A trust is a legal relationship where one person, the trustee, holds assets for the benefit of another person, a beneficiary. A constructive trust is one type of trust. Instead of being created expressly and intentionally by a settler, a constructive trust arises by operation of law as a response to certain events. It’s basically an equitable device that’s used to prevent one party from taking advantage of another party. For example, if one party steals another party’s car and trades it for a pick-up, the party that stole the car will obtain legal title to the pick-up. But, the other party can sue the thief and the court will say that the thief holds the pick-up on constructive trust for the true owner of the car. In this case, a father claimed that his son was holding farm property in trust for him and that Iowa law did not prevent him from recovering it.
The genesis of the dispute dated back to an alleged oral contract concerning the ownership of a fifty-acre farm in Benton County. The father claimed that he entered into a contract with the executors of his father’s estate to buy the farm. He couldn’t come up with all of the financing to buy the farm, so he assigned the contract to his son who was able to obtain financing for the full amount. While payment was being made under the contract, the son lived on the farm with his own family and refinanced the property in 1999, all with the father’s knowledge. The father actually leased the farm, with the son making the mortgage payments and covering farm expenses with the income derived from the farm. The son paid any additional expenses from his personal funds. The father also tried to move into the farmhouse with the son and the son’s family, but the son tried to evict his father from the premises in 2005. After the purchase contract was paid in full, the executors deeded the farm to the son.
The father sued to quiet title to the farm in his name but the trial court refused, instead determining that the son was the record owner of the property. On appeal, the father claimed that he had an oral contract with his son which allowed the son to hold the property in trust for the father for the sole purpose of obtaining financing. However, the mortgage on the property was solely in the son’s name and the father’s name did not appear on the deed to the property. The appellate court affirmed the trial court’s ruling that the son was the property owner. The father failed to prove the existence of an oral contract by clear and convincing evidence. Underwoood v. Underwood, No. 7-856/07-0191, 2007 Iowa App. LEXIS 1351 (Iowa Ct. App. Dec. 28, 2007).