constructive trust

Constructive trusts refers to the trust imposed by law irrespective of the intentions of the parties to create one. These trusts are imposed by the courts in response to fraudulent or unconscionable conduct. They are imposed irrespective of the intention of the trustee and in many cases it is clear that a trust was the last thing that the trustee contemplated. Constructive trust is concerned with preventing the legal owner of a property from escaping with an unconscionable conduct. Kotoye v. Saraki (1994) 7 N.W.L.R. (Pt. 357) 414.

Constructive trusts occur by operation of law, dating back to the event which gave rise to it and this is merely declared by the court. Westdeutsche Landesbank v. Islington B.C. (1996) A.C. 669. Resulting trusts on the other hand is based on the presumed intention of the parties.

The following are the features of a constructive trusts:

• a. Constructive trusts are the class of trusts imposed by the law irrespective of the intention of the parties.
• b. Constructive trust is concerned with preventing the legal owner of a property from escaping with an unconscionable conduct.
• c. In a constructive trust, fiduciary relationship must exist between the constructive trustee and the claimant, and that relationship is breached by the constructive trustee withholding property from the claimant in an unconscionable way.

Some practical example of constructive trusts are as follows:

• a. The vendor as a constructive trustee: Where there is a contract for the sale of a real property, once the vendor receives the purchase price for the property, he holds the property as a constructive trustee for the purchaser until the contract is completed and title is transferred to the purchaser.
• b. Profit from crime: On grounds of public policy, a person will not be allowed to make profit or claim any benefit from his own crime. Where for example, one joint tenant kills the other so that the property can devolve on him as a joint tenant, he will hold the property on constructive trust for himself and the deceased’s estate or next of kin. Cleaver v. Mutual Reserve Fund Life Association (1892) 1 Q.B. 147.
• c. Mutual will: Where two persons enter into agreement for the disposal of their property in a particular manner after the death of the person who first die, and in view of this the parties executed a mutual will to reflect their agreement; any survivor will not be allowed at equity to vary or disregard such an agreement either by an amendment or a revocation of the mutual will, in order to give effect to the agreement of the parties. The survivor thus becomes a constructive trustee for the deceased party in respect of the property to be disposed.
• d. Acquisition of property by fraud: Where a person has acquired property by personal fraud, he may be compelled by equity to hold such property as constructive trustee for the benefit of the person injured by the fraud. McComick v. Grogan (1869) L.R. 4.
• e. Trustee profiting from position of trust: It is a cardinal equitable rule that a trustee must not profit from his position or use the same to his advantage by virtue of the fiduciary position in which he stands. When a trustee breaches this fiduciary duty and by so doing gains a personal advantage, he becomes a constructive trustee of the gains made for the beneficiary. Marques v. Edematie (1950) 19 N.LR. 75.
• f. Mortgagee as constructive trustee: A mortgagee in possession of the mortgaged property for instance is a treated as a constructive trustee of the mortgagor and is liable to account for all rents and profits received in respect of the property. A mortgagee exercising his power of sale also cannot involve in sharp practices by selling the mortgaged property to himself or someone nominated by him. Robertson v. Norris (1857) I Giff. 421.
• g. Stranger intermeddling with trust property: This covers diverse situations, for example, where a stranger, without acting as a trustee or having the authority of the trustee takes it upon himself to intermeddle with the trust property; he becomes a trustee of his own wrong. Mara v. Browne (1896) 1 Ch. 199. Another situation is where a trustee transfers the trust property to a stranger who receives it, knowing that same to be in breach of a trust, irrespective of whether such a notice is actual, constructive or imputed. Soar v. Ashwell (1893) 2 Q.B. 390. In the case of volunteer who receives notice of the beneficiary’s equitable interest after acquiring the property, the law will convert him to a constructive trustee for the beneficiary.
• h. Persons in fiduciary position: Persons who stand in a fiduciary positions to others such as agents, trustees, executors and administrators are not entitled to make profits either directly or indirectly by virtue of their position and also should not put themselves in positions whereby their interests will conflict with their duties. The making of profit by persons in fiduciary positions constitutes a fundamental breach of that position. Regal (Hastings) Ltd v. Gulliver & Others (1942) 1 All E.R. 378.