Brown v. BrownBrown v. Brown
Appellant Joseph H. Brown (“Joseph” or “Appellant”) appeals a judgment of the Cireuit Court of Lafayette County, Missouri, imposing a constructive trust on certain Lafayette County real estate in favor of Respondents, John C. Brown and Pamela K. Heitman (“John” and “Pam” or “Respondents”). 1 Appellant raises three points of trial court error. In his first two points, he contends that the trial court erred when it imposed the trust because a constructive trust is only proper if there has been a showing of actual or constructive fraud, and because a showing of unjust enrichment alone is legally insufficient to support the imposition of such a trust. In his third point, he argues that the trial court erred in imposing a constructive trust since Respondents failed to meet their burden of proof at trial to establish facts giving rise to such a trust by clear, cogent, and convincing evidence. We vacate the trial court’s judgment but remand for entry of a new judgment in favor of Respondents.
As in other court-tried matters, this court will affirm the judgment of the trial court “unless there is no substantial evidence to support it, unless it is against the weight of the evidence, unless it erroneously declares the law, or unless it erroneously applies the law.”
Murphy v. Carron,
The subject of the lawsuit is approximately twenty acres of rural real estate, on which a modular home, a cabin (improvements to which had been made by John and Pam), a nine-acre lake, and a single-wide trailer are present. The land, which is located about five miles west of Odessa, Missouri, was originally purchased in February 1966 by Catherine and her husband, Edward Brown. There were four children of the marriage: John, Pam, Joseph, and Carolyn. When Edward Brown died on June 24, 1988, his interest in the real estate devolved to Catherine, who became the sole record title owner of the property. By warranty deed dated June 12, 1989, Catherine granted the land to Catherine and her son John as joint tenants with right of survivorship. This deed was recorded on June 14, 1989, in Book 705, Pages 312-313. On October 16, 1997, Catherine executed another warranty deed transferring title to her remaining interest in the land to Catherine and her daughter Pam as joint tenants with right of survivorship. This deed was recorded on February 12,1998.
John testified that some time in 1999, he and his mother decided that Pam should be properly added as a third joint tenant with right of survivorship. On August 23, 1999, after John had made an appointment for the three of them to confer with a lawyer, they visited the 'Independence, Missouri, law office of Joyce B. Kerber, an attorney, bringing with them a copy of the 1989 and 1997 warranty deeds. Kerber testified that the three asked her to prepare appropriate instruments that would leave the property titled in the names of Catherine, John, and Pam as joint tenants with right of survivorship, and there was similar testimony from John and Pam. According to Kerber, the idea was to “undo the previous warranty deeds and get it all back in Catherine’s name so she could make a deed placing both John and Pam on [the deed] as joint tenants with right of survivorship with her.” Since Catherine was elderly (78 years old) and in failing health, prior to preparing any documents Kerber met with Catherine out of the presence of John and Pam and questioned her closely to confirm her wishes and to ensure that she was competent and not being subjected to undue influence. Neither John nor Pam spoke to Kerber while Catherine was not also present.
After the meeting of August 23, 1999, Kerber prepared three quitclaim deeds. The first was a quitclaim deed conveying John’s interest in the land to Catherine. The second transferred Pam’s interest in the land to Catherine, and the third deeded Catherine’s interest in the land to Catherine, John, and Pam as joint tenants with right of survivorship. Kerber testified that the first two quitclaim deeds were prepared with the intention of clearing up the prior and conflicting warranty deeds executed by Catherine so the property could then properly be conveyed, via the third quitclaim deed, to Catherine, John, and Pam as joint tenants with right of survivorship. Kerber also prepared a will and a durable power of attorney for Catherine.
