Johnson v. Kenneth D. Collins Agency, Inc. , 50 State Rptr. 1749 ( 1993 )

No. 93-294
IN THE SUPREME COURT OF THE STATE OF MONTANA
1993
BOB J. JOHNSON,
Plaintiff and Appellant,
V.
KENNETH D. COLLINS AGENCY, INC.,
a corporation,
Defendant and Respondent.
APPEAL FROM: District Court of the Sixteenth Judicial District,
In and for the County of Custer,
The Honorable Kenneth R. Wilson, Judge presiding.
COUNSEL OF RECORD:
For Appellant:
Robin A. Wolff and Rodd A. Hamman, Calton,
Hamman & Wolff, Billings, Montana
For Respondent:
Loren J. O'Toole, II, O'Toole & O'Toole,
Plentywood, Montana
Submitted on Briefs: November 18, 1993
Decided: December 28, 1993
Filed:
Chief Justice J. A. Turnage delivered the Opinion of the Court.
Bob F. Johnson brought this equity action to recover sums he
expended toward fulfilling a contract to purchase an apartment
complex from Kenneth D. Collins Agency, Inc. (Collins Agency). The
District Court for the Sixteenth Judicial District, Custer County,
entered summary judgment for Collins Agency. We affirm.
The issue is whether the District Court erred in entering
summary judgment on Johnson's complaint.
The parties entered two agreements in July 1981: a Sale and
Purchase Agreement and a Save Harmless Agreement. Under the Sale
and Purchase Agreement, Johnson agreed to purchase and Collins
Agency agreed to sell an apartment complex to be constructed in
Miles City, Montana. Collins Agency had previously obtained a loan
commitment from the Farmers Home Administration (FmHA) to build
such a complex, but the site Collins Agency proposed was determined
unfeasible because it was in a flood plain.
Under the Sale and Purchase Agreement, Johnson would build the
complex for Collins Agency on a site selected by Johnson, and would
later assume the note and mortgage with FmHA. In addition, he
would pay Collins Agency $10,000 when construction was completed
and approved. The Sale and Purchase Agreement referred to the Save
Harmless Agreement, under which Johnson was to hold and save
harmless Collins Agency from any claim, demand, or lawsuit by the
architect originally hired to design the project on the original
site.
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Collins Agency borrowed $570,000 from FmHA. Johnson con-
structed the apartments and was paid $570,000 for doing so. He
made the down payment of $28,025, pursuant to the Sale and Purchase
Agreement.
However, FWIA never approved transfer of the note from Collins
Agency to Johnson. Johnson did not purchase the apartment complex
from Collins Agency, nor was the $10,000 released from escrow.
Also, Johnson did not save harmless Collins Agency from a claim by
the original architect which resulted in a judgment of $14,658.93.
While the parties were attempting to obtain FmHA approval for
the transfer, from 1982 until 1989, Johnson, through several
management corporations, was involved in managing the apartment
complex. He expended $11,629.18 in operating money during that
time and paid attorney fees and other expenses in the lawsuit
between Collins Agency and the original architect.
In 1992, Johnson brought this action, alleging that a
resulting or constructive trust had arisen in his favor and that he
had acquired equitable title to a portion of the apartment complex.
He asked for a declaration that he held title to a percentage of
the property or, in the alternative, for judgment in the amount of
$58,848.45. Collins Agency counterclaimed for legal fees,
delinquent property taxes, and other damages.
Collins Agency moved for summary judgment based upon affida-
vits and depositions filed with the District Court. The court
ruled that the clean hands doctrine bars Johnson's claim. Stating
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also that Johnson has constructed and owned many l?mRA projects and
should have been familiar with F'mHA requirements, and noting that
the Sale and Purchase Agreement was not made contingent upon PmHA
approval, the court granted summary judgment for Collins Agency.
Did the District Court err in entering summary judgment on
Johnson's complaint?
Our standard of review of a summary judgment is the same as
the trial court's: Do genuine issues of material fact exist, and
is Collins Agency entitled to judgment as a matter of law? See,
Rule 56(c), M.R.Civ.P.; Knight v. City of Missoula (1992), 252
Mont. 232, 243, 827 P.2d 1270, 1276. This Court will uphold a
correct decision, regardless of the reasons given below for the
result. Shimsky v. Valley Credit Union (1984), 208 Mont. 186, 190,
676 P.2d 1308, 1310.
The parties do not disagree on issues of fact; instead, their
arguments address application of the law to those facts. There-
fore, the prerequisite for summary judgment is met.
In analyzing whether Collins Agency is entitled to judgment as
a matter of law, we begin by noting that resulting trusts and
constructive trusts are involuntary in nature and arise by
operation of law. Eckart v. Hubbard (1979), 184 Mont. 320, 326,
602 P.2d 988, 991. They must be established by evidence that is
clear, convincing, and practically free from doubt. Hilliard v.
Hilliard (1992), 255 Mont. 487, 492, 844 P.2d 54, 57.
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Resulting trusts are defined at §§ 72-33-216 through -218,
MCA. Neither a resulting trust upon failure of a trust, 5 72-33-
216, MCA, nor a resulting trust upon full performance of a trust,
5 72-33-217, MCA, is possible under the facts of this case. A
purchase money resulting trust is created when a transfer of
property is made to one person and the purchase price is paid by
another. Section 72-33-218, MCA. Here, despite' Johnson's
contribution of the down payment on the apartment complex, Collins
Agency remains the debtor on the F'mHA loan. We conclude that, as
a matter of law, no resulting trust has been created.
Under § 72-33-219, MCA, a constructive trust arises when a
person holding title to property is subject to an equitable duty to
convey it because he would be unjustly enriched if he were allowed
to retain it. Johnson argues that Collins Agency would be unjustly
enriched if it is allowed to retain the apartment complex, because
of Johnson's contributions to the property and because Collins
Agency receives tax benefits from owning the property.
The tax benefits are immaterial. Further, Johnson did not
honor the Save Harmless Agreement in that he did not pay the
judgment obtained by the original architect against Collins Agency.
This obligation was not contingent on sale of the apartment
complex; it was a separate contractual obligation. Additionally,
while Johnson was involved with managing the apartment complex, the
Internal Revenue Service levied on apartment complex funds in
Johnson's possession in the amount of $8,741.66, for payment of
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income taxes Johnson owed. Further, when Collins Agency resumed
management of the complex, there was a $22,000 delinquency in real
estate taxes on the property.
In light of these acts and failures to act which are the
responsibility of Johnson, we conclude that he has not established
by evidence that is clear, convincing, and practically free from
doubt that Collins Agency has an equitable duty to convey an
interest in the apartment complex to him. We hold that no
constructive trust has been established.
Johnson further alleges that the District Court erred by
mentioning that it was 1%roubled8S by the ten-year delay between the
contract between the parties and the initiation of this lawsuit.
Because the District Court's comment is not essential to the
result, the comment is not reversible error.
Affirmed.
We concur: