Title: JOAN BAKER, an individual, as a representative shareholder and as personal representative of the estate of Alvin R. Baker V. AYRES AND BAKER POLE AND POST, INC., a Wyoming corporation; LARRY W. AYRES, an individual; and KARAN L. AYRES, an individual

State: wyoming

Issuer: Wyoming Supreme Court

Document:

JOAN BAKER, an individual, as a representative shareholder and as personal representative of the estate of Alvin R. Baker V. AYRES AND BAKER POLE AND POST, INC., a Wyoming corporation; LARRY W. AYRES, an individual; and KARAN L. AYRES, an individual2007 WY 185170 P.3d 1247Case Number: 06-260Decided: 11/16/2007
OCTOBER 
TERM, A.D. 2007

 
 
JOAN BAKER, an 
individual, as a representative shareholder and as personal representative of 
the estate of Alvin R. Baker,

 
 
Appellant

(Plaintiff),

 
 
v.

 
 
AYRES AND BAKER 
POLE AND POST, INC., a Wyoming corporation; LARRY W. AYRES, an 
individual; and KARAN L. AYRES, an individual,

 
 
Appellees

(Defendants).

 
 
Appeal 
from the DistrictCourtofUintaCounty

The 
Honorable Dennis L. Sanderson, Judge

 
 
Representing 
Appellant:

Clark D. Stith, Rock Springs, Wyoming.

 
 
Representing 
Appellees:

Ford T. Bussart, Rock Springs, Wyoming.

            

Before VOIGT, C.J., and GOLDEN, 
HILL, KITE, and BURKE, JJ.

 
 
BURKE, 
Justice, delivers the opinion of the Court; KITE, Justice, files a dissenting 
opinion.

 
 
BURKE, 
Justice.

[¶1]           
This is a 
dispute over the proceeds of an insurance policy on the life of the late Alvin 
Baker.  His widow, Appellant Joan 
Baker, contends that the district court misapplied claims of promissory estoppel 
and constructive trust when it awarded the insurance proceeds to Appellees Larry 
Ayres, Karan Ayres, and Ayres and Baker Pole and Post, Inc.  We agree, and reverse the judgment, 
remanding the case to the district court for entry of judgment in favor of Ms. 
Baker.

ISSUES

[¶2]           
Ms. Baker 
lists ten separate issues in her brief, but two of them are 
dispositive:

1.         
Whether the district court erred by invoking promissory estoppel to 
defeat enforcement of a contract based upon pre-contract formation events; and 

2.         
Whether the district court erred in imposing a constructive 
trust.

As explained below, our decision on 
these two issues also resolves Ms. Baker's remaining 
issues.

FACTS

[¶3]           
This case 
has been before us previously.  The 
facts set forth in Baker v. Ayres and 
Baker Pole and Post, Inc., 2005 WY 97, 117 P.3d 1234 (Wyo. 2005), will be 
summarized here.  Joan Baker and 
Karan Ayres are sisters.  Their 
husbands, Alvin Baker and Larry Ayres, owned and operated a successful lumber 
business.  In 1972, they organized 
the business as a partnership.  In 
1993, they incorporated as Ayres and Baker Pole and Post, Inc. ("the 
Company").  The Bakers owned half of 
the shares as tenants by the entireties, and the Ayres owned the other half, 
also as tenants by the entireties.  

[¶4]           
The two 
couples executed a Stock Purchase Agreement soon after the Company was 
incorporated.  This Agreement 
provided that, upon the death of either Mr. Baker or Mr. Ayres, the 
Company would be obligated to purchase the widow's shares at fair market 
value.  It further provided 
that:

In order to assure that all or a 
substantial part of the purchase price for the shares of a deceased shareholder 
will be available immediately in cash upon their death, the Company has, or 
plans on procuring insurance upon the lives of Larry W. Ayres and Alvin R. 
Baker, which will be owned by the Company, the proceeds of which will be used to 
purchase said deceased shareholder's interest.

