Opinion
No. 4-781 / 04-0467
Filed February 9, 2005
Appeal from the Iowa District Court for Cass County, Gordon C. Abel, Judge.
The defendant in a quiet title action appeals from a district court ruling that quieted titled to property in the plaintiff, and dismissed the defendant's action against the plaintiff and his wife for forcible entry and detainer. AFFIRMED.
Michael Oliver, Des Moines, for appellant.
Thomas Tarbox, Des Moines, for appellee.
Heard by Huitink, P.J., and Mahan, Miller, Vaitheswaran, JJ., and Nelson, S.J.
Senior judge assigned by order pursuant to Iowa Code section 602.9206 (2003).
Sandra Ridout appeals from a district court decree that quieted title to certain property in Harry Wood, and dismissed Ridout's forcible entry and detainer action against Wood and his wife Kim. We affirm the district court.
I. Background Facts and Proceedings.
Sandra Ridout, Harry Wood, and Rita Cook are the children of Harry Wood, Sr. (Harry Sr.) and Doris Wood. In 1974 Harry Sr. and Doris acquired property in Cass County (subject property) which contained an old farmhouse. In 1977 they acquired a manufactured home and placed it on the subject property. Harry Sr. and Doris thereafter occupied the manufactured home. Wood and his wife Kim began occupying the farmhouse on the subject property in 1983, for which they paid Harry Sr. and Doris $100 per month in rent.
Ridout moved to Alaska, from Iowa, in 1990. She returned to Iowa a few times each year to visit Harry Sr. and Doris. During one such visit, on May 12, 1995, Harry Sr. and Doris conveyed the subject property to Ridout. The deed stated the conveyance of the property was in "[c]onsideration [of] less than $500 being an interfamily [sic] gift." Ridout provided no consideration for the property. On the same day, May 12, Harry Sr. and Doris also signed powers of attorney. Harry Sr. appointed only Ridout as attorney-in-fact. The draft of Doris's power of attorney appointed Ridout as her attorney-in-fact, but was amended by hand to list both Ridout and Wood as attorneys-in-fact.
Ridout did not inform her siblings of the conveyance, but did record the deed. Wood learned of the conveyance via a local "scandal sheet," a published compilation of recent courthouse filings. At the time of the conveyance Doris was residing in a subsidized senior housing apartment. However, Harry Sr. was still residing in the manufactured home, and continued to reside there following the transfer to Ridout.
Harry Sr. died on September 25, 1995. According to Wood, he and Doris then entered into discussions regarding Wood's purchase of the subject property. Two appraisals were obtained on the property. The first, performed in July 1996, valued the property at $36,700. However, that appraisal did not include the old farmhouse. The second appraisal, which occurred in February 1997, valued the total property between $49,500 and $55,000. Wood asserts that he and Doris then entered into an oral agreement, wherein he would purchase the subject property for $50,000.
Wood and his wife moved into the manufactured home in September 1997, and made substantial improvements and repairs to both the manufactured home and the farmhouse. They also began renting the farmhouse to various tenants, and declared the income as rental income on their tax returns. Between June 1996 and August 1998 Wood made a payment to Doris, a payment on behalf of Doris, and deposited sums into a bank account, which totaled $31,476.94. Although Doris did not have access to the account, which was in the name of Harry Sr., all three children were signatories on the account and funds from the account were used for Doris's benefit and care. Of the $31,476.94 paid by Wood, $25,000 was obtained as part of a $37,500 loan from Wood's 401(k) account. The remaining $12,500 from the 401(k) loan was used by Wood to make improvements and repairs to the subject property.
Wood acknowledged that a small percentage of the payments occurred before he and Doris had agreed upon a final purchase price, but stated he did so "[w]ell, because it's family. Mom and I were working together on it."
It appears Doris and/or the children continued to use Harry Sr.'s account to minimize the appearance of Doris's assets.
Doris died on September 23, 1999. On November 29, 2001, Wood filed a petition to quiet title to the subject property in himself. On March 19, 2002, Ridout filed a forcible entry and detainer action against Wood and his wife. The two actions were combined for trial, which occurred in October 2002.
