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You can search the entire site. or go to the recent opinions, or the chronological or subject indices. Bennett v. Artus (3/30/01) sp-5381

Bennett v. Artus (3/30/01) sp-5381

     Notice:  This opinion is subject to correction before publication in
the Pacific Reporter.  Readers are requested to bring errors to the attention of
the Clerk of the Appellate Courts, 303 K Street, Anchorage, Alaska 99501, phone
(907) 264-0608, fax (907) 264-0878.



             THE SUPREME COURT OF THE STATE OF ALASKA
                                 


CONNIE S. BENNETT,            )
                              )    Supreme Court Nos. S-9186/9225
          Appellant/          )
          Cross-Appellee,     )    Superior Court No.
                              )    3AN-92-10585 CI
     v.                       )
                              )    O P I N I O N
WILLIAM D. ARTUS,             )
                              )    [No. 5381 - March 30, 2001]
          Appellee/           )
          Cross-Appellant.    )
______________________________)



          Appeal from the Superior Court of the State of
Alaska, Third Judicial District, Anchorage,
                      Karen L. Hunt, Judge.


          Appearances:  Thomas J. Yerbich, Law Office
Thomas J. Yerbich, Anchorage, for Appellant/ Cross-Appellee.
Charles E. Cole, Law Offices of Charles E. Cole, Fairbanks, for
Appellee/ Cross-Appellant. 


          Before: Matthews, Chief Justice, Eastaugh,
          Fabe, Bryner, and Carpeneti, Justices.  


          EASTAUGH, Justice.

I.   INTRODUCTION
          A lawyer had a romantic relationship and business
dealings with his client.  When disputes arose, the client sued the
lawyer for damages.  He counterclaimed.  After a bench trial, the
superior court offset some of their claims and awarded the client
about $66,000.  Both parties appeal.  We affirm in all respects.
II.  FACTS AND PROCEEDINGS
          Connie Bennett met attorney William Artus in 1980 when
she and her then-husband hired Artus to handle their personal
bankruptcy.  Bennett hired Artus in 1981 and 1986 to do legal work
for her business; by mid-1987 their relationship had become
romantic.  Three of their business activities are relevant here:
(1) they remodeled a condominium which Bennett bought on Artus's
behalf; (2) Artus identified a Fairbanks office building that was
for sale, helped Bennett purchase it, and performed legal services
relating to its management; and (3) Artus represented Bennett in
numerous forcible eviction and detainer (FED) lawsuits and in
another matter.
          The proceedings germane to this appeal are not complex. 
In 1992 Bennett filed a multi-count complaint against Artus
asserting claims not relevant here.  Her 1993 amended complaint
included claims alleging that Artus had defaulted on several loans
and seeking reimbursement for items allegedly purchased on Artus's
behalf.  Artus counterclaimed to recover amounts Bennett allegedly
owed him for the condominium remodel and for his services
concerning the Fairbanks office building and the lawsuits.  After 
dismissal or settlement resolved many of the parties' claims, the
superior court held a bench trial on their unresolved disputes.  It
entered extensive written findings and conclusions and in May 1998
entered judgment for Bennett for $66,119.04, plus costs and
attorney's fees.  Bennett and Artus both appeal.
III. DISCUSSION
     A.   Standard of Review
          We apply the clearly erroneous standard of review in
evaluating the trial court's factual findings. [Fn. 1]  We exercise
our independent judgment when considering any questions of law.
[Fn. 2]
     B.   The Condominium Remodel Credit
          Bennett argues that it was error to reduce the amount
Artus owed her by what Artus expended in remodeling her
condominium. 
          Artus wanted to buy an Anchorage condominium but had
difficulty getting financing.  In November 1989 Bennett bought a
condominium on Artus's behalf, with the oral understanding that
they would remodel it and that he would later buy it from her by
paying her the $119,000 purchase price, her remodel costs, and a
mark-up.  Artus did not put their agreement in writing.
          Bennett and Artus proceeded with the remodel.  Artus
treated the condominium as if he owned it.  He  commissioned an
architect and hired George Janssen to act as general contractor. 
He also paid many remodel expenses himself.  The remodel was
comprehensive.  It included new floors, new cabinets, a new
bathroom, new sheet rock, and reinforced studs.  But upon
completion, Artus could not obtain financing sufficient to purchase
the condominium from Bennett as agreed.
          Artus's counterclaim alleged that he and Bennett had
agreed that if he did not purchase the condominium from her, she
would reimburse him for the actual costs and expenses he
contributed to the remodel.  He claimed that he spent more than
$45,000 on the remodel.  Bennett testified at trial that she had
never authorized him to make independent expenditures to improve
the condominium.  She argued that because there was no written
agreement between lawyer and client, Artus was entitled to no
recovery.
          Following trial, the superior court found that Artus had
contributed $39,544.64 to the remodel.  Finding that his
contributions benefitted Bennett "through enhanced market value,"
the superior court gave Artus a credit for the full $39,544.64, and
subtracted that amount from what he owed Bennett.  This "remodel
credit" included $13,034.75 for legal services Artus provided to
contractor Janssen to discharge a remodel bill that Bennett had
refused to pay in full.
          The court therefore grounded its decision in the law of
unjust enrichment or quantum meruit.  We treat unjust enrichment
and quantum meruit claims as essentially the same. [Fn. 3]  Under
our law of unjust enrichment, Artus, as the party seeking the
credit, had the burden of showing that (1) he conferred a benefit
upon Bennett; (2) Bennett appreciated the benefit; and (3) Bennett
accepted and retained the benefit under circumstances making it
inequitable for her to retain the benefit without paying Artus the
value thereof. [Fn. 4]  Moreover, Artus had the burden of proving
the value of the benefits he conferred upon Bennett. [Fn. 5]
          1.   Failure to "document" agreement

