Title: ECKART v HUBBARD

State: montana

Issuer: Montana Supreme Court

Document:

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: September 14, 1979 Decided: 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 insis- tence, 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 terms of a divorce decree between Hubbard and h i s second wife Constance. The decree provided f o r support payments f o r t h e support of t h e couple's two children, Roderick and Michael Jean. A s t h e payments became delinquent, l i e n s attached t o Hubbard's land. Some of t h e l i e n s on land o t h e r than t h e two t r a c t s were released after t h e divorce. Richard Eklund, Constance's f a t h e r , t e s t i f i e d t h a t Constance released these 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 placed 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 never released, and a w r i t t e n t r u s t w a s never drawn. O n October 18, 1953, Hubbard married h i s t h i r d wife, Faye. Three children were born of t h i s marriage, two of whom survived: John, born March 1, 1955, and Mary, born on J u l y 4 , 1956. Hubbard died i n t e s t a t e on April 3 , 1972, i n Cascade County, survived by h i s wife Faye and four children. P r i o r t o h i s death, he informed Alden Lohrke on a t l e a s t two occasions t h a t he had hoped the two t r a c t s of land would go t o h i s children. One of these conversations took place approximately two o r t h r e e years a f t e r Hubbard conveyed t h e land t o t h e Lohrkes. The o t h e r took place between 1970 and 1972. 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 casual, "off t h e cuff" 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 he meant by " h i s children." Knowing Hubbard r a t h e r w e l l , Lohrke f e l t t h a t the t e r m might be representa- t i v e of a c l a s s and included not only h i s present b u t any f u t u r e children. With r e s p e c t t o t h e second conversation, Lohrke understood Hubbard t o mean a l l four of h i s children. O n May 18, 1973, Hubbard's son Roderick, who i s a p r a c t i c i n g attorney i n San Diego, obtained without consider- a t i o n from Alden Lohrke two quitclaim deeds regarding 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 Ina Lohrke, who had died i n t e s t a t e on June 13, 1966. The proceedings were i n s t i t u t e d f o r t h e purpose 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 land, s i n c e t h e Lohrkes' daughter, Linda Russell, had acquired an i n t e r e s t i n t h e land upon her mother's death. Linda, i n t u r n , quitclaimed h e r i n t e r e s t i n t h e two t r a c t s of land t o Roderick without consideration on June 1 4 , 1973. The Lohrkes t r a n s f e r r e d t h e lands t o Roderick with t h e understanding t h a t t h e t r a n s f e r s w e r e being made f o r t h e b e n e f i t of a l l f o u r children. Roderick, of h i s own v o l i t i o n , acquired the land i n t r u s t f o r t h e four children. I n a response t o a telephone c a l l from Faye concerning t h e land, Roderick wrote: "There i s n o t much I can do as long as t h e t i t l e i s i n Alden's name; t h e r e f o r e I suggest 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 property t o m e . . . I w i l l hold t h e property i n t r u s t f o r t h e children." Sometime later, 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 claimed t h e land f o r himself and Michael Jean because of t h e l i e n s f o r support payments on which h i s f a t h e r had been delinquent. Roderick i n s i s t s t h a t , a t t h e t i m e of t h e conveyances from t h e Lohrkes t o himself, he w a s unaware of t h e e x i s t e n c e of t h e l i e n s . When he became aware of them, he contends t h a t he informed Alden Lohrke of t h e l i e n s and t h a t Lohrke agreed t h a t t h e land should be Roderick's and Michael Jean's. Lohrke, on t h e o t h e r hand, denies t h e s e things. Roderick admits t h a t he took no a c t i o n of any kind t o enforce t h e l i e n s f o r t h e delinquent support payments when he served as t h e executor of h i s mother's estate i n 1973. H e explained t h a t he d i d n o t take any a c t i o n because Lohrke purportedly agreed t o t h e v a l i d i t y of h i s mother's l i e n s and t o t h e f a c t t h a t t h e land w a s h i s and Michael Jean'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 land, claiming t h a t they had an 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 land 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 delinquent support payments under t h e divorce decree between Hubbard and h i s second wife. A t t r i a l without jury on J u l y 10, 1978, t h e D i s t r i c