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Constructive Trust

Breach Of Express Trust By Disloyalty

If a trustee of an express trust acquires property by a breach of trust—for example, by a violation of an obligation to be loyal to the beneficiary—a constructive trust can be imposed on such property. The constructive trust can be applied not only to the property originally obtained by disloyalty, but also to its products and proceeds. It can be used against persons who succeed the disloyal trustee as the owner of the products of the disloyalty if they are not bona fide purchasers.

It is immaterial that the trustee acted innocently because of ignorance or in the belief that the conduct was not disloyal. It is unnecessary to prove that the acquisition of the property by dis-loyalty damaged the beneficiary, since it is sufficient to show the receipt by the trustee of property obtained by breach of his or her duty.

In addition, the duty and the remedy exist with respect to persons who are in a confidential relation. This term has no exact definition but entails dominance and superiority of one individual over another because of such elements as a close familiar relationship, an enduring practice of entrusting business matters to the knowledge of a confidant, and differences in age, health, and education.

Additional topics

Law Library - American Law and Legal InformationFree Legal Encyclopedia: Constituency to CosignerConstructive Trust - Mistake, Undue Influence, Or Duress, Fraudulent Misrepresentation Or Concealment, Property Obtained By Homicide