Banderob v. Estate of Banderob ( 1996 )

NO. 95-217
IN THE SUPREMECOURT OF THE STATE OF MONTANA
1996
Defendant, Third Party Plaintiff,
Respondent and Cross-Appellant,
v.
MARTHA BANDEROB,
Third Party Defendant and Appellant.
APPEAL FROM: District Court of the Thirteenth Judicial District,
In and for the County of Yellowstone,
The Honorable Russell K. Fillner, Judge presiding.
COUNSEL OF RECORD:
For Appellant:
Terry L. Seiffert, Attorney at Law, Billings,
Montana
For Respondent:
Mark E. Noennig; Hendrickson, Everson, Noennig &
Woodward, Billings, Montana
Submitted on Briefs: September 7, 1995
Decided: February 6, 1996
Filed:
Justice Karla M. Gray delivered the Opinion of the Court.
Pursuant to Section I, Paragraph 3(c), Montana Supreme Court
1995 Internal Operating Rules, the following decision shall not be
cited as precedent and shall be published by its filing as a public
document with the Clerk of the Supreme Court and by a report of its
result to Montana Law Week, State Reporter and West Publishing
Company.
All parties appeal from the judgment entered in this case by
the Thirteenth Judicial District Court, Yellowstone County, on
findings of fact and conclusions of law. Neil Banderob appeals,
and the Estate of Frank Banderob (Estate) cross-appeals, from the
award to Neil of limited damages in his action against the Estate.
Neil and Martha Banderob appeal the award of damages to the Estate
on its breach of lease claim. We affirm in part and reverse in
part.
We address the following dispositive issues:
1. Did the District Court err in concluding that Neil
Banderob consented to the compensation he received?
2. Did the District Court err in concluding that Neil could
not recover under quantum meruit?
3. Did the District Court err in concluding that no joint
venture existed?
4. Did the District Court err in awarding Neil compensation
for his services and improvements to the property?
5. Did the District Court err in concluding that Neil and
Martha Banderob owed rent payments to the Estate?
6. Did the District Court err in concluding that Neil is not
entitled to a set-off against rent owed, under the theory of
unjust enrichment, for the Estate's tax savings from the
special use valuation agreement?
2
FACTUAL AND PROCEDURAL
BACKGROUND
Neil Banderob (Neil) is one of four children of the decedent,
Frank Banderob (Frank). All of the Banderob children grew up on
Frank's ranch near Pryor, Montana. Neil was the only one of the
children to live and work on the ranch for most of his life. Over
the years, Neil purchased equipment and supplies for the ranch and
paid for repairs on ranch equipment. No express agreement, either
oral or written, existed between Neil and Frank pursuant to which
Neil was paid specific wages or reimbursed for the purchases and
repairs he made. For his participation on the ranch from 1955
until Frank's death in 1982, Neil received room and board, spending
money, a share of veterinary bills, and a contribution toward
insurance and licensing. Frank also provided Neil with cattle,
grain and pigs, and the use of ranch pasture and equipment. Neil
did custom ranch work for others in addition to his work on Frank's
ranch.
In 1981, Neil and his attorney met with Frank and Frank's
attorney in an effort to obtain "justice" for Neil's contributions
on the ranch. Neil hoped that Frank would "make it right," but
acknowledged that it was Frank's decision. Frank never agreed to
any change and Neil continued on at the ranch as before.
Frank died in 1982, leaving a 1978 will that devised his
estate equally among his four children and designated Neil's
brothers Joe and Norman as co-personal representatives. On June
18, 1982, Neil filed a creditor's claim with the Estate for
approximately $175,000 for labor, equipment, supplies, and repairs.
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The Estate rejected his claim. Neil filed this action based on
agreement or quantum meruit soon thereafter, seeking compensation
for labor, equipment, supplies and repairs, and for the
appreciation in value of the property which resulted from
improvements he made.
Effective January 1, 1984, Neil and his wife Martha leased the
ranch from the Estate for one year. The lease was automatically
renewable each year unless terminated in writing six months prior
to the end of the year. Annual rent was $11,001.25, to be paid in
equal installments of $5,500.63 on January 1 and September 15 each
year. Prior to any termination of the lease based on default by
Neil and Martha, the Estate was required to serve a written go-day
notice of default.
In October of 1984, the heirs, including Neil, signed a
special use valuation agreement under Section 2032(a) of the
Internal Revenue Code. Such an agreement reduces the valuation of
property for estate tax purposes, provided that a family member
materially participates in its operation for 10 years. The Estate
saved approximately $110,000 in federal estate taxes as a result of
the agreement. Neil did not renegotiate any lease provisions in
exchange for signing the special use valuation agreement.