As misfortune would have it, on November 4, 1999, the Recorder of Deeds recorded the deeds in the reverse order of that intended by Kerber, Catherine, John, and Pam. That is to say, the third quitclaim deed (from Catherine to the three parties jointly) was recorded first, followed by the other two quitclaim deeds (from John to Catherine and from Pam to Catherine) very shortly thereafter. The third quitclaim deed was recorded in Book 867 at Page 1140, while the other two quitclaim deeds were recorded in Book 867 at Pages 1141 and 1142. Unbeknownst to John and Pam, the result of the order of the filing of the deeds was that Catherine held the property in fee simple absolute, leaving them no interest in the property whatsoever.
On April 3, 2002, Catherine granted a durable power of attorney to Joseph and Carolyn. The same day, Catherine executed a beneficiary deed purporting to convey the property, upon her death, to each of her four children (Joseph, Carolyn, John, and Pam) as joint tenants with right of survivorship. This deed was recorded on April 8, 2002, in Book 927 at Pages 872-873. Considered in conjunction with the effect of the prior quitclaim deeds (including the order in which they were recorded), this would have left John and Pam with one-fourth interests in the property on Catherine’s death, rather than one-half interests (assuming, of course, they survived Catherine).
Shortly thereafter, John and Pam discovered what had happened. When Catherine subsequently refused to rectify the mistake by altering or revoking the beneficiary deed, their relationship with her deteriorated. On June 12, 2002, John and Pam filed the present action, seeking a variety of equitable relief, including the imposition of a constructive trust and the cancellation of the beneficiary deed, to rectify the mistake made by Kerber and/or the Lafayette County Recorder of Deeds.
A one-day trial took place on September 26, 2003. On October 24, 2003, the trial court issued its judgment, in which it found, “by clear, cogent, and convincing evidence,” that “the agreement, intent, and purpose of all the parties in the execution of’ the first, second, and third quitclaim deeds “was to ultimately place title in said real estate in Catherine Brown, John Brown and Pam K. Heitman, as joint tenants with right of survivorship.” The court further found that the quitclaim deeds were recorded in the wrong sequence “through no fault of the parties” and, as a result of this mistake, Catherine “was left as sole owner of said real estate, contrary to the intention of the parties.” After noting that the beneficiary deed of April 3, 2002 “would result in Plaintiffs having less ownership than as set forth” in the third quitclaim deed dated September
Appellant advances three points relied on, which we will address out of their original order. Before we do, though, we offer the following observations regarding constructive trusts.
Technically, constructive trusts are not trusts at all, but equitable devices employed by courts of equity.
Schultz v. Schultz,
Thus a court of equity may impose or declare a constructive trust to provide a remedy in cases where one who “ ‘has acquired property under such circumstances as make it inequitable for him to retain it’ ” by making him or her a trustee for the person or persons injured thereby.
Schultz,
Turning now to Appellant’s points on appeal, we first address his second point, in which he claims the trial court erred in imposing a constructive trust since a showing of unjust enrichment alone is legally insufficient to support the imposition of such a trust. In particular, he asserts that “[d]espite confusion in the case law, unjust enrichment of one party, absent a showing of actual or constructive fraud, is insufficient to invoke a constructive trust.” We disagree.
“ ‘Unjust enrichment of a person occurs when he has and retains money or benefits which in justice and equity belong to another.’ ”
Straube v. Bowling Green Gas Co.,
the object and purpose of a court of equity in imposing a constructive trust is ‘to restore to plaintiff property of which he has been unjustly deprived and to take from the defendant property the retention of which by him would result in a corresponding unjust enrichment of the defendant; in other words the effect is to prevent a loss to the plaintiff and a corresponding gain to the defendant, and to put each of them in [the] position in which he was before the defendant acquired the property.’
Suhre v. Busch,
In his Point I, Appellant contends the trial court erred in imposing a constructive trust since a constructive trust is only proper if there has been a showing of actual or constructive fraud, a breach of a confidential or fiduciary relationship, undue influence, or some other form of wrongful or tortious conduct by the defendant. “Without a showing of actual or constructive fraud,” he argues, the trial court “lacked equitable powers to impose a constructive trust.”