          The superior court found that Artus had entered into two
business transactions with Bennett involving the condominium: one
to purchase and remodel it, and another to furnish it.  The
superior court found that "[n]o executed documents evidence the
agreements defendant and his client reached regarding either
transaction.  Without appropriate documents to protect his client,
the defendant's use of the client's money to provide him with a
fully remodeled, furnished residence lacks integrity, is unfair and
inequitable." [Fn. 6]
          Relying on this finding, Bennett argues that the superior
court erred by crediting Artus in quantum meruit for his remodel
expenses.  In effect, Bennett reasons that because the court found
that Artus's conduct "lacked integrity," was "unfair," and
"inequitable," Artus could not invoke equity to seek a credit for
his remodel expenses.  
          We disagree.  Although the superior court condemned
Artus's conduct, it could have permissibly concluded that a greater
inequity would result if Bennett were to retain the benefit of
Artus's uncompensated contributions.  Further, we are not convinced
that the quoted finding is inconsistent with the result.  The
finding addresses Artus's use of "the client's money."  The court
may not have intended the finding to apply to Artus's claim based
on the expenditure of his, not her, money.  Finally, Artus received
only a setoff, not an affirmative recovery.
          2.   Legal services trade-out with the remodel

contractor
          Artus hired Janssen, a friend and legal client, to be
general contractor on the remodel.  Janssen took instructions from
both Artus and Bennett, but billed Artus for services through the
early summer of 1990.  Both Artus and Bennett paid those bills. 
Artus testified that he also traded his legal services for
Janssen's contracting work.
          In July 1990 Bennett challenged one of Janssen's bills. 
She wrote Janssen a letter expressing her disappointment with the
quality of work; although his bill was for $21,166.62, she sent him
a check for $9,434.98.  Her letter stated that the check would
"cover all amounts due."
          Artus disagreed with Bennett's refusal to pay Janssen's
bill in full.  Artus testified that the work was "satisfactory,"
that Bennett's refusal to pay was "unreasonable," and that Janssen
was a "friend and client."  He said he was "not going to let him go
unpaid."  To satisfy the outstanding amount, Artus provided Janssen
legal services worth at least $13,034.75. [Fn. 7]  Because this
$13,034.75 was included in the total $39,544.64 remodel credit, the
superior court effectively required Bennett to reimburse Artus for
this service trade-out.   
          Bennett asserts that it was error to give Artus the
$13,034.75 credit.  She reasons that he breached a fiduciary duty
he owed her because, by satisfying Janssen's bill, Artus favored
one legal client, Janssen, over another, Bennett; he was therefore
ethically and equitably ineligible for any credit.  She argues that
satisfying the bill harmed her, and "effectively stripped [her] of
her ability to contest the matter with Janssen."  She also claims
that by satisfying the bill, Artus became subrogated to Janssen's
rights against Bennett, requiring that Artus prove Bennett "owed an
obligation" to Janssen.
          Artus responds that Janssen billed him, not Bennett, for
the condominium work, and that he could not have breached any
duties to Bennett by paying a bill that he was personally liable to
pay.  Bennett does not deny that Artus may have been obligated on
the bill.
          Bennett's argument is terse and undeveloped.  It does not
convince us that Artus breached any ethical duty by discharging an
obligation Artus owed Janssen.  Nor has Bennett established any
other reason why Artus should be altogether disqualified from
seeking a credit for the benefit he conferred on Bennett by
satisfying the bill.
          3.   Value of benefit conferred

