Junker v. Carlson ( 2018 )


Menu:
  • Nebraska Supreme Court Online Library
    www.nebraska.gov/apps-courts-epub/
    07/13/2018 12:08 AM CDT
    - 423 -
    Nebraska Supreme Court A dvance Sheets
    300 Nebraska R eports
    JUNKER v. CARLSON
    Cite as 
    300 Neb. 423
    Debra J. Junker et al., appellants, v. Elwyn Carlson and
    Joel Carlson, defendants and third -party plaintiffs,
    appellees, SLS Partners, appellee, and M ichael
    Carlson, also known as Mike Carlson,
    third -party defendant, appellee.
    ___ 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 appel-
    late court decides factual questions de novo on the record and, as to
    questions of both fact and law, is obligated to reach a conclusion inde-
    pendent 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, misrepre-
    sentation, 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.
    - 424 -
    Nebraska Supreme Court A dvance Sheets
    300 Nebraska R eports
    JUNKER v. CARLSON
    Cite as 
    300 Neb. 423
    Appeal from the District Court for Kearney County: Terri S.
    H arder, 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,   Stacy,   and
    Funke, JJ.
    Cassel, J.
    I. INTRODUCTION
    A trust’s grantors and beneficiaries asserted claims for con-
    structive 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
    - 425 -
    Nebraska Supreme Court A dvance Sheets
    300 Nebraska R eports
    JUNKER v. CARLSON
    Cite as 
    300 Neb. 423
    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 dis-
    missed from the suit prior to judgment and are not relevant for
    the purposes of this appeal. The suit asserted that the defend­
    ants 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 Transactions
    In December 2001, Trustee leased the farmland portion of
    the trust property to Joel Carlson and Elwyn Carlson (col-
    lectively 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
    - 426 -
    Nebraska Supreme Court A dvance Sheets
    300 Nebraska R eports
    JUNKER v. CARLSON
    Cite as 
    300 Neb. 423
    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 origi-
    nal 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 simultane-
    ously 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 Judgment
    In their operative complaint, Claimants alleged that Buyer
    participated in Trustee’s breaches of trust and improper exer-
    cise of trust powers, resulting in a net damage to the benefici­
    aries 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 protec-
    tion 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).
    - 427 -
    Nebraska Supreme Court A dvance Sheets
    300 Nebraska R eports
    JUNKER v. CARLSON
    Cite as 
    300 Neb. 423
    the Trust and when they received $152,000 for the relinquish-
    ment 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 coer-
    cion, 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 “alterna-
    tive” 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 conclu-
    sion independent of the trial court’s determination.4 And in
    such an appeal, when credible evidence is in conflict on mate-
    rial 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) (con­
    structive 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).
    - 428 -
    Nebraska Supreme Court A dvance Sheets
    300 Nebraska R eports
    JUNKER v. CARLSON
    Cite as 
    300 Neb. 423
    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 prop-
    erty 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).
    - 429 -
    Nebraska Supreme Court A dvance Sheets
    300 Nebraska R eports
    JUNKER v. CARLSON
    Cite as 
    300 Neb. 423
    1. Entitlement to Constructive
    Trust Against Buyer
    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 transac-
    tion 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 objec-
    tive is to receive or make approximately 18 percent return
    on their investment. [Buyer] wants to make their invest-
    ment return. They do not want to own the real estate.
    Dale also testified that while Buyer’s partners were inspect-
    ing 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 arrange-
    ment and in [Trustee] as trustee through 2005.’” Dale also
    - 430 -
    Nebraska Supreme Court A dvance Sheets
    300 Nebraska R eports
    JUNKER v. CARLSON
    Cite as 
    300 Neb. 423
    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 agree-
    ment 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 inter-
    ested in investing too, but they declined.
    As the sale proceeded, Buyer relied on counsel, the sell-
    er’s counsel, and the title companies to facilitate the clos-
    ing 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 sign-
    ing it.
    Finally, the closing statement shows, and Dale testified, that
    $35,000 of the proceeds from the sale was used to pay an ear-
    lier 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 docu-
    ments 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
    - 431 -
    Nebraska Supreme Court A dvance Sheets
    300 Nebraska R eports
    JUNKER v. CARLSON
    Cite as 
    300 Neb. 423
    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 propri-
    ety 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 Constructive
    Trust Against Tenants
    [6] Claimants assert that Tenants were unjustly enriched
    when they received the payment of $152,000 for the relin-
    quishment 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).
    - 432 -
    Nebraska Supreme Court A dvance Sheets
    300 Nebraska R eports
    JUNKER v. CARLSON
    Cite as 
    300 Neb. 423
    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 con-
    tained 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 exten-
    sion 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 dura-
    tion of the lease. According to Claimants’ argument, there
    must be some extra consideration, apart from the terms con-
    tained within the original lease, in order for there to be consid-
    eration for the extension. They cite no authority to support that
    proposition, and we have not found any.
    There was also adequate consideration for the relinquish-
    ment. 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 testi-
    fied 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.
    - 433 -
    Nebraska Supreme Court A dvance Sheets
    300 Nebraska R eports
    JUNKER v. CARLSON
    Cite as 
    300 Neb. 423
    (c) Validity of Lease Extension
    In the remaining argument regarding lease extension, the
    issue is whether Tenants were aware, at the time of the exten-
    sion, 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 Tenant
    had the authority to enter into the lease, because that is what
    Dale represented to them. They testified that they did not dis-
    cover 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.
    A ffirmed.
    Wright and K elch, JJ., not participating.
    

Document Info

Docket Number: S-17-356

Filed Date: 7/6/2018

Precedential Status: Precedential

Modified Date: 7/12/2019