Opinion ID: 547255
Heading Depth: 2
Heading Rank: 1

Heading: Constructive Trust Principles

Text: 9 The equitable remedy of constructive trust has proved a difficult concept for courts to define. As usual, Judge Cardozo expressed its vague contours most eloquently: A constructive trust is the formula through which the conscience of equity finds expression. When property has been acquired in such circumstances that the holder of the legal title may not in good conscience retain the beneficial interest, equity converts him to a trustee. Beatty v. Guggenheim Exploration Co., 225 N.Y. 380, 386, 122 N.E. 378 (1919), quoted in A.W. Scott and W.F. Fratcher, The Law of Trusts, Sec. 462 (1989). Indiana courts, like most jurisdictions, have long recognized this equitable remedy where a party through fraud or mistake or by any means ex malificio acquires the property of another. Brown v. Brown, 135 N.E.2d 614 (Ind.1956). 10 Under current Indiana law, equity will create a constructive trust where there is actual fraud or there exists a breach of duty arising out of a confidential or fiduciary relationship which necessitates the presumption that fraud be found. Givens v. Rose, 383 N.E.2d 448, 453 (Ind.App.1978). The courts have imposed a constructive trust where this confidential or fiduciary duty has been breached, and a third party unjustly enriched as a result of that breach, even absent wrongdoing by the party unjustly enriched. See Kopis v. Savage, 498 N.E.2d 1266 (Ind.App.1986); see also Hunter v. Hunter, 283 N.E.2d 775, 779 (Ind.1972). Thus, equity may collect proceeds from an innocent party in order to protect the equitable rights of those who have suffered the wrong. See Ridgway v. Ridgway, 454 U.S. 46, 71-72, 102 S.Ct. 49, 63-64, 70 L.Ed.2d 39 (1987) (Stevens, J., dissenting). 11 The party seeking to invoke a constructive trust has the initial burden of demonstrating that a confidential or fiduciary relationship exists. Reiss v. Reiss, 516 N.E.2d 7 (Ind.1987). Such a relationship must be established by clear and convincing evidence. Melloh v. Gladis, 309 N.E.2d 433 (Ind.1974); Terry v. West, 524 N.E.2d 343 (Ind.App.1988). Once the plaintiff has established such a relationship and a breach of the resulting duty, the burden necessarily shifts to the defendant to prove good faith, the absence of undue influence, or any other affirmative defense, which would bar the creation of the constructive trust. See Givens, 383 N.E.2d 448; Hall v. Indiana Dept. of Revenue, 351 N.E.2d 35 (Ind.App.1976). See also 28 Indiana Law Encyclopedia (I.L.E.) Trusts Sec. 78, p. 553.