After Mr. Baker died in 2000, the 
Company was obligated to purchase Ms. Baker's shares for fair market value, 
which was determined by an arbitrator to be $719,000. 

[¶5]           
The 
Company, however, never procured the life insurance policies that, according to 
the 1993 Stock Purchase Agreement, were meant to fund the purchase.  Mr. Baker did have his own life 
insurance policy, but the Company was not the beneficiary.  Rather, Ms. Baker was the named 
beneficiary, and the $500,000 proceeds were paid to her.  Mr. Ayres also had his own life 
insurance policy.  The named 
beneficiary of that policy was not the Company, but the partnership under which 
the business had operated before it was incorporated.  Both men procured these policies before 
the Company was incorporated.

[¶6]           
The 
Company and the Ayres asserted that the proceeds of Mr. Baker's life insurance 
policy were intended to be used to purchase the Bakers' shares in the 
Company.  By their calculation, the 
Company did not owe Ms. Baker $719,000, but only $219,000, the difference 
between the $719,000 fair market value and the $500,000 insurance proceeds.  Ms. Baker maintained that the Company 
owed her the full $719,000, without reduction for the life insurance proceeds, 
and she initiated litigation against the Company and the Ayres.  The trial court ruled that 
Mr. Baker and Mr. Ayres had explicitly agreed that their life 
insurance policies would fund the buy-out provisions of the Stock Purchase 
Agreement.  Finding that the Bakers 
had breached this agreement, the trial court entered summary judgment in favor 
of the Company and the Ayres.

[¶7]           
On Ms. 
Baker's appeal of that summary judgment ruling, we held that the Stock Purchase 
Agreement clearly and unambiguously obligated the Company to procure and own 
life insurance policies on Mr. Baker and Mr. Ayres, and that the Company had 
breached that obligation.  
Accordingly, we ruled that Ms. Baker was entitled to judgment as a matter 
of law on her breach of contract claim.  
Id., ¶ 23, 
117 P.3d  at 1242.  But while we 
resolved the breach of contract claim, we also noted that the Company and the 
Ayres had asserted claims of promissory estoppel and constructive trust, and 
found that disputed issues of material fact precluded summary judgment on those 
claims.  Accordingly, we remanded 
the case for trial on the claims of constructive trust and promissory 
estoppel.  

Id., ¶ 33, 117 P.3d  at 1244.  

[¶8]           
On 
remand, the district court held a bench trial.  In a detailed decision containing 
findings of fact and conclusions of law, it ruled in favor of the Company and 
the Ayres on the claims of promissory estoppel and constructive trust.  Ms. Baker now appeals that 
judgment.

STANDARD OF 
REVIEW

[¶9]           
In 
reviewing a judgment in which the trial court has set forth findings of fact and 
conclusions of law, we review conclusions of law de novo.  We review findings of fact for clear 
error.  A finding of fact is clearly 
erroneous when, although there is evidence to support it, the reviewing court on 
the entire evidence is left with the definite and firm conviction that a mistake 
has been committed.  Rolfe v. Varley, 860 P.2d 1152, 1156 
(Wyo. 
1993).  When reviewing questions of 
law de novo, no deference is afforded 
to the decision of the trial court.  
Jacoby v. Jacoby, 2004 WY 140, 
¶ 7, 100 P.3d 852, 855 (Wyo. 2004).  

DISCUSSION

[¶10]       
We begin 
our discussion by recalling our previous ruling that the 1993 Stock Purchase 
Agreement clearly and unambiguously required the Company to purchase and own 
insurance policies on the lives of Mr. Baker and Mr. Ayres, and that the 
Company had breached that obligation.  
Baker I, ¶ 22, 117 P.3d  
at 1241-42.  We also ruled that 
Ms. Baker was entitled to receive the proceeds of Mr. Baker's life 
insurance policy.  Id., ¶ 20, 
117 P.3d  at 1241.  The question we 
remanded to the trial court was whether the Company, through application of 
promissory estoppel or constructive trust, was entitled to apply the insurance 
proceeds Ms. Baker had received against the amount the Company owed her for the 
purchase of her shares.  Id., ¶ 25, 
117 P.3d  at 1242.  We now review the 
district court's ruling in favor of the Company and the Ayres, first as to 
promissory estoppel, and second as to constructive trust.

