Rawlings v. Rawlings

• Decision Date: 26 December 2008
• Docket Number: No. 20070797-CA.,20070797-CA.
• Citation: 200 P.3d 662,2008 UT App 478
• Parties: Donald RAWLINGS and Jeanette Rawlings, Plaintiffs and Appellants, v. Arnold Dwayne RAWLINGS and Paulette Rawlings, Defendants and Appellees. Arnold Dwayne Rawlings and Paulette Rawlings, as Trustees of the Arnold Dwayne Rawlings Family Trust; Theron LaRell Rawlings; Bryce C. Rawlings; and Carol Lynn R. Masterson, Third-party Plaintiffs and Appellees, v. Donald Rawlings and Jeanette Rawlings; and Donald Rawlings and Jeanette Rawlings, as trustees of a trust whose name is unknown, Third-party Defendants and Appellants.
• Court: Utah Court of Appeals

200 P.3d 662

2008 UT App 478

Donald RAWLINGS and Jeanette Rawlings, Plaintiffs and Appellants, v. Arnold Dwayne RAWLINGS and Paulette Rawlings, Defendants and Appellees.

Arnold Dwayne Rawlings and Paulette Rawlings, as Trustees of the Arnold Dwayne Rawlings Family Trust; Theron LaRell Rawlings; Bryce C. Rawlings; and Carol Lynn R. Masterson, Third-party Plaintiffs and Appellees, v. Donald Rawlings and Jeanette Rawlings; and Donald Rawlings and Jeanette Rawlings, as trustees of a trust whose name is unknown, Third-party Defendants and Appellants.

No. 20070797-CA.

Court of Appeals of Utah.

December 26, 2008.

M. David Eckersley, Salt Lake City, for Appellants.

M. Dayle Jeffs and Thomas W. Seiler, Provo, for Appellees.

Before GREENWOOD, P.J., THORNE, Associate P.J., and ORME, J.

OPINION

THORNE, Associate Presiding Judge:

¶ 1 Donald and Jeanette Rawlings (collectively, the Grantees) appeal from the district court's entry of judgment finding an equitable constructive trust in favor of Dwayne and Paulette Rawlings, LaRell Rawlings, Bryce C. Rawlings, and Carol Lynn R. Masterson (collectively, the Siblings).¹ We reverse the judgment of the district court, as well as an order imposing sanctions against the Grantees for failing to participate in mediation proceedings in good faith.

¶ 2 This dispute centers on a family farm that Arnold Rawlings transferred to the Grantees by deed in 1967. The Grantees are Arnold and Cleo Rawlings's oldest son, Donald, and Donald's wife, Jeanette. The Siblings comprise the rest of Arnold and Cleo's children, along with Dwayne's wife, Paulette. As summarized in greater detail below, the Grantees' position in this litigation is that they own the farm in fee simple pursuant to the 1967 deed from Arnold. The Siblings argue that the Grantees hold the farm in trust for the entire surviving family under a constructive trust theory. After a four-day trial exploring the circumstances of the 1967 deed, the district court agreed with the Siblings and imposed an equitable constructive trust on the Grantees in regard to the farm.

BACKGROUND

¶ 3 Arnold acquired the farm from his mother in 1944. In 1966, Arnold was diagnosed with cancer. Arnold believed that he would be unable to obtain state-provided cancer treatment if he retained the farm in his name. This belief motivated Arnold to explore the possibility of transferring the farm to one of his sons as a means of getting it out of his name while still keeping it in the family. On March 24, 1967, Arnold conveyed the farm to the Grantees by warranty deed. Arnold's wife, Cleo, also signed the warranty deed although her name was not on the title to the farm. That same day, each of the Siblings signed quit-claim deeds transferring any interest they may have had in the farm to the Grantees. The Siblings contend that the transfer to the Grantees was always meant to be for their collective benefit as a family farm.

¶ 4 After the transfer, Arnold and Cleo continued to live and work on the farm as if no transfer had occurred. When Arnold died in 1971, Cleo continued to live on the farm and family members worked the farm for her benefit. In 1974, the Grantees litigated a boundary dispute with the farm's southern neighbor. The Grantees' success in litigating the matter led to a settlement with several title companies, who paid the Grantees $52,000. The Grantees kept the bulk of that money but did distribute portions to Cleo and the Siblings.

¶ 5 In 1978, the Grantees deeded one of the lots comprising the farm to themselves and Dwayne and Paulette in joint tenancy. About this same time, Donald and Dwayne began a business selling topsoil. In 1993, the Grantees asserted, allegedly for the first time, that they owned the farm free and clear and were not holding it in trust for the Siblings. This dispute over the nature of the Grantees' ownership interest in the farm led to the dissolution of Donald and Dwayne's business, and the Grantees eventually sued Dwayne and Paulette. Dwayne and Paulette filed a counterclaim and self-described third-party complaint against the Grantees in their individual capacities and as trustees of an alleged trust, asserting a constructive trust over the farm property. The remainder of the Siblings joined in the counterclaim and third-party complaint. After extensive discovery, the district court bifurcated the parties' disputes and decided to first address the constructive trust issue.

