Court Opinion

ID: 9524426
Source: CourtListenerOpinion
Date Created: 2023-08-07 02:52:36.289245+00
Date Added: 2024-06-11T13:09:57.862784
License: Public Domain

SABERS, Justice
(concurring in part and dissenting in part).
I concur in all respects, except that I dissent from the reversal of the compensatory and punitive damage awards.
The trial court found Chrystal to be an implied trustee by virtue of the fact that she “received and disbursed income of the trust property” and that she acted “willful and fraudulent toward the plaintiffs.” The trial court further found in its memorandum decision, incorporated into the findings of fact, that “there are innumerable unexplained discrepancies in funds and assets which otherwise would have gone to plaintiffs as beneficiaries of the trust and estate.” Finally, the trial court found that some of the rent proceeds from the trust properties went to the Madsens’ (Chrystal’s) account.
The above findings of fact support the finding of an implied trust under SDCL 55-1-8. SDCL 55-1-8 provides:
One who gains a thing by fraud, accident, mistake, undue influence, the violation of a trust or other wrongful act, is, unless he has some other and better right thereto, an implied trustee of the thing gained for the benefit of the person who would otherwise have had it.
Under SDCL 55-1-8 there are three elements which must be satisfied to create an implied trust. First, a person must “gain a thing.” The trial court found that some of the rent proceeds from the trust property went into the Madsens’ account. Though some of these proceeds which were deposited in the Madsens’ account went to improvements or expenses on the trust property,* much of this money was unaccounted for by Chrystal. This evidence satisfies the first element under SDCL 55-1-8. The second element is that the gain must be accomplished by some wrongful act. This element is satisfied by the trial court’s finding of fraud by Chrystal toward the plaintiffs. There is evidence in the record which supports this finding, as some testimony indicated Chrystal attempted to de*534ceive her brothers and sister as to the state of the trust property and refused to give any information or accounting regarding the trust. Finally, the third element under SDCL 55-1-8 is that the person[s] claiming an implied trust must have a better right to the thing wrongfully gained. The trial court found that the trust proceeds which went to Madsens’ account otherwise would have gone to the plaintiffs as beneficiaries of the trust. Under the trust agreement the proceeds from the trust property were to be paid to Elizabeth for support, used for improvements on the trust property, or paid back into the trust. On the death of Elizabeth the entire trust was to pass through the estate to the children. Clearly, by wrongfully obtaining some of the rent proceeds Chrystal gained at the future expense of her siblings. Thus, Chrystal became an implied trustee for the benefit of her brothers and sister who became entitled to these proceeds and/or the benefits of these proceeds at the time of Elizabeth's death.
The majority appears to have abandoned its role as a reviewing court in reversing the judgment of the trial court. They do •not attempt to challenge any of the trial court’s factual findings as clearly erroneous, but simply conclude that there are no facts which support an implied trust in this case. The majority bases their conclusion on Elizabeth’s non-ownership of the trust property. However, ownership is not even one of the considerations for an implied trust under SDCL 55-1-8.
SDCL 55-1-8 is sufficient to support the trial court’s finding of an implied trust, but it should be noted that SDCL 55-1-11 could also give rise to an implied trust in this case, contrary to the majority’s assertion. SDCL 55-1-11 is a broad, equitable remedy, which may be available in situations not encompassed by SDCL 55-1-7 through 55-1-10. The statute provides:
The enumeration in §§ 55-1-7 to 55-1-10, inclusive, of cases wherein an implied trust arises does not exclude the arising of an implied trust in other cases nor prevent a court of equity from establishing and declaring an implied, resulting, or constructive trust in other cases and instances pursuant to the custom and practice of such courts.
A leading commentator has recognized that implied or constructive trusts are elusive of definition and may arise in many situations where such an equitable remedy is necessary. V. Scott on Trusts § 462 (1967). Scott states that a constructive trust most often arises where “a person who holds title to property is subject to an equitable duty to convey it to another on the ground that he would be unjustly enriched if he were permitted to retain it.” Id, The majority implies that this is the only situation where such a trust may arise. Scott notes that a constructive trust is often recognized as a remedy for fraud. “It is a jurisdiction by which a Court of Equity, proceeding on the ground of fraud, converts the party who has committed it into a trustee for the party who is injured by that fraud.” Id. (citing McCormick v. Grogan, L.R. 4 H.L. 82, 97 (1869)).
The above definitions are consistent with SDCL 55-1-11, which permits a court of equity to declare an implied trust even in the absence of a specific allegation that property wrongfully was transferred to or converted by the implied trustee.
The majority does not contest the trial court’s finding of fraud, which is supported by the record. Despite this finding, the majority rejects SDCL 55-1-11 as a basis for finding Chrystal liable as an implied trustee. They reason that Chrystal was an agent of the express trustee, Thurow, and thus could not be an implied trustee. This reasoning reveals a fundamental misper-ception as to the nature of an implied trust. In equity, an implied trust may arise to protect one party from another’s unjust enrichment or wrongdoing, regardless of the legal relationship. In such situations, an implied trust permits a court of equity to provide a remedy by adjusting the relationship of the parties according to the reality of the situation, in contrast to a rigid, often harsh legal result. The implied trust statutes provide the tool for such adjustment, under proper circumstances.
In this case, Chrystal might have been an agent of the express trustee, Thurow, in *535form. However, in substance, it appears Chrystal actually carried out many of the duties as trustee over the trust property. Thurow, on the other hand, appears to have played merely an advisory role as attorney to the trustee. Even if these circumstances alone were insufficient to find Chrystal an implied trustee under the implied trust statutes, the trial court’s findings that rent proceeds from the trust property were placed into Madsens’ account, and fraud on the part of Chrystal certainly provide a sufficient basis. Chrystal’s wrongdoing should not be hidden behind a legal veil when an equitable remedy is statutorily available to right these wrongs.
As an implied trustee Chrystal owed a fiduciary obligation to the beneficiaries to care for the trust and account for the income and expenses of the trust, particularly in light of her extensive involvement and dealing with the trust property. The breach of this obligation created a basis to award compensatory damages. In this circumstance it also was proper for the trial court to award punitive damages as there was a finding of willful and fraudulent behavior on the part of Chrystal.
Therefore, I respectfully dissent as to the reversal of the trial court’s award of compensatory and punitive damages to the appellees.

 It should be noted that the trial court considered Chrystal's contributions toward improvements and expenses on the trust property, and credited Chrystal to that extent in awarding compensatory damages.