Lucas v. Grant

Wade LUCAS v. Tanya GRANT

CA 97-890                                          ___ S.W.2d ___

                  Court of Appeals of Arkansas
                           Division IV
               Opinion delivered February 25, 1998


1.   Trusts -- establishing existence of -- burden upon appellant. -- The
     burden of proof was upon appellant to establish the existence
     of a trust.

2.   Trusts -- constructive or resulting -- decision to impose not reversed
     unless clearly erroneous. -- A chancellorþs decision regarding
     whether to impose a constructive or resulting trust will not
     be reversed unless it is clearly erroneous or clearly against
     the preponderance of the evidence.

3.   Trusts -- confidential relationships discussed. -- A confidential
     relation exists between two persons when one has gained the
     confidence of the other and purports to act or advise with the
     otherþs interest in mind; relationships deemed to be
     confidential are not limited to those involving legal control;
     they also arise whenever there is a relation of dependence or
     confidence, especially confidence that springs from affection
     on one side and a trust in reciprocal affection on the other;
     a confidential relationship, however, is not established
     simply because parties are related or live in the same
     household; there is no set formula by which the existence of
     a confidential relationship may be determined, for each case
     is factually different and involves different individuals;
     whether two individuals have a confidential relationship is a
     question of fact.

4.   Trusts -- confidential relationship -- chancellor did not err in finding
     existence of. -- On the basis of the record before it, the
     appellate court could not say that the chancellor erred in
     failing to find that appellant had a confidential relationship
     with his deceased wife.

5.   Trusts -- constructive trust -- policy factors to be considered in
     imposing. -- To determine whether to impose a constructive
     trust, conflicting principles of public policy must be
     balanced; among the factors to be considered are (1) whether
     the grantor's conduct involves moral turpitude, (2) the extent
     of the policy making the transaction illegal, (3) whether the
     enforcement of a trust would tend to prevent the
     accomplishment of the illegal purpose, (4) whether the
     transferee was more at fault than the transferor, and (5)
     whether the transferor was ignorant of the law or of the facts
     making the trust illegal.

6.   Equity -- clean-hands doctrine discussed. -- The clean-hands maxim
     bars relief to those guilty of improper conduct in the matter
     for which they seek relief; the purpose of invoking the clean-
     hands doctrine is to protect the interest of the public on the
     grounds of public policy and to protect the integrity of the
     court; it is within the chancellorþs discretion to determine
     whether the interests of equity and justice require
     application of the doctrine.

7.   Equity -- clean-hands doctrine -- chancellor did not err in applying
     against appellant. -- Where appellant admitted that the conveyance
     of property to the decedent was an attempt to avoid a tax lien
     and the enforcement of a judgment; where there was no dispute
     that appellant was guilty of improper conduct and that his
     actions were unconscientious and unjust; where the chancellor
     obviously believed that the policy against permitting possible
     unjust enrichment of the estate was outweighed by the policy
     against giving relief to a person who had entered a
     transaction for an improper purpose; and where the chancellor
     was in the better position to determine the facts and to weigh
     the competing interests in the case, the appellate court could
     not say that he had abused his discretion in applying the
     clean-hands doctrine against appellant.

8.   Trusts -- constructive trust -- parol evidence of oral promise admissible
     to establish existence of. -- Parol evidence of an oral promise is
     admissible to establish the existence of a constructive trust.

9.   Evidence -- excluded parol evidence of decedent's intent -- outcome would
     not have been different if admitted. -- Even if the chancellor had
     admitted parol evidence concerning the decedent's statements
     about the real property in issue with respect to intent, the
     appellate court could not say that the outcome would have been
     different because the chancellor was not required to believe
     appellant or another witness; further, even if taken as true,
     the statements were not germane to the question whether the
     chancellor acted appropriately in applying the clean-hands
     doctrine.  

10.  Appeal & error -- prejudice must be demonstrated for reversal. -- Error
     is no longer presumed to be prejudicial; unless the appellant
     demonstrates prejudice, the appellate court does not reverse.


     Appeal from Saline Chancery Court; Robert Garrett, Chancellor;
affirmed.
     Michael Knollmeyer, for appellant.
     Lovell & Nalley, by: John Doyle Nalley, for appellee.

