# FILED
May 15, 1997 Cecil Crowson, Jr . App ellate C ou rt Clerk IN THE COU RT OF A PPEA LS OF TENN ESSEE WESTERN SECT ION A T JA CKSON
BRANDY

REBECCA TH ATCHER, ) a m in or by n ex t f ri en d, KAT HY VAN ) STORY, ) ) Plaintiffs/App ellants, ) Hay wood Chancery

No. 10975 ) VS. ) A ppeal No. 02A 01-9605-CH- 00114 ) BOBBY PHILLIP WYA TT, ROBERT ) PH IL LI P W YAT T a nd WI LL IAM LE A, ) ) Defendants/Ap pellees. )
APPEAL FROM THE CH ANCERY COU RT OF H AYWOOD COU NTY

AT BROWNSVILLE, TENNESSEE THE HONORABLE GEORGE R. EL LIS, CHANC ELLOR

LEWIS L. COBB JUSTIN S. GILBERT SPRA GINS, BA RNETT, CO BB & BUT LER Jackson, Tennessee Attorneys for Appellants PAT H. MA NN, JR. Brownsv ille, Tennessee Attorney for Appellees

REVERSED

ALAN E. HIGHERS , J.

CONCUR: DAVID R. FA RMER, J. HOLLY K IRBY LIL LA RD, J. In this breach of contract case, Ka thy Van Story (“Plaintiff”) , as t he next friend of2

Brandy Thatcher (“Brandy”), seeks a judgment declaring that th e proceeds of Janie Pe rry Thatcher Wyatt’s (“Decedent ” ) $100,000.00 li fe insurance poli cy be held i n trust for the benefit of Brandy. The trial court ordered that the proceeds o f Decedent’s life insuran ce policybe held in tr ust until Br andy reaches

age twe nty-f ive or until Br andy has compl eted her desired col lege, gr

aduate and medical school educati on, whichever is later , and further ordered that any remaining monies be distribut ed between Br andy and Bobby

Wyat t (“Defendant”). Plaintiff appeals the judgment of the t rial court arg uing that the trial judge erred in granting Defendant a one-half interest in the trust following the latter of Brandy’s twenty- fifth birthday or desired college, graduate and medi cal school edu cation asserting that it was the D ecedent’s intent that the entire trust be used for the benefit of Brandy. F or the r easo ns st ated here aft er, we revers e the judgm ent o f th e cou rt be low.

FACTS

In 1986, Decedent married Defendant. Decedent had o ne child from a prev ious marriage, Brandy. Defend ant had two children from a previous marriage, Robe rt Phillip Wyatt (“Phill ip”) and Terr y Ralph Wyatt (“Ter ry”). No children were bor n of the marriage between Dece dent and Defendant.

In 1988, Decedent developed uterine cancer. After unde rgoin g t reatment for her cancer, Decedent’s cancer remained in remission for almost five yea rs. In October 1992, Decedentbega n expe rien cing p robl ems wi th he r lung s. Upo n vi siti ng her physician, Decedentwas ini tially diagnosed as h av ing pneu monia. Howev er, in Januar

y 1993, Decedentwas cor rectly diagnosed as h aving l ung cancer. On March 18, 1994, Decedent died.

Before her d eath , Dece den t exec uted a $10 0,00 0.00 life insu ranc e pol icy, naming Defendant as the beneficiar y. According to the testimony of the Plaintiff , Decedent’s sister, in December 1993 D ecedent instruc ted both th e Pl aintiff and Defendant to hol d the proceeds ofDecedent’s $100,000 .00 life insurance policy in trust for the education, ca re3

and future of Brandy. Plaintiff and Defendant were to act as co-tr ustees and were not t o extract money from the tr ust withou t the signat ures ofboth parties. Plaintiff and Defendant agreed to create a tr ust from the proceeds of De cedent’s life i nsurance poli cy and to act as co-trust ees of the trust for Brandy.
Defendant, however, denied that the D ecedent requested that he and Plaintiff f orm a trust for the care and education of Brandy out of the proce eds of Decedent’s $100,000.00 life insurance policy. Instead, Defe ndant testified th at Decedent only asked him to take care of Bran dy after she die d, and he agreed that he woul d take care of Brandy to th e best of his abil ity.
Substantiating Plaintiff’s testimony t hat a trust was to be created for Br andy from the proceeds of Decedent’s $100, 000.00 life insurance policy, Phyllis Presley, Decedent’s sis ter, testified that D ecedent said on s everal oc casions that t he proceeds from he r $100,000.00 life insuranc e policy were to be held in trust for Brandy and that Plaintiff and Defendant were to act as co-trustees of this money . Presley further stated that the money was to be us ed by no one other than Brandy.
Moreover, the Decedent’s aunt, Fl oye C obb (“Cobb”) , testified that D ecedent executed a $100,000.00 life i nsurance poli cy for thebenefit of Brandy w hile Decedent was married to he r previous husband, Ron Thatcher . After Ron and D ecedent divor ced but before Decedent marri ed Defendant, Deced ent exe cute d ano ther $100 ,000 .00 l ife insurance policy making Cobb the beneficiary and instructing Co bb to use t he proceeds to take care of Bra ndy . Fo llowingher marriag e to Defendant, Decede nt changed the beneficiary on her life insurance policy from Cobb to Defendant and instruct ed Defendant that he and the Plaintiff were to act as co-trustees of the procee ds of the policy which were to be used for the care and education of Brand y. Furthermore, Co b b testified that Decedentrepeatedly stated that the pr oceeds from her $100,00 0.00 insurance policy were to be used solel y for the benefit of Brandy.4

