Opinion
No. 5-326 / 04-1230
Filed May 25, 2005
Appeal from the Iowa District Court for ClayCounty, Frank B. Nelson, Judge.
William Muller appeals from a district court determination that he was unjustly enriched as a consequence of transactions with Burton and Doris Stukas. REVERSED.
Gregg L. Owens of Ladegaard, Maahs Owens, Spirit Lake, for appellant.
Redge Berg of Berg Howe, Spencer, and Matthew Boles of Parrish, Kruidenier, Moss, Dunn, Boles, Gribble Cook, L.L.P., Des Moines, for appellee.
Heard by Vogel, P.J., and Miller and Hecht, JJ.
William Muller appeals from a district court determination that he was unjustly enriched as a consequence of transactions with Burton and Doris Stukas. We reverse.
Background Facts and Proceedings.
William Muller first met Burton and Doris Stukas in the mid-1970s when Muller installed a lawn sprinkler system at their home. Muller and the Stukases continued to have contact through the years, and eventually developed a close friendship. Muller became a frequent visitor in the Stukas home, sold them a life insurance policy, fished with Burton, gathered with the Stukases at holidays, and occasionally drove Burton to his farm to oversee the crops. In May of 1995, Doris amended her will to name Muller as her executor.
The Stukases eventually transferred most of their property to Muller. In 1995 the Stukases conveyed their farm to him. Muller agreed to pay the Stukases an annuity payment of $20,000 per year until both of the Stukases died. In a second transaction, the Stukases transferred their home located in Spencer, Iowa to Muller. To accomplish this conveyance, Doris Stukas gave Muller a check in the amount of $160,000. Muller used these funds to accomplish a 1031 exchange, took title to the home and achieved a basis of $160,000 in the house for tax purposes. In a third transaction, completed shortly before his death, Burton deposited $79,875.78 from the sale of stocks into a bank account which listed Muller as a joint owner. Muller subsequently withdrew $20,000 from the account and claimed Burton intended him to have the funds as a gift.
Muller testified at trial the Stukases first proposed to transfer the farm by gift. However, because of his claimed reluctance to receive the property as a gift, Muller proposed an alternative arrangement and the annuity arrangement was developed.
Later, Doris Stukas and Wayne Burnham, Doris' conservator and Burton's executor, filed an action against Muller alleging he breached a confidential relationship with the Stukases and was unjustly enriched by the three transactions. After a trial, the district court determined the transfer of the Stukases' residence, the establishment of the joint bank account, and Muller's withdrawal from the joint account should be set aside on grounds of unjust enrichment. However, the court concluded the plaintiffs failed to prove Muller was unjustly enriched as a consequence of the farm transaction because the Stukases received consideration in the form of an annuity; and further concluded plaintiffs had not met their burden to prove Muller breached a confidential relationship. Muller appeals.
Scope of Review.
Because this matter was tried in equity, our review is de novo. Iowa R. App. P. 6.4.
Unjust Enrichment.
The doctrine of unjust enrichment is based on the principle that a party should not be unjustly enriched at the expense of another or receive property or benefits without paying just compensation. Credit Bureau Enters., Inc. v. Pelo, 608 N.W.2d 20, 25 (Iowa 2000). Although it is referred to as a quasi-contract theory, the doctrine of unjust enrichment is equitable, not contractual, in nature. See Iowa Waste Sys., Inc. v. Buchanan County, 617 N.W.2d 23, 29 (Iowa Ct.App. 2000). The doctrine of unjust enrichment serves as a ground for the remedy of restitution. See Smith v. Harrison, 325 N.W.2d 92, 94 (Iowa 1982). It has application in cases arising from contracts, torts or other predicate wrongs, and may serve as an independent ground for restitution in the absence of mistake, wrongdoing, or breach of contract.
Id. One asserting a claim of unjust enrichment must establish three propositions: (1) defendant was enriched by the receipt of a benefit, (2) the enrichment was at the expense of the plaintiff, and (3) it is unjust to allow the defendant to retain the benefit under the circumstances. State v. Unisys, 637 N.W.2d 142, 154-55 (Iowa 2001).
As noted above, the district court concluded Muller was not unjustly enriched as a consequence of the conveyance of the farm. The court reasoned:
Consideration [for the farm sale] was and is continuing to be paid by Muller. The Stukases were represented by an attorney who testified that there were clearly negotiations between the parties concerning the value of the land and the amount of the annuity.
The court's reasoning is amply supported by the testimony of Richard Loney, the attorney who facilitated the annuity transaction. He testified that Burton and Doris understood what they were signing and effectuated the transfer freely and voluntarily. Loney recalled Burton was "very adamant" about Muller getting the farm and noted that Burton had expressed a desire to simply gift the farm to Muller without the expectation of compensation. This evidence amply supports the district court's refusal to set aside the conveyance of the farm; but more importantly for purposes of our de novo review in this appeal, the evidence sheds light on the closeness of Muller's relationship with the Stukases and on Muller's claim that the Stukases intended the two other transactions to be gifts.
After a careful review of the record, we find plaintiffs failed to meet their burden to prove Muller was unjustly enriched as a consequence of either the residence transaction or the transfer of the interest in the bank account. In each instance, we are persuaded that the Stukases intended to gift property to Muller. The Stukases clearly considered Muller a close friend. He spent a significant amount of time with the couple, and he helped them out in a variety of ways. The closeness of their relationship is essentially conceded in the appellees' appeal brief.
