Case Name: Kathy Ann Peek PALMER v. Richard Warren PALMER
Court: Mississippi Supreme Court
Jurisdiction: Mississippi
Decision Date: 1995-02-09
Citations: 654 So. 2d 1
Docket Number: No. 92-CA-01122-SCT
Parties: Kathy Ann Peek PALMER v. Richard Warren PALMER.
Judges: HAWKINS, C.J., PRATHER, P.J, PITTMAN, BANKS, McRAE, JAMES L. ROBERTS Jr. and SMITH, JJ, concur.
Reporter: Southern Reporter, Second Series
Volume: 654
Pages: 1–17

Head Matter:
Kathy Ann Peek PALMER v. Richard Warren PALMER.
No. 92-CA-01122-SCT.
Supreme Court of Mississippi.
Feb. 9, 1995.
Robert H. Pedersen, James A. Becker, Jr., Watkins & Eager, Jackson, for appellant.
Jefferson D. Stewart, James L. Halford, Brunini Grantham Grower & Hewes, Jackson, for appellee.

Opinion:
SULLIVAN, Justice, for the Court:
I.
The Palmers were divorced in Louisiana on October 6, 1990. In a "Partial Community Property Settlement," dated October 10, 1990 all property acquired during the marriage was divided except the oil and gas interest in Wayne and Yazoo Counties, the record ownership of which was held in Richard's name only. Similarly acquired oil and gas properties in the states of Texas, Arkansas, and Louisiana were treated as community property and divided equally, one-half being the property of Kathy and one-half being the property of Richard. All oil and gas properties in Mississippi were acquired by Richard using community property funds.
By agreement, the parties submitted the Mississippi oil and gas properties ownership question to the Wayne County Chancery Court for resolution. Following trial, the Chancellor applied divorce law and ruled Kathy was not entitled to an "equitable distribution" based upon the factors in Retzer v. Retzer, 578 So.2d 580 (Miss.1991). The chancellor, after tracing the community property funds to the acquisition of the Mississippi oil and gas properties, refused to apply Mississippi law providing for a resulting or constructive trust. Had the Chancellor correctly applied the law, Kathy would have been entitled to an undivided fifty percent (50%) interest in the oil and gas properties located in Mississippi. Instead, the chancellor incorrectly applied divorce law when the chancery court had no jurisdiction over the divorce which had already been granted to the parties in the State of Louisiana. The chancellor incorrectly treated the case as an equitable distribution action between married spouses traditionally originating in a divorce proceeding. It should be remembered that Richard filed the action in chancery court seeking to remove a cloud on the oil and gas properties in Mississippi. Kathy defended and by counterclaim sought a judicial determination that she was entitled to an undivided one-half interest in those properties under the theory of resulting or con structive trust. Clearly, Mississippi law applied which required imposition of the trust once community property funds accumulated during the marriage of the parties in Louisiana was traced and found to have been utilized to purchase that property.
II.
This Court has applied the equitable theory of resulting or constructive trust to protect the community property interest of a wife in real property acquired in Mississippi solely in the husband's name. In Stone v. Sample, 216 Miss. 287, 62 So.2d 307, 308-09 (1953), this Court was dealing with these facts:
About the year 1940 Sample purchased certain mineral rights in this State. He was then, and for many years had been, a married man and a resident citizen of Texas. The money used by him in purchasing the mineral interests belonged in equal parts to himself and his wife as community property under the laws of Texas. The conveyances were to Sample alone.
Sample argued that he held legal title to the minerals in trust for himself and his wife. Thus:
half of the purchase price of the minerals was the property of Mrs. Sample, then a trust resulted in favor of Mrs. Sample and he holds title in trust to her one-half interest.... Here, she was owner by virtue of the community laws of Texas.... The source of her title, or ownership, is immaterial.
The commission invokes the rule that real property is controlled by the law of its situs. That, of course, is true. This is not an effort to transport the Texas community law into this state. The title of Mrs. Sample to a half interest in the property in Mississippi does not result from application of the community law of Texas to the real property in Mississippi. The trusteeship comes about as a result of using her money in the purchase of the property regardless, as above stated, how and where she acquired title to the money. (Emphasis supplied).
Id. 62 So.2d at 308-09.
In Texas, as in Louisiana, that produced by the labor of either spouse is community property. La.Civ.Code, Art. 2338.
Cases involving questions of resulting trusts have often been before this court. The following principles are recognized and declared by this court: If one buys land in the name of another and pays the consideration therefor, the land will be held by the grantee in trust for the benefit of him who advances the purchase money; . The foundation of trust in such cases is that the property really belongs to him whose funds have paid for it.... Property rights are not lost simple because property is transported into another state and exchanged there for other property.
Stone v. Sample, 62 So.2d at 310.
LSU law professor Joseph Dainaow limits the impact of Pennison v. Pennison, 157 So.2d 628 (La.App. 4th Cir.1963) by stating:
[Tlhere were a number of problems concerning child support and the separation of community property after a divorce so that the one point of conflicts of law may have been relatively unimportant, but its treatment was unduly summary.
The land was in Mississippi and the court applied the presumed Mississippi law vesting title in the husband. However, in so doing there was not a sufficient inquiry into the law of the state in which the land was situated. While in the instant case, it may not have made any difference, in the ultimate legal or practical result, the problem calls for a more complete analysis which may lead to different results where there has been a significant change in the value of the property (for example, by the discovery of oil).