At trial, Ridout took the position that the property was a gift to her from Harry Sr. and Doris, as evidenced by her recorded title. Wood asserted that in executing the deed his parents did not intend to gift the property to Ridout, but only to create a "constructive trust" that "remove[d] title from the elder Woods to protect it from creditors, and to assist in qualifying for Medicaid." Wood asserted he had a superior title to the subject property, based on the partially performed oral purchase contract.
The district court, relying heavily on credibility determinations in favor of Wood and against Ridout, concluded that Ridout's deed amounted to, at best, "color of title," and that "[i]f it is title at all it is title to be held in a constructive trust for Doris Wood." The court concluded Wood had superior title, based on his oral contract with Doris, and quieted title to the subject property in him. The court further ordered Wood to pay the remaining balance on the purchase price, and to reimburse Ridout for any taxes she had paid on the property. The court also concluded Ridout had not established her right to the remedy of forcible entry and detainer, and dismissed that action.
Ridout appeals. She asserts the district court's decision was contrary to the law and the evidence. Specifically, she complains the court applied the wrong standard of proof in concluding Wood had overcome the presumption of ownership raised by her recorded title, and asserts that under the correct standard, and upon consideration of only the properly admitted evidence, that presumption cannot be overcome.
II. Scope and Standards of Review.
Wood's quiet title action was filed in equity. Quiet title actions are conducted by equitable proceedings. Iowa Code § 649.6 (2001). Because title was in issue, Ridout's forcible entry and detainer action was also triable by equitable proceedings. Id. § 648.16. Further, the parties agree this matter was tried to the court in equity. Thus, our review is de novo. Iowa R. App. P. 6.4. Although not bound by the district court's factual findings, we give them weight, especially when considering the credibility of witnesses. Iowa R. App. P. 6.14(6)( g).
III. Evidentiary Issues.
Before we can assess the merits of Wood's quiet title action, we must address Ridout's claims that the district court erroneously admitted and considered certain evidence.
Ridout first complains the court erroneously admitted and considered, over her foundational objection, photocopies of the 1982 wills of Harry Sr. and Doris. Ridout asserts Iowa Rules of Evidence 5.1002 and 5.1004(2) require production of the original wills. However, the admissibility of photocopies and other "duplicates," see Iowa R. Evid. 5.1001(4), is specifically controlled by rule 5.1003, which provides that a duplicate of a document is admissible to the same extent as the original unless either "(1) a genuine question is raised as to the authenticity of the original or (2) under the circumstances, admission of the duplicate would be unfair." Ridout does not assert that it was unfair to admit the photocopies, and appears to have abandoned her trial argument that additional foundation was required to establish the documents were in fact wills executed by Harry Sr. and Doris.
Ridout's primary complaint is that Wood did not adequately demonstrate the wills were in fact the last wills executed by Harry Sr. and Doris. Presumably this point is relevant to show that the testamentary intent evidenced in the 1982 wills — that of dividing the couple's estate equally between all three children — was the testamentary intent in effect at the time of the 1995 deed transfer. However, upon our de novo review we find the wills to be of limited if any relevance to Wood's quiet title claim and, in light of the remaining evidence, unnecessary for the establishment of that claim. Moreover, it does not appear that the wills informed the district court's credibility assessments. Accordingly, rather than assessing whether Wood in fact offered the documents as the last wills of his parents, and whether he laid an adequate foundation for their admission as such, we simply proceed to consider Wood's claim without reference to those documents.
Evidence of Harry Sr. and Doris's testamentary intent in 1982 sheds very little light on their intent at the time of the 1995 deed transfer, particularly given testimony about Harry Sr.'s "cantankerous" nature and confrontations with the children over his alcoholism.
We do so even though, through her testimony and statements, Ridout arguably concedes both the authenticity of the 1982 wills, and the fact that they were the last wills executed by her parents. When shown the documents during trial, Ridout identified the signatures on the wills as those of Harry Sr. and Doris. See Iowa R. Evid. 5.901(2) (providing for authentication through non-expert opinion on handwriting). Moreover, Ridout admits in her brief, "Both Harry [Sr.] and Doris Wood died testate." This must be, of necessity, a reference to the 1982 wills, which were the only wills shown by the evidence to have been executed by Harry Sr. and Doris.
