Nunn v. Nunn

Opinion

1 This memorandum opinion was not selected for publication in the New Mexico Reports. Please see 2 Rule 12-405 NMRA for restrictions on the citation of unpublished memorandum opinions. Please 3 also note that this electronic memorandum opinion may contain computer-generated errors or other 4 deviations from the official paper version filed by the Court of Appeals and does not include the 5 filing date. 6 IN THE COURT OF APPEALS OF THE STATE OF NEW MEXICO

7 GRETCHEN NUNN, 8 Plaintiff-Appellee, 9 v. No. 29,132 10 KATHLEEN NUNN, 11 Defendant-Appellant.

12 APPEAL FROM THE DISTRICT COURT OF BERNALILLO COUNTY 13 Ted Baca, District Judge

14 Rocha de Gandara Law Firm 15 Jane Rocha de Gandara 16 Los Lunas, NM

17 for Appellee

18 James C. Ellis, P.C. 19 Lance Himmelberger 20 Albuquerque, NM

21 for Appellant

22 MEMORANDUM OPINION 23 BUSTAMANTE, Judge.

1 After a bench trial, the district court awarded an equitable lien of $40,000 2 against a landlord for her tenants’ costs of installing a pool and some tiling to the 3 rental property during their tenancy. The district court also declined to enforce a 4 rental agreement between the parties. We reverse the award of the equitable lien and 5 affirm the finding that the contract was not enforceable. 6 I. BACKGROUND 7 In 1998 Kathleen Nunn (Mother) received an inheritance. Her accountant 8 advised her that it might be beneficial for her to invest some of this inheritance in a 9 rental property. Mother was not interested in being a landlord, but decided that she 10 would be willing to buy a house if she could rent it to family members. 11 Mother’s son, Reid Nunn (Son), and his wife, Gretchen Nunn (Wife) agreed to 12 this arrangement. Wife testified that the arrangement would allow them to sell their 13 first home in a better market. Son testified that the arrangement would allow him to 14 live closer to his job, family, and friends. Son and Wife identified a house that they 15 would like to live in, and Mother used $40,000 of her inheritance as a down payment 16 to purchase the house. Mother took out a $130,000 mortgage on the property. Mother 17 was the sole owner of title to the property. 18 In 1998 Son and Wife moved out of their existing house and into Mother’s new 19 property. Son and Wife began paying $950 per month in rent to Mother. At all times

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1 Mother paid the mortgage, utilities, and property taxes on the property, reported rental 2 income, and took deductions for maintenance on her income taxes. 3 During the time that Son and Wife lived in the rental house, they made 4 numerous improvements. Although most were modest, two stand out. In 2000 the 5 couple spent $7,191 replacing tile throughout the house. They had not obtained 6 permission from Mother prior to installing the tile. In 2001 the couple spent $29,766 7 installing a pool at the house. Son testified that he asked for permission to install the 8 pool, which Mother initially denied. Son then testified that Mother eventually 9 acquiesced on the condition that she would not pay for the repairs, maintenance, or 10 anything associated with the pool. 11 In 2003 Mother desired to refinance her mortgage on the rental property. As 12 part of this process, the lender required a current copy of her rental agreement with 13 Son and Wife. Mother obtained a rental agreement from an office supply store, which 14 Son executed on behalf of Son and Wife in front of two witnesses. The rental 15 agreement provided that, in the event of a lawsuit, the prevailing party could recover 16 attorney fees. 17 In October 2006 Son moved out of the rental house. Then, in November, Son 18 filed for divorce. Shortly thereafter, on November 21, 2006, a termination of rental 19 agreement was delivered to Son and Wife. When Wife did not vacate the property,

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1 Mother filed an eviction action in metropolitan court. That petition was dismissed 2 without prejudice when Wife filed the instant lawsuit in district court. After a short 3 bench trial, the district court awarded an equitable lien in favor of Wife and Son 4 against Mother in the approximate amount of the costs to Wife and Son of installing 5 the pool and the tile. The district court found that no initial written rental agreement 6 had been executed. The court further ordered that “[t]here was not a typical landlord- 7 tenant relationship between the parties, and therefore the [r]ental [a]greement executed 8 by [Son] is not enforceable.” [RP 178] 9 II. DISCUSSION 10 Mother argues (1) that the district court erred in granting an equitable lien, and 11 (2) that the district court erred in not enforcing the rental agreement, an issue that 12 might allow her to obtain attorney fees if this Court reverses. We address each 13 argument in turn. 14 We note that our task is made more difficult because Wife did not file an 15 answer brief in this appeal. However, our rules do not require that an answer brief be 16 filed, as we may affirm on any ground. See Lozano v. GTE Lenkurt, Inc., 1996- 17 NMCA-074, ¶ 30, 122 N.M. 103, 920 P.2d 1057. Accordingly, we address each issue 18 on the merits. 19 A. The Equitable Lien

