Chapter 4.3 Rights and Claims Available to All Beneficiaries

• Jurisdiction: Washington

§4.3 RIGHTS AND CLAIMS AVAILABLE TO ALL BENEFICIARIES

This section discusses the rights of all beneficiaries during administration of an estate or trust.

(1) Right to constructive trust over assets

A constructive trust is an equitable remedy that arises when the person holding title to property has an equitable duty to convey it to another on the grounds that they would be unjustly enriched if permitted to retain it. City of Lakewood v. Pierce County, 144 Wn.2d 118, 126, 30 P.3d 446 (2001). A "constructive trust... 'compel[s] restoration where one through actual fraud, abuse of confidence reposed and accepted, or through other questionable means, gains something for himself which, in equity and good conscience, he should not be permitted to hold.'" Consulting Overseas Mgmt., Ltd. v. Shtikel, 105 Wn.App. 80, 86-87, 18 P.3d 1144 (quoting Scymanski v. Dufault, 80 Wn.2d 774, 91 P.2d 1050 (1971) (internal citations omitted)), review denied, 145 Wn.2d 1003 (2001);

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see also West v. Stanfield, 48 Wn.2d 55, 290 P.2d 704 (1955) (natural daughter represented to court that she was only child of decedent to the detriment of an adopted daughter; the court imposed a constructive trust over the natural daughter's assets equal to one-half of the appraised value of the estate distributed to natural daughter); Francon v. Cox, 38 Wn.2d 530, 231 P.2d 265 (1951) (involving decedent's widow's failure to disclose the identity of her stepdaughter to the court).

Although courts typically will impose a constructive trust in cases of fraud, bad faith, misrepresentation, or overreaching, they may also do so in broader circumstances not rising to fraud or undue influence. Pitzer v. Union Bank of Cal., 141 Wn.2d 539, 549-51, 9 P.3d 805 (2000). For example, in Hesthagen v. Harby, 78 Wn.2d 934, 481 P.2d 438 (1971), a constructive trust was placed over funds distributed to two American siblings of the decedent when the identities of a third (predeceased) sibling's children residing in Germany and Norway were withheld by the two Americans during the administration of the intestate estate. In Hesthagen, the court found the American siblings "primarily liable" under the constructive trust but remanded for a determination of whether there should be damages assessed against the administrator, who could have discovered the existence of the other heirs, and on his bond if the proceeds available were insufficient to satisfy the judgment.

Constructive trusts arise independently of the intention of the parties and "may arise even though acquisition of the property [is] not wrongful." Mehelich v. Mehelich, 7 Wn.App. 545, 551, 500 P.2d 779 (1972) (quoting Scymanski v. Dufault, 80 Wn.2d 77, 89, 491 P.2d 1050 (1971)). Such trusts arise "where the retention of the property would result in the unjust enrichment of the person retaining it." Scymanski, 80 Wn.2d at 89. Indeed, the primary purpose of a constructive trust is to prevent unjust enrichment. Id.

Washington courts will impose a constructive trust "when there is clear, cogent, and convincing evidence of the basis for impressing the trust." Baker v. Leonard, 120 Wn.2d 538, 547, 843 P.2d 1050 (1993). To file an action for a constructive trust, the party must show the trust arose from the relationship of the parties involved and that the property justly belongs to that party. City of Lakewood, 144 Wn.2d at 129.

The beneficiary may always claim and reach the trust property through all its changes of form while in the hands of the trustee. The beneficiary may even follow the property until it has been transferred to a bona fide purchaser for valuable consideration without notice. The court, acting in equity, will furnish a beneficiary with all incidental

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remedies necessary to make the beneficiary's...