94-1282 La.App. 3 Cir. 10/18/95, Gray v. McCormick

• Court: Court of Appeal of Louisiana
• Writing for the Court: Before DOUCET; DOUCET
• Citation: 94-1282 La.App. 3 Cir. 10/18/95, Gray v. McCormick, 663 So.2d 480 (La. App. 1995)
• Decision Date: 18 October 1995
• Parties: 94-1282 La.App. 3 Cir

Page 480

663 So.2d 480

94-1282 La.App. 3 Cir. 10/18/95

Charles GRAY, et ux, Plaintiffs-Appellees, v. Leonard J. McCORMICK, et ux, Defendants-Appellants.

No. 94-1282.

Court of Appeal of Louisiana Third Circuit.

Oct. 18, 1995.

Rehearing Denied Dec. 14, 1995.

William M. Ford, Alexandria, for Charles Gray et ux.

Dan E. Melichar, Alexandria, for Leonard J. McCormick et ux.

Before DOUCET, C.J., and LABORDE, KNOLL, COOKS and PETERS, JJ.

[94-1282 La.App. 3 Cir. 1] KNOLL, Judge.

The issues on this appeal grew out of a family feud. After learning that their daughter, Barbara M. Gray, her husband, Charles, and their two children (hereafter the Grays) were experiencing financial difficulties in Texas, Leonard J. McCormick and his wife Vivian (hereafter the McCormicks), opened their house to them where they stayed rent-free for approximately nine months. During that time, the McCormicks mortgaged 1.5 acres of their property and then built a Jim Walter shell-home on the mortgaged property; the McCormicks had to obtain the financing because the Grays were unable to receive credit approval due to their recent bankruptcy. After the shell-home was completed, the McCormicks allowed the Grays to complete as much of the interior as they wished so that the Grays could reside there.

[94-1282 La.App. 3 Cir. 2] During the six years that the Grays lived in the house, they made monthly mortgage payments of $319.60 to MidState Homes, Inc. (MidState), the McCormick's mortgagee, and made improvements of $6,074.69 to the house. ¹ After a disagreement arose over the Grays' inability to secure financing to purchase the house and release the McCormicks from any obligation on the indebtedness, the McCormicks evicted the Grays. The Grays then sued the McCormicks for damages based on unjust enrichment and detrimental reliance. The trial court found that the McCormicks and the Grays entered into a contract for a gratuitous use of the home and awarded damages as follows: (1) reimbursement for the $23,011.20 of mortgage payments the Grays made; (2) $6,074.69 for the improvements made by the Grays; and (3) mental anguish damages of $7,500 each for Barbara and Charles. The trial court also granted the McCormicks' reconventional demand and awarded them damages of $2,783.68 for repairs they were required to make when the Grays damaged the property at the time of their eviction.

The McCormicks appeal, contending that the trial court erred: (1) in finding that a gratuitous contract existed between the McCormicks and the Grays; (2) in failing to find that an onerous, bilateral contract existed between them; (3) in finding that the McCormicks failed to perform their obligation under the agreement between them; (4) in enforcing an oral contract for the transfer of immovable property by awarding damages for nonperformance of the transfer; (5) alternatively, in failing to deduct an amount from any recovery due the Grays for rental value of the property; and (6) alternatively, in awarding nonpecuniary damages.

[94-1282 La.App. 3 Cir. 3] The Grays answered the appeal to increase the damage award and to reverse the trial court's granting of the McCormicks' reconventional demand.

We reverse and render.

FACTS

We adopt the trial court's summarization of the pertinent facts that it incorporated in its written reasons for judgment as follows:

In 1986 Mr. and Mrs. Gray decided to sell their home in Duncan, Texas. The testimony is conflicting regarding the circumstances leading up to the sale but that information is of no importance to this court's final decision.

In any event, the Grays moved to Deville, Louisiana after their home was sold in August 1986. Both Mr. and Mrs. Gray testified that Mr. McCormick, Mrs. Gray's father, approached them about moving to Louisiana in the early part of 1986. The undisputed testimony reveals that Mr. McCormick offered to donate five acres of land on which the Grays could build a home. The donation of the land did not include timber or mineral rights. The Grays attempted to negotiate with Jim Walter Homes, Inc., for the construction of a home in May 1986. When the application was declined the McCormicks agreed to put the home in their name with the understanding that the property and house would be transferred to the Grays at a later date. Mr. Gray contended at trial that there was never any time specified within which they were to effectuate the transfer. On the other hand, Mr. McCormick testified that he specifically set a time of one year within which time the property was to be transferred and he and his wife would be relieved of the debt....