Beginning in September 1986, and excluding the January 1993
payment, Neil and Martha did not pay the semi-annual lease
payments. In September of 1987, the Estate sent a letter to Neil
and Martha stating that, because they had failed to pay the rent,
it appeared that the lease was no longer in effect. Neil and
4
Martha's attorney responded that the lease was still in effect.
On September 28, 1990, the Estate gave Neil and Martha a 90-
day notice of default relating to their failure to make rent
payments. After Neil and Martha failed to cure the default, the
Estate filed a counterclaim in this action alleging breach of the
lease and failure to cure default, and seeking accrued and unpaid
rent. Neil asserted affirmative defenses to the counterclaim
seeking set-offs for expenses he incurred in undertaking unusual
maintenance and improvements on the property and for the tax
savings realized by the Estate from the special use valuation
agreement. He also sought to modify the lease as a result of
alleged Agricultural Stabilization and Conservation Service payment
modifications.
The Estate mailed Neil and Martha a second notice of default
on May 8, 1992, when it discovered that Neil was asserting a defect
regarding the earlier notice. Thereafter, the District Court
allowed the Estate to file an amended pleading reciting the new
default notice and requesting declaratory relief in the event the
default was not timely cured. Alternatively, and in the event the
court determined, as Neil asserted, that the lease had been
terminated, the Estate sought the reasonable value of Neil and
Martha's use and occupation of the ranch beginning January 1, 1986.
Martha was added as a third party defendant.
The District Court held a bench trial and, thereafter, entered
extensive findings of fact and conclusions of law. With regard to
Neil's claims against the Estate, the court concluded that Neil
5
consented to the compensation he received as full payment for his
services and supplies contributed to the ranch, that Neil could not
recover under quantum meruit and that no joint venture existed
between Neil and Frank. In addition, however, the court awarded
Neil $19,283, representing $1,640 in compensation and $17,643 in
simple interest at 6%, for services to the ranch and $10,000 for
the enhanced value of the ranch resulting from improvements Neil
made.
With regard to the Estate's counterclaim, the court determined
that Neil and Martha had breached the lease by failing to pay rent.
It entered judgment for the Estate in the amount of $114,277.45 in
delinquent lease payments and interest, as well as lease payments
accruing until the lease is terminated and the property vacated.
The total amount of Neil's judgment, $29,283, was to be set off
against the accrued interest portion of the Estate's judgment
against Neil and Martha.
Neil and Martha appeal and the Estate cross-appeals.
STANDARDOF REVIEW
We review a district court's findings of fact under a three-
part test to determine whether they are clearly erroneous. Daines
v. Knight (1995), 269 Mont. 320, 324-25, 888 P.2d 904, 906
(citations omitted). A finding of fact is clearly erroneous if it
is not supported by substantial evidence or, if so supported, the
district court misapprehended the evidence or this Court is left
with the definite and firm conviction that a mistake has been
committed. Daines, 888 P.2d at 906. We review a court's
6
conclusions of law to determine whether they are correct. Dairies,
888 P.2d at 906.
DISCUSSION
1. Did the District Court err in concluding that Neil
consented to the compensation he received?
With regard to Neil's claim for compensation for his labor and
other contributions to the ranch operation before Frank's death,
the District Court found that the benefits Neil received were all
that Frank agreed to pay and that Neil remained on the ranch
despite Frank's refusal to change his compensation practices. The
court also found that, although Neil hoped to negotiate a purchase
of the ranch, no agreement was reached and Frank did not promise
Neil that he would receive the ranch when Frank died. The District
Court determined that Neil was bound by his admission that the only
agreement between Neil and Frank was that Frank would pay what he
felt like paying and concluded, under § 28-2-503, MCA, that Neil
accepted and consented to the compensation he received as being
full payment.
Neil does not specifically contend that the court's findings
relating to the extent of the agreement between himself and Frank
are clearly erroneous. He argues that the District Court erred as
a matter of law in failing to conclude, under § 28-2-503(2), MCA,
that his lack of knowledge of certain facts invalidated his consent
to the compensation and benefits received as full payment. He also
asserts that the cases relied on by the court are distinguishable
on their facts.
Section 28-2-503(2), MCA, provides that the "voluntary
acceptance of the benefit of a transaction is equivalent to a
consent to all the obligations arising from it, so far as the facts
are known or ought to be known to the person accepting." Neil's
first contention is that he accepted--and consented to--the
compensation and benefits Frank provided based on an "impression"
or "anticipation" that the ranch ultimately would be his. Thus,
according to Neil, he did not know of the "fact" that he would not
inherit the ranch and, as a result, his acceptance and consent do
not preclude recovery for his labor and other contributions to the
ranch.
