                     IN THE COURT OF APPEALS OF TENNESSEE
                                 AT NASHVILLE
                                        September 2, 1999 Session

                JAMES D. LECKRONE v. JAMES D. WALKER, ET AL.

                        Appeal from the Chancery Court for Davidson County
                          No. 96-3056-III  Ellen Hobbs Lyle, Chancellor


                         No. M1998-00974-COA-R3-CV - Filed April 30, 2002


This appeal arises from a dispute over the proceeds from the sale of a Florida condominium unit
once owned by a Tennessee partnership but titled in the name of two of its partners. When the
successor to the partnership’s interest in the unit undertook to sell it, one of the owners of record
agreed to sign the deed only if the proceeds were placed in escrow while the parties attempted to
resolve his claim to one-half of the funds. When the parties failed to agree on a distribution of the
proceeds, the escrow holder filed an interpleader action in the Chancery Court for Davidson County.
Following a bench trial, the trial court awarded the escrowed proceeds to the partnership’s successor
after determining that the owner of record was estopped to invoke the statute of frauds to defeat the
successor’s claim. We have determined that the trial court reached the correct result because the
owner of record no longer possessed a beneficial interest in the unit. Accordingly, we affirm the
judgment.1

      Tenn. R. App. P. 3 Appeal as of Right; Judgment of the Chancery Court Affirmed

WILLIAM C. KOCH , JR., J., delivered the opinion of the court, in which BEN H. CANTRELL , P.J., M.S.,
and WILLIAM B. CAIN , J., joined.

John R. Jacobson, Nashville, Tennessee, for the appellant, James D. Walker.

W. Lee Corbett and David F. Lewis, Nashville, Tennessee, for the appellee, Prism Partners, L.P.

                                                     OPINION

                                                           I.

       James D. Walker is a self-employed employee benefits consultant. Sometime in the late
1970s, he struck up a friendship with Larry Cherry who held himself out as a certified financial
planner. Messrs. Walker and Cherry became fast friends, and by the early 1980s, Mr. Walker had

         1
           The Court of Appe als may affirm a judgment on different grounds than those relied on by the trial court when
the trial court reached the corre ct result. Continental C as. Co. v. Smith, 720 S.W .2d 4 8, 50 (Te nn. 19 86); Allen v.
National Ban k of New port, 839 S.W .2d 7 63, 7 65 (Tenn. Ct. A pp. 1 992 ); Clark v. Metropolitan Gov’t, 827 S.W.2d 312,
317 (T enn. Ct. App. 1991).
become one of Mr. Cherry’s clients. According to Mr. Walker, he gave Mr. Cherry virtually free
reign to manage his assets with essentially no supervision or accountability.

        In 1984, Mr. Cherry invited Mr. Walker to accompany him to Panama City, Florida to inspect
a condominium unit at the Dunes of Panama that one of Mr. Cherry’s clients was considering as an
investment. After listening to the sales pitch, Messrs. Cherry and Walker decided to purchase a unit
for themselves. Later in 1984, they made a ten percent down payment on a $137,000 unit that was
under construction. In April 1985, Messrs. Cherry and Walker closed on their unit and had the title
placed in their names as joint tenants. Several days after the closing they purchased furnishings for
the condominium. The funds used for the down payment, the purchase, and the furnishings came
from Money Management III, a “loose investment pool” containing funds entrusted to Mr. Cherry
by other clients, and from one of Mr. Cherry’s other clients.2 There is little disagreement that the
condominium was, in Mr. Cherry’s words, “highly leveraged.”

         In 1986, when the rental income from the condominium did not meet expectations, Mr.
Cherry suggested to Mr. Walker that they should “put the condominium into” an existing partnership
called Money Management Investment I. Mr. Cherry’s purpose was to spread the risk of the
condominium investment and to provide a tax shelter for two of the other partners in Money
Management Investment I. Mr. Walker agreed with Mr. Cherry’s proposal, but neither Mr. Cherry
nor Mr. Walker executed a deed conveying the condominium unit to Money Management Investment
I. In return for transferring his interest in the unit to Money Management Investment I, Mr. Walker
received: (1) a twenty percent interest in the Money Management Investment I partnership, (2) a
check for the costs he had incurred in connection with the condominium, and (3) Money
Management Investment I’s assumption of the remaining condominium-related debts.3

         Mr. Walker never again treated the condominium as if it belonged to him personally. Money
Management Investment I took over managing the property, paid the operating expenses, and
collected the rental income. While Mr. Walker included his interest in the Money Management
Investment I partnership as an asset on his financial statements, he did not include the condominium
unit itself as an asset. At the same time, he received periodic statements from Money Management
Investment I and copies of the partnership’s tax returns in which the condominium unit was
identified as a partnership asset. Mr. Walker never questioned these documents, and, when he or his
family used the condominium, he paid rent to Mr. Cherry who was managing Money Management
Investment I’s affairs.




