State ex rel. Moore v. Scroggie

• Decision Date: 02 August 1985
• Docket Number: Nos. 14526,14560,s. 14526
• Citation: 704 P.2d 364,109 Idaho 32
• Parties: The STATE of Idaho, ex rel. Carl C. MOORE, Lloyd F. Barron and Roy I. Strocshein, Idaho Transportation Board, Plaintiff-Respondent-Cross Respondent, v. Jesse SCROGGIE, Defendant-Appellant, Eileen M. Scroggie, Defendant-Respondent, Steven F. Bell, Defendant-Appellant, James F. Lyons, Defendant-Cross Appellant, Moorene Peterson, a/k/a Morene Peterson, a widow; and Boundary County, Idaho, Defendants.
• Court: Idaho Court of Appeals

Page 364

704 P.2d 364

109 Idaho 32

The STATE of Idaho, ex rel. Carl C. MOORE, Lloyd F. Barron and Roy I. Strocshein, Idaho Transportation Board, Plaintiff-Respondent-Cross Respondent, v. Jesse SCROGGIE, Defendant-Appellant Eileen M. Scroggie, Defendant-Respondent Steven F. Bell, Defendant-Appellant James F. Lyons, Defendant-Cross Appellant Moorene Peterson, a/k/a Morene Peterson, a widow; and Boundary County, Idaho, Defendants.

Nos. 14526, 14560.

Court of Appeals of Idaho.

Aug. 2, 1985.

Bruce S. Bistline of Boise and Jon N. Wyman of Wyman & Wyman, Boise, for defendant-appellant, Jesse Scroggie.

Michael J. Verbillis, Coeur d'Alene, for defendant-appellant, Steven F. Bell.

Peter B. Wilson, Bonners Ferry, for defendant-respondent, Eileen Scroggie.

Randall W. Day, Bonners Ferry, for defendant-cross-appellant, James F. Lyons.

Leonard G. Hill of Idaho Transportation Department, Boise, for plaintiff-respondent-cross-respondent, State of Idaho.

ON DENIAL OF PETITION FOR REHEARING

This opinion supersedes our opinion issued March 26, 1985, which is hereby withdrawn.

SWANSTROM, Judge.

This case was commenced as a condemnation action by the State of Idaho to acquire parcels of land needed for highway purposes in Boundary County. The suit proliferated several cross-claims and counterclaims among the persons purporting to have some interest in the condemned property. By a pretrial order, the district court conducted a limited trial to determine the nature and extent of each party's interest in the property. The court also determined the just compensation to be paid by the state for acquisition of the property, but severed all other issues for a separate trial. After the court issued its memorandum decision and order, a judgment and a final order of condemnation were entered. The judgment was certified as final for purposes of appeal. I.R.C.P. 54(b). Jesse Scroggie, dissatisfied with the district court's ruling that he had no interest in the condemned property, appealed. James Lyons cross-appealed. Steven Bell filed an independent appeal now consolidated with Scroggie's appeal. Bell and Lyons appeal from the trial court's ruling that together they had only a one-half interest in the property. We affirm in part, vacate in part, and remand for further proceedings.

Jesse and Eileen Scroggie were purchasing one of the parcels involved in the action under a contract of purchase from the owner of record, Moorene Peterson. The Scroggies were lessees of an adjoining parcel, owned by a railroad, upon which they had certain improvements. The Idaho Transportation Department sought to acquire these two parcels to build an approach for a new highway bridge in Bonners Ferry, Idaho. Allegedly to facilitate negotiations with the state for a purchase price, Eileen quitclaimed her interest in the parcel they were purchasing to Jesse on October 1, 1979, and, in exchange, received a promissory note for $10,000 which was to be paid from the proceeds of any sale of the property. Jesse recorded the deed the same day.

On October 22, a divorce complaint was filed by Eileen. After proposing a specific property division, the complaint alleged the following:

That the parties hereto have agreed to division of the proceeds received from any sale of the above-mentioned businesses on the North Side, Bonners Ferry, Idaho; that each party retains ownership interest in and to said real and personal property and businesses located thereon, pursuant to the agreement. That the terms of the sale include any disposition of the property, including but not limited to eminent domain proceedings. That this provision of the agreement is lodged in the files of James F. Lyons, under the attorney privilege, and is not to be released except with the permission of both the plaintiff and defendant.

Two months prior to her transaction with Jesse, Eileen had contacted James Lyons, of the law firm of Nixon, Nixon, Lyons and Bell, for the purpose of obtaining a divorce. Lyons handled the divorce for Eileen in its early stages, but later "turned it over" to another attorney "to finish it out."

