TRUSTS - CONSTRUCTIVE TRUST AS DEVICE TO PERMIT TRACING OF PLAINTIFF'S PROPERTY IN ACTION OF RESCISSION FOR BREACH OF WARRANTY

Authors

Abstract

Defendant, in order to finance the purchase of a tract of land adjoining his farm, arranged to sell the oil and gas lease in the new tract to the plaintiff for $750. He took a conveyance of the new tract, giving a check to the vendor for $1,200, the entire purchase price. A few hours later he executed an oil and gas lease to the plaintiff who paid him $750, which defendant then deposited in his bank account together with $650 he had borrowed from the bank, thus covering the $1,200 check. Both parties understood that the money paid by the plaintiff was to be used in the purchase of the land. It transpired that the land was already subject to an oil and gas lease which was registered in the Union Indian Office, but not in the county records. Defendant was innocent of deliberate misrepresentation, and there was no claim that he had been negligent. Defendant was insolvent at the time of this action for rescission and claimed a homestead exemption. Held, a constructive trust should be imposed upon the land upon grounds of constructive fraud. Plaintiff is given an equitable lien upon the land for $550, taking junior to the bank's mortgage securing the $650 loan. Orr v. Rose, (Okla. 1934) 37 Pac. (2d) 300.

Recommended Citation

TRUSTS - CONSTRUCTIVE TRUST AS DEVICE TO PERMIT TRACING OF PLAINTIFF'S PROPERTY IN ACTION OF RESCISSION FOR BREACH OF WARRANTY, 33 Mich. L. Rev. 1290 (1935).
Available at: https://repository.law.umich.edu/mlr/vol33/iss8/32