Tennessee Business Litigation Lawyers Blog
There are many situations in which Tennessee courts have been able to impose resulting trusts to recover property for aggrieved parties when no other legal avenue was available to help. The law of resulting trusts, to boil it down to the point of over generalization, allows a court “to follow the money” of the party taken advantage of to property purchased with that money, and then to place a resulting trust on the property. Once a resulting trust is imposed on property, a court can provide relief to the injured party by divesting title to the property out of the titled owner and/or vesting it in the aggrieved party.
In an opinion involving a decision of the Davidson County Probate Court, the Court of Appeals of Tennessee declined to allow a resulting trust to be imposed to undo a son’s ownership of an expensive home for which his mother paid almost the entire cost of construction. The opinion provides a helpful analysis of the limitations on a court’s ability to impose a resulting trust to assist a wronged party.
A mother (“Mother”) sold her house in Nashville for a net gain of $395,719. Her son (“Son”) owned a farm in Pegram, Tennessee. Mother moved to the farm and lived with Son in a farmhouse. At the time of Mother’s move, and at all times thereafter, Son was the only owner listed on the deed to the farm. After moving to Son’s farm, Son and Mother signed a construction contract to have a new home constructed on the farm. Both signed the construction contract as owners.
Mother paid $433,064 towards the construction of the new home, while Son paid only about $15,000. When Son re-married and brought his new wife to live in the home, the relationship between Mother and Son began to sour. A lawsuit was brought on behalf of Mother against Son by Mother’s daughter (“Daughter”) using a power of attorney. Mother died during the pendency of the lawsuit and her estate was substituted as the party.
The proof at trial was conflicting as to what interest Mother and Son had agreed that Mother was supposed to have in the home that her funds were used to construct. Some witnesses testified that Mother had expressed that she thought that she did own the home. A witness even testified that Son had expressed that it was his intention to put his Mother on the deed to the farm. Son denied this. Other witnesses testified that Mother intended to make a gift of the home to Son.
The trial judge, Judge Randy Kennedy, found that the proof demonstrated that Mother believed that she was an owner of the home which was to be constructed with her money. The trial judge held that a resulting trust should be imposed on the home and that Son’s right to use the home was divested out of him. The trial judge further held that Mother’s estate be vested with an easement allowing it to use and to occupy the home as well as to have ingress and egress over the farm to the home.
The Court of Appeals acknowledged, though impliedly, that the trial judge had reached a fair result. Nevertheless, it reversed the decision of the trial court. Its rationale? Under Tennessee law, a resulting trust cannot be based on improvements to real estate. (A home is considered an improvement to real estate. Real estate with a structure on it, like a home, is often referred to as “improved real estate”).
The crucial distinction between this case, and other cases in which a resulting trust has been successfully used to provide relief, is that, in this case, Mother’s money was used for an improvement, a home, made after the real estate, the farm, was purchased. If the same amount of Mother’s money had been used to buy real estate with a home already on it, then, under the same facts, the trial judge’s decision would have almost certainly been affirmed.