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No. 3-03-0399

APPELLATE COURT OF ILLINOIS

THIRD DISTRICT

A.D., 2004

FACTS

The petitioner, Karen Kendra, and the respondent, David Kendra, were married onSeptember 27, 1980, and were divorced on August 24, 2001. The intervenors, Larry andGwendolyn Rinkenberger, are the parents of Karen Kendra.

The property at the center of the dispute is a 40-acre tract of undeveloped land in ruralHancock County. The property was part of a 120-acre property purchased by LarryRinkenberger on May 6, 1998. At the time of purchase, the property was divided into three 40-acre tracts. The tracts were conveyed separately by warranty deeds to Larry and GwendolynRinkenberger, David and Karen Kendra, and Thomas and Lynn Haas, another daughter and son-in-law of Rinkenberger. The Kendra acreage was never conveyed to the Rinkenbergers by theseller. Neither the Kendras nor the Haases were present at the closing.

Rinkenberger testified that he deeded the property to his daughters and their spouses inorder to encourage David Kendra and Thomas Haas to begin hunting and to guarantee them freehunting licenses rather than having them take their chances for a paid license in the annual lottery. The testimony of Karen Kendra and Thomas Haas supported this assertion. David Kendra'stestimony confirmed his understanding that the property was for hunting and that he was able toget a free hunting permit by owning it.

By December 1998, the Kendra marriage had begun to deteriorate. At about that time,approximately eight months after the land purchase, Rinkenberger prepared a $28,000 promissorynote which was executed on December 25 by Karen. Although the document itself contains noindication of the reason for the debt and makes no reference to or attempt to bind David, it isagreed by the parties to the note that it was for the purchase price of the 40 acres held in jointtenancy by Karen and David Kendra. Both Rinkenberger and Karen testified that the note was toserve as evidence that the property still belonged to Rinkenberger. Only in the event thatRinkenberger decided to convey the beneficial interest that he claimed to have retained would heseek satisfaction on the note.

Nearly two years after signing the promissory note, and one month after her divorcebecame final, Karen executed a quit claim deed to Rinkenberger, relinquishing all of her rights tothe property. Rinkenberger testified that the deed foreclosed any possibility that he would seeksatisfaction on Karen's note. Apart from acknowledging that David owed him no money as aresult of the note, it is unclear from the record what legal effect, if any, Rinkenberger anticipatedwith regard to his former son-in-law.

On November 27, 2001, Rinkenberger petitioned to intervene in David and Karen'sdissolution proceedings and filed a complaint for declaratory judgment claiming that the 40-acreproperty had not been a gift to the Kendras but was, rather, a resulting trust. After a bench trial,the court entered judgment finding that the Rinkenbergers were the beneficial owners of theproperty by virtue of a resulting trust. The respondent appeals.

ANALYSIS

The respondent argues on appeal that the trial court erred in finding that Larry andGwendolyn Rinkenberger created a resulting trust when they purchased the subject property andplaced it in the names of respondent and his wife. Respondent asserts that the property was a giftto Karen Kendra and himself.

The decision of the trial court following a bench trial should be overturned only if it isagainst the manifest weight of the evidence. Judgment Services Corp. v. Sullivan, 321 Ill. App.3d 151, 154, 746 N.E.2d 827, 830 (2001). A decision is against the manifest weight of theevidence when the opposite conclusion is apparent or when the ruling is unreasonably arbitrary ornot based on the evidence. Sullivan, 321 Ill. App. 3d at 154, 746 N.E.2d at 831. The partyasserting a resulting trust must prove its existence by clear and convincing evidence. Sullivan,321 Ill. App. 3d at 154, 746 N.E.2d at 831.

A resulting trust originates when a party purchases property with his own funds thenplaces title to the property in the name of another, but actually intends to retain legal ownershipfor himself. Sullivan, 321 Ill. App. 3d at 154, 746 N.E.2d at 831. A resulting trust arises at thetime of the conveyance, and its existence is determined by the intent of the purchasing party atthat time. In re Estate of Koch, 297 Ill. App. 3d 786, 788, 697 N.E.2d 931, 933 (1998). Theintent of the parties is determined by their conduct and relationship and surrounding thecircumstances. Carlson v. Carlson, 74 Ill. App. 3d 673, 675, 393 N.E.2d 643, 645 (1979). Because the law of resulting trusts was created to enforce the intent of the parties, certainrebuttable presumptions have arisen. Sullivan, 321 Ill. App. 3d at 154, 746 N.E. 2d at 831. Relevant to this case, it is presumed that the placement of title in the name of a child by a parent isa gift, rather than a resulting trust. Sullivan, 321 Ill. App. 3d at 155, 746 N.E.2d at 831. This isso because a child is the natural object of the bounty of the person paying the purchase price. Sullivan, 321 Ill. App. 3d at 155, 746 N.E.2d at 831. A resulting trust will not be found wherethe transaction can be construed in any other reasonable fashion. Sullivan, 321 Ill. App. 3d at155, 746 N.E.2d at 831.

The intervenors cite the case of Varap v. Varap, 76 Ill. App. 2d 402, 222 N.E.2d 77(1966), for the proposition that the presumption of gift is destroyed by the fact that the propertywas placed in the names of both the intervenors' daughter and son-in-law. In Varap, the courtfound that the presumption of gift did not arise when title was placed in the name of a child-in-law. Varap, 76 Ill. App. 2d at 413, 222 N.E.2d at 84.

