A Constructive Word About The Equitable Remedy Of A Constructive Trust

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Every so often we receive complaints that contain a count or claim for “constructive trust”.  In these “claims” the parties generally seek a lien on a piece of property (real or personal) or to have the property deemed to be held “in trust” for their benefit.  In fact, Michigan recognizes no independent cause of action for “constructive trust” and these “claims” are subject to summary dismissal under MCR 2.116(C)(8) for failure to state a claim.

In Kammer Asphalt Paving Co v East China Twp Sch, 443 Mich 176 (1993) the Michigan Supreme Court discussed the equitable remedy of a constructive trust and when it may be imposed:

A constructive trust may be imposed “where such trust is necessary to do equity or to prevent unjust enrichment . . . .” Ooley v Collins, 344 Mich 148, 158; 73 NW2d 464 (1955). Hence, such a trust may be imposed when property “‘has been obtained through fraud, misrepresentation, concealment, undue influence, duress, taking advantage of one’s weakness, or necessities, or any other similar circumstances which render it unconscionable for the holder of the legal title to retain and enjoy the property . . . .'” Potter v Lindsay, 337 Mich 404, 411; 60 NW2d 133 (1953), quoting Racho v Beach, 254 Mich 600, 606-607; 236 NW 875 (1931). Accordingly, it may not be imposed upon parties “who have in no way contributed to the reasons for imposing a constructive trust.” Ooley, supra at 158. The burden of proof is upon the person seeking the imposition of such a trust. MacKenzie v Fritzinger, 370 Mich 284; 121 NW2d 410 (1963).  [Id. at p.188.]

 The Court further explained:

[A] constructive trust is imposed as a remedy to prevent unjust enrichment.

The constructive trust, as it was put by Mr. Justice Cardozo, “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.” Kent v Klein, 352 Mich 652, 656; 91 NW2d 11 (1958). Citation omitted.

The remedy of a constructive trust will be imposed when it is inequitable under the circumstances to allow one to retain property.  [Id. at p.201, J. Cavanagh concurring and dissenting opinion, emphasis added.]

 Thus, by its very nature, a constructive trust is an equitable remedy that may be imposed by a court when justice requires.[1]

In Coalition Protecting Auto No-Fault v. Mich. Catastrophic Claims Ass’n, 305 Mich App 301 (2014), vacated in part on other grounds, 498 Mich 896 (2015), the Court of Appeals expressly held that an independent action for “constructive trust” failed to state a claim and should have been dismissed by the trial court.  In that case, the plaintiff sought to compel the defendant MCCA to produce various records under a “constructive trust” theory, alleging the MCCA held the records for the benefit of the plaintiff and should be required to produce them to it.  The trial court denied the defendant’s motion to dismiss the claim under MCR 2.116(C)(8)( failure to state a claim) and granted summary disposition in favor of plaintiff.  The Court of Appeals reversed holding:  “A constructive trust is not an independent cause of action; rather, it is an equitable remedy”.  Id. at 325.  As such, the Court of Appeals found the trial court erred in not dismissing the “claim” for constructive trust and remanded for entry of an order granting the MCCA’s motion to dismiss for failure to state a claim.

Michigan courts have now firmly established that there is no independent cause of action for “constructive trust”.  Rather, a constructive trust is a remedy that may be sought in conjunction with a given claim.  Given this, any separate count or claim for “constructive trust” is subject to summary dismissal under MCR 2.116(C)(8) for failure to state a claim.  We have successfully argued this on several occasions and had such “non-claims” dismissed.

[1] The Court of Appeals’ recent and soon to be published opinion in Cassidy v. Cassidy (January 10, 2017) contains an excellent discussion of the constructive trust remedy and the circumstances under which such a trust is properly imposed.  This case is likely to become the new standard citation on the remedy.  In Cassidy, a divorce action, the trial court found the defendant husband and his girlfriend had conspired to deprive the plaintiff wife of her marital property.  In particular, the husband had given his girlfriend hundreds of thousands of dollars to build a house.  As the house was built with marital property, the trial court imposed a constructive trust on the home and placed a lien on it in favor of the wife to secure her property award in the divorce action.