Belton v. Buesing

• Decision Date: 19 May 1965
• Citation: 402 P.2d 98,240 Or. 399
• Parties: In the Matter of the Estate of Henry Buesing, Deceased. Howard C. BELTON, as State Treasurer, Appellant, v. Charles BUESING as executor of the Estate of Henry Buesing, deceased, Respondent.
• Court: Oregon Supreme Court

Page 98

402 P.2d 98

240 Or. 399

In the Matter of the Estate of Henry Buesing, Deceased.

Howard C. BELTON, as State Treasurer, Appellant, v. Charles BUESING as executor of the Estate of Henry Buesing, deceased, Respondent.

Supreme Court of Oregon.

Argued and Submitted at Pendleton, Oct. 26, 1964.

Decided May 19, 1965.

Oliver I. Norville, Sp. Asst. Atty. Gen., Portland, argued the cause for appellant. With him on the briefs was Robert Y. Thornton, Atty. Gen., Salem.

R. Thomas Gooding, La Grande, argued the cause for respondent. On the brief were Burleigh, Carey & Gooding, La Grande.

Before McALLISTER, C. J., and PERRY, SLOAN, O'CONNELL, GOODWIN, DENECKE and LUSK, JJ.

O'CONNELL, Justice.

This is an appeal by the State Treasurer from an order of the Union County Circuit Court overruling his objections to the determination of the inheritance tax in the estate of Henry Buesing, deceased. The objections were made on the ground that certain property in which decedent had an interest had been excluded from the net taxable estate in determining the inheritance.

Henry, Charles, and Benjamin Buesing, who were brothers, formed a partnership in 1903 for the purpose of operating a farming and cattle business. From 1915 to 1931 the brothers acquired four parcels of land. Two of the deeds designated the brothers as tenants in common; two deeds designated the grantees as partners.

In 1940 Henry disclosed to Charles his intent to marry. On May 3, 1940, at Charles' insistence, Henry conveyed all of his interest in the property which the brothers had previously acquired and which had been used for partnership purposes. The purpose of the conveyance was to prevent Henry's prospective wife from getting an interest in the property. ¹ No consideration was paid for the conveyance. A gift tax return was not filed. Henry was married on December 4, 1941. The marriage was annulled on June 29, 1942. After the annulment the property was not conveyed back to Henry. When asked why the property was not reconveyed, Charles testified, 'Oh, I don't know just why.' He added, 'Never was anything said about it and I just forgot about it and that land.' ²

In 1955 the three brothers joined in the sale of three parcels of property referred to as the Schroeder, Taylor Bros. and Anson sales. The property was sold under executory land sale contracts. The down payment and subsequent payments on the contracts went into the partnership bank account. Later in 1955 Benjamin died. The payments continued to be deposited in the partnership bank account and Henry and Charles regarded the account as owned equally by them. Charles and Henry reported the capital gain and the income derived from these contracts on an equal basis. Henry died in 1962 leaving all of his interest in the partnership and the property to Charles.

The taxpayer contends that since Henry conveyed all of his property to Charles in 1940 the only interest he had at his death was the one-sixth interest he received upon Benjamin's death (Benjamin having left one half of his one-third interest to each of his brothers after Henry's conveyance to Charles). The State Treasurer contends that Henry owned a one-half interest in the partnership and its assets at his death, and that this interest was taxable when it was devised to Charles.

The trial court held that the deed from Henry to Charles conveyed all of Henry's interest, both legal and equitable, in the property then owned by him and, therefore, the only taxable interest was the one-sixth interest which Henry had received upon the death of Benjamin.

Ordinarily a deed absolute in form with or without consideration creates in the grantee the entire interest in the land, both legal and equitable. In the early English law, since it was common for the grantee to hold land for the benefit of the grantor, it was presumed that a gratuitous conveyance was not intended to vest the beneficial ownership in the grantee and, consequently, he held the legal title upon a resulting use for the grantor. In modern law, since it is common to make gratuitous conveyances with the intent to vest complete ownership in the grantee, it is held that such conveyances without more do not give rise to a resulting trust for the grantor. ³

However, a trust may arise out of a gratuitous conveyance absolute in form upon other grounds. Thus a constructive trust may be imposed upon the grantee as a remedial device to avoid unjust enrichment. And an express trust may be created if the grantor manifests an intention to create it.