Promissory 
Estoppel 

[¶11]       
The 
required elements of promissory estoppel are:  (1) the existence of a clear and 
definite agreement; (2) proof that the party urging the doctrine acted in 
reasonable reliance on the agreement; and (3) equities supporting the 
enforcement of the agreement.  
Id., ¶ 32, 
117 P.3d  at 1244.  In this case, the questions to be 
answered by the trial court were "whether the parties clearly and definitely 
agreed that the existing insurance policies would be used to fund the buy-out; 
if that was the agreement, whether [the Company and] the Ayres reasonably relied 
on Mr. Baker's statements that he would transfer his policy to the Company; 
and whether the equities supported enforcing any such agreement."  Id.

[¶12]       
The trial 
court made two findings of fact relating to the existence of a clear and 
definite agreement.  It found 
that:

At the April 2, 1993 meeting, 
[Mr. Baker] and [Mr. Ayres] explicitly stated and agreed that their 
existing policies were going to be used to fulfill the "plans on procuring 
insurance" provision of the agreement.  
The Stock Purchase Agreement was signed by [the Bakers] and [the Ayres] 
on April 26, 1993.

It also found:

that in 1988 and again in 1993 there 
was an express promise by [Mr. Baker] to [Mr. Ayres] to procure insurance on his 
life in the approximate sum of $500,000 with the partnership, and later the 
corporation, named as the owner and beneficiary.  

Significantly, both agreements 
referred to by the trial court were made before the 1993 Stock Purchase 
Agreement.  Our precedent is clear 
that promissory estoppel applies only where there is no contract.  E.g., Sowerwine v. Keith, 997 P.2d 1018, 1021 
(Wyo. 2000); Parkhurst v. Boykin, 
2004 WY 90, ¶ 21, 94 P.3d 450, 460 (Wyo. 2004).  "Since promissory estoppel applies only 
if a contract does not exist, a promissory estoppel argument in this case, where 
the evidence demonstrates the existence of a contract, is incongruous."  Frost Constr. Co. v. Lobo, Inc., 951 P.2d 390, 397 (Wyo. 1998).  When the parties establish obligations 
by contract, those obligations should be enforced as set forth in the contract, 
see, e.g., East Broadway Assocs. v. Dowell, 2002 WY 
106, ¶ 18, 49 P.3d 1004, 1008 (Wyo. 2002), and promissory estoppel will not 
serve to substitute different or contrary obligations.  Accordingly, the promissory estoppel 
claim asserted by the Company and the Ayres is simply not supported by findings 
of fact that, before the 1993 Stock Purchase Agreement, Mr. Baker made clear and 
definite agreements to transfer his life insurance policy to the Company.  Where the express written agreement 
obligates the Company to procure life insurance policies, promissory estoppel 
does not shift that obligation to the Bakers.

[¶13]       
As the 
Company and the Ayres correctly assert in their brief, however, promissory 
estoppel may arise from the conduct of parties after the execution of a written 
contract.  Parties to a written 
contract may agree to change that contract.  In the proper circumstances, the change 
may be enforced through promissory estoppel.  See, e.g., Verschoor v. Mountain West Farm 
Bureau Mut. Ins. Co., 907 P.2d 1293, 1298 (Wyo. 1995).

