931 N.W.2d 198
N.D.2019Background
- In 2012 Twete quitclaimed farmland and minerals to Mullin (and sold equipment); later Mullin conveyed farmland interest to Nelson as joint tenant and took a Farm Credit mortgage. Minerals were later sold for $600,000.
- Twete sued (2015) alleging breach of trust, constructive trust, fraud, quiet title, unjust enrichment, conversion, and sought rescission and equitable relief; jury trial in 2017.
- A nine-person jury found a confidential relationship between Twete and Mullin, found Mullin breached a trust, and awarded Twete $200,000 (loss of use) plus $2.35 million (value of land); the jury found Nelson knew or should have known of Twete’s claim but awarded no damages against her.
- The district court, in equitable proceedings, imposed a constructive trust, ordered Mullin and Nelson to reconvey the farmland to Twete or pay the Farm Credit mortgage payoff ($945,392.37), awarded Twete $600,000 (mineral proceeds) from Mullin, offset competing jury awards, and awarded attorney fees ($260,203.50) to Twete.
- On appeal Mullin and Nelson challenged (inter alia) sufficiency of evidence for breach of trust, availability of equitable relief against Nelson, validity of jury instructions after repeal of a statute, and the attorney-fee award. The Supreme Court affirmed liability and the monetary judgments but reversed and remanded the attorney-fee award for the district court to identify legal authority for the fee award.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether breach of trust / constructive trust claim is barred by plaintiff’s alleged fraudulent intent (transfer to avoid sibling lawsuit) | Twete: illegality/unclean hands defense not pled or tried; court should weigh equities and allow constructive trust where fraud on creditors is doubtful | Mullin/Nelson: transfer was to hinder creditors; a party cannot use a trust to further a fraud—claim barred | Court: defendants waived the defense by failing to preserve it and by stipulating to jury instructions; no abuse of discretion in denying new trial on this ground |
| Whether relying on a repealed statute (N.D.C.C. §59‑01‑08) defeats the confidential-relationship instruction | Twete: parties stipulated to instruction; doctrine of confidential relationship survives and evidence supports it | Mullin/Nelson: statute creating trustee-by-voluntary-assumption was repealed; instruction legally erroneous | Court: defendants waived this objection by stipulating to jury instructions; no abuse of discretion |
| Whether evidence supports existence of a confidential relationship and breach of trust | Twete: extensive evidence of trust and reliance (close relationship, Mullin advising legal matters, handling debts) | Mullin/Nelson: mere friendship/kindness insufficient; jury found no deceit about returning property | Court: substantial and compelling evidence supports confidential relationship; district court properly denied new trial for insufficiency |
| Whether monetary restitution against Nelson (jointly and severally for mortgage payoff) is proper | Twete: complaint and equitable pleadings gave notice; equitable restitution to make plaintiff whole was proper because Nelson knew or should have known and did not pay fair value; she could have cleared the mortgage | Mullin/Nelson: no claim for money against Nelson at trial; no finding she was unjustly enriched or received mortgage proceeds; award unsupported | Court: complaint and motions gave fair notice for equitable relief; district court’s factual findings (Nelson knew of claim, did not pay fair value, unjust enrichment) not clearly erroneous; award affirmed |
| Whether district court lawfully awarded attorney fees absent statute or contract | Twete: common-law equitable power and trust-law principles permit fees for beneficiary restitution when trustee misconduct occurs | Mullin/Nelson: no statutory or contractual basis; American Rule bars fees | Court: reversed and remanded—district court did not state legal authority for fees; court must identify the legal basis before fee award can stand |
Key Cases Cited
- Markgraf v. Welker, 873 N.W.2d 26 (N.D. 2015) (explains differences between resulting and constructive trusts and elements required for constructive trust)
- Paulson v. Meinke, 389 N.W.2d 798 (N.D. 1986) (equity may impose trust despite some intent to hinder creditors when unjust enrichment concerns prevail)
- Flaten v. Couture, 912 N.W.2d 330 (N.D. 2018) (unopposed jury instructions become law of the case)
- Gisvold v. Windbreak, Inc., 730 N.W.2d 597 (N.D. 2007) (standard for district court considering new trial motion based on insufficiency/weight of the evidence)
- McColl Farms, LLC v. Pflaum, 837 N.W.2d 359 (N.D. 2013) (elements and equitable purpose of unjust enrichment/restitution)
- Bjorneby v. Nodak Mut. Ins. Co., 882 N.W.2d 232 (N.D. 2016) (limited appellate review of jury findings)