NO. 92-225
IN THE SUPREME COURT OF THE STATE OF MONTANA
1992
MILTON J. HILLIARD, a/k/a MEL J.
HILLIARD, a/k/a J. HILLIARD,
Plaintiff and Respondent,
LaDONNA M. HILLIARD, individually and
as Personal Representative of the
ESTATE OF HARLAN F. HILLIARD, Deceased,
Defendant and Appellant.
APPEAL FROM: District Court of the Nineteenth Judicial District,
In and for the County of Lincoln,
The Honorable Robert S. Keller, Judge presiding.
COUNSEL OF RECORD:
For Appellant:
Donald L. Shaffer, Attorney at Law, Libby, Montana
For Respondent:
William A. Douglas; Douglas & Sprinkle, Libby,
Montana
Submitted on Briefs: October 14, 1992
Decided: December 15, 1992
Justice John Conway Harrison delivered the Opinion of the Court.
This is an appeal from the Nineteenth Judicial District,
Lincoln County, the Honorable Robert S. Keller presiding.
Appellant LaDonna Hilliard (LaDonna) appeals a judgment entered
after a bench trial in which the District Court found that she held
certain real property in trust for respondent Milton J. Hilliard
(Milton) and ordered her to convey the property to him. We affirm.
We note at the outset that the parties seem unclear whether
this case involves a resulting trust or a constructive trust. In
his complaint to quiet title, Milton asserted that appellant held
the property in a constructive trust for his benefit. He also
included that theory in his proposed conclusions of law. However,
he did not make any allegations of fraud or other wrongful act or
present any evidence of such, although these are the basis upon
which a constructive trust is found. Gitto v. Gitto (1989). 239
Mont. 47, 778 P.2d 906; Howard v. Dali0 (1991), 249 Mont. 316, 815
P.2d 1150. Further, in his brief to this Court, Milton concludes
that "a finding by the lower Court of a 'resulting trust' is
predicated upon reasonable grounds and should not be disturbed."
In her brief, LaDonna argues against a constructive trust and cites
a 1947 case, Thompson v. Steinkamp (1947), 120 Mont. 475, 187 P.2d
1018, as authority, even though that case involved a resulting
trust.
We also note that the District Court did not make it clear
whether it found a resulting trust or a constructive trust in this
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matter. In its conclusions of law, the court found that a trust
had been created, but it did not state whether the trust was a
resulting trust or a constructive trust. The court then stated
that "LaDonna would be unjustly enriched if she were permitted to
retain title to the real property." We look for unjust enrichment
of the party holding the property when dealing with constructive
trusts. Section 72-33-219, MCA. The court also spoke to the
intent of the parties. We look to intent when dealing with
resulting trusts. Section 72-33-218, MCA. The court then cited $j§
72-33-220 and 72-33-208(3), MCA, in finding that this action was
not barred by the Statute of Frauds. However, it did not cite
either 5 72-33-218--purchasemoney resulting trust--or § 72-33-219-
-constructive trust--to indicate clearly which type of trust it
found in this case.
Because Milton actually presented his case on a theory of
resulting trust, LaDonna defended that theory, and the District
Court made findings on that theory, we will speak as if the parties
and the court had proceeded on that theory alone.
Although appellant raises four issues on appeal, we combine
and restate them as follows:
1. Do the clean hands doctrine and other principles of equity
prevent Milton from claiming a resulting trust on the property in
question?
2. Did the District Court err in finding that a resulting
trust had been created?
In August 1987, Milton filed a complaint against LaDonna and
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Harlan's estate seeking to quiet title to certain real property
located in Lincoln County. Harlan Hilliard (Harlan) was Milton's
son. LaDonna was Harlan's wife. Harlan died on April 10, 1987.
LaDonna has since remarried and is now LaDonna Mack.
The incidents giving rise to this matter initially began in
Oregon in 1971 when Milton's second marriage ended in divorce. At
that time his attorney advised him to avoid holding property in his
own name to prevent his ex-wife from levying on it. Therefore, he
placed certain real property in Harlan's name. When Milton sold
this property, Harlan provided him with a guitclaim deed to
complete the transaction. Milton received the money.
