Real Estate Litigation 101: Resulting Trust

Unknown to even many real estate attorneys, resulting trust is a real estate litigation concept that is used when there is no express contract or other written agreement. The most common use of the resulting trust concept is when a party gives money to another to purchase property and is not on title. When a dispute arises over who owns the property, the party who contributed money towards the purchase will allege a resulting trust—I paid to buy the property and you (defendant) are holding the property in trust for me.

A resulting trust “arises from a transfer of property under circumstances showing that the transferee was not intended to take the beneficial interest…. It has been termed an ‘intention-enforcing’ trust, to distinguish it from the other type of implied trust, the constructive or ‘fraud-rectifying’ trust. The resulting trust carries out the inferred intent of the parties; the constructive trust defeats or prevent the wrongful act of one of them.” Martin v. Kehl (1983) 145 Cal.App.3d 228, 238.

“Ordinarily a resulting trust arises in favor of the payor of the purchase price of the property where the purchase price, or a part thereof, is paid by one person and the title is taken in the name of another.” Id. “The trust arises because it is the natural presumption in such a case that it was their intention that the ostensible purchaser should acquire and hold the property for the one with whose means it was acquired.” Id.

The burden is on the party who asserts a trust to establish with definiteness and specificity the proportional amount contributed. Lloyd’s Bank California v. Wells Fargo Bank (1987) 187 Cal.App.3d 1038, 1044. California Evidence Code §662 provides that “the owner of the legal title to property is presumed to be the owner of the full beneficial title. This presumption may be rebutted only by clear and convincing proof.” What this means is that the person whose name is on the deed is presumed to be the owner, but the plaintiff who alleges a resulting trust can rebut that presumption by offering up clear and convincing proof that he or she is the rightful owner.

A resulting trust attempts to rebut this presumption by showing that the plaintiff paid all or some of the money towards the purchase of the property. “A resulting trust cannot be enforced in favor of a person who has paid part of the consideration for the transfer of property unless it is possible to clearly establish the amount of money contributed by him [or her] or the proportion of his [or her] contribution to the whole purchase price. [Citations.] One who claims a resulting trust in land must establish clearly, convincingly and unambiguously, the precise amount of the consideration furnished by him [or her]. If the claimant does not, then the presumption of ownership arising from the legal title is not overcome and a resulting trust will not be declared.” Id. at 1044-1045.

In a traditional resulting trust case, a party is not on title but contributes the money for the purchase. This can happen when, for example, the true purchaser does not have acceptable credit with which to procure a mortgage. See, In Re Marriage of Ruelas (2007) 154 Cal.App.4th 339.

Resulting trust is an equitable remedy, meaning that the lawsuit will be heard by the court rather than a jury.