¶ 6 Prior to trial, the district court ordered the parties to mediate their disputes. The Grantees informed the Siblings before mediation that they had no intent of considering any settlement of the matter. The Grantees appeared at the mediation session and told the mediator the same thing. The mediation session did not result in a settlement. Afterwards, the Siblings sought sanctions from the Grantees, alleging that they did not participate in mediation in good faith. The district court agreed, and ordered the Grantees to pay the Siblings $2937 in expenses that the Siblings had incurred during the mediation process.

¶ 7 A four-day trial on the constructive trust issue commenced on March 12, 2007. The bulk of the trial was comprised of the Siblings' testimony describing the circumstances of the 1967 transfer and the family's treatment of the farm property after that date. Several of the Siblings testified to conversations that they had had with Arnold prior to the transfer, conversations that the Siblings interpreted as expressing an intent to place the farm in trust. The Grantees used the Siblings' testimony to explore issues regarding the Grantees' payment of debts owed by Arnold, which the Grantees argued supported their position that Arnold intended to transfer the farm to them in fee simple.

¶ 8 At the close of the Siblings' evidence, the Grantees moved for dismissal of the Siblings' constructive trust claims. The Grantees' motion and the Siblings' opposition to that motion relied on very different legal theories as to how the district court should evaluate the evidence at trial. The Grantees argued that the only way a constructive trust could have arisen in this case is if Arnold had attempted to create an express trust at the time of the transfer, but that express trust failed due to the lack of a writing evidencing the trust. Under the Grantees' theory, no trust was created unless Arnold intended to transfer the farm property into trust and Arnold and the Grantees were in a confidential relationship at the time of the transfer. The Siblings theory was much broader, asserting that the district court could simply employ its equitable powers to impose a constructive trust if it felt the circumstances warranted it. The district court requested written briefing from the parties on their respective positions and took the matter under advisement. The Grantees then presented their case, comprised solely of their own brief testimony, and the trial concluded.

¶ 9 Two months after trial, the district court ruled on the constructive trust issue. The district court expressly adopted the Siblings' argument that it could impose a trust relying solely on equitable principles and without regard to Arnold's intent or relationship to the Grantees at the time of transfer. The ruling recited an extensive factual summary of the testimony at trial, rejected the Grantees' alternative argument that the transfer was in consideration of them paying off a prior mortgage, and determined that Arnold had intended the conveyance solely as a mechanism to protect the family's ownership of the farm and did not intend the deed to operate as an actual transfer at all. The ruling concluded with the statement that the district court was "exercis[ing] its equitable powers to impose a constructive trust." In findings of fact prepared from the district court's ruling and later signed by the court, the court found as a factual matter that "Arnold did not consider the [1967] conveyance to be a transfer of his ownership rights in the [farm]."

ISSUES AND STANDARDS OF REVIEW

¶ 10 On appeal from the district court's final order imposing an equitable constructive trust, the Grantees argue that the Siblings failed to present sufficient evidence in the district court to support the imposition of a trust under the circumstances of this case.² "`When an appellant is essentially challenging the legal sufficiency of the evidence, a clearly erroneous standard of appellate review applies.'" Hi-Country Estates Homeowners Ass'n v. Bagley & Co., 2008 UT App 105, ¶ 10, 182 P.3d 417 (quoting Reinbold v. Utah Fun Shares, 850 P.2d 487, 489 (Utah Ct.App.1993)). However, we review a district court's decisions on questions of law, such as the legal requirements for the imposition of constructive trusts, for correctness. See, e.g., Flake v. Flake, 2003 UT 17, ¶ 8, 71 P.3d 589 ("The validity of [a] trust is an issue of law, which we review for correctness.").

¶ 11 The Grantees also argue that the district court erred when it imposed sanctions against the Grantees based on their alleged lack of good faith participation in court-ordered mediation. The proper interpretation of court rules presents an issue of law that we review for correctness. See, e.g., N.A.R., Inc. v. Farr, 2000 UT App 62, ¶ 5, 997 P.2d 343 ("`A trial court's interpretation of a rule in the Utah Code of Judicial Administration presents a question of law reviewed for correctness.'" (quoting Loporto v. Hoegemann, 1999 UT App 175, ¶ 5, 982 P.2d 586)).

ANALYSIS

I. The District Court's Finding of an Equitable Constructive Trust

¶ 12 The Grantees first challenge the evidentiary basis for the district court's imposition of an equitable constructive trust. Specifically, the Grantees argue that there is no evidence to support two elements that they assert must exist in order to impose a constructive trust in this case: (1) that a confidential relationship existed between Arnold and the Grantees at the time Arnold transferred the farm...