Opinion ID: 1153076
Heading Depth: 1
Heading Rank: 9

Heading: the chancery court acted improperly by failing to apply equitable principles in this case

Text: Alvarez contends that Miss. Code Ann. (1972) 91-9-1 (Supp. 1993) allows an unrecorded trust to take effect, despite non-compliance with the statute, where equity so requires. Alvarez argues that the chancellor wrongly failed to consider the equitable principles of clean hands, constructive or resulting trusts, equitable estoppel, and breach of fiduciary duty by Vernard. Coleman argues that the chancellor correctly found that the trust agreement never came into existence under Miss. Code Ann. (1972) § 91-9-1. Section 91-9-1 of Miss. Code Ann. (1972) provides: Hereafter all declarations or creations of trusts or confidence of or in any land shall be made and manifested by writing, signed by the party who declares or creates such trust, or by his last will, in writing; or else they shall be utterly void. Every writing declaring or creating a trust shall be acknowledged or proved as other writings, ... shall be lodged with the clerk of the chancery court of the proper county to be recorded, and shall only take effect from the time it is so lodged for record. Where any trust shall arise or result, by implication of law, out of a conveyance of land, such trust or confidence shall be of the like force and effect the same as it would have been if this statute had not been passed. (emphasis added). With respect to the Droke Family Trust agreement, the chancellor stated: The third instrument, or paper writing, executed by Vernard Droke and Dixie Droke, styled Revocable Trust Agreement-Droke Family Trust, was never lodged with the Clerk of the Chancery Court of DeSoto County, Mississippi to be recorded as required by Section 91-9-1, Mississippi Code, Annotated. The so-called Trust instrument contained no acknowledgment of delivery, and, hence, was not entitled to record, from which it inevitably follows that the attempted trust never had any effect. The two flaws in the trust agreement noted by the chancellor  lack of acknowledgment of delivery, and failure to record  generally prevent a trust from taking effect. Smith v. Smith, 233 So.2d 527 (Miss. 1970); Thames v. Holcomb, 230 Miss. 387, 92 So.2d 548 (1957); Board of Trustees of M.E. Church South v. Odom, 100 Miss. 64, 56 So. 314 (1911). The Droke Family trust therefore fails under 91-1-1, unless, as argued by Alvarez, it is saved by last sentence of the statute. The last sentence of § 91-1-1 contemplates constructive and resulting trusts, affording them validity despite a lack of acknowledgment, delivery, or record. The nearly-identical predecessor to Miss. Code Ann. § 91-1-1 (Supp. 1993), Section 269 of the Miss.Code (1942), requiring all trusts in land to be in writing and recorded to be valid, has been held inapplicable to resulting and constructive trusts in cases too numerous for citation. Stone v. Sample, 216 Miss. 287, 292, 63 So.2d 555 (1953). See also Pitchford v. Howard, 208 Miss. 567, 45 So.2d 142 (1950). We have defined a constructive trust as follows: A constructive trust is one that arises by operation of law against one who, by fraud, actual or constructive, by duress or abuse of confidence, by commission of wrong, or by any form of unconscionable conduct, artifice, concealment, or questionable means, or who in any way against equity and good conscience, either has obtained or holds the legal right to property which he ought not, in equity and good conscience, hold and enjoy. Planters Bank & Trust Co. v. Sklar, 555 So.2d 1024, 1034 (Miss. 1990), citing Sojourner v. Sojourner, 247 Miss. 342, 153 So.2d 803, 807 (1963). See also Conner v. Conner, 238 Miss. 471, 119 So.2d 240 (1960). Constructive trusts are created for the purpose of preventing unjust enrichment, whereby one unfairly holding a property interest may be compelled to convey that interest to whom it justly belongs. Allgood v. Allgood, 473 So.2d 416 (Miss. 1985). It is unjust enrichment under cover of the relation of confidence, which puts the court in motion. Russell v. Douglas, 243 Miss. 497 at 506, 138 So.2d 730 (1962) citing Sinclair v. Purdy, 235 N.Y. 245, 139 N.E. 255 (1923) (Cardoza, J.). Any transaction may provide an appropriate setting for creating a constructive trust; their forms and varieties