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Monday, April 13, 2009

Ind. Decisions - Supreme Court rules in riverboat gambling proceeds case

In Gregory Zoeller v. East Chicago Second Century (Marion Sup.Ct. 4, Judge Bradford), a 10-page, 5-0 opinion, Chief Justice Shepard writes:

The City of East Chicago and Showboat Marina Partnership agreed that part of the proceeds from riverboat gambling would flow back for community benefit through various entities. The Attorney General has now brought claims for constructive trust and unjust enrichment as to property in the hands of one of those entities, East Chicago Second Century, Inc., and its principals. We reverse the trial court’s dismissal of these claims. * * *

I. Does the Attorney General Have Authority to Bring this Case?

Second Century moved to dismiss on grounds that its status as a for-profit corporation took it out from under the provisions in the trust code that describe the Attorney General’s supervisory role as respects charitable activity. It argues on appeal that it was established under the agreement to benefit as a private for-profit corporation, and that “this non-charitable component eliminates the possibility that a public charitable trust was created,” citing the definition of such trusts, Ind. Code § 30-4-1-2(5). (Appellant’s Br. at 5, 7.) Second Century cites S. Ind. Gas and Elec. Co. v. City of Boonville, 252 Ind. 385, 248 N.E.2d 343 (1969), for the proposition that East Chicago was acting in a private or proprietary manner when it entered into the agreements and that this means they are not public contracts on which a charitable trust might be imposed. * * *

Given the broad common law and statutory authority conferred upon the Attorney General to protect the public interest in charitable and benevolent instrumentalities, we conclude
that it was error to dismiss the Attorney General’s counterclaim on grounds that Second Century
is a for-profit corporation.

II. Whether Unjust Enrichment is Available * * *

The fact that a claimant has requested imposition of a constructive trust does not affect the right of the claimant to assert a claim for unjust enrichment and restitution where the contention is that one person has been unjustly enriched at the expense of another.

It was error to dismiss the Attorney General’s complaint on these grounds.

III. Whether the Unjust Enrichment Claim is Actionable * * *

There was an express contract in this transaction, but it was not one to which the Attorney General or the State were parties. Showboat entered into the local development agreement with East Chicago. That transaction is thus not a bar to the Attorney General’s claim for unjust enrichment, an equitable remedy.

Moreover, the agreement is not like an ordinary commercial contract at all. This agreement was a mode of implementing the casino’s obligation to contribute to local economic development. Its terms were intended to control the rights and duties of East Chicago and the casino licensee in relation to each other; they were not intended to control the rights of any non-parties. The Attorney General’s claim for unjust enrichment is actionable.

IV. Is Fraud a Necessary Prerequisite to Constructive Trust? * * *

While Indiana courts have certainly said on occasion that fraud is a prerequisite, see, e.g., Brown v. Brown, 235 Ind. 563, 135 N.E.2d 614, 617 (1956), the meaning of this declaration is not confined to fraud as one might define it for purposes of criminal law. Rather, the remedy is available where there is standard fraud (i.e., misrepresentation, reliance, etc.) or a breach of duty arising out of a confidential or fiduciary relationship. United Steelworkers of Am. v. N. Ind. Public Serv. Co., 436 N.E.2d 826, 831 (Ind. Ct. App. 1982). * * *

Conclusion. We reverse the dismissal entered by the trial court and remand for further proceedings on the merits.

Posted by Marcia Oddi on April 13, 2009 03:07 PM
Posted to Ind. Sup.Ct. Decisions