The problem with Neil's contention is that it is not supported
by either the stipulated facts or the evidence presented at trial.
Neil stipulated to the fact that no specific agreement entitled him
to wages or reimbursement for ranch-related purchases. He also
stipulated that, when his mother died in 1975, he signed papers at
his father's request transferring property from his mother's name
to his father's name. He further agreed that he tried to negotiate
with his father through attorneys in 1981 for "justice," hoping
that his father would "make it right." Finally, he acknowledged
that such decisions were entirely up to his father and that his
father never did "make it right."
In addition, as found by the court and not challenged by Neil,
Neil's effort to negotiate a purchase of the ranch was not
successful. Nor did Frank ever promise Neil that he would receive
8
the ranch when Frank died. Simply stated, and as the court found,
the benefits Neil received were all that Frank agreed to pay and
Neil stayed on, despite Frank's refusal to pay increased benefits.
The stipulated facts and evidence are clear that,
notwithstanding Neil's efforts to acquire the ranch while Frank was
alive or ensure that he would receive it after Frank's death, no
agreement was reached. The evidence also is clear that, while Neil
could have left the ranch at any time, he chose not to do so;
indeed, Neil stayed on at the ranch accepting the compensation and
benefits Frank provided with full knowledge of the circumstances.
These facts, as found by the District Court and unchallenged by
Neil, are the pertinent "facts" under § 28-2-503(2), MCA, which
were known by Neil in continuing to accept the compensation
provided by Frank.
Against this backdrop, Neil argues that his parents "gave him
the impression" the ranch would be his some day and he
"anticipated" that the ranch would be his someday if he "stuck it
out. " This argument essentially requests us to determine that the
District Court erred in failing to make additional findings--in
Neil's favor--and, based on such additional findings, to conclude
that he did not consent to the compensation he received.
With the exception of his own testimony in these regards,
however, Neil did not provide evidentiary support for either the
"impression" or the "anticipation." Neil was required to prove
these matters in order to negate the Estate's consent defense; he
did not establish them to the District Court's satisfaction.
9
It is the sole province of the trier of fact--here, the
District Court--to weigh evidence and determine the credibility of
witnesses, and we will not substitute our judgment for that of the
factfinder. Magone v. Froehlich (1995), 270 Mont. 381, 387, 892
P.2d 540, 544 (citation omitted). We cannot conclude as a matter
of law that, for purposes of 5 28-Z-503(2), MCA, Neil established
his lack of knowledge of material facts regarding the compensation
and benefits he accepted and to which he consented.
Neil's second contention is that the District Court erred in
relying on Stone-Ordean-Wells Co. v. Anderson (19231, 66 Mont. 64,
212 P. 853, and Cook-Reynolds v. Beyer (1938), 107 Mont. 1, 79 P.2d
658, because those cases involved written agreements. We agree
that the facts on which those cases were decided were
distinguishable from those in the present case; in addition, it is
not clear that those cases are applicable here in any event.
Even assuming that the cases relied on by the District Court
were inapplicable, however, Neil presents no authority which
supports his position, and we have located none. On the basis of
the record before us, we cannot conclude that the District Court
erred in determining that Neil consented to the compensation and
benefits he received.
2. Did the District Court err in concluding that Neil could
not recover under quantum meruit?
Neil asserted a right to recover the value of his services,
expenditures and use of his equipment in the ranch operations under
the theory of quantum meruit. The District Court concluded that no
10
quantum meruit recovery was available to Neil.
"Quantum Meruit" as an amount of recovery simply means
"as much as deserved, " and measures the recovery under an
implied contract to pay compensation as the reasonable
value of services rendered.
Lutey Construction-The Craftsman v. State (19931, 257 Mont. 387,
391-92, 851 P.2d 1037, 1039 (citing Kintz v. Read (Wash. App.
1981), 626 P.2d 52, 55). An implied contract arises not from
consent of the parties, but from principles of natural justice and
equity, based on the doctrine of unjust enrichment. St. James
Community Hospital v. Dep't of Social and Rehabilitation Services
(19791, 182 Mont. 80, 85, 595 P.2d 379, 382 (citation omitted). To
establish an implied contract based on unjust enrichment, the
plaintiff must demonstrate misconduct or fault of some kind by the
defendant or that he was taken advantage of by the defendant.
Brown v. Thornton (1967), 150 Mont. 150, 156, 432 P.2d 386, 390
(citations omitted).
Based on its determinations that the benefits Neil received
were all Frank agreed to pay and that, by staying on at the ranch
under those circumstances Neil consented to the compensation he
received, the District Court determined that no implied contract to
pay additional compensation existed. The court relied on St. James
Communitv HosDital in concluding that an implied promise to pay for
services cannot coexist with a specific agreement to pay a
particular amount, or in a particular manner, for services
rendered.
