97-051
No. 97-051
IN THE SUPREME COURT OF THE STATE OF MONTANA
1997
LEANNE M. NESET,
Plaintiff and Appellant,
v.
MICHAEL FIFER,
Defendant, Third Party Plaintiff and Respondent,
v.
LEANNE M. NESET, and all other persons, unknown,
claiming or who might claim any right, title, estate, or
interest in a lien or encumbrance upon the real property
described in the complaint adverse to Third-Party Plaintiff's
ownership, or any cloud upon Third-Party Plaintiff's title
thereto, whether such claim or possible claim be present
or contingent,
Third Party Defendants.
APPEAL FROM: District Court of the Seventh Judicial District, In and for the County of
Richland, the Honorable Dale Cox, Judge Presiding.
COUNSEL OF RECORD:
For Appellant:
Phillip N. Carter, Sidney, Montana
For Respondent:
Donald L. Netzer, Netzer Law Office, Sidney, Montana
Submitted on Briefs: May 30, 1997
Decided:
July
23, 1997
Filed:
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__________________________________________
Clerk
Chief Justice J. A. Turnage delivered the Opinion of the Court.
In this action, the Seventh Judicial District Court, Richland County, entered
summary judgment that Michael Fifer is the owner of certain real property under a theory
of resulting trust. Leanne M. Neset appeals. We vacate the summary judgment and
remand for further proceedings consistent with this Opinion.
We restate the issue as whether the District Court erred when it entered summary
judgment that a purchase money resulting trust existed in favor of Fifer pursuant to 72-
33-218, MCA.
In the spring of 1989, Fifer wrote a $33,500 check as a down payment on a home
and real property in Sidney, Montana. Fifer and his then-girlfriend, Neset, borrowed
$20,000 as joint obligors for the remainder of the property's purchase price. Title to the
property was placed in Neset's name.
Neset and Fifer lived together in the home off and on (Neset moved out twice) for
several years. When Neset and Fifer ended their romantic relationship in 1992, Fifer
remained in the home and Neset moved out.
Neset brought this action in 1994, seeking an injunction evicting Fifer from the
home to which she held title. Fifer counterclaimed that the property was his based on
adverse possession, unjust enrichment, constructive trust, laches, equitable estoppel, and
resulting trust. The District Court granted Fifer summary judgment under a theory of
resulting trust, and declared him the owner of the property in fee simple. Neset appeals.
Standard of Review
Summary judgment is proper when no genuine issues of material fact exist and the
moving party is entitled to judgment as a matter of law. Rule 56(c), M.R.Civ.P. This
Court reviews a grant of summary judgment under the same Rule 56(c), M.R.Civ.P.,
criteria used by the district court. Carelli v. Hall (Mont. 1996), 926 P.2d 756, 759, 53
St.Rep. 1116, 1117 (citation omitted).
Discussion
Did the District Court err when it entered summary judgment that a purchase
money resulting trust existed in favor of Fifer pursuant to 72-33-218, MCA?
Section 72-33-218, MCA, provides, in relevant part:
(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 circum-
stances:
(a) whenever the party paying the purchase price manifests an
intention that no resulting trust should arise;
. . . or
(c) whenever the transfer is made in order to accomplish an illegal
purpose and the policy against unjust enrichment of the transferee is out
weighed by the policy against giving relief to a person who has entered into
an illegal transaction.
In the present case, the District Court found that all funds to purchase the property
came from Fifer and that none came from Neset. It found that although the home loan
payments were paid from Neset's checking account for the first six months, Fifer had
deposited funds into that account to cover the loan payments. The court concluded that
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a resulting trust arose in favor of Fifer as a result of his payment of the purchase price
of the property.
In discussing whether Fifer manifested an intention that no resulting trust should
exist as described under subsection (2)(a) above, the court concluded that no gift occurred
because Fifer never clearly divested dominion and control of the property to Neset, and
Neset did not accept the property and treat it as her own. The court further concluded
that Fifer was not precluded from a resulting trust by a weighing of the equities under
subsection (2)(c) above, because Neset was not an unknowing recipient of the property.
Neset argues that the District Court failed to correctly determine which facts are
material to the dispute, made improper factual findings, and did not apply the proper
standard of proof. She argues that the down payment on the home was a gift to her from
Fifer and that Fifer therefore did not effectively pay the purchase price for the property,
so that 72-33-218, MCA, does not apply. She argues that the District Court erred by
concluding as a matter of law that Fifer did not manifest an intent that no resulting trust
should arise as described in the exception under 72-33-218(2)(a), MCA.
Neset filed an affidavit with the District Court in which she stated that the $33,500
down payment on the property was a gift to her from Fifer. She also stated in the
affidavit that, "He told me several times that the house was mine and that he was paying
the down payment so that we could live together and love each other." In his deposition
filed with the District Court, Fifer stated, to the contrary, that title to the house was
put
in Neset's name only to avoid the house being attached for back child support he owed
and that he did not give the house to Neset. Fifer also filed affidavits by several of his
friends and relatives who stated their understandings that he did not intend either the
money or the house as gifts to Neset, but that Fifer was merely placing the property in
Neset's name so that it could not be levied upon for back child support he owed for
children from a previous marriage.
