Sandra Burmeister and Keith Hutchinson v. Maxyne L. Richman

ca02-899

ARKANSAS COURT OF APPEALS

NOT DESIGNATED FOR PUBLICATION

CHIEF JUDGE JOHN F. STROUD, JR.

DIVISION IV

SANDRA BURMEISTER and

KEITH HUTCHINSON

APPELLANTS

V.

MAXYNE L. RICHMAN

APPELLEE

CA 02-899

May 21, 2003

APPEAL FROM THE BENTON

COUNTY CIRCUIT COURT

[E-00-1749]

HONORABLE XOLLIE DUNCAN,

CIRCUIT JUDGE

AFFIRMED

This is the second appeal in this case. Appellee, Maxyne Richman, petitioned the trial court to set aside a deed that she had executed to herself and appellants, Sandra Burmeister and Keith Hutchinson, as joint tenants with the right of survivorship, claiming that the deed should be set aside because appellants repudiated an agreement that, upon her death, they would sell the property and give the proceeds to the Humane Society. The court originally granted appellee's petition on the basis of non-delivery of the deed from appellee to appellants after its execution. We reversed and remanded that decision in Burmeister v. Richman, 78 Ark. App. 1, 76 S.W.3d 912 (2002).

On remand, the trial court, without hearing any further testimony or arguments from the parties, considered the issue of a constructive trust, which was originally pleaded by Richman but had not been ruled upon by the trial court in the first proceeding, and imposed

a constructive trust on the property in favor of appellee during her lifetime and in favor of the Humane Society at her death. On appeal, appellants argue that the trial judge erred in holding that clear and convincing evidence supported the imposition of a constructive trust because such an imposition exceeded the scope of the appellate mandate upon reversal and because there was no clear and convincing evidence that a confidential relationship existed between the parties or that appellants made a false oral promise to appellee. We affirm.

Our supreme court recently set forth our oft-stated standard of review in equity cases in Carter v. Four Seasons Funding Corp., 351 Ark. 637, 652, 97 S.W.3d 387, 394-95 (2003) (citing Lewellyn v. Lewellyn, 351 Ark. 346, 93 S.W.3d 681 (2002)) (internal citations omitted):

This court has traditionally reviewed matters that sounded in equity de novo on the record with respect to fact questions and legal questions. We have stated repeatedly that we would not reverse a finding by a trial court in an equity case unless it was clearly erroneous. We have further stated that a finding of fact by a trial court sitting in an equity case is clearly erroneous when, despite supporting evidence in the record, the appellate court viewing all of the evidence is left with a definite and firm conviction that a mistake had been committed. These common law principles continue to pertain after the adoption of Amendment 80 to the Arkansas Constitution, which was effective on July 1, 2001.

We first address appellants' contention that the trial judge's imposition of a constructive trust exceeded the scope of our mandate in Burmeister v. Richman, 78 Ark. App. 1, 76 S.W.3d 912 (2002). In that opinion, we held:

We do not interpret the judge's rulings to contain a finding one way or the other regarding the credibility of appellee's contention that appellants promised to turn the house over to the Humane Society upon her death. Instead, we read her remarks from the bench and the language contained in her order to say that her finding of non-delivery rests on the fact that appellee continued to live in and pay taxes on the home after the deed was executed. Therefore, our review of the judge's findings will be limited to whether her decision on that basis was clearly erroneous.

We also state in the last paragraph of the opinion, "Appellants also challenged the trial court's imposition of a constructive trust, but our review of the court's order does not reveal that a constructive trust was imposed. We therefore reverse and remand on the basis discussed herein."

Nothing in the language quoted above required that the trial judge enter an order in favor of appellants. In the complaint, appellee had pleaded the theory of imposition of a constructive trust; however, due to the trial judge's initial disposition of the case, it was unnecessary for her to rule on that theory prior to the first appeal. Appellants argue that no further proceedings were called for in the mandate; therefore, the trial court should not have ruled on the constructive trust theory. This is incorrect. Although this court reviews equity cases de novo and may render such a decree as should have been entered in the trial court, it is not required to do so. See, e.g., Bennett Ford, Inc. v. Pulaski County Spec. Sch. Dist., 274 Ark. 208, 624 S.W.2d 426 (1981). In the present case, the theory of a constructive trust was pleaded below but not ruled upon because the trial court ruled upon a different theory. In reversing that decision, we felt it would have been inappropriate for this court to rule on the alternative theory of constructive trust when the trial judge had the benefit of seeing and hearing the witnesses' testimony during trial and that theory was not considered below. Our mandate in no way limited the trial judge's ability to consider the theory of a constructive trust on remand; therefore, we hold that her consideration of that theory was proper.