         2
             Mr. Cherry arranged the financing and saw to it that neither he nor Mr. W alker signed a note or deed of trust.

         3
         Money Manage ment Investment I executed two promissory no tes as part of this tran saction . The first note for
$123,891.70 to Mone y Managem ent Mortgage Acco unt was for the unpaid purchase price of the condominium. The
second note for $23,900 to Don Crace was for the balance of the funds used to purchase the condominium’s furniture.

                                                             -2-
         Mr. Cherry’s financial house of cards began to crumble in 1993 when one of his clients
obtained a $75,000 judgment against him.4 In an effort to shield his assets, Mr. Cherry decided to
shift the ownership of the condominium unit. Accordingly, in March 1993 Money Management III
purchased the unit from Money Management Investment I for $110,000 in cash. Just as in 1986,
there is no written contract or deed of conveyance to memorialize this transaction. Money
Management III, apparently with Mr. Cherry’s assistance, continued to manage the Dunes
condominium property. In October 1995, Money Management III was “formalized” into Prism
Partners, L.P., a limited partnership made up of fifteen of the individual investors who had
contributed funds to Money Management III.5

         Shortly after its creation, Prism Partners entered into a contract to sell the Dunes
condominium to a third party for $133,000. When it was discovered that the title to the property was
still the Messrs. Cherry’s and Walker’s names, Prism Partners asked them to execute the necessary
deeds to accomplish the sale. Mr. Walker declined because Prism Partners would not agree to share
the proceeds of the sale with him. However, because the buyer insisted that the sale be completed
before the end of 1995, Mr. Walker agreed to sign the deed and to permit the sale to be completed
in return for Prism Partners’s agreement to place the proceeds of the sale in escrow pending the
resolution of their disagreement.

        On December 29, 1995, Prism Partners placed approximately $121,660 with James D.
Leckrone. Later, approximately $1,395 in reimbursed Florida property tax payments was added to
the original amount. When it became evident that Prism Partners and Mr. Walker would not agree
on the disposition of the funds, Mr. Leckrone filed an interpleader action in the Chancery Court for
Davidson County, tendering $125,001.77 to the court for disposition. Mr. Walker insisted that he
was entitled to one-half of the funds because he owned an undivided one-half interest in the property
when it was sold in 1995. He also asserted that the statute of frauds [Tenn. Code Ann. § 29-2-
101(a)(4) (2000)] prevented Prism Partners from introducing evidence to contradict his record
ownership of the property. Following a bench trial, the trial court determined that Mr. Walker was
estopped from raising the statute of frauds and awarded the interpleaded funds to Prism Partners.
Mr. Walker has perfected this appeal.

                                                          II.

       Mr. Walker’s sole argument here is that the trial court erred by invoking the principle of
estoppel to prevent him from using the statute of frauds to rebuff Prism Partners’s claim to the
escrowed proceeds from the sale of the condominium unit. This argument, even if well-taken, will
not carry the day for Mr. Walker because the statute of frauds cannot be used to defeat a


         4
          This court later determined that the amount of punitive damages awarded by the trial court was inadequate and
increased the judgment against M r. Cherry to $150 ,000 . Pridem ore v. Ch erry, 903 S.W.2d 705, 709 (Tenn. Ct. App.
1995). Mr. Cherry later filed an unsuccessful malpractice action against the lawyers who represented him in that
proceed ing. Cherry v. Williams, 36 S.W .3d 78 (T enn. Ct. App. 2000).

         5
          The general partner of Prism Partners, L.P. is Prism M anagemen t, Inc., a corporation ow ned by M essrs.
Cherry’s and W alker’s certified p ublic accountant.

                                                         -3-
partnership’s claim that one or more of its partners are holding legal title to property for the
partnership’s benefit. This case stands or falls on the strength of the evidence regarding the
beneficial ownership of the condominium unit after 1986.

                                                            A.

