What is the legal definition of Constructive Trust as it relates to a fiduciary duty?
Full Question:
Answer:
A constructive trust is essentially a legal fiction designed to avoid injustice and prevent giving an unfair advantage to one of the parties. Each case is decided on its own facts, taking all circumstances into consideration.
A constructive trust may be created by a court where legal title to property has been unjustly taken by duress, fraud, mistake, or undue influence. For example, property may be distributed under a will that is later found to have been made under undue influence. A court may order the distributed property to be held in a constructive trust for the appropriate heirs or beneficiaries. A constructive trust is an equitable remedy that may be available upon proof that the party against whom the trust will be imposed has been unjustly enriched by receiving assets that rightly belong to the party in whose favor the trust will be created. A constructive trust may be defined as a device used by courts to compel one who unfairly holds a property interest to convey that interest to another to whom it justly belongs. A constructive trust is created to prevent the property holder from retaining property obtained by reason of unjust, unconscionable, or unlawful means.
A fiduciary is someone who has undertaken to act for and on behalf of another in a particular matter in circumstances which give rise to a relationship of trust and confidence. A fiduciary duty is the highest standard of care at either equity or law. A fiduciary is expected to be extremely loyal to the person to whom he owes the duty (the "principal"). He must not put his personal interests before the duty, and must not profit from his position as a fiduciary, unless the principal consents.
A constructive trust may be created where a person takes property from a fiduciary and knows, or should have known, the fiduciary was violating his or her fiduciary duties. A court may order the property held in a constructive trust for the person that the fiduciary was supposed to protect.