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1 Mother first argues that the district court erred in granting an equitable lien of 2 $40,000 against her property. Mother contends that the equitable lien must be based 3 on unjust enrichment, but that the district court failed to find unjust enrichment. 4 Mother specifically argues that there was no unjust enrichment because (1) Wife did 5 not prove that Mother was enriched, (2) any enrichment was not unjust, and (3) the 6 court applied an incorrect measure of damages in calculating the amount of the lien. 7 Points one and three are closely related. Although Mother would appear to be correct 8 on all counts, we need not address the argument that any benefit was not unjust, as we 9 resolve this case on Wife’s failure to show any benefit to Mother. 10 New Mexico recognizes two types of equitable liens: one based on agreement, 11 and the other “constituting a ‘remedial device, used to enforce a right to restitution in 12 order to prevent unjust enrichment.’” Arena Res., Inc. v. OBO, Inc., 2010-NMCA- 13 061, ¶ 15, 148 N.M. 483, 238 P.3d 357 (citation omitted). Because the district court 14 determined that no agreement existed at the time the improvements were made, the 15 equitable lien in this case must find its support, if any, in unjust enrichment. 16 Unjust enrichment occurs when “(1) another has been knowingly benefitted at 17 one’s expense (2) in a manner such that allowance of the other to retain the benefit 18 would be unjust.” Ontiveros Insulation Co. v. Sanchez, 2000-NMCA-051, ¶ 11, 129 19 N.M. 200, 3 P.3d 695. To recover in unjust enrichment, a plaintiff must prove that a

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1 benefit was received by the defendant. See Toltec Int’l, Inc. v. Vill. of Ruidoso, 95 2 N.M. 82, 84, 619 P.2d 186, 188 (1980). The measure of the benefit is “the reasonable 3 value [cost of the improvements] or to the amount which [the] improvements have 4 added to the market value of the land, whichever is smaller.” Cano v. Lovato, 105 5 N.M. 522, 537, 734 P.2d 762, 777 (Ct. App. 1986) (internal quotation marks and 6 citation omitted). 7 Restitution for unjust enrichment is an equitable remedy. See Arena Res., 2010- 8 NMCA-061, ¶ 15. “We review a [district] court’s decision to grant or deny equitable 9 relief for abuse of discretion.” Amkco, Ltd. v. Welborn, 2001-NMSC-012, ¶ 8, 130 10 N.M. 155, 21 P.3d 24. A court abuses its discretion “when it applies an incorrect 11 standard, incorrect substantive law, or its discretionary decision is premised on a 12 misapprehension of the law.” Klinksiek v. Klinksiek, 2005-NMCA-008, ¶ 4, 136 N.M. 13 693, 104 P.3d 559 (internal quotation marks and citation omitted). 14 If the market value of the property did not increase, there is no benefit. For 15 example, in Toltec Int’l, the finance director of the Village of Ruidoso arranged for 16 a company to install a metal tower at a race track. 95 N.M. at 83, 619 P.2d at 187. 17 The tower was installed but the village, which had not authorized the director to make 18 the purchase, refused to pay. Id. The district court ordered the village to pay under 19 a theory of unjust enrichment. Id. at 83-84, 619 P.2d at 187-88. Toltec Int’l had

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1 argued that the village benefitted from increased tourism from the use of the tower at 2 mule races and because the tower could be used at the village’s airport. Id. at 84, 619 3 P.2d at 188. The Court noted that the record contained no evidence that the tower had 4 increased tourism by attracting people to the race track or that the tower had been used 5 at the town’s airport. Id. Accordingly, there was no proof that the village had 6 received a benefit, and the Court reversed the district court and ordered the complaint 7 dismissed. Id. 8 When benefits are proved, the cost of improvements serves as a limitation on 9 restitution. In Cano, an improver purchased property from an estate and began 10 making improvements. However, before the improver closed on the sale, another 11 buyer purchased the same property in a tax proceeding. In the resulting suit to quiet 12 title, the district court awarded an equitable lien against buyer in favor of improver in 13 the amount of $37,500, which reflected the fair market value of the improvements. 14 105 N.M. at 537, 734 P.2d at 777. However, the record showed that the cost of those 15 improvements was only $23,322.56. Id. On appeal, this Court reduced the lien to the 16 lower amount of the cost of the improvements, observing that “the owner is not 17 unjustly enriched more than the improver’s cost.” Id. (internal quotation marks and 18 citation omitted).

