Milanovich v. Dwyer , 2004 MT 91N ( 2004 )


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  •                                          No. 02-347
    IN THE SUPREME COURT OF THE STATE OF MONTANA
    
    2004 MT 91N
    PHILIP MILANOVICH,
    Plaintiff, Appellant, and Counterdefendant,
    v.
    JOHN DWYER,
    Defendant, Respondent, and Counterclaimant.
    APPEAL FROM:         District Court of the Second Judicial District,
    In and for the County of Silver Bow, Cause No. DV-01-18
    The Honorable Loren Tucker, Judge presiding.
    COUNSEL OF RECORD:
    For Appellant:
    Jonathan R. Motl, Reynolds Motl Sherwood, Helena, Montana
    For Respondent:
    Dolphy O. Pohlman and Timothy M. Dick, Corette Pohlman & Kebe, Butte,
    Montana
    Submitted on Briefs: March 6, 2003
    Decided: April 13, 2004
    Filed:
    __________________________________________
    Clerk
    Justice James C. Nelson delivered the Opinion of the Court.
    ¶1     Pursuant to Section I, Paragraph 3(c), Montana Supreme Court 1996 Internal
    Operating Rules, the following decision shall not be cited as precedent. It shall be filed as
    a public document with the Clerk of the Supreme Court and shall be reported by case title,
    Supreme Court cause number and result to the State Reporter Publishing Company and to
    West Group in the quarterly table of noncitable cases issued by this Court.
    ¶2     Dr. Philip Milanovich (Milanovich) appeals the judgment of the Second Judicial
    District Court, Silver Bow County, concluding that Dr. William F. O’Brien (O’Brien)
    abandoned his property and that O’Brien’s former landlord, John H. Dwyer (Dwyer),
    asserted ownership over that property prior to that property being claimed by its true owner.
    ¶3     We address the following issues on appeal and affirm:
    ¶4     1.     Was the District Court’s conclusion that O’Brien had abandoned his
    property supported by substantial evidence?
    ¶5     2.     Did the District Court err in concluding that Dwyer had asserted ownership
    over the property prior to that property being claimed by its true owner?
    FACTUAL AND PROCEDURAL BACKGROUND
    ¶6     O’Brien, a practicing dentist for 35 years, worked in various cities, the last of which
    was Townsend, Montana. Having lived before in Butte, Montana, O’Brien wished to return
    to Butte to open a dental practice there.
    ¶7     O’Brien looked at commercial property for rent in Butte and viewed a free-standing
    space that Dwyer had available to lease. This free-standing space previously had been a
    2
    carpet showroom, and, therefore, was an open space without interior divider walls.
    ¶8     After viewing this commercial property, O’Brien rented the space from Dwyer for
    approximately six weeks before signing a lease agreement with Dwyer. On October 30,
    1999, O’Brien then entered into a lease agreement with Dwyer. This lease agreement stated
    that O’Brien, the tenant, agreed to pay Dwyer, the landlord, $1,600 per month for rent. Rent
    was due on or before the first day of each month.
    ¶9     Before seeing dental patients, O’Brien performed extensive remodeling on the rented
    commercial space, transforming the space from its previous carpet showroom to a functional
    dental office. O’Brien took out a loan from Citicorp in order to fund the transformation of
    this rented commercial space. Hence, Citicorp had a security interest, which it did not
    perfect, in the dental property that O’Brien purchased with the money Citicorp lent to him.
    ¶10    Dwyer greatly assisted O’Brien’s endeavor in transforming the open space to a
    functional dental office, spending in total around $44,000 in construction costs.
    ¶11    O’Brien saw his first patient in April 2000 and continued to see patients until August
    2000, when he traveled to Louisiana for an evaluation. O’Brien had been experiencing
    various personal difficulties which prompted his trip to Louisiana. This trip, however,
    created a financial hardship. O’Brien notified his creditors that he would have difficulty in
    meeting his financial obligations.
    ¶12    As a result of this financial hardship, O’Brien was late in paying the August 2000 rent
    and did not pay the September 2000 rent that was due on the first of the month. O’Brien also
    defaulted on his payment obligations to Citicorp.
    3
    ¶13    As a result of O’Brien’s delinquent September 2000 rent payment, Dwyer told
    O’Brien that he was going to change the locks to the office. Dwyer gave O’Brien 24 hours
    to remove his personal effects. O’Brien did so, removing his diplomas, some plants, chairs,
    tables, and a microwave. The office space then was vacant.
