This section is from the book "The Law Of Real Property and Other Interests In Land", by Herbert Thorn Dike Tiffany. Also available from Amazon: A Treatise on the Modern Law of Real Property and Other Interests in Land .
Constructive trusts are trusts which are recognized or imposed by equity, for the purpose of adjusting the rights of the individuals concerned, without reference to the existence of any actual or presumed intention on their part to that effect. By far the most important class of constructive trusts are those arising from fraud.
If one person acquires property by the exercise of fraud, or fraudulently refuses to relinquish property acquired by him to which he is not entitled, equity will ordinarily consider that, though he has the legal title, he holds it merely for the benefit of the person whom he has sought to defraud, who is, in fact, the rightful trust, not for the grantor, but for a third person, the courts ordinarily take much the same view as in the case of an agreement by the grantee to hold in trust for the grantor, that the grantee does not hold subject to a constructive trust by reason of his repudiation of the agreement unless he intended at the time of acquisition not to perform his agreement, unless he solicited the conveyance, or unless the parties stood in a confidential relation.52 In cases in which such a constructive trust is recognized, it is ordinarily recognized in favor of the person for the benefit of whom the agreement was made, the cestui que trust named, rather than in favor of the grantor.53
43. 1 Stimson's Am. St. Law, Sec. 1706; 1 Perry, Trusts, Sec. 142; Bis-pham, Equity, Sec. 85. See Harlan v. Eilke, 100 Ky. 642, 38 S. W. 1094; Miller v. McLin, 147 Ky. 248, 143 S. W. 1008; Halliday v. Basel, 170 Mich. 489, 136 N. W. 354; Went-worth v. Wentworth, 2 Minn. 277, 72 Am. Dec. 97; Reitz v. Reitz, 80 N. Y. 538; Campbell v. Campbell, 70 Wis. 311, 35 N. W. 743.
44. 1 Stimson's Am. St. Law, Sec. 1706. See Fairbairn v. Middlemiss, 47 Mich. 372. 11 N. W. 203; McCartney v. Bostwick, 32 N. Y. 53; Allen v. McRae, 91 Wis. 226, 64 N. W. 889.
If one is induced by misrepresentation to convey land to another, the latter may be regarded as a constructive trustee for the grantor, and will he compelled to make a reconveyance and account for any receipts from the property.47
In the case of a conveyance by a person to another standing in a confidential relation to him, as by a cestui que trust to a trustee, ward to his guardian, client to attorney, principal to agent, the transaction will be severely scrutinized, and, unless it appears absolutely free from suspicion, the grantee may, in order to pro46. As regards the right to proceed against such substituted property, see article by Professor Ames in 19 Harv. Law Rev. at p. 521: 2 Perry, Trusts Sec. 828.
47. 1 Perry, Trusts, Sec. 171; 2 Pomeroy, Eq. Jur. Sec. 1053; Moore v. Crawford, 130 U. S. 122, 32 L. Ed. 878; Huxley v. Rice, 40 Mich. 73.
Tect the grantor, be regarded as a trustee for the latter as regards the property so conveyed.48
In case one conveys land to another under an oral agreement by such other to hold it in trust for him, the grantor, the express trust thus sought to be credited in favor of the grantor is not enforcible, by reason of the Statute of Frauds. In England, however, the view has been adopted that in such case the making of the promise, taken in connection with the subsequent repudiation thereof, involves such fraud on the grantee's part that he is to be regarded as a constructive trustee for the grantor.49 In this country such a possibility of protecting one, who makes a conveyance on an oral trust, against the action of the grantee in repudiating the trust, has ordinarily been ignored and has occasionally been absolutely repudiated, though in so far as the grantee acquired the property with an actual fraudulent intention at the time not to carry out his agreement, the courts have regarded him as holding as constructive trustee.50 And they have occasionally taken a like view, where they considered the grantor and grantee as standing in a confidential relation.51
In eases in which the grantee acquires the land by reason of an oral agreement on his part to hold it in
48. 1 Perry, Trusts, Sec.Sec. 194-210; 2 Pomeroy, Eq. Jur. Sec. 1052; Fox v. Mackreth, 1 White & T. Lead. Cas. Eq. 188 and notes. Editorial note, 15 Columbia Law Rev. 446.
49. Hutchins v. Lee 1 Atk. 447; Young v. Peachy, 2 Atk. 254; Lincoln v. Wright, 4 De G. & J. 16; Davis v. Whitehead (1896) 2 Ch. 133; Rochefoucauld v. Bowstead, (1897) 1 Ch. 196.
50. Professor Costigan mentions, as apparently adopting the English view. Taylor v. Morris, 163 Cal. 717, 127 Pac. 66; Medical College Laboratory v. New York University 178 N. Y. 153, 70 N. E. 467; Flesner v. Cooper, 39 Okla. 133, 134 Pac. 379; See also Lauri-cella v. Lauricella, 161 Cal. 61, 118 Pac. 430; Doll v. Doll, 96 Neb. 185, 147 N. W. 471.
51. The numerous cases are collated by Professor Costigan in .12 Mich. Law Rev. at p. 531 et seq. See also Prof. Ames' article in 20 Harv. Law Rev. at pp. 551, 552, Lectures on Legal History, pp. 427, 428; Article by Professor Harlan F. Stone, Esq. on "Resulting Trusts and the Statute of Frauds," in 6 Columbia Law trust, but under an express trust, thai is, the trust under which he held the funds for which the land was substituted.
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Although, as just stated, the grantee of land whose acquisition thereof was effected by his oral promise to hold it in trust, is not, in most jurisdictions, in the ordinary case, regarded as holding it subject to a constructive trust, a contrary view has almost invariably been taken when the acquisition of land by will was so effected, the devisee being regarded as holding subject to a constructive trust in favor of the person in trust for whom he promised to hold.54 And in the analogous case of the acquisition of land by descent, brought about by the heir's promise to the decedent, that if the latter would refrain from making a will, the heir would make a provision for a third person, a trust to the extent of such promised provision has been imposed on the land in the hands of the heir.55 Why a conRev. at p. 326; Editorial notes in 12 Columbia Law Rev, at p. 283, 14 Id. at p. 273, 15 Id. at p. 446.