Thursday, July 23, 2015

Have I been defrauded?



Common Definition of Fraud

Most people view fraud as “an act of deceiving or misrepresenting.” See http://www.merriam-webster.com/dictionary/fraud. This colloquial use of the term “fraud” causes many people to believe that if someone said something that is untrue, then that person has committed fraud.  The term “fraud,” as a legal term, is much narrower than this common understanding.

Legal Definition of Fraud

In order for fraud to exist legally, then the elements of a fraud cause of action must exist.  “The elements of an action in deceit based on fraudulent misrepresentation are: (1) a representation; (2) concerning a presently existing material fact; (3) which was false; (4) which the representor either (a) knew to be false, or (b) made recklessly, knowing that he had insufficient knowledge upon which to base such representation; (5) for the purpose of inducing the other party to act upon it; (6) that the other party, acting reasonably and in ignorance of its falsity; (7) did in fact rely upon it; (8) and was thereby induced to act; (9) to his injury and damage.” Dugan v. Jones, 615 P.2d 1239 (Utah 1980).  For fraud to exist legally, it is not enough for a statement to be false.  There must be both an intent to deceive and damages cause by reliance on the false statement.

Even if all the elements of fraud are not met, there may be alternative but similar legal theories that could be proven, such as claims for negligent misrepresentation or fraudulent non-disclosure.

Proving Fraud

“In all averments of fraud or mistake, the circumstances constituting fraud or mistake shall be stated with particularity.” Utah Rules of Civil Procedure 9(b).  For fraud to be properly alleged with particularity, Plaintiff “must state with particularity the circumstances supporting each element of fraud.” Otsuka Electronics v. Imaging Specialists, et al., 937 P.2d 1274, ¶24 (Utah Ct. App. 1997).  Sometimes, a plaintiff may not know whether each element of fraud can be proven at the time of a lawsuit is filed.  If he has a good faith basis to believe that an element has been met, he can allege the facts that would satisfy each element “upon information and belief.”

Most parties do not simply admit to committing fraud.  Extrinsic evidence may be used to prove each element.  For example, while a defendant may claim not to have known that a representation was false, extrinsic evidence can refute the defendant’s claim.

Many fraud cases involve real estate deals.  The language in the related contracts and deeds is often the best indication of whether fraud occurred.

For more specific information about this particular subject, please call my office at 801-691-7770 for a free consultation or see the following web pages:

1.      Whiting & Jardine, LLC Home Page: www.WhitingJardine.com
3.      Sales & Purchase Agreements: http://whitingjardine.com/practice_areas.php?part=purchase
5.      Contract Negotiation and Drafting: http://whitingjardine.com/practice_areas.php?part=contract


Disclaimer: This blog is for general information and educational purposes only.  Nothing in this blog should be construed as legal advice for any particular situation.  The statements in this blog may be generalized, contain speculation, be based on opinion, or be made inaccurate by updates or clarifications to the law.  No attorney-client relationship is created by virtue of this blog.  To receive competent legal advice for your situation, you should seek competent, licensed legal counsel in the appropriate jurisdiction and practice area.

Wednesday, July 15, 2015

Can I acquire real property through a constructive trust?



What is a Constructive Trust?
A constructive trust is an implied trust created by a court when the transferor of land intends for the transfer to benefit someone other than the transferor or the transferee.  “It is not a ‘trust’ according to the common usage of that term.  Rather, it requires one party to transfer property to the party who was intended to benefit from the property. A constructive trust is an equitable remedy which arises by operation of law to prevent unjust enrichment.”  Ashton v. Ashton, 733 P.2d 147, 150 (Utah 1987).

Circumstances Justifying a Constructive Trust
The Utah Supreme Court has indicated that constructive trusts are appropriate (1) in order to give effect to oral trusts which have not been reduced to a writing and may not survive the statute of frauds, and (2) when a party has an equitable duty to convey land to another.   The Utah Supreme Court also provided the following instructions about creating constructive trusts:

“We have recognized that constructive trusts may be imposed in the circumstances set forth in section 45 of the Restatement (Second) of Trusts (the “Restatement of Trusts”).

