Present: All the Justices 

LORETTA W. FAULKNIER 

v. Record No. 012006 OPINION BY JUSTICE CYNTHIA D. KINSER 

 JUNE 7, 2002 

LINDA D. SHAFER 

FROM THE CIRCUIT COURT OF PRINCE GEORGE COUNTY 

Robert G. O’Hara, Jr., Judge 

This appeal involves a dispute over the proceeds of a 

life insurance policy that were paid to Linda D. Shafer, 

the named beneficiary on the policy, allegedly in 

contravention of a separation agreement between the 

decedent and his former wife, Loretta W. Faulknier. 

Because we conclude that Faulknier alleged sufficient facts 

to state a cause of action for the imposition of a 

constructive trust on the insurance proceeds, we will 

reverse the circuit court’s judgment sustaining a demurrer. 

FACTS AND MATERIAL PROCEEDINGS 

The circuit court decided this case on demurrer. 

Therefore, we “recite as true the well-pleaded facts.” 

Thompson v. Skate America, Inc., 261 Va. 121, 125, 540 

S.E.2d 123, 124 (2001). In doing so, we look solely at 

Faulknier’s allegations in her bill of complaint, see Perk 

v. Vector Resources Group, Ltd., 253 Va. 310, 312, 485 

S.E.2d 140, 142 (1997), and any exhibits mentioned in the 
challenged pleading, Rule 1:4(i); Flippo v. F & L Land Co., 

241 Va. 15, 17, 400 S.E.2d 156, 156 (1991).1

The marriage between Faulknier and the decedent was 

dissolved by a decree of divorce entered in June 1989. A 

separation agreement that Faulknier and the decedent had 

previously executed was filed with that decree.2 As 

pertinent to this appeal, the separation agreement provided 

that “[Faulknier] shall remain as beneficiary on [the 

decedent’s] Civil Service Life Insurance[.]” However, in 

1996, the decedent designated Shafer as beneficiary of that 

policy. 

After the decedent’s death in 1997, Faulknier filed a 

claim for the proceeds of that life insurance policy. The 

Office of Federal Employees’ Group Life Insurance denied 

the claim because “THE LATEST DESIGNATION OF BENEFICIARY ON 

FILE THAT WAS COMPLETED BY THE INSURED ON 02/20/96 NAME[D] 

SOMEONE OTHER THAN [FAULKNIER] AS BENEFICIARY.” 

Faulknier then filed a bill of complaint against 

Shafer to recover the proceeds of the decedent’s life 

 1

 Faulknier attached two exhibits to her bill of 

complaint: a separation agreement and a letter from the 

Office of Federal Employees’ Group Life Insurance. 

2

 The decree of divorce did not “affirm, ratify and 

incorporate by reference” the separation agreement. Code 

§ 20-109.1. 

2
insurance policy. Faulknier alleged that the decedent 

changed the beneficiary designation on his life insurance 

policy in contravention of the separation agreement. 

Continuing, she asserted that Shafer received those 

insurance proceeds upon the decedent’s death because she 

was the named beneficiary at that time and that, either 

before or upon receipt of the funds, Shafer “knew or 

expected, or reasonably should have known or expected, that 

her designation as beneficiary of the Insurance Plan 

violated the terms of the Separation Agreement.” Faulknier 

alleged that Shafer, therefore, has been unjustly enriched 

and “wrongfully has obtained payment of benefits” under the 

decedent’s life insurance policy that “rightfully belong to 

Faulknier” under the terms of the separation agreement. 

Faulknier asked the court, among other things, to impose a 

constructive trust on those funds. 

In response, Shafer filed a demurrer asserting that 

Faulknier must seek redress against the decedent’s estate 

before pursuing an equitable remedy.3 Shafer argued that, 

because the decedent’s estate had sufficient assets to 

satisfy Faulknier’s claim, Faulknier could proceed against 

the estate either in an action for breach of contract, see

3
Code § 64.1-144, or by requesting a “debts and demands” 

hearing before the commissioner of accounts pursuant to 

Code § 64.1-171. Therefore, according to Shafer, Faulknier 

had an adequate remedy at law and was not entitled to the 

imposition of a constructive trust upon the life insurance 

proceeds paid to Shafer. 

