A man is appointed trustee of a trust for the benefit of himself and another, younger beneficiary. The trust agreement provides that the trustee should use the assets for his own benefit only if his other resources are depleted. Nevertheless, at a time when the trustee has significant other financial resources he uses the trust assets to purchase a primary residence in California for himself and his spouse, as joint owners with survivorship. The trustee dies. Title to the home passes to the surviving spouse. The surviving spouse sells the home, moves to Florida, and invests the proceeds in a Florida homestead. The other beneficiary sues to recover proceeds invested in the California house. A California court finds that the trustee wrongfully appropriated trust property in violation of California statutes and his general fiduciary duty, and as remedy, holds that the surviving spouse holds her Florida house in a constructive trust for the surviving beneficiary. Can the beneficiary enforce the California court order in Florida so as to force conveyance of the spouse’s Florida homestead to the California beneficiary?
This is a complicated and interesting question which I have just begun to research. Generally, a California court cannot determine title to Florida property. On the other hand, Florida courts have found that imposition of a constructive trust is not the same as determining title ownership such as the case in a quiet title action. A constructive trust is an equitable remedy to make right what is otherwise inequitable.
The other issue is whether a California court, or a Florida court, could impose a constructive trust on a Florida homestead to remedy the deceased’s trustee’s wrongdoing. The Florida Supreme Court has held that a court can place an equitable lien on a homestead to remedy a fraud or other egregious circumstance. However, an equitable lien is similar to , yet different from a constructive trust. A constructive trust calls for the immediate transfer of title back to the complainant, whereas an equitable lien does not give the complainant the right to force a sale or conveyance.
The Trustee’s breach of his fiduciary duty is not the same as common law fraud, and there is no case in Florida holding that breach of duty calls for an equitable remedy against homestead property. Also, one Florida case says that a constructive trust cannot be placed on a house unless there was fraud by the beneficiary of the homestead protection, in this case, the innocent surviving spouse.
As of know, I think the Florida homestead would survive absent showing of fraud or other really bad facts in the California case.