Resulting Trust in the Nature of a Mortgage - Statute of Frauds: Newell v. Newell


Newell v. Newell, [Ms. 1160851, Dec. 15, 2017] __ So. 3d __ (Ala. 2017). This unanimous decision by Justice Main (Stuart, C.J., and Bolin, Murdock, and Bryan, JJ., concur) reverses the Franklin Circuit Court’s order granting partial summary judgment dismissing the plaintiff’s claim alleging equitable mortgage as to two tracts of farm land. The Court noted that this dispute between father and son over ownership of the land was subject to myriad factual disputes. Ms. *9.

Among the claims asserted by the son to establish his ownership of the two farms was that the father provided financing for the son’s purchase of the farms and as security, title to the farms was placed in the father. The son labeled his claim “equitable mortgage.” Ms. *3.

The circuit court dismissed this claim on summary judgment on the ground that it was barred by the statute of frauds. Ms. *6. In reversing, the Court first noted that the appropriate terminology for what is often referred to as an “equitable mortgage” is a resulting trust in the nature of a mortgage. Ms. *8. The Court explained that “‘the transaction partakes of the nature both of resulting trust and a mortgage. A resulting trust, because the money loaned becomes that of the borrower, and the title acquired with this money is taken in the name of another; a mortgage, because it is given as security for the debt due from lender to borrower.’” Ms. *7-8, quoting O’Rear v. O’Rear, 220 Ala. 85, 86, 123 So. 895, 896 (1929). The Court reversed, holding that “a resulting trust in the nature of a mortgage arises by implication of law and is therefore not subject to the statute of frauds.” Ms. *8-9.

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