Estate of Murphy, Matter of

• Decision Date: 01 October 1996
• Docket Number: No. 960036,960036
• Citation: 554 N.W.2d 432
• Parties: In the Matter of the ESTATE OF Hugh R. MURPHY, Also Known as Red Murphy, Deceased. William Pat MURPHY, a/k/a Pat or W.P. Murphy, Petitioner and Appellee, v. Sheila MURPHY, Personal Representative of the Estate of Hugh R. Murphy, Respondent, Petitioner and Appellant, v. Tom MURPHY, Respondent. Civil
• Court: North Dakota Supreme Court

Page 432

554 N.W.2d 432

In the Matter of the ESTATE OF Hugh R. MURPHY, Also Known as

Red Murphy, Deceased.

William Pat MURPHY, a/k/a Pat or W.P. Murphy, Petitioner and Appellee, v. Sheila MURPHY, Personal Representative of the Estate of Hugh

R. Murphy, Respondent, Petitioner and Appellant, v. Tom MURPHY, Respondent.

Civil No. 960036.

Supreme Court of North Dakota.

Oct. 1, 1996.

John L. Sherman of Mackoff, Kellogg, Kirby & Kloster, PC, Dickinson, for petitioner and appellee.

Michael J. Maus of Howe, Hardy, Galloway & Maus, PC, Dickinson, for respondent, petitioner, and appellant.

SANDSTROM, Justice.

This is a dispute over a contract requiring Hugh Redmond (Red) Murphy, now deceased, to pay his uncle, Pat Murphy, $300 per month for Pat's life. After a bench trial, the district court found: 1) Red Murphy's estate was liable for $300-per-month payments to Pat; 2) Pat Murphy was entitled to the amount Red's estate was in arrears; and 3) Pat Murphy was entitled to attorney's fees. The estate of Red Murphy appeals the judgment, claiming it did not receive a fair hearing because the trial court failed to rule on the motion for guardian ad litem and the motion for joinder until after the hearing. The Murphy estate also argues it was prejudiced because it was not given an opportunity to depose Red's partner, Tom Murphy, and the trial court abused its discretion in awarding attorney's fees. We affirm the district court judgment, except we reverse the award of attorney's fees.

I

Hugh T. Murphy and his siblings, including his brother Pat Murphy, inherited land known as the Murphy Ranch from their parents. Pat Murphy conveyed his share of the ranch to Hugh T. Murphy in exchange for payment of $300 per month. In 1980, Hugh T. Murphy conveyed a portion of the land to his nephews, Red Murphy and Tom Murphy. In consideration for the conveyance, the parties executed an annuity agreement whereby Red Murphy and Tom Murphy would make annual payments to Hugh Murphy. Red and Tom Murphy also orally agreed to take care of their uncle, Pat.

Upon Hugh T. Murphy's death, Pat Murphy was entitled to inherit by intestacy an additional portion of the land. On March 12, 1990, Pat Murphy and Red Murphy agreed in writing that Pat Murphy relinquished any rights to Hugh's estate in exchange for Red paying $300 per month to Pat for the remainder of Pat's life. For the first six months, Red Murphy gave Pat Murphy $300 per month.

In February 1991, Red Murphy and Tom Murphy formed a partnership for the purpose of operating the ranch, to be retroactively effective as of January 1, 1991. On January 9, 1991, Red Murphy conveyed to his brother Tom Murphy one-half of the interest he had acquired from Pat Murphy. For some time, Tom Murphy made payments of $300 per month to Pat Murphy. On May 6, 1994, Red Murphy died. At the time of his death, he and Tom Murphy were each paying $150 per month to Pat Murphy. Red Murphy's wife, Sheila Murphy, continued to pay $150 per month to Pat Murphy. Tom Murphy also paid $150 per month to Pat Murphy during this time.

Pat Murphy filed a creditor's claim against the estate of Red Murphy. The trial court found the agreement between Pat Murphy and Red Murphy had not been altered by the conveyance of half the ranch to Tom Murphy. Therefore, Red Murphy alone was obligated to make the full payment of $300 per month to Pat Murphy. Additionally, the trial court found Pat Murphy was entitled to the full $300 per month from the estate from the date of the agreement, less the payments made by Red. The trial court denied Sheila's motion to join Tom Murphy and awarded Pat Murphy attorney's fees. The trial court also appointed a guardian ad litem for Pat Murphy.

The district court had jurisdiction under N.D. Const. Art. VI, § 8, and N.D.C.C. § 27-05-06(2). The appeal was filed in a timely manner under N.D.R.App.P. 4(a). This Court has jurisdiction under N.D. Const. Art. VI, § 6, and N.D.C.C. § 28-27-01.

II

The district court found Red Murphy's estate was liable for the entire $300-per-month payment under the March 12, 1990, contract between Red and Pat. We affirm the district court's findings of fact unless they are clearly erroneous. N.D.R.Civ.P. 52. "[A] finding of fact is clearly erroneous if it is induced by an erroneous view of the law, if no evidence supports it or if, on the entire record, we are left with a definite and firm conviction that a mistake has been made." Shaver v. Kopp, 545 N.W.2d 170, 174 (N.D.1996). Sheila Murphy concedes the estate is liable on the contract; however, she contends Tom Murphy is liable for one-half of the contractual obligation.