Ridout also contends the district court erred in admitting, and then relying upon, a letter from the law firm involved in drafting the 1995 deed and powers of attorney. The letter and its attachments indicated that Ridout had called the firm from Alaska and requested the firm prepare the deed conveying the subject property, and that she requested to be billed for the resulting attorney fees. The letter directly contradicted Ridout's assertions that she had not arranged for the preparation of the deed, and had not paid the attorney fees. Despite Ridout's foundation and hearsay objections, the court accepted and considered the exhibit, stating it would consider it for impeachment purposes only.
Evidence offered for the purpose of contradicting and discrediting a witness must be admissible for a proper purpose independent of the contradiction. State v. Turecek, 456 N.W.2d 219, 224 (Iowa 1990). This evidence falls into two categories: (1) evidence relevant to a legitimate issue in the case, and (2) evidence that establishes or undermines the general credibility of the witness. Id. This second category embraces issues such as the witness's bias, skills, and knowledge, or a specific testimonial quality. Id.
Although Wood asserts he offered the letter only to impeach Ridout's credibility, the letter was in fact used to attack the veracity of specific factual assertions by Ridout. While the accuracy of those assertions was relevant to a legitimate issue in the case, the letter is nevertheless a written, out-of-court statement, and constitutes inadmissible hearsay if it was offered for the truth of the matter asserted. See Iowa R. Evid. 5.801-804. Whether a statement is hearsay is determined by the purpose of the offered testimony. State v. Horn, 282 N.W.2d 717, 724 (Iowa 1979).
Although Wood asserts he was not attempting to show the truth of the letter's contents, and the proffered reason for the evidence was the contradiction of Ridout, the letter was impeaching to Ridout's assertions only if the contents of the letter were accepted as true. Thus, it is difficult to escape the conclusion that the underlying intent and effect of admitting and considering the letter was to substantively establish the facts contained within. We conclude the letter is hearsay, and thus would not have been independently admissible to show the level of Ridout's knowledge and involvement in the deed preparation process. Accordingly, we will not consider the letter and its attachments in assessing whether the district court properly concluded Wood had met his burdens of proof in his action for quiet title.
The 1995 powers of attorney signed by Harry Sr. and Doris were also attached to the letter. However, Ridout testified to their existence and contents, and we will consider the powers of attorney and their contents to the extent of that testimony when assessing the merits of the quiet title action.
III. Quiet Title.
Before we consider the merits of the quiet title action, we must note the very clear credibility determinations the district court made in favor of Wood and against Ridout. We recognize that those determinations were based, in part, on the contents of the erroneously admitted letter from the law firm. However, in reviewing the totality of the district court's ruling, we believe its credibility assessments are adequately supported by the remaining record. Giving due weight to those assessments, we, like the district court, find the facts of this matter are more accurately reflected in Wood's testimony and evidence, than in Ridout's. With that in mind, we turn to the merits of the issue. Because our review is de novo, rather than parsing the district court's articulation of the various legal standards we will simply set forth the appropriate standards and assess whether, under the facts established, those standards were met.
Because Ridout holds record title to the subject property, there is a presumption of ownership in Ridout that can only be overcome by clear and convincing evidence. State ex rel. Iowa Dep't of Natural Res. v. Burlington Basket Co., 651 N.W.2d 29, 34 (Iowa 2002). Wood asserts this presumption is overcome by clear and convincing evidence that the deed was executed, not to gift Ridout the subject property, but to remove legal title to the property from Harry Sr. and Doris during their lifetimes, to be certain they could qualify for Medicaid. Wood contends this evidence clearly, convincingly, and satisfactorily supports the creation of a constructive trust in favor of Harry Sr. and Doris.