Neil contends that St. James Community Hospital is
distinguishable from the present case because that decision was
11
premised on the existence of a specific contract to pay, and he is
correct that a written contract existed in St. James Community
Hospital. & St. James Communitv Hosoital, 595 P.2d at 381. On
the other hand, our conclusion in St. James Communitv Hosnital--
that no promise to pay the value of services will be implied if
there is a special agreement to pay for those services in a
particular amount or manner--is not expressly limited to situations
involving written agreements to pay. St. James Communitv Hospital,
595 P.2d at 382. Neil offers no analysis based on either law or
logic in support of such a limitation.
We concluded above that the District Court did not err in
determining that Neil consented to the compensation he received.
That consent created an agreement between Neil and Frank that Neil
would accept the amount of money and other benefits Frank provided
as payment for his services and other contributions to the ranch.
On that basis, and pursuant to St. James Communitv Hospital, we
conclude that no implied promise to pay the value of Neil's
contributions exists here as a matter of law.
Neil argues that the evidence shows that Frank took advantage
of him and, therefore, that he met the Brown requirement that a
plaintiff demonstrate misconduct or fault by the defendant, or that
the defendant took advantage of the plaintiff. See Brown, 432 P.2d
at 390. Where, as here, the law will not imply a promise to pay
because an agreement to pay a particular amount or in a particular
manner exists, we need go no further in our analysis of a party's
entitlement to recovery under quantum meruit. Therefore, we
12
decline to address Neil's argument that he satisfied the Brown
requirement.
We hold that the District Court did not err in concluding that
Neil could not recover under quantum meruit.
3. Did the District Court err in concluding that no joint
venture existed?
As an alternative theory of recovery against the Estate, Neil
asserted the existence of a joint venture between himself and Frank
for the operation of the ranch from 1955 to 1982. The definition
of a joint venture has remained unchanged in Montana for over fifty
years. A joint venture is an:
"enterprise undertaken by several persons jointly, and
more particularly, as an association of two or more
persons to carry on a single business enterprise for
profit. It has also been defined, somewhat variantly, as
a special combination of persons undertaking jointly some
specific adventure for profit."
Wiesner v. BBD Partnership (1993), 256 Mont. 158, 162, 845 P.2d
120, 123 (quoting Sunbird Aviation, Inc. v. Anderson (1982), 200
Mont. 438, 444, 651 P.2d 622, 625 (quoting Rae v. Cameron (1941),
112 Mont. 159, 167, 114 P.2d 1060, 1064-65)).
Four elements must be satisfied in order to establish the
existence of a joint venture:
1) an express or implied agreement or contract creating
the joint venture;
2) a common purpose among the parties;
3) a community of interest; and
4) an equal right of control.
Wiesner, 845 P.2d at 123 (citation omitted). A joint venture
13
arises only when the intention of the parties to associate
themselves in this manner is clearly manifested. Bender v. Bender
(1965), 144 Mont. 470, 480, 397 P.2d 957, 962 (citations omitted).
The District Court entered findings with regard to the
elements which must be satisfied by a party asserting the existence
of a joint venture. Those findings--taken singly and in the
aggregate--reflect the court's determination that Neil did not
satisfy any of the required elements for a joint venture, and form
the basis for the court's conclusion that no joint venture existed
as a matter of law. Neil purports to rely on the Wiesner principle
that the agreement to create a joint venture may be inferred from
the parties' conduct or the surrounding circumstances and, on that
basis, argues legal error by the court. His position, however,
essentially requests this Court to make findings different from
those made by the District Court on each required element of a
joint venture.
With regard to the first element, the court found that no
agreement existed under which Neil and Frank created the joint
venture and that nothing of record evidenced a clear intent to
establish such a venture. Neil does not contend that these
findings are unsupported by substantial evidence or otherwise
clearly erroneous and, based on the record before us, no such
contention could be successful. There is no question but that the
District Court's findings in this regard are supported by
substantial evidence; moreover, the court did not misapprehend the
evidence in this regard and we are not left with a definite and
14
firm conviction that a mistake has been committed. See Daines, 888
P.2d at 906.
Neil asserts that he satisfied the first--and, indeed, every--
element required to establish the existence of a joint venture.
His arguments consist of conclusory statements that "the facts
clearly reflect that [he] in fact did meet all of the elements of
a joint venture" and that "the conduct of the parties from 1955 to
1982 clearly reflected they were acting in unison to keep the ranch
in operation." Such assertions ignore our standard in reviewing a
district court's findings of fact. We will not substitute our
judgment for that of the finder of fact by reweighing evidence and
redetermining the credibility of witnesses. See Maqone, 892 P.2d
at 544.