Again, we disagree. While it is certainly true that a constructive trust may arise in such cases, it is not true that a constructive trust may arise
only
under those circumstances. For example, as noted by our Supreme Court in
Estate of Bean v. Hazel,
In particular, “where the retention of the property would result in the unjust enrichment of the person retaining it,” a constructive trust arises “even though the acquisition of the property was not wrongful.” Scott & Fratcher,
supra,
§ 462.2 at 314. In
Cole v. Morris,
Thus contrary to Appellant’s argument, it is not necessary that the unjustly enriched party be found to have engaged in legal wrongdoing or have had wrongful or malicious intent. Rather, the touchstone for imposition of a constructive trust is injustice or unfairness, which may take the form or be the product of fraud (actual or constructive), abuse of a fiduciary or confidential relationship, undue influence, or unjust enrichment. This is entirely consistent with not only the express holdings in the cases we have just discussed, but also other Missouri Supreme Court precedent indicating that the constructive trust is a fluid, flexible device which may be employed to remedy many different types of injustice. As the Court observed more than forty years ago, “in decreeing or refusing to decree a constructive trust the court is not bound by an unyielding formula. The equities of the situation must shape the measure of the relief, if any.”
Durwood v. Dubinsky,
In further support of his first point, Appellant also argues that mistake is insufficient to justify the imposition of a constructive trust inasmuch as it is “axiomatic that mistake does not constitute fraud.” Appellant is incorrect, as “a constructive trust arises where the title to property is acquired through a mistake[.]” Scott & FRAtcheR, supra, § 462.2 at 314-15. “Just as transfers based on misrepresentation are subject to attack and avoidance by the wronged party, so equity regards many types of mistake as grounds for setting aside conveyances and restoring the property to the grantor. One method of accomplishing such restoration is that of declaring the grantee who has obtained his title under a mistake to be a constructive trustee for the grantor.” George Gleason Bogert & George Tayloh Bogert, The Law of Trusts and Trustees § 474 at 93 (rev.2d ed. (1978)) (emphasis in original). That is to say, “where property is conveyed by mistake, the grantee is chargeable as a constructive trustee and can be compelled to reconvey the property,” Scott & FratcheR, supra, § 466 at 343, since the grantee’s “[rjetention of the property after discovery of the mistake would be unconscionable.” Bogert, supra, § 474 at 94.
Missouri law is in accord with the views of the authors of these two respected treatises, which have been described by our Supreme Court as “the most eminent of authorities” on the subject of trusts.
Cohn,
Thus, contrary to Appellant’s assertions, mistake is a sufficient ground for the imposition and enforcement of a constructive trust. We readily acknowledge the existence of substantial Missouri authority suggesting a contrary result. For example, in the early case of
Ferguson v. Robinson,
And so it is here. As observed
supra,
the trial court found that Catherine accidentally received an undivided fee simple interest in the property as a result of a mistake made by attorney Kerber and/or the Lafayette County Recorder of Deeds. At the moment she received all Respondents’ interest in the property and thereby began enjoying an undivided ownership interest in real estate that was not intended to become hers alone, Catherine became subject to a duty to hold the real estate in constructive trust for John and Pam, the equitable co-owners of the property, even though Catherine’s acquisition of their ownership interests was not wrongful in and of itself. When Catherine subsequently executed the beneficiary deed, she breached the constructive trust, unjustly depriving John and Pam of a significant portion of their vested present and future interest in the property and unjustly enriching herself in the process. As equity requires that the mistake be remedied by
In his third and final point, Appellant argues the trial court erred in imposing a constructive trust since the judgment was" against the weight of the evidence and Respondents failed to meet their burden of proof at trial to establish facts giving rise to such a trust by clear, cogent, and convincing evidence. In particular, he claims they “failed to show, by clear and convincing evidence, that the deeds were prepared incorrectly” since there was evidence that it was Catherine’s intent that the deeds be recorded in the order they were. Once again, we disagree.
