Appellants Ruth W. O'Neal, next friend of Anne Davis Warmack, David George Warmack, John Porter Warmack and Robert Edward Warmack, minor children of appellees, and Eugene Weisenfels, guardian ad litem of James T. Warmack and Daniel D. Warmack, also minor children of appellees Ed and Jane Warmack, allege that the trial court erred in ruling that a trust instrument violated the rule against perpetuities and in the alternative that the trial court erred in ruling that the property revested in the settlors instead of the beneficiaries.
We do not reach the first point because the trust instrument, upon which the trial court ruled, has not been abstracted as required by our Rule 9(d).
The next alleged error is not supported by the record which shows that all the assets of the trust originated with appellees Ed and Jane Warmack who made an attempted gift for the benefit of their children. The general rule is that a resulting trust arises in favor of the donor or settlor when the trust is held void for violating the rule against perpetuities. See Hopkins v. Grimshaw, 165 U.S. 342, 17 S.Ct. 401, 41 L.Ed. 739 (1897); 54 Am.Jur. Trusts § 200.
SMITH, J., concurs.
FOGLEMAN, J., dissents.
FOGLEMAN, Justice (dissenting).
I respectfully dissent as to point two. I find no evidence whatever to support the statement that Mr. and Mrs. Warmack made or attempted any gift to their children or that any of the assets of the trust originated with them. Ed Warmack testified that all property of the purported trust was conveyed to him as trustee for Ed Warmack Family Trust. He never owned any of the real property, nor held any title except as trustee. He borrowed the money, in his capacity as trustee, to purchase the Kansas property, the first acquisition. Later he exchanged property he personally owned for property in Louisiana conveyed to the trust, but financed the property as trustee and paid himself the fair market value of his property exchanged. There is a shopping center on the Kansas property and a Sears-Roebuck warehouse on the Louisiana property. The
It seems to me that the Warmacks, as declarants of the trust, clearly intended a trust for the benefit of all children born to them during the life of the trust. This is clearly indicated by Paragraph 1 of the trust set out in appellants' brief. The invalidity of the trust should not vest title in grantors who conveyed the property to the trustee and who have been paid full consideration for their conveyances. While a resulting trust in favor of the grantor is often declared when the trust expressed in his conveyance fails, such a result is proper and equitable when the conveyance is without consideration, but it is improper when the grantor conveys his entire estate upon a valuable consideration. Davis v. Jernigan, 71 Ark. 494, 76 S.W. 554. The father was not the grantor in any conveyance of property to him as trustee under the declaration of trust, so there would be no proper basis for a trust in his favor. Certainly there should not be a trust in favor of the grantors who have received a valuable consideration for their property. Davis v. Jernigan, supra.
The violation of the rule against perpetuities can only be based upon delayed distribution of the corpus beyond the time allowed. The conveyances themselves should not be invalid. The equitable result would be that the title to the property go to those who should certainly benefit — the children of the Warmacks — and that the title should be held in trust for their benefit, either by resulting trust of which the grantors in the conveyances are trustees, or, preferably, the named trustee in the conveyances, the father of these children. Vesting the title in the parents, or either of them, who have not contributed one cent to the purchase price of the property and who never intended to benefit from the purchases seems totally inequitable.
Neither of the parties is a donor or a settlor in the sense of the authorities stated in the majority opinion. Regardless of the very wholesome desires of these parents at the time the family trust was created and their present concern for their children, there are many, many factors, such as financial reverses, that frustrate the most noble parental concern. More than 90 years ago, Mr. Justice Eakin spoke for this court of equity's jurisdiction over the property of minors as a very high trust, involving the most delicate and important interests of a helpless class which is peculiarly the subject of the jealous and watchful care of chancery and peculiarly liable to injury from the greed of crafty men and the carelessness of relations. Myrick v. Jacks, 33 Ark. 425.
This concern for the welfare of minors makes it our duty to take that action with regard to the title to the land which is most consonant with the best interests of these minors. The principles of equity not only permit us to do so, but direct us to do so. The rules applicable to property freed from the disposition made by the conveyor are aptly stated at 5 Powell on Real Property 686.1, § 790 (1970) as follows:
The rule stated by Powell is consistent with § 424, Restatement of the Law, Trusts, Second, Chapter 12, Page 370, which reads:
When I view all the circumstances here, among which are the stated intention of the parents and the source of the purchase money, I think equity demands that we declare Ed Warmack to hold the title to the property involved as trustee for the children now or hereafter born to appellees.
Language of § 404.1, V Scott on Trusts (Third Edition) 3213, seems clearly applicable:
On the other hand, where property is purchased by one person and the property is transferred at his direction to another, it is inferred that the purchaser intended that the grantee should hold the property for the benefit of the purchaser. It is arguable that the trust which arises is therefore an express trust arising out of the intention of the purchaser manifested by his conduct. The courts have always taken the view, however, that the trust can properly be considered a resulting trust, since no evidence of the purchaser's intention to create a trust is required other than the character of the transaction. The character of the transaction raises an inference that he did not intend that the grantee should have the beneficial interest in the property. Accordingly, it is held that the purchaser is not precluded by the Statute of Frauds from compelling the grantee to convey the property to him. The circumstances of the transaction make it unnecessary to prove an undertaking by the grantee to hold the property in trust for the purchaser, and certainly dispense with the necessity of a written memorandum which is required by the Statute of Frauds where an express trust of an interest in land is created.
