Constructive Trust, Defined
A remedy to prevent fraud or unjust enrichment. When court decrees constructive trust the wrongdoer will have only one obligation to transfer the property to the intended beneficiary as determined by the court. It is means to disgorge a wrongdoer of his ill-gotten gains.
Constructive trust arises in 4 situations
1. Where trustee of private express trust or charitable trust makes a profit because of self-dealing.
2. With respect to law of wills, when there is fraud in the inducement or undue influence.
3. Secret trusts in the law of wills
4. Oral real estate trusts, aka Breach of promise
Trustee of private express trust or charitable trust makes profit from self-dealing
1. With respect to ill-gotten profits trustee will be a constructive trustee
2. Trustee will have to turn those profits over to the intended beneficiaries of the trust, as decreed by the court
Law of wills, fraud in the inducement or undue influence
A remedy the courts have for fraud in the inducement or undue influence is that the court can deny the will probate and make the heir a constructive trustee who will have only one obligation: to transfer the property to the intended beneficiary, as determined by the court.
Secret Trusts in the law of wills
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. Parol evidence is admissible to show beneficiary was B thus A will not be allowed to keep the property and will become a constructive trustee.
Semi-secret trust vs. secret trust
Semi secret trust: "I devise $100,000 to Abel as trustee" with no beneficiary named. Secret trust: "I devise $100,000 to Abel" accompanied by oral promise that Abel will use funds for beneficiary. First is cured through resulting trust - money back to settlor. Second is cured through constructive trust, parol evidence leading to transfer of property to beneficiary.
Oral Real Estate Trusts, Breach of promise, General rule
S transfers deed to A, with oral condition that A hold property for the benefit of B. S executes deed in favor of A and delivers it to A. Four corners of deed state A owns property in fee simple absolute. If B claims property A can raise Statute of Fraud's defense.
Oral Real Estate Trusts, Breach of promise. Exceptions to general rule
Three situations where A will not be allowed to invoke statute of frauds to keep property. In such cases, A will be decreed a constructive trustee with only one obligation to transfer the property to intended beneficiary.
1. Fiduciary relationship between S and A.
2. There was fraud in the inducement on A's part.
3. There was detrimental reliance by B. If B relied in detriment on the existence of this oral real estate trust, then B will get the property from A via a constructive trust. For example, B takes possession and makes improvements.