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Constructive Trust Actions in California

OVERVIEW

When real property is transferred through fraud, undue influence, mistake, or abuse of trust, California courts have the power to impose a constructive trust to prevent unjust enrichment and restore property to its rightful owner. Constructive trust actions are commonly used in real estate disputes involving fraudulent deeds, elder abuse, breached fiduciary duties, and wrongful title transfers.

At Vokshori Law Group, our Los Angeles real estate litigation attorneys represent property owners in constructive trust actions throughout California, with a focus on disputes involving ownership, title, and equitable remedies affecting real property.

What Is a Constructive Trust in California?

Constructive trust is an equitable remedy imposed by a California court when someone wrongfully acquires or retains property. The court treats the titleholder as an involuntary trustee and orders the property transferred to the person equitably entitled to it to prevent unjust enrichment

Under California law, constructive trusts are grounded in statute. Civil Code section 2223 provides that a person who wrongfully detains property gained by fraud, accident, mistake, or other wrongful act is an involuntary trustee.

Civil Code section 2224 further states that one who gains property by fraud, undue influence, violation of trust, or other wrongful act holds it as an involuntary trustee for the benefit of the rightful owner. In real estate cases, this allows courts to look beyond record title and focus on how the property was obtained.

When Will a Court Impose a Constructive Trust?

California courts generally impose a constructive trust when property has been wrongfully acquired or retained and equity requires restoration to prevent unjust enrichment. Courts typically look for facts showing:
  • Property was obtained or retained through a wrongful act, such as fraud, undue influence, breach of fiduciary duty, or similar wrongdoing
  • The defendant would be unjustly enriched if allowed to keep the property
  • The property or its proceeds are identifiable and traceable
  • Equity favors restoring the property to the rightful party
Because constructive trust is an equitable remedy, courts focus on substance over form, particularly in disputes involving family members, fiduciaries, or vulnerable property owners.

Common Real Estate Disputes Involving Constructive Trusts

Constructive trust claims frequently arise in California real estate disputes involving:
  • Fraudulent or forged deeds
  • Property transfers obtained through elder abuse or undue influence
  • Abuse of power of attorney or trustee authority
  • Family members added to title based on false promises
  • Romantic partners or relatives wrongfully retaining ownership interests
  • Straw buyer or nominee arrangements involving real property
In these situations, quiet title alone may not fully address the wrongdoing. A constructive trust allows the court to unwind the transfer and restore equitable ownership.

Constructive Trust vs. Resulting Trust

A constructive trust and a resulting trust arise from different legal theories and apply to different fact patterns.

A constructive trust is imposed because of wrongful conduct, such as fraud or abuse of trust. A resulting trust arises from the intent of the parties, most commonly where one person pays for property but title is taken in another’s name without intent to make a gift.

In practice:
  • Constructive trust claims are wrongdoing-based
  • Resulting trust claims are intent-based
Many real estate disputes involve both theories, pled in the alternative.

Is a Constructive Trust a Standalone Cause of Action in California?

Technically, a constructive trust is an equitable remedy rather than an independent cause of action. However, California courts routinely allow constructive trust claims to be pled as separate causes of action when the complaint alleges facts showing wrongful acquisition or retention of property and unjust enrichment.

California courts have explained that a constructive trust is a remedial device used to prevent unjust enrichment. (See Communist Party v. 522 Valencia, Inc. (1995) 35 Cal.App.4th 980, 990.) At the same time, courts regularly analyze whether plaintiffs have adequately “stated a cause of action for constructive trust” by examining the sufficiency of the underlying factual allegations.

As a result, demurrers attacking constructive trust claims solely on the ground that they are “not a cause of action” often fail where the complaint pleads fraud, breach of fiduciary duty, undue influence, or similar wrongdoing. Courts focus on substance, not labels.

Example Case: Constructive Trust Imposed Despite Record Title

A constructive trust is most often imposed when one party acquires or retains property through wrongful conduct, even though legal title appears valid on its face. A well-known example is Communist Party v. 522 Valencia, Inc.(1995) 35 Cal.App.4th 980.

Key Facts

The dispute arose over valuable San Francisco real property that had been transferred during internal turmoil within an organization. Control over the property shifted through entities and individuals who claimed legal title, while others argued the transfer was the product of misuse of authority and wrongful retention of the property. On paper, title appeared clean. In reality, the transfer left one side holding property it was never equitably entitled to keep.

Legal Issue

Can a California court impose a constructive trust on real property when the defendant holds record title, but the property was obtained or retained through wrongful conduct?

Holding

Yes. A California court may impose a constructive trust to prevent unjust enrichment even where the defendant holds legal title to the property.

Court’s Reasoning

The Court of Appeal emphasized that equity looks to substance over form. The existence of a recorded deed did not end the analysis. Where property is acquired or retained through conduct that would make it unjust for the titleholder to keep it, the court may treat that party as an involuntary trustee and order the property returned to the rightful owner.

Why This Case Is Memorable

The case stands for a simple but powerful proposition: a deed does not sanitize wrongdoing. Even when the title appears valid on the public record, California courts will intervene if equity demands it. For real estate disputes involving fraud, abuse of trust, or improper transfers, this case illustrates why constructive trust is often essential and why quiet title alone may not be enough.

How Constructive Trust Claims Are Litigated in Real Estate Cases

In real estate litigation, constructive trust claims are commonly paired with:
  • Quiet title
  • Cancellation or rescission of deeds
  • Fraud or negligent misrepresentation
  • Breach of fiduciary duty
  • Elder abuse claims
  • Injunctive relief to prevent further transfers
Courts may also order accountings, tracing of proceeds, or reconveyance of property depending on the facts.

Do Constructive Trusts Apply Outside Real Estate?

Yes. Constructive trusts also apply in business and fiduciary disputes, such as misappropriated partnership assets or breaches of corporate fiduciary duties. The same equitable principles apply, but this page focuses primarily on real property disputes.

Frequently Asked Questions About Constructive Trusts in California

1. What is a constructive trust?

A constructive trust is an equitable remedy that requires a person who wrongfully holds property to transfer it to the rightful owner.

2. Can a court impose a constructive trust if the deed appears valid?

Yes. Courts may impose a constructive trust even when legal title appears valid if the property was obtained through fraud, undue influence, or breach of trust.

3. Is a constructive trust a lawsuit by itself?

No. It is an equitable remedy, though it is often pled as a separate claim in California practice.

4. Does the property have to still exist?

Generally, the property or its proceeds must be identifiable and traceable, though courts retain flexibility in equity.

How Vokshori Law Group Can Help

Constructive trust actions are fact-intensive and equity-driven. Success often depends on early strategy, careful pleading, and the ability to trace property and prove wrongful conduct.

At Vokshori Law Group, our Los Angeles real estate litigation attorneys represent clients in constructive trust actions involving fraudulent deeds, wrongful title transfers, and complex ownership disputes throughout California.
If real property was transferred unfairly or through misconduct, contact our office to discuss your legal options.

Call (855) 855-2608 or visit  www.VokLaw.com to learn more.

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