Constructive Trusts
Posted Tuesday, October 6, 2015 by John S. Palmer
Washington courts may, in certain circumstances, order the legal owner of property to convey the property to another person. This may be done when the court finds that the owner obtained the property by fraud or other misconduct. In legal parlance, the court is said to impose a constructive trust over the property for the benefit of the rightful owner.
A court may impose a constructive trust over inherited property if there is clear and convincing evidence that the person who inherited it was not the true beneficiary intended by the decedent. A recent decision by the Court of Appeals illustrates that such cases may arise when a decedent makes a binding verbal promise to convey property to someone that contradicts his or her will.
In DeSpain v Lund (decided August 18, 2015), the decedent and his wife purchased 40 acres of land. They subsequently raised three children in a house they built in the middle of the property. After the children were grown, the decedent asked his daughter Diane to move back onto the property; to entice her to do so, he promised to leave her one-third of the property when he died. In reliance on this promise, Diane built a house on the western portion of the property and made other improvements.
In 1988, the decedent made a similar promise to his daughter Deborah, and in response she built a house in the middle of the property, near the decedent’s house.
After both daughters moved onto the property, the decedent had a map drawn up showing how the property would be divided upon his death, with Diane receiving the western portion, Deborah the middle, and their brother Duane inheriting the eastern third. However, before he died the decedent executed a new will leaving the entire property to Duane.
After her father died, Deborah sued both his estate and her brother, arguing that she was entitled to the middle portion of the property. The trial court agreed and imposed a constructive trust over it for her benefit.
The Court of Appeals noted that in the 1993 case of Baker v. Leonard, the Washington Supreme Court said that: “A constructive trust arises where a person holding title to property is subject to an equitable duty to convey it to another on the ground that he would be unjustly enriched if he were permitted to retain it.” Constructive trusts can be established by evidence of an oral agreement, but may be imposed only when supported by clear, cogent and convincing evidence.
The court found sufficient evidence to support the conclusion that Deborah was induced to build a home on the property by her father’s promise to bequeath her an unspecified one-third of the property if she did so. It found, though, that she was not specifically entitled to the middle portion, as the plans to do so were drawn up after she moved onto the property and were not part of the original promise made by her father.
Deborah’s sister Diane fared a little better. Apparently upon learning that her father had cut her out of his will, she brought an action to secure title to the western portion of the property, where she had built her home. As a result, a constructive trust was imposed over that portion of the property for her benefit while her father was still alive.
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