Milton eventually liquidated all his holdings in Oregon. He
testified that he put the $23,800 he received from those sales in
a joint bank account at the United Bank of Libby under the name of
"J. Hilliard and LaDonna Hilliard." Once again, the purpose was to
avoid putting assets in his own name. LaDonna denies having any
knowledge of that account.
Milton intended to move to Libby, Montana, and establish a
retail tire store. He located a suitable piece of property--the
property at issue here--which was owned by Carl and Velmeda Cole
(the Coles). At that time the property included a house, as well
as space for a tire shop. The terms of the contract for deed were
$25,000 as the purchase price with a $10,000 down payment and equal
monthly installments over a ten-year period. In 1974 the property
was purchased in Harlan's and LaDonna's names, but the $10,000 down
payment came from the account Milton established. The $13,800
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remaining in the account was partially used to pay for the
construction of a tire store on the property. Harlan and LaDonna
executed a quitclaim deed and Harlan gave a copy to Milton. Milton
testified that the original was to be delivered when the contract
for deed was paid off. The contract was paid off on February 4,
1982, and the warranty deed from the Coles to Harlan and LaDonna
was recorded. However, Milton did not receive the quitclaim deed
at that time.
On August 20, 1984, Harlan and LaDonna executed mutual
reciprocal wills in which all property was to go to the surviving
spouse. If neither spouse survived, specific property, including
the property at issue here if Milton was not alive, was devised to
their children. In the event that Milton survived both Harlan and
LaDonna, he was to receive the property in question. Harlan died
on April 10, 1987 without delivering the original quitclaim deed to
Milton. Milton testified that LaDonna assured him that the
quitclaim deed would be forthcoming. She denies this.
Milton filed this suit to quiet title. LaDonna claims that
Milton is only entitled to a life estate in the property.
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Do the clean hands doctrine and other principles of equity
prevent Milton from claiming a resulting trust on the property in
question?
LaDonna contends that Milton cannot now come to the court
seeking to enforce a resulting trust when his purpose in placing
his assets in Harlan's and her name was to avoid execution by his
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ex-wife. She quotes extensively from Thompson where this Court was
asked to determine the same question under very similar facts. In
Thompson, Fred Thompson, the decedent, gave money to the defendant
to buy real property in her name. A witness testified that he did
this because "Ihe didn't want to have his second wife, to whom he
was paying alimony, to come back and take a crack at the
property."' Thompson, 187 P.2d at 1020. The defendant argued that
Thompson's estate should not be entitled to the property because of
the general rule that a court of equity will not aid one who
transfers his property to another with the intent to hinder, delay,
or defraud his creditors. We said in Thompson:
The general rule is as contended for by defendant
but it is not a universal rule. Thus in Scott on Trusts,
vol. 3, section 444, it is said: "Although a resulting
trust ordinarily arises where A purchases property and
takes title in the name of B, A may be precluded from
enforcing the resulting trust because of the illegality
of his purpose. If A cannot recover the property, B
keeps it and is thereby enriched. The question in each
case is whether the policy against the unjust enrichment
of the grantee is outweighed by the policy against giving
relief to the payor who has entered into an illegal
transaction.
. . .
The rule is likewise stated in the Restatement of
the Law of Trusts, section 422, as follows: "Where the
owner of property transfers it inter vivos upon an
intended trust which fails for illegality, a resulting
trust does not arise if the policy against permitting
unjust enrichment of the transferee is out-weighed by the
policy against giving relief to a person who has entered
into an illegal transaction."
As stated in the Comments in the Restatement, 'I. .
. It is impossible to state a definite rule which will
determine in all cases whether a resulting trust will be
imposed or not, since the court will consider all the
circumstances involved in the particular case."
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Thompson, 187 P.2d at 1021-1022. These rules hold true today.
Restatement (Second) of Trusts § 422.
In holding that the District Court did not abuse its
discretion in finding a resulting trust in Thompson, we noted that
no claims had been presented against the decedent's estate and that
no creditor had been defrauded. Likewise, in the present case,
there is no evidence on the record that Milton defrauded any
creditors, including his ex-wife, by following his attorney's
advice.
LaDonna also argues that Milton would be unjustly enriched if
he is allowed to keep the property because Harlan supervised and
worked on the construction of the tire shop. We disagree. In a
memorandum to its Findings of Fact, Conclusions of Law and
Judgment, the District Court added the following:
It would appear that Harlan assisted his father in
constructing the building initially and in the
construction of two additions which were made to the
property. There is no evidence indicating that the
Plaintiff intended to make a gift of the property to
Harlan and LaDonna. The evidence does however tend to
suggest that the work done by Harlan was intended as a
gift to his father.
