This Trust is Just

Constructive Trusts

In 2010 the highest appellate court in Maryland held that the girlfriend was entitled to compensation for her contributions for the mortgage and other in-kind services even though the residence where the parties had lived for over 10 years was solely titled in the boyfriend’s name. How did the Court come to this conclusion?

The facts are as follows:

—The couple originally were going to purchase the property jointly but due to the girlfriend’s poor credit score a mortgage company would not provide a mortgage at a good annual rate.

—Early on in their relationship, they had a joint checking account which they used to share expenses and each contributed almost equally to the down payment and made mortgage payments from the joint account.

—Their intention was to place the girlfriend’s name on the deed but that did not occur.

—Eventually the boyfriend asked the girlfriend to leave the residence and he refused to give her one half of the fair market value less the balance of the mortgage.

—The girlfriend filed suit.

A constructive trust may exist where there is a relationship in which a person who has obtained property has an equitable duty to transfer the property to another and to whom it rightfully belongs. The justification is that the acquisition or retention of it by one party is wrongful and would unjustly enrich that person if he or she were allowed to retain the property.

The Court, after hearing testimony at trial, decided that a constructive trust was created by the boyfriend and that the property which was the parties’ residence should be equally divided. A trustee was appointed to achieve the division of the property. Here the court believed that the boyfriend would be unjustly enriched by his solely owning the property. The boyfriend appealed the case, the Court of Appeals agreed with the lower court, and the girlfriend was awarded one half of the residence. The trustee could sell the property at what is called a “ trustee’s sale”. Such a sale involves a great deal of expense and has expenses similar to those of a foreclosure.

Often parties knowing of the high cost of a trustee’s sale agree to settle the case in a number ways. One option of the parties is for one party to buy out the other party’s interest based on fair market value. Another practical way of avoiding the high cost of a trustee’s sale is to list the property with a realtor and sell the property.

I’ve not discussed in this article what is called the statute of frauds which often is raised as a defense to allegations of a constructive trust. We will discuss statute of frauds in a future article.

Fred Antenberg is a Family Law attorney with an office is Columbia, Maryland, who represents individuals in Howard County, Maryland, and in surrounding Maryland counties. CONTACT Fred at 410 730 4404.