Decedent’s si ster, Sherr y Van Story

(“Sherry ”), testifie d that Decedent told h er on several occasions that Plaintiff and Defendant had agreed to act as joi nt trustees of the proce eds from Decedent’s $ 100,000.00 life insu rance policy . Sherry stated that t he lif e insu rance proce eds w ere tobe used to pay Deced ent’smedica l bil ls, th e mo rtgage o n Defendant’s hous e if B rand y c ontinued to live with Defendant after Decedent’s death, Brandy’s college education and Brandy ’s future liv ing expens es.

Kim Evans, the Decedent’s first cousin, test ified that Decedent told her th at the proceeds from Decedent’s $100 ,000.00 life insur ance policy

were to beused for Brandy’s college education and that Pl aintiff and Defendant w ere to act as co-trustees.
Brandy testified that her

mother, the Dec edent, had repeatedl y stated to her that she had the cost of Bran dy’s medical school “covered.”

Charlotte Wright, a co-wor ker and friend of the Decedent, testi fied that the proceeds from Decedent ’s $100, 000.0 0 life in surance policy were to be used for Bran dy’s college education.
Phillip Wyatt, his wife StephanieWyatt and Terry Wyatt all testi fied that they had
never heard the Decedent refer to a trust which was to be created f or the benefit of B rand y.

Non etheless , in May 1 994 after Decedent’ s death, Defendant col lected the $100,000.00 in life insur ance proceeds, pu rchased a $50,000.00 certi ficate of deposit and placed the other $50,000.00int o an investment a ccount. Without conferring with the Plai ntiff, Defendant placed the certificat e of deposit and the i nvestment account under th e name of the “Brandy

Thatcher Trust.”

However, instead of act ing as the co-trustee along with the Plaintiff, Defendant empl oyed William Lea to act as trustee and made thetrust a revocable trust. Def endant s tructured the trust so that it would terminate w hen Brandy reached age twenty-five. The trust was then to be distribut ed equally

between Bra ndy and Defendant’s two sons, Phill ip Wyatt and Terry Wyatt.5

In the summer of 1994, Brandy moved out of Defendant’s house and began liv ing with the Plaintiff. In July 1994, two days after Brandy ’s move from D efendant’s house to Plaintiff’s house, Defenda nt inst ructed W il liam Lea to termi nate the trust t hat he had created for Brandy and to pl ace the pro ceeds in an account under the name of his son, Phillip Wyatt.

LAW

The sole issue before this Cour t is whet her the trial court e rred in gr anting the Defendant, Defendant Wyatt, a one-half interest in the remaini ng proceedsof Decedent’s $100,000.00 life insurance policy following the latter of Br andy’s twenty-fifth bir

thday or the date at whic h Brandy compl etes her desir ed graduate sc hool education.

As a tool of equity, a re sulting t rust wi ll be imposed w hen necessary to prevent a failure of jus tice. B urleson v. McCrary , 753 S.W.2d 349, 352 (Tenn. 1988); Estate of W ardell ex rel. Wardell v. Dailey , 674 S.W.2d 293, 295 (Tenn. Ct. App. 1983), quotin g 76 Am.Jur.2d Trusts

§ 196 (1975). Such trusts are “judge-created trusts or doctrines which enable a court, w ithoutviolati ng all ru les of logic, to reach an interest in proper ty belong ing t o one person yet

titled in and held by anoth er." W ells v. Wells , 556 S.W.2d 769, 771 (Tenn. Ct. App. 1977 ). A resulting trust is defined as follows:

