4th Circuit: In re Pfister- No Resulting Trust in Transfer from Wife and Husband to Husband's Corporation.

Summary: Patricia Pfister and her husband, Phillip Pfister purchased real property on May 10, 2001. Originally, this property was to be purchased by Architectural Glass Construction, Inc. ("AGC"), a corporation wholly owned by Mr. Pfister, but, on the advice of accountants, instead at the closing it was instead purchased and financed by the Pfisters, with the intention of leasing the property to AGC. In practice, however, AGC never paid the Pfisters, but paid the mortgage directly. In 2002, the mortgage was refinanced, with AGC now actually liable for the mortgage note. Over the next six years, the property was repeatedly refinanced, with the obligor under the new notes changing between the Pfisters and AGC. In 2008, the property was again refinanced, with AGC being liable for the mortgage note with Greer State Bank. As AGC was not, however, the owner of the property, the closing attorney realized that AGC could not grant a Deed of Trust and, to remedy the situation, the Pfisters transferred ownership in the property to AGC for $10.00. Mrs. Pfister declared bankruptcy seven months later and the trustee successfully sought to set aside the transfer as a constructive fraud. The bankruptcy court ordered AGC to reimburse the bankruptcy estate in the amount of $43,500.00. The district court, while accepting the factual conclusions of the bankruptcy court, held that the use of the property and payment of the mortgage by AGC evidenced a resulting trust, pursuant to which AGC held equitable title to the property and Mrs. Pfister held only bare legal title. The majority opinion for the Court Appeals, however, held that, under South Carolina law, a while a transfer by one party, but which the consideration is paid by another party, is presumed to be for the benefit of the party that paid, with a resulting trust arising in favor of the paying party. The exception to this rule, however, is if the conveyance is to a wife or child, then the transfer is presumed to be a gift. See Caulk v. Caulk, 43 S.E.2d 600, 603 (S.C. 1947) and Windsor Props., Inc. v. Dolphin Head Constr. Co., 498 S.E.2d 858, 861 (S.C. 1998). As such, even though AGC paid for property deeded to Pfisters, since Mrs. Pfister is the wife of Mr. Pfister, and Mr. Pfister is the sole owner of AGC, South Carolina law presumes that the purchase was intended as a gift by Mr. Pfister to Mrs. Pfister, accordingly becoming the full owner of a 50% interest in the property. The presumption against this being a gift can be rebutted by clear and convincing evidence showing the following that the paying party: (1) actually paid for the property (or committed to pay for the property), (2) with the intent to own it, (3) on the date of purchase, not at some later date. Here, however, at the time of the original acquisition of the property AGC did not pay for the property (as it was financed) nor, given the parties initial intention for the Pfisters to lease the property to AGC, did AGC clearly intend to own the property. The dissent, however, would have more simply held that AGC held a resulting trust as it paid for the property, despite being "for a different reason [was] titled in the name of [Mrs. Pfister]." Commentary: Pursuant to Mims v. Mims, 305 N.C. 41 (N.C. 1982), this would likely be the same result in North Carolina. For a copy of the opinion, please see: Pfister- No Constructive Trust in Transfer from Wife and Husband to Husband’s Corporation