Purchase Money Resulting Trust Theory And Title on Deed

A married judgment debtor can be unpleasantly surprise when a creditor has garnished an account, or levied upon property, titled in their own name. The debtor tries to convince the creditor or court that because he is married the property should be considered an exempt tenants by entireties asset owned jointly with his non-debtor spouse. “ I always intended to own the property jointly with my spouse.”

The debtor’s plea did not work in a recent bankruptcy case on appeal to the Circuit Court of Appeals. The debtor had legal title to a piece of real estate which he and his non-debtor spouse used together. They purchased the property with money from the debtor spouse and from the non-debtor spouse and her parents.. The couple paid ongoing property expenses from a joint account. The bankruptcy trustee said the property was part of the debtor’s bankruptcy property because it had always been titled in his name. The debtor argued that because his wife and her family contributed some of the money used to buy and maintain the property, and because the couple intended to own this and all other property jointly during their marriage, that the debtor held legal title in trust for he and his non-debtor wife.

The court ruled in favor of the trustee and authorized the trustee to sell the property. The legal basis of the debtor’s argument was based upon theories of “resulting trust.” A person who contributes money to the purchase of a property is deemed to have an equitable interest held in a resulting trust by the legal title holder (the debtor in this case). However, the court said that a resulting trust requires an agreement between the legal title holder and beneficiary who contributed part of the money, and that a resulting trust must be proved by “clear and convincing evidence.” In this case, the court said there was insufficient evidence that the spouses agreed to hold legal title in the debtor’s name in trust for joint ownership.

Merely reciting intent to own property jointly as husband and wife will not change ownership established by the names on the deed.

Last updated on May 22, 2020