November 4, 2016 The Imposition Of A Constructive Trust Under Florida Law
All too often a business owner learns that a trusted employee or advisor has taken advantage of his or her position to abscond with a significant sum of money and / or property. At that point the business owner seeks to establish a constructive trust over the lost assets. First, it needs to be noted that a constructive trust is a remedy and not a cause of action. In Collinson v. Miller, 903 So.2d 221 (Fla. 2nd DCA 2005), the Second DCA held:
“We recognize that some cases have treated constructive trust in a manner similar to a cause of action, by discussing the “elements” of such a claim and even treating such a claim for constructive trust as subject to dismissal for failure to state a cause of action…Because a constructive trust is a remedy, it must be imposed based upon an established cause of action.”
Id. at 228 (internal citation omitted). See also Swope v. Harmon, 85 So. 3d 508 (Fla. 2d DCA 2012 (“we conclude the trial court correctly dismissed the claim for a constructive trust because a constructive trust is a remedy, not a cause of action”).
Second, a constructive trust may only be imposed on specific or identifiable property or property which can be clearly traced to the business owner. In Small Bus. Admin. v. Echevarria, 864 F. Supp. 1254 (S.D. Fla. 1994), the Court held:
“Under Florida law, equity principles can create a constructive trust in property and compel its restoration, where an individual through actual fraud, abuse of confidence or other questionable means, gains the property for himself which in equity and good conscience he should not be permitted to hold. A constructive trust may be imposed only where the res is specific, identifiable property or can be clearly traced in assets of the defendant which are claimed by the party seeking relief, and may not be imposed on defendant's general assets. Finkelstein v. Southeast Bank, N.A., 490 So. 2d 976, 983 (Fla. Dist. Ct. App. 1986); Landers v. Sherwin, 261 So. 2d 542 (Fla. Dist. Ct. App.), cert. denied, sub nom., 265 So. 2d 49 (Fla. 1972); Trend Setter Villas v. Villas on the Green, Inc., 569 So. 2d 766 (Fla. Dist. Ct. App. 1990). The court in Trend Setter Villas found that there was no evidence presented that any specific property was obtained by two of the plaintiffs through an inequitable transaction, thus a constructive trust was not warranted. Id. at 768.
Id. at 1265 (internal citations partially omitted).
Third, a constructive trust cannot be imposed on money as it may not be directly traced to the business owner. See Martin v. Martin, 787 So. 2d 951,952 (Fla. 2d DCA 2001)(no constructive trust as money is fungible).
Fourth, a constructive trust cannot be imposed simply to preserve assets to satisfy a potential money judgment or for mere failure to pay a debt. See Bender v. CenTrust Mortg. Corp., 51 F.3d 1027, 1030 (11th Cir. 1995), modified on other grounds, 60 F.3d 1507 (11th Cir. 1995).
A constructive trust may be imposed, however, over stocks, bonds, vehicles, boats, real property, antiques, machinery, inventory, business fixtures, etc. Moreover, if the business owner is concerned that the assets may be removed from the State of Florida, or secreted where they would be difficult to locate, there are pre-judgment procedures which may be utilized to safeguard those assets pending a final determination by the Court.