When is a Constructive Trust Appropriate?
January 28, 2015 § 1 Comment
Jeanette Brown and Edward Wilson (Brown) filed suit against Virginia Jones and others (Jones) to set aside a will and some inter vivos gifts made in favor of Jones by the decedent, J.T. Smith. After a trial, the chancellor upheld the will, but did order that the $484,000 in inter vivos gifts were the result of undue influence, and ordered that they be repaid to the estate.
Brown appealed, claiming inter alia that the trial court erred by not imposing a constructive trust on the funds.
The COA, In the Matter of the Last Will and Testament of J.T. Smith: Brown, et al. v. Jones, et al., handed down September 2, 2014, affirmed the chancellor’s decision not to impose a constructive trust. Judge James, for the court:
¶39. A constructive trust has been defined as follows:
A constructive trust is one that arises by operation of law against one who, by fraud, actual or constructive, by duress or abuse of confidence, by commission of wrong, or by any form of unconscionable conduct, artifice, concealment, or questionable means, or who in any way against equity and good conscience, either has obtained or holds the legal right to property which he ought not, in equity and good conscience, hold and enjoy.
Yarbrough v. Patrick, 65 So. 3d 865, 871 (¶28) (Miss. Ct. App. 2011) (quoting Alvarez v. Coleman, 642 So. 2d 361, 367 (Miss. 1994)). A constructive trust is “a means by which one who unfairly holds a property interest may be compelled to convey that interest to another to whom it justly belongs.” Van Cleave v. Estate of Fairchild, 950 So. 2d 1047, 1054 (¶29) (Miss. Ct. App. 2007). A constructive trust “arises by implication from the relationship and conduct of the parties and may be established by parol testimony.” Id. “It is the relationship plus the abuse of confidence that authorizes a court of equity to construct a trust for the benefit of the party whose confidence has been abused.” Id. at 1054-55 (¶29). Finally, “the proponent of such a trust must show its necessity by clear and convincing evidence.” Yarbrough, 65 So. 3d at 871 (¶28).
¶40. Here, we find that Brown has failed to show, by clear and convincing evidence, that a constructive trust is necessary. The chancellor found that a confidential relationship existed between Jones and Smith and that Jones failed to rebut the presumption of undue influence, which arose due to that confidential relationship. However, the chancellor did not find that Jones abused the confidential relationship, only that she failed to rebut the presumption of undue influence that arose by operation of law due to the existence of a confidential relationship. Absent a finding of fraud, duress, abuse of confidence, commission of wrong, unconscionable conduct, or the use of other questionable means, we are not compelled to impose a constructive trust.
¶41. Furthermore, a constructive trust is typically imposed where the aggrieved party has no adequate remedy other than through equity. As our supreme court has stated, “[a] constructive trust is raised by equity to satisfy the demands of justice.” Church of God Pentecostal Inc. v. Freewill Pentecostal Church of God Inc., 716 So. 2d 200, 207 (¶23) (Miss. 1998). The supreme court has further noted:
A constructive trust is a fiction of equity. It is the formula through which the conscience of equity finds expression. When property has been acquired in such circumstances that the holder of the legal title may not in good conscience retain the beneficial interest, equity converts him into a trustee. The equity must shape the relief and courts are bound by no unyielding formula. Id. (quoting Russell v. Douglas, 243 Miss. 497, 505-06, 138 So. 2d 730, 734 (1962)).
¶42. However, here, we fail to see why the remedy ordered by the chancellor was inadequate, necessitating the imposition of a constructive trust. The chancellor ordered that the $450,000, which was removed from Smith’s AmSouth account and placed in the various CDs, and any interest earned upon the funds, be returned to the estate and distributed pursuant to the terms of the will.
¶43. We find that the chancellor did not abuse his discretion by failing to impose a constructive trust and Brown has failed to demonstrate, by clear and convincing evidence, that a constructive trust is necessary here. Accordingly, this issue is without merit.
The key point here is that you must establish by clear and convincing evidence that a constructive trust is necessary, and that other avenues of relief would be inadequate. It’s within the chancellor’s discretion. In this case, the chancellor was satisfied, apparently, that the funds were readily identifiable, available, liquid, and would be repaid — all without the necessity of a constructive trust.