SMITH v. McCLUNG

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Docket Number

A94A1987.

Attorney(S)

Lee Sexton Associates, Lee Sexton, for appellants. Charles J. Vrono, for appellee.

Judges

BEASLEY, Presiding Judge.

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Smart Summary

Factual and Procedural Background

Lawrence Wade Smith, married to Mary McClung Smith, built a home on a portion of a farm owned by Mary's father, J. T. McClung, with Wade's father’s assistance. Wade and Mary lived there from December 1986 until October 1990, when Wade moved out and left Mary in residence. They divorced in March 1991, with the divorce court rejecting Wade's claim to include the house in the marital estate because the land was owned by J. T. McClung. Subsequently, Wade and his father sued McClung alleging fraud and unjust enrichment, claiming McClung had promised to deed the land to Mary or to both Mary and Wade, thereby inducing them to build the house and make improvements. McClung filed a motion for summary judgment, arguing the fraud elements were not established and that the statute of frauds barred enforcement of any land agreement. The trial court granted summary judgment for McClung, and the Smiths appealed.

Legal Issues Presented

Whether McClung fraudulently induced the Smiths to build improvements on the property by promising to deed the land to Mary or to both Mary and Wade.
Whether the statute of frauds barred enforcement of any alleged agreement concerning the land.
Whether the Smiths stated a valid claim for unjust enrichment based on the improvements made to the property.
Whether the trial court erred in granting summary judgment on all claims, including unjust enrichment.

Arguments of the Parties

Appellants' Arguments

McClung fraudulently induced them to build the house by promising to deed the land to Mary or to both Mary and Wade.
An exception to the general rule against fraud claims based on promissory statements applies because McClung knew at the time he made the promises that he would not perform.
The unjust enrichment claim remains viable despite the statute of frauds.

Appellee's Arguments

The Smiths cannot establish the elements of fraud, particularly scienter and justifiable reliance.
The statute of frauds bars enforcement of any contract concerning the land unless in writing.
No argument was made challenging the sufficiency of evidence on unjust enrichment.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
Centennial Life Ins. Co. v. Smith, 210 Ga. App. 194 (1993)	Elements required to prove fraud.	Defined the necessary elements of fraud which the Smiths failed to establish.
Prophecy Corp. v. Charles Rossignol, Inc., 256 Ga. 27 (1986)	Interpretation of contradictory affidavits against the affiant on summary judgment.	Construes Roy Smith's contradictory affidavit against him, limiting its evidentiary weight.
Hill v. Century 21 c. Realty, 187 Ga. App. 754 (1988)	Justifiable reliance not supported when plaintiff fails to investigate title status.	Held Smiths were not justified in relying on statements about title without inquiry.
First Nat. c. v. Thompson, 240 Ga. 494 (1978)	General rule that fraud cannot be predicated on promissory statements about future acts.	Acknowledged the general rule and the exception requiring present intent not to perform.
Rogers v. deMonteguin, 193 Ga. App. 480 (1989)	Exception to promissory fraud rule requires proof that promisor knew promise would not be fulfilled.	Found no evidence McClung had present intent not to perform his promises.
Bridges v. Reliance Trust Co., 205 Ga. App. 400 (1992)	Requirement that promissory statements be sufficiently specific to be enforceable.	Noted that even assuming enforceability, no evidence of present intent not to perform was shown.
Davidson Mineral Prop. v. Baird, 260 Ga. 75 (1990)	Fraud requires present intent not to perform promise.	Confirmed absence of evidence of intent not to perform.
Condon v. Kunse, 208 Ga. App. 856 (1993)	Representations of hope or expectation do not constitute actionable fraud.	Held that expectations about future ownership are not fraudulent.
Ga. Tile Distrib. v. Zumpano Enterprises, 205 Ga. App. 487 (1992)	Unjust enrichment applies where no legal contract exists but a benefit was conferred.	Clarified that unjust enrichment claim is not barred by statute of frauds.
Llop v. McDaniel, Chorey Taylor, 171 Ga. App. 400 (1984)	Statute of frauds does not bar relief in quantum meruit or unjust enrichment claims.	Supported that statute of frauds does not bar unjust enrichment claim here.
Firearms Training System v. Sharp, 213 Ga. App. 566 (1994)	Jurisdictional rule that Supreme Court has exclusive appellate jurisdiction in equity matters, except where no substantive equity issues are involved.	Determined Court of Appeals had jurisdiction because underlying issues were legal, not equitable.

Court's Reasoning and Analysis

The court first addressed jurisdiction, concluding that despite the equitable nature of the complaint, the absence of substantive equity issues meant the Court of Appeals had jurisdiction. Regarding the fraud claim, the court applied the established elements of fraud, requiring a false representation, scienter, intent to induce reliance, justifiable reliance, and damages.

The evidence showed that McClung made statements about future intentions to deed the property to Mary, but there was no evidence he had a present intent not to perform such promises. The Smiths failed to establish justifiable reliance because they did not verify the property's title status, and reliance on mere expectations about future events was unreasonable. The court noted that representations of hopes or expectations are not actionable fraud.