This section applies:
(1)   Where the owner of an interest in land transfers it inter vivos to another in trust for a third person, but no memorandum properly evidencing the intention to create a trust is signed, as required by the Statute of Frauds, and the transferee refuses to perform the trust, the transferee holds the interest upon a constructive trust for the third person, if, but only if,

(a) the transferee by fraud, duress or undue influence prevented the transferor from creating an enforceable interest in the third person, or
(b) the transferee at the time of the transfer was in a confidential relation to the transferor, or
(c) the transfer was made by the transferor in anticipation of death.

In short, the imposition of a constructive trust under this section of the Restatement of Trusts requires proof that the transferor of land intended to create a trust and that one of the three identified circumstances existed at the time of the transfer. And where proving this intent will be contrary to an otherwise valid deed, the evidence of the trust must be clear and convincing.”  Rawlings v. Rawlings, 240 P.3d 754, 763 (Utah 2010).

Situations involving constructive trusts are often tied to other issues such as contract reformation, the statute of frauds, and fiduciary duty litigation.  Constructive trusts are complex.  An attorney should be consulted before trying to create a constructive trust.

            As always, if you have any questions about your situation, you are welcome to contact one of Whiting & Jardine’s real estate lawyers for legal advice.



For more specific information about this particular subject, please call my office at 801-691-7770 for a free consultation or see the following web pages: 

1.                  Whiting & Jardine, LLC Home Page: www.WhitingJardine.com
2.                  Quiet Title: http://whitingjardine.com/practice_areas.php?part=quiet_title
3.                  Sales & Purchase Agreements: http://whitingjardine.com/practice_areas.php?part=purchase
4.                  Transactions: http://whitingjardine.com/services.php?part=transactions



Disclaimer: This blog is for general information and educational purposes only.  Nothing in this blog should be construed as legal advice for any particular situation.  The statements in this blog may be generalized, contain speculation, be based on opinion, or be made inaccurate by updates or clarifications to the law.  No attorney-client relationship is created by virtue of this blog.  To receive competent legal advice for your situation, you should seek competent, licensed legal counsel in the appropriate jurisdiction and practice area.

Friday, July 10, 2015

How does the one action rule affect my foreclosure?



The One Action Rule

Both real estate and lending are highly-regulated industries.  It should be no surprise that there are a plethora of laws about the ways lender’s seize real estate.  Utah has restricted a lender’s options to recover debt through the one action rule (which is sometimes referred to as the “single-action rule”).

Requirement to Seize Real Estate First

The one action rule states, “There is only one action for the recovery of any debt, or the enforcement of any right, secured solely by mortgage upon real estate and that action shall be in accordance with the provisions of this chapter.”  Utah Code §78B-6-901“The purpose of the statute was to eliminate harassment of debtors and multiple litigation which sometimes occurred under the common-law rule which allowed a creditor to foreclose and sell the land and sue on the note.”  Lockhart C. v. Equitable Realty, Inc., 657 P.2d 1333, 1334 (Utah 1983).  “Under this and the following section there is no personal liability on the part of mortgagor until after foreclosure or sale of the security and then only for the deficiency then remaining unpaid."  Id at 1335.

In essence, if a lender is secured solely by real estate, then that lender must foreclose on the real estate first before seeking personal liability from the borrower.  This statute prevents double recovery.  A lender does not have the option of collecting all the money it can from the borrower and then seizing the collateral through a foreclosure. A lender must take what it can get out of the real estate and may only turn to the borrower for recovery if the foreclosed-upon security was not enough to cover the debt.

Limited Applicability

The one action rule states that it only applies to debt “secured solely by mortgage upon real estate[.]”  Utah Code §78B-6-901.  It does not apply to debtors secured all or in part by personal property, but lenders should be aware of the policy behind the one action rule even when personal property is involved.  The one action rule does apply to debts secured by multiple parcels of real estate.

Contracting around the One Action Rule

“No private or special law shall be enacted where a general law can be applicable.” Utah Constitution, Article VI, Section 26.  Though both lenders and borrowers sometimes want to contract around the one-action rule, this option is not available.  If public law did not trump private law, then lenders could regularly contract borrowers out of the protections provided by the law.  If a borrower and lender enter into an agreement to get around the one-action rule, then several interesting legal questions would be raised about waiver, estoppel, and modification.  Neither the lender nor the borrower would likely want to be the legal guinea pig to test out attorneys’ theories on these issues.