Faulknier subsequently moved for summary judgment 

asserting that the undisputed facts demonstrate that Shafer 

had been unjustly enriched at Faulknier’s expense. Thus, 

Faulknier claimed that a constructive trust should be 

imposed on the life insurance proceeds, even if Shafer was 

unaware of the terms of the separation agreement and 

innocently received payment of those benefits. 

After considering the parties’ arguments, the circuit 

court granted Shafer’s demurrer and denied Faulknier’s 

motion for summary judgment. The court subsequently 

entered an order dismissing Faulknier’s suit without 

prejudice and she now appeals. 

ANALYSIS 

 On appeal, Faulknier asserts that the circuit court 

erred as a matter of law in finding that she must seek 

redress against the decedent’s estate in order to recover 

 3

 Shafer also filed an answer denying any indebtedness 

to Faulknier and a cross-bill seeking indemnification from 

4
the proceeds of the life insurance policy. She also 

assigns error to the court’s conclusion that she was not 

entitled to summary judgment since the uncontroverted 

evidence, according to Faulknier, demonstrates that Shafer 

was not entitled to the proceeds of the life insurance 

policy and will be unjustly enriched if she is allowed to 

retain those funds. We will first decide whether the 

circuit court erred in sustaining Shafer’s demurrer and 

then consider whether the court also erred in denying 

summary judgment to Faulknier. 

 With regard to the first issue, the procedural posture 

of this case is important because the function of a 

demurrer is to test only whether the challenged pleading 

states a cause of action upon which relief can be granted 

if all the allegations are admitted as true. Bellamy v. 

Gates, 214 Va. 314, 315-16, 200 S.E.2d 533, 534 (1973). 

See also Votsis v. Ward’s Coffee Shop, 217 Va. 652, 654, 

231 S.E.2d 236, 237 (1977). In ruling on the demurrer, the 

circuit court “was required to consider all reasonable 

inferences of fact which fairly and justly could be drawn 

from the facts alleged.” Ryland Group, Inc. v. Wills, 229 

Va. 459, 461, 331 S.E.2d 399, 401 (1985) (citing Chippenham 

Manor, Inc. v. Dervishian, 214 Va. 448, 450, 201 S.E.2d 

 

the decedent’s estate for any sum owed by her to Faulknier. 

5
794, 796 (1974)). “[A] plaintiff challenging on appeal the 

sustaining of a defendant’s demurrer by the trial court 

need show only that the trial court erred in finding that 

the pleading failed to state a cause of action, and not 

that the plaintiff would have prevailed on the merits of 

that cause.” Thompson, 261 Va. at 128, 540 S.E.2d at 127. 

These same principles guide our review of the allegations 

in Faulknier’s bill of complaint. 

 In deciding whether those allegations are sufficient, 

as a matter of law, to state a cause of action upon which 

the requested relief could be granted, we must also 

consider well-established principles regarding the 

imposition of constructive trusts. 

Constructive trusts arise, independently of the 

intention of the parties, by construction of law; 

being fastened upon the conscience of him who has the 

legal estate, in order to prevent what otherwise would

be a fraud. They occur not only where property has 

been acquired by fraud or improper means, but also 

where it has been fairly and properly acquired, but it 

is contrary to the principles of equity that it should 

be retained, at least for the acquirer’s own benefit. 

Leonard v. Counts, 221 Va. 582, 589, 272 S.E.2d 190, 195 

(1980) (quoting 1 Minor on Real Property § 462 at 616 (2d 

ed. Ribble 1928)). Courts of equity may impose 

constructive trusts whenever necessary to prevent a failure 

of justice. Richardson v. Richardson, 242 Va. 242, 245, 

6
409 S.E.2d 148, 150 (1991) (citing Patterson’s Ex’rs v. 

