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.