[b]roadly speaking, a

resulting trust ari ses from the nature of circumst an ces of consideration involved in a transac tion whereby one person thereby

becomes inve sted with a legal t itle but is obligated in equity to hold his legal title for t h e benefit of another, the intention of the former to h old in trust for the latte r bein g imp lied or p resu med as a m atte r of l aw, althou gh no intention to c reate or hold in trust has been manifested, expressl y or by inference, and although there is an absence of fraud or constructive fraud. In Re E stat e of R oark

v. Bis choff , 829 S.W.2d 688, 692 (Tenn. Ct. App. 1991), quoting 7 6 Am.Jur.2d, Trusts , § 196, p. 429 (1975).
The equitable power to establi sh a resulti ng trust appl ies with respect to both real and personal prop erty. In Re Estate of Roark , 829 S.W.2d at 693, citing 89 C.J.S. Trust6

§ 9 8 p. 941 (1955). See also , Dailey , 674 S.W.2d at 295; 23 A.L.R. p. 1500 . In eithe r case, "[i]t is .

. . uniformly hel d that resulti ng trustsmay be, and g enerally are, prove d by parol evidence." Chappell v . D awson , 308 S. W.2d 420, 422 (Tenn. 1957). See also , Butler v. Rutledge , 42 Tenn. (2 Cold.) 4 (1865); Savage , 4 Tenn. App. at 283; See generally , 89 C.J.S. Trusts Sec. 101, 133 (1955); Gibson 's Suits in C hancery, § 976, n. 2 (5th Ed.1956). In addi tion, it is also uniformly

hel d that any or

al statement purpo rting to create a resultin g trust in property must have been made p rior to or contemporaneously with the t ransaction. In Re Estate of Roark , 829 S.W.2d at 692.
However, when one att em pts to create a resulting trust on the bas is of parol evidence, proof of an o ral trust m ust be e stablish ed by clea r, coge nt and convinci ng evidence. King v. Warren , 680 S.W.2d 459, 460 (Tenn. 1984); Allen v. Nati onal Bank of Newport , 839 S.W.2d 763, 765 (Tenn. Ct. App. 1992); In Re Estate of Roark , 829 S.W.2d at 693; Al-Haddad v . Al-Haddad , 774 S.W .2d 192 (Tenn. Ct. App . 1989).

In addressing the requirements necessary forthe creation of an oral resul ting trus t, the court in King v. Warren , 680 S.W.2d 459 (Tenn. 1984), stated as follows: [w]e recently

had oc casion to discuss the law w ith respect t o the establishment of a n oral tru st in re al estate, affirmingthe requisit es that the declar ation must be mad e pri or to or contemporaneouswith a tr ansfer of re alty, must be proven by e vidence that is cle ar, cogent an d convinci ng, and tha t ordi nari ly, the t e stimony of a single, interested witness would not be sufficient to establish atrust by that quantum of proof. Ta nsil v. Tansil , 673 S.W.2d 131 (Tenn.1984); citi ng e.g., Sanderson v. Mil ligan , 585 S.W.2d 573 (Tenn.1979) and Hunt v. Hunt , 169 Tenn. 1, 80 S.W.2d 666 (1935). King , 680 S.W.2d at 461. Simi larly, the court in Linder v. Little , 490 S.W.2d 717 (Tenn. Ct. A pp. 1972), addressed the cr

eation of an oral t rust and stated that: the declaration of trust by the gra nt or must be before or contemporaneous w ith the conveyance. Adrian v. Brown , 29 Tenn.App. 236, 196 S.W.2d 118 (1946). And, proof of a parol trust must b e of the clearest and m ost convincing character. It must be so clear, cogent and conv incing as to overcome t he opposing evidence coupled with the presumption that obtains in fav or o f t he w ritten inst rument. Hoffner v. Hoffner , 32 Tenn.App. 98, 2 21 S .W.2d 907 (1949) and authorities cited therein.7

Linder , 490 S.W.2d at 723.
Resulting trusts generally are imposed in accordance with theactual or assumed intention of the parties. Burleson , 753 S.W.2d at 352-53; See generally , Gibson’s Suits in Chancery§ 382 (1982). One instance w here resulti ng tr usts are impo sed occurs i n a situation when the ow ner of property gratuitous ly transfers it and pro perly mani fests an intention that the transferee sho uld hold t he prop erty in tr ust, bu t the t rust, for som e reason, fails. Burleson , 753 S.W.2d at 353; See , Restatement (S econd) of Trusts § 411 (1959); G. Bog ert Trusts and T rustees § 468 (1977).

