Opinion
Supreme Court No. S-12283.
September 26, 2007.
Appeal from the Superior Court of the State of Alaska, Fourth Judicial District, Fairbanks, Robert B. Downes, Judge, Superior Court No. 4FA-04-2823 Civil.
Appearances: S. Jason Crawford, Crawford Law Offices, LLC, Fairbanks, for Appellant. No appearance by Appellee.
Before: Fabe, Chief Justice, Matthews, Bryner, and Carpeneti, Justices. [Eastaugh, Justice, not participating.]
NOTICE
Memorandum decisions of this court do not create legal precedent. See Alaska Appellate Rule 214(d). Accordingly, this memorandum decision may not be cited for any proposition of law or as an example of the proper resolution of any issue.
MEMORANDUM OPINION AND JUDGMENT
Entered pursuant to Appellate Rule 214.
I. INTRODUCTION
The central issue in this case is whether a quitclaim deed given by William Kruse to Cecili Balough was a gift or security for a loan. Based on the conflicting versions of events given by these two parties at trial, the superior court concluded that the deed was a gift. Kruse now appeals that determination as well as the superior court's refusal to order a new trial based on witness affidavits that Kruse offered after the superior court's initial decision. We affirm.
II. FACTS AND PROCEEDINGS
A. Undisputed Facts
In 1985 Kruse purchased about five acres of land in Salcha. Kruse lived on the Salcha property. He became acquainted with Balough around December 1998. They traded personal property, went camping and fishing together, and seemed to be friends. The precise nature of their relationship was disputed at trial.
In July 1999 Kruse gave a quitclaim deed to the Salcha property to Balough. They had it drafted at "some legal place" but without the help of lawyers. They also had Kruse's signature on the deed notarized at a local bank. Kruse continued to live on the property.
After this transaction, Kruse made a number of attempts to regain title to the property. In March 2000 Kruse conveyed the same property to a friend via a quitclaim deed, who then reconveyed the property back to Kruse on the same date. A few months later, Kruse conducted a similar exchange with Balough's stepfather. Shortly after this second conveyance-reconveyance, Kruse borrowed $5300 from a mortgage company and used the Salcha property as security. He repaid the loan and the lien was removed. Kruse received a veteran tax exemption for the property in 1999 and 2000.
In November 2001 Kruse went to Colombia to have some dental work done and remained there for several years. He paid property taxes on the Salcha property from abroad in 2002 and 2003. Balough moved onto the property while Kruse was out of the country in 2004. She paid property taxes on the Salcha property in 2005. On December 13, 2004, Balough recorded the quitclaim deed to the Salcha property. Kruse returned to Alaska in December 2004 when he heard that Balough had moved onto the property.
The record is unclear on whether Kruse or Balough paid the taxes in 2004.
Kruse filed a complaint to quiet title on December 28, 2004. Kruse and Balough were the only two witnesses to testify. They each testified to a very different version of events.
B. Kruse's Testimony
The deed was meant to be security for a $1000 cash loan from Balough to Kruse so Kruse could pay off a divorce attorney. He initially gave her $7000 worth of guns to hold as collateral for the loan. As a commission for her loan, they agreed that Kruse would give Balough an old gun and a new gun. Balough subsequently questioned the resale value of the guns and asked Kruse for the deed to the Salcha property as additional collateral. Kruse obliged. When asked why he would provide such a disproportionate amount of security ($7000 in guns and the deed to his property), Kruse explained: "[S]he is very persistent. . . . She kept threatening me. [`]Well, I'm going to have to take you to court for my $1000,['] you know." Kruse repaid the loan about six weeks later. Balough allowed Kruse to take his gun collection back but kept the two promised guns and refused to return the deed.
Kruse never had a romantic relationship with Balough and never proposed to her. C. Balough's Testimony
Balough testified that the deed was an outright gift. She testified that when it was first offered she told Kruse that she did not want the property because she did not want to pay taxes on property that she was not living on. She eventually accepted the property when Kruse stated that she would not have to pay taxes until she made it her residence. She also testified as follows:
He kept badgering me about receiving this present that he had paid for. And I said, I told him I didn't want it. And finally, he said, well I got the paperwork all together, I'll do this. And I said, I don't want a gift, unless this is a gift. I can't afford to have something given to me for what you might want from me. If this is for the joy of giving, then yes I will receive it. But I am not going to owe you or be, you know, marry you, or do any of these things. If you want to give it to me, that will be fine.
Concerning the notarization of the deed at the bank, Balough testified:
Well, when we went in there, I said, well, you know, my best friend, Martie, is a notary. Why are we going here? Why don't we just have Martie notarize it? And, he says, well I don't want them to know. They would think I was a fool. And I told him, well they'd be right. And he said, well, you'd be a fool for not taking it. So, I said, okay, well, then I will. And we went in front of the notary. And I said, so, you know, why are you giving this to me? He says, well, because I'm sweet on you, and I never want you to be homeless. And I said, well, that's fine. I'll take it for, under those circumstances.
