In re Hoskins

• Decision Date: 16 March 2009
• Docket Number: No. 08-565.,08-565.
• Citation: 405 B.R. 576
• Court: U.S. Bankruptcy Court — Northern District of West Virginia
• Parties: In re Larry Gene HOSKINS, and Pamela Jo Hubbard Hoskins, Debtors.

405 B.R. 576

In re Larry Gene HOSKINS, and Pamela Jo Hubbard Hoskins, Debtors.

No. 08-565.

United States Bankruptcy Court, N.D. West Virginia.

March 16, 2009.

COPYRIGHT MATERIAL OMITTED

Thomas H. Fluharty, Clarksburg, WV, for Debtors.

MEMORANDUM OPINION

PATRICK M. FLATLEY, Bankruptcy Judge.

In 1998, Mr. Kungle constructed, for himself, a cabin on 15 acres of real property belonging to Larry and Pamela Hoskins (the "Debtors"). In 2004, after a dispute regarding Mr. Kungle's use of their land, the Debtors prohibited Mr. Kungle from accessing the cabin. Mr. Kungle now claims that the Debtors owe him $98,348 for the cabin, and he filed an unsecured proof of claim in the Debtors' Chapter 13 bankruptcy case in that amount. The Debtors object to the proof of claim arguing that they owe Mr. Kungle nothing, or, in the alternative, that Mr. Kungle's claim should not exceed $13,679.

For the reasons stated herein, the court concludes that Mr. Kungle has a claim against the Debtors' bankruptcy estate for unjust enrichment that, under a theory of restitution, is to be measured by the enhanced value of the 15 acre parcel of land on which the new cabin sits. The applicable date for making the valuation determination is November 7, 2004. Because the parties only established the enhanced value as of August 25, 2007, the court will set a further evidentiary hearing to determine value as of November 7, 2004.

I. BACKGROUND

The Debtors own approximately 364 acres of rural land in Tyler County, West Virginia. On the property is a hovel, described by the parties as "the old red cabin." Over thirty years ago, Mr. Hoskins' father began allowing Mr. Kungle's family to use the old red cabin for hunting and recreation purposes. Although the amount of time Mr. Kungle spent at the old red cabin varied, he would generally be there about one month per year. He would also call the Debtors in advance to alert them of his coming, and inform them about any guests that he was bringing with him. The old red cabin has no electricity or gas; it consists of a single room, a wood stove, and six bunk beds. It has an attached outhouse.

In 1997 or 1998, Mr. Kungle approached Mr. Hoskins about building a new cabin on the Debtors' property. Mr. Kungle offered to buy the 15 acre parcel on which the new cabin was to sit, but the Debtors were adamant that no part of their land be sold. The Debtors were willing, however, to execute a long term lease, and, according to Mr. Kungle, he believed that they may have offered him a life estate in the 15 acres of land.

With no formal agreement, and with nothing more than a handshake over the notion that Mr. Kungle would be allowed to build a new cabin and use it for hunting and recreational purposes, Mr. Kungle began to construct the new cabin at his own expense. The Debtors provided some raw materials for the cabin's construction, and Mr. Hoskins actively assisted Mr. Kungle with labor and other services. It soon became apparent to Mr. Hoskins, however, that the new cabin was going to be much different than the old red cabin. Unlike the old red cabin, the new cabin has a full basement, two bedrooms on the ground floor, and a large loft. The new cabin has about 1500 square feet of living space, a modern bath, and a kitchen with hickory cabinets. The new cabin is more akin to a permanent dwelling house than the hovel that served as an overnight hunting cabin. Consistent with its purpose of being a hunting and recreation cabin, it is located about 0.9 miles from the county road and is not accessible year round.

In November 1998, the new cabin was substantially complete. Concerned about the lack of a written agreement allowing for Mr. Kungle's use of the new cabin, the Debtors hired an attorney to prepare a written lease. Among other terms, the November 6, 1998, lease had a duration of 25 years, and it restricted Mr. Kungle's use of the new cabin to 15 days a month. In the Debtors' view, the new cabin was to be nothing more than a hunting/recreation cabin — like the old red cabin — and they believed that the terms of the lease were more than adequate to accommodate Mr. Kungle's anticipated use. The only amount due the Debtors under the lease was a $1 annual payment.

