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JUNKER v. CARLSON

Cite as 300 Neb. 423

Debra J. Junker et al., appellants, v. Elwyn Carl

Joel Carlson, defendants and third-party plainti

appellees, LS Partners, appellee, and

Carlson, also known as Mike Carl

third-party defendant, appelle

___ N.W.2d ___

Filed July 6, 2018. No. S-17-356.

1. Actions: Trusts: Equity. An action to impose a constructive trust is an 

equitable action.

2. Equity: Appeal and Error. On appeal from an equity action, an appellate court decides factual questions de novo on the record and, as to 

questions of both fact and law, is obligated to reach a conclusion independent of the trial court’s determination.

3. ____: ____. On appeal from an equity action, when credible evidence 

is in conflict on material issues of fact, the court considers and may 

give weight to the fact that the trial court observed the witnesses and 

accepted one version of the facts over another.

4. Trusts: Property: Title: Unjust Enrichment: Equity. A constructive 

trust is a relationship, with respect to property, subjecting the person 

who holds title to the property to an equitable duty to convey it to 

another on the ground that his or her acquisition or retention of the 

property would constitute unjust enrichment.

5. Trusts: Property: Title: Equity: Proof. Regardless of the nature of the 

property upon which a constructive trust is imposed, a party seeking to 

establish the trust must prove by clear and convincing evidence that the 

individual holding the property obtained title to it by fraud, misrepresentation, or an abuse of an influential or confidential relationship and 

that under the circumstances, such individual should not, according to 

the rules of equity and good conscience, hold and enjoy the property 

so obtained.

6. Appeal and Error. Appellate courts do not consider arguments and 

theories raised for the first time on appeal.

Nebraska Supreme Court Online Library

www.nebraska.gov/apps-courts-epub/

08/03/2018 09:08 AM CDT
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Cite as 300 Neb. 423

Appeal from the District Court for Kearney County: Terri S

Harder, Judge. Affirmed

George G. Vinton for appellants.

Steve Windrum, of Malcom, Nelsen & Windrum, L.L.C., for 

appellees Elwyn Carlson and Joel Carlson.

Donald J. Pepperl, P.C., L.L.O., for appellee SLS Partners.

Heavican, C.J., Miller-Lerman, Cassel, St

Funke, J

Cassel, J.

I. INTRODUCTION

A trust’s grantors and beneficiaries asserted claims for constructive trusts against other parties who had dealt with the 

trustee. After a bench trial, the district court dismissed the 

claims. Because we agree that the claims failed either for lack 

of proof or because of Neb. Rev. Stat. § 30-38,101 (Reissue 

2016), which protects third parties dealing in good faith with a 

trustee, we affirm.

II. BACKGROUND

In 1997, Dale E. Carlson and Carol A. Carlson (collectively 

Grantors), husband and wife, conveyed certain real estate to a 

trust known as Mill Creek Trust Company. Although the trust 

instrument is not a part of our record, evidence and testimony 

established that the intended beneficiaries of this trust were 

Grantors’ three children: Debra J. Junker, Lynn P. Carlson, and 

Mike Carlson. The conveyed real estate included farmland, 

several buildings, and one residential home. Grantors lived in 

this residential home until 2006.

The property was conveyed between trusts in order to 

avoid taxation and Grantors’ creditors until it was held by the 

Aebeskiver Company Trust (the Trust), of which Roger Wells 

(Trustee) was trustee. In his deposition, Trustee acknowledged 
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that the property was conveyed to the Trust for the benefit of 

Grantors’ children.

Grantors and two of the three beneficiaries brought suit 

against (1) Trustee, (2) a buyer of the property, and (3) tenants 

who had leased a portion of the property. There were two other 

defendants whom we do not address, because they were dismissed from the suit prior to judgment and are not relevant for 

the purposes of this appeal. The suit asserted that the defendants had knowingly participated in certain transactions which 

constituted a breach of Trustee’s fiduciary duties. The third 

beneficiary was later added as a third-party defendant, but his 

interests aligned with the other trust beneficiaries and he was 

represented by their counsel at trial. For convenience, we will 

refer to the Grantors and the three beneficiaries collectively as 

“Claimants.” And we will disregard technical distinctions in 

pleadings between the trust beneficiaries.

After judgment was entered against Trustee in his separate 

bankruptcy action, he was dismissed from the suit. After the 

dismissal of Trustee, the contested issues were limited to (1) 

whether the transactions constituted a breach of trust and, if 

so, whether the buyer and tenants knowingly participated in 

those breaches and (2) whether the buyer and tenants were 

unjustly enriched.

