n s f e r c e r t a i n p r o p e r t i e s t o h e r and t h a t a r e s u l t a n t t r u s t was c r e a t e d making h e r a c o n s t r u c t i v e t r u s t e e f o r s a i d property. The cause i s r e t u r n e d t o t h e d i s t r i c t c o u r t t o comply with t h i s opinion. . .... b? ' k. Chief 2 . JustYce P L. ; Justices. ,, I * * <- >*- &- $. % . t-. . . M. J u s t i c e Frank I. Haswell, d i s s e n t i n g : r I dissent, I n m view t h e r e i s s u b s t a n t i a l evidence supporting t h e y d i s t r i c t c o u r t ' s f i n d i n g s of f a c t ; i t s conclusions of law based on such f a c t s a r e c o r r e c t ; and i t s r e s u l t i n g judgment should be affirmed . A s I see i t , t h i s c a s e t u r n s p r i m a r i l y on t h e f a c t s . Admittedly t h e evidence i s c o n f l i c t i n g . The d i s t r i c t judge, a s t r i e r of t h e f a c t s , resolved t h e s e c o n f l i c t s i n favor of p l a i n t i f f s . The function of t h e Supreme Court on appeal i s t o review t h e record and determine whether t h e r e i s s u b s t a n t i a l c r e d i b l e evidence supporting t h e t r i a l c o u r t ' s f i n d i n g s of f a c t . Richardson v. Howard Motors, I n c , , 163 Mont. 347, 516 P.2d 1153 and cases c i t e d t h e r e i n . I n an e q u i t y c a s e t h i s Court must review a l l questions of f a c t and law, and must s u s t a i n t h e t r i a l c o u r t ' s f i n d i n g s of f a c t u n l e s s t h e r e i s a decided preponderance of evidence a g a i n s t them. B a r r e t t v, Zenisek, 132 Mont. 229, 315 P.2d 1001. A summary of t h e p r i n c i p a l f i n d i n g s of f a c t by t h e t r i a l c o u r t i s : (1) That a mutual r e l a t i o n s h i p of t r u s t and confidence e x i s t e d between T i m and Annie. (2) That T i m was a heavy d r i n k e r who could n o t o r would n o t a s s e r t h i s own judgment i n t h e f a c e of Annie's arguments and remonstrances concerning h i s personal l i f e and business a f f a i r s . (3) That i n August 1968, Annie induced T i m t o t r a n s f e r t o h e r a l l r e a l e s t a t e standing i n h i s name by r e p r e s e n t i n g t h a t i t was f o r h i s own p r o t e c t i o n and l e d him t o b e l i e v e t h a t she would reconvey i t back t o him a t t h e proper t i m e . (4) That conveyance was made without c o n s i d e r a t i o n and with t h e understanding t h a t Annie would reconvey t h e property back t o T i m on request. (5) That between t h e d a t e of T i m ' s t h i r d marriage i n 1970 and t h e d a t e of h i s sudden and unexpected death i n 1971, Annie refused T i m ' s demand f o r reconveyance of t h e property. The evidence supporting t h e s e f i n d i n g s i s : (1) The f i r s t f i n d i n g i s undisputed. (2) The second f i n d i n g i s supported by t h e testimony of Thelma Mahaffey, ~ i m ' sf i r s t wife t o whom he was married f o r 20 y e a r s , and from t h e death c e r t i f i c a t e l i s t i n g a c u t e alcoholism a s a c o n t r i b u t i n g cause of death. (3) The t h i r d f i n d i n g i s supported by t h e testimony of James A. Hoffman, t h e l i c e n s e d public accountant who kept t h e books and records f o r T i m ' s b u s i n e s s e s , including accounts between Annie and T i m , f o r about 20 years and who prepared both ~ i m ' sand Annie's income t a x r e t u r n s . Hoffman t e s t i f i e d t h a t i n 1968 Annie t o l d him t h a t t h e F o p e r t y t r a n s f e r "was only temporary, t h a t i t was going t o be t r a n s f e r r e d back t o [Tim]"; t h a t so f a r a s h i s books ref l e c t e d , t h e r e was " s t i l l a