A

Even though Tom Murphy received a one-half interest in the land, acquiring this interest does not make him liable on the contract. See Home Ins. of Dickinson v. Speldrich, 436 N.W.2d 1 (N.D.1989) (finding insureds not liable for premium payments even though they benefitted from the policy). Tom Murphy was not a party to the contract. Tom Murphy is liable on the contract only if the payment obligation had been assigned or otherwise transferred from Red Murphy to Tom Murphy.

B

Under N.D.C.C. § 9-11-03, "[t]he burden of an obligation may be transferred with the consent of the party entitled to its benefit, but not otherwise, except as provided by section 47-04-29." N.D.C.C. § 47-04-29 applies to covenants running with the land. For a covenant to run with the land, it must be contained in the grant of land. N.D.C.C. § 47-04-24. In this case, there was no reference to the $300 payment in the deed from Red Murphy to Tom Murphy. The transfer of the land was not a transfer of any part of the payment obligation. Since the exception provided in § 47-04-29 does not apply, we consider whether Pat Murphy consented to the transfer of the payment obligation from Red Murphy to Tom Murphy.

C

"An assignment ¹ is an expression of intention by the assignor that his duty shall immediately pass to the assignee." 4 Corbin on Contracts § 866 (1960). The benefitted party's consent to such a transfer can be manifested either expressly or by implication. Benson County Coop. Credit Union v. Central Livestock Ass'n, Inc., 300 N.W.2d 236, 241 (N.D.1980). Sufficient evidence supports the district court's finding Pat Murphy did not expressly agree to any modification of the contract. Consent, however, can also be implied through conduct. Benson County Coop.

Implied consent is "[a]n inference arising from a course of conduct or relationship between the parties, in which there is mutual acquiescence or a lack of objection under circumstances signifying assent." Black's Law Dictionary 305 (6th ed. 1990); see also Benson County Coop. at 241 (under the Uniform Commercial Code, "consent may be shown by implication arising from a course of conduct as well as by express words"). Consent is implied when the benefitted party knows of the other party's actions and fails to object to those actions. See Schaffer v. Smith, 113 N.W.2d 668, 672 (N.D.1962) (presuming consent when a property owner knew work was being done and made no objection).

There may be an implied acceptance of an assignment when a seller knows of the assignment and accepts payments from the assignee. See Rosenberg v. Son, Inc., 491 N.W.2d 71 (N.D.1992). We distinguish Rosenberg from the present case. In Rosenberg, the sellers knew of the assignment and accepted payments, which were clearly being made in satisfaction of the original contract, from the assignees. Rosenberg at 73. Pat testified he did not know whether any of the payments from Tom Murphy were in satisfaction of the 1990 contract. Tom also testified the payments were not in satisfaction of the 1990 contract. Absent knowledge of the payee that payments from an assignee are in satisfaction of the original debt, there can be no consent to an assignment.

Even where there is an effective assignment of a contractual obligation, the assignor's " 'duty remains absolutely unchanged.' " Rosenberg at 74 (quoting 4 Corbin on Contracts § 866); see also Smith v. Wrehe, 199 Neb. 753, 261 N.W.2d 620, 625 (1978); Brooks v. Hayes, 133 Wis.2d 228, 395 N.W.2d 167, 170 (1986). The original party remains a guarantor. Rosenberg at 74. Therefore, any assignment of the obligation to Tom Murphy would not release Red Murphy from liability on the entire $300 per month.

D

Red Murphy would have been released from a portion of the obligation only if a novation had occurred. See Rosenberg, 491 N.W.2d at 74. "The question of whether there has been a novation is a question of fact, which will not be overturned on appeal unless it is clearly erroneous." Schmitt v. Berwick Tp., 488 N.W.2d 398, 401 (N.D.1992); see also Herb Hill Ins., Inc. v. Radtke, 380 N.W.2d 651, 654 (N.D.1986). The district court found no novation occurred.

"Novation is made by the substitution of ... [a] new debtor in the place of the old one with intent to release the latter." N.D.C.C. § 9-13-10(2). "To have a novation, the parties must intend to extinguish the old obligation, there must be mutual assent, and there must be sufficient consideration." Schmitt v. Berwick Tp., 488 N.W.2d 398, 400 (N.D.1992). The acquisition of one-half interest in the land is sufficient consideration for assuming the debt. See N.D.C.C. § 9-05-01 (defining consideration).

"If it clearly appears from the terms of the assignment transaction that the assignee intends to undertake the duty to perform for the assignor, and that the latter intends to be himself no longer bound, there is a discharge of the assignor by novation if the third party accepts performance by the assignee with knowledge of the terms of the assignment or otherwise assents to those terms." 4 Corbin on Contracts § 866 (citing Iowa Bridge Co. v. Comm'r of Internal Revenue, 39 F.2d 777 (8th Cir.1930)). A valid consent for an assignment does not require a finding of valid consent for a novation. Rosenberg at 75-6. "Acceptance of a check does not create a novation in the absence of...