1. Overview of Transac

In December 2001, Trustee leased the farmland portion of 

the trust property to Joel Carlson and Elwyn Carlson (collectively Tenants), with the lease to expire in 2007. While 

the lease was still in place, Trustee sold the property to SLS 

Partners (Buyer), a company that provides capital to property 

owners by buying their property and leasing it back with an 

option to repurchase. The terms of the sale were such that, in 

exchange for the property, Buyer paid $200,000, as well as 

executed a lease and an option agreement. Buyer agreed to 

lease the property back to the seller for $26,405 per year, and 

the agreement provided the seller with the option to purchase 
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the property back in the first 4 years of the lease at a price 

which increased each year the option was not exercised.

In July 2004, even though the property had been sold to 

Buyer, Trustee entered into an agreement to amend the original lease with Tenants, extending it from February 2007 to 

February 2014.

In January 2007, the Trust exercised its option to repurchase 

the trust property from Buyer for $294,000 and simultaneously sold it to a third party for $515,000. In order to clear 

the title prior to closing, the Trust negotiated with and paid 

Tenants $152,000 for the relinquishment of the remainder of 

the extended lease.

2. District Court Judgm

In their operative complaint, Claimants alleged that Buyer 

participated in Trustee’s breaches of trust and improper exercise of trust powers, resulting in a net damage to the beneficiaries of $133,000. They asserted similar claims against Tenants 

and alleged that they incurred $152,000 in damages. In their 

prayer for relief, Claimants requested to have said moneys 

“held in trust for them.”

After a bench trial, the district court dismissed the case, 

finding that Buyer and Tenants were all entitled to protection under § 30-38,101, which protects third parties dealing in 

good faith with a trustee. Additional facts and findings from 

the trial and the judgment, styled as an order, are set forth in 

our analysis.

Claimants appealed, and we moved the case to our docket.1

III. ASSIGNMENTS OF ERROR

Claimants assign, combined and restated, that the district 

court erred in failing to (1) find that Buyer acted in bad faith 

when purchasing the trust property, (2) find that Tenants acted 

in bad faith when they entered into the lease extension with 

1 See Neb. Rev. Stat. § 24-1106(3) (Supp. 2017).
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the Trust and when they received $152,000 for the relinquishment of the lease, (3) find that the $152,000 payment made 

to Tenants constituted unjust enrichment, (4) find that the 

$152,000 payment to Tenants was made under duress and coercion, and (5) grant judgment in favor of Claimants.

IV. STANDARD OF REVIEW

[1] The parties disagree on whether the asserted claims 

sounded in law or equity. The discrepancy apparently stems 

from the parties’ attempts to separately categorize the claims 

for restitution and unjust enrichment as theories of recovery 

alternative to a constructive trust. However, these “alternative” theories of recovery are grounded in Claimants’ action 

to impose a constructive trust,2 as evidenced by the prayer for 

relief that the alleged damages be “held in trust for them.” And 

an action to impose a constructive trust is an equitable action.3

[2,3] On appeal from an equity action, an appellate court 

decides factual questions de novo on the record and, as to 

questions of both fact and law, is obligated to reach a conclusion independent of the trial court’s determination.4

 And in 

such an appeal, when credible evidence is in conflict on material issues of fact, the court considers and may give weight to 

the fact that the trial court observed the witnesses and accepted 

one version of the facts over another.5

V. ANALYSIS

[4,5] A constructive trust is a relationship, with respect to 

property, subjecting the person who holds title to the property 

2 See, e.g., Manker v. Manker, 263 Neb. 944, 644 N.W.2d 522 (2002) (constructive trust is equitable remedy intended to prevent unjust enrichment).

3 In re Claims Against Pierce Elevator, 291 Neb. 798, 868 N.W.2d 781 

(2015).

4 Estates at Prairie Ridge Homeowners Assn. v. Korth, 298 Neb. 266, 904 

N.W.2d 15 (2017).

