Court Opinion

ID: 880356
Source: CourtListenerOpinion
Date Created: 2013-06-05 00:04:19.820619+00
Date Added: 2024-06-11T12:50:49.961108
License: Public Domain

IN THE SUPREME COURT OF THE STATE OF MONTANA

CAROLINA GITTO,
                plaintiff and Appellant,
       -vs-
GUISEPPE GITTO AND KAREN GITTO,
                Defendants and Respondents.

APPEAL FROM:    District Court of the Fourth ~udicial~istrict,
                In and for the County of Missoula,
                The Honorable James B. wheelis, Judge presiding.
COUNSEL OF RECORD:
       For Appellant:
                 Sol   &   Wolfe; Michael Sol, Missoula, Montana
       For Respondent:
                Tipp, Frizzell      &   Buley; Thomas W. ~rizzell, is sou la,
                Montana

                                         Submitted on ~riefs: ~ p r i l27, 1989
                                           Decided:   August 31, 1989
Mr. Justice William E. Hunt, Sr. , delivered the Opinion of
the Court.

     Plaintiff, ~arolina itt to (Mother), filed a complaint in
the District Court of the Fourth ~udicial~istrict,c is sou la
County, seeking to impose a trust upon the home of the
defendants, ~uiseppe (Joe) and Karen itt to.     The ~istrict
Court, after a non-jury trial, granted judgment in favor of
Karen. Mother appeals. We affirm.
     The following issues are raised on appeal:
     1. When a mother loans money to her son for the
construction of the son's family home, is the district court
required to impose upon the home a resulting trust in favor
of the mother?
     2.   Is a wife unjustly enriched when, in a dissolution
action, she is awarded the family home that was constructed
in whole or in part out of funds loaned to her husband by his
mother, and, if so, does equity entitle the mother to a
constructive trust upon the home?
     On December 2, 1972, Joe and Karen itt to were married in
Floral Park, New York. In 1979, the couple moved to Montana,
where they purchased a parcel of land on a contract for deed.
Shortly thereafter, Joe contacted his mother, Carolina Gitto,
who lived in New York, to borrow money for the construction
of a home on the Montana property. Mother consented to lend
Joe money, which he orally agreed to repay.
     From 1979 through 1983, Joe continued to borrow money
from Mother. The parties understood that Joe would repay the
loans when he obtained steady employment. This understanding
was never reduced to writing.
     Karen was not a party to the loans. Although she knew
that Joe received money from Mother, she herself did not
request any money, nor was she sure how Joe spent the funds
he received from Mother.
     At one point, Mother sought to secure the loans by
asking Joe to place her name on the title to the Montana
property. Nothing in the record shows that Joe assented to,
or otherwise indicated he would honor, Mother's request.
Needless to say, he did not add her name to the deed. Even
so, she continued to loan him money.
     All in all, Joe borrowed a total of $76,630. During the
time he borrowed the money and continuing through the time of
this action, Joe's employment picture remained gloomy.     He
was only sporadically employed; the two heating businesses he
attempted to set up ended in failure.
     Joe's home life was not much better.         The record
reflects a tumultuous marital relationship. Joe displayed a
violent temper, which he occasionally exhibited by destroying
household furnishings.    Due in part to Joe's destructive
tendencies, the home in question had a value of only $45,000
at the time of this action.
     Joe and Karen separated in 1981, then reconciled.     In
1985, Karen petitioned to dissolve the marriage.     Slightly
over one month later, Mother filed a complaint against both
Joe and Karen, alleging that the loans were due and owing and
seeking to impose a trust on the family home. The ~istrict
Court granted Mother's motion to consolidate the two actions.
     On December 15, 1986, the dissolution trial was held.
Only Karen appeared at the hearing.       The District Court
awarded her the custody of the couple's minor child. The
court also granted her the family home, finding that she
required the home as a residence for herself and the child.
Karen was ordered to pay any debts she had incurred in the
marriage, with the exception of any claim of debt on the
family home, which the court found to be free of mortgage
indebtedness. The court ordered Joe to pay "his own debts
incurred by him."
     A non-jury trial on Mother's complaint was held on July
20, 1987. On March 29, 1988, the court issued its findings
of fact and conclusions of law, opinion and order. The court
held that the $76,630 constituted loans, not gifts, from
Mother to Joe, but that equity would not be served by
requiring Karen to repay the loans. Consequently, the court
refused to impose either a constructive or resulting trust on
the property. From this order, Mother appeals.
     The remedies of constructive and resulting trusts are
equitable in nature.      The standard of review governing
proceedings in equity is codified at S 3-2-204(5), MCA, which
directs the appellate court to review and determine questions
of fact as well as questions of law. Although this statute
appears to provide this Court with broad powers of review, we
continue to defer to the trial court's judgment in those
cases presenting close questions of fact.       We will not
disturb the district court's factual findings unless the
record establishes a decided preponderance of the evidence
against them.    Rase v. Castle ~ountain Ranch, Inc. (Mont.
1981), 631 P.2d 680, 684, 38 St.Rep. 992, 996.
     Before we begin our discussion regarding whether the
~istrict Court erred in failing to impose an involuntary
trust on the home, we note that the present case involves a
series of money transactions between a mother and son.
Generally, transfers of property between close relatives are
presumed to be gifts. Peterson v. Kabrich (1984), 213 Mont.
401, 407, 691 P.2d 1360, 1364; Platts v. Platts (1959), 134
Mont. 474, 480-81, 334 P.2d 722, 727. In this case, however,
the District Court found that Mother successfully rebutted
the gift presumption, a finding that the evidence in the
