Also known as: trace · traced · traces · following assets · asset tracing
Written by attorneys · grounded in primary & secondary sources — see below
2 senses
A method of determining ownership priority by following the sequence of recorded instruments that establish a chain of title. A purchaser is charged with constructive notice of all recorded instruments appearing in that chain.
A method of determining ownership priority by following the sequence of recorded instruments that establish a chain of title. A purchaser is charged with constructive notice of all recorded instruments appearing in that chain.
Tanner Thompson contracts to buy a commercial parcel from a seller who acquired it through two prior deeds. Thompson's attorney examines the recorded instruments linking each grantor to the next and discovers an unrecorded mortgage from an earlier owner. Because the mortgage does not appear in the chain of title, Thompson takes free of it under the recording act.
An equitable technique for identifying misappropriated property or collateral proceeds after they have been exchanged or commingled with other assets. The technique permits recovery by imposing a constructive trust or lien on the traced property or its proceeds.
Trinity Pharmaceuticals holds a perfected security interest in a debtor's inventory. The debtor sells the inventory and deposits the cash proceeds into a general operating account that already contains other funds. Using equitable tracing rules permitted outside Article 9, Trinity identifies the exact amount of its proceeds within the commingled balance and claims a perfected security interest in that portion.
An equitable technique for identifying misappropriated property or collateral proceeds after they have been exchanged or commingled with other assets. The technique permits recovery by imposing a constructive trust or lien on the traced property or its proceeds.
Each sense below has its own examples, sources, and questions.
The purchaser examines the sequence of recorded instruments that form the chain of title. Any recorded interest appearing in that chain gives constructive notice and may affect priority. An interest outside the chain does not bind a subsequent purchaser without notice.
A trustee wrongfully sells trust land and uses the proceeds to purchase a new parcel titled in the trustee's own name. The beneficiary traces the original trust res through the sale and into the substituted parcel, then obtains a constructive trust on the new land to recover the trust property.
A corporate officer diverts company funds into a personal brokerage account and then into real estate. The company traces the funds through each successive transfer and imposes an equitable lien on the real estate to the extent of the diverted amount.
Thomas Thompson deposits separate inheritance money into a joint account that also holds marital earnings. After multiple deposits and withdrawals, he traces the original inheritance through bank records and proves that a portion of the current balance remains his separate property.
Tiffany Torres receives a fraudulent wire transfer and immediately spends the funds on a yacht. The victim traces the money into the yacht purchase and obtains an equitable lien on the vessel even though Torres had no knowledge of the fraud.
The secured party may apply any tracing method permitted by other law, including equitable principles that allow identification of proceeds within a commingled mass. The security interest remains perfected if it was perfected in the original collateral.
Tracing supports a constructive trust when the claimant shows that misappropriated property or its proceeds can be followed into specific assets held by the defendant or a transferee who is not a bona fide purchaser. The remedy prevents unjust enrichment by returning the traced asset or its value.
The spouse claiming separate property must produce records showing the source and movement of the funds through the account. If the tracing fails, the entire commingled balance is treated as marital property.
…Means II). The author examines the two principal precedents cited marginally by Coke, both contrary to his dictum, and traces the treatment of these and other cases by earlier commentators. He concludes that Coke, who himself participated as an advocate in an abortion case in 1601, may have intentionally misstated…