Loren v. Douglas

• Decision Date: 01 November 2011
• Docket Number: No. DA 11–0240.,DA 11–0240.
• Parties: Loren and Mary HINEBAUCH, husband and wife, and Good Things, LLC, Plaintiffs and Appellants,v.Douglas and Kim McRAE, husband and wife, Defendants and Appellees.
• Court: Montana Supreme Court

362 Mont. 358

264 P.3d 1098

2011 MT 270

Loren and Mary HINEBAUCH, husband and wife, and Good Things, LLC, Plaintiffs and Appellants,

v.Douglas and Kim McRAE, husband and wife, Defendants and Appellees.

No. DA 11–0240.

Supreme Court of Montana.

Submitted on Briefs Aug. 17, 2011.Decided Nov. 1, 2011.

For Appellants: Eric Edward Nord, Tanis M. Holm, Crist, Krogh & Nord, LLC, Billings, Montana, Paula Saye–Dooper, Saye Law, PLLC, Billings, Montana.For Appellees: William J. Speare, Speare Law Firm, PLLC, Billings, Montana.Justice PATRICIA O. COTTER delivered the Opinion of the Court.

¶ 1 Loren and Mary Hinebauch and Good Things, LLC (Hinebauchs), appeal from the order of the Sixteenth Judicial District Court, Custer County, Montana, granting Douglas and Kim McRae's (McRaes) motion for summary judgment. The Hinebauchs allege the District Court erred in determining disputed issues of material fact regarding their breach of contract and unjust enrichment claims, and in determining that the Hinebauchs had unclean hands, thus barring their unjust enrichment claim.

¶ 2 We affirm the result on different grounds.

ISSUES

¶ 3 The Hinebauchs raise three issues on appeal. A restatement of the issues is:

¶ 4 1. Did the District Court err in determining disputed issues of material fact and granting summary judgment to the McRaes for the breach of contract claim?

¶ 5 2. Did the District Court err in determining disputed issues of material fact and granting summary judgment to the McRaes on the unjust enrichment claim?

¶ 6 3. Did the District Court err in determining the Hinebauchs had unclean hands, thus barring their unjust enrichment claim?

FACTUAL AND PROCEDURAL BACKGROUND

¶ 7 In November 2005, the Hinebauchs entered a buy-sell agreement to purchase the Shores commercial building at 707 Main Street, Miles City, Montana, for $85,000 from Mickey and Marcia McFarland. The Hinebauchs evidently paid a $500 earnest money deposit to secure the purchase, but they never closed or purchased the building from the McFarlands. The Hinebauchs then met with Douglas McRae on December 12, 2005, and discussed the prospects of the McRaes purchasing the building. The McRaes then entered a buy-sell agreement with the McFarlands to purchase the building for $85,000, and the McRaes purchased the building for $85,000 plus closing costs on December 16, 2005. None of the $500 deposit originally made by the Hinebauchs was applied to the purchase.

¶ 8 The Hinebauchs, who operated a business in the building, began making “rent” payments to the McRaes in March 2006. Later that spring, the McRaes presented the Hinebauchs with a proposed lease agreement, which referred to the McRaes as the Lessors and the Hinebauchs as the Lessees. The McRaes proposed to lease the building to the Hinebauchs for five years, from January 1, 2006, through December 31, 2011, in exchange for monthly payments of $501.67, and the Hinebauchs would have the option to purchase the building at the end of the five years for $86,000. The McRaes were to obtain fire and casualty insurance on the building, while the Hinebauchs were responsible for the payments of taxes, utilities, maintenance, and premiums for the fire and casualty insurance, as well as for obtaining and paying for a commercial general liability insurance policy and tenant fire loss protection. The proposed lease agreement also included a remodeling costs provision that the “Lessees shall be solely responsible for all costs necessary to remodel the premises to suit Lessees' needs.” The McRaes obtained fire and casualty insurance on the building for 80% of the replacement costs, and were named as the sole insured party on the policy.

¶ 9 The Hinebauchs received the proposed lease agreement from the McRaes, made comments and suggestions regarding it, and returned it to the McRaes without signing it. They proposed multiple modifications to the proposed lease, some substantive, and some not. Notably, the Hinebauchs did not propose any changes to Article VII, Section 7.01 of the proposed lease agreement. This section, titled Casualty Insurance, states:

Lessors shall obtain and maintain fire and other casualty insurance on the entire premises and Lessees shall pay fire or casualty insurance within fifteen (15) days of the posting of written notice to Lessees by Lessors. Lessees shall obtain and maintain at all times during the term hereof with a responsible insurer $1,000,000.00 combined single limit commercial general liability insurance and tenant fire of not less than $100,000.00. All insurance policies shall have affixed thereto a loss payable clause in favor of the Lessors. Lessees shall pay the entire cost of such insurance.

