Citizens Bank of Mass. v. Coleman

• Decision Date: 15 May 2013
• Docket Number: No. 12–P–365.,12–P–365.
• Citation: 83 Mass.App.Ct. 609,987 N.E.2d 1282
• Parties: CITIZENS BANK OF MASSACHUSETTS v. Pamela Baker COLEMAN.
• Court: Appeals Court of Massachusetts

83 Mass.App.Ct. 609

987 N.E.2d 1282

CITIZENS BANK OF MASSACHUSETTS

v.Pamela Baker COLEMAN.

No. 12–P–365.

Appeals Court of Massachusetts,

Suffolk.

Argued Oct. 10, 2012.

Decided May 15, 2013.

Steven B. Rosenthal for the defendant.

Robert L. Hamer, Boston, for the plaintiff.

Present: GRASSO, FECTEAU, & AGNES, JJ.

AGNES, J.

The principal question presented by this appeal is whether the judge was correct in determining that the purported transfers of the beneficial interests in two pieces of real estate by a husband to his wife as an alleged estate planning maneuver failed and thereby gave rise to resulting trusts. We conclude that the judge was warranted in finding that at the time of the transfers the husband's intent was to protect the two properties from his creditors, and that he did not intend to convey the beneficial interests to his wife. The combination of the husband's intent and his wife's tacit agreement to act as his agent supports the judge's ruling that the two properties were held by the wife, as trustee, in resulting trusts for her husband's benefit and thus were subject to reach and apply actions by his creditor. We therefore affirm.

Background. The plaintiff, Citizens Bank of Massachusetts (Citizens Bank), brought this reach and apply action to obtain assets purportedly held by the defendant, Pamela Baker Coleman (wife), to satisfy debts owed by her husband, Martin J. Coleman, III (husband), a real estate developer. The case was tried without a jury. We summarize the pertinent facts, drawn from the judge's findings of fact, rulings of law, and order of judgment.

In April of 1983 and 1984, the husband purchased, in his own name, two multifamily rental properties (collectively, rental properties) in Waltham: 331–333 Grove Street (Grove Street property) and 156–158 Ash Street (Ash Street property). The judge found that the husband furnished all the consideration to acquire these properties. In 1986, the husband and wife were married, and the wife began managing the properties. The judge found that the wife dealt with all issues relating to the tenants (including rent collection and filling vacancies) and superintended the maintenance, repairs, and payment of bills. In 1988, the husband experienced financial trouble, owing to his default on a $6.2 million construction loan, which he had personally guaranteed, for a development called Sunset Cove. This triggered defaults by the husband on other obligations, including his mortgage obligations on the rental properties.

On March 31, 1989, the husband transferred, by separate deeds, for nominal consideration, title to both rental properties to two respective nominee trusts,¹ with the wife named as the sole beneficiary of each trust. The judge found that these transfers were subject to outstanding mortgages on the rental properties. The judge also found that there was no evidence in the record that the wife paid any amounts toward the outstanding mortgages, although, as noted above, she collected rents and paid the obligations of the rental properties. In rejecting a proposed finding of fact, filed by the wife, to the effect that she had not been involved in the management of the rental properties, the judge pointed to a letter written by the husband to one of his creditors in 1990, one year after his purported gift of the properties to his wife, in which the husband maintained he owned the equity value of the properties.

In 1994, the Federal Savings Bank (FSB) obtained a judgment in the amount of $609,241.64 against the husband in an action which arose from a deficiency in the payment of a loan issued in 1991. FSB was subsequently placed in receivership, and was ultimately acquired by U.S. Trust in 1998. U.S. Trust was acquired by Citizens Bank in 2000. Neither FSB, its receiver, nor U.S. Trust made any attempt to reach and apply the wife's assets to satisfy the 1994 judgment. In 2005, Citizens Bank instituted the present action. After a bench trial, the judge ruled that the wife held the rental properties in resulting trusts for the husband, and that Citizens Bank could reach and apply these properties against the husband's debt. The judge also ruled that the bank was not entitled to an accounting to recover any excess rents. The case is before us on the parties' cross appeals.²

Discussion. We review the judge's findings of fact for clear error, his rulings of law de novo, and the imposition of equitable remedies for abuse of discretion. Cavadi v. DeYeso, 458 Mass. 615, 624, 941 N.E.2d 23 (2011).

1. Resulting trust. A. A resulting trust may be implied despite a gratuitous, voluntary transfer of property. The trial judge correctly ruled that resulting trusts existed, although we do not agree with his reasoning that this case involves purchase money resulting trusts. A resulting trust “is a reversionary, equitable interest implied by law in property that is held by a transferee, in whole or in part, as trustee for the transferor or the transferor's successors in interest.” Eaton v. Federal Natl. Mort. Assn., 462 Mass. 569, 577 n. 10, 969 N.E.2d 1118 (2012), quoting from Restatement (Third) of Trusts § 7 (2003). A resulting trust pivots on the key element of intent.³

“The case is made by showing circumstances which raise a presumption that the person making the transfer or causing it to be made did not intend to give the transferee the beneficial interest in question, and thus that the interest remained in the transferor or payor or his or her estate.”