        Partnership property includes all the property originally brought into the partnership as well
as any property subsequently acquired for the partnership. Tenn. Code Ann. § 61-1-107(a) (1989).
Real property owned by a partnership may be held either in the partnership’s name, Tenn. Code Ann.
§ 61-1-107(c);6 Brown v. Brown, 45 Tenn. App. 78, 97, 320 S.W.2d 721, 729 (1958), or in the name
of one or more of the partners. In re Magnani, 223 B.R. 177, 182 (Bankr. N.D. Iowa 1997);
Mathews v. Wosek, 205 N.W.2d 813, 817 (Mich. Ct. App. 1973); Grissum v. Reesman, 505 S.W.2d
81, 87 (Mo. 1974); State v. King, 460 N.E.2d 1143, 1145-46 (Ohio Ct. App. 1983). Accordingly,
the record title of a piece of property does not necessarily reveal whether the property belongs to the
owners of record or to a partnership of which the owners of record are members. Hunt & Co. v.
Benson, 21 Tenn. (2 Hum.) 459, 460-61 (1841); see also Wilen v. Wilen, 486 A.2d 775, 783 (Md.
Ct. Spec. App. 1985); Foust v. Old Am. County Mut. Fire Ins. Co., 977 S.W.2d 783, 786 (Tex. App.
1998).7 At most, it gives rise to a rebuttable presumption that the property is owned by the owners
of record. In re Perry’s Estate, 192 P.2d 532, 536 (Mont. 1948).8

        At least among the partners themselves, determining whether property belongs to the
partnership or to one or more of the partners in their individual capacities depends on the partners’
intentions and understandings.9 Boyers v. Elliott, 26 Tenn. (7 Hum.) 204, 207 (1846) (deciding the
status of property using documents and evidence to determine the intent of the parties); Young v.
Cooper, 30 Tenn. App. 55, 67, 203 S.W.2d 376, 382 (1947); Jenkins v. Harris, 19 Tenn. App. 113,




         6
          Tennesse e’s version of the Uniform Partnership Act of 1914, Tenn. Code Ann. §§ 61-1-101, -142 (1989), was
repealed effective January 1, 2002 by the Tennessee G eneral Assembly’s enactment of the Uniform Partnership Act of
1997. Act of Ma y 29, 2 001 , ch. 35 3, 20 01 T enn. P ub. Acts 775 (codified at Tenn. Code Ann. §§ 61-1-101, -1208 (Supp.
2001)). Tenn. Code Ann. § 61-1-204(a)(1) (Sup p. 20 01) states that p roperty is partne rship p roperty if it is acquired in
the partnership’s name.

         7
          The Tennessee Supreme Co urt has characterized the partnership’s interest as a “secret trust in favor of the
partnership.” Killebrew v. Ray, 181 Tenn. 33 3, 339, 181 S .W.2d 334, 337 (1944).

         8
           Tenn. Code Ann. § 61-1-204(d) (Supp. 2001) states that “[p]roperty acquired in the name of one (1) or more
of the partners, without an indication in the instrume nt transferring title to the property o f the person’s capa city as a
partner or of the existence of a pa rtnership and without use of partnership assets, is presumed to b e separate p roperty,
even if used for partnership purp oses.” The effect of this provision is to create a rebuttable presumption that only the
use of the property, not the property itself, was contrib uted to the partnership. Uniform Partnership Act (1997) § 204
cmt. 3, 6 [Part I] U .L.A. 9 8 (2001 ) (“Uniform Partnership Act (1 997 )”).

         9
         The courts must consider other matters when the rights o f third pa rties will be affected by a decision regarding
the ownership of pro perty. See Tenn. Cod e Ann. § 61-1-302(b) (Sup p. 2001).

                                                            -4-
121, 83 S.W.2d 562, 566-67 (1935).10 Using partnership funds to purchase the property is not the
only basis upon which these decisions are made. In re Fair Oaks, Ltd., 168 B.R. 397, 402 (B.A.P.
9th Cir. 1994); King v. Evans, 791 S.W.2d 531, 533 (Tex. App. 1990). The courts regularly derive
the partners’ intentions and understandings by considering: (1) the parties’ statements, conduct, and
writings when the property was acquired, (2) the parties’ course of conduct after the acquisition of
the property, (3) the use of the property in the partnership business, (4) the terms of the partnership
agreement, (5) the listing of the property as an asset on the partnership books and tax returns, (6) the
attribution of profits or losses from the property to the partnership, and (7) the use of partnership
funds to maintain the property. Davis v. Loring, No. 01A01-9004-CV-00149, 1991 WL 32311, at
*2 (Tenn. Ct. App. Mar. 13, 1991) (No Tenn. R. App. P. 11 application filed) (quoting In re Fulton,
43 B.R. 273, 275 (Bankr. M.D. Tenn. 1984)) (deriving the parties’ intention from the facts and
circumstances surrounding the purchase and the parties' conduct after the purchase); see also In re
Sealy Bros., 158 B.R. 801, 804 (Bankr. W.D. Mo. 1993); Standring v. Standring, 794 P.2d 1089,
1091 (Colo. Ct. App. 1990); Crowe v. Smith, 603 So. 2d 301, 305 (Miss. 1992); Thomas v. Lloyd,
17 S.W.3d 177, 183 (Mo. Ct. App. 2000); Lutz v. Schmillen, 899 P.2d 861, 864 (Wyo. 1995).

