Court Rules on Inter Vivos Gift

The Eighth Circuit U.S. Court of Appeals recently ruled on a case where an estate claimed that the decedent made a gift during his lifetime that actually belonged to the estate after his death. The court ruled that the gift was actually a conditional gift that had its reversionary interest end when the decedent died without asking for the gift back from the recipient.

Facts of the Case

In the case of Estate of Pepper v. Whitehead, Sterling Pepper Jr. owned a large collection of Elvis Presley memorabilia. When he moved into a nursing home in 1978, he told Nancy Whitehead to “keep it.” Mr. Pepper died two years later in the home, and Ms. Whitehead kept the Elvis collection. In 2009, after maintaining the collection for over thirty years, the Pease Family Partnership put it up for auction, and it sold for more than $250,000.

The estate for Mr. Pepper filed a lawsuit against Ms. Whitehead, alleging that Mr. Pepper retained ownership of the Elvis memorabilia as well as that the ownership interest passed to his heirs at his death. At trial, the jury found that Mr. Pepper made a conditional gift to Ms. Whitehead. As a result, when Mr. Pepper died the reversionary interest was no longer valid, and Ms. Whitehead was entitled to the collection. The Pepper estate appealed the trial court’s decision.

Ruling of the Court

The appellate court first looked at what is considered a conditional gift. Under the law, to create a conditional gift the donor must “deliver the personal property to the donee . . . with the manifested intention that the donee acquire an ownership that terminates after the passage of some period of time or on the occurrence or nonoccurrence of some event or condition.” In doing so, the donor of the conditional gift retains a reversionary interest in the gift. However, the law also states that the reversionary interest in a conditional gift terminates automatically at the death of the donor.

According to the testimony at the trial court level, Ms. Whitehead testified that Mr. Pepper never gave her specific instructions for the collection, only to “keep it.” She said that if he had ever asked her to return it she would have done so. There was no evidence proffered at the trial level to indicate that Mr. Pepper ever meant for Ms. Whitehead to keep the collection merely for safekeeping or as a bailment.

Finally, the court of appeals agreed that the evidence at the trial level supported the finding that the Elvis collection was meant as a conditional gift. Mr. Pepper and Ms. Whitehead both shared a love of Elvis, and Ms. Whitehead was considered a nurse and close friend. She also testified to how close of a relationship they had, how she brought him items to the nursing home, and how his family members were not even aware of its existence. Furthermore, Mr. Pepper did not want his relatives to be entrusted with the collection. Therefore, the Court of Appeals agreed with the trial court and found that the collection belonged to Ms. Whitehead.