Arkansas Court of Appeals Provides Guidance on Finding of Resulting Trust

Case: Reichert v. Colwell, 2020 Ark. App. 466

Trial Court: Izard County Circuit Court (Judge Holly L. Meyer)

Issue: When are the requirements of a resulting trust met?

Holding: Where evidence demonstrates that only one of two grantees listed in deed contributed to purchase of property, co-grantee was listed only to provide grantors with peace of mind, and grantors and party asserting true ownership took steps shortly after execution of first deed to provide him with sole title, a court may find a resulting trust.

Summary:

William Colwell was given up for adoption after being born to a woman named Betty. Betty later married Brent Morris, with whom she had a daughter, Lillian Morris Reichert. Later in life (the mid-1990s), William reconnected with his birth mother and got to know her husband and his (half-)sister Lillian.

In 1998, William agreed to buy Betty and Brent’s home for $60,000. The record reflects that he paid $60,000 and, thereafter, the Morrises executed a warranty deed in favor of William and Lillian. William testified that his sister was listed as a grantee only to assuage his biological mother and stepfather’s fears that conveying the house to him only might leave them vulnerable to him selling the house from under them. He also testified that his and Lillian’s relationship went south after this conveyance and that the Morrises therefore executed a new deed conveying the property only to him but retaining a life estate. This second deed was filed in 1999. Betty died in 2009.

In 2018, William began working to get his affairs in order and discovered that the 1999 deed was invalid. Thereafter, he contacted Brent to try to get things sorted out. Though Brent was inclined to fix the issue, Lillian refused to cooperate:

William contacted Brent once again. Upon learning that the 1999 deed was invalid, Brent contacted an attorney to have the deficiencies corrected. Lillian was present when Brent met with the attorney. As a result of their discussions, the attorney prepared two deeds. The first deed transferred Lillian's interest in the property to William and removed Lillian's name from the deed. The second deed granted a life estate in the property to Brent. Lillian refused to sign the deed transferring the property to William.

Opinion at 5. The matter proceeded to litigation, where the siblings offered dueling versions of events to the trial court:

William asserts that Lillian was included on the 1998 deed solely as a placeholder for Brent and Betty's life-estate interest. He further claims that Lillian did not provide any of the money used to purchase the property, that she did not have a beneficial interest in the property despite her name being on the deed, and that she had agreed to convey her interest to him but ultimately refused to do so.

Lillian's version of events was quite different. While Lillian admits that William paid the $60,000 purchase price for the property initially, she claims that she subsequently gave William $30,000 in cash for her half of the property. She testified that her fiancé at the time, who was a gambler and a businessman with access to large sums of cash, retrieved $30,000 from a hotel-room safe, converted the funds into $100 bills, and placed it in a briefcase, which she handed the over to William at a gas station in Houston, Texas. Thus,  she claims the evidence shows that she jointly purchased the property with William, subject to a life estate in favor of Betty and Brent. Upon cross-examination, however, she admitted that she had no physical proof of any such payment.

Id. at 5-6. The circuit court sided with William and found that a resulting trust existed. What’s a resulting trust, you ask?

A resulting trust is an implied trust; it arises by operation of law, not out of an express agreement, but out of the circumstances surrounding the transaction, indicating that the beneficial interest is not to go with the legal title. Henslee v. Kennedy, 262 Ark. 198, 202-03, 555 S.W.2d 937, 938-39 (1977) (citing Harbour v. Harbour, 207 Ark. 551, 181 S.W.2d 805 (1944)); see also Darsow v. Landreth, 236 Ark. 189, 365 S.W.2d 136 (1963). A resulting trust is presumed to arise in favor of one who pays or secures the purchase price for land when the deed is taken in the name of another. Id. In general, a trial court must find a resulting trust proved by clear and convincing evidence. Edwards v. Edwards, 311 Ark. 339, 843 S.W.2d 846 (1992).

Id. at 3. In essence, the existence of a resulting trust means that even though Lillian’s name is on the deed, she does not have an ownership interest that is useful in any real way. For instance, if it is sold, she is not entitled to any of the proceeds.

On appeal, the Court of Appeals noted that

the circuit court was presented with undisputed evidence from both William and Lillian that the parties intended for Brent and Betty to have a life estate in the property. Despite this undisputed intent, the 1998 deed did not delineate or effectuate this intent. However, just one year later, Brent and Betty seemingly attempted to rectify this situation and executed a deed retaining a life estate and attempting to transfer the property solely to William. The circuit court found that the actions of Brent and Betty in executing the 1999 deed were significant. The court found that the 1999 deed was an  apparent attempt to clarify the parties' ownership interest in the property and supported William's claim that the only purpose of the 1998 deed was to transfer the ownership of the property to himself and that Lillian was merely a placeholder for Brent and Betty's life-estate interest. Likewise, the circuit court found that Brent's actions in 2018 to place the property solely in William's name and reserving a life estate were significant and corroborated a resulting trust.

Id. at 6-7.

The appellate court agreed with circuit court’s conclusions, rejected all of Lillian’s arguments in opposition, and affirmed.

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