Milton financed the property and the improvements. The
evidence does not establish that Harlan intended anything other
than to assist his father in the matter. Therefore, Milton will
not be unjustly enriched.
We hold that the clean hands doctrine and other principles of
equity do not prevent Milton from claiming a resulting trust in
this property.
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Did the District Court err in finding that a resulting trust
had been created?
As noted above, the District Court concluded that an
involuntary or implied trust had been created. Trusts must be
established by evidence that is clear, convincing and practically
free from doubt. Eckartv. Hubbard (1979), 184 Mont. 320, 325, 602
P.2d 988, 991. Involuntary trusts are equitable in nature.
Therefore, in reviewing this matter we are guided by 5 3-2-204(5),
MCA, which requires this Court to review and determine both
questions of fact and law. We are also guided by the rule that
this Court will not disturb the lower court's findings of fact
unless the record shows a decided preponderance of evidence against
them. Gitto, 778 P.2d at 908.
Neither the parties nor the court cited the controlling
statute in this case. That statute provides in pertinent part:
72-33-218. Purchase money resulting trust. (1) Where a
transfer of property is made to one person and the
purchase price is paid by another, a resulting trust
arises in favor of the person who paid the purchase
price.
(2) Subsection (1) does not apply in any of the
following circumstances: . . .
(b) whenever the transferee is a spouse, child, or
other natural object of the bounty of the person who paid
the purchase price: . . .
(3) Subsection (2)(b) does not apply if the party
paying the purchase price manifested an intention that
the transferee should nothavethe beneficial interest in
the property.
Subsection (1) states the general rule regarding purchase
money resulting trusts. As noted above, Milton placed $23,800 in
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an account with United Bank of Libby. The evidence showed that
$10,000 of the funds in that account were used as down payment for
the purchase of the Coles' property. Milton also made all payments
on the contract for deed to the Coles. There is no dispute that
the property was placed in Harlan's and LaDonna's name. Therefore,
this case falls within subsection (1) of this statute.
Subsection (2) seemingly makes subsection (1) inapplicable
because this transaction occurred between father and son. This
subsection creates a rebuttable presumption that the transaction
created a gift. However, subsection (3) provides for a rebuttal by
showing that the payor manifested an intention that the transferee
should not have a beneficial interest.
The presumption of a gift must be overcome by clear and
convincing evidence. In re the Estate of Lettenqarver (1991), 249
Mont. 92, 96, 813 P.2d 468, 471. The evidence establishing that
this was not a gift begins in Oregon where Milton and Harlan
established a practice whereby Milton placed his property in
Harlan's name and Harlan guitclaimed it back to him when Milton
sold the property. The procedure followed in Libby is wholly
consistent with that practice. Also, Milton testified that he
located the property and negotiated for its purchase. LaDonna
points to the testimony from Roy Cook who testified that he was
present when Harlan and LaDonna were discussing the property with
the Coles. However, Mr. Cook was not present at the final
negotiations. Further, Milton paid for the property and all
improvements including the tire shop and two additions to the shop.
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Milton also collected all the rents and paid all the insurance and
taxes and maintained the property. And Milton treated the property
as his own by taking exclusive possession, excepting the renters,
and using it for his business.
On the other hand, Harlan and LaDonna bore none of the
expenses associated with the property. Both parties presented
evidence that they claimed depreciation on the property for tax
purposes. This does not cast a shadow of doubt in light of the
other evidence of record. The facts clearly and convincingly
establish that a gift was not intended here.
Further, the copy of the quitclaim deed and statement that the
original would be forthcoming are evidence of an understanding
between Harlan and Milton that Milton was to have the property.
LaDonna admits that she had nothing to do with the dealings between
Harlan and Milton and that she was not present during their
conversations concerning the property. Although the wills, which
left the property to Milton only if he survived Harlan and LaDonna,
tend to show a different perspective, we do not look to Harlan's
and LaDonna's intent: we look to Milton's intent. Milton's actions
manifested a quite different intent.
The facts clearly and convincingly establish that a purchase
money resulting trust was intended and created.
Affirmed.
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