What to do when a third party has an interest in property that is part of the marital pot? The Indiana Court of Appeals dealt with this problem in Leever v. Leever.
Appellant-petitioner Lisa A. Leever appeals the trial court’s order dissolving her
marriage to appellee-respondent Doug R. Leever. Lisa argues that the trial court erred by refusing to consider certain real estate as part of the marital estate, instead placing the real estate in an equitable constructive trust in favor of Doug’s parents. Finding that the trial court properly placed the real estate in constructive trust but should have assigned the real estate a value and included it in the marital estate, we affirm in part, reverse in part, and remand with instructions to assign a value to the real estate, include it in the marital estate, and re-divide the marital estate consistent with Indiana Code section 31-15-7-5.
The Court of Appeals explains constructive trusts here:
A constructive trust is a creature of equity, devised to do justice by making
equitable remedies available against one who through fraud or other wrongful means
acquires property of another. Kalwitz v. Estate of Kalwitz, 822 N.E.2d 274, 280 (Ind. Ct. App. 2005). A constructive trust is imposed where a person holding title to property is subject to an equitable duty to convey it to another on the ground that he would be unjustly enriched if he were permitted to retain it. Id.
While it is well established that fraud is a prerequisite to the imposition of a
constructive trust, this prerequisite is not confined to fraud as one might define it for
purposes of criminal law. Zoeller v. E. Chicago Second Century, Inc., 904 N.E.2d 213,
221 (Ind. 2009). Rather, the remedy is available where there is standard fraud or a breach of duty arising out of a confidential or fiduciary relationship. Id. The duty to convey the property may arise because the property was acquired through fraud, duress, undue influence or mistake, or through a breach of a fiduciary duty or the wrongful disposition of another’s property. Kalwitz, 822 N.E.2d at 280. The basis of the constructive trust is the unjust enrichment that would result if the person having the property were permitted to retain it. Id. This type of trust is more in the nature of an equitable remedy than an independent cause of action. Id.
Here the Court of Appeals explains why constructive trusts can be used in dividing marital property:
What to take away from all this? Putting marital property in another person's name does not mean that it will escape the divorce court.By imposing a constructive trust, the trial court implicitly found that a fiduciary or
confidential relationship existed between Doug’s parents and Doug and Lisa. A
confidential or fiduciary relationship exists when confidence is reposed by one party in another with resulting superiority and influence exercised by the other. Kalwitz, 822 N.E.2d at 281. In Indiana, certain legal and domestic relationships raise a presumption of trust and confidence as to the subordinate party on the one side and a corresponding influence as to the dominant party on the other side. Meyer v. Wright, 854 N.E.2d 57, 60 (Ind. Ct. App. 2006). These relationships include that of attorney and client, guardian and ward, principal and agent, pastor and parishioner, husband and wife, and, as in this case, parent and child. Id. Here, the existence of a confidential relationship is self-evident because Verna and Don trusted Doug and Lisa with the ownership of their home while Verna and Don were still living in the residence.