Fifer contends, and the District Court apparently agreed, that any statements he
made to Neset about intending the money or the house as a gift to Neset are inconsequen-
tial in light of the parties' subsequent behavior. Fifer points out that a completed gift
must
include intent, delivery, and acceptance. See Lance v. Lance (1981), 195 Mont. 176,
183, 635 P.2d 571, 575. He argues that even if an issue of fact exists as to his intent to
make a gift, he never completely divested himself of dominion and control over the
property. He asserts that as a matter of law there was no delivery of the gift and, thus,
the gift was never completed.
We disagree with Fifer and the District Court concerning the existence of issues
of material fact. Physical delivery of the down payment was accomplished when the
payment was made and title to the property was placed in Neset's name. Fifer's alleged
statements to Neset are relevant as to whether he manifested an intent that no resulting
trust exist. The conflicting affidavit and deposition statements submitted to the court
create, at minimum, a question of fact as to whether the down payment was a gift from
Fifer to Neset.
Further, Fifer's retention of physical possession of the property after Neset left it
is not dispositive as to delivery of a gift of the property. Delivery occurred when title
to the property was placed in Neset's name. Inasmuch as Fifer's retention of the property
is offered as evidence of intent, Neset testified in her deposition that she moved out of
the home when she and Fifer split up not because she believed the home belonged to him,
but because she knew he would not leave.
The District Court noted that Fifer paid all the property taxes on the home except
for one payment Neset made immediately before she filed this suit. Fifer claimed an
income tax deduction for interest paid on the mortgage on the property and he maintains
that he made all the house payments. Although some of those payments came out of
Neset's checking account, Fifer stated that he deposited money to that account to fund
those payments.
However, Fifer's payment of property taxes and claim of the income tax deduction
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for such payments is not conclusive as to whether a purchase money resulting trust exists
or as to whether he gifted the property to Neset. Neset, too, took an income tax
deduction for the property taxes which she paid. Nor is it conclusive of ownership that
Fifer made mortgage payments while he resided in the home after Neset left. Such
payment would also be consistent with a rental arrangement.
Neset cites Johnson v. Kenneth D. Collins Agency (1993), 263 Mont. 137, 865
P.2d 312, as authority that no resulting trust was created here. In that case, Johnson
constructed an apartment complex, the cost of which was paid with an FmHA loan to
Collins Agency. When Collins Agency paid Johnson for his construction work, Johnson
gave Collins Agency a down payment on the apartment complex and agreed to assume
the loan. However, Johnson never obtained FmHA approval to assume the loan, and he
made no payments on it. This Court held that, as a matter of law, a purchase money
resulting trust was not created. Johnson, 865 P.2d at 314.
Johnson is distinguishable from the present case in several important respects.
First, in Johnson, the Court noted that the parties did not disagree as to any issues of
material fact. Johnson made no payments on and was not liable as a borrower on the
loan against the property. In the present case, Fifer and Neset are both exposed to
financial and legal liability as co-borrowers on the $20,000 mortgage on the property.
Finally, Johnson's down payment on the property was to Collins Agency itself, rather
than to a third party.
In Poepping v. Monson (1960), 138 Mont. 38-48, 353 P.2d 325, 330-31, this
Court applied the rule that a person claiming a resulting trust who has paid only a portion
of the purchase price is entitled to claim a resulting trust only proportionate to the
amount
of the total purchase price paid, absent clear and convincing evidence of a contrary
intent.
See also Restatement (Second) of Trusts 454, pp. 416-17 (1997).
We conclude that issues of material fact exist in this case concerning to what
extent, if any, the property or the down payment thereon was a gift from Fifer to Neset.
These issues of fact implicate whether and to what extent a purchase money resulting
trust, or the exception thereto, has arisen under 72-33-218(1) and (2)(a), MCA, and
Poepping.
Neset further argues that the District Court misapplied the balancing test under
72-33-218(2)(c), MCA, when it concluded that, in this case, the policy against unjust
enrichment outweighed the policy against giving relief to a person who has intentionally
transacted business so as to deprive his children of the support to which they are
entitled.
Neset contends that the District Court did not properly apply the balancing test because
the court determined that subsection (2)(c) was essentially a codification of the clean
hands doctrine and then determined that Neset was not entitled to assert the doctrine
because she was aware that Fifer owed back child support.
The proper factors to be weighed in the balance under subsection (2)(c) is a
question of law, and we review questions of law to determine whether the district court's
interpretation of the law is correct. Matter of Estate of Dern Family Trust (Mont. 1996),
928 P.2d 123, 127, 53 St.Rep. 1087, 1089. Neset correctly states that the balance in this
case should be between the policy against unjust enrichment of her and the policy
disfavoring relief to Fifer as a result of his attempt to evade his child support
obligation.
The Uniform Fraudulent Transfer Act, 31-2-326 through -342, MCA, makes it illegal
to transfer property with the intent to hinder, delay, or defraud any creditor. The
affidavits filed by both parties and the copies of court documents filed concerning Fifer's
child support obligation indicate that Fifer's transfer of the down payment and title to
the
property to Neset were for the illegal purpose of evading his child support obligation, in
violation of previous court orders and the Uniform Fraudulent Transfer Act. If, after
resolving the material issues of fact described above, the finder of fact determines that
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a purchase money resulting trust was created in this case, it should then weigh the proper
factors in determining whether the exception under 72-33-218(2)(c), MCA, applies.
The summary judgment is vacated and this case is remanded for further
proceedings consistent with this Opinion.
/S/ J. A. TURNAGE
We concur:
/S/ KARLA M. GRAY
/S/ JIM REGNIER
/S/ W. WILLIAM LEAPHART
/S/ TERRY N. TRIEWEILER
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