Lewis v. Lewis

• Decision Date: 30 June 2008
• Docket Number: No. 07SC134.,07SC134.
• Citation: 189 P.3d 1134
• Parties: Cassandra LEWIS, Petitioner, v. Frank LEWIS and Lucy Lewis, Respondents.
• Court: Colorado Supreme Court

189 P.3d 1134

Cassandra LEWIS, Petitioner, v. Frank LEWIS and Lucy Lewis, Respondents.

No. 07SC134.

Supreme Court of Colorado, En Banc.

June 30, 2008.

As Modified on Denial of Rehearing August 18, 2008.^*

Dietze and Davis, P.C., Joel C. Maguire, Boulder, Colorado, Attorneys for Petitioner.

Michael P. Dugan Greeley, Colorado, Attorney for Respondents.

Justice MARTINEZ delivered the Opinion of the Court.

In this appeal, we review the unpublished opinion of the court of appeals in Lewis v. Lewis, 2006 WL 3441766 (Colo.App.2006), which reversed the trial court's judgment. The trial court found that the defendants were unjustly enriched when they failed to compensate the plaintiff for her contribution to a home that was sold for a significant profit. The court of appeals held that unjust enrichment claims present questions of mixed law and fact. Thus, it reviewed the trial court's determination that the plaintiff satisfied the elements of unjust enrichment de novo and reached a contrary result.

We consider whether the court of appeals applied the wrong standard in its appellate review of the trial court's conclusion. We hold that the proper appellate review standard for claims of unjust enrichment is abuse of discretion. However, we also recognize that the trial court must apply the correct test for deciding whether enrichment is unjust.

We hold that claims of unjust enrichment by close family members or confidants should be evaluated by considering the mutual purpose of the parties. To determine unjust enrichment in situations involving a failed gift or failed contract between close family members and confidants, trial courts must determine whether there existed a mutual purpose between the parties. If such a purpose did exist and one party profited from a significant deviation from this mutual purpose, that party is unjustly enriched.

Applying this standard to the present case, we find support in the record for the trial court's determination that the plaintiff's in-laws purchased the home so that their son and daughter-in-law could have the benefits of home ownership. As a consequence, we find that the trial court did not abuse its discretion when it determined that the defendants in the case were unjustly enriched.

I. Facts and Procedural History

Cassandra Lewis ("Cassandra") asserts that her ex-in-laws were unjustly enriched through the sale of the house where Cassandra and her husband Sammy lived from June 1986 to September 2000. On September 6, 1984, Cassandra and Sammy Lewis were married. Over the next two years, the couple lived with Sammy's parents, Frank and Lucy Lewis ("The Lewises"). After the birth of their daughter in February 1986, Cassandra and Sammy began looking for a place of their own to either rent or purchase. One house they considered was at 403 Division Avenue in Platteville, but on the advice of Frank Lewis, they decided against purchasing it because it needed too much work. Although Frank Lewis discouraged Cassandra and Sammy from buying the property, he and Lucy Lewis surreptitiously purchased the home on May 20, 1986. When Cassandra and Sammy found out that the Lewises bought the house, the Lewises told them that they meant the purchase to be a surprise gift for Cassandra and Sammy.

Frank Lewis purchased the house for a sale price of $29,500. He made a $5,000 down payment and executed a mortgage to the seller for the balance. The mortgage was calculated over twenty years with monthly payments of principal plus interest of $236.43. Cassandra and Sammy made the monthly mortgage payments, paying $236.46 directly to the Lewises. The Lewises then paid that same amount to the mortgage holder. At trial, Cassandra testified that the Lewises told her "that they put down $5,000 as a gift on the house as a surprise for us." The trial court made a factual finding that the Lewises proposed this arrangement to "ensure that the payments were made because [the Lewises] were concerned that Sammy had a drinking problem and that payments might not otherwise be made on time." The court further found that Cassandra and Sammy faithfully made all the payments for the fourteen years they occupied the house prior to their separation.

In addition to paying the Lewises the mortgage amount due each month, Cassandra and Sammy were named the insureds on the homeowner's insurance policy. The trial court found that Cassandra and Sammy paid the full cost of insuring the house. The trial court also found that when the property suffered a loss, such as hail damage, the insurance benefits were paid directly to Cassandra and Sammy. Cassandra and Sammy paid the real estate taxes, utilities, and all maintenance costs. Each of these bills were mailed directly to Cassandra and Sammy. Likewise, Cassandra and Sammy paid each bill directly to the party owed.