          Bennett next argues that any credit must be measured by
the value of the benefit she received, not the expense Artus
incurred.  She contends that no specific fact findings support the
superior court's determination that Bennett's benefit had value of
$39,544.64.  She claims that Artus's contributions did not confer
a "dollar-for-dollar" benefit on her.  In effect, she argues that
Artus's remodel expenditures did not benefit her to the extent
found by the superior court.
          Artus was entitled to a credit measured by the value of
the benefit he conferred on Bennett. [Fn. 8]  That value does not
necessarily equal what he spent.
          The superior court observed that "[i]n determining the
reasonable value of benefits retained, the court may consider the
costs to the bestower together with the other evidence of value." 
In support of that proposition, it appropriately cited  Fairbanks
North Star Borough v. Tundra Tours, Inc. [Fn. 9]  We review the
superior court's fact findings for clear error.
          Two circumstances lead us to conclude that the superior
court did not clearly err in calculating the value of the benefit
conferred at $39,544.64.  Most importantly, it found that Artus had
proved that he spent that much on the remodel.  The superior
court's page-specific citation of Tundra Tours confirms that it was
well aware both that the cost to the bestower is relevant to the
value conferred and that a quantum meruit recovery is measured by
the value of the benefit conferred.  The court's written decision
twice found that Artus's remodeling expenses conferred a benefit on
Bennett by enhancing the condominium's fair market value.  Given
its awareness of the principle that controls valuation of a quantum
meruit recovery, we think it clear that the superior court
implicitly and permissibly found that Artus's contributions
conferred a benefit worth not less than what he paid.  We also
observe that there was evidence about what parts of the remodel
Artus paid for, including payments for some basic repairs, such as
new flooring and kitchen and bathroom cabinets.  There was also
evidence that some expenses he bore were for less important
improvements, but it was for the trial court to assess the effect
of the improvements, and it permissibly could have found from this
evidence that the cost incurred at least equalled the benefit
conferred.
          Second, the general contractor, Janssen, testified that
"any time that you remodel a building you add the value of the
remodeling at least to the value of that particular piece of
property."  The court could weigh the value of that opinion in
considering the value of the benefit.
          Bennett argues, however, that she personally spent
between $110,000 and $115,000 on the remodel, and that there was
evidence that the condominium's value had increased by no more than
$75,000.  From this she reasons that because the superior court
gave Artus a dollar-for-dollar credit, it implicitly must have
found that each dollar Bennett spent only increased the
condominium's value by about thirty-two cents.  Because no evidence
supports that implied finding, she argues, Artus should receive
only a pro rata credit, limiting his credit to $19,772, at most. 
          But Bennett's analysis in part would require us to assume
that any appreciation can be accurately measured by the difference
between two tax appraisals. [Fn. 10]  We have previously observed
that tax appraisals do not reliably measure true value. [Fn. 11] 
Furthermore, although the purchase price of the condominium was
$119,000, that does not prove that the court thought the
condominium was necessarily worth that much when Bennett purchased
it.  Finally, there was other evidence of substantially higher
post-remodel value, including an appraisal in 1995 and Bennett's
asking price in 1996.  Therefore, the superior court may have
justifiably reasoned that the remodel caused much greater
appreciation than the maximum $75,000 Bennett claims.  Some
evidence would have permitted the court to conclude that the value
increased by nearly $150,000, an amount not significantly less than
the total of what Artus and Bennett claimed they spent on the
remodel.  A dollar-for-dollar credit to Artus would not have been
inconsistent with appreciation of this magnitude.  In any event,
the superior court was not obliged to find that all of the costs
Bennett claimed to have incurred were properly attributed to the
remodel or were adequately proved.  For these reasons, it was not
necessarily clearly erroneous to value the benefit Bennett realized
by what Artus spent.
          Bennett also argues that Artus was not entitled to a
dollar-for-dollar credit for the legal services trade-out.  The
evidence permitted a conclusion that Artus proved that his trade-
outs conferred a benefit on Bennett, that Bennett appreciated that
benefit, [Fn. 12] and that allowing Bennett to retain that benefit
would be inequitable. [Fn. 13]
          But there was also evidence that Janssen's disputed
service bill encompassed work that was deficient, requiring Bennett
to hire new workers to correct the deficiencies at considerable
expense to her, and allegedly justifying her decision to pay him
less than half the amount he billed.  The amount of the trade-out
was part of the $39,544.64 credit the court awarded, based on its
finding that Artus had contributed that amount to the remodel. 
What we said about the total value of the benefit conferred applies
equally to this component of Artus's contribution. [Fn. 14]
     C.   Bennett's December 1990 and May 1991 Payments to Artus
          Bennett asserts that it was error to find that two
payments she made to Artus were payments for legal services, rather
than loans he was obliged to repay.
          In the fall of 1989 Artus worked between forty and fifty
hours a week to help Bennett acquire a Fairbanks office building.
After she purchased it, Artus worked on legal matters concerning
the building.  Bennett paid Artus for legal services he rendered in
connection with the building.   
          The checks Bennett wrote to Artus included a December
1990 check for $5,000 and a May 1991 check for $20,000.  Bennett
testified that these two payments were loans, but the superior
court found that they were compensation for services Artus
rendered, and thus were not to be repaid.
          To support her argument that these payments were loans,
Bennett points to evidence that her tax returns did not deduct
either payment, that Artus's tax returns did not declare either
payment as income, and that her 1990 financial statement lists a
$5,000 loan to Artus and her 1991 financial statement lists a
$20,000 loan to him. [Fn. 15]  Bennett asks us to hold that the
superior court's finding was clearly erroneous.
          The superior court did not clearly err.  No loan
documents in evidence support Bennett's claim.  In contrast, two
other loans from Bennett to Artus were evidenced by formal loan
documents.  The checks contain no clear notations showing that they
were loans.  And the superior court noted Bennett's testimony that
Artus worked forty-to-fifty hour weeks throughout the acquisition
period; this evidence supported a conclusion he had earned these
payments.  Likewise, the superior court could have relied on its
findings that Artus had performed substantial office building-
related legal work for Bennett after the acquisition.  And finally,
the superior court apparently believed Artus's trial testimony that
Bennett had paid him for legal services rendered, and that he had
received these two checks in the form of distributions from an
informal partnership in the building.  Artus also notes that
Bennett did not request repayment of these monies in pre-suit
correspondence listing monies owed.
          Given the evidence, it was not clear error to find that
these two payments were for legal services and were not loans.
     D.   Bennett's Request for Disgorgement of Legal Fees