record amply supports. The following discussion is therefore
based on the conclusion that the transfers between Mother and
Joe constituted loans, not gifts.
     Montana law recognizes two general categories of
trusts: voluntary and involuntary. Voluntary trusts arise
by express agreement of the parties. Involuntary trusts, on
the other hand, arise independently of any express contract.
Lynch v. ~ e r r i g (1905), 32 Mont. 267, 274, 80 P. 240, 242.
Because involuntary trusts are not dependent upon an express
agreement, they may be proven by par01 evidence. The Statute
of Frauds plays no part in the finding of an involuntary
trust. Campanello v. Mercer (1951), 124 Mont. 528, 531, 227
P.2d 312, 314; Feeley v. Feeley (1924), 72 Mont. 84, 92, 231
P. 908, 910.
     within    the     category of    involuntary trusts, two
subclasses exist: resulting trusts and constructive trusts.
Mother argues that the ~istrict Court erred in failing to
impose either one or the other of these trusts upon the home
awarded to Karen in the dissolution decree.
     A resulting trust, also known as a purchase-money trust,
arises only in certain narrowly defined circumstances, which
have been codified by statute as follows:
     When a transfer of real property is made to one
     person and the consideration thereof is paid by or
     for another, a trust is presumed to result in favor
     of the person by or for whom such payment is made.
Section 72-24-104, MCA.
     A resulting trust exists only when one party provides
the consideration for the transfer of property. If A gives
money to B for the purchase of real estate and B puts the
title to the land in his name, presumably the parties intend
that B will merely hold the title in trust for A, and A will
retain the beneficial use of the property. See Meagher v.
Harrington (1927) 78 Mont. 457, 469-70, 254 P. 432, 435-36;
Lynch, 32 Mont. at 274, 80 P. at 242. ~ikewise,if A gives
money to B for the purchase of personal property, and B takes
title to the personal property in his name, B holds the title
in trust for A.     Meaqher, 78 at 469-70, 254 P. at 435.
However, if A gives money to B for the purpose of improving
property owned by B, a resulting trust does not arise. As
explained by a leading authority:
    If B has contracted for the purchase of land and
    entered into possession, and A thereafter, but
    before B gets a deed, pays for the construction of
    a house on the land, A has not paid the price of
    the equitable property interest which B then owns.
    A has merely added to the value of that interest,
    and the law does not infer an intent that B is to
    have an equitable interest by way of trust.      A
    fortiori, if the improvement paid for by A comex
    after B has obtained a deed, there is no resulting
    trust presumed for A.   The price of the land has
    already been paid by B. A is merely adding to the
    value of realty which is owned by B in fee simple
    absolute.
 G. Bogart, S 455, at 661-62 (rev. 2d ed. 1977).
     In the present case, Joe and Karen purchased the
underlying real property on a contract for deed from Joe's
aunt, Sally Travanto. The funds advanced by Mother were not
intended to be, nor were they actually, used for the purchase
of real property. Rather, Joe used the money to construct a
house on the land.    Because the parties applied the funds
only to improve the underlying real property, the District
Court did not err in refusing to impose a resulting trust on
the home.
     Unlike a resulting trust, a constructive trust may be
imposed in a wide variety of circumstances.         While a
resulting trust is said to be "intent enforcing," a
constructive trust is "fraud rectifying." Bogart, S 451 at
611. A constructive trust may be imposed regardless of the
intent of the parties. It is a remedy created by operation
of law to prevent the unjust enrichment of one party at the
expense of another.   Rust v. Kelly (Mont. 1987), 741 P . 2 d
786, 787, 44 St.Rep. 1471, 1473; Meagher, 78 Mont at 469-70,
254 P. at 435-36. As provided by statute:
     One who gains a thing by fraud, accident, mistake,
     undue influence, the violation of a trust, or other
     wrongful act is, unless he has some other or better
     right thereto, an involuntary trustee of the thing
     gained for the benefit of the person who would
     otherwise have had it.
Section 72-20-111, MCA.
     Before a court may impose a constructive trust, it must
determine whether the holder of the subject property has been
unjustly enriched.    Undoubtedly, in this case, Karen was
enriched when the court awarded her the home built with funds
furnished by Mother. But is Karen's enrichment unjust? We
think not.
     Injustice results from the performance of a wrongful
act.   Mother argues that the wrongful act in this case was
Joe's breach of the trust she reposed in him. She contends
that, by virtue of the fact that she was his mother, she
stood in a confidential relationship with Joe, a relationship
he violated when he failed to take steps to secure her
interest in the property.
     Even assuming that Mother is correct in asserting that
she maintained a confidential relationship with Joe, this
fact in and of itself will not give rise to a constructive
trust. Equity will not impose a constructive trust for the
violation of a confidential relationship unless the party
seeking to impose the trust shows by clear and convincing
evidence the exercise of fraud or undue influence. Mahaffey
v. DeLeeuw (1975), 168 Mont. 274, 280, 542 P.2d 103, 107.
     Here, Mother failed to introduce any evidence of fraud
or undue influence. Quite the contrary, the record indicates
that Mother entered into the series of money transfers with
her eyes wide open. Joe represented only that he would repay
the loans when he obtained steady employment.       Although
Mother knew his employment situation was shaky at best, she
loaned him money.    When he failed to honor her request to
secure the loans, she continued to send him money.
     A constructive trust arises in law to remedy a wrongful
act. In this case, no wrongful act occurred.
     We affirm the District Court.   ,

We Concur:

         Justices