1 The Co urt of A ppe als may affi rm a judgment on diff erent grounds t

han thos e reli ed on by the tri al court when the tria l court reach ed the corre ct result. Co ntine ntal C as. C o. v. S mith , 720 S.W .2d 4 8, 50 (Te nn. 19 86) ; Allen v. Nati onal Ban k of New port , 839 S.W .2d 7 63, 7 65 ( Te nn. Ct. A pp. 1 992 ); Clark v. Met ropoli tan Gov’t , 827 S. W.2d 312, 317 (T enn. Ct. App. 1991).



### IN THE COURT OF APPEALS OF TENNESSEE

AT NASHVILLE Septem ber 2, 1999 Session
JAMES D. LECKRONE v. JAMES D. WALKE R, ET AL 

### . Appeal from the Chancery Court for Davidson County No. 96-3056-III Ellen Hobbs Lyle, Chancellor

No. M1998-00974-COA-R3-CV - Filed April 30, 2002

This appeal a

rises fr om a disp ute over the proc eeds fr om the sale

of a Flor ida condominium unit once o wned by

a Tenne ssee par

tnership but titled in the name

of two of i

ts partne rs. When th e successor to the partnership’s interest in the unit undertook to sell it, one of the o wners of re cord agreed to sign the deed only

if t he proceeds were

placed in escrow

while the parties a ttempted t

o resolve his claim to one-half of the funds. When the parties failed to agree on a distribution of the procee ds, the escr

ow holder filed an interple ader action in

the Chancery

Court for Da vi ds on Co un ty. Following a bench trial, thetrial court awarded the escrowed pr oceeds to the partnership’s successor after determining that the owner of record w as estopped to invoke the statute of frauds to defeat the su ccessor’s clai m. We have determined that the trial court reached the correct result because the owner of record no lon ger possessed a beneficial interest in the unit. Accordingly , we affirm the judgmen t. 1 Tenn. R. App. P. 3 Appeal as of Right; Judgment of the Chancery Court Affirmed
W IL LI AM C. K OCH , J R ., J., delive red the o pinion of t

he court , in which B EN H. C ANT RELL , P.J., M.S., and W IL LI AM B. C AIN , J., joined. John R. Jacobson, Nashville, Tennessee, for the appellant, James D. Walker.
W. Lee Corbett a nd David F . Lewis, Nashville, Ten nessee, for the a

ppellee , Prism Par

tners, L .P.
OPINION
I.
James D. Walker

is a self- employ

ed employ

ee bene fits consu ltant. So metime i n the late 19 70s, he struck up a friendship with Lar ry Cherry who held himself out as a certified finan cia l planner . Messrs. Walker andCherry bec ame fast friends, and by the early 1980s, Mr . Walker had2 Mr. Che rry arra nged the financ ing and saw to it tha t neither h e nor M r. W alker sig ned a note or deed of trust.
3 Money Manage ment Investment I exec uted tw o pr omiss ory no tes as p art of this tran saction

. The fi rst note for $123,891. 70 to Mone y Managem ent Mortgage Acco unt was for t he unpaid pur cha se price of the condominium. The second note for$23,900 to Don Crace was f or the bal ance of t

he funds used to pur chase t he condominiu m’s f

urnit ure. -2- become one of Mr. Cherry ’s clients. According to Mr. Walker, he ga ve Mr. Cherry

virtually free re ig n t o m an ag e h is as se ts wi th es se nt ia ll y no su pe rv is io n o r a cc ou nt ab il it y.
In 1984, Mr. Cherry

invited Mr . Walker to

accompany

him to Panama City, Florida to inspect a condominium unit at the Dunes of Panama that one of Mr. Cherry ’s clients was considering as an investmen

t. After listening to the sale s pitch, Me ssrs. Cher ry and Walke

r decided to purch ase a uni t for themselves. Later in 1984, they made a ten percent down pay ment on a $137,00 0 unit

that was under construction. I

n April 198 5, Messrs . Cherry and Walke

r closed on their u nit and ha d the title placed in their names as joint tenants. Several day s after the closing they purchased

furnishings for the condominium. The funds used for the down pay ment, the purchase, and the f urnishing s came from Money Management I