t Court made t h e following findings: t h a t no t r u s t was cre- 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 it was immaterial whether a t r u s t w a s c r e a t e d because l e g a l t i t l e t o t h e property vested i n Hub- b a r d ' s e s t a t e upon h i s death and, under t h e laws of i n t e s - t a c y , Faye became e n t i t l e d t o one-third of t h e property and t h e c h i l d r e n shared equally i n t h e remainder; and, t h a t c o l l e c t i o n on t h e delinquent support payments was barred 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, a p p e l l a n t s appeal. The s i n g l e i s s u e presented f o r review i s whether 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 holding 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 property remained i n Hubbard's i n t e s t a t e estate. Our a t t e n t i o n i s f i r s t drawn t o t h e kinds 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 : voluntary t r u s t s , otherwise known as express t r u s t s , and involuntary t r u s t s , otherwise known as implied t r u s t s . Section 72-20-101, MCA; P l a t t v. P l a t t (1959), 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 of t r u s t s is t h a t voluntary o r express 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 clear and d i r e c t expression of i n t e n t by t h e t r u s t o r . Involuntary o r implied t r u s t s arise by operation of l a w and a r e concerned with implied o r presumed i n t e n t , o r a r e n o t concerned with i n t e n t a t a l l . Bogert on T r u s t s , 5 t h ed., S71, p. 262; s e c t i o n 72-20-103, MCA; P l a t t v. P l a t t , supra. Both kinds of t r u s t s , however, must be e s t a b l i s h e d by evidence which i s c l e a r , convincing, and p r a c t i c a l l y f r e e from doubt. F i r s t National Bank of Twin Bridges v. Sant (1973), 161 Mont. 376, 386, 506 P.2d 835, 841; B a r r e t t v. Zenisek (1957), 132 Mont. 229, 238, 315 P.2d 1001, 1006. Here a p p e l l a n t s seek t o have a t r u s t declared 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 allow both classes of t r u s t s t o be c r e a t e d with r e s p e c t t o r e a l prop- e r t y . Involuntary 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 implies 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 simply d e c l a r e s , employing t h e p r i n c i p l e s of 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 required. Voluntary t r u s t s , however, depend upon a w r i t t e n instrument f o r t h e i r c r e a t i o n . Section 72-24-102, MCA, provides: "No t r u s t i n r e l a t i o n t o r e a l property i s v a l i d u n l e s s c r e a t e d o r declared by: " (1) a w r i t t e n instrument, subscribed by t h e t r u s t e e o r by h i s agent t h e r e t o authorized by w r i t i n g ; " ( 2 ) t h e instrument 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) operation of law. " It i s clear t h a t t h e D i s t r i c t Court was c o r r e c t i n holding t h a t an express t r u s t w a s n o t c r e a t e d . Neither p a r t y introduced evidence of a w r i t t e n document i n which a t r u s t w a s c r e a t e d o r declared. What w a s introduced, r a t h e r , w a s simply testimony t h a t Hubbard had conveyed c e r t a i n land t o t h e Lohrkes which w a s l a t e r explained by an o r a l s t a t e - ment. Approximately two years a f t e r the conveyances, Hub- bard casually remarked t o Lohrke t h a t t i t l e t o the land was i n Lohrke's name and t h a t Hubbard wanted t h e land t o go t o h i s children. These a c t s a r e not 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 remains, however, t h a t an involuntary 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 property arise by operation of l a w and a r e of two kinds, r e s u l t i n g and constructive. P l a t t , supra. Constructive t r u s t s spring from fraud, mistake, undue influence, 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 . P l a t t , supra. Constructive t r u s t s occur where t h e p a r t i e s have expressed no i n t e n t t o create a t r u s t , nor does t h e c o u r t presume t h a t any i n t e n t existed. 