     John Mauzy Pittman, Judge.
     Wade Lucas has appealed from an order of the Saline County
Chancery Court denying his petition to establish a constructive
trust or an equitable lien on real property held by the Estate of
Myra Lucas.  We affirm the chancellorþs decision.
     Appellant married Myra Lucas in January of 1989, after living
with her for approximately eight months.  On December 30, 1988, the
real property in issue was conveyed by warranty deed to Myra, who
gave a mortgage to Superior Federal Bank to secure a $20,000.00
note of the same date.  Myra signed the mortgage as an unmarried
person and was the only person to sign the note.  On August 17,
1989, Myra signed a quitclaim deed to the same property to herself
and appellant as husband and wife.  On December 6, 1989, Myra and
appellant signed a quitclaim deed of the property to Myra.
     Myra died intestate on February 26, 1994, survived by
appellant and her two daughters, Linda Brown and Tanya Grant. 
Myraþs estate sought authority from the probate court to sell the
decedentþs home.  Appellant filed a counterclaim, contending that
he was the equitable owner of the home and asking the court to
impose a constructive or resulting trust or equitable lien.  The
probate court denied the counterclaim, and on appeal to this court,
we held that the probate court lacked jurisdiction to decide the
merits of the counterclaim.  See Lucas v. Brown, No. CA95-634
(November 27, 1996).
     On February 28, 1997, appellant filed a petition in the Saline
County Chancery Court, asking the court to impose a constructive
trust or equitable lien on the property.  By agreement, the parties
submitted the record from the probate court as the record in this
case.
     Appellant testified that he had provided $61,000.00 of the
houseþs purchase price, which was $69,000 plus cancellation of a
$2,000.00 debt that the sellers owed to Myra.  Appellant testified
that a portion of the $20,000.00 loan from the bank went toward the
purchase price of the house.  Appellant stated that he had caused
the deed to be placed in Myraþs name because he owed the Internal
Revenue Service approximately $30,000.00 and because his ex-wife
had recently obtained a $15,000.00 judgment against him.  He said
that he and Myra had a joint checking account, into which both
deposited their income.  The $300.00 monthly mortgage payments were
made from this joint checking account.  He stated that he had not
intended to give the house to Myra and had caused it to be placed
in her name þ[b]ecause I didnþt want the IRS or my ex-wife to have
any part of it.þ  He stated that the house had been placed in his
and Myraþs names in order to secure a loan for $5,000.00; he signed
the property back to Myra after they obtained the loan. 
     In his decision, the chancellor found:
     Mr. Lucas deeded the property to his deceased wife on two
     occasions for the purpose of avoiding a tax lien with the
     Internal Revenue Service and to avoid paying a judgment
     to his former wife.  This decision is based upon the
     doctrine of estoppel, because Mr. Lucas knew exactly what
     he was doing and the ramifications of signing the deed
     and the doctrine of unclean hands.  
     On appeal, appellant argues that the chancellor abused his
discretion in refusing to impose a constructive or resulting trust
or an equitable lien on the property.  Appellant contends that he
and Myra were in a confidential relationship and, therefore, a
presumption arose that appellant intended to purchase the property
for his own benefit.  
     The burden of proof was upon appellant to establish the
existence of a trust.  Waller v. Waller, 15 Ark. App. 336, 693 S.W.2d 61 (1985).  A chancellorþs decision regarding whether to
impose a constructive or resulting trust will not be reversed
unless it is clearly erroneous or clearly against the preponderance
of the evidence. 
     A confidential relation exists between two persons when one
has gained the confidence of the other and purports to act or
advise with the otherþs interest in mind.  Horton v. Koner, 12 Ark.
App. 38, 671 S.W.2d 235 (1984).  Relationships deemed to be
confidential are not limited to those involving legal control; they
also arise whenever there is a relation of dependence or
confidence, especially confidence that springs from affection on
one side and a trust in reciprocal affection on the other.  Jones
v. Balentine, 44 Ark. App. 62, 866 S.W.2d 829 (1993).  A
confidential relationship, however, is not established simply
because parties are related or live in the same household.  Wright
v. Union Natþl Bank, 307 Ark. 301, 819 S.W.2d 698 (1991).  There is
no set formula by which the existence of a confidential
relationship may be determined, for each case is factually
different and involves different individuals.  Donaldson v.
Johnson, 235 Ark. 348, 359 S.W.2d 810 (1962).  Whether two
individuals have a confidential relationship is a question of fact. 
See Savage v. McCain, 21 Ark. App. 50, 728 S.W.2d 203 (1987).  On
this record, we cannot say that the chancellor erred in failing to
find that appellant had a confidential relationship with Myra.
     In Henry v. Goodwin, 266 Ark. 95, 583 S.W.2d 29 (1979), the
supreme court recognized that to determine whether to impose a
constructive trust conflicting principles of public policy must be
balanced:  
          The appellants also contend that since Mrs. Goodwin
     apparently misrepresented her position to the Social
     Security agency, she is precluded by estoppel or the
     clean hands doctrine from claiming the land. In a similar
     situation, where the owner of property transfers it upon
     an intended trust which fails for illegality, "a
     resulting trust does not arise if the policy against
     permitting unjust enrichment of the transferee is
     outweighed by the policy against giving relief to a
     person who has entered into an illegal transaction."
     Restatement, [(Second) of Trusts]  422. It is thus a
     matter of balancing conflicting principles of public
     policy. Among the factors to be considered are (1)
     whether the grantor's conduct involves moral turpitude,
     (2) the extent of the policy making the transaction
     illegal, (3) whether the enforcement of a trust would
     tend to prevent the accomplishment of the illegal
     purpose, (4) whether the transferee was more at fault
     than the transferor, and (5) whether the transferor was
     ignorant of the law or of the facts making the trust
     illegal.  Id., Comment b.