Appellants also argue that the trial judge erred in holding that clear and convincing evidence supported imposing a constructive trust. Specifically, they argue that the trial judge erred in holding that appellee proved by clear and convincing evidence that a confidentialrelationship existed between appellants and appellee and that appellants made an intentionally false oral promise to appellee.

A constructive trust arises in favor of persons entitled to a beneficial interest against one who secured legal title either by an intentional false oral promise to hold the title for a specified purpose, or by violation of a confidential or fiduciary duty, or is guilty of any other unconscionable conduct which amounts to a constructive fraud. Edwards v. Edwards, 311 Ark. 339, 843 S.W.2d 846 (1992). In Betts v. Betts, 326 Ark. 544, 547, 932 S.W.2d 336, 337-38 (1996) (citations omitted), our supreme court held:

A constructive trust is imposed where a person holding title to property is subject to an equitable duty to convey it to another on the ground that he would be unjustly enriched if he were to be permitted to retain it. The duty to convey the property may arise because it was acquired through fraud, duress, undue influence or mistake, breach of a fiduciary duty, or wrongful disposition of another's property. The basis of the constructive trust is the unjust enrichment that would result if the person having the property were permitted to retain it. Ordinarily a constructive trust arises without regard to the intention of the person who transferred the property.

In Nichols v. Wray, 325 Ark. 326, 333, 925 S.W.2d 785, 789 (1996) (citations omitted), the supreme court set forth the requirements necessary to impose a constructive trust:

To impose a constructive trust, there must be full, clear, and convincing evidence leaving no doubt with respect to the necessary facts, and the burden is especially great when a title to real estate is sought to be overturned by parol evidence. The test on review is not whether the court is convinced that there is clear and convincing evidence to support the chancellor's finding but whether it can say the chancellor's finding is clearly erroneous, and we defer to the superior position of the chancellor to evaluate the evidence. A finding is clearly erroneous when, although there is evidence to support it, the reviewing court on the entire evidence is left with the definite and firm conviction that a mistake has been committed.

A brief recitation of the facts in this case is necessary. On June 12, 1997, appellee, who is now in her 80s and has no spouse, children, or relatives, executed a deed that conveyed her residence in Bella Vista to "SANDRA BURMEISTER, KEITH HUTCHINSON, and MAXYNE L. RICHMAN, as joint tenants with right of survivorship and not as tenants in common...." The deed contained no conditions or other limiting language. In 1990 she had previously deeded this property to herself and Oscar Shaffer, her long-time friend, as joint tenants with the right of survivorship; when Oscar died in 1996, appellee regained her status as sole owner of the house.

In 1997, appellee became close friends with appellants, whom appellee referred to as her "kids." The three enjoyed a close social relationship that included going to eat together and exchanging gifts. Appellants sometimes took appellee grocery shopping, and Hutchinson occasionally performed odd jobs at appellee's home, for which he was paid with gifts of nice clothing and meals. Appellee also gave appellants a set of house keys and a garage door opener, and she put their names on her credit cards and bank account.

The circumstances leading to the execution of the deed are disputed. According to appellee, she spoke with an attorney friend after Oscar Shaffer's death and learned that, if she died without close relatives, her property might escheat to the State. She testified that she communicated her concern to appellants as follows:

I told [Hutchinson]...I did not want the State of Arkansas to have it, and I said, "If you would put your name on the deed with me," I said, "then I would have to ask you to be sure the home is sold and that the money is turned over to the humane society."

According to appellee, Hutchinson responded that this was "no problem." Appellee also testified that Burmeister was present during this exchange, but said nothing.

Appellee hired attorney David George, who prepared the abovementioned deed and also prepared, at her request, a will appointing appellants as executors of her estate and bequeathing the bulk of her estate to them. The will, like the deed, contained no restrictions or limiting language even though, according to appellee, she told George that she wanted her home sold and the proceeds given to the Humane Society.