5 O’Connor v. Kearny Junction, 295 Neb. 981, 893 N.W.2d 684 (2017).
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to an equitable duty to convey it to another on the ground 

that his or her acquisition or retention of the property would 

constitute unjust enrichment.6 Regardless of the nature of 

the property upon which a constructive trust is imposed, a 

party seeking to establish the trust must prove by clear and 

convincing evidence that the individual holding the property 

obtained title to it by fraud, misrepresentation, or an abuse of 

an influential or confidential relationship and that under the 

circumstances, such individual should not, according to the 

rules of equity and good conscience, hold and enjoy the property so obtained.7

We have previously held that a constructive trust may be 

imposed where (1) a third party acquires trust property from 

a trustee, (2) the third party had notice that the transfer is 

in breach of trust, and (3) the beneficiary of the trust can in 

equity compel the third party to restore the property to the 

trust.8 But a third party “who in good faith and for value 

deals with a trustee, without knowledge that the trustee is 

exceeding or improperly exercising the trustee’s powers is 

protected from liability as if the trustee properly exercised 

the power.” 9

In this case, it is undisputed that both Buyer and Tenants 

received interest in trust property from Trustee. However, 

Buyer and Tenants assert that they had no knowledge Trustee’s 

actions were breaches of trust and that they are protected by 

§ 30-38,101, because they dealt with Trustee in good faith. 

Therefore, the issues are whether Buyer and Tenants were 

unjustly enriched and, if so, whether they were nonetheless 

protected by § 30-38,101.

6 United Gen. Title Ins. Co. v. Malone, 289 Neb. 1006, 858 N.W.2d 196 

(2015).

7 Id.

8 See Bend v. Marsh, 145 Neb. 780, 18 N.W.2d 106 (1945).

9 § 30-38,101(a).
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1. Entitlement to Constru

Trust Against B

In their brief on appeal, Claimants maintain that the sale 

of the real estate to Buyer and the following lease and option 

were not executed in good faith and were breaches of trust of 

which Buyer had actual knowledge. However, the evidence 

is unclear whether the sale was in fact a breach of trust, let 

alone whether Buyer had reason to believe that it constituted a 

breach of trust. In fact, the record is replete with testimony and 

evidence that Grantors knew of and participated in the sale of 

the land to Buyer.

Grantors were present when Buyer inspected the land before 

the sale, and Carol testified that Trustee explained the transaction to them “[j]ust about word for word” the way that Buyer’s 

counsel did in his opening statement at the bench trial. In his 

opening statement, Buyer’s counsel stated:

[Buyer] buys the property, [Buyer] leases the property 

back to the seller for a period of years, and during the 

lease the seller is given an option to repurchase the 

property with the option price usually escalating on an 

annual basis.

[Buyer] is in the business to make money. Their objective is to receive or make approximately 18 percent return 

on their investment. [Buyer] wants to make their investment return. They do not want to own the real estate.

Dale also testified that while Buyer’s partners were inspecting the property, they mentioned that they were interested in 

purchasing it. At that point in time, Dale asked Trustee, “‘What 

is going on?’” and Trustee supposedly responded, “‘I’m the 

trustee. I can do what I want.’” When Dale asked Trustee why 

the property needed to be sold, Trustee responded, “‘Well, 

I’m just doing it.’” Although Dale testified at trial that he did 

not agree to sell the land in 2004, he testified in an earlier 

affidavit that he “‘still had strong faith in the trust arrangement and in [Trustee] as trustee through 2005.’” Dale also 
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admitted that he did not consult an attorney about Trustee’s 

actions until 2007.

One of Buyer’s partners testified that both Trustee and Dale 

had agreed to the terms of the sale before Buyer came to look 

at the property. The partner reiterated the terms of the agreement in Dale’s presence and testified that Dale expressed that 

he thought it was “‘a great deal.’” According to the partner, 

Dale was “high” and “excited” about making an investment in 

some sort of medical device, and he wanted the deal to close 

quickly so that he could get the money for that investment. 

Dale allegedly asked the partners whether they would be interested in investing too, but they declined.

As the sale proceeded, Buyer relied on counsel, the seller’s counsel, and the title companies to facilitate the closing process. Before closing, an agent of the title company 

called Trustee’s counsel to acquire a corrective deed. Three 

weeks later, Grantors executed a warranty deed, granting the 

property to the Trust. Then, on the day of closing, Grantors 

executed an affidavit stating, among other things, that they 

were the owners and sellers of the trust property and that there 

were no encumbrances on the land. When confronted with the 

document at trial, Carol acknowledged that her signature was 

on the affidavit, but stated that she could not remember signing it.

Finally, the closing statement shows, and Dale testified, that 

$35,000 of the proceeds from the sale was used to pay an earlier judgment debt of Dale’s.

On this evidence, the district court found that Grantors were 

participants, and not simply unknowing bystanders, to the deal 

with Buyer. We agree. It would be difficult to find Buyer had 

notice that Trustee was exceeding or improperly exercising his 

authority in the sale where Grantors personally prepared documents necessary for closing.