          Bennett contends that it was error not to require Artus
to disgorge $23,834.31 in legal fees that Bennett paid him in May
1990 for his Fairbanks office building services.  Relying on
Artus's expressed belief that they had an oral contingent fee
agreement for the building, Bennett argues that Alaska Bar Rule
35(c) requires disgorgement. [Fn. 16]
          We are unpersuaded.  The unenforceability of the contract
he thought they had does not prevent Artus from retaining fees
compensating him fairly for work benefitting his client.  We held
in Estate of Katchatag that even though an attorney operated under
an unenforceable fee-sharing agreement, he could seek compensation
in quantum meruit for his work. [Fn. 17]  Artus advanced the same
theory in the superior court to successfully defeat Bennett's
disgorgement claim.  Bennett admits on appeal that Artus performed
valuable services for which she voluntarily paid what she thought
were "reasonable" fees.  The superior court did not err in
concluding that Artus was entitled under quantum meruit principles
to keep the monies Bennett paid him for his legal services.
          Bennett's reply brief raises a new argument for
disgorgement.  It asserts that because Artus was a full-time
employee of Good Taste, Inc., a business owned by Bennett, when he
performed the legal services, he could not be paid those fees for
services performed on an hourly basis.  We decline to address this
argument because Bennett failed to raise it in her opening brief,
and thereby denied Artus the opportunity to respond to it. [Fn. 18] 
     E.   The Litigation Legal Fees
          Artus argues in his cross-appeal that it was clear error
to deny his $12,000 quantum meruit claim for services he rendered
representing Bennett in numerous FED lawsuits against her tenants
and in another lawsuit.  The superior court denied this claim.  In
explaining its reasoning, the superior court referred to three
factors, all supported by the record, each of which justifies
denial of this claim.
          First, the court noted that Artus kept no records
establishing the nature, scope, or duration of his legal services,
and that this lack of disclosure prevented both client and court
from determining the reasonableness of the fees per the guidelines
set by Alaska Bar Rule 35(a). [Fn. 19] 
          Second, the court found that Artus failed to establish by
clear and convincing evidence that he was owed $13,900 for services
on miscellaneous matters (including the litigation matters) and
took note of evidence that the FED work "languished" and was in
part incomplete.  Consequently, there was a genuine dispute about
the quality and value of this work, justifying a conclusion that
Artus had not proved the value of the benefit conferred.
          Third, the court referred to evidence justifying a
conclusion that Artus did the FED work gratuitously, as Bennett
argued below and argues on appeal.  She points out that Artus
submitted no evidence that he had expected payment for these
services.  She relies on our opinion in Brady v. State, where we
held that "[i]t is not unjust to retain a benefit given without
expectation of payment." [Fn. 20]  There is ample evidence that
Artus offered his FED legal services gratuitously.  When given the
opportunity to bill Bennett for his services, Artus repeatedly
declined to do so, even though his law firm had billed Bennett for
court costs.  Even on appeal, Artus does not argue that he had
expected to be compensated for these services.  And given the
parties' personal relationship and Artus's testimony that he did
not bill Bennett for legal services because "that's just the way it
worked," the superior court could permissibly conclude that Artus
did not expect to be paid. [Fn. 21]
          It was therefore not error to deny this claim.
IV.  CONCLUSION
          For the reasons discussed above, we AFFIRM the judgment
in all respects. 