We conclude that the District Court's findings of fact
relating to the nonexistence of an express or implied agreement
creating the joint venture are not clearly erroneous. Because each
of the four Wiesner elements must be satisfied by the party
claiming the existence of a joint venture (see Wiesner, 845 P.2d at
1231, these findings provide a sufficient basis for the District
Court's conclusion that no joint venture was established as a
matter of law. Therefore, we need not address Neil's similar
arguments regarding the remaining three elements necessary to
establish the existence of a joint venture.
We conclude that the District Court did not err in concluding
that no joint venture existed.
15
4. Did the District Court err in awarding Neil compensation
for services and improvements to the property?
The District Court awarded Neil $1,640 as full compensation
for his services, including contributions of equipment and
supplies, together with 6% simple interest, for a total of $19,283.
The court also awarded Neil $10,000, as a set-off against rent
owed, for the contributory value of improvements made to the ranch
during the lease which unjustly enriched the Estate.
Neil contends that the District Court erred by summarily
relying on the calculations and information submitted by the
Estate's expert in awarding only $19,283 on his quantum meruit
claim for services as a ranch hand. The Estate cross-appeals from
both monetary awards to Neil. Regarding the award for services,
the Estate argues that no basis for any award for services remained
after the court properly rejected Neil's quantum meruit and joint
venture theories. Regarding the award on Neil's claim for the
contributory value of repairs and improvements he made on the ranch
during the lease, the Estate contends that no award is available as
a matter of law where the property did not increase in value as a
result of the improvements. We address the Estate's cross-appeal
first, looking at each of these awards in turn.
We concluded above that the District Court did not err in
determining that Neil consented to the compensation and benefits
Frank provided for his services. We also concluded that the court
did not err in determining that Neil could not recover compensation
for his services to the ranch based on either a quantum meruit
recovery or the existence of a joint venture. We note, in
16
addition, that the District Court entered a finding of fact that
"[blenefits paid to Neil for his work on the ranch from 1955 to
1982 were equal to the reasonable value of his services." Because
no legal basis remained upon which an award for Neil's services on
the ranch properly could be premised, we conclude that the District
Court erred in awarding Neil $1,640 as compensation for his
services as a ranch hand, including his contributions of equipment
and supplies.
The parties also dispute the nature and legal propriety of the
court's award of $17,643 as "6% simple interest" on the $1,640
award to Neil for his services. Neil contends that this award is
a conversion of the $1,640 award into current dollars or, in other
words, an adjustment for inflation. The Estate argues that the
court erred as a matter of law in awarding either "legal interest"
under § 31-l-106, MCA, interest pursuant to an agreement in writing
under § 31-l-107, MCA, or prejudgment interest under § 27-1-211,
MCA. We need not resolve this dispute. Our conclusion that the
District Court erred in awarding Neil the $1,640 onto which the
"interest" was added--or, under Neil's approach, the conversion
into current dollars was applied--necessitates our further
conclusion that, however denominated, the court erred in awarding
Neil the additional $17,643. Moreover, based on our conclusions on
this cross-appeal issue that the District Court erred in awarding
Neil both the $1,640 for services and the $17,643 as interest, we
need not address Neil's argument that the court erred in relying on
the Estate's expert to minimize the amount of his award.
17
The Estate also cross-appeals the District Court's award to
Neil of $10,000, for improvements he made to the ranch during the
lease, as a set-off against rent owed. The court entered findings
that the value of the ranch was enhanced by $10,000 because of
Neil's improvements and that the Estate was unjustly enriched in
that amount. Thereafter, relying on Overcast v. Akra (1982), 197
Mont. 276, 642 P.2d 1058, the court concluded that tenants could be
reimbursed only for improvements which were permanent and which
enhanced the value of the property. Further concluding that the
ranch decreased in value over the relevant period of time, the
court ultimately concluded that the Estate had not been unjustly
enriched. Notwithstanding these latter conclusions, the court's
judgment included the $10,000 set-off against the judgment in the
Estate's favor for improvements Neil made to the ranch.
In Overcast, the lessee made improvements to the land in hopes
of eventually purchasing it. When the lease expired, the lessor
offered to sell the land to the lessee, but the terms were
unacceptable to the lessee. Ultimately, the lessee filed suit to
recover his costs in making permanent improvements. Overcast, 642
P.2d at 1060. The "improvements clause" in the lease did not
encompass nonremovable improvements and, at trial, the lessee
failed to present evidence that his improvements increased the
value of the land. Overcast, 642 P.2d at 1062. We held that a
lessee may not recover for making permanent improvements unless the
improvements enhance the property's value; stated differently, "if
the tenant has not made the premises more valuable to the owner,
18
the owner has no obligation to make compensation, however great the
expenditures may have been." Overcast, 642 P.2d at 1062 (citations
omitted).