¶ 10 In any event, no lease was ever signed between the parties. Rather, the Hinebauchs contend that they “entered into an oral agreement with the McRaes” to purchase the building, and that the material terms of the agreement were a purchase price of $85,000; $1,000 in closing costs; payment of seven percent (7%) interest; payment of taxes, insurance, and maintenance/remodel costs for a period of five years; and a balloon payment of $86,000 on or before five years, at which time the building would be deeded to the Hinebauchs. The Hinebauchs also allege that the McRaes merely “loaned” them $86,000, and that they have already paid the McRaes $19,578 in “monthly interest payments,” approximately $8,473 in property insurance, approximately $8,277 in property taxes, and approximately $5,000 in maintenance and repairs. In other words, they contend they were in the process of purchasing the building.

¶ 11 The Hinebauchs state that the reason the McRaes obtained the insurance was because the property was not to be transferred to the Hinebauchs until the final payment of $86,000 was made to the McRaes. The Hinebauchs also believe the McRaes should have listed the Hinebauchs as loss payees on the policy in order to protect the Hinebauchs' interests in the property.

¶ 12 The Hinebauchs further allege that by April 2006 they spent over $70,000 on renovations of the building, moved Mary's inventory into the building, and that her store was in “full operation.” Over two years later, on June 19, 2008, Mary formed Good Things, LLC in the state of Montana.

¶ 13 On March 23, 2009, at no fault of either party, a fire damaged the building, rendering it uninhabitable. The McRaes contend that as of the date of the fire, the Hinebauchs were behind on payments by $5,581.66, including the insurance premium for the policy in effect at the time of the fire, and the property taxes due the previous fall. The Hinebauchs allege they were behind by only $1,953.63 and that the McRaes had declined their offer of reimbursement for the missing insurance payments. After the fire the McRaes received the 80% insurance proceeds for the loss of the building, totaling approximately $335,000. The McRaes state they “incurred substantial expenses related to demolition and clean up” of the building, while the Hinebauchs argue the McRaes “did not expend any further resources beyond their initial purchase of the building.” The Hinebauchs allege the fire destroyed over $381,250 worth of their inventory, antiques, and other personal property in the building. The McRaes later sold the lot.

¶ 14 After the fire, the Hinebauchs sought to enforce the alleged oral purchase agreement and collect a portion of the insurance money. In March 2010, the Hinebauchs and Good Things, LLC filed a complaint in the Sixteenth Judicial District Court in Custer County, Montana, alleging breach of contract, unjust enrichment, and fraud against the McRaes. The District Court subsequently dismissed Good Things, LLC as a party and dismissed the fraud claim, neither of which is at issue in this appeal.

¶ 15 On March 28, 2011, the District Court granted the McRaes' motion for summary judgment against the Hinebauchs on the breach of contract and unjust enrichment claims. The court determined that because no evidence was presented showing that the McRaes agreed to obtain insurance for the building naming the Hinebauchs as an insured party, there was a lack of mutual consent and the agreement was unenforceable. Even if there had been mutual consent, the Hinebauchs would have materially breached the agreement by failing to pay the insurance policy premiums required to keep the policy in effect prior to the fire. Regarding the unjust enrichment claim, the court determined that the Hinebauchs did not establish any requisite misconduct or fault on the part of the McRaes, and that the Hinebauchs had unclean hands in seeking equitable relief on the claim for unjust enrichment.

¶ 16 The Hinebauchs appeal.

STANDARD OF REVIEW

¶ 17 We review a district court's grant of summary judgment de novo, applying the standards of M.R. Civ. P. 56. Smith v. Burlington N. & Santa Fe Ry., 2008 MT 225, ¶ 10, 344 Mont. 278, 187 P.3d 639 [hereinafter Burlington ] (citation omitted). “The moving party has the burden of establishing the absence of a genuine issue of material fact, and entitlement to judgment as a matter of law.” Burlington, ¶ 10 (citation omitted). To fulfill this burden, “the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits” must not demonstrate a genuine issue of material fact. Hinderman v. Krivor, 2010 MT 230, ¶ 13, 358 Mont. 111, 244 P.3d 306 (citation omitted). Whether the moving party is “entitled to judgment as a matter of law is a legal conclusion....” Ternes v. State Farm Fire & Cas. Co., 2011 MT 156, ¶ 18, 361 Mont. 129, 257 P.3d 352 (citation omitted). We review a district court's conclusions of law for correctness. Burlington, ¶ 11 (citation omitted).

¶ 18 “Once the moving party has met this burden, the non-moving party must present substantial evidence essential to one or more elements of the case to raise a genuine issue of material fact.” Burlington, ¶ 10 (citation omitted). Disagreement about fact...