For a deed to constitute a valid gift, there must be not only delivery and acceptance, but donative intent. Gray v. Roth, 438 N.W.2d 25, 29 (Iowa Ct.App. 1989). The intent of Harry Sr. and Doris as the grantors is the controlling element. Id. Harry Sr. and Doris must have not only had "a present intention to make a gift," but also must have divested themselves "of all control and dominion over the subject of the gift." In re Estate of Crabtree, 550 N.W.2d 168, 170 (Iowa 1996) (quoting Taylor v. Grimes, 223 Iowa 821, 826, 273 N.W. 898, 901 (1937)).
A constructive trust is an equitable, remedial device, applied by the courts, to provide restitution and prevent unjust enrichment. Berger v. Cas' Feed Store, Inc., 577 N.W.2d 631, 632 (Iowa 1998). Under a constructive trust the legal title holder is held to be a trustee for the benefit of another who in good conscience is entitled to the beneficial interest. Id. While a constructive trust can arise from fraud, it can be based on other equitable principles, such as "bad faith, duress, coercion, undue influence, abuse of confidence, or any form of unconscionable conduct or questionable means by which one obtains the legal right to property which they should not in equity and good conscience hold." Id. The party advocating for a constructive trust must establish it by clear and convincing evidence. See id. (stating burden of proof is by clear, convincing, and satisfactory evidence); Raim v. Stancel, 339 N.W.2d 621, 624 (Iowa Ct.App. 1983) (providing that "clear, satisfactory and convincing evidence" is equivalent to "clear and convincing evidence").
Having reviewed the record, and placing greater weight on Wood's version of events than on Ridout's, we conclude the record contains clear and convincing evidence that Harry Sr. and Doris did not intend to gift Ridout the subject property, nor did they abandon control and dominion over the property to Ridout. The record further contains clear and convincing evidence that the deed was executed to remove legal title to the property from Harry Sr. and Doris during their lifetimes, to assure that the couple could qualify for Medicaid. We find this sufficient to create a constructive trust in favor of Harry Sr. and Doris as the equitable title holders.
Despite Ridout's claim that the property transfer was a gift, there was no evidence that Harry Sr. and Doris ever filed a gift tax return, nor was there any history of Harry Sr. and Doris making substantial gifts to any of their children. Ridout could offer no credible explanation as to why her parents suddenly decided to give her property that constituted the majority of their assets.
Moreover, in August 1995, approximately three months after Harry Sr. and Doris executed the deed, Ridout told Wood that the transfer was "just to help [their parents] out." Based on previous concerns about their parents' ability to qualify for Medicaid, Wood construed this as a statement that the transfer was only a mechanism to reduce their parents' assets, and thus assist their parents in qualifying for Medicaid. Wood then spoke with Doris, who stated she and Harry Sr. had made the transfer to Ridout so that she, Doris, could "get some help," and that she felt she was "under pressure" when she signed the deed.
In addition, Ridout exercised very few indicia of ownership. Although she owned rental properties, she neither demanded nor received any rental payments from her parents or from Wood. She did not demand that Wood turn over the rental payments he was receiving for the old farmhouse. Ridout did nothing to maintain, repair or improve the subject property. Although she became aware of the improvements Wood was making, she did not offer to reimburse him for the expenses incurred. She did not transfer the utilities on the subject property into her name or pay the utility bills; following the 1995 transfer, the utility bills on the property were paid by Harry Sr. and Doris, from funds held for their benefit, or by Wood himself.
From 1995 until her death in 1999, Doris maintained full insurance on the subject property. While the policy did list Ridout as the named insured, she was listed as "in care of" Wood at the subject property. Wood received the various notices, and filed the renewal application in 1998. Following Doris's death, the policies were cancelled for non-payment. Only then was a notice sent to Ridout. Ridout obtained insurance on the subject property, but limited her coverage to liability. Wood inquired into obtaining insurance on the subject property, but was told he could not do so as the property was formally titled in Ridout's name.
Ridout did pay the taxes on the subject property, although she did not take a corresponding income tax deduction. She also admitted that she had asked Wood to pay the taxes, and that she had paid them only when she received a delinquency notice. Wood was willing and attempted to pay the property taxes, and offered to reimburse Ridout for the tax expenses. Wood also filed a successful tax protest on behalf of the subject property.
