Trusts that are Imposed

Not all trusts are created – some are imposed. One trust that is imposed is called a

constructive trust. These trusts aren’t true trusts; rather, they are devices that are created by

courts of equity when property is taken by one who has gained possession of property wrongfully.

The property is taken from the wrongdoer and then given to another. A constructive trust isn’t

dependent on what a person wants. Instead, it is a trust that imposed. It is imposed to prevent

unjust enrichment.

Consider this set of facts. A man and woman separate and then divorce. They agree in

the divorce that a garden tractor will become the man’s exclusive property. Before the man can

gain possession of the garden tractor, it is stolen. The woman reports the theft to the police and

to her homeowner’s insurance policy. She claims that the tractor belongs to her and demands that

the homeowner’s insurance company pay the proceeds of the loss to her. The man goes to a court

of equity (usually the superior court) and asks that the court impose a constructive trust on the

insurance proceeds. The insurance company is notified of the court’s order. The insurance

company then sends the money to the court and files something called a bill in interpleader.

This pleading essentially says: “I know this money isn’t mine. Two people are claiming it. I

know that it belongs to one of the two people. Please figure this out.”

A constructive trust has been held to be “the formula through which the conscience of

equity finds expression.” It is impossible to describe the various ways that trusts can be imposed

but they are many. If you can think of the various ways that property is obtained in bad faith, you

can probably figure out the various ways that constructive trusts can be imposed. The

imposition of a constructive trust provides a remedy where once there wasn’t one. Stakeholders

such as insurance companies and other parties holding property in contention sit up and take

notice when they are served with court orders imposing constructive trusts.

In most civil cases, the burden of proof is by a preponderance of the evidence – something

is more likely true than not true. With constructive trusts, however, the burden is higher. A

person asking for a constructive trust must show entitlement by clear and convincing evidence

that there is/was a confidential relationship between the parties (e.g., between a husband and a

wife or a decedent and a defendant); the defendant was in a dominant position; and that the

defendant used this dominant position to their advantage and to the disadvantage to the other.

I like remedies. Remedies cure wrongdoing. Remedies provide hope where before all

hope was lost. Constructive trusts provide a useful remedy when someone is unjustly enriched at

the expense of someone else. Knowing there is such a remedy can be useful in a time of need

 

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