[¶14]       
  However, the district court made no 
findings of fact regarding any subsequent agreement to alter the provisions of 
the 1993 Stock Purchase Agreement.  
It did recite that "in the corporate meetings in 1998, 1999 and 2000," 
Mr. Baker repeatedly told Mr. Ayres that the Company was the 
beneficiary on his policy.  
Considering this finding in the light most favorable to the Company and 
the Ayres, it indicates that Mr. Baker did not tell the truth.  It does not establish any clear and 
definite agreement to transfer his life insurance policy to the Company, or an 
agreement of any sort to alter the parties' obligations under the 1993 Stock 
Purchase Agreement.  The Company and 
the Ayres have not pointed to any evidence in the record indicating that any new 
agreement was made after the 1993 Stock Purchase Agreement, and our review of 
the record yielded none.

[¶15]       
In sum, 
the trial court's findings regarding Mr. Baker's agreements prior to the 1993 
Stock Purchase Agreement do not support the promissory estoppel claim asserted 
by the Company and the Ayres, and there is no evidence of any subsequent 
agreement.  Having failed to 
establish the existence of a clear and definite agreement, the first element of 
promissory estoppel, the Company and the Ayres did not sustain that 
claim.

Constructive 
Trust

[¶16]       
A 
constructive trust is an equitable remedy imposed to compel a person who 
unfairly holds a property interest to hold that property in trust for the person 
for whom, in equity and good conscience, it should be held.  Baker I, ¶ 26, 117 P.3d  at 1242 (citing 
Rossel v. Miller, 2001 WY 60, 
¶ 13, 26 P.3d 1025, 1028 (Wyo. 2001)). The established elements required of 
a constructive trust are these:  
(1) a promise, either express or implied; (2) a transfer made in 
reliance on that promise; and (3) unjust enrichment.  Baker I, ¶ 26, 117 P.3d  at 
1242.

[¶17]       
With 
regard to the third element of constructive trust, unjust 
enrichment occurs when "a party receives something of value without payment, which was accepted and 
used so as to unjustly enrich the recipient of the goods or services."  McNeill Family Trust v. Centura 
Bank, 2003 WY 2, ¶ 26, 
60 P.3d 1277, 1288 (Wyo. 2003) (quoting Metz Beverage Co. v. Wyoming 
Beverages, Inc., 2002 WY 
21, ¶ 36, 39 P.3d 1051, 1061 (Wyo. 2002)) (emphasis added).  To determine whether Ms. Baker was 
unjustly enriched by receiving the insurance proceeds, it is therefore necessary 
to determine who paid the insurance premiums.  It was for that reason that our previous 
opinion in this case took note of evidence  presented by the Company and the Ayres 
about the insurance payments:

As proof 
that the Company paid the premiums for Mr. Baker's life insurance, the 
Ayres submitted copies of the Company's general ledger and cancelled checks 
written on its account showing premium payments to [the insurance company] in 
the years 1990 and 1993 through 2000.

Baker 
I, 
¶ 29, 117 P.3d  at 1243.  We 
also noted Ms. Baker's evidence to the contrary:

[A]lthough 
the premiums for Mr. Baker's policy were paid by the business, her husband told 
her they were treated as part of his wages and he paid taxes on the 
amounts.

Id., ¶ 30, 117 P.3d  at 1244.  This gave rise to one of the disputed 
issues of material fact that prompted our remand to the trial 
court.

[¶18]       
At the 
trial on remand, the evidence was clear that Mr. Baker and Mr. Ayres paid their 
own insurance premiums.  The checks 
were written on the Company account, but the parties do not dispute that the 
amounts were accounted for either as salary paid to Mr. Baker and 
Mr. Ayres, or as loan repayments to them.  In practical terms, Mr. Baker and Mr. 
Ayres paid the insurance premiums out of their own pockets.  On this point, the trial court made the 
following finding of fact:

From 
1990 to 2000, the premiums on the policies were paid by either the partnership 
or the corporation.  The funds for 
these premium payments were charged to corporate payroll between 1993 and 1996 
and thereafter treated as corporate repayment to [Mr. Baker] and [Mr. Ayres] of 
loans made by each of them from bonus distributions received at the end of the 
corporate tax year.

