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The Necessity for Unjust Enrichment in a Constructive Trust in California: Elliot V

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The Necessity for Unjust Enrichment in a Constructive Trust in California: Elliot V Hastings Law Journal Volume 19 | Issue 4 Article 16 1-1968 The ecesN sity for Unjust Enrichment in a Constructive Trust in California: Elliot v. Elliot Larry Hultquist Follow this and additional works at: https://repository.uchastings.edu/hastings_law_journal Part of the Law Commons Recommended Citation Larry Hultquist, The Necessity for Unjust Enrichment in a Constructive Trust in California: Elliot v. Elliot, 19 Hastings L.J. 1268 (1968). Available at: https://repository.uchastings.edu/hastings_law_journal/vol19/iss4/16 This Note is brought to you for free and open access by the Law Journals at UC Hastings Scholarship Repository. It has been accepted for inclusion in Hastings Law Journal by an authorized editor of UC Hastings Scholarship Repository. THE NECESSITY FOR UNJUST ENRICHMENT IN A CONSTRUCTIVE TRUST IN CALIFORNIA: ELLIOTT v. ELLIOTT The constructive trust1 has been called "the most important contribution of equity to the remedies for the prevention of unjust enrichment."2 California courts and the Restatement of Restitution3 have referred to the constructive trust as a proprietary remedial device 4 to be imposed to prevent unjust enrichment, capable of use in almost any case where there is a wrongful acquisition or retention of property.6 Dean Pound speaks of the use of the constructive trust as affording "specific restitution'7 of a received benefit in order to prevent unjust enrichment. The constructive trust has been used to "frustrate human skull- duggery,"8 yet it has remained an elusive remedy. One commenta- 1 See generally 3 G. BOGART, TRUSTS AND TRUSTEES § 471 (2d ed. 1960); R. NEWMAN, TRUSTS 200 (2d ed. 1955); 1 J. POMEROY, EQUITY JuRIPDmEc § 156 (5th ed. 1941); 4A. SCOTT, TRUSTS § 462 (2d ed. 1956); Cobb, Resulting and Constructive Trusts in Realty, 1 BAYLOR'L. RE. 296 (1949); Costigan, The Classification of Trusts as Express, Resulting and Constructive, 27 HARv. L. REv. 437 (1914); Gilmer, Current Developments in Resulting Trusts and Con- structive Trusts in Kentucky, 42 Ky. L.J. 455 (1954); Jennings & Shapiro, The Minnesota Law of Constructive Trusts and Analogous Equitable Remedies, 25 M NN. L. REV. 667 (1941); Scott, The Expectant Legatee, 63 HARv. L. REV. 108 (1949); Scott, Constructive Trusts, 71 L.Q. REV. 39 (1955); Waters, The English Constructive Trust, 19 VAND. L. REV. 1019 (1967); Note, Imposition of a Constructive Trust in New England, 41 B.U.L. REV. 78 (1961). 2 J. DAWSON, UNJUST ENRICHMENT 26 (1951). "A constructive trust is the formula through which the conscience of equity finds expression." Beatty v. Guggenheim Exploration Co., 225 N.Y. 380, 386, 122 N.E. 378, 380 (1919). 8 RESTATEMENT Or RESTITUTION § 160 (1937). 4 Bainbridge v. Stoner, 16 Cal. 2d 423, 106 P.2d 423 (1940); Schaefer v. Bernstein, 180 Cal. App. 2d 107, 4 Cal. Rptr. 236 (1960); Reay v. Reay, 97 Cal. App. 264, 275 P. 533 (1929). 5 Day v. Greene, 59 Cal. 2d 404, 380 P.2d 385, 29 Cal. Rptr. 785 (1963); Orella v. Johnson, 38 Cal. 2d 693, 242 P.2d 5 (1952); Beck v. West Coast Life Ins. Co., 28 Cal. 2d 643, 241 P.2d 544 (1952); Sears v. Rule, 27 Cal. 2d 131, 163 P.2d 443 (1945), cert. denied, 328 U.S. 843 (1946); Efron v. Kalmanovitz, 249 Cal. App. 2d 187, 57 Cal. Rptr. 248 (1967); McCauley v. Dennis, 220 Cal. App. 2d 627, 34 Cal. Rptr. 90 (1963); Nevarez v. Nevarez, 202 Cal. App. 2d 596, 21 Cal. Rptr. 70 (1962); Ornbaun v. Main, 198 Cal. App. 2d 92, 17 Cal. Rptr. 631 (1961); Fleischman v. Blechman, 148 Cal. App. 2d 88, 306 P.2d 548 (1957); Atwood v. Elwood, 132 Cal. App. 2d 761, 283 P.2d 43 (1955); Monica v. Pelicas, 131 Cal. App. 2d 700, 281 P.2d 269 (1955); Weightmon v. Hadley, 113 Cal. App. 2d 598, 248 P.2d 801 (1952) ; Adams v. Talbott, 61 Cal. App. 2d 315, 142 P.2d 775 (1943); Steinberger v. Steinberger, 60 Cal. App.. 2d 116, 140 P.2d 31 (1943); Sampson v. Bruder, 47 Cal. App. 2d 431, 118 P.2d 28 (1941). 0 Rankin v. Satir, 75 Cal. App. 2d 691, 171 P.2d 78 (1946); Sanguinetti v. Rossen, 12 Cal. App. 623, 107 P. 560 (1906). 7 Pound, The Progressof Law, 33 HARV. L. REV. 420, 421 (1920). 8 4 R. POWELL, REAL PROPERTY fI 593 (1949). 9 "Without much conscious purpose or plan we have created this sham- bling creature. It is time to fence it in." J. DAWSON, supra note 2, at 33. "It [1268] May 19681 CONSTRUCTIVE TRUSTS 1269 tor has observed that the vagueness surrounding this subject is de- liberately intended, "so the powers of the equity courts will not be unduly restricted."' 