Traceable economic value of fraudulently acquired property may be made the subject of a constructive trust: Two procedural equitable remedies, tracing and constructive trust, working in tandem

Assume fraudulent representations by the owner of a residence with multiple hidden material defects that the defects were non-existent induce Jones to purchase residence. Call that residence the “old residence.” The unjustly enriched seller then purchases with the sales proceeds and takes legal title to another residence. Call that residence the “new residence.” If sales proceeds are traceable to new residence, the new residence judicially may be made the subject of a constructive trust for Jones’ benefit. The unjustly enriched titleholder of the new residence is now its constructive trustee and thus subject to the in personam orders of the equity court. One of many possible substantive equitable remedies for the unjust enrichment might be a specific performance order that the parties shall exchange the legal titles to their respective current residences, subject to appropriate equitable financial adjustments. He who seeks equity must do equity. We consider tracing, albeit in the breach-of-fiduciary-duty context rather than the nonfiduciary unjust enrichment context, in §7.2.3.1.3 of Loring and Rounds: A Trustee’s Handbook (2026), which section is reproduced in the appendix below.

In McOmber v. Thompson, 572 P.3d 736 (Idaho 2025), whose facts are similar to those of our hypothetical, the court failed to explain why equity’s interplay of tracing doctrine and constructive trust doctrine was inapplicable. “In sum, … [the purchase of the old residence] …had nothing to do with the purchase of … [the new residence]; thus, … [the victims of the unjust enrichment] …never had a right to a constructive trust in the … [new residence] …” The issue however is not whether the victims of the unjust enrichment had “anything to do” with the mechanics of purchasing the new residence or whether the new residence “had been obtained by fraudulent means,” but whether the fraudulently obtained proceeds from the sale of the defectinfested old residence can be traced in equity to the new residence. It appears that evidence of traceability had been proffered but ignored.