When and How to Use a Constructive Trust

If somebody owes you money and you sue, you don’t care what money you get back, as long as it equals the money you are owed. In other words, nobody cares what actual dollars are being paid so long as those dollars are legal currency and repay you what you have lost.

But not all lawsuits are like that. Sometimes, there is a very specific pot of money that you want back from a single identifiable source. Or very specific nonmonetary property, that you feel someone else has, but which should be yours or paid or returned to you.

Or, someone else has money that you want segregated because you feel that money is yours and you don’t want the other side, intermingling what you see as your money, with their money.

Using the Constructive Trust

That’s where a constructive trust comes in.

A constructive trust asks the court to put specifically identifiable money or property into a separate trust. That’s not necessarily an actual legal trust, the way you might set up for estate planning. Rather, it’s a trust created by the court where you just want the money or property separated and identified, and protected, until the outcome or resolution of your case, when the actual, real owner is determined by the court.

Trusts have trustees and when you ask the court to create a constructive trust, you are asking the court to act as trustee over the money or the property.

How to Get a Constructive Trust

To ask for a constructive trust, the parties to the lawsuit must have some kind of special, often fiduciary, relationship. You must also show the court that it would be unfair and unjust, to let the other side keep the money or property. Sometimes this is because one side is benefitting from wrongdoing.

As an example, imagine partners who buy an apartment building to rent out the units. It turns out Partner 1 has stolen rental money, but Partner 1 disagrees with any wrongdoing. If Partner 2 sues, Partner 2 might ask for a constructive trust to be placed on the rental money that has been earned and which is still coming in from tenants.

As partners, the two are fiduciaries, and it is alleged that Partner 1 has engaged in wrongdoing, and would be unjustly enriched by keeping the rental money from the apartment building.

Notice in our example that although money (rent money) is what is in dispute the rent money is specifically identifiable, from a single source. A constructive trust can only be imposed when this is the case.

Adding With Other Causes of Action

Normally you do not sue simply to ask the court to impose a constructive trust. Rather, it is combined with other causes of action like fraud or breach of contract or business disputes. Because many of these cases allege that one person has identifiable property as a result of wrongdoing, a constructive trust is usually appropriate.

Do you need a constructive trust? Call our Fort Lauderdale business attorneys at Sweeney Law P.A. at 954-440-3993 for help.

Sources:

casemine.com/judgement/us/59146fbbadd7b0493434f95b

case-law.vlex.com/vid/wallace-v-torres-rodriguez-914818057