The general rule is stated at 5 Thompson on Real Property (Permanent Edition) 48, § 2361, thus:
In finding that the allegations of a complaint stated a resulting trust in Allbert v. Allbert, supra, the Kansas Supreme Court quoted and relied upon statements from Corpus Juris as follows:
I find that there are applicable Kansas Statutes which read:
When a conveyance for a valuable consideration is made to one person and the consideration therefor paid by another, no use or trust shall result in favor of the latter; but the title shall vest in the former, subject to the provisions of the next two sections. Kan.Stat.Ann. 58-2406.
See also Aaron v. Rothrock, 102 Kan. 272, 169 P. 1161 (1918).
On the subject of resulting trust, we find that Thompson makes these additional statements (Volume 5, Page 62, § 2370):
A resulting trust arises by implication of law, and does not grow out of a contract, and, where there is an express trust, there can be no resulting trust. It results from the conduct, relation, and supposed intention of the parties independent of any agreement whatsoever between them. Fraud is not an essential element to the creation or existence of a resulting trust. Such trusts are raised by implication of law and presumed to have been contemplated by the parties, the intention being found in the nature of the transaction although not expressed in the deed or instrument of conveyance. They ordinarily arise either upon a failure of an express trust or where property is transferred by a grantor to a third party at the request of one who pays the purchase-price. A trust may result in favor of the donor where there is a failure of an express trust. Such trust arises where the legal estate in property is transferred, but the intent appears or is inferred from the terms of the disposition, or from the accompanying facts and circumstances, that the beneficial interest is not to be enjoyed with the legal title, in which case, the trust is implied or results in favor of the grantor who is deemed to be the real owner. A resulting trust arises when one person's money is paid for land and the conveyance is taken in the name of another person. The trust depends upon the equitable presumption of intention, and arises the instant the legal title is taken. They are sometimes termed "presumptive trusts," or "passive trusts." Where, for any reason, the legal title to property is in one person under such circumstances as to make it inequitable for him to have the beneficial interest, equity will imply a trust in favor of the person entitled to the beneficial interest. It must appear from the entire transaction that there is an obligation on the part of the holder of the legal title to hold it for the benefit of someone else.
In all species of resulting trusts, intention is an essential element, although that intention is never expressed by any words of direct creation. There must be a transfer, and equity infers the intention that the transferee was not to receive and hold the legal title as the beneficial owner, but that a trust was to arise in favor of the party whom equity would regard as the beneficial owner under the circumstances. The equitable theory of consideration, heretofore explained, is the source and underlying principle of the entire class (see § 981). Resulting trusts, therefore, are those which arise where the legal estate in property is disposed of, conveyed, or transferred, but the intent appears or is inferred from the terms of the disposition, or from the accompanying facts and circumstances, that the beneficial interest is not to go or be enjoyed with the legal title. In such case a trust is implied or results in favor of the person for whom the equitable interest is assumed to have been intended, and whom equity deems to be the real owner. This person is the one from whom the consideration actually comes, or who represents or is identified in right with the consideration; the resulting trust follows or goes with the real consideration.
All true resulting trusts may be reduced to two general types: 1. Where there is a gift to A, but the intention appears, from the terms of the instrument, that the legal and beneficial estates are to be separated, and that he is either to enjoy no beneficial interest or only a part of it. In order that a case of this kind may arise, there must be a true gift so far as the immediate transferee, A, is concerned; the instrument must not even state any consideration, and no valid complete trust must be declared in favor of A or of any other person. Such trusts, therefore, generally arise from wills, although they may arise from deeds. If the conveyance be by a deed, the trust will result to the grantor; if it be by a will, the trust will result to the testator's residuary devisees or legatees, or to his heirs or personal representatives, according to the nature of the property and of the dispositions. 2. The second type includes the cases where a purchase has been made, and the legal estate is conveyed or transferred to A, but the purchase price is paid by B.
Cases supporting the rules stated in the texts are numerous. Some are particularly applicable to the facts here:
In Skidmore v. Gueutal, 143 App.Div. 407, 128 N.Y.S. 402 (1911), it was held that when a grantor conveys property absolutely for a valuable consideration paid to a trustee who executes a declaration of trust later found to be invalid for indefiniteness and for violation of the rule against perpetuities, title does not vest in the person named as trustee, but vests in the beneficiaries named in the declaration, when it is manifest that the grantor did not intend to convey to the trustee in his individual capacity.
In Smith v. Pratt, 95 N.H. 337, 63 A.2d 237 (1949), it was held that, when the trust instrument fails to disclose the intention of a declarant concerning ultimate disposition of the res, it will result to the creator of the trust in the absence of evidence of intention that the beneficial interest should pass to someone else. In that case there was no such evidence, so the one who furnished the consideration for the conveyance to the trustee who made the declaration of trust was deemed to be the creator of the trust and the beneficiary of a resulting trust in the remainder, after a life estate in the trustee specifically provided for in the property.
In Rosenthal v. Miller, 148 Md. 226, 129 A. 28 (1925), it was said that when there is consideration for a conveyance upon a
Graybill v. Manheim Central School District, 175 Pa.Super. 415, 106 A.2d 629 (1954), is another case in which it was held that fee simple title vests in the beneficiary in a deed where full consideration has been paid to the grantor and an attempted limitation is void for violation of the rule against perpetuities.
I would reverse the decree and remand for the entry of a decree declaring that Ed Warmack holds the corpus of the trust as trustee for the use and benefit of children born to him and his wife.