Constructive Trust in New York

What Is a Constructive Trust?

Background

“In the words of Judge Cardozo, ‘[a] constructive trust 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.’” (Simonds v. Simonds (1978) 45 N.Y.2d 233, 241 citing Beatty v. Guggenheim Exploration Co. (1919) 225 N.Y. 380, 386.)

“Thus, a constructive trust is an equitable remedy. It is perhaps more different from an express trust than it is similar.” (Simonds v. Simonds (1978) 45 N.Y.2d 233, 241 citing 5 Scott, Trusts [3d ed], § 461.)

“More precise definitions of a constructive trust have been termed inadequate because of the failure to recognize the broad scope of constructive trust doctrine.” (Simonds v. Simonds (1978) 45 N.Y.2d 233, 241 citing id., at p. 3412.)

“As another leading scholar has said of constructive trusts, ‘[t]he Court does not restrict itself by describing all the specific forms of inequitable holding which will move it to grant relief, but rather reserves freedom to apply this remedy to whatever knavery human ingenuity can invent.’” (Simonds v. Simonds (1978) 45 N.Y.2d 233, 241 citing Bogert, Trusts and Trustees [2d ed rev, 1978], § 471, at p. 29.)

General Information for Complaints and Motions

“A constructive trust is an equitable remedy and its purpose is to prevent unjust enrichment.” (Marini v. Lombardo (2010) 79 A.D.3d at 933; see Henning v. Henning (2013) 103 A.D.3d 778, 779–780.)

To obtain the remedy of a constructive trust, a party generally is required to demonstrate four factors:

a confidential or fiduciary relationship,
a promise,
a transfer in reliance thereon, and
unjust enrichment flowing from the breach of the promise.

(McGrath v. Hilding (1977) 41 N.Y.2d 625, 629.)

However, these factors, or elements, serve only as a guideline, and a constructive trust may still be imposed even if all four elements are not established. (Tyree v. Henn (2013) 109 A.D.3d 906, 907-08 citing Simonds v. Simonds, supra, 45 N.Y.2d 233, 241, 408 N.Y.S.2d 359, 380 N.E.2d 189; Henning v. Henning, supra, 103 A.D.3d at 780; Marini v. Lombardo, supra, 79 A.D.3d at 933.)

Statute of Limitations for Constructive Trusts

“The equitable claim for the imposition of a constructive trust is governed by the six-year Statute of Limitations of CPLR 213(1), which begins to run at the time of the wrongful conduct or event giving rise to a duty of restitution.” (Maric Piping, Inc. v. Maric (2000) 271 A.D.2d 507, 508.)

“As [the] court explained in Sitkowski v. Petzing, 175 A.D.2d 801, 802 (N.Y. App. Div. 1991):

‘A determination of when the wrongful act triggering the running of the Statute of Limitations occurs depends upon whether the constructive trustee acquired the property wrongfully, in which case the property would be held adversely from the date of acquisition... , or whether the constructive trustee wrongfully withholds property acquired lawfully from the beneficiary, in which case the property would be held adversely from the date the trustee breaches or repudiates the agreement to transfer the property.’”

(Maric Piping, Inc., supra, citing id.)

Notice of Pendency for Constructuve Trust

“A notice of pendency is authorized to be filed in an action seeking a judgment that would affect the title to, or possession, use, or enjoyment of, real property.” (Nastasi v. Nastasi (2005) 26 A.D.3d 32, 35-36 CPLR 6501.) “An action seeking to impose a constructive trust over real property qualifies as one in which the filing of a notice of pendency is allowed.” (Id.)

The Court’s Decision

“The doctrine of constructive trust is not limited to that subspecies, but is given broad scope to flex in response to all human implications of the transaction, to remedy whatever knavery ingenious wrongdoers can invent, to give expression to the conscience of equity, and to satisfy the demands of justice.” (Nastasi v. Nastasi (2005) 26 A.D.3d 32, 38.)

New York Courts “have not applied a rigid standard when identifying relationships that can be the predicate for imposition of a constructive trust.” (Thomas v. Thomas (2010) 70 A.D.3d 588, 591 citing Panetta v. Kelly (2005) 17 A.D.3d 163, [where “the plaintiff and her business partner paid for a cooperative apartment that they intended to use for business purposes, but asked a ‘family friend’ of the business partner to hold the shares. When the partner's friend refused to cooperate in selling the apartment, the plaintiff sought a constructive trust over the shares. Affording the plaintiff ‘the benefit of all favorable inferences’, [the Court] found an issue of fact to exist as to whether plaintiff and the partner's ‘family friend’ enjoyed a confidential relationship.”])