City of Hastings v. Jerry Spady

In 1977 and 1978, the City of Hastings (Hastings) (plaintiff) sought to purchase an abandoned railroad right of way (Property) owned by the Missouri Pacific Railroad Company (MPRC). The purchase of the Property was a necessary part of Hastings’ comprehensive plan. Duane Stromer, the attorney for Hastings, was also the attorney for Jerry Spady Pontiac-Cadillac, Inc. (Spady) (defendant). Stromer made MPRC a written offer to purchase the Property, but falsely informed MPRC that Hastings was not interested in purchasing the Property. Later that month, Stromer contracted with MPRC to purchase the Property for $10,900. The next day, Stromer informed Hastings’ council that he had acquired the Property and would sell it to Hastings for $20,000. The mayor, after a discussion with Stromer, told the council that Stromer had agreed to withdraw from the contract and allow Hastings to purchase the Property. Stromer said the same in a letter to MPRC. However, in a telephone call to MPRC, Stromer advised MPRC that the deed should be issued to a corporation wholly owned by Spady. Stromer told MPRC that he would send the money after completing a title search. Meanwhile, Hastings had completed appraisals on the Property, expecting to purchase it. A motion to offer $18,000 for the Property passed in the Hastings council. Stromer forwarded a check of $10,900 from Spady to MPRC and requested that the Property be deeded directly to Spady. The Property was so deeded, and the deed was mailed to Stromer. During this time, Hastings never authorized Stromer to negotiate on its behalf, nor did Hastings know that Stromer was making representations about its intentions to others. Hastings brought an action in equity to impress a constructive trust on the Property. The district court found for Hastings and impressed the constructive trust. Spady appealed.