## Facts

- Jack M. Hirsch and Shirley Hirsch divorced in 1967; their daughters, Janis E. Hirsch and Carol E. Hirsch Bidwell, were the plaintiffs.
- A property-settlement agreement, incorporated into the divorce judgment, required Jack to:
  - designate the daughters as *irrevocable* beneficiaries of seven life-insurance policies totaling $98,000 in face value, pay the premiums, and direct the insurers to notify the daughters if premiums were in default; and
  - place certain securities in trust for the daughters’ education; a trust instrument was executed.
- After the divorce, Jack married Doris Hirsch.
- Plaintiffs alleged Jack breached the settlement agreement and trust arrangement by, among other things:
  - changing beneficiaries on some policies to Doris,
  - borrowing against some policies,
  - reducing the face amount of some policies to paid-up amounts and discontinuing premium payments on others, and
  - selling the securities held in the education trust and converting the proceeds to other uses.
- Plaintiffs alleged Jack used proceeds from these actions to finance the purchase of land and construction of a house (alleged value about $200,000), titled to Jack and Doris as tenants by the entirety.
- Jack died testate on January 18, 1973, leaving Doris as the surviving spouse and (by survivorship) sole owner of the property.
- Plaintiffs sued Travelers Insurance Company and other insurers, the executors of Jack’s estate, and Doris. As to Doris, plaintiffs sought to impose a constructive trust (or similar equitable relief) on the real property allegedly acquired and improved with funds diverted from plaintiffs’ insurance and trust interests.
- Doris moved to dismiss the complaint against her for failure to state a claim, arguing she had not been unjustly enriched. The trial court granted the motion and dismissed the claim against Doris. Plaintiffs appealed.

## Issues

1. Whether the complaint’s allegations, taken as true on a motion to dismiss, stated a claim for a constructive trust (or equitable lien) on real property allegedly purchased and improved with proceeds wrongfully diverted from plaintiffs’ interests created by a divorce property-settlement agreement and an education trust.
2. Whether the claim against Doris could be dismissed at the pleading stage on the ground that she was not unjustly enriched (or was otherwise insulated as a recipient of the property interest) as a matter of law.

## Decision

- The Appellate Division reversed the dismissal of the complaint against Doris and remanded for further proceedings.
- Applying the standard for a Rule 4:6-2(e) motion, the court accepted as true plaintiffs’ allegations that Jack violated obligations owed to plaintiffs and that the resulting proceeds were used to acquire and build the home titled to Jack and Doris.
- The court held that, on those alleged facts, plaintiffs pleaded a sufficient basis to seek equitable relief against the property held by Doris, and the trial court erred in concluding—on the pleadings alone—that Doris could not have been unjustly enriched.

## Legal Principles

- On a motion to dismiss for failure to state a claim, the court assumes the truth of the complaint’s factual allegations and gives plaintiffs the benefit of reasonable inferences; disputes about what actually occurred are not resolved on the pleadings.
- A constructive trust (and related equitable remedies such as an equitable lien) may be imposed to prevent unjust enrichment where property is acquired or retained as a result of wrongful conduct, including a breach of duties arising from a divorce judgment or trust arrangement.
- When a plaintiff alleges that misdirected or converted funds can be traced into identifiable property, equity may allow the plaintiff to pursue the property itself, not merely a damages remedy against the wrongdoer’s estate.
- Whether a recipient of property gave value for the interest received, had notice, or is otherwise protected from equitable remedies ordinarily depends on facts not suitable for resolution on a bare pleading.

## Conclusion

The Appellate Division held that Janis Hirsch and Carol Hirsch Bidwell adequately alleged that their father breached divorce-settlement and trust obligations, diverted value from insurance and trust assets intended for them, and used the proceeds to acquire and build a home titled with his second wife, Doris; because those allegations plausibly supported a finding of unjust enrichment and traceable property, the dismissal of the constructive-trust claim against Doris at the pleading stage was reversed and the matter was remanded.


Hirsch v. Travelers Insurance Co., 341 A.2d 691, 134 N.J. Super. 466 (1975)