New York Law (NYLE) Practice Exam

Which statement is not true regarding a constructive trust?

1. It is an equitable remedy for purpose of preventing unjust enrichment.

2. It generally requires a promise to hold property in trust for another.

3. It generally requires a wrongful act.

4. It generally requires a confidential or fiduciary relationship.

The correct answer is: It generally requires a wrongful act.

A constructive trust is indeed an equitable remedy employed primarily to prevent unjust enrichment. This legal concept arises under circumstances where it would be unfair for one party to retain property that rightfully belongs to another. The very nature of a constructive trust centers on the idea that the person holding the property has an obligation to return it to its rightful owner due to equity principles. In establishing a constructive trust, it is ordinarily necessary to demonstrate that the individual holding the property had committed a wrongful act leading to the unjust enrichment. This could include fraud, breach of fiduciary duty, or other inequitable conduct. Therefore, the presence of a wrongful act is a foundational element in many cases involving constructive trusts. Although not all constructive trusts necessarily stem from a breach of duty or wrongdoing, most commonly cited instances do include that requirement, underscoring the notion that the law seeks to correct the inequity caused by such actions. A constructive trust usually does not rely on the existence of a promise to hold property in trust for another, as it can be imposed by a court even in the absence of an explicit agreement. Furthermore, while a confidential or fiduciary relationship can strengthen a case for the imposition of a constructive trust, it is not a strict requirement—constructive trusts