balance due from Annie t o T i m of $1,967.69"; and t h a t a l l p r e e x i s t i n g recorded indebtedness of T i m t o Annie had been completely paid and discharged. Beverly DeLeeuw Pulver, ~ i m ' swidow, t e s t i f i e d she asked Annie why "the property was i n her name, ~ i m ' sproperty was i n h e r name, and she s a i d 'For h i s p r o t e c t i o n ' ; and I s a i d 'why h i s protect i o n ? You know h e ' s a grown man' and she s a i d he awed money and i f he had i t i n h i s name then he would g e t a l i e n a g a i n s t him * Jc *.I1 Thelma Mahaffey, Tim's f i r s t w i f e , t e s t i f i e d t o a conversat i o n she had with Annie during t h e time of Tim's marriage t o h i s second w i f e , when Annie s a i d "there would be no one touch h i s property o r ever t a k e anything away from him because she had i t a l l t i e d up. 11 (4) The f o u r t h f i n d i n g i s supported by t h e foregoing testimony of t h e accountant, Hoffman; h i s ledger and accounting s h e e t s ; t h e property v a l u a t i o n testimony of William F. Stevens, t h e a p p r a i s e r ; t h e 1966 agreement, r e l e a s e and s a t i s f a c t i o n of judgment by Annie i n her debt a c t i o n a g a i n s t both T i m and Thelma; and t h e corroborating testimony of Thelma Mahaffey. (5) The f i f t h f i n d i n g i s supported by t h e testimony of Thelma Mahaffey t o t h e e f f e c t t h a t T i m s o advised h e r s h o r t l y b e f o r e h i s death. I would hold t h a t t h e foregoing c o n s t i t u t e s s u b s t a n t i a l > c r e d i b l e evidence supporting t h e d i s t r i c t c o u r t ' s f i n d i n g s of f a c t . Given t h e s e f i n d i n g s of f a c t , t h e d i s t r i c t c o u r t ' s conc l u s i o n s of law follow a s n i g h t follows day. The p e r t i n e n t s t a t u t e provides : "86-210. Involuntary t r u s t r e s u l t i n g from f r a u d , e t c . 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 , mistake, 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 , i s , u n l e s s he has some o t h e r o r b e t t e r r i g h t t h e r e t o , an i n v o l u n t a r y t r u s t e e of t h e t h i n g gained, f o r t h e b e n e f i t of t h e person who would otherwise have had it." Whether t h e circumstances h e r e a r e c h a r a c t e r i z e d a s c o n s t r u c t i v e f r a u d , undue i n f l u e n c e , o r v i o l a t i o n of a t r u s t i s beside t h e point. Where, a s h e r e , a t r a n s f e r i s made between two persons s t a n d i n g i n a c o n f i d e n t i a l r e l a t i o n s h i p without v a l u a b l e c o n s i d e r a t i o n and induced by a promise t o reconvey, e q u i t y imposes a r e s u l t i n g t r u s t on t h e p r o p e r t y , not because t h e p a r t i e s agreed t h a t t h e property would be held i n t r u s t , b u t t o prevent u n j u s t enrichment of t h e malefactor a t t h e expense of t h e i n j u r e d p a r t y . Robuck v. Dennis, 149 Mont. 247, 425 P.2d 327; Bradbury v. Nagelhus, 132 Mont. 417, 319 P.2d 503. The abuse o f t h e c o n f i d e n t i a l r e l a - t i o n s h i p by f a i l u r e t o f u l f i l l t h e promise t o reconvey i s t h e subs t a n c e of t h e wrong f o r which e q u i t y w i l l impose a r e s u l t i n g t r u s t . S c o t t on T r u s t s , Third E d i t i o n , V. 1, 544.2. I n m view, t h e m a j o r i t y h e r e has c u t o f f t h e i n h e r i t a n c e y a r i g h t s of t h e widow and c h i l d r e n by making/factual determination c o n t r a r y t o t h a t of t h e d i s t r i c t c o u r t . Therefore, I d i s s e n t . Justice.

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