#constructive trust

Introduction In trust law, a constructive trust is an equitable remedy imposed by a court to benefit a party that has been wrongfully deprived of its rights due to either a person obtaining or holding a legal property right which they should not possess due to unjust enrichment or interference, or due to a breach of fiduciary duty, which is intercausative with unjust enrichment and/or property…

A con­struc­tive trust accord­ing to Wikipedia is an equi­table rem­edy resem­bling a trust (implied trust) imposed by a court to ben­e­fit a party that has been wrong­fully deprived of its rights due to either a per­son obtain­ing or hold­ing legal right to prop­erty which they should not pos­sess due to unjust enrich­ment or interference.(That was a mouth­ful). More sim­ply: Is a con­struc­tive trust a trust as this term is used in the com­mon report­ing stan­dard ? Does the lit­tle attribute “con­struc­tive” make a big difference ?

The word con­struc­tive might mis­lead the unwary; the con­struc­tion tak­ing place here is that of lawyers who chip off blocks of the trust to make it fit a rather atyp­i­cal set of cir­cum­stances. Many know this type of legal con­struc­tion from employ­ment law where a con­struc­tive dis­missal is the inter­pre­ta­tion that an employee who quits his job actu­ally has been fired.How come to such a con­clu­sion: the boss treated the employee badly so that the employee did not have a choice but leave.

That Wikipedia (which pro­vided the intro­duc­tory sen­tence) is not far off in regards to the inter­pre­ta­tion of the law can be seen by recent deci­sions of US courts which define a con­struc­tive trust as “a rela­tion­ship, with respect to prop­erty, sub­ject­ing the per­son who holds title to the prop­erty to an equi­table duty to con­vey it to another on the ground that his or her acqui­si­tion or reten­tion of the prop­erty would con­sti­tute unjust enrich­ment”.  Other juris­dic­tions will treat fact pat­terns as those described by the Nebraska court by apply­ing con­cepts of unjust enrich­ment. Even though mul­ti­ple nat­ural per­sons might be involved in such a trans­ac­tion, with poten­tially fidu­ciary duties run­ning among them, the label “con­struc­tive“ indi­cates seman­tic lawyerly wran­gling that leave the orig­i­nal word and its mean­ing in the dust. The view that con­struc­tive trusts are not trusts is sup­ported by leg­is­la­tures as e.g. the Cal­i­for­nia Pro­bate Code , which specif­i­cally excludes con­struc­tive trusts from the def­i­n­i­tion of a trust (see sec­tion 82). (See also MATTER OF HSBC BANK USA, NA, 96 AD 3d 1655 — NY: Appel­late Div., 4th Dept. 2012).

The lit­tle lawyerly con­struc­tion seems to indi­cate that con­struc­tive trusts are not trusts for pur­poses of the com­mon report­ing stan­dard. The alter­na­tive would be rather ridicu­lous, since any claim for unjust enrich­ment needed to be reported under CRS.