In discussing the varying situations in which a resulting trust may be imposed, this Court stated in Estate of Wardell ex rel. Wardell v. D ailey , 674 S.W.2d 293, 295 (Tenn. Ct. App. 1983), as foll ows:

[t]he resulting trust may be created in a variet y of situati ons, for example "[w]here a deed by father to son is shown to be for the benefit of the mother." Gibson's Sui ts in Chancer y, § 976, n. 2 (5th Ed.1956). T his court, more than fif ty years ago, in S avage v. Savage , 4 Tenn.App. 277 (1927) , confronted a somewhat

similar s ituation. The re, the plaint iff, after purchasing a lot wi th a house on it, had conveyed the same to his father to be held in tr ust for the forme r and other third persons, while t he former went "north, [to] work where he could getbett er wage s" i n order to pay off the notes on the l and. Id

. at 279. While the plaintiff/son was absent, the father remarr ied and later died , afterwhich thewidow claimed the la nd. In establishinga re sul tingtru st i n favor o f the son, the court stated that "[w]hen property i s conveyed or given by one person to another, to hol d for the use of a thi rd person, such a trust will thereby be c reated as w ill gi ve equit y juris diction to compel the applicati on to the purpos es of the trust." Id . at 284. In Estate of W ardell ex rel. Wardell v. Dailey , 674 S.W.2d 293, 295 (Tenn. Ct. App. 1983), a wife req uested that her name be removed from her joint ch ecking an d savings accountwhich s he had establish ed with her husband due to her blindness and inabilit

y to oversee her financial aff airs. Id . at 296. Upon removal of the wife’s n ame from her joint checking and savin gs accounts, her son’s name was added instead. Husband thereafter had the name of his son placed jointly with him on virtually all of his certificates of deposit and money market c ertificates, w hich result ed in the son bei ng the joint owner of most of his parent’s est ate at the time of his father’s death. Id . After the fat her’s death, s on8

claimed to be the sole ow ner of the joint c hecking and s aving s account s, certificat es of deposit and money market certificates

. Id

. The court, however, impos ed a resulting trust
on the joint and surviv

orship bank

accounts and cer

tificates of deposit

and required the son to hold the money in trust for t he lifetime of his mothe r and thereafter

required the son to divide the corpus of the trust with hi s sister at his mother’s

death. Id . at 297.

In Burleson v . McCrar

y , 753 S.W .2d 349 (Tenn. 198 8), Mr. Burleson gratuitously transferred his reside nce to one of his daug hters and manifested an intentio n that the daughter hold the property i n t rust for the benefit of all five chi ldren of Mr. B urleson. Althou gh the daughter claimed that she owned the property in fee simple absolu te because the property had been properly deeded and record ed in her name, the cour t held that the daughter held the proper

ty in tr ust for the benefit of all five chil dren of Mr. Bur leson. Id . at 353. The court, therefore, imposed a res ulting tr ust upon the gr ante e daughter a nd directed her to reconvey the property

to the execut or of Mr. Bur leson’s estat e. Id

.
Moreover, in t he ca se of Cook v. C ook , 559 S.W .2d 329, 332 (Tenn . Ct. App. 1977), this Court was faced with a situation si milar to the case at bar. I n Cook , the decedent designated his brother as the beneficiary of h is li fe insuran ce policy but orally

instructed his brother

to pay decedent’s debts, to set decedent’ s step-son up i n a farming operation and to use the remai ning proceeds for the benefit of decedent’s s on. Id . In accordance with the decedent’s i ntentions, this Court held t hat the decedent’s brother was the trustee of the proceeds from de cedent’s life insurance po li cy and that the proceeds of the trust
were to be used to pay decedent’s deb ts, to set the decedent’s step-son up i n a farming operation and to use the remaining proc eeds for the benefit of decedent’s son. Id . at 333. In holding that an oral trust had been crea ted, this Court stated that it is important to take note of the relations hip between t he parties to t he trust agr eement and to wei gh the reasonableness of the terms of the tr ust as orall y related. Cook v. C ook , 559 S.W.2d 329, 332 (Tenn. Ct. App. 1977).

The record establishes that Decedent and B randy enjoyed a close rel ationship. As9

the only natural child of the Decedent, it is reasonabl e to believe that Decedent w anted to
ensure that Bran dy was proper ly prov ided for after Deced ent’s death. Thus, upon our review of the record, th e clear, cog ent and convi ncing evidence reveals that the Decedent named Defendant as the leg al beneficiary of her $100,000.00 li fe insurance poli cy, but Decedentimpressed an oral trust upon the p roceeds of her i nsurance poli cy by instructing the Plaintiff and Defendant to create a trust for the benefit of Brandy from these proceeds and to act as co- trusteesof the trust. W e, therefore, hold th at the proceeds of Dece dent’s $100,000.00 life insurance policy be held in trust forthe benefit of Brandy. We further hold that the Plainti ff, Kathy Van Story , is hereby appointed as tr ustee of the trust.

The judgment of the tr ial court is her eby reversed. Costs on appeal are taxed t o the app elle es f or whic h exec utio n ma y issue if ne cess ary.

HIGHERS, J.
CONCUR:
FARMER, J.
LILLARD, J.