* * * * * * [W]hat the evidence shows is that Mr. and Mrs. Gray were never asked to pay rent to the McCormicks although they did pay the monthly mortgage note [for 72 months]. Further, the Grays completed [some of] the interior and some exterior work on the home using their own money and labor, in most instances.

Additionally, we find the following facts important in the present case. In August 1992, Mr. Gray attempted to have the McCormicks transfer the property to him and Barbara; at that time he presented Mr. McCormick with a cash deed and assumption of mortgage document that he had prepared. However, Mr. McCormick [94-1282 La.App. 3 Cir. 4] refused to sign because the documents did not release the McCormicks from the indebtedness. In January 1993, after learning that the fire insurance on the house and the mortgage payment due that month had not been paid, Mr. McCormick served an eviction notice on the Grays. In the latter part of January 1993, the Grays left the premises.

Mr. and Mrs. Gray spent $5,293.55 of their own funds when they partially completed the McCormick home. ² In addition to the use of their own funds, Mr. McCormick was able to obtain grant money from two agencies, Louisiana Housing Assistance Corporation (LHAC) and Cenla Community Action Committee (CCAC), to assist the Grays in doing further work on the house. LHAC provided grant money in the sum of $6,535.85 to do some of the sheetrock, ceilings, window trimming, and baseboards, and CCAC provided a weatherization grant of $1,050 for skirting around the house and insulation. In their action against the McCormicks the Grays did not seek reimbursement of the grant funds received from LHAC and CCAC.

GRATUITOUS USE CONTRACT

The McCormicks first contend that the trial court erred in finding that they agreed to give the Grays the gratuitous use of the house and 1.5 acre tract of land on which the house was located. They argue that the Grays failed to present evidence that preponderated that there was an agreement among the parties that the Grays would have the gratuitous use of the property.

[94-1282 La.App. 3 Cir. 5] The laws pertaining to the formation of a contract are well recognized in our Civil Code. A contract is an agreement by two or more parties by which obligations are created, modified, or extinguished. La.Civ.Code art. 1906. An obligation is a legal relationship by which a person is bound to render a performance in favor of another. Performance may consist of giving, doing, or not doing something. La.Civ.Code art. 1756. Obligations arise from contracts and other declarations of the will and may also arise directly from law, despite the declaration of will, in instances such as wrongful acts, the management of the affairs of another, unjust enrichment and other acts or facts. La.Civ.Code art. 1757.

It is well settled that a party who demands performance of the obligation must prove the existence of the obligation by a preponderance of the evidence. Bordlee v. Pat's Const. Co., 316 So.2d 16 (La.App. 4 Cir.1975). A contract is gratuitous when one party obligates himself toward another for the benefit of the latter, without obtaining any advantage in return. La.Civ.Code art. 1910. A contract is onerous when each party obtains an advantage in exchange for his obligation. La.Civ.Code art. 1909. The concept of "advantage" referred to in Article 1909 includes the "service, interest or condition" mentioned in La.Civ.Code art. 1774 (1870). La.Civ.Code art. 1909, cmt. (b).

In the case sub judice, whether we consider the McCormicks' first offer to donate five acres to the Grays or their subsequent agreement to enter into a mortgage contract with MidState for the construction of a home on 1.5 acres, we find that the evidence preponderates that the McCormicks expected the Grays to pay for the house. Mr. Gray said that he was responsible for making the monthly mortgage payment, that he paid the mortgage note to MidState each month for over five years, and that he and his wife were responsible for the payment of the hazard insurance premiums [94-1282 La.App. 3 Cir. 6] on the house. Also, as indicative of their understanding, the McCormicks testified that although they incurred the indebtedness to MidState in their name, they always expected that the Grays were responsible for the monthly mortgage payments.

Based on this evidence, we find that there was no basis in law for the trial court to hold that the McCormicks obligated themselves to provide the Grays with the gratuitous use of the house that they had constructed. Accordingly, we conclude that the trial court erred as a matter of law in construing the evidence as establishing a gratuitous use contract.

As an ancillary factual finding, the trial court dismissed the McCormicks' contention that the Grays were to release the McCormicks from the mortgage indebtedness within one year of the construction of the home. The Grays testified that there was never such an understanding. The trial court held that the evidence failed to support the McCormicks' assertion.

It is well settled that the factual findings of the trier of fact are reviewed under the manifest error/clearly erroneous standard of review. To set aside the trial court's factual findings, we must determine from the record that a reasonable factual basis did not exist for the trial court's...