Attorney John Bjornstad was involved in the 1031 like-kind transaction which transferred to Muller ownership of the Stukases' home. Bjornstad testified that, while the Stukases appeared to "rely" on Muller, Muller did not "control" them in any way during the transaction. Bjornstad observed "[the Stukases] liked
Bill, they trusted [him], they relied on [him] for counsel." In addition, Bjornstad testified the $160,000 check signed by Doris and given to Muller as part of the exchange included the notation "gift." While certainly not determinative of the question of whether Muller was unjustly enriched, this evidence does tend to support Muller's assertion of the Stukases' donative intent. Muller also testified that Burton sold stocks and used the proceeds to open a jointly owned bank account in furtherance of Burton's desire that Muller would "look after Doris." While it was unclear at the time of trial whether Muller had actually used any of these funds for Doris' maintenance prior to the trial, he did testify that he intended to do so.
As noted above, Plaintiffs also sought to set aside the three transfers on the theory Muller breached a confidential relationship. Plaintiffs presented evidence tending to establish that Muller arranged and perhaps controlled the legal representation provided to the Stukases in the transactions. When Doris was deposed on February 25, 2003, she did not recall living in the residence that was transferred to Muller, or transferring the farm to Muller, or other particulars of the disputed transactions. The district court's decision did not grant plaintiffs relief under the confidential relationship theory, however, and plaintiffs did not cross-appeal. Moreover, plaintiffs do not urge us to affirm the district court's decision on the theory that Muller obtained the Stukases property through a breach of a relationship of trust and confidence. See Johnson Equip. Corp. v. Indus. Indem., 489 N.W.2d 13, 17 (Iowa 1992) (stating that although a party need not cross-appeal a trial court's rejection of a ground urged in the trial court to preserve error on a claim decided in the party's favor, he must cross-appeal to preserve an issue on a claim decided adversely to him).
We find the house and bank account transactions were valid gifts. Of course, consideration is not an element of a gift. Frederick v. Shorman, 259 Iowa 1050, 1057, 147 N.W.2d 478, 483 (Iowa 1966). A gift is established from proof of: (1) donative intent, (2) delivery, and (3) acceptance. Raim v. Stancel, 339 N.W.2d 621, 623 (Iowa Ct.App. 1983). The intent of the grantor is the controlling element. Id. Here, delivery and acceptance of the property are not at issue, and we find the evidence sufficiently establishes the Stukases' donative intent in both of the challenged transactions.
The plaintiffs maintain Muller's "gift defense" is an affirmative defense that must be specifically pleaded. As it was not pleaded, they argue the issue of whether the transactions were gifts is not properly before this court. Plaintiffs cite no authority for this proposition. See Iowa R. App. P. 6.14(1)( c). Regardless, we conclude the theory inhered in the parties' theories of the case and was tried by consent of the parties. See Gibson Elevator, Inc. v. Molyneux, 668 N.W.2d 565, 567 (Iowa 2003).
Muller also testified that Burton and Doris were motivated to make the substantial gifts to him by their desire to insure their niece, Myrna Noland, with whom they had become disenchanted, would not receive access to their assets. Plaintiffs offered in evidence an October 1999 codicil to Doris' will to challenge Muller's claim that the Stukases were estranged from Myrna. The testamentary document established that despite the claimed estrangement, Doris intended, when the codicil was executed, to make a residuary bequest to Myrna. We acknowledge the plaintiffs' argument that if the Stukases were, as Muller contends, at one time motivated to assure most of their assets would not be inherited by Myrna, their objective could have been achieved without gifting the property to Muller. Nonetheless, the claimed objective of the Stukases could also be accomplished through valid gifts to Muller.
Our conclusion that the conveyances constituted valid gifts is significant. Generally, "a party may not recover damages for unjustenrichment pursuant to a gift relationship." Liautaud v. Liautaud, 221 F.3d 981, 988 (7th Cir. 2000); see also In re Estate of Hill, 492 N.W.2d 288, 295 n. 2 (N.D. 1992) (stating a finding of a gift necessarily defeats a finding of unjustenrichment, absent circumstances of fraud, undue influence, and the like, for equity generally cannot force the repayment of a gift). If one confers a benefit gratuitously, the retention of that benefit without payment is not considered unjust. See In re Estate of Zent, 459 N.W.2d 795, 798 (N.D. 1990) (citing Cole v. Cole, 517 N.E.2d 1248, 1250 (Ind.Ct.App. 1988)). Consequently, we cannot say on this record that Muller was unjustly enriched as a consequence of the Stukases' benevolence.
Conclusion.
The district court found it "inconceivable that the Stukases would give away their home and essentially all of their cash assets or that Muller would accept these assets." Plaintiffs similarly posit that Burton, who resolutely intended to leave Doris in a secure financial position, could not possibly have intended to give Muller virtually all of the Stukases' assets. Although a reasonable person could certainly conclude on this record that the transfers to Muller were not in the Stukases' best interests, and find the elderly couple made unwise choices under the circumstances, it is not the court's function to substitute its judgment for that of the donors on the question of whether Muller was a worthy donee or a legitimate object of their bounty. We conclude plaintiffs failed on this record to prove by a preponderance of the evidence that the house and bank account transactions resulted in unjust enrichment. Accordingly, we reverse the district court's judgment and decree.