Here, the parties stipulated that, over the period from 1982
to 1991 during which Neil made the improvements at issue, the
appraised value of the ranch decreased from $432,600 to $210,000.
Such a decrease in value is not determinative of whether Neil's
permanent improvements increased the value of the ranch for
Overcast purposes, however, since it is possible that a larger
decrease in value would have occurred absent Neil's improvements.
Whatever the "contributory value" or costs incurred in making
the improvements may have been, the record supports only a $1,900
enhancement in the value of the ranch from Neil's improvements.
Thus, the District Court's finding that the ranch increased in
value by $10,000 as a result of Neil's improvements is not
supported by substantial evidence. The Estate "has no obligation
to make compensation, however great the expenditures may have been"
for improvements that did not increase the value of the ranch or
for repairs that were the tenant's duty under the lease. &
Overcast, 642 P.2d at 1061-62.
Neil asserts that the Estate conceded the $10,000 amount via
the testimony of its expert. The record reflects, however, that
the expert's report states only that the value of the ranch may
have been enhanced by as much as $10,000. This figure included a
specific increased value of $1,900, but also included $5,025 Neil
spent for repairs; no testimony or other evidence related this
19
dollar amount for repairs to any increase in the value of the
ranch. Furthermore, the District Court correctly concluded that
Neil and Martha are not entitled to compensation for repairs which
were their duty under the lease.
Additionally, the expert rounded his maximum increase in value
of the ranch up to $10,000 by noting that there 'I [mlay have been
some other contributions out thereE.1 'I This testimony is
insufficient to serve as substantial evidentiary support for the
difference between the established $1,900 increased value and the
$10,000 award.
We conclude that the District Court's finding that Neil's
improvements increased the value of the ranch by $10,000 is clearly
erroneous and that substantial evidence supports a $1,900 increase
in value to the ranch as a result of permanent improvements by
Neil. We further conclude that the court correctly determined,
pursuant to Overcast, that Neil was not entitled to recover for
repairs or improvements which did not increase the value of the
ranch. We hold that the court erred in including in its judgment
the $10,000 for improvements; we also hold, however, that Neil is
entitled to judgment in the amount of $1,900 for such improvements.
5. Did the District Court err in concluding that Neil and
Martha owed rent payments to the Estate?
In its counterclaim and third party complaint, the Estate
alleged that Neil and Martha breached the lease by failing to make
the rent payments, and sought recovery of the unpaid rental amounts
and interest thereon. Based on its findings that Neil and Martha
20
failed to make the rental payments required by the lease and that
the lease does not require a notice of default before pursuing a
claim for rent, the District Court concluded that Neil and Martha
were liable to the Estate for the lease payments. The court
separately determined that the payments were due as a result of
Neil and Martha's failure to cure the defaults of which they were
given notice and that any error in the first notice of default was
cured by the second notice which Neil received and Martha was
presumed to have received.
Neil and Martha do not challenge either the District Court's
findings or its Conclusion of Law #12, based on those findings,
that they are liable to the Estate for the unpaid rent. They
assert error only with regard to the court's Conclusion of Law #13,
which related to the sufficiency of the notices of default. They
contend that, because the earlier notice incorrectly stated the
amount owed and the second notice was not "served" on them, the
Estate is precluded from pursuing its claim for rent. We need not
address Neil and Martha's argument regarding the sufficiency of the
default notices, however, given the court's unchallenged separate
determinations that they breached the lease and that the lease did
not require the Estate to give notice of default before pursuing a
breach action based on failure to pay rent.
In pertinent part, the default provision in the lease
provides:
Default by Tenants prior to termination of lease.
If the Tenants should fail to carry out substantially the
terms of this lease, the Landlord may serve a ninety (90)
day written notice to the Tenants of the Tenants' failure
21
to fulfill the terms of this rental agreement, specifying
the exact default, and the requirements to correct said
default.
If the Tenants fail to correct such default within
the ninety (90) days, the Landlord shall have the right
to re-enter and to take full possession of the farm and
buildings . . . .
This provision establishes the necessity of a go-day written notice
of default and an opportunity to cure before the Estate could re-
enter, take possession of the ranch and terminate the lease. It
does not require such a notice before the Estate may pursue a
breach claim for unpaid rent.
