by: Patrick A. Randolph, Jr.
Professor of Law
UMKC School of Law
EQUITY; CONSTRUCTIVE TRUST; CONVEYANCES: Executed recital that grantee of deed to house "owed" to the person supplying the consideration for the house $30,500, "with a note and mortgage to be drawn up at a later date" did not create any obligation on the grantee, who received house free and clear of any encumbrance.
Ely v. Bowman, 925 P.2d 567 (Okla. App. 1996).
The appellant alleged that he loaned the grantee, who was then his son's fiance, the funds to purchase their intended marital residence, and that her signed writing imposed a constructive trust on the property. After the marriage was called off, the grantee alleged that the appellant's son had actually borrowed the money from his father and had given her the house as a gift.
A resulting trust arises where a party pays consideration to to a grantor of legal title to property but the legal title is transferred to another. In such cases, a trust is imposed for the benefit of the party paying the consideration for the property, "whom equity deems to be the real owner" upon proof by "clear, satisfactory and convincing proof." But a constructive trust does not arise where there is evidence that the party paying for the deed intended, at the time of payment, to have the property transferred to the grantee as a gift. The trial court found that there was insufficient evidence to rebut the grantee's story that she had received the property as a gift.
The grounds for a constructive trust are broader. Basically, a constructive trust is an equitable remedy that will arise whenever the court concludes that one is an owner of legal title to property under circumstances that would work an "equitable fraud" unless a constructive trust is imposed. The Court of appeals affirmed the trial court's ruling that no constructive trust existed basically on the same theory explained above. There was inadequate evidence upon which to conclude that the property was anything other than a gift.
Note: What about the document acknowledging the creation of a debt? The grantee alleged that she was pressured into signing it because the father argued that the son should have the house if she died before they were married.(???!!!) Well, anyway, it must have sounded better when she said it in court.
Comment: The case largely depends upon the trial court's interpretation of the facts, which is as it should be. But it is nevertheless worth noting because a relatively clear document, albeit not a formal legal document, appears to have been given no legal effect whatever. Lawyers are sometimes called upon to "bless" informal arrangements which are carried out "just to move the project along," when no one wants to invest the money in doing something more formal. Formality often equates with enforceability, and lawyers who truly serve their clients ought to be reminding them of that reality. Had this been a formal note and mortgage executed, delivered, and recorded, all of the presumptions would have run the other way, and Daddy would have had his lien.
Items in the Daily Development section generally are extracted from the Quarterly Report on Developments in Real Estate Law, published by the ABA Section on Real Property, Probate & Trust Law. Subscriptions to the Quarterly Report are available to Section members only. The cost is nominal. For the last six years, these Reports have been collated, updated, indexed and bound into an Annual Survey of Developments in Real Estate Law, volumes 1-6, published by the ABA Press. The Annual Survey volumes are available for sale to the public. For the Report or the Survey, contact Stacy Walter at the ABA. (312) 988 5260 or email@example.com
Items reported here and in the ABA publications are for general information purposes only and should not be relied upon in the course of representation or in the forming of decisions in legal matters. Accuracy of data and opinions expressed are the sole responsibility of the DIRT editor and are in no sense the publication of the ABA.