The intention to create an express trust may be inferred from circumstances attending the conveyance. A resulting trust is also deemed to arise from circumstances attending the conveyance. ⁴ The difference appears to be that in the case of an express trust the circumstances give rise to an inference that the grantor had an affirmative intention to create a trust, whereas in the case of a resulting trust the circumstances give rise to an inference that grantor had no intention to give the beneficial interest to the transferee. ⁵ Whether this expresses a valid or useful conceptual distinction we need not consider. ⁶ It is enough to note that a trust of either category may arise out of conduct alone, that is, where there is no expression of intent and the inferences leading to the conclusion that a trust was or would have been intended by the grantor if he had thought about it, are drawn entirely from circumstantial evidence.

In the present case the conveyance was made for the purpose of preventing Henry's prospective wife from obtaining an interest in his property. It seems reasonable to infer from this circumstance that the conveyance was not made to vest the beneficial interest in Charles but simply to set up in him a facade of complete ownership which was to hide the continued beneficial ownership previously enjoyed by Henry. The conveyance could have been made for the double purpose of defeating a marital interest and of making a gift to Charles. But there were no circumstances from which it could be inferred that Henry intended to make a gift to Charles. Quite to the contrary, the evidence indicates that the transfer to Charles was made to serve partnership purposes. Charles testified that it was he who requested the transfer. In fact, he stated 'I made him do that,' i. e., execute the deed. This clearly is not the setting for a gift--it is the obvious maneuver of the partners erroneously assuming that it was necessary to rearrange the appearance of ownership in the interest of continuing the partnership affairs unembarrassed by claims of an outsider to property used in the partnership business.

Although it was not shown that Charles expressly promised to hold Henry's interest in trust, the obligation could he inferred from the circumstances. Justice Cardozo's language in Sinclair v. Purdy, 235 N.Y. 245, 139 N.E. 255, 258-259 (1923) is appropriate. In that case the grantor, to escape the importunities of friends asking him to go bail for them, executed a deed absolute in form to his sister. There was no proof that the sister agreed to hold in trust for the grantor. The court said, 'Though a promise in words was lacking, the whole transaction, it might be found, was 'instinct with obligation' imperfectly expressed [citing Wood v. Lucy, Lady Duff-Gordon, 222 N.Y. 88, 91, 118 N.E. 214].' Although this language was used in developing the idea that a constructive trust was created (on the assumption that the Statute of Frauds had not been complied with), it is equally pertinent in a case such as the present to show how a promise may be inferred from circumstances so as to create an enforceable intent-formed oral trust.

Although the grantor's intent at the time of making the conveyance determines the nature of the interest created, it is permissible to look at the conduct of the parties after the conveyance in ascertaining that intent. ⁷ Their conduct may be regarded as a 'practical construction' of the deed. ⁸ It was shown that after Henry's conveyance the three brothers sold a part of the property used by the partnership and that the down payment and subsequent installment payments were deposited to the partnership account. ⁹ This conduct would indicate that the partners regarded Henry as having a beneficial interest in the property he had previously conveyed to Charles. In other respects the property was treated as partnership property in precisely the same way as it was treated prior to the transfer by Henry to Charles. ¹⁰

The circumstances in this case give rise to an inference that Henry Buesing had no intention to give to Charles a beneficial interest in the property conveyed, and that it was the intention of the parties that the property conveyed should be held and used as partnership property in the same manner as it was held and used before the conveyance. It is immaterial whether this conclusion is explained upon the ground that the transfer to Charles gave rise to an express trust (inferred from conduct) or a resulting trust.

The facts of the present case do not give rise to a constructive trust inasmuch as a constructive trust arises only if the transaction does not create an enforceable express or a resulting trust. ¹¹ A constructive trust is simply a remedial institution invented by equity to avoid unjust enrichment in situations where there is no other available equitable remedy. If, for example, personal property is transferred to the transferee upon an express promise to reconvey to the transferor and the transferee refuses to reconvey in accordance with the agreement a constructive trust does not arise, because all of the elements necessary to the existence of an express trust are present. The same would be true in the case of an oral trust of land unless the defense of the Statute of Frauds were interposed. ^{12 12} There is nothing in the record of the present case to show that the Statute of Frauds was interposed...