Simplifying Claims to Traceable Proceeds

Abstract

There is continuing debate, in case law and in academic literature, as to the nature of "common law tracing". Some recent cases suggest that a plaintiff can assert a kind of legal property interest in the proceeds of an unauthorized disposition of the plaintiff's property. But the nature of this property interest is poorly understood, while the possibility of asserting a trust interest in the proceeds of an unauthorized disposition is clear and well-established. The author shows that the recent cases are based on a misunderstanding. Since the early 19th century if not before, the common law courts allowed plaintiffs to use common law claims to vindicate equitable interests under a trust. It follows that all proprietary claims to the traceable proceeds of unauthorized dispositions can be understood as founded on trusts arising by operation of law. This approach promises to make the law much simpler and more coherent. There is no room, and no need, to try to make sense of proprietary common law claims to assets that are the traceable proceeds of an unauthorized substitution.

Keywords: tracing, trusts, common law tracing, equitable tracing, money had and received, legal history

JEL Classification: K11, K12