Schroeder v. Buchholz, 20000191.

• Decision Date: 15 February 2001
• Docket Number: No. 20000191.,20000191.
• Citation: 622 N.W.2d 202,2001 ND 36
• Parties: Donald SCHROEDER and Evelyn A. Schroeder, Plaintiffs and Appellees, v. Dennis BUCHHOLZ, Defendant and Appellant, and Donna Buchholz, Defendant and Appellee.
• Court: North Dakota Supreme Court

622 N.W.2d 202

2001 ND 36

Donald SCHROEDER and Evelyn A. Schroeder, Plaintiffs and Appellees, v. Dennis BUCHHOLZ, Defendant and Appellant, and Donna Buchholz, Defendant and Appellee.

No. 20000191.

Supreme Court of North Dakota.

February 15, 2001.

Don R. Krassin (argued), Krassin Law Office, Wahpeton, ND, for plaintiffs and appellees Donald Schroeder and Evelyn A. Schroeder.

Samuel S. Johnson, Wahpeton, ND, for defendant and appellee Donna Buchholz.

John D. Bullis (argued), Lies & Bullis, Wahpeton, ND, and Tracey R. Lindberg, Lindberg Law Firm, Breckenridge, MN, for defendant and appellant.

SANDSTROM, Justice.

[¶ 1] Dennis Buchholz appeals from a district court order imposing a constructive trust in favor of Donald and Evelyn Schroeder. Concluding the elements of a constructive trust were sufficiently established but the district court's remedy was improper, we affirm in part, reverse in part, and remand for further proceedings.

I

[¶ 2] In 1981 Dennis and Donna Buchholz, along with Donna Buchholz's parents—Donald and Evelyn Schroeder, inspected a 23-acre¹ tract of land for sale near Colfax, North Dakota. Prior to closing the purchase, the Schroeders gave the Buchholzes a paper bag containing $19,750 in cash, which, along with the Buchholzes' assumption of a note, was used to purchase the property for $39,500. The Buchholzes were deeded the property as joint tenants.

[¶ 3] The Buchholzes moved into a house on the property, and the Buchholzes and Schroeders jointly improved the house and property. In 1984 a second house was moved onto the property and has since been occupied by the Schroeders. In 1998 the Buchholzes sought a divorce and separated. Donna Buchholz moved away, while Dennis Buchholz remained on the property and continued to run his business that is collocated on the property. The Schroeders sued Dennis and Donna Buchholz, seeking partition of the property and the right to remain on the property and in the home.

[¶ 4] The district court granted the Schroeders a lifetime right to reside in their home and lifetime use of 1.03 acres surrounding the house. The district court's order provided that upon the death of the Schroeders, the property and house will revert to Dennis and Donna Buchholz. Dennis Buchholz timely appealed.² The district court had jurisdiction under N.D.C.C. § 27-05-06. This Court has jurisdiction under N.D. Const. art. VI, § 6, and N.D.C.C. § 28-27-01.

II

[¶ 5] "An implied trust is one that is created by operation of law." N.D.C.C. § 59-01-05. There are two types of implied trusts: resulting and constructive. Loberg v. Alford, 372 N.W.2d 912, 915 (N.D.1985). A constructive trust is an equitable remedy to compel a person "who unfairly holds a property interest to convey such interest to the rightful owner." Id. (quoting Scheid v. Scheid, 239 N.W.2d 833, 837-38 (N.D.1976)). A constructive trust is imposed to prevent the unjust enrichment of the person wrongfully interfering with the owner's possession of the property. Id. (citations omitted). An implied trust, whether resulting or constructive, must be established by clear and convincing evidence. McCarney v. Knudsen, 342 N.W.2d 380, 385 (N.D.1983); Scheid, 239 N.W.2d at 838.

A

[¶ 6] The district court considered only the constructive-trust theory because the court concluded the plaintiffs withdrew their resulting-trust theory. Although a constructive trust must be proven by clear and convincing evidence, whether a relationship of personal confidence exists need be proven only by a preponderance of the evidence. Matter of Estate of Bendickson, 353 N.W.2d 320, 323 (N.D.1984); Loberg v. Alford, 372 N.W.2d 912, 915 (N.D.1985); Estate of Zins by Kelsch v. Zins, 420 N.W.2d 729, 733 (N.D.1988).

[¶ 7] The existence of a confidential relationship and the existence of an implied trust are questions of fact. Black v. Peterson, 442 N.W.2d 426, 428 n. 1 (N.D.1989). Findings of fact are subject to a clearly erroneous standard of review. N.D.R.Civ.P. 52(a). A finding of fact is clearly erroneous only if the reviewing court is left with a definite and firm conviction that a mistake has been made. Nastrom v. Nastrom, 284 N.W.2d 576, 580 (N.D.1979) (citations omitted). [¶ 8] Buchholz argues the trial court's findings are insufficient because they are not based upon the implied-trust elements identified in N.D.C.C. § 59-01-06. A constructive trust has two essential elements: unjust enrichment and a confidential relationship. Paulson v. Meinke, 389 N.W.2d 798, 801 (N.D.1986). A confidential relationship "may exist although there is no fiduciary relation; it is particularly likely to exist where there is a family relationship." Id. (citation omitted).