II , a “loose investment pool” containing funds entrusted to Mr. Cherry by othe r cli ents, and

from one of Mr. Che

rry ’s other

clients. 2 There is little disagreement that the condominium was, in Mr. Cherry’s w ords, “highly leveraged.”
In 1986, when the rental income from the condominium did not mee t expecta tio ns, Mr. Cherry suggested to Mr. Walker that they should “putthe condominium into” an existing partnership calledMoney Management Investment I . Mr. Cherry’ s purpose was to spread the risk of the condo minium investment and to provide a tax shelter for two of the other partners in Money Management

Investment I . Mr. Walker agreed with Mr. Cherry ’s proposal, but neither Mr. Cherry nor M r. Wa lk er ex ec ut ed a d ee d c on ve yin g t he co nd om in iu m u ni t t o M on ey M anagement Investmen t I. In return

for tran sferring his inte

rest in the unit to Money Manag ement Investment I , Mr. Walker receive d: (1) a twenty per cent interest in the Money Management I

nvestment I partnership, (2) a check for the costs he had incurred in connection with the condominium, and (3) Money Manag ement I

nvestmen t I’sassumption

of the re maining condomini

um-rela ted debts

. 3
Mr. Walker ne

ver ag ain trea

ted the c ondominium

as if it belonged

to him personally. Money Management

Investment I

took o ver man agi ng the property , paid the operating expenses, and coll ected the r ental income. While Mr. Walker included his interest in the Money Management Investment

I partnership as an a sset on his financial statements, he did not include the condominium unit itself asan asset . At the sa me time, he received periodic statements from Money Management Inve stm ent

I and copies of the par tnership’s tax returns in which the condominium unit was identifiedas a partnership asset. Mr. Walker never questioned these documents, and, when he or his family used the c ondominium , he paid rent to Mr. Cherry who was managing

Money Management Inve stment I ’s affa

irs.4 Th is court l ater determined t hat t he amount of

punit ive damages awarded by the tri al court was inadequate and increa sed the judg men t against M r. Che rry to $ 150 ,000

. Pridem ore v. Ch erry , 903 S. W.2d 705, 709 (Tenn. Ct. App. 1995). Mr. Cherry later fi led an unsuccessfulmalpractice acti on against the l awyers who represent ed him in that pro ceed ing. Che rr

y v . W il li ams , 36 S.W .3d 78 (T enn. Ct. App. 2000).
5 The general partner of Pris m Partners, L.P. is Pris m M anage men t, Inc., a corp oration ow ned by M essrs. Che rry’s and W alker’s c ertified p ublic a cco untant. -3- Mr. Cherry’s f

inancial house o f cards beg an to cru mble in 199 3 when one

of his clie

nts obtained a $75,000

judgmen t again st him. 4 In an effort to shield his assets, Mr. Cherry decided to shiftthe ownership of

th e co ndo mi ni um uni t. Acc ord in gly, in Mar ch 1 993 Mon ey Ma nag eme nt III purchas ed th e unit from Money Mana gement Investment I

for $110,000 in cash. Just as in 1986, there is n o written contract or deed of convey ance to memorialize this transaction. M one y Management

II I, ap parentl ywith Mr. Cherry’s a ssistance, continued to manage the Dunes condom in ium propert

y. I n Octobe r 1995, Mo ney

Manag ement I

II was “fo rmalized”into Prism Partner s, L.P., a limited partnership ma de up of fifteen of the individual investors who had con tri but ed f

und s t o Mo ney M ana gem ent III. 5 Shortly after its creation, Prism Partners entered into a cont r act to sell the Dunes condominium to a third party for $133,000. When it was discove red that the title to the property wa s still the Messrs. Cherry ’s andWalker’snames, Prism Partners asked them to execute the necessary deeds to accomplish the sale. Mr. Walker declined because Prism Partners would not agree to share the proceeds of the sale with him. However, beca use the buyer insisted that the sale be completed before the end

of 1995, Mr. Walker agreed to sign the deed andto permit the sale to be completed in return for Prism Partners’s agree ment to place the proc eeds o f the sale in escrow pending the resolution of their

disagr eement.
On December 29, 1995, Prism Partners placed ap proximately $121,660 with James D. Leckrone. Later, approximately $1,395 in reimbursedFlorida property tax payments was added to the origina

l amount. When it bec ameevident that Prism Partners and Mr. Walker would not agree on the disposition of the funds, Mr. Leckrone filed a n interpleader action in theChancery Court for Davidson County, tendering $125,001.77 to the court for disposition. Mr. Walker insisted that he was entitled t

o one-half of the f

unds bec ause he o wned an u ndivided one-half

interest in the pro perty when it was sold in 1995. He also asserted that the statute of frauds [Tenn. Code Ann. § 29-2- 101(a)(4) (2000)] preven ted Pri sm Partners from introducing evidence to contradict his record ownersh ip of the property

