Coming to Terms

Written by Bert Rush on May 2nd, 2011

When details are neglected, fate comes out to play.

SOUTHAVEN, MS–Janet Wright, a widow, lived with her daughter Patricia and son-in-law, James O’Daniel. Janet wanted a home of her own, and the three of them talked about building a house together.

Details, details: The Southaven property

Janet bought a lot in Southaven, a suburb of Memphis, and held title with Patricia as joint tenants with a right of survivorship. Then, Janet, Patricia and James contracted to build a 5,200 square foot home on the lot, for an estimated $440,000.

Janet intended to contribute $200,000 to construction, but the work went over budget and she paid another $200,000. Having advanced $400,000, Janet approached Patricia and James about getting a construction loan to finish the work.

In March 2003, Janet, Patricia and James got a construction loan, secured by a mortgage against the Southaven property. The construction loan had to be paid off when the work was completed.

A few months later the work was completed and Patricia and James arranged a permanent loan to pay off the construction loan. Since this loan would be their contribution to the asset, it was agreed only Patricia and James would be the borrowers on the permanent loan.

The new lender, National City Mortgage, required a mortgage to secure the loan. The lender instructed that the property title be vested in Patricia and James so that the new mortgage would have first priority, and encumber the entire ownership.

So Janet and Patricia signed a deed conveying the property to Patricia and James, and the loan was ready for closing.

The closing was handled by a law firm where James’s mother was employed. With Patricia and James’s agreement, Janet instructed James’s mother to return Janet’s name to the property title after the loan was closed.

The loan closed and another deed was recorded conveying the property from Patricia and James to Janet, Patricia and James, as joint tenants with right of survivorship.

When she got a copy of the latest deed, Janet thought there’d been a mistake. It was, after all, her intention to vest the property in herself and Patricia, as joint tenants, without James being on the title at all.

So Janet contacted her own attorney, who advised her to have a real estate attorney correct the error. But Janet didn’t follow the advice, and neither did she raise the issue with Patricia and James. Then, of course, Patricia filed for divorce.

With Patricia and James divorcing, and James claiming a one-third interest in the property, Janet decided to file a lawsuit to straighten things out.

De Soto County Courthouse, at Hernando, Mississippi

Janet sued James for a judicial declaration that his interest in the property should be subject to a constructive trust or an equitable lien in favor of Janet. James filed a defense.

At trial, Janet testified it was always her intention to own the property 50-50 with Patricia. If she died, she wanted Patricia to own the property outright. Patricia testified the parties never discussed specific ownership interests in the property. James’s mother said she was told only that Janet’s name should be “added” to the title, with nothing said about James.

The trial court ruled in favor of James, mainly holding there was insufficient evidence to impose a constructive trust. Janet appealed.

The Court of Appeals affirmed, agreeing there was insufficient evidence to support Janet’s complaint.

The Court said Janet is not entitled to a constructive trust or an equitable lien because there was no evidence of fraud, duress or unconscionable conduct. In other words, James didn’t do anything wrong. Likewise, the Court would not cancel the deed for mutual mistake, because a mistake (if any there was) was Janet’s alone.

Moral: Mere intentions hold no sway in real estate matters. Any supposed real property interest should be reduced to writing. Otherwise, it probably can’t be enforced if challenged. In fact, our “statute of frauds,” a rule inherited from English common law, generally invalidates unwritten agreements as to real property interests. And, every state has some version of the statute of frauds.

Judges don’t like to re-write contracts, or deeds.

The case is Wright v. O’Daniel, 58 So.3d 694 (Miss. App. 2011).


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