On the unjust enrichment claim, the court observed that the trial court’s summary judgment order did not specifically address this claim. The court clarified that the statute of frauds does not bar unjust enrichment claims, which apply in the absence of a contract. Since McClung did not argue a lack of evidence on unjust enrichment, and there was evidence that the property’s value increased due to the Smiths’ improvements, a genuine issue of material fact existed for trial on unjust enrichment.

Consequently, the court affirmed the dismissal of the fraud claim but reversed the grant of summary judgment as to the unjust enrichment claim.

Holding and Implications

The Court of Appeals affirmed in part and reversed in part the trial court's grant of summary judgment. It affirmed the dismissal of the fraud claim due to insufficient evidence of present intent not to perform and lack of justifiable reliance. However, it reversed the summary judgment regarding the unjust enrichment claim, finding that genuine factual issues remained for trial.

The direct effect of this decision is that the Smiths cannot pursue their fraud claim against McClung but may proceed on their unjust enrichment claim. The opinion does not establish new legal precedent beyond applying existing principles to the facts.

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SMITH et al. v. McCLUNG.

BEASLEY, Presiding Judge.

Lawrence Wade Smith was married to Mary McClung Smith. Wade, with the assistance of his father, built a home on a portion of a farm owned by his wife's father, J. T. McClung, and made other improvements to the property. Wade and Mary resided there from December 1986 to October 1990, when Wade moved and left Mary in residency. They were divorced in March 1991. Although the divorce proceedings are not before us, the parties do not dispute that the court in that case rejected Wade's efforts to include the house in the marital estate, on the ground that it was located on land owned by J. T. McClung.

Thereafter, Wade and his father sued McClung alleging that: 1) he had fraudulently induced them to enter a contract to build the house by promises to deed the land to his daughter or to his daughter and Wade together, and 2) McClung had been unjustly enriched. McClung moved for summary judgment, arguing that the elements of fraud could not be established and that the statute of frauds barred enforcement of any agreement concerning the land. The court's grant of the motion is appealed.

1. Preliminarily, we address the question of jurisdiction. Contrary to Court of Appeals Rule 27 (c), the Smiths have not supplied a statement of the reason this court, rather than the Supreme Court, has jurisdiction of this appeal. The complaint is styled "Complaint in Equity" and seeks, among other forms of relief, that the superior court order McClung to deed certain real estate to Wade and Mary. Nevertheless, we recognized in Firearms Training System v. Sharp, 213 Ga. App. 566 ( 445 S.E.2d 538) (1994), that "[g]enerally, the Supreme Court has exclusive appellate jurisdiction in matters of equity. Ga. Const. of 1983, Art. VI, Sec. VI, Par. III[, however, although the case presented involves injunctive relief, `no substantive issues of equity are involved in th(is) (appeal).'" Since resolution involves only underlying legal issues concerning fraud and unjust enrichment, jurisdiction lies in this court.

2. We next address the fraud claim, that McClung fraudulently induced the Smiths to make the improvements to the property. A plaintiff who claims fraud must show: "`(1) a false representation by defendant; (2) scienter; (3) an intention to induce the plaintiff to act or refrain from action; (4) justifiable reliance by the plaintiff; and (5) damages. (Cit.)' [Cit.]" Centennial Life Ins. Co. v. Smith, 210 Ga. App. 194, 195 ( 435 S.E.2d 498) (1993).

The evidence presented by the Smiths indicates that during the marriage they developed certain understandings concerning McClung's intentions for future disposition of the property. Wade deposed that McClung had stated he "was going to deed" the land to Mary, and that the land would become Mary's upon his death. His deposition also indicates that at some point he assumed McClung had already deeded the land to Mary, but he admits that neither McClung nor anyone else ever told him a conveyance had been made. He also stated that McClung did not ask him to spend money on the property.

In his deposition, McClung stated that he "assumed" Wade knew the property would one day become Mary's but he did not remember ever telling Wade that. He also stated that it was his intent that Mary receive the property in the future, but that immediately after his death it would go to his wife. He considered the improvements to be for the benefit of Mary and Wade and acquiesced in their construction after Mary asked for permission. There was no suggestion that he considered the improvements a benefit to himself.

After suit was filed, McClung died testate and his executrix was substituted as a party. There is no evidence in the record that the property was left to Mary.

Wade's father averred that during the marriage, "McClung personally told [him] that he was going to deed the property to Mary McClung Smith," and that based upon conversations with McClung, he believed that McClung had already transferred title to either Mary or to both Mary and her husband. This affidavit is self-contradictory to the extent Roy Smith states that McClung told him action would be taken in the future, and that the same action had already been taken. No explanation is given for the contradiction, and it is construed against him on this motion for summary judgment. Prophecy Corp. v. Charles Rossignol, Inc., 256 Ga. 27, 30 (2) ( 343 S.E.2d 680) (1986). Therefore, we take his testimony to be that McClung represented that he would arrange for the property to be transferred to Mary at some time in the future.

