Chapter 55 - § 55.4 • RESULTING TRUSTS

• Jurisdiction: Colorado

§ 55.4 • RESULTING TRUSTS

§ 55.4.1—Generally

A resulting trust is an equitable remedy implied by law, used for the purpose of carrying out the intent of a party who has transferred property to another without the intent to convey a beneficial interest in the property to the transferee. Bryant v. Cmty. Choice Credit Union, 160 P.3d 266, 271 (Colo. App. 2007). When a resulting trust arises, title reverts to the transferor or the transferor's successors. Loring and Rounds § 4.1.1.1. If a resulting trust is imposed on property, the legal title holder is subject to a duty to convey the property back to the transferor. A resulting trust is a remedy, not a separate cause of action. Bryant, 160 P.3d at 276. If pleaded as a separate cause of action, the claim may be dismissed or denied by the court. Id.

The Restatement (Second) of Trusts states that:

A resulting trust arises where a person makes or causes to be made a disposition of property under circumstances which raise an inference that he does not intend that the person taking or holding the property should have the beneficial interest therein, unless the inference is rebutted or the beneficial interest is otherwise effectively disposed of.

Restatement (Second) of Trusts § 404 (1959).

The Restatement (Third) of Trusts makes no reference to intent, describing a resulting trust as "a reversionary, equitable interest implied by law in property that is held by a transferee, in whole or in part, as trustee for the transferor or the transferor's successors in interest." Restatement (Third) of Trusts § 7 (2003). Although these definitions are not necessarily contradictory, Colorado courts have relied on the definition contained in the Restatement (Second) of Trusts. Mancuso v. United Bank of Pueblo, 818 P.2d 732, 739 (Colo. 1991).

A resulting trust is most appropriate in situations where the transferor transfers title to a transferee with the intent that the transferee hold legal title to the property for the benefit of another, but for some reason the intent of the transferor cannot be fully implemented. In such a case, presumably the transferor did not intend for the transferee to retain the beneficial interest. This situation occurs most frequently when a transferor and transferee orally agree to a trust or other type of arrangement (such as for the transferee to serve as a mere nominee), but the instrument conveying the property transfers the property outright to the transferee. A resulting trust is imposed to prevent the transferee from taking title to the property free and clear of the intention of the parties. Note that Colorado law does allow enforcement of oral trusts on personal property, but any arrangement involving real property must be in writing under the statute of frauds. If the oral trust arrangement is enforceable, no resulting trust would be imposed because the agreement can be enforced according to its terms.

Commentators and case law have identified three main situations in which a resulting trust may be imposed, each of which will be discussed in more detail in the sections that follow. The first situation in which resulting trusts are utilized is when a party intends to create an express trust, but the express trust fails, either in whole or in part. Page v. Clark, 592 P.2d 792, 797 (Colo. 1979) (quoting 5 Scott on Trusts § 404.1 (3d ed. 1967)). The second situation arises when the terms of an express trust have been performed in their entirety, but there are still trust assets remaining. Id. In the final situation, one party pays the purchase price for property, but a...