. Following a bench trial, the trial court deter mined that Mr. Walker was estoppedfrom raising the statute of frauds and awa rded the interpleaded fun ds to Prism Partn ers. Mr. Walker has perfected this appeal.
II.
Mr. Wal ker’s sole argument here is that the trial c ourt erred by invoking the principle o f estoppel to prevent him from using the statute of frauds to re buff Prism Partners’s claim to the escrowed proceeds from the sale of the condominium unit. This argument, even if well-t aken, will notcarry the day for

Mr. Walker because the statute of frauds cann ot be used to defea t a6 Te nnesse e’s versi on of th e Uniform Partnershi p Act of 1914, Tenn. Code Ann. §§ 61-1-101, - 142 (1989), was

repealed effecti ve January 1, 2002 by the Tennessee G eneral Assembly’s enactment of the Uniform Partnershi p Act of 1997. Act o f Ma y 29, 2 001 , ch. 35 3, 20 01 T enn. P ub. A cts 775 (codifi ed at Tenn. Code Ann. §§ 61-1- 101, - 1208 (Supp. 2001)). Tenn. Code Ann. § 61-1- 204(a)( 1) (Sup p. 20 01) states that p rop erty is partne rship p rop erty if it is acqu ired in the part nershi p’s name.
7 The Tennessee Supreme Co urt has characteri zed the partnership’s interest as a “secret t

rust in favor of the partner ship. ” Kil lebrew v. Ray , 181 Tenn. 33 3, 339, 181 S .W.2d 334, 337 (1944).

8 Tenn. Code Ann. § 61-1-204(d) ( Supp. 2001) states tha t “[p] ropert y acqu ire d in t

he name of one (1) or more of the pa rtners, with out an indica tion in the instrume nt transfer ring title to the pro perty o f the per son’s capa city a s a part ner or

of the exi stence of a pa rtnersh ip and withou t use of p artners hip ass ets, is pres ume d to b e sep arate p rop erty, even if used fo r partn ership purp oses.” Th e effect o f this pro vision is to create a rebuttable presumpti on that only t he use of t he property , not t

he property its elf, was contrib uted to the part ners hip. Unif orm Partners hip Act

(1997) § 204 cmt. 3 , 6 [P art I] U .L.A. 9 8 (2 001 ) (“U niform Par tnership Act (1 997 )”).

9 The courts must cons ider other matters when the rights o f third pa rties will be affected by a decisi on regarding the ow nership of pro perty. See Tenn. Cod e Ann. § 61-1-302(b) (Sup p. 2001). -4- partnership’s claim that one or more of its partners are holding legal title to pr operty for the partnership’s benefit

. Th is case stands or falls on the strength of the evidenc e regarding the beneficial ownership of the condominium unit after 1986.
A.
Partner ship property include s all the property or iginally broug

htinto the pa

rtnersh ip as well as any propert y subsequently acquired for the partnership. Tenn. Code Ann. § 61-1-107(a) (1989). Real property owned by a

partnership may

be held e ither in the partnership’s name, Tenn. Code Ann. § 61-1-107(c); 6 Brown v. B rown , 45 Tenn. App. 78, 97, 320 S.W.2d 721, 7 29 (1958) , or in the name of one or more of the partners. In re Magnani , 223 B.R. 177, 182 (Bankr. N.D. Iowa 1997); Mathews v. Wosek, 205 N.W.2d