In November, Jesse was charged with the first-degree murder of Eileen's alleged lover. At Jesse's request, Eileen contacted Steven Bell, also of the law firm of Nixon, Nixon, Lyons and Bell, ¹ and indicated that her husband had need of an attorney. Bell met with Jesse and agreed to represent him. Lyons, allegedly, also agreed to represent Jesse at the criminal trial. Lyons drafted and took to Jesse a warranty deed conveying the Scroggie parcel to Lyons and Bell. Because there was no other notary available to acknowledge Jesse's signature on the deed, Lyons deleted his own name as a grantee and, as a notary, he acknowledged the deed which purported to transfer the Scroggie parcel outright to Bell. Bell then quitclaimed an undivided one-half interest in this parcel to Lyons. Bell contends that the parcel was conveyed as payment for legal services to be rendered. Jesse, on the other hand, maintains that the parcel was intended only as security for the payment of those services.

Jesse was tried and convicted in May 1980 of first degree murder. In June, Eileen was granted a divorce. Negotiations between the state and Jesse subsequently broke down and the state brought this action to condemn the property. ² Following a hearing, the district court granted the state possession of the property and ordered it to deposit $76,500 with the court. Jesse was unable to attend this hearing because he was in prison. A second hearing was then held, also in Jesse's absence, at which little was decided. Finally, a third hearing was convened, this time with Jesse present. At this hearing an expert witness called by the state testified that the total value of the property, including the value of the Scroggies' interest in the leased railroad parcel, was $76,500. All of the parties to this action, except Jesse Scroggie, agreed that $76,500 was the fair market value of the property to be condemned. Jesse, contending the property was worth more, insisted upon his right to call an expert appraisal witness in rebuttal. The court reserved this right to Jesse if the court determined that Jesse then had any interest in the property. All of the parties to the action, including Jesse, stipulated that from the money deposited by the state with the court, the court could order disbursement of part of the funds needed to pay the balance owing to Moorene Peterson on the contract and to Boundary County for all accrued taxes.

The court then held that Eileen and Jesse had become tenants-in-common of the equitable interest in the property. This relationship arose, according to the court, as a result of the quitclaim deed from Eileen to Jesse and an agreement, referred to in the divorce complaint, which allegedly provided that each party was to retain an "ownership interest" in the property. The complaint itself, however, requested that Jesse be awarded the property as his sole and separate property. This, in fact, was done in the final divorce decree. Nevertheless, the court, in the present action, held that Jesse owned only an undivided one-half interest in the property when he executed the warranty deed to Bell. Bell thus took Jesse's one-half interest, half of which Bell quitclaimed to Lyons.

Jesse contends (1) the trial court should have held that the property was his sole and separate property by virtue of both the quitclaim deed from Eileen and the divorce decree, (2) that the transfer of the property from Jesse to Bell was not an outright conveyance, but was intended merely as security for the services to be rendered in the criminal action, and (3) that he was deprived of due process because the district court refused to allow him discovery or to permit him to appear at the two earlier hearings. On the other hand, Bell contends that Jesse had been the sole owner of the property when he deeded it to Bell. He also argues that the warranty deed from Jesse was intended to be a conveyance of title and not merely security for a debt. Finally, respondent Eileen maintains that should we accept Jesse and Bell's contention as to the separate character of the property, we should also impose a constructive trust for her benefit on any proceeds of the condemnation that may be payable to Bell and Lyons.

I

We will first address the contention that the district court erred in determining the rights of the parties in the property and thus in the condemnation proceeds. It is undisputed that Peterson was the record title holder of the one parcel throughout these proceedings. It is also undisputed that Eileen and Jesse, as husband and wife, had a contract to purchase that parcel from Peterson. Therefore, at one point in time, the community held the equitable title of the parcel, while Peterson held the legal title. This arrangement, alas, did not remain so simple.

In October, 1979, as noted above, Eileen quitclaimed her interest in the property to Jesse and, in exchange, received a promissory note for $10,000. She denies that this transaction affected her ownership interest in the property, pointing to allegations in her divorce complaint. However, allegations in a complaint do not necessarily establish the existence of a fact. The avowed purpose of the transaction between Eileen and Jesse was to make negotiations with the state easier by giving Jesse the sole right to bargain. If she had not intended to transfer her interest in the property, she could have accomplished the same purpose by, for example, executing a power of attorney. Therefore, the use of a quitclaim deed here demonstrates an intent on the part of Eileen to relinquish her interest in the property, if not in the proceeds from any future sale. Furthermore, as we discuss below, her interest in the proceeds of the condemnation is based on contract, not on any retained ownership in the property. Thus, as of October 1, 1979, Jesse held the entire...