Balough testified that she never lent Kruse $1000 but on a few occasions she lent him smaller sums of money to help him pay his credit card bills. Kruse stored guns with her, but not as security for any loan. She moved onto the Salcha property five years after the deed was delivered because at that time her stepfather, who was her landlord, raised her rent to a level she could no longer afford. Balough testified that Balough and Kruse had a romantic relationship and that he proposed to her in the summer of 2000. He gave her many gifts including a four-wheeler, a new gun, and jewelry. They were still dating and on good terms when Kruse left for a putative month-long trip to Colombia for dental work. She thought that they would live together on the Salcha property when he returned.
D. The Superior Court's Decision
After hearing testimony from both sides, the superior court issued an oral decision in favor of Balough. The superior court reasoned that it made little sense for Kruse to use both his gun collection and his property as collateral since the value of these items far exceeded $1000. It noted that Kruse had some litigation experience in the past regarding a mortgage on the Salcha property and thus was not totally ignorant about how land transactions worked. The superior court concluded that Kruse gave the deed to Balough as a lover's gift.
Shortly after the superior court issued its final judgment, Kruse filed a motion for a new trial on the basis that Balough had knowingly misled the court in her testimony. As evidence, Kruse submitted affidavits from four witnesses, including Balough's mother, stepfather, and friend. These affidavits state or tend to show that Balough's possession of the deed and guns was security for a loan to Kruse and that Kruse and Balough did not have a romantic relationship. The superior court treated Kruse's motion as one based on newly discovered evidence and denied it because the testimony contained in the affidavits was discoverable before trial and because it effectively sought to impeach Balough's testimony.
E. Contentions on Appeal
Kruse now appeals the superior court's judgment on three grounds. He argues that the superior court erred by (1) finding that the deed was a gift, (2) failing to impose a constructive trust in his favor, and (3) failing to order a new trial in light of Balough's fraud. Balough did not submit a brief.
III. DISCUSSION
A. The Superior Court Did Not Err by Finding That the Deed Was a Gift.
We outlined the standard of review for deed/mortgage disputes in Rausch v. Devine:
The choice of the proper standard of law for resolving property disputes is a question of law that we review de novo. The application of law to the facts of the case is reviewed de novo. We adopt the rule of law that is most persuasive in light of precedent, reason, and policy. The factual findings of the trial court are reviewed for clear error, a standard that is met if, after a thorough review of the record, we come to a definite and firm conviction that a mistake has been made. The trial court's findings regarding the credibility of witnesses and weighing of the evidence may be reversed only if clearly erroneous. In reviewing the trial court's factual findings, we view the evidence in the light most favorable to the party prevailing in the trial court. We may affirm the trial court's result on any basis supported by the record.
80 P.3d 733, 737 (Alaska 2003) (footnotes omitted).
We have held that "a deed absolute on its face may be declared to be a security agreement." However, there is a presumption of a valid conveyance when a deed has been recorded. The party challenging the conveyance can overcome this presumption only by clear and convincing evidence. "To determine whether an instrument is a deed or a security instrument, the court must look to the [mutual] intention of the parties at the time of execution." Where that intention is not expressly manifested in a writing, a court will look at the circumstances surrounding the transaction as well as the conduct of the parties afterward. In such cases, we consider the following circumstances:
Rizo v. MacBeth, 398 P.2d 209, 211 (Alaska 1965).
Rausch, 80 P.3d at 739, 742; see Rizo, 398 P.2d at 211 (adopting the majority rule that "there is a presumption that [a deed] is what it purports to be" without mention of whether the deed must be recorded or not).
Rausch, 80 P.3d at 739, 742; see Rizo, 398 P.2d at 211 ("[T]here is a presumption that an instrument is what it purports to be, and clear and convincing evidence is required to overcome this presumption.").
Rizo, 398 P.2d at 211.
Id. at 211-12.
• "The adequacy or inadequacy of consideration as compared to the value of the property[.]"
Id. at 212.
• "Retention or nonretention of possession."
Id.; see Rausch, 80 P.3d at 738 (noting that under Iowa law, "[t]he grantor's continued possession and control of the property strongly suggest the absence of delivery, especially where the grantee does not take possession in any way").
• "The financial condition of grantor at the time of execution of the instrument."
Rizo, 398 P.2d at 212.
• "The overall relationship of the parties — financial, business, debtor-creditor, etc."
Id.; see Rausch, 80 P.3d at 741 (noting that one party had "a history of extravagant gifts, including land" to another party in a dispute over whether a couple of deeds were gifts or not).
• "Whether the grantor or grantee paid the taxes" or mortgage. "Generally it can be said that no one of the circumstances is necessarily controlling, but that all present are to be considered."
