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Turley v. Ethington - 11/29/2006

Arizona Court of Appeals Division Two Rules Statute of Frauds Inapplicable to Claim for Constructive Trust Brought by Nephew Claiming Breach of Fiduciary Duty by Uncle Under Oral Partnership Agreement to Purchase Land.


Plaintiffs (“Nephew”) alleged an oral partnership agreement with Defendants (“Uncle”) for the purchase of certain real estate. Nephew claimed bad faith, fraud, unjust enrichment and breach of fiduciary duty, and sought money damages and an order for a constructive trust. The trial court dismissed the claims under Rule 12(b)(6), Ariz. R. Civ. P., for failure to satisfy the statute of frauds for transfer of an interest in land, A.R.S. § 44-101(6).

Nephew appealed the dismissal, arguing that the statute of frauds did not preclude a claim for constructive trust resulting from the breach of the Uncle’s fiduciary duty under the partnership agreement. The Court of Appeals agreed, and reversed the trial court’s dismissal. The Court noted that Uncle did not challenge the validity of the alleged partnership agreement under the Revised Uniform Partnership Act (“RUPA”), A.R.S. §§ 29-1001 through 29-1111. The Court held that, because RUPA provides adequate protection against fraud under the circumstances, the statute of frauds did not bar the imposition of a constructive trust. The Court adopted the approach of Corbin on Contracts § 17.12 (1997) for determining under which circumstances the statute of frauds would apply to transfers of an interest in property relating to a partnership, and overruled Johnson v. Gilbert, 127 Ariz. 410, 621 P.2d 916 (App. 1980), to the extent of any conflict.

Judge Howard wrote the opinion, with Judges Pelander and Vásquez concurring.

Posted On: 12/4/2006