        Individual partners have a fiduciary relationship with the other partners and with the
partnership itself. Cude v. Couch, 588 S.W.2d 554, 555 (Tenn. 1979); Killebrew v. Ray, 181 Tenn.
at 337, 181 S.W.2d at 336. Thus, when property is acquired for partnership purposes but is held in
the name of one or more of the partners, equity recognizes the existence of a resulting trust11 for the
benefit of the partnership. Boyers v. Elliott, 26 Tenn. (7 Hum.) at 208 (holding that the property
becomes, in equity, the property of the partnership even though one partner retains legal title); see
also In re Urban Dev. Co. & Assocs., 452 F. Supp. 902, 905 (D. Md. 1978); Omohundro v.
Matthews, 341 S.W.2d 401, 405 (Tex. 1960).

        Resulting trusts may be established using parol evidence. Hunt v. Hunt, 169 Tenn. 1, 9, 80
S.W.2d 666, 669 (1935); Hoffner v. Hoffner, 32 Tenn. App. 98, 103, 221 S.W.2d 907, 909 (1949).
Thus, neither the lack of a written conveyance nor the statute of frauds will defeat a partnership’s
claim that one or more of its partners is holding legal title to property for the partnership’s benefit.
King v. Evans, 791 S.W.2d at 532 (lack of a written conveyance); Davis v. Sheerin, 754 S.W.2d 375,
386 (Tex. App. 1988) (statute of frauds).



         10
           See also N orris v. N orris, No. 03A01-9403-CH-00101, 19 94 W L 529405, at *7 (Tenn. Ct. App. Sept. 15,
1994) (No T enn. R. Ap p. P. 11 application filed ); First Nat’l Bank v. Tennessee Consol. Coal Co., No. 01A01-9208-CV-
00326, 1993 W L 2412 89, at *3 (Tenn. Ct. App. July 2, 1993) (No T enn. R. App. P. 11 app lication filed); Uniform
Partnership Act (1997) § 204, cmt. 3.

         11
             A resulting trust is a judg e-mad e vehicle that ena bles the courts to reac h an interest in property b elonging to
one perso n but titled in another. Wells v. Wells, 556 S.W.2d 769, 771 (Tenn. Ct. App. 1977). Its principal purp ose is
to prevent unjust enrichment. Green v. Hooton, 624 S.W .2d 898, 902 (Tenn. Ct. App . 1981 ). The co urts will impose
a resulting trust when a person acquires a legal estate in property under circumstances indicating that the beneficial
interest in the prope rty doe s not accom pany the title. W illiam H . Inman, Gibson’s Suits In Chancery § 382 (7th ed.
198 8). In other wo rds, a resulting trust arises when “one person becomes invested with a legal title but is obligated in
equity to hold his legal title for the benefit of another.” In re Estate of Nichols, 856 S.W .2d 3 97, 4 01 (Tenn. 19 93).



                                                              -5-
                                                  B.

         We now apply these principles to the evidence of the acquisition, ownership, and use of the
Dunes condominium unit. In examining evidence, we must be mindful that determining whether
property being held in the name of one or more of the partners is partnership property is a question
of fact. In re Wingo, 89 B.R. 54, 57 (B.A.P. 9th Cir. 1988); Mathews v. Wosek, 205 N.W.2d at 817.
However, because the partnership’s claim hinges on the imposition of a resulting trust, the
partnership must prove its claim by more than a preponderance of the evidence. Browder v. Hite,
602 S.W.2d 489, 493 (Tenn. Ct. App. 1980). To warrant the imposition of a resulting trust, the party
seeking to impose the trust on a legal interest in property must establish the grounds for the trust by
clear and convincing evidence. In re Estate of Nichols, 856 S.W.2d at 401; In re Estate of Wardell,
674 S.W.2d 293, 295 (Tenn. Ct. App. 1983).

