Deborah Elkins//June 13, 2016
Deborah Elkins//June 13, 2016//
We have held that constructive trusts arise, independently of the intention of the parties, by construction of law. In order to be entitled to the benefit of a constructive trust, a claimant’s interest must be distinctly traced into the chose in action, fund or other property which is to be made the subject of the trust.
Crestar Bank v. Williams, 250 Va. 198 (1995), involved multiple victims of an investment fraud who sought recovery against the few remaining assets of the man who perpetrated what was essentially a Ponzi scheme. We held that the trial court erroneously imposed a constructive trust in favor of the defrauded investors because the investors failed to distinctly trace the funds they had invested into the remaining assets.
In this case, too, appellee failed to distinctly trace her claim to the property that was the subject of the constructive trust. As amended in 2005, appellee’s contract with the developer provided that she would receive a particular subdivision lot, designated as Lot 1. Yet 10 years later, the trial court imposed a constructive trust upon Lot A, a different lot within the subdivision. Unlike money, land is not fungible. Therefore, even if Lot 1 and Lot A were identical in shape and size, appellee would have no equitable claim to Lot A.
After her choice of lot in 2005, appellee’s interest lay with Lot 1, not with Lot A. In 2012, when the developer sold Lot 1 to another buyer, it breached its contract with appellee. She was entitled to damages. But a constructive trust is an equitable remedy available under specific conditions and when legal remedies, such as monetary damages, would be insufficient. We hold the trial court erred when it imposed a constructive trust upon Lot A. However, the trial court’s award of $110,000 in damages against the developer and other defendants is proper.
Because the trial court erred in imposing a constructive trust upon Lot A, the issue whether the bank was a bona fide purchaser is no longer relevant. Further, the bank is not aggrieved and lacks standing to challenge the trial court’s refusal to reduce appellee’s $110,000 judgment by the $25,000 which she allegedly received to settle her claim against the buyer of Lot 1.
Judgment imposing a constructive trust is reversed and final judgment of $110,000 for appellee.
The Bank of Hampton Roads v. Powell (Lemons) No. 151190, June 2, 2016; Chesapeake Cir.Ct. (Arrington) Richard H. Matthews, Kristen R. Jurjevich for appellants; Gregory S. Larsen for appellee. VLW 016-6- 045, 7 pp.