[¶ 9] "A confidential relationship exists whenever trust and confidence is reposed by one person in the integrity and fidelity of another, and that such relationship is a fact to be established in the same manner and by the same kind of evidence [as] any other fact is proven." Estate of Wenzel-Mosset by Gaukler v. Nickels, 1998 ND 16, ¶ 25, 575 N.W.2d 425 (citations omitted).

[¶ 10] Among the district court's 124 findings of fact are numerous findings evidencing a confidential relationship. The Schroeders provided one-half of the money to purchase the property.³ The parties jointly improved the property. Shortly after the purchase, the Schroeders, assisting the Buchholzes, spent "nearly every weekend" improving the property, including "trimming and removing brush, trimming and removing trees, general cleanup, remodeling of the house, removal of old out buildings and eventually remodeling of a barn into a shop." The district court classified Donald Schroeder's work on the property as extensive.

[¶ 11] Later, the parties collectively prepared the property for addition of a second home. A house was moved onto the property, and the Schroeders lived in it from 1987 until the trial. The district court found "Donald Schroeder paid for various items that went into maintenance" of the farmstead, including a well and pressure tank system to service both houses. Later, Dennis Buchholz paid for improvements and replacements to those systems. The parties worked together on remodeling projects. The district court found Donald Schroeder "obtained at his expense and effort most of the lumber used for raising the barn" that subsequently housed a business for Dennis Buchholz.

[¶ 12] The district court found the parties' "mutual cooperation was demonstrated by the fact that they hunted together, gardened together, and canned together over the years." Further, Donald Schroeder assisted in the operation of Dennis Buchholz's business. The district court found, although the parties exchanged labor, Donald Schroeder "greatly exceeded the reciprocal work provided by Dennis Buchholz."

[¶ 13] Although included in the district court's conclusions of law, the district court found, "During the transactions that are pertinent to these proceedings Dennis Buchholz was in a confidential relationship with the Schroeders, primarily as a result of the family relationships that existed." The existence of a confidential relationship is a question of fact subject to the clearly erroneous standard of review. Black v. Peterson, 442 N.W.2d 426, 428 n. 1 (N.D. 1989). We conclude the district court's findings aptly set forth a confidential relationship, we are not left with a definite and firm conviction that a mistake has been made, and we therefore hold the district court did not err in finding a confidential relationship.

B

[¶ 14] The determination of unjust enrichment is a conclusion of law and is fully reviewable on appeal. Matter of Estate of Zent, 459 N.W.2d 795, 798 (N.D.1990); Opp v. Matzke, 1997 ND 32, ¶ 8, 559 N.W.2d 837. Unjust enrichment is an equitable doctrine applied in the absence of a contract and used to prevent one person from being unjustly enriched at another's expense. Apache Corp. v. MDU Resources Group, Inc., 1999 ND 247, ¶ 13, 603 N.W.2d 891 (citing Zuger v. North Dakota Ins. Guar. Ass'n, 494 N.W.2d 135, 138 (N.D.1992)). "The essential element in recovering under a theory of unjust enrichment is the receipt of a benefit by the defendant from the plaintiff which would be inequitable to retain without paying for its value." Zuger v. North Dakota Ins. Guar. Ass'n, 494 N.W.2d 135, 138 (N.D.1992) (citation omitted).

[¶ 15] Five elements must be established to prove unjust enrichment:

1. An enrichment; 2. An impoverishment; 3. A connection between the enrichment and the impoverishment; 4. Absence of a justification for the enrichment and impoverishment; and 5. An absence of a remedy provided by law.

Apache Corp. v. MDU Resources Group, Inc., 1999 ND 247, ¶ 13, 603 N.W.2d 891 (citations omitted). Although review would be easier if the district court had outlined these elements, after fully reviewing the record, we hold the district court did not err in concluding Buchholz would be unjustly enriched.

[¶ 16] The value of the Buchholz property has increased, due in large part to the efforts and contributions of the Schroeders. The Schroeders assisted Dennis Buchholz with his business, which was operated on the property. The Schroeders shared costs, expenses, and labor for improvements with Buchholz. The Schroeders' purchase of a well and pressure tank system to service both houses, the jointly installed and serviced heating system, and the Schroeders' purchase of lumber and materials to convert the barn into a shop are evidence of an impoverishment. The time, labor, and materials provided by the Schroeders for the overall improvement of the whole property are further evidence of an impoverishment. We conclude the district court's findings and conclusions aptly set forth an enrichment of Dennis Buchholz, an impoverishment of the Schroeders, and a connection between the enrichment and impoverishment.

[¶ 17] Unjust enrichment requires a finding by the court of the absence of a justification for the...