0 It has been suggested that the requirement of unjust enrich- ment has engendered "a fight between those who want to expand the common law by reference to its ultimate ethico-juridical principles and those content to stay in clearly defined paths ... ."I' A victory for those favoring expansion has seemingly occurred in the recent California case of Elliott v. Elliott,12 where the district court of ap- peal stated that a benefit to the wrongdoer is not required for the imposition of a constructive trust.13 After examining the California law relating to constructive trusts, this note will discuss the propriety of that conclusion. Constructive Trusts Prior to 1872 Prior to 1872, cases involving constructive trusts required: (1) either a fiduciary relationship or wrongful or mistaken conduct; (2) a proprietary interest gained; and (3) an inequitable retention and en- joyment of the proprietary interest. During this period constructive trusts were imposed where there was a breach of a fiduciary duty by an attorney,' 4 guardian,' 5 co- tenant,16 administrator,17 agent,18 and a bank officer. 9 Where an agent acquired an interest in property adverse to his principal it was 20 held that the agent took as a constructive trustee; his partner,2 who was outside the agency, took free of the constructive trust. ' Similarly, constructive trusts were imposed where there was wrong- ful conduct: for example, where the defendant misrepresented own- ership of a mortgage in order to obtain title to real property,22 and where a party seeking to acquire a patent to realty misrepresented certain material facts.23 Constructive trusts, likewise, were used to afford relief where an interest in property was gained by mistake, as illustrated by one24 case where a widow mistakenly kept land from her husband's heirs. It was never enough merely to show that there was fraud, mis- take, or a breach of a fiduciary relationship: there must have also thus constitutes a fenceless field with hazy boundaries." 4 R. Pow..L, supra note 8, at 565. 10 J. DAwsoN, supra note 2, at 148. 11 O'Connell, Unjust Enrichment, 5 Am. J.Comp. L. 2 (1956). 12 231 Cal. App. 2d 205, 41 Cal. Rptr. 686 (1964). 18 Id. at 210, 41 Cal. Rptr. at 688. 14 Webster v. King, 33 Cal. 348 (1867). 'i Lathrop v. Bampton, 31 Cal. 17 (1866). 16 Mandeville v. Solomon, 33 Cal. 38 (1867). 1,7 Scott v. Umbarger, 41 Cal. 410 (1871). 18 Hardenbergh v. Bacon, 33 Cal. 356 (1867). '9 Wells, Fargo & Co. v. Robinson, 13 Cal. 133 (1859). 20 Hardenbergh v. Bacon, 33 Cal. 356 (1867). 21 Id. at 379. 22 De Leon v. Higuera, 15 Cal. 483 (1860). 28 Salmon v. Symonds, 30 Cal. 301 (1866). 24 Wilson v. Castro, 31 Cal. 420 (1866). 1270 THE HASTINGS LAW JOURNAL [Vol. 19 been some interest acquired thereby. California courts refused to impose a constructive trust where either void25 or defective 6 title to land was obtained by fraud. Where the interest obtained was uncertain 27 or there had been a change in form,28 a constructive trust would be imposed only if the identity of the interest could be traced. Where it could not be shown that the property was the origi- nal trust property or2 9the fruit or product thereof, a constructive trust would be denied. There are several reasons for requiring the acquisition of a proprietary interest. First, although a constructive trust is an equita- ble remedy, it is dealt with in express trust terms and there must therefore be a res. 30 Second, since a constructive trust is a specific remedy, there must be some interest that can be returned to the owner.31 Third, a constructive trust is a remedy for the prevention of unjust enrichment 32 and the requirement of a proprietary interest seems inextricably interwoven with that concept. So, where the decisions require the defendant to have gained a proprietary inter- est, it is difficult to determine if the court was simply requiring that there be a res before there could be a trust, or whether the court was requiring that there be some tangible unjust enrichment gained or held by the defendant. In discussing constructive trusts prior to 1872 the courts made no specific references to the principle of unjust enrichment. Instead, the courts required33 the retention and enjoyment of the interest to be inequitable: Where the circumstances of a transaction are such that a person who takes title to property cannot be permitted to hold and enjoy it, in whole or in part, without necessarily violating some principle of equity, a constructive trust will be raised for the benefit of the party entitled in equity to its beneficial enjoyment. It is because he holds the property, or some interest therein, which is inequitable for him to enjoy, that the court declares the trust and fastens it upon his conscience, and wrests the property or interest from him and causes it to be transferred to the person equitably entitled to it.34 The prevention of inequitable retention of property was seen as the basis of the constructive trust and in this regard may be equated with the principle of unjust enrichment.
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