                            FOOTNOTES


Footnote 1:

     See City of Hydaburg v. Hydaburg Co-op Ass'n, 858 P.2d 1131,
1135 (Alaska 1993); Alaska R. Civ. P. 52(a).


Footnote 2:

     See Langdon v. Champion, 752 P.2d 999, 1001 (Alaska 1988).


Footnote 3:

     "Courts generally treat actions brought upon theories of
unjust enrichment, quasi-contract, contracts implied in law, and
quantum meruit as essentially the same.  In fact, this
'terminology' is generally employed interchangeably, often within
the same opinion."  Alaska Sales & Serv., Inc. v. Millet, 735 P.2d
743, 746 n.6 (Alaska 1987) (citation omitted), cited in Brady v.
State, 965 P.2d 1, 13 n.38 (Alaska 1998).  But see Fairbanks N.
Star Borough v. Tundra Tours, Inc., 719 P.2d 1020, 1029 n.15
(Alaska 1986) (dictum distinguishing between unjust enrichment and
quantum meruit).


Footnote 4:

     See Beluga Mining Co. v. State, Dep't of Natural Resources,
973 P.2d 570, 579 (Alaska 1999); Alaska Sales & Serv., 735 P.2d at
746.


Footnote 5:

     See Nordin Constr. Co. v. City of Nome, 489 P.2d 455, 465-66
(Alaska 1971).


Footnote 6:

     Artus's involvement in the remodel apparently ended before
1993.  Alaska Rule of Professional Conduct 1.8(a)(3), which took
effect July 15, 1993, provides that "[a] lawyer shall not enter
into a business transaction with a client . . . unless . . . the
client consents in writing thereto."  When Artus entered into the
condominium transactions, DR 5-104(A) of the Code of Professional
Responsibility applied.  It provided that "a lawyer shall not enter
into a business transaction with a client if they have differing
interests therein and if the client expects the lawyer to exercise
his professional judgment therein for the protection of the client,
unless the client has consented after full disclosure."  