Patterson, 144 Va. 113, 123, 131 S.E. 217, 220 (1926)). 

When property is given or devised to a defendant in 

breach of a donor’s or testator’s contract with a 

plaintiff, equity will impose a constructive trust 

upon that property in the hands of the recipient even 

though (1) the transfer is not the result of breach of 

a fiduciary duty or an actual or constructive fraud 

practiced upon the plaintiff, and (2) the donee or 

devisee had no knowledge of the wrongdoing or breach 

of contract. 

Jones v. Harrison, 250 Va. 64, 69, 458 S.E.2d 766, 769 

(1995). 

 Shafer argues, however, as she did before the circuit 

court, that Faulknier has an adequate remedy at law because 

the decedent’s estate is solvent and contains sufficient 

assets to satisfy Faulknier’s claim. Relying on Jones, 

Shafer contends that Faulknier must therefore pursue her 

contractual claim against the estate pursuant to either 

Code § 64.1-144 or § 64.1-171 before she can seek the 

equitable remedy of imposing a constructive trust on the 

life insurance proceeds. We are not persuaded by this 

argument and conclude that our decision in Jones is not 

controlling authority because of the procedural posture of 

the present case vis-à-vis that in Jones. 

 This Court held in Jones that the provisions of a 

property settlement and support agreement entitled the 

children of a decedent’s former marriage to a constructive 

7
trust on the proceeds of life insurance policies payable to 

the decedent’s second wife, even though there was no 

evidence that the second wife had done anything improper, 

had participated in the decedent’s breach of the support 

agreement, or had knowledge of that breach. 250 Va. at 69-

70, 458 S.E.2d at 769-70. See also Richardson, 242 Va. at 

246-47, 409 S.E.2d at 151 (constructive trust imposed where 

transferee, who had not engaged in any wrongdoing and had 

furnished no consideration for the transfer, was unjustly 

enriched). Thus, we concluded that “because the other 

elements necessary to establish a constructive trust [were] 

present, the [second wife’s] gratuitous receipt of a 

portion of the insurance proceeds forms the basis for 

imposing a constructive trust on that property.” Jones, 

250 Va. at 70, 458 S.E.2d at 770. In a footnote, we 

explained that the children had a contractual claim against 

the decedent’s estate, but because the estate was 

insolvent, the children could claim a constructive trust in 

a portion of the proceeds of the insurance policies. Id.

at 70 n.3, 458 S.E.2d at 770 n.3. 

 The statement in that footnote forms the basis of 

Shafer’s contention that Faulknier must first seek redress 

from the decedent’s estate. However, we decided Jones by 

reviewing the findings of a commissioner in chancery who 

8
had heard evidence. Id. at 67, 458 S.E.2d at 768. In 

contrast, the present case comes to us on a judgment 

sustaining a demurrer. Shafer’s assertion that the estate 

in the present case is solvent is based solely upon 

documents that she appended to her memorandum in support of 

the demurrer. Those documents were not mentioned in 

Faulknier’s bill of complaint. See Rule 1:4(i). Thus, we 

will not consider them in deciding whether the allegations 

in the bill of complaint state a cause of action. See

Flippo, 241 Va. at 17, 400 S.E.2d at 156. 

 Relying on Overby v. White, 245 Va. 446, 449, 429 

S.E.2d 17, 19 (1993), Shafer also argues that the 

imposition of a constructive trust is warranted only when 

the recipient of funds obtained them in some wrongful way. 

She asserts that she had no knowledge of the decedent’s 

beneficiary designation or separation agreement before he 

died. Based on that assertion and because there is no 

allegation that she colluded with the decedent, induced him 

to change his beneficiary designation, or otherwise acted 

with the intention of depriving Faulknier of the insurance 

proceeds, Shafer contends that impressing a constructive 

trust in this case in inappropriate. 