    ¶14    On October 9, 2000, Milanovich, also an established dentist in Butte, met with
    Dwyer. Milanovich was very interested in renting O’Brien’s former dental office.
    Milanovich toured the office space and had his staff do the same. Milanovich then gave
    Dwyer a check for $1300, which Dwyer cashed.
    ¶15    Milanovich testified that he believed he had successfully rented the office space from
    Dwyer, since Dwyer cashed Milanovich’s check. Dwyer, however, testified that he did not
    consider Milanovich a tenant, as the rent for the office space was $1,600 per month, although
    Dwyer could not explain the reasoning behind why he cashed Milanovich’s check.
    ¶16    After O’Brien vacated the office space upon Dwyer’s request, Dwyer sought legal
    counsel regarding the money O’Brien owed him in recoupment of delinquent rent and
    remodeling costs.
    ¶17    After Dwyer retained legal counsel, on November 10, 2000, O’Brien was served, via
    certified mail, with a notice of abandonment and termination regarding his leased property.
    On November 28, 2000, O’Brien was again served via certified mail, this time with a notice
    of plan to sell his leased property. O’Brien did not respond to either of these notices, nor did
    he file any action to assert ownership of the property.
    ¶18    In the meantime, Milanovich met with O’Brien informally, as they were long-time
    4
    friends. During this meeting, O’Brien told Milanovich that he would sell to Milanovich the
    dental property remaining in O’Brien’s former office space for $10,000. Milanovich
    accepted O’Brien’s offer, and on December 12, 2000, Milanovich and O’Brien entered into
    a bill of sale agreement that reflected their previous discussions. Milanovich gave Dwyer
    a copy of the bill of sale agreement on December 13, 2000.
    ¶19    Dwyer then met with Milanovich on December 14, 2000. At this meeting, Dwyer
    returned to Milanovich the $1,300 that Dwyer had previously accepted. Dwyer told
    Milanovich that he, and not O’Brien, owned the dental property remaining in O’Brien’s
    former office space. Dwyer then removed the dental property remaining in O’Brien’s former
    office space. Dwyer placed this dental property in his storage room and proceeded to rent
    out the vacant office space to another tenant.
    ¶20    In January 2001, Milanovich filed a claim against Dwyer for possession of the
    property he purchased from O’Brien. After a bench trial, the District Court concluded that
    O’Brien had abandoned his property and that Milanovich had no interest in the property.
    The District Court dismissed with prejudice both Milanovich’s claims and Dwyer’s
    counterclaims.
    ¶21    Milanovich now appeals the District Court’s judgment.
    5
    STANDARD OF REVIEW
    ¶22    We review a district court’s findings of fact to determine whether they are clearly
    erroneous. Galassi v. Lincoln County Bd. of Com’rs, 
    2003 MT 319
    , ¶ 7, 
    318 Mont. 288
    , ¶ 7,
    
    80 P.3d 84
    , ¶ 7. In making this determination, we utilize a three part test, wherein we review
    (1) whether the findings are supported by substantial evidence; (2) whether the effect of the
    evidence was misapprehended; or (3) whether a mistake was committed. Galassi, ¶ 7. We
    review a district court’s conclusions of law to determine whether they are correct. Galassi,
    ¶ 7.
    DISCUSSION
    ¶23    1.     Was the District Court’s conclusion that O’Brien had abandoned his
    property supported by substantial evidence?
    ¶24    Milanovich argues that because Dwyer admitted that “at no time” did O’Brien ever
    tell Dwyer that O’Brien had abandoned his property, the District Court needed to analyze
    O’Brien’s actions to infer O’Brien’s intent to abandon. And, this inference, Milanovich
    maintains, was not that O’Brien intended to abandon his property. Rather, Milanovich
    argues: (1) that no substantial evidence existed to prove that O’Brien even received the
    notice of abandonment or the notice of sale; (2) that O’Brien met with Milanovich less than
    three months after Dwyer changed the locks on O’Brien’s property, thereby asserting
    ownership of the property; (3) that Dwyer threatened Milanovich, thereby implicitly
    asserting that Dwyer did not have rights to the property; and (4) that O’Brien did not
    voluntarily relinquish his property since he attempted to bring a criminal action against
    6
    Dwyer, but was turned away.