Ridout's actions following Doris's death also belie her claims of ownership. On September 30, 1999, shortly after Doris's death, Wood presented Ridout with a warranty deed that would transfer the property from Ridout and her husband to Wood and his wife. Ridout indicated the property would eventually be transferred, but declined to do so before speaking with her accountant. When Wood raised the issue again in 2000, Ridout asserted that her accountant had advised her not to transfer the property that year. It was not until a discussion in March 2001 that Ridout stated that she would sell Wood the house. Significantly, at no time prior to filing the action for forcible entry and detainer did Ridout demand that Wood vacate the subject property.
Although Ridout complains Wood did nothing to formally challenge her title to the subject property until two years after their mother's death, Wood's actions are in fact consistent with his belief that the deed was intended to relieve Harry Sr. and Doris of legal title during their lifetimes, but retain to them equitable title which would pass into their estates. After Harry Sr. died, his property interests presumably passed to Doris. After Doris's death, Wood immediately attempted to resolve the issue without court intervention. Although he was unsuccessful, he continued to attempt a resolution of what he viewed as a family issue. Only when it became clear to him that Ridout was asserting full legal and equitable title to the property did Wood find it necessary to resort to formal proceedings.
No probate proceeding was initiated on either Harry Sr.'s or Doris's estate.
As previously mentioned, we conclude all the foregoing is sufficient to overcome a presumption of ownership in Ridout, and to establish that, despite legal title, Ridout held only the status of trustee, initially for the benefit of Harry Sr. and Doris and, following Harry Sr.'s death for the benefit of Doris. Having rebutted the presumption of ownership in Ridout, Wood need establish his title by only a preponderance of the evidence. See Burlington Basket Co., 651 N.W.2d at 34.
Ridout asserts Wood cannot establish his own title to the subject property as he failed to present "evidence of the alleged oral agreement . . . [that was] so cogent, clear and forcible as to leave no reasonable doubt . . . as to its terms and character." Mack v. Linge, 254 Iowa 963, 969, 119 N.W.2d 897, 900 (1963). Ridout also complains that Wood never made any payment to Doris, because funds we paid into an account to which Doris did not have access. Proof of payment is critical to Wood's claim, as the statute of frauds generally requires a party to prove a contract creating or transferring an interest in real property via a writing signed by the party to be charged. See Iowa Code § 622.32; Pollmann v. Belle Plaine Livestock Auction, Inc., 567 N.W.2d 405, 407 (Iowa 1997). However, if a party has engaged in acts constituting partial performance, where those acts are referable exclusively and unequivocally to the contract, then the statute of frauds does not apply. Pollmann, 567 N.W.2d at 408-09.
As with so many issues in this case, the existence of the oral contract turns, at least in part, upon credibility assessments. We credit Wood's testimony that he and Doris agreed he would purchase the subject property for $50,000. Implicit in this statement are the offer, acceptance, and consideration of the agreement. Wood's testimony is supported by the fact that he obtained not one but two appraisals on the property, and that the purchase price was within the range of value assigned by the second appraisal. It is further bolstered by the fact that Doris gave Wood the abstracts of title for the subject property. The terms of the agreement are sufficiently "cogent, clear and forcible."
We conclude the forgoing evidence is competent to establish an oral agreement, as testimony from Wood, his wife Kim, and the third sibling, Rita Cook, along with physical proof of checks and deposits, demonstrate that Wood had paid over $30,000 toward the $50,000 purchase price. While the vast majority of the funds were deposited into Harry Sr.'s "estate" account, the testimony established these funds were for Doris, and she was provided funds from the account as needed.
IV. Conclusion.
Having considered all of Ridout's arguments, whether or not specifically discussed, we agree with the district court that Wood established superior title to the subject property, and that title to the property should be quieted in him. Ridout has not raised any claims regarding the district court's dismissal of her action for forcible entry and detainer, or to those portions of the court's order requiring Wood to complete payment of the purchase price under the contract and to reimburse Ridout for the amount of taxes she has paid on the property. Accordingly, the district court's decree is affirmed.