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:
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.
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