            As always, if you have any questions about your situation, you are welcome to contact one of Whiting & Jardine’s real estate lawyers for legal advice.


For more specific information about this particular subject, please call my office at 801-691-7770 for a free consultation or see the following web pages: 

1.                  Whiting & Jardine, LLC Home Page: www.WhitingJardine.com
2.                  Collections: http://whitingjardine.com/practice_areas.php?part=collections
3.                  Liens: http://whitingjardine.com/practice_areas.php?part=liens


Disclaimer: This blog is for general information and educational purposes only.  Nothing in this blog should be construed as legal advice for any particular situation.  The statements in this blog may be generalized, contain speculation, be based on opinion, or be made inaccurate by updates or clarifications to the law.  No attorney-client relationship is created by virtue of this blog.  To receive competent legal advice for your situation, you should seek competent, licensed legal counsel in the appropriate jurisdiction and practice area.

Thursday, July 9, 2015

What happens when someone conveys real estate that they do not yet own?



Utah Real Estate Law for After-Acquired Title

It is too common that people convey an interest in real estate without actually having that interest or before actually having that interest to convey. Usually, this mistake isn’t caused by malice or fraud, but rather because people sometimes make mistakes while putting together real estate deals in proximity to other transactions. 

General Rule

“[I]t is a basic tenent of property law that [one] could convey to [another] only what it then owned.”  FDIC at ¶19. Also see Drazich v. Lasson, 964 P.2d 324, 327 (Utah Ct.App.1998) (“One can only convey as much estate in land as one actually has.”).  Similar to the classic “Brooklyn Bridge” scams, conveyed interests are generally void if there was no interest to convey.  While you would likely have claims in contract and tort against the party who did not have the promised interest (the “grantor”), your claims would not generally give a right to a third-party’s property.

Utah’s After-Acquired Title Statute

            Exceptions to the general rule exist when there is a connection between the person who failed to convey an interest and the property.  Utah’s after-acquired property statute provides:

“If any person conveys any real estate by conveyance purporting to convey the real estate in fee simple absolute, and at the time of the conveyance the person does not have the legal estate in the real estate, but afterwards acquires the legal estate… the conveyance is as valid as if the legal estate had been in the grantor at the time of the conveyance.” Utah Code §57-1-10(1).
            Essentially, if a person conveys a property that they don’t own but subsequently acquire that property, then the original conveyance becomes valid after-the-fact.  This after-acquired statute only applies to fee simple conveyances, such as a common conveyances through a general warranty deed.  It does not apply to other conveyances, such as trust deeds, liens, or quit-claim deeds. 

Equitable Interests

           Sometimes if the grantor does not have title to the conveyed interest, the improper conveyance will give an equitable interest to grantee, even though title was not effectively conveyed.  See FDIC v. Taylor, 267 P. 3d 949, ¶14 (Utah Ct. App. 2011) (“[T]rust deeds in favor of [the lenders] were ineffective to convey title but, nevertheless, created equitable liens against the Property.”).  Whether an equitable interest has been created is a fact intensive issue which would likely hinge on the effect to innocent third-parties.

            As always, if you have any questions about your situation, you are welcome to contact one of Whiting & Jardine’s real estate lawyers for legal advice.



     For more specific information about this particular subject, please call my office at 801-691-7770 for a free consultation or see the following web pages: 
  1. Whiting & Jardine, LLC Home Page: www.WhitingJardine.com.
  2. Quiet Title: http://whitingjardine.com/practice_areas.php?part=quiet_title
  3. Liens: http://whitingjardine.com/practice_areas.php?part=liens
  4. Sales & Purchase Agreements: http://whitingjardine.com/practice_areas.php?part=purchase
  5. Transactions: http://whitingjardine.com/services.php?part=transactions

Disclaimer: This blog is for general information and educational purposes only.  Nothing in this blog should be construed as legal advice for any particular situation.  The statements in this blog may be generalized, contain speculation, be based on opinion, or be made inaccurate by updates or clarifications to the law.  No attorney-client relationship is created by virtue of this blog.  To receive competent legal advice for your situation, you should seek competent, licensed legal counsel in the appropriate jurisdiction and practice area.