are practically without limit. Planters Bank, 555 So.2d at 1034, citing 89 C.J.S. Trusts, § 142 at 1027 (1955). Allgood v. Allgood, 473 So.2d 416, 421 (Miss. 1985). Moreover, the terms confidence and confidential relationship are construed liberally in favor of the confider and against the confident for purposes of raising a constructive trust. Russell v. Douglas, 243 Miss. at 505, 138 So.2d 730; Adcock v. Merchants & Manufacturers Bank, 207 Miss. 448, 42 So.2d 427 (1949). In Russell v. Douglas, 243 Miss. 497, 138 So.2d 730 (1962), we summarized Mississippi constructive trust law: A constructive trust is a fiction of equity. It is the formula through which the conscience of equity finds expression. When property has been acquired in such circumstances that the holder of the legal title may not in good conscience retain the beneficial interest, equity converts him into a trustee. The equity must shape the relief and courts are bound by no unyielding formula. It arises regardless of intention or agreement, express or implied. The trust is raised by implication of law. Fraud need not be shown. Russell v. Douglas, 243 Miss. 497, 505-506, 138 So.2d 730, 734, cited in Planters Bank, 555 So.2d at 1034 (citations omitted). See also Sojourner v. Sojourner, 247 Miss. 342, 153 So.2d 803 (1963) (it is necessary only to establish such conduct and bad faith as would shock the conscience of the court). The evidence to establish a constructive trust must be clear and convincing. Planters Bank, 555 So.2d at 1034; Allgood v. Allgood, 473 So.2d 416, 421; Shumpert v. Tanner, 332 So.2d 411, 412 (Miss. 1976); Stovall v. Stovall, 218 Miss. 364, 67 So.2d 391 (1953); Coleman v. Kierbow, 212 Miss. 541, 54 So.2d 915 (1951). In Lipe v. Souther, 224 Miss. 473, 80 So.2d 471 (1955), we considered whether a constructive trust arose on a plot of land deeded to a woman by her parents, based on an alleged oral agreement to hold half the land in trust for her two brothers, and based on the confidential relationship among the family members. Fraud was not alleged. We found insufficient proof to establish a trust, and stated: An enforceable trust will not arise from the mere breach of an oral promise to hold land in trust. There must be conduct influential in producing the result, and but for which such result would not have occurred, amounting, in the view of a court of equity, to fraud in order to save the case from the Statute of Frauds ... There is no clear and convincing evidence that the conveyance was executed by T.E. Lipe with any understanding, express or implied, that the grantee would hold one-half of the land for the benefit of Roy, nor that Phyllis by any act, word or deed, expressly or impliedly, led the grantors to believe that she would hold the property for the benefit of her brother ... Lipe v. Souther, 224 Miss. at 483-484, 80 So.2d at 475. We also held that the mere existence of fiduciary or confidential relationships among the parties was insufficient to show fraud or overreaching warranting action by the equity court: It is the relationship plus the abuse of confidence imposed that authorizes a court of equity to construct a trust for the benefit of the party whose confidence has been abused. Id. at 484, 80 So.2d 471, citing Summer v. Summer, 224 Miss. 273, 80 So.2d 35 (1955). [7] In Harris v. Armstrong, 232 Miss. 192, 98 So.2d 463 (1957), we again held that a merely oral promise and its breach would not cause a chancery court to declare a trust: The oral promise, to be pertinent and relevant, must substantially influence and induce the result about which complaint is made. The chancellor, very reasonably, could have found under the testimony in this case, as presumably he did, that the oral promise, such as it was, did not materially aid in inducing, the execution of the deed by Wesley Harris and his wife. Harris v. Armstrong, 232 Miss. at 197, 98 So.2d at 465-466. In Moore v. Crump, 84 Miss. 612, 37 So. 109 (1904), we recognized a constructive trust, where evidence showed that a woman had received a deed of land from her father based on her promise to hold the land for benefit of herself and her siblings. The above cases concern the exception of constructive or resulting trusts from the requirements of § 269 of the Miss.Code (1942), and § 4230 of the Miss.Code of 1892, the predecessors of