Trusts - Constructive Trusts/Conclusion Flashcards
Constructive Trust
This is NOT a trust. And it’s NOT based on intent. Remember express trusts are based on express intent and resulting trusts are based on implied intent. This isn’t about intent AT ALL. This is an equitable remedy to prevent unjust enrichment.
Constructive trust is NOT automatic. Must plead it and prove it like any other remedy.
Constructive trusts are imposed on specific property. Mere proof that we have a D who engaged in wrongful behavior and has property that could be used to compensate for that wrongful behavior is not enough for the imposition of a constructive trust.
MUST have connection between whatever behavior we’re trying to remedy and the property involved.
A person seeking a constructive trust remedy must DO EQUITY to GET EQUITY. Ex: while evil D had the property for 2 years, he made the mortgage payments. When P gets property back, he has to reimburse for the mortgage payments.
No duties, just court judgment that trustee must convey legal title to the person who should have received it.
Grounds Giving Rise to Constructive Trust
No definitive list of situations. Often used when heir murders intestate or beneficiary murders testator (in states without a slayer statute).
Typical examples:
- Fraud
- Duress
- Abuse of confidential relationship (even a friendship can count if it’s a deep/long friendship)
- Promises made in contemplation of death (like bequeathing your house to someone in reliance on their oral promise to bequeath it on their death to your son (like a casual life estate)). A constructive trust is the remedy for this form of unjust enrichment.
Trusts Framework
Step 1: Identify the type of trust: inter vivos trust (declaration or conveyance) or testamentary. And is it private or charitable? If problem doesn’t say it’s valid, then
Step 2: Check validity of trust. Fulfill all 5 reqs. Assuming it’s valid, then while identifying issues, look at the traits of the trust:
Step 3: Assess traits of trust. Revocability? Limits like spendthrift provisions? Discretionary? Support? Subject to change? Can settlor change it (yes if not irrevocable). Can beneficiaries? Maybe but hard. What about court? Is it making changes like through cy pres? Can trust be terminated and was it terminated properly? OR ask
Step 4: Did the trustee breach the terms of the trust? See what powers trustee had and did he exceed them. Look at standard of care and whether or not it was breached. Check prudent investor rule. Did trustee account properly for what he did? Did he violate other fiduciary duties like good faith, loyalty, not self dealing? Liability to 3rd parties such as in K or tort?
Step 5: Double check for remedies like monetary damages, constructive trusts, etc.