Restatement (Third) of Trusts § 7 comment a, at 87.⁴

Ordinarily, a resulting trust is implied by courts when “a transfer of property is made to one person and the purchase price is paid by another; in such a case a trust results in favor of the person who furnished the consideration.” Meskell v. Meskell, 355 Mass. 148, 150, 243 N.E.2d 804 (1969). The trust that arises in such a situation is referred to as a “purchase money resulting trust.” See Restatement (Third) of Trusts § 7 comment c, at 89; Bogert, Trusts and Trustees § 454, at 299–302 (3d ed. 2005). See generally 6 Scott, Fratcher, & Ascher, Scott and Ascher on Trusts § 40.1.2 (5th ed. 2007). In such a case, the nominal title holder is said to hold the property in trust for the benefit of the person who paid the consideration based on the “natural presumption that, in the absence of anything to show the contrary, he who supplies the purchase price intends that the property bought shall inure to his own benefit and not that of another, and that the conveyance is taken in the name of another for some incidental reason.” Quinn v. Quinn, 260 Mass. 494, 501, 157 N.E. 641 (1927). See Simmons v. Smith, 20 Mass.App.Ct. 775, 778, 482 N.E.2d 887 (1985), and cases cited.

The husband's acquisition of the rental properties in 1983 and 1984 did not give rise to purchase money resulting trusts. The husband was not only the one who advanced the purchase money, but also was the one to whom the transfers were made. Regardless of the husband's intent at the time of the 1989 purported transfers to his wife, it could not cause resulting trusts to arise as of the dates the husband acquired the properties in 1983 and 1984. “[A] resulting trust must arise, if at all, at the time of the execution of the deed.” Maffei v. Roman Catholic Archbishop of Boston, 449 Mass. 235, 254, 867 N.E.2d 300 (2007), cert. denied, 552 U.S. 1099, 128 S.Ct. 907, 169 L.Ed.2d 729 (2008) (quotation and citation omitted).⁵ A purchase money resulting trust did not arise in 1989 because the husband did not advance the purchase money for the wife.

This turn of events, however, does not lead to the conclusion that the property held by the wife is beyond the reach of the husband's creditors. “[A] decision may be affirmed on appeal if the judge is ‘right for the wrong reason, even relying on a principle of law not argued below.’ ” Segal v. First Psychiatric Planners, Inc., 68 Mass.App.Ct. 709, 719 n. 4, 864 N.E.2d 574 (2007) (Meade, J., dissenting), quoting from Aetna Cas. & Sur. Co. v. Continental Cas. Co., 413 Mass. 730, 734–735, 604 N.E.2d 30 (1992). “A resulting trust may be decreed under a variety of circumstances that do not involve purchase money resulting trusts.” Bogert, Trusts and Trustees § 451, at 286. The circumstances of this case involve gratuitous transfers to a family member. There is no presumption of a resulting trust in such a case. See Dwyer v. Dwyer, 275 Mass. 490, 494, 176 N.E. 619 (1931); Meskell, 355 Mass. at 151, 243 N.E.2d 804;Cavadi, 458 Mass. at 631, 941 N.E.2d 23. See also Restatement (Third) of Trusts § 9(2). Instead, there is a contrary presumption of a gift. Restatement (Third) of Trusts § 7 comment c, at 89–90. However, that presumption is not conclusive. “[T]he presumption, whether of resulting trust or gift, may be rebutted in whole or in part by evidence of a different intention.” Id. at 89. This is such a case. Based on the judge's findings regarding the husband's intent at the time of the 1989 transfers and the wife's conduct thereafter, resulting trusts arose at the time of the transfers. This conclusion is supported by the reasoning in cases such as Barche v. Shea, 335 Mass. 367, 140 N.E.2d 305 (1957), and Abalan v. Abalan, 329 Mass. 182, 107 N.E.2d 302 (1952), in which the Supreme Judicial Court imposed a resulting trust in circumstances which involved a gratuitous voluntary transfer of property to a family member.

In Abalan, the Supreme Judicial Court held that the parents' conveyance of a piece of real property that they had owned for a number of years to their daughter, incidental to mortgaging the property, with the expectation that the daughter would reconvey it to them on demand, gave rise to a resulting trust in favor of the parents. Id. at 183–184, 107 N.E.2d 302. The court concluded that the evidence supported the judge's findings that the daughter knew the conveyance was not intended as a gift and assented by her silence to the parents'...