Claimants additionally argued that Buyer should have 

known that the sale was a breach of trust, because Buyer 

purchased the land for less than half the market value, leased 
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the property back for more than the Trust was receiving from 

Tenants, granted an option to purchase “with a steep escalating 

option price,” and received “an excessive investment return.” 

However, these arguments attack the propriety of the sale, and 

a party “who in good faith deals with a trustee is not required 

to inquire into the extent of the trustee’s powers or the propriety of their exercise.”10

Because Buyer dealt in good faith with Trustee and had no 

reason to believe they participated in a breach of trust, Buyer 

was protected under § 30-38,101. The district court did not 

err in dismissing the claims for a constructive trust against 

Buyer.

2. Entitlement to Constru

Trust Against T

[6] Claimants assert that Tenants were unjustly enriched 

when they received the payment of $152,000 for the relinquishment of their lease, because (1) the original lease, which 

was drafted by one of the Tenants, was unfair and constituted 

a violation of an attorney or trusted relationship; (2) the lease 

extension and relinquishment lacked consideration; (3) Tenants 

had knowledge that the Trust did not own the land when they 

entered into the agreement to extend the lease; and (4) the 

relinquishment payment was made under duress and coercion. 

However, Claimants failed to plead their theory of duress 

and coercion in the court below. Because appellate courts 

do not consider arguments and theories raised for the first 

time on appeal,11 we decline to consider the theory of duress 

and coercion.

(a) Original Lease

We first dispose of Claimants’ attack upon the original lease 

with Tenants. Claimants complain that Joel served as Dale’s 

10 § 30-38,101(b).

11 Tolbert v. Jamison, 281 Neb. 206, 794 N.W.2d 877 (2011).
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attorney and abused a trusting relationship when he wrote an 

unfair lease. In the argument section of their brief, Claimants’ 

sole basis for claiming the lease was unfair was that it contained a provision allowing Tenants to terminate the lease under 

certain circumstances. However, Tenants never terminated the 

lease under that provision. Accordingly, even assuming that 

Joel abused a trusting relationship and that the particular lease 

provision was unfair, we fail to see how Tenants were unjustly 

enriched by this provision.

(b) Consideration for Lease Extension 

and Relinquishment

Claimants next argue that Tenants were unjustly enriched 

because they were paid $152,000 to relinquish a lease that they 

paid nothing to obtain. However, this argument lacks merit, 

because there was adequate consideration for both the extension of the lease and the relinquishment.

When Tenants entered into the amendment that extended the 

term of the original lease, they agreed to pay rent in exchange 

for the Trust’s leasing the farmland to them for the new duration of the lease. According to Claimants’ argument, there 

must be some extra consideration, apart from the terms contained within the original lease, in order for there to be consideration for the extension. They cite no authority to support that 

proposition, and we have not found any.

There was also adequate consideration for the relinquishment. Under the original lease and its amendment, Tenants 

had the right to farm the land until February 2014. In 

exchange for the relinquishment of that right, the parties 

negotiated that Tenants would be paid $152,000. Joel testified that this amount was based off the amount of projected 

earnings from farming the ground. Because the $152,000 

payment compensated Tenants for the lost profits resulting 

from the loss of the right to farm the ground, we conclude 

that Tenants were not unjustly enriched by retaining that 

payment.
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(c) Validity of Lease Extension

In the remaining argument regarding lease extension, the 

issue is whether Tenants were aware, at the time of the extension, that the Trust did not own the property and that Trustee 

no longer had authority to execute the extension. In our de 

novo review, we conclude that the evidence was insufficient to 

establish that knowledge.

Tenants testified that at the time of the extension, they 

believed that the Trust still owned the land and that Trustee 

had the authority to enter into the lease, because that is what 

Dale represented to them. They testified that they did not discover that the land had been sold to Buyer until they went to 

the “ASCS office” to “sign up” the farmland for an incentive 

program, which was after they had entered into the extension. 

And, as the district court noted, there was no reason to think 

that Tenants would knowingly enter into a lease with someone 

who neither owned the property nor had the legal authority to 

bind the owner.

Because Claimants failed to prove that Tenants were 

unjustly enriched, it is unnecessary to consider whether they 

were also protected by § 30-38,101. The district court did not 

err in dismissing the claims for a constructive trust against 

Tenants.

VI. CONCLUSION

For the reasons set forth above, we affirm the district court’s 

judgment dismissing the claims set forth in the operative 

complaint.

Affirmed

Wright and Kelch, JJ., not participati