The Estate did not pursue its right of re-entry under the
lease pursuant to the notices of default. The claim pursued by the
Estate is a claim for rent owed by Neil and Martha under the lease.
Thus, the District Court's finding that the lease does not require
a notice of default before a claim for rent may be pursued is
supported by the language of the lease. Moreover, Neil and Martha
admitted, and the court found accordingly, that they failed to make
the rent payments as alleged by the Estate.
While a lease is in effect and prior to any termination,
tenants are liable for unpaid rent pursuant to the lease. Montana
Williams Double Diamond Corp. v. Hill (19781, 175 Mont. 248, 255,
573 P.2d 649, 653 (citation omitted). Although Hill involved
distinguishing when rent was due under a lease from when unlawful
detainer entitles a landlord to treble damages, our statement that
the tenant remains liable for rent under an existing lease is
applicable to the instant case. Here, the District Court found
that the lease was never terminated by either party; indeed, Neil
22
admitted at trial that the lease was still in existence. We hold,
therefore, that the District Court did not err in concluding that
Neil and Martha are liable to the Estate for the rent owing and
unpaid under the lease.
Neil and Martha also contend that the District Court erred in
concluding that the Estate was not estopped from pursuing its rent
claim. Their contention is based on a 1987 letter from the
Estate's counsel containing Joe Banderob's view that the lease was
no longer in existence because of the unpaid rent payments.
According to Neil and Martha, the Estate should be estopped from
changing its position in 1990 by claiming a right to unpaid rent
under the lease.
The object of equitable estoppel is to prevent a party from
taking unconscionable advantage of its own wrong while asserting
its strict legal right. Matter of Shaw (1980), 189 Mont. 310, 316,
615 P.2d 910, 914 (citation omitted). An essential element of
equitable estoppel is that a party must detrimentally rely on
another's conduct. King v. Rosebud County (1981), 193 Mont. 268,
279, 631 P.2d 711, 717 (citing m, 615 P.2d at 914). The party
claiming estoppel must act upon the other's representation in a
manner that changes his position for the worse. Carroccia v. Todd
(1980), 189 Mont. 172, 177, 615 P.2d 225, 228 (citation omitted).
Here, Neil and Martha did not establish that they
detrimentally relied on the 1987 letter from the Estate. Indeed,
in response to the Estate's letter, Neil's attorney immediately
communicated that the lease was still in effect and there were no
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further communications in that regard. Neil and Martha continued
to live and work on the ranch and receive income from it. We
conclude, therefore, that the District Court did not err in
rejecting Neil and Martha's estoppel theory.
Finally, Neil and Martha contend that lathes bars the Estate's
claim because the Estate failed to pursue a claim for rent during
the period between 1986 to 1990. Lathes is an equitable concept
which is applicable when there has been an unexplained delay of
such a duration and character that would create an inequitable
result if the asserted rights were enforced. Filler v. Richland
County (1991), 247 Mont. 285, 290, 806 P.2d 537, 540 (citation
omitted). Lathes is not applied due simply to elapsed time, but
turns primarily on whether it would be inequitable to enforce the
asserted claim; each case must be determined in light of its own
particular circumstances. Filler, 806 P.2d at 540.
Here, the lease is a written agreement between the parties
which has remained in effect since it was executed in 1984. The
first breach vis-a-vis nonpayment of rent occurred in September of
1986. The statute of limitations for an action on a written
agreement is eight years. Section 27-2-202(l), MCA. It is
undisputed that the Estate counterclaimed for breach of the lease
via unpaid rent in 1991, well within the time limit specified by
the statute. When an action is filed within the applicable statute
of limitations, the party claiming lathes must demonstrate that
extraordinary circumstances exist requiring the application of
lathes. In re Marriage of Hahn and Cladouhos (1994), 263 Mont.
24315, 319, 868 ??.2d 599, 601 (citation omitted).
Neil and Martha contend that the Estate waited to pursue its
action for rent until the special use valuation agreement period
was over and the Estate had saved $110,693 in taxes; under such a
circumstance, they urge that allowing the Estate to enforce the
lease would be inequitable. We fail to understand how a benefit to
the Estate clearly contemplated by all who executed the special use
valuation agreement, including Neil, can constitute such an
extraordinary circumstance as to require the application of lathes
to the Estate's timely pursuit of a remedy under the lease between
the parties. This is particularly true in light of Neil's
admissions that the lease remained in existence, that rent was not
paid and that Neil and Martha continued to receive the benefits of
the lease. Moreover, Neil and Martha do not challenge the District
Court's finding that the Estate refrained from terminating the
lease because Neil hoped to make the payments "when better times
came. ‘I
Neil and Martha have not demonstrated any extraordinary
circumstances which would require the application of lathes to the
Estate's timely claim. See Marriase of Hahn and Cladouhos, 868
P.2d at 601. Nor, under the circumstances of this case, have they
established any inequity resulting from requiring them to pay the
rent the lease requires. We conclude that the Estate's claim for
rent under the lease is not barred by lathes.
