Opinion ID: 1059194
Heading Depth: 1
Heading Rank: 3

Heading: constructive trusts

Text: In the fraudulent conveyance proceedings, the trial court ordered that a constructive trust be imposed on the $22,500 owed Husband under the promissory note executed for the construction equipment and instructed the Special Commissioner to take possession of the promissory note and any payments due thereunder pending further order of this court in the divorce action. The trial court also imposed a constructive trust on the $12,250 Husband paid to Mother and ordered Mother to deposit that sum with the Special Commissioner pending the divorce action. In his second and third assignments of error, Husband asserts that these constructive trusts were improperly imposed by the trial court. A constructive trust is a mechanism by which the person holding title to property is subjected to an equitable duty to convey the property to another because allowing the title holder to retain the property would be unjust. Leonard v. Counts, 221 Va. 582, 590, 272 S.E.2d 190, 195-96 (1980). The constructive trust arises by operation of law and is independent of the intention of the parties. Id. at 588-89, 272 S.E.2d at 195. In an action in which a constructive trust is imposed, the original transfer is not declared void; rather the title holder is ordered to transfer title of the property to or for the benefit of another. Id. at 591, 272 S.E.2d at 196. The remedy for a fraudulent conveyance is generally to declare the transfer void, or, under certain circumstances, to enter a personal judgment against the transferee. See Price v. Hawkins, 247 Va. 32, 35-36, 439 S.E.2d 382, 384 (1994). Voiding the conveyance was the remedy adopted by the trial court with regard to the funds Husband fraudulently transferred to Mother, but, rather than returning the funds to the Husband, the trial court placed the funds with the Special Commissioner pending a final decree in the divorce action. Although labeled a constructive trust, placing the funds with the Special Commissioner did not create the type of trust contemplated by the jurisprudence of constructive trusts. Accordingly, regardless of the terminology used, the trial court did not impose a constructive trust on the funds fraudulently conveyed to Mother. [5] Pursuant to Code § 20-103, the trial court had the authority to transfer those funds to the Commissioner pending further proceedings in the divorce actions. Husband also complains that the trial court erred in imposing a constructive trust on the promissory note executed by Father in favor of Husband and on the cash payments made under that note. [6] Once again, however, the constructive trust imposed was not a true constructive trust. The legal title holder of the note, the Husband, was not required to transfer the note to, or hold the note for the benefit of, another party. The trial court's order that the note and its proceeds be placed in the custody of the Special Commissioner pending divorce was no more than a mechanism to preserve the Husband's estate authorized by Code § 20-103. Because no true constructive trusts were placed on the note or its proceeds, we reject Husband's second and third assignments of error.