        Because the heightened burden of proof required to impose a resulting trust differs from the
customary burden of proof in civil cases, we must adapt the customary standard in Tenn. R. App.
P. 13(d) for reviewing findings of fact. In cases requiring proof by clear and convincing evidence,
we will first review the trial court’s findings of fact de novo in accordance with Tenn. R. App. P.
13(d). Thus, each of the trial court’s findings of fact will be presumed to be correct unless the
evidence preponderates otherwise. Then, we will determine whether the facts, either as found by the
trial court or as supported by the preponderance of the evidence, clearly and convincingly establish
the grounds for imposing a resulting trust on an interest in property. See Ray v. Ray, No. M2000-
00895-COA-R3-CV, 2001 WL 1173266, at *6 (Tenn. Ct. App. Oct. 5, 2001) (Tenn. R. App. P. 11
application pending); In re L.S.W., ___ S.W.3d ___, ___, 2001 WL 1013079, at *5 (Tenn. Ct. App.
2001) (both applying the hybrid, two-step standard of review to an issue requiring proof by clear and
convincing evidence).

         There can be no dispute that Messrs. Cherry and Walker purchased the Dunes condominium
unit in 1995 with the intention to hold it as tenants in common for the use of their families and for
their own financial gain. However, the evidence shows clearly and convincingly that in early 1986,
Messrs. Cherry and Walker transferred beneficial ownership of the unit to the Money Management
Investment I partnership. In return, they received (1) a twenty percent interest in the partnership, (2)
relief from possible future liability for the money borrowed to purchase and furnish the unit, and (3)
a cash payment to reimburse them for their condominium-related expenses between 1985 and 1986.
From and after 1986, Mr. Walker, Mr. Cherry, and the Money Management Investment I partnership
treated the unit as if it belonged to Money Management Investment I. Mr. Walker paid rent when
he or members of his family used the unit. Mr. Walker did not list the property as an asset on any
of his financial documents or tax returns. Mr. Walker did not object when Money Management
Investment I listed the property as an asset on its books and tax returns. Finally, in 1993, Mr. Walker
did not insist on receiving a portion of the proceeds when Money Management Investment I sold the
condominium to Money Management III.

      In the same vein, holding and managing the condominium unit was entirely consistent not
only with the purposes of the Money Management Investment I partnership reflected in the




                                                  -6-
partnership agreement,12 but also with the evidence that transferring the unprofitable unit to the
partnership enabled Messrs. Cherry and Walker to spread the risk of loss to others and also enabled
their partners to take advantage of the business losses for tax purposes. In contrast to Mr. Walker’s
actions after 1986, all the actions of the Money Management Investment I partnership were
consistent with its claim of ownership. The partnership listed the property as an asset on its books
and tax returns. The partnership managed and controlled the property and paid the expenses
associated with the property. Finally, the partnership sold the property to Money Management III
in 1993. The only conclusion that can be drawn from these facts is that as of 1986, the Money
Management Investment I partnership owned the beneficial interest in the Dunes condominium unit
even if legal title remained with Messrs. Cherry and Walker. Accordingly, Messrs. Cherry and
Walker, as fiduciaries of the partnership, were holding the property solely for the benefit of Money
Management Investment I and its successors.

                                                            C.

        In light of the clear and convincing evidence regarding the ownership of the condominium
unit after 1986, it is unnecessary to determine whether Mr. Walker was estopped to assert the statute
of frauds as a defense to Prism Partners’s claim to the escrowed proceeds. The statute of frauds
could not have prevented the introduction of parol evidence to establish the grounds for imposing
a resulting trust on the condominium unit for the benefit of Money Management Investment I and
its successors in interest. Therefore, it is entirely unnecessary to determine whether Mr. Walker
should have been estopped to assert the statute of frauds as a defense.

        Prism Partners, as Money Management Investment I's successor in interest, was not required
to present a written conveyance to establish its interest in the condominium unit. It presented
sufficient evidence to prove clearly and convincingly that it owned the beneficial interest in the unit
in 1995 when it undertook to sell it to a third party. Accordingly, the trial court could have
circumvented the doctrine of estoppel by concluding that Mr. Walker no longer owned a beneficial
interest in the property and by directing Mr. Walker to honor his fiduciary obligation by executing
the deed conveying the property to Prism Partners’s purchaser.

                                                            III.

       Even though we do not concur with the trial court’s reasoning, we concur with its decision
to award Prism Partners all the escrowed proceeds from the sale of the condominium unit.
Accordingly, we affirm the judgment and remand the case for whatever further proceedings may be
required. We tax the costs of this appeal to James D. Walker and his surety for which execution, if
necessary, may issue.

                                                                   _____________________________
                                                                   WILLIAM C. KOCH, JR., JUDGE

         12
           As reflected in Article II of the partnership agreem ent, the purpo se of the partne rship was “[t]o engage in the
general business of owning or investing in real or personal . . . property of every description, and to manage, administer.
develop or imp rove the same.”

                                                            -7-
