SEVENTH CONCEPT: CONSTRUCTIVE TRUSTS Flashcards
What is a constructive trust used for?
A remedy to prevent fraud or unjust enrichment. is a means to disgorge a wrongdoer of his ill-gotten gains.
When a court decrees a constructive trust, the wrongdoer will have only one obligation. What is that obligation?
to transfer the property to the intended beneficiary as determined by the court.
When a trustee of a private express or a charitable trust makes a profit because of self dealing what is the result?
A constructive trust.the trustee will have to turn those profits over to the intended beneficiaries of the trust, as decreed by the court.
What is a secret trust?
The will on its face makes a gift outright to A, but the gift is given on the basis of an oral promise by A to use the property for the benefit of B.
Testator goes to A and says, “A, I shall devise $100,000 to you, if you promise to use this money for the benefit of B.” A states to testator that he (A) will comply. Thereafter testator executes his will that states, “I devise $100,000 to A.” How do you make this a constructive trust?
Parol evidence is admissible to show that the beneficiary was B. A will become a constructive trustee who will have only one obligation: to transfer the property to B
For semi-secret trusts will courts impose a constructive trust?.
No, they will impose a resulting trust.
What does a semi-secret trust look like?
“I devise 100k to A as trustee” (no beneficiary is named)
what does a secret trsut look like?
I devise 100K to A (but their is parol evidence it was meant to be a trust for B.
S goes to A and states, “If I transfer Blackacre to you by deed, will you hold Blackacre for the benefit of B?” A agrees. Thereafter S executes a deed in favor of A and delivers it to A. What kind of trust is this? What is the result?
Oral Real Estate Trusts, the statute of faruds could prevent B from getting the trust however there are 3 situations where you can get around the statute of frauds.
S goes to A and states, “If I transfer Blackacre to you by deed, will you hold Blackacre for the benefit of B?” A agrees. Thereafter S executes a deed in favor of A and delivers it to A. If there was a fiduciary relationship between S and the oral real estate trustee A,
What kind of trust is this? What is the result?
This is an oral real estate trust, A will not be able to invoke the statute of frauds. A will be decreed a constructive trustee, who will have only one obligation: turn the property over to the intended beneficiary, as decreed by the court.
S goes to A and states, “If I transfer Blackacre to you by deed, will you hold Blackacre for the benefit of B?” A agrees. Thereafter S executes a deed in favor of A and delivers it to A. “If I transfer Blackacre
to you in fee simple, do you promise to hold
Blackacre for the benefit of B,” and A says yes,
while he is thinking to himself: “What a fool. I
can’t believe this guy is doing this.”
Why kind of trust is this? Why can A not use the statute of frauds? What result?
Its an oral real estate trust. A cannot use the statute of frauds because he has committed fraud in the inducement. A will be decreed a constructive trustee: turn the property over to the intended beneficiary, B.
S goes to A and states, “If I transfer Blackacre to you by deed, will you hold Blackacre for the benefit of B?” A agrees. Thereafter S executes a deed in favor of A and delivers it to A. And If B relied to his detriment on the existence of this oral real estate trust, what result?
B will get the property from A via a constructive trust.
What constitutes detrimental reliance?
Look for B taking possession and making improvements. Possession alone is not enough.