813, 817 (Mich. Ct. App. 1973 ); Grissum v. Reesman , 505 S.W.2d 81, 87 (Mo. 1974); State v. King , 460 N.E.2d 1143, 1145-46 (O hi o C t. Ap p. 19 83 ). Ac co rd in gl y, the record title of a piece of propert y do es not nec essarily

reveal whether the prope rty belongs to the owners of record or to a partnership of which the owners of record are members. Hun t & Co. v. Benson , 21 Tenn. ( 2 Hum.) 45 9, 460-61 (1841); see also Wilen v. W

ilen , 486 A.2d 775, 783 (Md. Ct. Spec. App . 1985); Foust v. O ld Am. Coun ty Mut. Fire Ins. Co. , 977 S.W.2d 783, 786 (Tex. App. 1998). 7 At most, it gives rise to a rebuttable presumption that the property is owned by the owners of record. In re Per

ry’s Esta te , 192 P.2d 532, 536 (Mont. 1948). 8
At least among the partne rs themselves, determining whether property belongs to the partner ship or to one or more of the partners in their individual capacities depends on the partners’ intentions and unde

rstandings. 9 Boyers v. Elliott , 26 Tenn. (7 Hum.) 204, 207 (1846) (deciding the status of property using

documents and evidence to determine the int en t of the pa

rties); Young v. Cooper , 30 Tenn. App. 55, 67, 203 S.W.2d 376, 3 82 (1947) ; Jenkins v. Harris , 19 Tenn. App. 113,10 See also N orris v. N orris , No. 03A01- 9403-CH-00101, 1 99 4 WL 529405, at *7 (Tenn . Ct . App. Sept. 15, 1994) (No T enn. R. Ap p. P . 11 a pplic ation filed ); First Nat’l Bank v. Tennessee Consol. Coal Co. , No . 0 1A01 -9 208 -C V00326, 1993 W L 2412 89, at *3 (Tenn. Ct. App. July 2, 1993) (No T enn. R. App. P. 11 app licati on filed); Uniform Partn ersh ip Act

(1997) § 204, cmt. 3.
11 A resulting tru st is a judg e-mad e vehic le that ena bles the cour ts to reac h an inte rest in pro perty b elong ing to
one perso n but titled in ano ther. We lls v. We lls , 556 S.W.2d 769, 771 (Tenn. Ct. App. 1977). Its princi pal purp ose is to prev ent unj ust enric hme nt. Green v. Hooton , 624 S.W .2d 898, 902 (Tenn. Ct. App . 1981 ). The co urts will impose
a res ult ing tru st when apers on acqui res a le gal est ate in pr opert y un de r circumstances indica tin g that the benef

icia l interest in the pr ope rty doe s not ac com pan y the title. W illiam H . Inma n, Gibson’sSuit s In C h ance ry § 382 (7th ed. 198 8). In other wo rds, a resulting trust arises when “one person becomes invested with a l egal tit le but is obliga ted in equ ity to hold hi s lega l ti tle for the benefi t of an other. ” In re Esta te of N icho ls , 856 S.W .2d 3 97, 4 01 ( Te nn. 19 93)

.
-5- 121, 83 S.W.2d 562, 566-67 (1935). 10 Using partnership funds to purchase the proper ty is not the only basis upon which these decisions are made. In re Fair Oaks, Ltd. , 168 B.R. 397, 402 (B.A.P. 9thCir. 1994) ; King v. Evans , 791 S.W.2d 531, 533 (Tex. App. 1990). The courts regularly derive the partn ers’ i ntent ions and un derst andin gs by c onsidering: (1) the part ies’ stat ements, conduct, and writi ngs when the property w as acquired, (2) the parties’ course of conduct

after the acquisition of the property, (3)the use of the property in the pa

rtnership business, (4) the terms of thepartnership agree ment, (5) the listing of the property as an asset on the partnership books and tax re turns, (6) the attribution of profits or losse s from th e proper ty to the part nership, and (7) t

he use of partnership funds to maintain the property. Davis v. Loring , No. 01A01-9004-CV-00149, 1991 WL 32311, at *2 (Tenn . Ct. App. M ar. 13 , 1991 ) (No Te nn. R . App. P. 11 appli catio n file d) (qu otin g In re Fulton , 43 B.R. 273, 275 (Bankr. M.D. Tenn. 1984)) (der iving the parties ’ intention fr om the facts and circumstances surrounding the purchase and the part ies' conduct af

