A Strong Offense
A Stronger Defense
Perception — or perhaps more precisely, misperception — fuels so much fiduciary litigation. For example, an elderly grantor may have perfectly legitimate reasons for conveying property to someone outside the family. Even if the grantor’s reasons aren’t good, she is within her rights to make a completely unreasonable transfer so long as nothing afoul is afoot (e.g., lack of capacity, undue influence, fraud, etc.).
But, when a blood relative learns of this transfer, a sense of entitlement kicks in, and we’re on our way to litigation. The problem for these elderly grantors, who are under so much pressure to explain or change their decision, is that they oftentimes say or do anything to try to make everyone happy. That never works. And that was the sort of situation recently before the Kentucky Court of Appeals.William (Billy) Sharp was Agnes Sharp’s biological son. Although not biologically related, Agnes referred to Michael (Mike) Sharp as her ‘grandson.’ Mike had lived with Agnes since he was two years old and he adopted Agnes’s last name.
One day, eighty-one-year-old Agnes consulted a local attorney who prepared a “love and affection” deed conveying Agnes’s house and the lot on which it was situated to Mike. Agnes signed the deed. Billy, who held a power of attorney for Agnes, learned about the conveyance a year later when he received Agnes’s property tax bills.
At the trial, Billy testified that when he asked Agnes about the conveyance, she had no recollection of going to the attorney’s office or signing the deed. Agnes even signed an affidavit stating that she did not intend to transfer the property to Mike.
Mike testified that, before the conveyance, he told Agnes that if she ever asked him to reconvey the property to her, he would do so. Agnes’s guardian ad litem testified that Agnes had stated that she wanted the property reconveyed. In Agnes’s video deposition (Agnes died before the trial), she testified that she wanted the property returned.
At the end of Billy’s case, the trial court granted Mike’s motion for directed verdict finding that there was no fraud or undue influence exerted upon Agnes. The trial court also speculated that, although Billy never asserted it in the complaint, the only possible remedy was the imposition of a constructive trust.
After judgment was entered, Billy sought to vacate the judgment and amend his original complaint to seek the imposition of a constructive trust. The basis for seeking the constructive trust was the alleged oral agreement between Mike and Agnes that he would reconvey the property if requested.
The trial court denied the motion on the grounds that, based on the evidence presented, Agnes intended that Mike legally possess the property and, thus, denied Billy’s efforts to seek a constructive trust.
In Sharp v. Sharp, the Kentucky Court of Appeals agreed with the trial court’s decision to deny Billy’s attempt to seek a constructive trust. While oral agreements to reconvey property can warrant the imposition of a constructive trust, the burden upon the party seeking to impose the trust is onerous. Thus, the evidence needed to be clear and convincing that, at the time of the conveyance, Mike misrepresented that he would reconvey the property to Agnes upon her request and, the promise must have been relied upon when Agnes executed the deed. Because there was no evidence at trial that Mike defrauded Agnes, there was likewise no evidence presented that Mike made a misrepresentation that would warrant imposition of a constructive trust.
While Mike promised to reconvey the property to Agnes if she asked, Agnes’s later request to reconvey the property was prompted by Billy. Thus, while there was evidence that Billy wanted the property reconveyed, there was no evidence that Agnes wanted the property reconveyed. Indeed, Agnes’s own testimony revealed that she intentionally and voluntarily wanted to convey the property to Mike. Her later statements appear to have been made with the hope of appeasing Billy and ending the litigation between her loved ones.