Rizo, 398 P.2d at 212.
See Rausch, 80 P.3d at 741.
Rizo, 398 P.2d at 212.
Because Balough recorded the deed to the Salcha property, the issue before the superior court was whether Kruse overcame the presumption that she owned the property by clear and convincing evidence. Kruse argues that his testimony and the facts indicating his continued possession and ownership of the Salcha property constitute clear and convincing evidence that the deed was meant to serve as security. He also claims that the superior court did not sufficiently consider the factors outlined above. Because she was the prevailing party, we view the evidence in a light most favorable to Balough.
The undisputed evidence is partly favorable and partly unfavorable to each party. On one hand, Kruse's conduct after the July 1999 conveyance of the deed supports the notion that he believed he still owned the Salcha property and that the deed was security. He continued to live alone on the property for more than two years. He paid taxes or got a veteran's exemption on the property until 2004. He borrowed $5300 on the property and paid it off. And Balough waited five years before taking possession of the property she claimed to own. On the other hand, Balough did eventually move onto the Salcha property. She paid taxes on it and recorded the deed. Also, as the superior court noted, Kruse's attempts to recapture legal title through the conveyance-reconveyance of wild deeds are consistent with the actions of a person intent on reclaiming land that he had lawfully given away. Plus, Kruse's motivation for paying off the $5300 security lien may have been protecting his credit rating rather than a concern that he might lose ownership of the Salcha property.
Thus, this case, as presented to the superior court, seemed to hinge on the credibility of the starkly conflicting testimony of Kruse and Balough. As the superior court noted, there would have been little need for Kruse to add the Salcha property deed as collateral for a $1000 loan when $7000 worth of guns was already serving that purpose. Then again, it does not make much more sense that he would give away the property on which he was living to a woman whom he had only known for six months. Still, Kruse clearly did something imprudent, and Balough's version may be seen as not much less probable than Kruse's.
The burden was on Kruse to overcome by clear and convincing evidence the presumption that the deed was a conveyance. Viewing the evidence in the light most favorable to Balough, we are unable to conclude that the superior court's decision is clearly erroneous.
The superior court's decision is consistent with the result recently reached by this court in Rausch. Rausch involved the break-up of a couple in a long-term relationship. Rausch, who sometimes worked as a lawyer, conveyed two properties — one in Iowa and one in Anchorage — to Devine via quitclaim. Both deeds were recorded. At trial, Rausch claimed that the first deed was meant to be testamentary — i.e., it would pass to Devine in the event of Rausch's death. The second property, he explained, was deeded to Devine "only as reassurance that he would not evict her from the house." Devine, on the other hand, claimed that Rausch deeded her the properties because he was generous and because she needed some kind of security as an unmarried stay-at-home mother. The superior court found that Rausch was not a credible witness and concluded that the two deeds were gifts for Devine. We affirmed. Similarly to this case, we concluded in Rausch that "the trial court was left only with the nakedly conflicting testimony of the two parties, making the whole case turn to a substantial extent on the credibility determination." Although we noted that Rausch paid the mortgage on the two properties and exercised other "incidents of ownership" over the properties, we concluded that "the credibility determinations and facts in this case do not provide clear and convincing evidence overcoming a presumption of delivery." B. The Trial Court Did Not Err by Failing To Impose a Constructive Trust in Favor of Kruse.
Id. at 735.
Id. at 735-36.
Id.
Id. at 736.
Id.
Id.
Id.
Id. at 745.
Id. at 741.
Id. at 739.
Kruse argues that the superior court erred by not imposing a constructive trust on the property because Balough inequitably received the Salcha property without consideration. "[I]n Alaska a constructive trust is appropriate to prevent unjust enrichment, defined as the retention of property through `unjust, unconscionable, or unlawful means.'" There are two problems with this argument. First, Kruse never made it before the superior court and thus waived it. Second, the validity of Kruse's constructive trust argument depends on whether the deed was a gift or a mortgage. Because the deed was found to be a gift, Kruse can not claim that Balough obtained it by "unjust, unconscionable, or unlawful means." Moreover, Kruse's lack-of-consideration argument reaches too far; it makes all gifts susceptible to the constructive trust doctrine.
Id. at 744 (quoting State Farm Auto. Ins. Co. v. Raymer, 977 P.2d 706, 712 (Alaska 1999)).
We will consider arguments not raised explicitly in the trial court only if the issue is (1) not dependent on any new or controverted facts, (2) closely related to the appellant's trial court arguments, and (3) could have been gleaned from the pleadings. Thoeni v. Consumer Elec. Servs., 151 P.3d 1249, 1257 (Alaska 2007). Kruse's sole argument before the superior court was that the deed was meant to be a security interest.