6. Did the District Court err in concluding that Neil is not
entitled to a set-off against rent owed, under the theory of
unjust enrichment, for the Estate's tax savings from the
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special use valuation agreement?
Neil and Martha claimed that the Estate was unjustly enriched
in the amount of the tax savings resulting from the special use
valuation agreement because Neil operated the ranch during the
special use valuation period. On that basis, they asserted
entitlement to a set-off against rent owed for the $110,000 the
Estate saved under the special use valuation agreement.
The District Court found that Neil was aware of the Estate's
intent to seek the special use valuation before he signed the
lease, but included no provision in the lease allowing compensation
to Neil and Martha--or less rent from them--upon his later
execution of the agreement. Moreover, Neil freely entered into the
special use valuation agreement, together with Frank's other heirs,
some five months after the lease was executed. Under such
circumstances, the District Court found no fault or misconduct by
the Estate with regard to the special use valuation agreement. The
court concluded that the existence of a written lease expressly
stating the payment--and other--rights and responsibilities of the
parties, and the absence of misconduct by the Estate, precluded
recovery by Neil of the $110,000 estate tax savings under an unjust
enrichment theory.
Neil and Martha do not specifically contend that any of the
District Court's findings of fact relating to the special use
valuation agreement and their unjust enrichment claim are clearly
erroneous. Instead, they advance conclusory statements such as
7P[o]bviously they were put in a position of being taken advantage
26
of. . ." Neil and Martha also do not assert error with regard
to the District Court's legal conclusions; indeed, they cite no
legal authority in presenting this issue.
As discussed under issue two above, plaintiffs seeking
recovery under a theory of unjust enrichment must establish
misconduct or fault of some kind by the defendant, or that the
defendant took advantage of them. Brown, 432 P.2d at 390. Here,
the District Court found no fault or misconduct by the Estate. We
review that finding under the clearly erroneous standard. See
Daines, 888 P.2d at 906.
The evidence supporting the court's finding indicates that, at
the time Neil executed the lease with the Estate in May of 1984,
he knew that the Estate intended to seek the special use valuation
agreement. With that knowledge, he chose to enter into the lease
which contained certain express rental, and other, provisions.
Some months later, Neil chose--together with Frank's other heirs--
to execute the special use valuation agreement which would result
in estate tax savings to the ultimate benefit of the Estate and,
therefore, the heirs. The upshot of these two transactions was
that Neil made himself a party to two separate written agreements,
each of which contained express terms relating to the subject
matter of the agreement, and neither of which referenced or varied
the terms of the other. The aim of the special use valuation
agreement ultimately was achieved: the Estate benefited by saving
approximately $110,000 in federal estate taxes. We conclude that
the District Court's finding that the Estate was not at fault or
27
guilty of any misconduct by electing the special use valuation and
not paying the tax savings to Neil is supported by substantial
evidence.
Neil's conclusory arguments in this regard essentially request
us to determine that evidence exists to support a finding different
from that made by the District Court or, in the alternative, to
simply make our own finding that there was fault or misconduct by
the Estate. Neither alternative is available under our standard of
review of trial court findings. See Daines, 888 P.Zd at 906. It
is the sole province of the trier of fact--here, the District
Court--to weigh evidence and determine the credibility of
witnesses; we will not substitute our judgment for that of the
factfinder. & Masone, 892 P.2d at 544. We conclude that the
District Court's finding of no fault or misconduct by the Estate is
not clearly erroneous.
On the basis of its finding that Neil had not established the
necessary fault/misconduct by the Estate, the District Court
concluded that Neil was not entitled to a set-off against rent
owed, under the theory of unjust enrichment, for the Estate's tax
savings from the special use valuation agreement. As set forth
above, there can be no recovery under a theory of unjust enrichment
absent demonstrated fault or misconduct by the defendant. See
Brown, 432 P.2d at 390. We hold, therefore, that the District
Court did not err in concluding that Neil was not entitled to the
set-off under the theory of unjust enrichment.
We affirm in part and reverse in part. As a result of the
28
partial reversal, we modify the judgment entered by the District
Court by decreasing the judgment in favor of Neil Banderob to the
amount of $1,900, decreasing the set-off against the accrued
interest portion of the Estate's judgment to that amount and
increasing the amount of the net judgment entered against Neil and
Martha Banderob, and in favor of the Estate, accordingly.
We concur:
J,&strces
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