    ¶25     Dwyer argues that because abandonment is “the absolute relinquishment of a known
    right,” O’Brien’s intent to abandon is “the first and paramount object of inquiry.” As such,
    Dwyer argues that substantial evidence existed to prove that O’Brien abandoned his
    property, namely: (1) that he moved out of the leased office space; (2) that he was in default
    of several financing agreements secured by the property, and, therefore, if he had retained
    ownership, the property would have been seized by the secured party; (3) that he gave up all
    means of access to the building and made no attempt to retrieve property through a court
    action; (4) that he never requested or demanded permission to retrieve the property; (5) that
    he ignored notices that were delivered via certified mail and were addressed to the address
    O’Brien listed on his lease with Dwyer; and (6) that by the time he contacted and entered
    into an agreement with Milanovich, he did not have an interest in the property he tried to
    sell.
    ¶26     We conclude that Dwyer’s arguments are correct.
    ¶27     Abandonment is the “concurrence of act and intent,” wherein the act is “the
    relinquishment of possession and the intent is a manifestation not to resume beneficial use
    of [the property].” Shammel v. Vogl (1964), 
    144 Mont. 354
    , 359, 
    396 P.2d 103
    , 106.
    Neither act nor intent alone is sufficient to establish abandonment. 
    Shammel, 144 Mont. at 359
    , 396 P.2d at 106. If no express intent exists, intent not to resume beneficial use may be
    inferred by the acts of the owner. Hawkins v. Mahoney, 
    1999 MT 296
    , ¶ 16, 
    297 Mont. 98
    ,
    ¶ 16, 
    990 P.2d 776
    , ¶ 16.
    7
    ¶28    In Rieman v. Anderson (1997), 
    282 Mont. 139
    , 
    935 P.2d 1122
    , abandonment existed
    where the owner “plugged” the diversion to his side of the ditch, plowed in his ditches, and
    made statements that he no longer intended to irrigate. 
    Rieman, 282 Mont. at 146
    , 935 P.2d
    at 1126. In Hawkins, however, abandonment did not exist where the prisoner, upon his
    return to prison and before anyone claimed his belongings, requested return of his property
    and where the prison labeled his property with the prisoner’s name and selectively returned
    it to him. Hawkins, ¶¶ 17, 19.
    ¶29    Like the facts presented here, the issue in Whalen v. Taylor (1996), 
    278 Mont. 293
    ,
    
    925 P.2d 462
    , concerned whether the tenant abandoned his apartment. We held that nothing
    in the evidence indicated “absolute relinquishment” because (1) the tenant kept his
    belongings in the apartment; (2) the tenant contacted his landlord as to his delinquent rent
    and requested more time to pay; and (3) the tenant ultimately tendered the late rent payment,
    albeit on the same day the landlord changed the locks. 
    Whalen, 278 Mont. at 300
    , 925 P.2d
    at 466. In so holding, we discussed another abandonment case, namely Napier v. Adkison
    (1984), 
    209 Mont. 163
    , 
    678 P.2d 1143
    , wherein we held that the tenants there showed an
    intent to abandon (1) by not making rental payments on time; (2) by never being at the
    apartment; and (3) by leaving their dogs unattended on the premises. 
    Napier, 209 Mont. at 167
    , 678 P.2d at 1145.
    ¶30    Here, O’Brien made no express statements that he intended to abandon his property,
    as did the individual in Rieman. However, unlike the prisoner in Hawkins, O’Brien did not
    attempt to reclaim his property, although he knew a sale of the property was pending. In
    8
    addition, unlike the tenant in Whalen, O’Brien took from his office his personal belongings;
    he did not request of Dwyer additional time to pay his September rent; nor did O’Brien pay
    the September rent due, as did the tenant in Whalen. Rather, much like the tenant in Napier,
    O’Brien defaulted on his rental obligation to Dwyer as well as his payment obligation to
    Citicorp; he gave up all means of access to the property; and he neither attempted to return
    to the property nor requested to retrieve additional belongings from the property. Further,
    he did not respond to either the notice of abandonment and termination or the notice of sale
    served upon him. We conclude that O’Brien’s actions demonstrate that he intended to
    relinquish his interest to the property.
    ¶31    Therefore, we hold that substantial evidence supported the District Court’s conclusion
    that O’Brien abandoned his property.
    ¶32    2.     Did the District Court err in concluding that Dwyer had asserted
    ownership over the property prior to that property being claimed by its
    true owner?