Footnote 7:

     The record is inconclusive about the exact amount of Artus's
payments and trade-outs to Janssen.  But the parties accept the
superior court finding that Artus's $39,544.64 contribution
included $13,034.75 in trade-outs with Janssen, and that this
amount directly related to Janssen's challenged bill.


Footnote 8:

     See Nordin Constr. Co., 489 P.2d at 465 (holding that party
seeking recovery upon unjust enrichment theory must prove "the
value to the [recipient] of the performance tendered"); see alsoGeorge v. Custer, 862 P.2d 176, 180-81 (Alaska 1993); Fairbanks N.
Star Borough, 719 P.2d at 1029 n.15 ("In determining the measure of
damages in a claim of unjust enrichment the court focuses upon the
amount of benefit which the defendant received which would be
unjustly retained, and does not necessarily focus on the value of
money, labor, and materials provided by the plaintiff to the
defendant.").


Footnote 9:

     719 P.2d 1020, 1029 (Alaska 1986).


Footnote 10:

     Bennett purchased the condominium for $119,000 in November
1989.  In May 1992, after the remodel was complete, the
Municipality of Anchorage appraised the property at $185,000
(valued as of January 1, 1992), an apparent increase in value of
only $66,000.  The superior court found that Artus contributed
$39,544.64 to the remodel.  But it also noted that a Bennett
exhibit listed her remodel costs as totaling between $110,000 and
$115,000.  Thus, Bennett and Artus together spent between
$149,544.64 and $154,544.65 on the remodel.


Footnote 11:

     See Zerbetz v. Municipality of Anchorage, 856 P.2d 777, 783
(Alaska 1993) (rejecting reliance on tax appraisals to show
diminished value); State v. 45,621 Sq. Ft. of Land, 475 P.2d 553,
557 (Alaska 1970) (holding that tax appraisals are not admissible
to establish fair market value because they are "notoriously
unreliable as a criterion of true value").


Footnote 12:

     See Alaska Sales & Serv., 735 P.2d at 747 (equating
"appreciat[ion]" of benefit with defendant's acknowledgment that
benefit received actually "enhanced the value" of defendant's
property).


Footnote 13:

     See Beluga Mining Co., 973 P.2d at 579.


Footnote 14:

     See Fairbanks N. Star Borough, 719 P.2d at 1029.


Footnote 15:

     Bennett's 1991 financial statement asserted that Artus owed
Bennett $75,000.  This total could plausibly include the alleged
December 1990 $5,000 loan, an undisputed $50,000 loan, and the
alleged May 1991 $20,000 loan.


Footnote 16:

     Alaska Bar Rule 35(c) provides that "[a] contingent fee
agreement will be in writing and will include the disclosure
required under Alaska Rule of Professional Conduct 1.4(c) and state
the method by which the fee is to be determined . . . ."  This
language was in effect during the relevant periods.


Footnote 17:

     907 P.2d 458, 464 (Alaska 1995).


Footnote 18:

     See K.E. v. J.W., 899 P.2d 133, 135 n.2 (Alaska 1995) (holding
appellant's argument waived because it was not raised in opening
brief) (citing Hitt v. J.B. Coghill, Inc., 641 P.2d 211, 213 n.4
(Alaska 1982) (holding that points are waived when argued only in
reply brief and not in opening brief)). 


Footnote 19:

     Alaska Bar Rule 35(a) provides that the reasonableness of an
attorney's fee is affected by factors such as the time and labor
involved, the customary fees for similar services, and the nature
and length of the professional relationship.


Footnote 20:

     965 P.2d 1, 14 (Alaska 1998); see also Sparks v. Gustafson,
750 P.2d 338, 342 (Alaska 1988) ("Courts will allow the defendant
to retain a benefit without compensating plaintiff in several
situations, one of which is relevant to the case at hand: where the
benefit was given gratuitously without expectation of payment.")
(citing Murdock-Bryant Constr. v. Pearson, 703 P.2d 1197, 1203
(Ariz. 1985)).


Footnote 21:

     See Sparks, 750 P.2d at 342-43 (noting relevance of close
personal relationships when evaluating evidence of gratuitousness).