Mr. Kungle refused to sign the lease on the grounds that it did not contain an option to renew the lease following the initial 25 year term for an additional 25 years. Additionally, he did not like the way it restricted his access to the Debtors' property. From 1998 to 2004, Mr. Kungle came and went to the new cabin as he pleased, and he often brought guests with him. Mr. Kungle's use of the new cabin, however, became a source of tension with the Debtors:

When they were in the old cabin, they always called before they came and let us know a week in advance or something, and he got so with that [new] cabin that he would just show up. And from where my trailer sits I can't see who's going up the hollow, and I would have to go out and see who is going up the hollow to see if it was them or if it was somebody that wasn't supposed to be there. So we never knew when they were coming and we discussed that with him. We asked him to call before he came, so he started calling five minutes before he got there.

. . . .

[T]hey would run four-wheelers all hours of the day and night past the trailer. It didn't matter what time it was, midnight, 1, 2, 3:00 in the morning, and my bedroom is on that end of the trailer. I don't know if we ever discussed [it] with him, but we had a problem with the number of people he was bringing. With the old cabin, it was mostly just his family and an occasional friend, and he started bringing as many as 16 people at a time.

(Pamela Hoskins Depo. p. 68).

On September 7, 2004, the Debtors sent a letter to Mr. Kungle accusing him of taking advantage of their good nature and generosity, and of making a "mockery" of their request that he provide them with advance notice before entering their property. Among other things, the letter states that Mr. Kungle had to notify them seven days in advance if he wanted to stay overnight at the new cabin, and that the use of ATVs, trail bikes, or other equipment was prohibited. In the Debtors' view, they were the owners of the property, and everything on it; Mr. Kungle's use of their land was a privilege and not a right.

After receiving the letter, Mr. Kungle informed the Debtors that he would be at the new cabin on October 31, 2004, for an overnight stay. When Mr. Kungle came, he removed substantially all of his personal property and vacated the new cabin. Mr. Kungle stated that he did not intend to return until the dispute with the Debtors over his use of the cabin was settled.

In an effort to settle the dispute, Mr. Kungle hired an attorney and asked his attorney to contact the Debtors on his behalf. By letter dated November 1, 2004, Mr. Kungle offered to purchase the 15 acre parcel of land on which the cabin sits for $15,000. The Debtors' received the letter about a week later. Before receiving the letter, the Debtors were willing to let Mr. Kungle return to the new cabin. After receiving the letter from Mr. Kungle's attorney, however, Mr. Hoskins stated that he "had no more use for him," and that Mr. Kungle could only come back to the new cabin with an appointment when he was ready to move it. Although Mr. Kungle investigated the possibility of moving the new cabin, he ultimately decided against it.

In the Debtors' bankruptcy case, which was filed on April 17, 2008, they propose a Chapter 13 plan that pays Mr. Kungle $16,752.24 as an unsecured creditor. The Debtors have substantial non-exempt equity in their real property. The Schedule A value of their 364 acres is $300,000, and the only claim secured by the value of that real property is for $50,325. Apart from Mr. Kungle, the Debtors only have one unsecured debt owed to the U.S. Department of Education in the amount of $1,346. Consequently, after deducting their applicable West Virginia bankruptcy exemptions, any Chapter 13 plan confirmed by the Debtors will have to pay Mr. Kungle 100% of his unsecured claim.

II. DISCUSSION

Under a theory of unjust enrichment, Mr. Kungle asserts that he is entitled to recover from the Debtors the value of the new cabin, which he contends is $68,000, and, adding pre-judgment interest from 2004, he asserts that the Debtors owe him $98,348 as of May 19, 2008.

The Debtors acknowledge that the new cabin adds value to their real property, but assert that the new cabin is not worth anything to them on the basis that they would rather have the cabin removed from their property. In their view, Mr. Kungle's unjust enrichment claim should fail on the grounds that he built the cabin on the Debtors' property knowing that he did not own or have identifiable rights to their real property. Moreover, the Debtors assert that they were unaware of the scope of the new cabin; at most they believed that the old red cabin was being replaced at a cost of no more than $20,000. In the alternative, assuming that they have been enriched by the construction of the new cabin, they argue that the maximum reasonable value for Mr. Kungle's claim is $13,679, which, they contend, would be the present value of Mr. Kungle's right to use the new cabin for one month a year over his lifetime.

As stated by the Supreme Court of Appeals of West Virginia, "[t]he law of unjust enrichment indicates that if one person improves the land of another ... through the affixation of chattels to the land, that person is entitled to restitution for the improvements if certain other circumstances are present." Realmark Devs. v. Ranson, 208 W.Va. 717, 542 S.E.2d 880, 884 (2000) (citing Restatement, 1st Restitution, § 53 (1937)). As indicated by the Court, those "certain other circumstances" are the ones set forth in the Restatement 1st of Restitution. Id. In general, the Restatement imposes a duty of restitution on any person that has tortiously...