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What’s a Resulting Trust?

By: Reuben Rosenblatt, Q.C. and Nicole Andreakos
Minden Gross LLP, a member of MERITAS Law Firms Worldwide.

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Just because a person is the registered owner of property does not necessarily
mean that the person is the true owner.

Just because a person is named as a joint tenant of a property, or of a bank account, or some other asset, does not mean that the person will be entitled to the property or the proceeds of the bank account or asset when the other joint tenant passes away.

Where a person transfers his or her property into another person’s name gratuitously a resulting trust arises by operation of law in favour of the transferor.  The law provides that the true ownership “results” to the person who made the transfer or who advanced the purchase money.  The reason is that it would be unfair for a person to retain property that he or she did not pay for and was not intended to be a gift simply because he or she holds legal title.  It is the recipient who must prove that a gift was intended by the transferor.  There is an exception when the gift is from a mother or father to a minor child.  In that event, there is a presumption of advancement, that is, there is a presumption that a gift was intended.

Mary Danicki was almost 102 years old when her court case against her 68 year old son was heard by the Ontario Superior Court.  The trial judge called her a remarkable person who retained a zest for life and who had an engaging sense of humour.  (Of course her sense of humour may have been somewhat alleviated after the decision).

Mrs. Danicki lived in her home with her son, Frank, his wife Mary and their 2 children.  Mrs. Danicki lived downstairs while Frank and his family lived in the upstairs area.

Mrs. Danicki wanted to transfer her house to Frank.  He was a good son.  She went to a lawyer who, on two occasions, saw her separately and apart from her son.  She then transferred her house to her son subject to a life interest in her favour.

Sometime after making the transfer, she had second thoughts.  She felt she had made a big mistake.  Her daughter, who was a good daughter, was very hurt when she found out that her mother favoured one of her siblings.

Mrs. Danicki asked her son to give her back the house.  She wanted to divide it evenly three ways so that her children would be treated equally.  Frank said no.

Mrs. Danicki took her son to court.

The lawyer who had acted for Mrs. Danicki when she transferred her house to her son testified that Mrs. Danicki indeed understood what she was doing and wanted, at that time, to transfer the house to her son.

The trial judge, after hearing all the evidence including the testimony of the lawyer, said that it was apparent that Mrs. Danicki wanted to gift the house to her son and concluded simply that “A Gift is a Gift”.  Once the gift was made Mrs. Danicki could not take it back.  The fact that she changed her mind was not enough.

Mrs. Danicki lost the case.  The trial judge did not award costs to either party.

In a recent Alberta decision, Erika Luitenko sued her former friend, Lada McAleer and her husband to get back title to her house. When Erika went to buy a house, she was told that she could not qualify for a mortgage.  She asked her good friend Lada McAleer and her husband to buy the house in their names so that they would qualify for the mortgage.

Erika paid the deposit, the legal fees to close the transaction and the balance due on closing.  The property however, was registered in the names of the McAleers.  Erika lived in the home for two years.  She paid her friends a monthly amount to cover the mortgage payments, municipal property taxes and insurance premiums. Erika paid for renovations and repairs.

The property increased substantially in value.  After Erika had lived in the house for more than two years, the McAleers sent a letter to Erika addressed to “Dear Tenant”.  The letter informed her that the McAleers wanted to sell the property and requested that Erika vacate “as soon as possible”.  After all, they thought the house was registered in their names.  They testified that they had purchased the home as an investment property and that Erika was a tenant.

Erika took the McAleers to court.  The trial judge found the behaviour of the McAleers to be unconscionable and that they lied under oath.  The trial judge stated that the McAleers concocted their evidence to enable them to realize a significant profit.  The trial judge held that the purchase was made by Erika in the name of the McAleers and that although the mortgage was taken out by the McAleers, the person who advanced the purchase money was Erika.

The trial judge concluded that the property was held by the McAleers on a resulting trust for Erika. What was surprising is that the McAleers appealed the decision of the trial judge.  The Court of Appeal however agreed with the trial judge that a resulting trust in fact had been created since there was a clear common intention by the parties that the property was to be purchased by the McAleers for Erika’s benefit.  The McAleers had to pay Erika’s costs of the trial and the appeal.

Mary Ruth Barnes and Ernest Groves were involved in an intimate relationship for eight years.  Groves, age 69, was the former Vice-President of Culligan Water.  He was an astute businessman and investor who had been married for 47 years.  He lived with his wife and had two adult daughters.  Barnes was a real estate agent.  She was divorced and had one adult daughter whom she lived with for most of the duration of her relationship with Groves.

Barnes came across a resale condominium unit which she thought would be a good investment.  Although Groves put up all the money, about $200,000.00, the condominium was registered in Barnes’ name.  Barnes moved into the condominium.  Groves paid the occupancy costs.  According to Groves, the condominium would be Barnes’ principal residence so that when it was sold, there would be no capital gains.
Groves subsequently found out that Barnes (without telling him) mortgaged the condominium for $52,000.00 and then used the funds to purchase a BMW.  Barnes said that the condominium was a gift to her.  It was also to serve as a place where the couple could meet and be together.

Although Barnes claimed that the condominium was a gift to her, she had signed a document stating that in the event of her death, the condominium would go to Groves.  Barnes candidly admitted to the Court that she was a “kept woman” stating that Groves would give her approximately $2,000.00 per month as support income because spending time with Groves prevented her from making enough money at her job.  According to Barnes, the couple would vacation together and Groves was generous to her with gifts that included flowers, a wedding band, a Cartier Bracelet, earrings and a Volvo.

The Court looked at the evidence and considered, in particular, that the document signed by Barnes stating that the condominium would revert to Groves in the event of Barnes’ death did not support Barnes’ claim that Groves gifted the property to her.

The Court ordered that the property be sold and the proceeds used to repay Groves for the amount that he put up for the purchase with any profits from the sale to be divided equally between the two of them.