C. The Superior Court Did Not Err by Not Ordering a New Trial.
Motions for a new trial are governed by Civil Rule 59(a), which states that "[a] new trial may be granted to all or any of the parties and on all or part of the issues in an action in which there has been a trial by jury or in an action tried without a jury, if required in the interest of justice." The trial court has broad discretion in deciding whether to grant or deny a motion for a new trial. "This court will not overrule the trial judge in the exercise of his discretion except in exceptional circumstances and to prevent a miscarriage of justice." But if a judge determines that not granting a new trial would result in a manifest injustice, the judge has a duty to order a new trial.
Cizek v. Concerned Citizens of Eagle River Valley, Inc., 49 P.3d 228, 234 n. 23 (Alaska 2002).
Higgins v. Mun. of Anchorage, 810 P.2d 149, 153 (Alaska 1991) (quoting Montgomery Ward v. Thomas, 394 P.2d 774, 774-75 (Alaska 1964)).
Id.
Kruse argues that the superior court erroneously categorized his motion for a new trial as one based on newly discovered evidence. He claims that his four affidavits instead prove that Balough committed fraud by lying to the court.
Even if his claim is couched as fraud, the vehicle by which Kruse attempts to establish his claim is the four affidavits, each of which contains evidence that Kruse did not present at trial. Without these affidavits, Kruse would have no basis to claim fraud. Nor would it be "in the interest of justice" under Rule 59(a) to allow Kruse to circumvent a newly discovered evidence analysis by simply categorizing his claim as one for fraud. Thus, the superior court did not abuse its discretion by classifying Kruse's motion as one based on newly discovered evidence.
If the fraud claimed was of such character that it prevented Kruse from fully and fairly presenting his case, using a newly discovered evidence analysis might not be appropriate. See Schultz v. Butcher, 24 F.3d 626, 630 (4th Cir. 1994). However, the alleged fraud does not fit that description.
This court has outlined the test for newly discovered evidence as follows: "[To] warrant relief under . . . Rule 59 . . . the newly discovered evidence `must (1) be likely to change the result on a new trial; (2) have been discovered after trial; (3) not have been discoverable, with due diligence, before trial; (4) be material; and (5) not be cumulative or impeaching.'" Kruse may have satisfied the first and fourth requirements. Because this case hinged on the credibility of the two parties, the additional evidence contained in the four affidavits might change the result in Kruse's favor on retrial if admitted.
Sengupta v. Univ. of Alaska, 21 P.3d 1240, 1261 (Alaska 2001) (quoting Dickerson v. Williams, 956 P.2d 458, 467 (Alaska 1998)).
However, Kruse did not provide a satisfactory explanation why the evidence presented in the affidavits was not discoverable before trial with due diligence. Kruse explains that he did not obtain the witnesses' testimony "because there was no indication until the time of trial that Appellee would lie under oath as to the very existence of a loan, and as to the nature of the relationship between the parties." However, Balough's pro se response to Kruse's initial quiet title complaint was sufficient warning that her version of events was significantly different than Kruse's. In its entirety Balough's answer stated: "William Kruse gifted me the property with the agreement that I'd pay the taxes when I lived here. This year I moved here and filed to pay property taxes as agreed." Moreover, to the extent that there were only two witnesses at the hearing — Balough and Kruse — Kruse should have reasonably expected credibility to play a major role in the disposition of the case. Furthermore, the evidence contained in the affidavits is meant to impeach Balough's testimony at trial and is seemingly cumulative with Kruse's own testimony.
Last, the superior court did not abuse its discretion by determining that there was not a manifest injustice. A trial court can grant a new trial under Rule 59(a) only if doing so is "required in the interest of justice." This court has previously held that "that initial determination is within [the judge's] discretion; [the judge] is not under a duty to find an injustice simply because a party alleges one." Here, the superior court had good reason to believe that no great injustice was suffered by Kruse. Kruse could and should have ascertained the testimony contained in the four affidavits before trial to rebut Balough's foreseeable version of events.
Higgins, 810 P.2d at 153.
IV. CONCLUSION
Kruse presents a sympathetic case. He lost a close case before the superior court. If he had offered the testimony contained in the affidavits at trial, he might have won back title to the Salcha property. However, Kruse did not produce this evidence until it was too late. Thus, the superior court's decision was based almost exclusively on the conflicting testimony of Balough and Kruse. Giving deference to the superior court's credibility determinations and weighing of the evidence, the court did not abuse its discretion in determining that Kruse failed to overcome the presumption of conveyance by clear and convincing evidence. Because the superior court found that the deed was a gift, Kruse's constructive trust argument necessarily fails, and in any event the argument was not preserved for appeal. Because Kruse had no reasonable excuse for not producing the evidence contained in the affidavits during the trial and because they are meant to impeach Balough's testimony, the superior court did not abuse its discretion by not ordering a new trial.
We therefore AFFIRM the superior court's decision.