## Facts

- The City of Hastings developed a comprehensive plan that required acquiring an abandoned Missouri Pacific Railroad right-of-way to extend F Street as a major east-west route.
- Duane Stromer served simultaneously as the city attorney for Hastings and as counsel for Jerry Spady Pontiac–Cadillac, Inc. (an auto dealership).
- Stromer attended planning discussions and knew the right-of-way was necessary for the city’s planned street extension.
- While city officials pursued the right-of-way through planning channels, appraisals, and a council-authorized offer, they did not authorize Stromer to negotiate a purchase on the city’s behalf and were unaware of his private negotiations.
- Stromer contacted the railroad regarding purchase of the property and communicated in a manner suggesting uncertainty or absence of city interest, despite his knowledge of the city’s need for the tract.
- Stromer sent the railroad a letter stating he was withdrawing his offer to avoid a conflict after learning the city was interested, but he then directed that the deed be made to Spady and transmitted Spady’s check for the purchase price.
- Missouri Pacific conveyed the right-of-way directly to Spady, with the deed routed through Stromer.
- After learning the property had been placed in Spady’s name through Stromer’s actions, the city sought equitable relief to obtain the right-of-way.

## Issues

1. Whether equity required imposition of a constructive trust in favor of the City of Hastings where its city attorney, while representing a private client, arranged for that client to acquire property the city needed for a public project.
2. Whether Spady could retain title as grantee, or whether it was bound by its attorney’s conflicted conduct and fiduciary breach.

## Decision

- The Nebraska Supreme Court affirmed the district court’s decree imposing a constructive trust.
- The court held that Stromer owed fiduciary duties to the city and breached them by pursuing acquisition for a private client while knowing the city’s plans and need for the property.
- The court concluded that Spady’s acquisition was intertwined with, and attributable to, its attorney’s breach; Spady was not treated as an innocent purchaser.
- The property was required to be held for the benefit of the city and conveyed to the City of Hastings.

## Legal Principles

- A constructive trust may be imposed when a party holds property that, in equity and good conscience, it should not be permitted to retain.
- An attorney owes a duty of loyalty to a client, including avoidance of conflicts of interest and refraining from exploiting client information or position for personal gain or for another client’s benefit.
- Property obtained through an attorney’s breach of fiduciary duty may be subjected to a constructive trust to prevent unjust retention by the attorney’s principal or beneficiary.
- A client or corporate grantee acquiring property through its attorney’s conflicted conduct may be charged with the consequences of that conduct in equity.

## Conclusion

The court upheld a constructive trust requiring transfer of the railroad right-of-way to the City of Hastings because the city attorney’s conflicted actions enabled his private client to acquire property essential to the city’s planned street extension, and equity would not allow the private grantee to retain title obtained through that breach of duty.


City of Hastings v. Jerry Spady Pontiac-Cadillac, Inc., 212 Neb. 137, 322 N.W.2d 369 (Neb. 1982)