An actual illustration of what is meant by further inquiry into the lex rei sitae is found in the Missouri case of Depas v. Mayo [11 Mo. 314, 49 Am.Dec. 88 (1848) ]. After accumulating their wealth in Louisiana, the husband and wife moved to Missouri, where the husband used some of these community funds to purchase land, taking title in his own name. Later, they were divorced, and the wife sued in Missouri for a half-interest in this land. Applying the Missouri lex rei sitae, the court there found that a person who purchases land with money of another takes legal title in trust. Since the purchase money had been community funds, the court declared a resulting trust in one-half of the land in favor of the wife and recognized her half interest in the property.
25 La.L.Rev. 391-92 (Feb. 1965).
Pennison merely held that Louisiana community property law does not cross state boundary lines. It did not determine the applicable Mississippi law and apply it. If the Louisiana Court of Appeals in 1963 had looked, it would have found that this Court had applied the equitable theory of resulting or constructive trust to a similar fact situation ten years earlier in Stone v. Sample.
The treatise writers are in agreement that a resulting or constructive trust is available to protect community property funds used to purchase land titled only in one spouse. The Restatement (Second) of the Law of Conflicts, § 234 (1971) provides:
§ 234. Effect of Marriage on an Interest in Land Later Acquired.
(1) The effect of marriage upon an interest in land acquired by either of the spouses during coverture is determined by the law that would be applied by the courts of the situs.
(2) These courts would usually apply their own local law in determining such questions.
Illustration:
1. H and W, husband and wife, are domiciled in state X, a community property state. With community funds, H purchases in his own name land in state Y, a common law state. If the Y courts, despite the fact that community property is unknown to their local law, would hold that the wife, W, has the same interest in the land as she had in the funds with which the land was purchased, the courts of all other states will hold likewise.
The fact situation used in the hypothetical illustration is the same fact situation existing in this case.
In Marital Property in Conflicts of Law by Harold Marsh § 2, entitled Community Property Taken Into a Common-law State, he discusses at length fact situations analogous to the one in issue. In analyzing the Missouri case of Depas v. Mayo discussed above, he concludes:
The court held that the husband was a "constructive trustee" for the wife as to one-half of the property after the divorce. Since Missouri does not have community property, its procedure of course does not contain the same remedies for protecting the interest of the wife which would be available in Louisiana; but the device of a constructive trust is capable of being used to enforce the kind of rights which the wife had under Louisiana law, and it should be used flexibly for that purpose.
H. Marsh, Jr., Marital Property in Conflicts of Law, § 2 (1982).
In Conflicts of Law by Eugene F. Scoles in Section 14-6, entitled B. Land Acquired After Marriage, he states:
The acquisition of land usually calls into operation an important practical limitation on the effect of the assumed situs reference: the tracing rule that marital rights in assets used to purchase land will be recognized in the land after purchase. (Emphasis supplied)
Following a review of the New Mexico Supreme Court decision in Hughes v. Hughes, 91 N.M. 339, 573 P.2d 1194 (1978), he opines:
Thus, the marital interest which attaches to movable assets acquired by the spouses according to the law of their domicile at the time of acquisition is recognized and traceable into real property located in another state in which those assets are invested. This has been the consistent result under the cases.
The reason generally given for the tracing rule is that one's title to money, or other assets, is not lost by moving it across a state line and turning it into some other form of property.... However, the lead ing California case rested its decision on constitutional grounds that property rights vested under the prior marital domicile could not be altered simply by moving the assets into a community property state. The approach taken in this line of authority is consistent with the longstanding theories of equitable tracing to achieve justice and equity among the parties in interest. The same approach has been applied to land purchased in a common law jurisdiction with the separate or community funds of spouses domiciled in a community property state_ If, however, the land is purchased by one of the spouses with community funds in that spouse's name only, the interest of the other spouse persists and enables that spouse to follow, by constructive trust principles, the community interest in the land acquired with community assets. The leading American case involved a husband who wrongly took funds belonging to the community from Louisiana and invested them in Missouri land, taking title in his own name. The husband was compelled to hold the title in trust to protect the wife's interests. [Depas v. Mayo, 11 Mo. 314, 49 Am.Dec. 88 (1848) ] (Emphasis supplied)
The chancellor erred by applying Pennison authoritatively. Once the trial court found that Richard had used community property to acquire the Mississippi oil and gas interests, the requisite tracing was done. Application of Mississippi law required that Kathy be awarded an undivided fifty percent (50%) interest on the theory of resulting or constructive trust. Stone v. Sample, 216 Miss. 287, 62 So.2d 307 (1953). Richard's trial counsel were successful in confusing the issue and getting the chancellor to run the "equitable distribution" rabbit. "Equitable distribution" applies only in marital cases involving lump sum alimony and property division questions between divorcing spouses. The case before the chancellor was Richard's complaint to remove a cloud on title and Kathy's equitable claim for an undivided one-half interest based upon the theory of resulting or constructive trust. The parties had already been divorced by the appropriate court in the state of Louisiana.
III.
The Chancellor erred as a matter of law. Kathy is entitled to an undivided one-half interest in the oil and gas properties held in Richard's name. The judgment of the Chancery Court of Wayne County is reversed and judgment is rendered here awarding Kathy Ann Peek Palmer an undivided one-half interest in the Mississippi oil and gas properties located in Wayne and Yazoo Counties.
REVERSED AND RENDERED.
HAWKINS, C.J., PRATHER, P.J, PITTMAN, BANKS, McRAE, JAMES L. ROBERTS Jr. and SMITH, JJ, concur.
DAN M. LEE, P.J., dissents with separate written opinion.