Even if McClung stated to the Smiths that the land had already been deeded to Mary, such a statement would not support a fraud claim. The Smiths would have a duty to ascertain the actual status of the title and would not be justified in simply relying upon such a representation. See Hill v. Century 21 c. Realty, 187 Ga. App. 754, 755 (2) ( 371 S.E.2d 217) (1988).

The court was correct in determining that to prevail, the Smiths must establish fraud concerning McClung's statements about the future disposition of the property. The Smiths argue that an exception to the general rule that "`fraud cannot be predicated upon statements that are promissory in their nature as to future acts. [Cits.]'" First Nat. c. v. Thompson, 240 Ga. 494 ( 241 S.E.2d 253) (1978) is found in Rogers v. deMonteguin, 193 Ga. App. 480, 481-482 (1) ( 388 S.E.2d 10) (1989). That exception, however, requires that "`when the misrepresentation is made, (the promisor) knows that the future event will not take place.' [Cit.]" Id. at 482 (1). There must be evidence that, at the time McClung made the statements concerning the future disposition of the property, he had no intention of transferring it.

The evidence, set out above, does not give rise to any such intention. Pretermitting the question of whether the statements of McClung concerning a future event constitute a promise that is specific enough to be enforced, see Bridges v. Reliance Trust Co., 205 Ga. App. 400, 403 (2) ( 422 S.E.2d 277) (1992), the Smiths "presented no evidence the promises were made with the present intent not to perform." Davidson Mineral Prop. v. Baird, 260 Ga. 75, 78 (5) ( 390 S.E.2d 33) (1990).

No one claims that McClung proposed to make a promise to convey the property in exchange for the improvements the Smiths made or that a promise was ever discussed as a condition for making the improvements. In fact, the Smiths point to no evidence that they entered into a contract with McClung in which they would make the improvements to the land in exchange for having the property left to his wife in McClung's will.

Rather, the evidence shows that, while married, Wade and Mary decided to build a house on land that they expected would one day be theirs. As McClung had the same expectation, he did not object. A divorce intervened and changed the anticipated future. This does not make McClung's actions during the marriage fraudulent. Representations concerning expectations and hopes are not actionable. See Condon v. Kunse, 208 Ga. App. 856, 857-858 (1) ( 432 S.E.2d 266) (1993).

Even if an intentionally false promise were shown, there is no justifiable reliance on such a promise, as the trial court noted. Building a house in reliance on such a promise is unreasonable; some formalization of an ownership interest must first be made. This would be the case even if McClung had expressly promised he would convey the property in the future, knowing he would not, a conclusion the evidence does not support despite the Smiths' arguments to the contrary.

Nor do the Smiths produce any evidence that they attempted to gain a firm understanding of McClung's intentions as to transfer of the property; there was no inquiry of whether the "property" would be the entire farm or the area right around the house, or even whether the conveyance would be made during McClung's life or by his will. Rather, the Smiths' own testimony indicates that they simply expected that the property would one day become Mary's and pursued the matter no further. A finding of fraud is precluded.

3. The court's order did not address the second count of the complaint, that restitution was required for the improvements to the property under the theory of unjust enrichment. McClung had not moved for partial summary judgment and the court's order appears to address the entire case.

Although the court did not address the unjust enrichment theory, it did declare that any contract for an interest in the property would be barred by the statute of frauds found at OCGA § 13-5-30. This does not affect the unjust enrichment claim; "`[t]he theory of unjust enrichment applies when as a matter of fact there is no legal contract . . ., but where the party sought to be charged has been conferred a benefit by the party contending an unjust enrichment which the benefited party equitably ought to return or compensate for. (Cits.)' [Cit.]" Ga. Tile Distrib. v. Zumpano Enterprises, 205 Ga. App. 487, 488 (1) ( 422 S.E.2d 906) (1992). As the claim requires that there be no legal contract, the provision in OCGA § 13-5-30 (4) that "[a]ny contract for the sale of lands, or any interest in, or concerning lands" be in writing is inapplicable. "[T]he Statute of Frauds . . . is no bar to relief in quantum meruit. [Cit.]" Llop v. McDaniel, Chorey Taylor, 171 Ga. App. 400, 403 (4) ( 320 S.E.2d 244) (1984). Although there is a distinction between the theories of unjust enrichment and quantum meruit, that distinction does not operate so as to bring an unjust enrichment claim into the purview of the statute of frauds, which does not bar the unjust enrichment claim.

McClung did not argue in his motion that there was an absence of evidence establishing an unjust enrichment claim, instead relying upon his arguments concerning fraud and the statute of frauds, and he does not make any such argument here. Although McClung stated in deposition that the improvements had not benefited him because of increased taxes on the property, he also stated that the appraised value of the property had risen. That, together with the evidence of the Smiths' investments in improvements to the property, establishes a jury question on the issue.

Although the court properly determined that the fraud claim was unsupported by evidence, McClung did not show there was an absence of evidence on the unjust enrichment claim, nor even take such a position in his motion for summary judgment. The court erred in granting complete summary judgment.

Judgment affirmed in part and reversed in part. Andrews and Johnson, JJ., concur.