The 
court's meaning here is not entirely clear.  To the extent this finding was meant to 
indicate that Mr. Baker and Mr. Ayres did not pay the insurance premiums, it is 
directly contrary to the evidence, and clearly erroneous.  To the extent it was meant to indicate 
that Mr. Baker and Mr. Ayres did pay their own insurance premiums, it is fully 
supported by the evidence, but it is also fatal to the constructive trust 
claim.  Because the insurance 
premiums were paid by Mr. Baker, not the Company, Ms. Baker did not receive 
something of value without paying for it, and was not unjustly enriched.  Having failed to prove unjust 
enrichment, the third element of constructive trust, the Company and the Ayres 
did not sustain their constructive trust claim.

[¶19]       
Finally, 
while we do not decide the matter on this basis, we do question whether the 
equities in this case favor any of the parties.  The Company failed to procure the life 
insurance policies, in breach of the 1993 Stock Purchase Agreement.  Mr. Baker and Mr. Ayres share the 
responsibility for the Company's breach. Neither Mr. Baker nor 
Mr. Ayres transferred his life insurance policy to the Company, or named 
the Company as beneficiary.  It is 
not readily apparent that equity should enforce an obligation against the Bakers 
that the Ayres also failed to meet.

Remaining 
Issues

[¶20]       
Ms. Baker 
asserts that much of the evidence introduced at trial was inadmissible under the 
parol evidence rule, the best evidence rule, the Dead Man's Statute, or other 
evidentiary directives.  It is 
unnecessary to resolve these evidentiary issues because, admissible or not, the 
evidence does not support the claims of the Company and the Ayres.  Ms. Baker also contends that the 
trial court's findings of fact are contrary to the evidence.  Again, it is unnecessary to reach this 
issue because the findings, even if correct, fail to support claims of 
promissory estoppel and constructive trust.

[¶21]       
Ms. Baker 
also requests that we direct the trial court to reinstate its previous judgment 
in favor of Ms. Baker for purposes of establishing its priority date.  The record suggests that the previous 
judgment in favor of Ms. Baker was not vacated or otherwise disturbed, so there 
may be no need to reinstate it.  
However, the trial court is in a better position to make that 
determination, and may do so on remand.  
Further, Ms. Baker invites us to consider whether, as the prevailing 
party, she is entitled to recover her attorney's fees under the 1993 Stock 
Purchase Agreement.  This, too, is a 
question that the trial court may consider on remand.

CONCLUSION

[¶22]       
For the 
reasons discussed above, we reverse the judgment in favor of the Company and the 
Ayres.  We remand to the trial court 
for entry of judgment in favor of Ms. Baker, and for such additional proceedings 
as may be needed to resolve this dispute.

  

KITE, J., dissenting. 

[¶23]  I do not agree that the district court's 
findings fail to support the promissory estoppel claim.  The district court found that in 1988 
and 1993, during his partnership with Mr. Ayres and before the partners entered 
into an agreement to incorporate the business, Mr. Baker made an express promise 
to procure insurance on his life naming the partnership as the beneficiary.  Later, during discussions about 
incorporating the business, the partners agreed that their existing policies 
would be used to fund the corporation's buy/sell agreement.  Evidence was presented showing that the 
policies pre-dated incorporation, were in the partnership name or were being 
paid for by the partnership, and the partners agreed the business would be the 
beneficiary  all of this before the stock purchase agreement was executed.  The stock purchase agreement, which 
included the agreement to transfer the policies from the partners and/or the 
partnership to the company, was made between the stockholders of the corporation 
 Mr. Baker, Mr. Ayres, Mrs. Baker and Mrs. Ayres.  The agreement to procure individual life 
insurance policies with the partnership as the beneficiary was made between Mr. 
Ayres and Mr. Baker.  I would hold 
that a promissory estoppel claim based upon a prior agreement between two 
partners comprising a partnership is cognizable despite a later agreement 
between the soon-to-be shareholders to incorporate the partnership.  I do not agree that the case authorities 
cited by the majority preclude that outcome.   