ter the purchase); see also In re Sealy Bros. , 158 B.R. 801, 804 (Bankr. W.D. Mo . 1993); Stand ring v. Standring , 794 P.2d 1089, 1091 (Colo. Ct. App. 19 90); Crowe v. Sm ith , 603 So. 2d 301, 305 (Miss. 1992); Thomas v. Lloyd , 17 S.W.3d 177 , 183 (Mo. Ct. App. 20 00); Lutz v. Schmillen , 899 P.2d 861, 864 (Wyo. 1995).
Individualpartners have a fi du ci ar y relationship with the other partners and with the partner ship itself. Cude v. Couch , 588 S.W.2d 5 54, 555 (Tenn. 1979 ); Killebrew v. Ray , 181 Tenn. at 337, 181 S.W.2d at 33 6. Thus, when prop erty is acquired for par

tnership purposesbut is held

in the name of

one or more o f the par

tners, equity

recognizes the e

xistence o f a resulting tru st 11 for the benefit of the partnership. B oyers v. Elliott , 26 Tenn. (7 Hum.) a t 208 (hold

ing that the prope

rty becomes , in equity , the prop erty of the pa rtnersh ip even though one partner retains legal title); see also In re Urban Dev. C o. &Assocs. , 452 F. Su pp. 902, 9 05 (D. Md. 1978); Omohundro v. Matthews , 341 S.W.2d 401, 405 (Tex. 1960). Resulting trusts may be established using parol evidence. Hunt v. Hunt , 169 Tenn. 1, 9, 80 S.W.2d 666, 669 ( 1935); Hoffner v. Hoffner , 32 Tenn. App. 98, 103, 221 S.W.2d 907, 909 (1949). Thus, neither

the lack of

a written convey ance nor the statute of frauds will defeat a partnership’s claim that one or more of

its partners is holding legal title to property for the partnership’s benefit

. King v. Evans , 791 S.W.2d at 532 (lack of a wr itten con vey ance); Davis v. Sheerin , 754 S.W.2d 375, 386 (Tex. App. 1988) (statute of frauds).-6- B.
We now apply

these pr inciples t o the evidence of the acquisition, ownership, and use of the Dunes condominium unit. In examining evidence, we must be mindful that deter mining whether propert y being held in the name of one or more of the pa rtners is partnership property is a question of fact. In reWingo , 89 B.R. 5 4, 57 (B. A.P. 9th Cir. 198 8); Mathews v. Wosek, 205 N.W.2d at 817. However, because the partnership’s cla im hinges on the imposition of a resulting trust, the partner ship must prove

its claim by more than a pr

eponderance of the evidence

. Browder v. Hite , 602 S.W.2d 489, 493 (Tenn. Ct. App. 1980). To warr ant the imp osition of a

resulting trust, the party seeking to impose th

e trust on a leg al intere st in prope rty must establish the grounds for the trust by clear and convincing evidence. In re Esta te of Nicho ls , 856 S.W.2d a t 401; In re Esta te of W

ardell , 674 S.W.2d 293, 295 (Tenn. Ct. App. 1983).
Becau se the heightened

burden of proof required to impose a resulting trust differs from the customary

burden o f proof in civil c ases, w e must adapt the customary standard in Tenn. R. App. P. 13(d) for reviewing

findings of fact. I

n cases requiring proof by clear and convincing evidence , we will first review the trial court’s findings of fa ct de novo i n accor

dance with Tenn. R . App. P. 13(d). Thus, each of the trial court’s findings of fact will be presumed to be c orrect unless the evidencepreponderates otherwise. Then, we will deter mine whether the facts, either as found by the trial court or as supported by the preponde

ranceof the ev

idence, clearly

and convincingl

y e stablish the grounds for imposing a resulting trust on an interest in property