    ¶33    Milanovich argues that O’Brien did not abandon the property. But, alternatively, if
    O’Brien did abandon the property, Milanovich argues that the District Court still erred
    because when Dwyer accepted Milanovich’s rental check, Milanovich, “as the true property
    owner, removed any stigma of abandonment.” Milanovich claims that because he paid
    money for the property, he is, in fact, the true owner under this Court’s holding in Hawkins.
    In addition, Milanovich argues that Dwyer only took possession of the property with the
    intent to sell it in order to collect remodel costs and not to claim ownership over the
    property. Hence, Milanovich maintains that Dwyer only claimed the right to possess the
    9
    property, the right to sell the property, and the right to keep some of the proceeds from the
    sale of the property. Dwyer did not, according to Milanovich, claim ownership over the
    property.
    ¶34    Dwyer argues that because O’Brien abandoned the property, O’Brien had nothing to
    assign to Milanovich. However, in the alternative, should this Court hold that O’Brien was
    able to transfer his rights in the property, Dwyer argues that Milanovich still has not proven
    any damages. Specifically, Dwyer maintains that O’Brien was prohibited from assigning
    his rights to the property because of Citicorp’s security agreement, and, therefore,
    Milanovich, as an assignee, took the property subject to that security interest--a fact which
    Milanovich does not dispute. Further, Dwyer argues that under this Court’s holding in
    Ragen v. Weston (1981), 
    191 Mont. 546
    , 
    625 P.2d 557
    , O’Brien made no effort to remove
    his equipment during the term of his lease and, therefore, lost his right to remove any
    fixtures.
    ¶35    Because we hold that the District Court did not err in concluding that O’Brien
    abandoned his property, Dwyer, and not O’Brien, had possession of the property at the time
    O’Brien met with Milanovich and entered into a bill of sale agreement. Hence, O’Brien had
    no interest to sell to Milanovich and the District Court did not err in concluding that
    “Milanovich could not acquire from O’Brien property which O’Brien no longer owned.”
    ¶36    Affirmed.
    /S/ JAMES C. NELSON
    10
    We Concur:
    /S/ PATRICIA O. COTTER
    /S/ JIM REGNIER
    /S/ JIM RICE
    11
    Justice W. William Leaphart dissenting.
    ¶37    I dissent. In determining whether there has been an abandonment of property,
    intention is the first and paramount object of inquiry. Conway v. Fabian (1939), 
    108 Mont. 287
    , 306, 
    89 P.2d 1022
    , 1029. There was no proof that O’Brien intended to abandon
    property worth over $200,000. Although noting a lack of proof that O’Brien received either
    of the two notices, the District Court concluded that he “ignored” the notices. He cannot be
    said to have “ignored” notices which he may not have received.
    ¶38    The District Court found that O’Brien took no steps to assert ownership. This finding
    is contrary to the evidence that, less than three months after being locked out on September
    15, O’Brien attempted to file a criminal complaint, he called Dwyer to protest his possession
    of the property and then, seven days later on December 12, 2000, he sold the property to
    Milanovich. These were all steps to assert ownership.
    ¶39    In this case, the District Court presumed abandonment based upon O’Brien’s acts or
    failures to act. A presumption or inference of intent to abandon one’s property, based solely
    on the acts of the owner, is a rebuttable presumption. Hawkins v. Mahoney, 
    1999 MT 296
    ,
    ¶ 18, 
    297 Mont. 98
    , ¶ 18, 
    990 P.2d 776
    , ¶ 18. Here, any presumption of abandonment was
    rebutted when O’Brien sold to Milanovich, who, in turn, made requests for his property
    before it was claimed by anyone else.
    ¶40    Finally, Dwyer did not claim ownership of the property. Rather, he took possession
    with intent to sell some of the property to collect a self-determined amount of remodeling
    12
    costs. The November 10 notice stated that O’Brien had fifteen days “to pay all outstanding
    rents and remove your property.” The notice refers to removing “your [O’Brien’s]
    property.” Likewise, the November 28 notice states that “[y]ou can get the property back
    at any time before it is sold by paying the full amount you owe . . . .” Obviously, if Dwyer
    were asserting ownership, he would be not offering O’Brien the opportunity to take his
    property back. Dwyer was merely taking the position of a landlord in possession, claiming
    the right to sell pursuant to § 70-24-430, MCA.
    ¶41    I would reverse.
    /S/ W. WILLIAM LEAPHART
    Chief Justice Karla M. Gray concurs in the dissent of Justice Leaphart.
    /S/ KARLA M. GRAY
    13