Appellants testified that they offered to become executors of appellee's estate after Oscar Shaffer died. According to them, they learned for the first time at the attorney's office that appellee planned to include them on her deed and make them beneficiaries in her will. However, Hutchinson admitted that one of the reasons that his and Burmeister's names were listed first on the deed was because the first two people listed on the deed receive the benefits of the Bella Vista Property Owners' Association. Appellants testified that no mention was made of selling the house and giving the proceeds to the Humane Society.

Following the execution of the deed, the attorney recorded it and sent it to appellee, who retained possession of it at her home. Appellee continued to live in the home alone, pay taxes on it, pay for repairs and improvements, and otherwise conduct herself as if she were sole owner. Appellants paid only the property owners' assessment fees, which allowed them to play golf at Bella Vista.

Following execution of the deed, the parties continued to enjoy a good relationship until August of 2000. At that time, appellee hired a couple named Blevins to place decorative rock in her backyard, and appellants were critical of the type of rock that appellee had chosen and the cost of the rock. According to appellee, she became angry and told appellants she would "turn [the house] over" to Mr. and Mrs. Blevins. She testified that,thereafter, appellants came to her house, showed her a copy of her will, and claimed to own her house and everything in it. Appellee told them to take back all their gifts and later asked them to deed their interest in the property back to her. They refused, and appellee filed suit, asking that the deed be canceled or, in the alternative, that a constructive trust be imposed.

The remaining testimony at trial was given by appellee's hairdresser, Sheila Harp; appellee's close friend, Helen Ulland; and attorney David George. Harp testified that, after the argument between appellee and appellants occurred, appellants called her to discuss the situation. According to Harp, appellants said that, if appellee did not "straighten out," they would purchase her one-third share and kick her out of the house. This was denied by Burmeister. Ulland testified that appellee called her when she returned from the attorney's office on June 12, 1997, and told her that she had arranged for appellants to sell the house and give the proceeds to the Humane Society. Attorney David George, who had practiced for many years in the areas of real estate and estate planning, testified in a limited fashion because he had represented both appellants and appellee, and he did not want to violate the attorney-client privilege. He said that appellee read over the deed and the will and that she understood them before she signed them.

Appellants contend that the trial judge erred in finding that a confidential relationship existed between them and appellee. In Horton v. Koner, 12 Ark. App. 38, 43-44, 671 S.W.2d 235, 239 (1984) (citations omitted), this court set forth what constitutes a confidential relationship:

A confidential relation exists between two persons when one has gained the confidence of the other and purports to act or advise with the other's interest in mind. There is no set formula by which the existence of a confidential relationship may bedetermined, for each case is factually different and involves different individuals. The cases for the application of the doctrine cannot be scheduled. They pervade all social and domestic life. Whether or not a confidential relationship exists depends upon the actual relationship between the parties. A kinship is not necessary for a confidential relationship.

In the present case, the trial judge found that a confidential relationship existed between appellee and appellants. Appellee was in advanced years, and she was alone in the world with no living relatives. Appellants befriended appellee, and it was undisputed that the three of them enjoyed a close relationship until August 2000. Appellee was concerned about her property escheating to the State on her death, a fact that she conveyed to appellants, who offered to be the executors of her estate upon her death. Furthermore, appellants also had access to appellee's bank accounts and credit cards. The trial court's finding that a confidential relationship existed between the parties was not clearly erroneous.

Appellants also contend that the trial court erred in finding that appellants made an intentional false oral promise to appellee. However, where the promise is made by one who stands in a confidential relation to the grantor, equity will impose a constructive trust without proof of actual fraud or any other evidence that the promisor had the intent to defraud at the time of the representation. White v. White, 254 Ark. 257, 493 S.W.2d 133 (1973). Because of our holding that a confidential relationship existed between appellee and appellants, it is immaterial whether appellants made an intentional false oral promise to appellee.

Even though the promise did not have to be intentionally false at the time it was made because of the finding that a confidential relationship existed, appellee must still show that there was a broken promise on the part of appellants. The testimony regarding whether there was a promise made by appellants to appellee to donate her house to the Humane Societyafter her death is sharply in conflict, as indicated above, and in cases such as these, we defer to the trier of fact to determine the credibility of the witnesses. Wright v. Union National Bank, 307 Ark. 301, 819 S.W.2d 698 (1991). The trial judge specifically found in her order that her findings were based upon the credibility of the witnesses, and we are bound by those determinations unless we find them to be clearly erroneous, which we do not. The imposition of a constructive trust is affirmed.

Affirmed.

Pittman and Baker, JJ., agree.