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1 Here, Wife put on no evidence showing that Mother was enriched. As in Toltec 2 Int’l, Wife showed, and Mother did not contest, that tile and a pool had been installed. 3 However, also like Toltec Int’l, Wife did not provide evidence that these 4 improvements in any way benefitted Mother. Instead, the district court seemed to 5 simply assume that replacing existing flooring with tile and adding a pool would 6 automatically provide a benefit. This is contrary to the result in Toltec Int’l, which 7 implicitly held that the mere possession of the tower by the village was not conclusive 8 as to whether the village enjoyed any benefit. Instead, proof of the benefit is required. 9 Worse, here, the district court appears to have valued that benefit at slightly above the 10 cost to Wife of adding the tile and the pool. However, Cano informs us that cost is 11 not a measure of benefit, but instead a limit on recovery. 12 Wife made no effort to prove the benefit to Mother, if any, of the tile and pool. 13 Despite this, the district court awarded the community a lien that exceeded the cost of 14 the additions. But an equitable lien intended to prevent unjust enrichment must relate 15 to the increase in market value of the property due to the tile and pool, limited by the 16 cost of the tile and pool if that amount were less. By imposing the lien in the absence 17 of proof, and by using an improper standard to measure benefit, the district court 18 abused its discretion. 19 B. The Rental Agreement

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1 The district court found the rental agreement to be unenforceable because 2 “[t]here was not a typical landlord-tenant relationship between the parties.” Mother 3 argues that this finding was error. Mother acknowledges that the rental agreement has 4 no bearing on who should bear the cost for the pool and the tile since those 5 improvements were made prior to the agreement. Instead, Mother hopes to enforce 6 a provision of the agreement allowing the prevailing party to obtain attorney fees. 7 There was little discussion of this issue at trial. The court stated only that

8 those rental agreements were not executed for the purposes of 9 establishing any legal relationship or identity between the parties. In 10 other words, they were not executed to establish a landlord/tenant 11 relationship necessarily. They [were] executed to satisfy the 12 requirements of some lending institution; therefore, [their use in] 13 establishing the relationship between the parties is somewhat diminished.

14 Taken together, we read these statements not as a finding that the agreement exists but 15 is unenforceable, but as a finding that the agreement is unenforceable because no 16 contract exists. 17 Mother quotes Garcia v. Middle Rio Grande Conservancy District, 99 N.M. 18 802, 807, 664 P.2d 1000, 1005 (Ct. App. 1983), overruled on other grounds by 19 Montoya v. Akal Sec., Inc., 114 N.M. 354, 838 P.2d 971 (1992), for the proposition 20 that we should review de novo whether a contract exists. However, a more complete 21 quote from Garcia reveals a more deferential standard:

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1 In order to establish a binding contractual agreement, plaintiff 2 must prove a meeting of the minds was arrived at between the parties or 3 that a mutual agreement was objectively manifested by each 4 party. . . . The existence of a contract between parties is generally a 5 question of law to be decided by the trial court. However, when the 6 existence of a contract is at issue and the evidence is conflicting or 7 permits more than one inference, it is for the finder of fact to determine 8 whether the contract did in fact exist.

9 Id. (citations omitted). Accordingly, the district court’s finding is a factual issue that 10 we review for substantial evidence. See Skeen v. Boyles, 2009-NMCA-080, ¶ 17, 146 11 N.M. 627, 213 P.3d 531. “Substantial evidence is such relevant evidence that a 12 reasonable mind would find adequate to support a conclusion.” Salazar v. D.W.B.H., 13 Inc., 2008-NMSC-054, ¶ 6, 144 N.M. 828, 192 P.3d 1205 (internal quotation marks 14 and citation omitted). 15 Conflicting evidence was presented at trial. Mother produced the rental 16 agreement, which was signed by herself, Son, and two witnesses. But Mother and Son 17 both testified that the entire purpose of that agreement was to satisfy her lender’s need 18 for documentation. Both also indicated that the agreement she produced at trial was 19 identical to an earlier agreement. However, Mother did not produce an earlier 20 agreement at trial, and the district court found that no such agreement existed. On 21 these facts, a reasonable mind could conclude—as the district court did—that the 22 contract was intended only to satisfy the lender and was not intended to create an

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1 actual new rental agreement between the parties. Accordingly, we affirm the district 2 court, and we would have done so even had it reached the opposite result.

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1 III. CONCLUSION 2 For the foregoing reasons, we reverse the district court’s award of the equitable 3 lien and affirm its decision not to enforce the rental agreement. 4 IT IS SO ORDERED.

5 6 MICHAEL D. BUSTAMANTE, Judge

7 WE CONCUR:

8 9 JONATHAN B. SUTIN, Judge

10 11 MICHAEL E. VIGIL, Judge