[¶24]   Sowerwine and Frost involved written agreements 
entered into between two parties, one of whom later claimed the written 
agreement omitted a provision of the parties' actual agreement.  Under those circumstances, where the 
same parties were involved in both the written agreement and the allegedly 
omitted provision, we held a promissory estoppel claim was not cognizable 
because of the existence of the contract.  
In Parkhurst, another case 
involving two parties to an alleged agreement, we reiterated the rule that 
promissory estoppel does not apply if a contract exists.  In that case, we concluded the party 
claiming that a contract existed failed to carry his burden of proving an oral 
contract sufficiently definite to avoid the statute of frauds.  Having concluded no contract existed, we 
considered the promissory estoppel claim but found insufficient evidence to 
support the claim. 

[¶25]   In contrast to those cases, the 
present case involved two agreements  the first between two partners in which 
they agreed to purchase insurance naming the partnership as beneficiary, and the 
second between four corporate stockholders in which they agreed the corporation 
would procure insurance the proceeds of which would be used to fund the buy/sell 
provision of the stock purchase agreement.  
I would hold that the existence of the 1993 stock purchase agreement does 
not extinguish a promissory estoppel claim based on the prior partnership 
agreement. 

[¶26]   In Verschoor v. Mountain West Farm Bureau Mut. 
Ins. Co., 907 P.2d 1293 (Wyo. 1995), a ranch employee who was injured while 
performing his job elected not to undergo treatment after his employer told him 
the ranch's insurance would not cover him.  
Upon being advised later by his employer that there might be coverage 
after all, the employee contacted the Mountain West representative who told him 
to get the treatment, send in the bills and Mountain West would pay them.  The employee did as he was told.  Mountain West paid $5,000 but declined 
further payment.  The employee 
brought claims against Mountain West based upon promissory estoppel and 
negligent misrepresentation theories.  
The district court rejected the promissory estoppel claim finding, as a 
matter of law, the theory would not apply to create coverage not found within 
the insurance contract.  We agreed 
that estoppel would not operate to create additional insurance in an existing 
insurance contract.  Id. at 1298.  
However, separate and apart from the insurance contract entered into 
between the ranch and Mountain West, we held that genuine issues of fact existed 
as to whether the insurance company representative's promises to the employee 
"resulted in the formation of an entirely new contract of insurance" 
under the theory of promissory estoppel.  
Id.  We said, "[the employee] may collect 
upon Mountain West's promise to him to pay for his surgery and rehabilitation, 
provided he can make his case for that promise to a jury of his peers."  Id.      

[¶27]   Applying this reasoning, it is 
clear the stock purchase agreement between the stockholders could not operate to 
require Mr. Baker to procure insurance on his life naming the company as 
beneficiary.  However, 
notwithstanding the stock purchase agreement, I would hold that the district 
court's factual findings supported its conclusion that Mr. Baker's promise to 
Mr. Ayres resulted in an entirely separate agreement enforceable under the 
theory of promissory estoppel. 

[¶28]   I also disagree with the majority's 
conclusion that the district court erred in imposing a constructive trust.  The 
majority's conclusion that the trial court was wrong hinges on the third element 
necessary for imposition of a constructive trust, i.e., unjust 
enrichment, which occurs when "a party receives something of value without 
payment, which was accepted and used so as to unjustly enrich the recipient of 
the goods or services."  McNeill Family Trust v. Centura Bank, 
2003 WY 2, ¶ 2, 60 P.3d 1277, 1287 (Wyo. 2003).  The majority concludes Mrs. Baker did 
not receive something of value "without 
payment" when she received the insurance proceeds because the evidence showed 
Mr. Baker paid the insurance premiums.  In my view, Mrs. Baker received 
something of value without payment and was unjustly enriched when she received 
both the insurance proceeds, which were intended to fund the corporate buyout, 
and payment for the value of the Bakers' corporate 
shares.