Editor’s note: This piece from the SCOV Law Blog is by SCOV Law editor Andrew Delaney.
McLaren v. Gabel, 2020 VT 8
This opinion issued on Valentine’s Day. I can imagine a lawyer couple reading this on Valentine’s Day morning and getting a prenup or postnup or adding some other contract to their relationship to celebrate Valentine’s Day. I married a nurse, thank God. When I did divorce work at the beginning of my legal career, I would come home at the end of the day and tell my wife how much I loved her — partially because of its truth and partially due to fear of financial and emotional ruin if she ever decided to divorce me. As it turns out, you don’t necessarily need marriage or children to end up in a post-breakup financial tango.
Plaintiff and defendant got together in 1993 and were more or less “together” until 2015. They first lived together in plaintiff’s home in Montreal, then in a home they bought together in Montreal, and finally at a place in Stowe. The Stowe place is wholly owned by defendant and what most of the litigation here is about.
When the parties lived together in Montreal, they shared expenses. Plaintiff was an independent film producer and director and defendant was a border-crossing lawyer working out of both Burlington and Montreal. When defendant was in Vermont, she’d stay in furnished rental apartments.
The parties’ joint Montreal home got a little expensive and they came up with agreements about both home expenses and their other financial arrangements. In 2006, defendant closed her law practices in Montreal and Burlington and took a job with the Vermont Judiciary.
Since defendant was no longer living in Montreal, the parties decided to sell their joint Montreal home. They sold it in 2007, paid some debts, and ended up with a little over $600,000 apiece. They put most of their personal property in storage.
In 2007, the parties were living apart but still held themselves out as a couple. Defendant lived in apartments in Vermont and plaintiff rented his own apartment in Montreal. In 2008, they began looking for a place in Stowe for defendant. They found a place and defendant purchased it in her name and plaintiff put in about a third of the purchase price (I’m being approximate here). They spent a lot of money renovating the house, and plaintiff put in another big chunk of money. Both dealt with contractors but plaintiff acted as the primary bookkeeper for the project. By the time they were done, plaintiff didn’t have much left from the Montreal home sale — roughly 10% of his original share.
Plaintiff didn’t make any significant financial contributions after 2009, though he did some projects around the house. The Stowe home became defendant’s primary residence, while plaintiff traveled between Stowe and Montreal, living during the week in the city and on weekends and holidays in Stowe. He brought valuable decorations and furnishings to the Stowe house. The parties entertained folks at the Stowe house and at least acted like a couple.
But there was trouble in paradise, and in November 2015, the split became official. They signed an agreement that attempted to unwind their legal and financial entanglements. They signed a second agreement, the following Valentine’s Day that said plaintiff was responsible for fixing a wall that he’d hung a carpet on (and then took the carpet from). At the final hearing in June 2018, the trial court found the Stowe house was worth $880,000 to $890,000.
Plaintiff started the lawsuit in 2017. After a five-day hearing, the trial court ruled in plaintiff’s favor on his unjust enrichment claim for his financial contributions to the purchase and renovation of the Stowe property owned by defendant, and also awarded him his own personal items from the Stowe home plus all jointly purchased items located in his Montreal apartment. The trial court declined a constructive trust, but awarded him all his financial contributions as equitable restitution.
The court’s award was based solely on the actual sums effectively given by the plaintiff to defendant, not the fair market value of the property. The court figured defendant would work until 75 and would get a decent retirement from the judiciary, though there wasn’t really evidence on these points.
The court issued a payment schedule, assuming defendant would remain at the property until she retired (at 75), and even though defendant hadn’t asked for an extended payment schedule if there was an award to plaintiff. The trial court dismissed defendant’s counterclaims, though it ordered plaintiff to pay $100 to fix the carpet wall.
Defendant appeals. She appeals the trial court’s decision on unjust enrichment and the restitution award, including the basis and the payment schedule. The rest of the potential issues are gone because nobody appealed or cross-appealed the remaining messes.
Defendant first argues that she wasn’t unjustly enriched because plaintiff provided the funds as a gift. Here, there’s a restatement section (§ 28 of the Restatement (Third) of Restitution and Unjust Enrichment) that applies to former cohabiting romantic partners. SCOV looks at the comment and reasoning behind the restatement section — that romantic partners have certain expectations that they’ll benefit from the investment in the partnership — that warrant treating transactions between romantic partners differently than otherwise-apparently-gratuitous transactions between not-in-that-kind-of-relationship folks.
What matters here are all the elements of an unjust enrichment claim, but especially whether plaintiff’s expectations were “justifiable” under the circumstances. This is a legal question that gets full review from SCOV. Plaintiff has the burden of proof. But SCOV does give some deference to the trial court’s decision to grant or withhold equitable memories — that gets an abuse-of-discretion standard.
There are three elements: “whether (1) a benefit was conferred on defendant; (2) defendant accepted the benefit; and (3) defendant retained the benefit under such circumstances that it would be inequitable for defendant not to compensate plaintiff for its value.”
The first two elements are here and there’s no quarrel on that point. So this claim here turns on whether it would be inequitable for defendant to retain the benefit without compensating plaintiff. SCOV notes that this type of claim — under § 28 — is based on the “claimant’s frustrated expectations.” In other words, the claimant wouldn’t have made the contribution if the claimant expected the relationship to end. In this case, it was reasonable for plaintiff to expect that he’d get use of the house and a financial value from the Stowe house as a part of the parties’ ongoing domestic relationship.
