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Equity Spring 2012. “Constructive Trusts”. In A Single Sentence. Constructive Trust: Equity Creates A Fictional Trust Based Upon Wrongdoing Or Breach Of Confidential Relationship To Prevent Injustice. Sharp v. Kosmalski, 351 N.E.2d 721 (N.Y. 1976).

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Equity Spring 2012

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Equity Spring 2012

“Constructive Trusts”

In A Single Sentence

  • Constructive Trust:

  • Equity Creates A Fictional Trust Based Upon Wrongdoing Or Breach Of Confidential Relationship To Prevent Injustice

Sharp v. Kosmalski,351 N.E.2d 721 (N.Y. 1976)

  • Plaintiff commenced an equitable action to impose a constructive trust upon property that he gave to the defendant as a gift.

  • Wife had just recently died

Why Does the Court Go Out of Its Way To Describe the Plaintiff?

  • Q: Who Is the Plaintiff?

  • A: 56 Year Old Dairy Farmer Whose Wife has just recently passed away (married for 32 years) and he has only 8th grade education. What is the Court driving at? Why are these facts relevant in Equity?

Sharp v. Jean C. KosmalskiContinued

  • Q: Who Is The Defendant?

  • A: 40 Year Old Close Personal Friend

  • Facts: P asked D to marry him; She refused. He constantly gave her gifts to see if she would change her mind. She ended up with title to his farm & bank accounts & house & all his property

  • Then: She turned around and evicted him -- Leaving him with $300 to his name.

Proving A Constructive Trust In The Swell State of New York

  • 1. A confidential or fiduciary relation

  • 2. A promise

  • 3. A transfer in reliance thereon

  • 4. Resulting in Unjust Enrichment

Court’s Conclusion:

  • This case seems to present the classic example of a situation where equity should intervene

  • It was for just this type of case that there evolved equitable principles and remedies to prevent injustices.

Classic Constructive Trust Cases in South Carolina

  • Chapman v. Citizens and Southern Nat. Bank of South   302 S.C. 469, 395 S.E.2d 446S.C.App.,1990. Jul 23, 1990

Chapman: In Three Easy Lessons

  • 1. Words Can Be Found To Promises

  • 2. Confidential Relationship Is Flexible

  • 3. Fraud Does Not Always Mean Nine Elements of a Legal Fraud

Chapman: Words can be Promises

  • Wife's words, when husband made his will, where wife agreed to make gifts of marital property to husband's children or not to exercise power of appointment at husband's death were promises for purposes of determining whether confidential relationship existed and whether constructive trust should be imposed

Chapman: Confidential Relationship

  • Confidential or fiduciary relationship exists when one reposes special confidence in another so that latter, in equity and good conscience, is bound to act in good faith and with due regard to interest of one reposing confidence.

Chapman: Fraud is not always legal fraud

  • Fraud, within meaning of constructive trust theory, is generally reprehensible conduct and not misrepresentation of facts.

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