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Factual Background:

Ted Summers acted as secretary/treasurer of Insurance Company and was also a senior vice-president of Bank.  Bank acted as Insurance Company’s depository bank.  Insurance Company had an account at Bank known as the Wind Premium Trust Account.  After the 1970s, Summers was the only person having signature authority on the Trust Account.  In 1993, Insurance Company directed the Trust Account be combined with the general operating accounts.  The president of Insurance Company believed the Trust Account had been closed, but Summers never actually closed the Trust Account.  From 1994 to 2001, Summers misappropriated $346,597.00 from the Trust Account by writing checks to Bank and others or by purchasing cashier’s checks or personal money orders payable to Bank.  Some of the funds were used for loan payments due to Bank by other customers.

Insurance Company filed a suit against Bank and a number of other individuals, including Summers.  By the time of trial, Insurance Company only sought to proceed on its count for a constructive trust against Bank.  In its count for a constructive trust, Insurance Company alleged it was entitled to a constructive trust on the funds Summers applied from the Trust Account and credited against loans which were delinquent, in default, or just as payments on loans which were current.

Marion County Circuit Court, J. Wallace, Held:

The circuit court imposed a constructive trust in the amount of $127,789.63.  The bank appealed.

Court of Appeals, J. Dowd Jr., Held:

Reversed.  The foundation of the remedy of a constructive trust is the identification of a specific property or funds as the res upon which the trust may be attached.  Bank asserts that Insurance Company did not establish through clear, cogent, and convincing evidence any identifiable property or funds as the res.  Insurance Company suggests the funds can be traced to Bank’s general operation account.  However, the record reflects that Insurance Company did not identify a res, and its assertion is not supported by evidence from trial.  Insurance Company only presented evidence that money passed through Bank and never showed where the money was deposited.  Bank president testified that at the time of trial, there was no record of where the misappropriated funds actually went.  There is no clear, cogent, and convincing evidence showing where the funds attributed to Bank went, whether the funds were deposited into Bank, or whether Bank retained those funds.  Because there was no identification of the specific res, no constructive trust can be imposed.