. See Ray v. Ray , No. M2000- 00895-COA-R3-CV, 2001 WL 1173266, at *6 (Tenn. Ct. App. Oct. 5, 2001) (Tenn. R. App. P. 11 application pending ); In re L. S.W. , ___ S.W.3d ___, ___, 2001 WL 1013079, at *5 (Tenn. Ct. App. 2001) (both applying

the hybrid, two-step standa rd of review to an issue requiring proof by cle ar and convincing evidence).
There can be n o dispute t

hat Messr s. Cherry and Walker purchased the Dunes condominium unit in 1995 with

the inten tion to hold

it as tena nts in common for the

useof their families and for their own financial gain. However, the evidence shows clearly a nd convincingly

that in early 1986, Messrs. Cherry and

Walker tr

ansfer red bene ficial ownership o f the unit to the Money Management Investment

I partnership. I

n return, they

receiv ed (1) a

twenty percen t interes t in the partnership, (2) relief from possible future liability for the money borrowed to purch ase and f urnish the unit, and (3) a cash payme

nt to reimburse them for their condominium-related expenses between 1985 and 1986. From and after 1986, Mr. Walker, Mr. Cherry , and the Money Manag ement I

nvestmen t I pa rtnersh ip treated the unit as if it belonged to Money Management I

nvestment

I. Mr. Walker paid rent when he or members of his family used the unit. Mr. Walker did not list the property as an a sset on any of his financial docum ent s or tax returns. Mr. Walker did not object when Money Management Investment

I listed the property

as an asset

on its books and tax returns. Finally, in 1993, Mr. Walker didnot insist

on receiving a portion

of the proceeds when Money Management I

nvestment I sold the condominium to Money Manag ement II I.
In the same vein, holding

and mana

ging th e condominium unit wa s entirel y consistent not only with the purposes of the Money Management Investment I partnership reflected in the12 As reflect ed in Article IIof the p artners hip ag reem ent, the p urpo se of the partne rship was “[t]o engage in the

general busi ness of own ing or investi ng in real or personal . . . property of every description, and to manage, administer. dev elop or imp rove the sam e.” -7- partner ship agree

ment, 12 but also with the evidence that transferring the unpr ofitable unit to the partner ship enabled Messrs. Cherry and Walker to spread therisk of loss to others and also enabled their partners to take advantage of the business losses for tax purposes. In contrast to Mr. Walker’s actions after 1986, all the actions of the Money Management I

nvestment I partnership wer e consistent with its claim of ownership. The par tnership listed the propert y a s an asse

t on its books and tax returns. The partnership managed a nd controlled the property and paid the expenses associated

wi th th e p ro pe rt y. F in al ly, the part nership s old the pr

operty to Mon ey Ma nag eme nt III in 1993. The only conclusion that ca n be drawn from these facts is that as of 1986, t he Mone y Management

Inve stment I

partner ship owne d the bene ficial in terest in the Dune s condomin

ium unit even if legal title remained with Messrs. Cherry and Walker. Accordingly , Messrs. Cherry a nd Walker, as fiduciaries of the partnership, were holding the property solely

for the benefit of

Money Manag ement I

nvestmen t I and its succ essors. C. In light of the clear and convincing evide nce regarding

the ownership of the condominium unit after 1986, it is unnec essary to deter mine whet

her Mr. Wa

lker wasestopped

to assert th

e statute of frauds as a defense to Prism Partner s’s clai m to the escrowed proceeds. The statute of fr auds could not have prevented the introduction of parol evidence to establish the groundsfor imposing a resulting trust on the condominium unit for the benefit of Money Management I

nvestment I and its successors in interest. Therefore, it is entirely unnecessary

t o determine whether Mr. Walker should have been estopped to assert the statute of frauds a s a defense.
Prism Partner s, as Mone

y Ma nageme nt Investment I 's succ essor in interest, was not required to present

a writte n convey ance to esta blish its interest in the condominium unit. It presented sufficient evidenc e to prove clearly and convincingly

that it owned the beneficial interest in the unit in 1995 when it undertook t o sell it to a third party. Acc ordingly, the tr ial court could have circumvented

the doctrine of estoppel by concluding that Mr. Walker no longer owned a beneficial interest in the property a

nd by directing

Mr. Walker to honor his fiduciary obligation by executing the deed convey

ing the property

to Prism Partners’s purchaser.

III.
Even though we do not concur with the trial court’s rea soning, we concur with its decision to award Prism Partners all the escrowed proceeds from the sale of the condominium unit. Ac co rd in gl y, we affirm

the ju dgment and rem and th e case f or what ever fu rther procee dings may be required. We tax the costs of this appeal to James D. Walker and his sur

ety for which executio n, if necessary , may issue.

_____________________________ WILL IAM C. KOCH, JR., JUDGE