The validity of the holding in Varap is called into question by In re Estate of McCormick,262 Ill. App. 3d 163, 634 N.E.2d 341 (1994), and by Sullivan. In McCormick, the courtimplicitly extended the presumption of gift to a daughter-in-law when the property wastransferred to the payor's son and son's wife in joint tenancy. McCormick, 262 Ill. App. 3d at170, 634 N.E.2d at 346. In Sullivan, the court expressly called into question the ruling in Varap,and found that the presumption of gift arose for a son-in-law just as it would for a natural child. Sullivan, 321 Ill. App. 3d at 158-59, 746 N.E.2d at 834. In light of these cases, the law nowincludes a presumption of gift with respect to transfers to sons- or daughters-in-law. Therefore,the presumption arises in this case with respect to the respondent.

The question then is whether there is clear and convincing evidence to rebut thepresumption of gift and establish that the intervenors intended, at the time of transfer, to create aresulting trust. This was the approach adopted by the trial court. We consider that question andthe court's decision mindful of Sullivan's instruction that a resulting trust should not be found ifthere is any other reasonable construction of the transaction.

As the respondent points out, there is no documentary evidence (including Rinkenberger'sdecision to transfer by warranty deed) which establishes that the intervenors intended a resultingtrust. Nor did Rinkenberger say anything to anyone at the time of transfer to indicate that thiswas merely a conveyance of convenience and that he intended to retain legal ownership of theproperty.

The record discloses some circumstantial evidence that could be interpreted as indicatingthat a resulting trust was intended. The court found the testimony that supported the intervenors'assertion of a trust to be credible and consistent. We review the evidence to assess whether thesame testimony can also be interpreted as supporting respondent's contention that the propertywas a gift to him and his wife. If it can, the argument for a resulting trust must fail.

The evidence established that Rinkenberger purchased a 120-acre lot with his own fundsand that he requested that two 40-acre parcels be placed in the names of his two daughters andtheir spouses. As shown by the testimony of Rinkenberger, Thomas Haas, and David Kendra, thepurpose of deeding the two portions to his sons-in-law was to encourage them to hunt and tofacilitate their doing so by making them landowners and thereby ensuring that they could get theannual hunting license without chancing being bypassed in the lottery. (Despite this statedpurpose, he also had his daughters included on the warranty deeds.) Moreover, Rinkenbergerpaid the annual $65 property taxes for all years after the purchase except for 2001, when DavidKendra paid them for the lot in his name. Rinkenberger also managed the agricultural businessconducted on his 40-acre tract, which contained the only arable portion of the 120 acres, storedsome trail-clearing equipment on the Haas parcel, and cleared trails on both the Haas and Kendralots. We note that all of these facts are as consistent with the presumption of gift for the statedpurpose as they are with resulting trust.

Haas testified to his belief that the transfers were not gifts. Kendra, however, testifiedthat he believed that his property was a gift, even though he had only hunted the property threetimes since it was titled in his name and could not say that an intent to make a gift was everactually expressed to him. Both recounted that Rinkenberger's stated purpose for the landconveyances was to encourage them to hunt. This evidence of what others believed and whatothers did or did not do sheds little or no probative light on the issue of the actual intent of theRinkenbergers at the time the transfer was made.

In the absence of any information from Gwendolyn Rinkenberger, we focus on what isdisclosed by the testimony and the actions of her husband to determine their intent at the time oftransfer. As we have already noted, Rinkenberger said nothing of an intent to create a trust orretain legal ownership of the land at the closing or within that general time frame. He did not taketitle and then transfer the property but rather directed that the parcels be conveyed by the originalowner by warranty deeds. Although the deeds did contain some exceptions, the conveyanceswere made, without any reservation of his own rights, to his daughters and their spouses in jointtenancy.

Rinkenberger did not testify, nor does the record otherwise reveal, that he told them hewas only lending them the property until further notice. Indeed, although he was asked severaltimes if he had ever expressly told any relevant person that he was giving them the land as a gift,he was never asked whether he had told them it was not a gift or that he was not really giving it tothem or that he was still the owner, with or without reference to a trust. Karen Kendra andThomas Haas testified that they knew the property was not a gift but did not say when or howthey had gained this knowledge.

The promissory note suggests that it was not until he realized that Karen's marriage was introuble that he began rethinking the wisdom of gifting the land. There is some support for thissuggestion in the fact that, although David was present at the family gathering on December 25and was a titleholder, he was not included on the note. In fact, Rinkenberger's creation of thenote in December rather than May of 1998 is suggestive of a later determination to hold onto theland for himself and his wife rather than one contemporaneous with the purchase. Other evidenceconcerning whether the property was listed as part of a financial disclosure for a bank loan orclaimed in its entirety for income tax purposes invites inference or speculation without leading toa definitive conclusion.

We do not challenge the court's credibility findings. After reviewing the record, however,we do not believe that clear and convincing evidence that the intervenors intended, at the time ofthe conveyance, to retain ownership of the property, thereby creating a resulting trust, wasactually presented to the court.

CONCLUSION

Rinkenberger testified that he never intended to gift the 40-acre tracts but rather to retainownership of them. Arrayed against this testimony is a variety of other evidence which eithersupports the presumption of gift or can be reasonably interpreted as consistent with either a gift ora resulting trust. There is nothing other than his statement that rebuts the presumption. Given thestandard set out in Sullivan, we believe a finding that a resulting trust was created at the time ofthe conveyances has been proven by clear and convincing evidence is contrary to the manifestweight of the evidence.

For the foregoing reason, the judgment of the circuit court of Grundy County is reversed.

Reversed.

LYTTON and O'BRIEN, JJ., concur.