Miss. Code Ann. (1972) § 91-9-1, which was held to defeat the Droke Family Trust agreement for lack of acknowledgment and recording. In the above cases, we held that a parol constructive trust in land could be recognized, if proven by clear and convincing evidence, and that such constructive trusts would not be invalid under § 269 of the Statute of Frauds. In the case at bar, there is sufficient proof to recognize a constructive trust arising from the Droke Family Trust agreement and the circumstances surrounding it. [8] First, a confidential relationship existed between Dixie and Vernard as husband and wife. Second, an agreement existed between Dixie and Vernard concerning the disposition of their property. Finally, there was a breach of this agreement by Vernard, leading to his unjust enrichment  disposition of the entire marital estate (rather than 1/2 of it) to designees of his choosing. 1. Confidential relationship In Moore v. Crump , explaining the basis for finding a constructive trust, we stated: Beyond all doubt but for this promise the deed would never have been made to her, founded as it must have been upon the confidence of the father in the daughter complying therewith. Where the promise is made between the father and child, the moral obligation in strengthened by the existing relation and the confidence which the one would naturally repose in the other. Moore v. Crump, 84 Miss. at 615, 37 So. 109. A promise made between husband and wife would surely entail a comparable moral obligation. 2. Agreement Contrary to the chancellor's opinion, the November 18, 1981, wills and the trust instrument are evidence of an agreement between Dixie and Vernard concerning the disposition of their property. On November 18, 1981, Dixie and Vernard executed the trust instrument, transferring all property they currently held to the trust. The trust was to provide for their mutual support until death. At the same time, Vernard and Dixie signed nearly identical wills, mutual promises to leave all their property to the trust, which would be revocable until the death of either. Further, the trust agreement provided that upon the death of the survivor, the trust would be split into two equal trusts, one for the benefit of Dixie's great grandchildren, and one for the benefit of the church. Witnesses testified that Dixie had expressed concern for her great grandchildren, and wanted to provide for them, and that Vernard expressed a desire that his share go to the church. The chancellor states that neither (will) contained any wording to indicate that it was made pursuant to any agreement between Vernard and Dixie Droke. Yet the two wills are identical, except for Vernard's devise of one dollar to his nephew, and Dixie's devise of one dollar each to her daughter and grandson. The wills and the trust agreement were executed the same day, witnessed by the same witnesses, and notarized by the same notary. Moreover, Item II  Residuary Estate appears, identically, in both wills. This section reads in part: All the rest, residue and remainder of my estate, real, personal and mixed, tangible and intangible, of whatever nature and wherever located, I give, devise and bequeath unto the Trustee of the revocable trust created of even date herewith by my wife, Dixie Droke (husband, Vernard Droke), and me as settlors. (emphasis added). While the two wills do not reference each other, they both reference the trust agreement executed that day. In light of these references, and the nearly identical nature of the wills, we find that the chancellor erred in concluding that neither will indicated an agreement between the Drokes. The mutuality of promises, symmetry of trust and testamentary arrangements, and the fact that the trust became irrevocable  that is, beyond the reach of the survivor  at the death of either Vernard or Dixie strongly suggest that each party's promise was dependent on the other, and that neither, but for other's identical promise, would have executed the will and trust agreement. Therefore, it may be said that Vernard's promises in his will and the trust agreements substantially or materially induced Dixie to turn all her property over to the trust, which she believed would ultimately be split between her designee and Vernard's designee. See Harris v. Armstrong and Lipe v. Souther, supra .