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 an e q u i t a b l e r e s u l t . Bogert, supra, S71, p. 263. Section 72-20-111, MCA, provides: "One who gains a thing by fraud, accident, m i s - take, undue influence, 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 is, unless he has some o t h e r 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 thing gained f o r t h e b e n e f i t of t h e person who would have otherwise have had i t . " The evidence here f a i l s t o support t h a t a constructive t r u s t w a s created by t h e conveyances from Hubbard t o the Lohrkes. I n no way may it be s a i d t h a t Alden Lohrke gained t h e property by a wrongful act. Lohrke and Hubbard w e r e longtime f r i e n d s who had g r e a t confidence and t r u s t i n each other. Lohrke described Hubbard a s "close t o being 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 property t o Lohrke without h i s knowledge because Hubbard was confident t h a t it would be " i n good hands." The D i s t r i c t Court w a s c o r r e c t , therefore, i n holding t h a t no constructive t r u s t existed. A r e s u l t i n g t r u s t occurs where, as a r e s u l t of 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 achieve an e q u i t a b l e r e s u l t . Usually r e s u l t i n g t r u s t s involve cases where t h e p a r t i e s have used ambiguous language which t h e c o u r t con- s 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 expressed 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. Bogert, supra, 871, p. 262. Where an express 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 , t h e 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 successors i n i n t e r e s t i f he is dead, pro- vided t h a t t h e s e t t l o r has n o t expressly o r impliedly made a d i f f e r e n t d i s p o s i t i o n of t h e equitable i n t e r e s t under t h e t r u s t . "Where an express p r i v a t e t r u s t i s created gratu- i t o u s l y and it f a i l s f o r any reason, 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 prop- e r t y . S h a l l t h e t r u s t e e be allowed t o r e t a i n it f o r h i s own benefit? . . . Usually t h e only de- f e n s i b l e r e s u l t i s t o r e t u r n t h e 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 declare 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 he is dead, t o h i s successors i n i n t e r e s t , and they o f t e n do it on t h e theory of a r e s u l t - i n g t r u s t . . . "Thus, i f a s e t t l o r of a p r i v a t e t r u s t t r a n s f e r s property i n t e r vivos . . . t o named t r u s t e e s , as a g i f t , b u t f a i l s t o describe t h e benefici- aries a t a l l o r describes them i n an uncertain way . . . t h e usual r e s u l t i s t h a t t h e property 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 successors of t h e s e t t l o r who would take t h e kind of property which was t h e s u b j e c t matter of t h e t r u s t . " Bogert, supra, 875, pp. 281-282. I n t h i s case it w a s possible f o r t h e D i s t r i c t Court t o have declared a r e s u l t i n g t r u s t on behalf of defendants 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 could have been implied from t h e circumstances surrounding t h e con- veyances. Hubbard's statement t h a t he wanted the property t o go t o h i s "children" could a l s o have been regarded as s u f f i c i e n t l y d e f i n i t e t o include h i s children as a c l a s s o r h i s children a t t h e t i m e of t h e conveyances. However, t h e D i s t r i c t Court held instead t h a t it was immaterial whether a t r u s t w a s created because t i t l e t o t h e property vested i n Hubbard's e s t a t e upon h i s death and, under t h e laws of i n t e s t a c y , Faye became e n t i t l e d t o one- t h i r d of t h e property and t h e children shared equally i n t h e remainder. The D i s t r i c t Court d i d not err i n rendering such a holding. W e have seen, f o r t h e aforementioned reasons, t h a t t h e D i s t r i c t Court could n o t have declared e i t h e r an express t r u s t o r a constructive t r u s t was created. The circum- stances facing t h e c o u r t l e f t open only 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 existed. Whatever a l t e r - n a t i v e s o r devices 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 , the proceeds had t o r e t u r n t o Hubbard o r h i s probate 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 property 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 , it w a s immaterial whether a t r u s t w a s created. The property had t o be returned 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 created and t h a t t h e t r u s t property be returned t o Hubbard's estate t o be d i s t r i b u t e d according t o t h e laws of intestacy. Accordingly, w e d i r e c t the D i s t r i c t Court t o r e q u i r e t h a t Roderick Hubbard, presently holding t i t l e t o t h e two t r a c t s of land by q u i t c l a i m deed from Alden Lohrke, t a k e a l l a c t i o n s and execute a l l instruments necessary t o r e t u r n t h e property t o Hubbard's e s t a t e . Judgment affirmed. W e concur: Chief J u s t i c e ,' / J u s t i c e s