Further, Cassandra and Sammy presented themselves as owners of the property. The trial court made a finding of fact that when hearings were held to determine whether Platteville would put in a new sewer line, Cassandra and Sammy attended the hearings and spoke as the property's owners. They also undertook various improvements to the property. Over the fourteen years in which Cassandra and Sammy lived in the house, they added carpet, vinyl flooring for the kitchen and bathroom, tiled the laundry room, painted the interior and exterior of the house "a couple of times," removed old wallpaper and put up new wallpaper, replaced light fixtures, vanities, and mirrors, and added ceiling fans in three rooms.

As for the exterior of the house, the trial court found that Cassandra and Sammy first put in a rock driveway and later replaced it with concrete. They put up a chain link fence, installed a satellite dish, and built an above-ground swimming pool. In addition, Cassandra and Sammy cleared space for and installed a basketball court on the property. They also laid new sod.

The trial court made a specific factual finding that at no point did Cassandra and Sammy seek the approval of the Lewises when they undertook these improvements. No evidence was presented and the trial court did not find that the Lewises contributed financially to any of these improvements, aside from some early cleanup work before the house was habitable.

After the birth of their second child in 1992, Cassandra and Sammy began looking for a larger home. The trial court found that during this time, the Lewises told Cassandra and Sammy "that they should not sell the property but should instead rent it out and use the rental income to pay for the new home." Cassandra and Sammy decided to build an addition to the house. The record indicates and the trial court found that the Lewises did not hire the contractor, nor sign the construction contract; rather, Cassandra and Sammy did.

Throughout the fourteen years, the parties made several comments concerning property ownership. Besides putting the title in their name because of Sammy's drinking problem, the trial court found that the Lewises assured Cassandra "that the house was hers and she could live there as long as she wanted." Some years later, Frank Lewis was asked by his six-year-old granddaughter, "Grandpa, when is this going to be our house?" Frank Lewis claimed to have responded that it was her house, as long as her parents paid the rent. Frank Lewis testified that he told Cassandra the same thing. Cassandra disputed this claim.

The trial court made a factual finding that at one point during the fourteen years in which Cassandra and Sammy occupied the residence, "Frank Lewis went to the County to try to change the title out of his and Lucy Lewis' names and into [Cassandra] and Sammy's." However, when he was told by county officials that he must first refinance the property to put it in Cassandra and Sammy's names, he did not follow through on the title change. Frank Lewis testified that he decided to sell the house to Cassandra and Sammy, presumably for the remaining balance plus the $5,000 down payment, but that sale never occurred.

Frank Lewis further testified that he told Sammy he could purchase the house if he paid back the $5,000 down payment and refinanced the loan to assume the remaining balance owed. Both Lucy and Frank Lewis conceded that while Sammy was aware of this option, Cassandra was never told that the house could be purchased by repaying the down payment.

After sixteen years of marriage and fourteen years living at the Platteville residence, Cassandra, along with her two daughters moved out in September 2000. Less than two months later, on November 22, 2000, the Lewises sold the house to an unrelated buyer for $122,000. The net proceeds from the sale of the house were $108,879.86. Cassandra and Sammy's marriage dissolution was finalized on April 20, 2002. The dissolution did not include reference to the house, and Cassandra received no compensation from the sale.

Cassandra filed suit against the Lewises claiming ownership of the Platteville home. At trial, Cassandra argued that the Lewises gave Cassandra and Sammy the house as a gift and that the court should enforce the gift and give Cassandra and Sammy the house. In the alternative, Cassandra asserted that the court should enforce the parties' mutual desire that the property be sold to Cassandra and Sammy upon payment of the remaining balance of the note and reimbursement for the down payment. However, because Cassandra was unaware of the option to purchase the house before it was sold to the unrelated party, she asserted that the only way to enforce the mutual purpose of the parties and to prevent the unjust enrichment of the Lewises was to place her in the shoes of the seller at the time of the house was sold. Under this theory, she would be entitled to the Lewises net proceeds of $108,879.86 minus the $5,000 down payment.

The Lewises' main argument against Cassandra's ownership claim was that they were renting the property to Cassandra and Sammy for the fourteen...