As correctly noted by Appellant in his brief, the party seeking the imposition and enforcement of a constructive trust has the burden of establishing the facts that give rise to such a trust.
Aronson v. Spitcaufsky,
As our Supreme Court has put it, in cases where the clear, cogent, and convincing evidence standard applies, “the court should be
clearly convinced
of the affirmative of the proposition to be proved.”
Grissum v. Reesman,
Appellant points to Catherine’s testimony that she visited Kerber’s law office only to discuss the preparation of a will, not deeds to the property, and that the three quitclaim deeds were recorded in proper order, thereby effectuating her express intent that she become the sole owner of the property so that all four of her children could share it equally upon her death if she still owned it at that time.
As noted in the factual summary provided supra, however, there was a wealth of evidence to the contrary. In particular, the sole witness with no particular axe to grind, attorney Kerber, testified that Catherine knew exactly what she was doing and clearly requested that she prepare new quitclaim deeds which, when executed and recorded in the proper order, would leave the property jointly titled in the names of Catherine, John, and Pam. Moreover, if Catherine’s true intent was merely to ensure that she regained an undivided fee simple interest in the property, the third quitclaim deed would have been entirely unnecessary, as she would have received such an interest by operation of law upon execution of the first and second quitclaim deeds by John and Pam.
At best, the evidence before the trial court was merely conflicting. The trial court was the sole judge of Catherine’s demeanor and credibility, and based on the record before us, could have been completely, clearly, and fully convinced, despite Catherine’s subsequent denials and claimed failure to remember, that the true intent of the parties was, beyond any reasonable doubt, to vest title in the subject real estate in Catherine, John, and Pam as tenants in common with rights of survivor-ship, rather than in Catherine alone in fee simple.
See Estate of Dawes,
Although the trial court’s legal reasoning was entirely sound, its original judgment must be vacated due to the death of Catherine after the judgment became final but before the cause was submitted on appeal. Thus, the only issue remaining before us is the proper disposition of this case on remand.
Since “equity will compel one who has unfairly acquired and holds a property interest to convey that interest to the one to whom it justly belongs,”
Durwood,
Where property is held by one person upon a constructive trust for another, the latter has the beneficial interest therein. In many cases the beneficiary of the constructive trust can by a proceeding in equity compel the constructive trustee to transfer the property to him in specie; he is entitled to specific enforcement of the constructive trust. This is true, for example, where the title to land or unique chattels is obtained by mistake or fraud.
Restatement (FiRSt) of Restitution § 160 cmt. e at 644 (1937).
See also
BogeRt,
Other forms of relief are, however, possible. For instance, the court “may by its own decree revest title in the complainant if it has such power.” BogeRT,
supra,
§ 472 at 63.
See, e.g., Parker,
On remand, we leave it to the sound discretion of the trial court to decide which of these forms of relief (or combination thereof) are appropriate. Therefore, we vacate the trial court’s judgment of October 24, 2003, and remand the cause to the trial court for its entry of a new judgment, not inconsistent with this opinion, which reflects the subsequent death of Catherine Brown.
All concur.
Notes
. This action was originally brought by John and Pam against Catherine M. Brown ("Catherine"), Joseph, and Carolyn M. Clark ("Carolyn"). On August 20, 2002, Joseph and Carolyn were dismissed as defendants, leaving Catherine as the only remaining defendant. Catherine died testate on October 1, 2004, well after the judgment against her had become final and her notice of appeal had been filed but before oral argument in this court. On December 7, 2004, pursuant to motion under Rule 52.13(a)(1), this court issued an order substituting Joseph, an heir of Catherine and a successor in interest to her property, as Appellant in the cause.
See Adams v. Mason,
.
We are fully aware that the ultimate facts and circumstances of this case might also have justified the imposition, by the trial court, of a resulting trust. Like a constructive trust, a resulting trust is a species of implied trust because they both arise by implication of law out of the particular circumstances of the case.
Norton v. Norton,