 Our decision in Overby is not dispositive of the issue 

before us. There, the plaintiff sought to have the court 

9
impress a constructive trust on an interest in property 

that the defendant had properly acquired before the conduct 

warranting a constructive trust had occurred. Id. at 447-

48, 429 S.E.2d at 18. In contrast, Shafer did not acquire 

the life insurance proceeds before the decedent breached 

the terms of his separation agreement with Faulknier. We 

noted this same distinction in our decision in Jones. 250 

Va. at 69, 458 S.E.2d at 769. Furthermore, our decision in 

Overby was not premised solely on the fact that the 

defendant had not engaged in any wrongdoing. Overby, 245 

Va. at 450, 429 S.E.2d at 19. We have repeatedly stated 

that constructive trusts can arise even when property has 

been acquired fairly and without any improper means. See, 

e.g., Jones, 250 Va. at 70, 458 S.E.2d at 770; Nedrich v. 

Jones, 245 Va. 465, 474, 429 S.E.2d 201, 206 (1993); 

Richardson, 242 Va. at 245, 409 S.E.2d at 150; Leonard, 221 

Va. at 589, 272 S.E.2d at 195. 

 Thus, we conclude that the circuit court erred in 

sustaining Shafer’s demurrer. Faulknier pled facts which, 

if taken as true, are sufficient to state a cause of action 

for the imposition of a constructive trust on the basis 

that Shafer has been unjustly enriched. “A constructive 

trust is appropriately imposed to avoid unjust enrichment 

of a party.” Cooper v. Cooper, 249 Va. 511, 517, 457 

10
S.E.2d 88, 92 (1995) (citing Leonard, 221 Va. at 589-90, 

272 S.E.2d at 195-96); see also Restatement of Restitution 

§ 160 (1937). 

 Issues such as whether the decedent’s estate has 

sufficient assets to satisfy Faulknier’s claim, and if so, 

whose share of the estate would be depleted by such a 

payment;4 whether Shafer was a gratuitous recipient of the 

life insurance proceeds;5 when she learned about the 

decedent’s beneficiary designation on his life insurance 

policy; and whether she knew about the terms of the 

separation agreement between the decedent and Faulknier are 

matters to be considered in determining whether, on remand, 

Faulknier establishes by clear and convincing evidence her 

entitlement to a constructive trust on the life insurance 

proceeds.6 See Cooper, 249 Va. at 517, 457 S.E.2d at 92 

 4 See Green v. Green, 433 N.E.2d 92, 93 (Mass. App. Ct. 

1982) (trial court’s ruling that estate was primarily 

liable exhausted plaintiffs’ share of estate in partial 

satisfaction of their claim to insurance proceeds). 

5

 We note that Shafer admitted, in response to 

Faulknier’s request for admissions, that she provided no 

monetary consideration for the decedent’s designation of 

her as the beneficiary of his life insurance policy. As 

with the documents disclosing the estate’s assets, we do 

not consider this admission when reviewing the judgment 

sustaining the demurrer. 

6

 On brief, Shafer asserted that Code § 38.2-3122 

allows her to receive the life insurance proceeds free of 

any claim by a creditor, such as Faulknier. In her 

11
(“constructive trust must be established by clear and 

convincing evidence”); Ogden v. Halliday, 235 Va. 639, 643, 

369 S.E.2d 417, 419 (1988)(same). Because proof of these 

issues has a bearing on whether Shafer has been unjustly 

enriched and whether a constructive trust is appropriate in 

this case, we also conclude that the circuit court did not 

err in denying Faulknier’s motion for summary judgment. 

 For these reasons, we will affirm in part and reverse 

in part the judgment of the circuit court and remand this 

case for further proceedings in accordance with this 

opinion.7

Affirmed in part, 

reversed in part, 

 and remanded. 

 

demurrer before the circuit court, Shafer did not argue 

that this Code section bars Faulknier’s claim. Pursuant to 

the provisions of Rule 5:25, we do not consider arguments 

raised for the first time on appeal. 

7

 Neither party addressed whether any provision of 

federal law, including 5 C.F.R. §§ 870.801 or 870.802, 

affects the validity of the decedent’s beneficiary 

designation for his life insurance proceeds or the 

imposition of a constructive trust on those proceeds. 

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