Though the trial court didn’t make specific findings that plaintiff justifiably expected something from his contributions, because the trial court found in his favor, SCOV reasons that all the essential elements were met if they can be supported. It’s an interesting way of looking at appellate review — it’s not the “you must show your work!” thing I’m used to.
SCOV reasons that there’s plenty of evidence here to support that plaintiff’s expectations were justifiable. The parties acted like they were in a relationship for many years. They stayed together after they sold their Montreal home and kept a long-distance relationship going by all appearances right up until the breakup. They spent the majority of their free time together. Plaintiff stayed in Stowe for weekends and holidays, and they held themselves out to the world as a couple.
SCOV reasons that the evidence supports the trial court’s findings on this point. Plaintiff was actively involved in the Stowe home’s purchase and renovation. Even after he stopped contributing financially to the home, after putting 90% of his proceeds from the Montreal home sale into the Stowe property, he worked on landscaping and other projects that benefitted the house and grounds. He owned no other real estate and expected to live off a small pension and other investments to the tune of about $5,000 CAD a month.
SCOV reasons that “plaintiff’s contribution of such a large sum to defendant’s home occurred only within the context of the parties’ long-term relationship and was not simply an unrestricted gift between people who were ‘just friends.’” Even defendant recognized this in the November 2015 contract.
SCOV doesn’t buy defendant’s his-name-isn’t-on-the-deed-or-anything-else argument. An unjust enrichment claim doesn’t require an agreement or contractual right. Here, this kind of thing comes up precisely because the unmarried folks don’t reduce their agreements to writing. SCOV also reasons that the lack of plaintiff’s insistence on an agreement cuts both ways. They didn’t come up with an agreement for their Montreal home until they were about to sell it — seven years in. The lack of an agreement was consistent with their practice.
SCOV concludes, “(G)iven the evidence at trial, the trial court’s obviously implicit determination that plaintiff’s contributions were not a gift is affirmed.”
SCOV next looks at defendant’s statute-of-limitations argument. I’ll make this easy. There’s a six-year statute of limitations for unjust enrichment (and most contract-based civil actions). What matters here is when the cause of action accrues. SCOV notes: “A cause of action does not accrue until each element of the cause of action exists.” And that’s really all you need to know here. The clock doesn’t start ticking until the breakup. SCOV reasons that the statute of limitations doesn’t bar plaintiff’s claims.
Defendant’s next challenge is to the dollar-for-dollar restitution award. She argues that the trial court done messed up when it chose not to take her substantial contributions into account when calculating its award. She also argues that the court screwed up when it calculated the damages dollar-for-dollar and not based on the property’s fair market value. She also argues for an offset based on defendant’s use of the property.
The trial court’s choice of some specific-amount-of-money award stands. But the dollar-for-dollar calculation does not. Here, SCOV reasons that the proper measure of damages is based on the lesser of — and “lesser” is important here — the actual amount contributed or the value of the benefit conferred on the defendant. It’s either the net increase in defendant’s assets or the actual amount. The trial court was wrong when it awarded a dollar-for-dollar amount. SCOV also reasons that even though the court didn’t award anything for certain contributions — college tuition for defendant’s son or a life insurance policy — the fact that it discussed these things was improper.
SCOV reasons that plaintiff knew: (1) the property needed extensive renovations; (2) the “investment” would likely never be recovered in a future sale; (3) he’d lose money on his investment in the property; and (4) defendant did not receive (and will not retain) a dollar-for-dollar benefit from his financial contributions. SCOV notes that even with over $1.25 million into the property, it’s worth $890,000 at most.
SCOV dismisses plaintiff’s “but the court could” arguments on this point. Even if the property is viewed as a mutual investment, plaintiff maxes out at $445,000, and it could be even less. What matters here is not the loss to the plaintiff but the benefit unjustly retained by the defendant.
Defendant also brings up some things that the trial court didn’t make findings on — specifically, some sort of rent for the time plaintiff spent at the property, and an additional $300,000-ish she put into the property after 2009 (when plaintiff stopped his financial contributions) for legal, engineering, taxes, and maintenance costs.
On the “rent” claim, SCOV is not swayed. However, when it comes to the carrying costs, SCOV reasons that the trial court could consider these on remand, and it should consider the legal costs on remand.
SCOV concludes that “given the specialized nature of recovery under § 28, the trial court must measure the net benefit to defendant and the amount of the unjust increase to her net worth that was made possible by the funds contributed by plaintiff.” SCOV notes that on remand, the trial court will have to make more-detailed findings regarding the parties’ respective contributions and additional findings “on the details of the renovation-related deposits, credits, and expenditures shown on the House Renovation Account spreadsheet, and as to any appropriate set-offs in valuing each party’s fractional share in order to arrive ultimately at the net benefit unjustly conferred on the defendant.”
Finally, SCOV takes up the structured payout awards. Because this “summary” is already getting a bit long in the tooth, I’ll just hit the highlights.
The trial court didn’t really have a basis to say that defendant would work until she’s 75. Nor did the trial court have a basis to opine that plaintiff could take on a “substantial mortgage” to pay off the award.
Even the trial court seems to have acknowledged that its findings were a bit shaky in this regard — using words like “presumably” and “perhaps” in crafting the reasoning behind the award and payment schedule. SCOV concludes the assumptions the trial court made were in error and not harmless.
Though both the amount and the structured-payout nature of the award get the remand button, SCOV doesn’t prohibit the trial court from giving it another try, so long as it’s supported by the evidence (apparently the mortgage calculator at Zillow.com was involved in the first determination).
So that’s the long (mostly long) and short of it. I think I’ll go tell my wife how much I love her.