266 Ark. at 98-99, 583 S.W.2d  at 31.
     It has long been recognized that the clean-hands maxim bars
relief to those guilty of improper conduct in the matter to which
they seek relief.  The purpose of invoking the clean-hands doctrine
is to protect the interest of the public on the grounds of public
policy and to protect the integrity of the court.  Id.  It is
within the chancellorþs discretion to determine whether the
interests of equity and justice require application of the
doctrine.  Id.; Reid v. Reid, 57 Ark. App. 289, 944 S.W.2d 559
(1997); Laroe v. Laroe, 48 Ark. App. 192, 893 S.W.2d 344 (1995). 
     We cannot say the chancellor erred in applying the clean-hands
doctrine in the case at bar.  Appellant freely admitted at trial
that the conveyance of the property to Myra was his idea, and we
note that appellant saw to it that a deed to the property was
placed in Myraþs name on two occasions.  Additionally, Myra signed
a note for $20,000.00 and a mortgage securing the same in her own
name.  Money from the partiesþ joint checking account, into which
both parties deposited their income, paid this note.  Appellant
admits that he was simply attempting to avoid a tax lien and the
enforcement of a judgment by his ex-wife.  At trial, appellant
testified that he had not yet paid either debt.  Certainly, there
is no dispute that appellant was guilty of improper conduct and
that his actions have been unconscientious and unjust in this
matter.  Obviously, the chancellor believed that, in this case, the
policy against permitting possible unjust enrichment of the estate
was outweighed by the policy against giving relief to a person who
has entered a transaction for an improper purpose.  See Henry v.
Goodwin, supra.  As the chancellor was in the better position to
determine the facts and weigh the competing interests in this case,
we cannot say that he abused his discretion in applying the clean-
hands doctrine against appellant.
     Finally, appellant argues that the probate judge erred in
failing to admit parol evidence concerning Myraþs and appellantþs
intent.  Although appellant testified at length about his intent in
having the deed placed in Myraþs name, the chancellor refused on
the ground of hearsay to consider appellantþs or Ohma Adairþs
testimony about Myraþs statements regarding the house.  It is true
that parol evidence of an oral promise is admissible to establish
the existence of a constructive trust.  Bramlett v. Selman, supra. 
Nevertheless, even if the chancellor had admitted this testimony,
we could not say that the outcome would have been different,
because the chancellor was not required to believe appellant or Ms.
Adair.  Further, even if taken as true, these statements are not
germane to the question of whether the chancellor acted
appropriately in applying the clean-hands doctrine.  Error is no
longer presumed to be prejudicial; unless the appellant
demonstrates prejudice, we do not reverse.  Abernathy v. Weldon,
Williams, & Lick, Inc., 54 Ark. App. 108, 923 S.W.2d 893 (1996);
Jones v. Jones, 43 Ark. App. 7, 858 S.W.2d 130 (1993).
     Affirmed.
     Jennings and Stroud, JJ., agree.