Status Of Marion County Indiana Sheriff's Sales

The Marion County Civil Sheriff's Office issued the following email last week:

The Marion County Sheriff sale for June 17th has been cancelled. These sales will be moved to August. However, your sales that moved from April to the June sale will have to be praeciped again. Please continue to send in your April cost checks.

I should be getting the July sale decrees from the Clerk this Friday. I will reassign your May SFN to the July sale. If you have not let us know the sales you want moved from May to July please let me know no later than Friday, the 15th by Noon.

We continue to work from home for the unforeseeable future. Please stay safe.

RE Team

Judgment Creditor Entitled To Recover Entire Value Of Real Estate Fraudulently Conveyed

Lesson. Although the transferee of real estate fraudulently conveyed theoretically could retain, or receive credit for, money spent to improve or otherwise increase the value of the subject property, the credit will only apply to improvements made after the fraudulent transfer. Otherwise, the judgment creditor will be entitled to the full value of the real estate, unless there is evidence of an inequitable windfall to the creditor.

Case cite. State v. Lawson, 128 N.E.3d 471 (Ind. Ct. App. 2019)

Legal issue. Whether judgment creditor was entitled to one-half ($7,500), or the full amount ($15,000), of proceeds from the sale of a Husband’s interest in real estate fraudulently transferred to him by Wife, the judgment debtor.

Vital facts. In 2017, the State obtained a large civil judgment against Wife for alleged theft. The State claimed that, when the theft was about to be discovered, Wife fraudulently conveyed to Husband her interest in the subject real estate. The property previously had been owned by Husband and a family member, both of whom spent $7,500 each improving the property in the 1990’s. In 2004, Husband transferred his one-half interest to Wife’s daughter, who later transferred her interest to Wife. Upon learning of the theft investigation in August 2014, Wife quitclaimed her one-half interest in the real estate back to Husband. While the litigation was pending, the parties agreed to the sale of Husband’s interests in the real estate for $15,000, which was deposited with the trial court pending the outcome of the case.

Procedural history. Following a bench trial, the trial court found that Wife had fraudulently transferred her interest in the real estate but ordered only $7,500 of the sale proceeds to be released to the State. The trial court ordered the remaining $7,500 to be released to Husband “for his equitable interest in the Property.” The State appealed.

Key rules.

Lawson involved the interpretation of Indiana’s Uniform Fraudulent Transfer Act. Under the Act, a creditor may bring a claim to set aside a fraudulent conveyance made by a debtor. As relevant here, a conveyance is fraudulent and voidable if the debtor made the transfer or incurred the obligation with actual intent to hinder, delay, or defraud a creditor of the debtor. I.C. § 32-18-2-14.

Section 18 was the key provision at issue and states in relevant part:

(b) To the extent that a transfer is avoidable in an action by a creditor under section 17(a)(1) of this chapter, the following rules apply:

    (1) Except as otherwise provided in this chapter, the creditor may recover judgment for the value of the asset transferred, as adjusted under subsection (c), or the amount necessary to satisfy the creditor’s claim, whichever is less....

* * *
(c) If the judgment under subsection (b) is based upon the value of the asset transferred, the judgment must be for an amount equal to the value of the asset at the time of the transfer, subject to adjustment as the equities may require.

The Indiana Court of Appeals interpreted “subject to adjustment as the equities may require” to mean: “A defrauded creditor is entitled to the full value of the fraudulently transferred property at the time of the transfer, and an equitable adjustment is permitted only when an inequitable windfall would result by granting the creditor the full value of the property.”

Holding. The Indiana Court of Appeals reversed the trial court and held that the State was entitled to a judgment for the full $15,000.

Policy/rationale. The trial court granted $7,500 to Husband under the equitable test of Section 18(c) based upon his cash outlay to improve the real estate in the 1990’s. On appeal, the State asserted that it should obtain the full value of the asset, as provided in Section 18(b) and (c). Significantly, Husband incurred the $7,500 “long before” the fraudulent transfer and after he himself transferred the property to Wife’s daughter. The Court of Appeals' focus was on whether any improvements had been made after the fraudulent transfer, and there had been none. Because Husband had not increased the value of the real estate after the subject transfer, “the equities did not require [Husband] to be reimbursed.”

Related post. “Negative Value” Dooms Indiana Fraudulent Transfer And Direct Continuation Claims

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I represent parties in disputes arising out of loans that occasionally involve post-judgment fraudulent transfer issues.  If you need assistance with a similar matter, please call me at 317-639-6151 or email me at john.waller@woodenlawyers.com. Also, don’t forget that you can follow me on Twitter @JohnDWaller or on LinkedIn, or you can subscribe to posts via RSS or email as noted on my home page.

Indiana Court Of Appeals Clarifies Bond Requirement In Corvette Receivership

Burelli v. Martin, 130 N.E.3d 661 (Ind. Ct. App. 2019) approved the appointment of a receiver to sell an expensive item of personal property, subject to the posting of a bond.  

At a judgment creditor’s request, the trial court appointed a receiver under I.C. 32-30-5-1(1) and (2) to sell a multi-million dollar Corvette to satisfy the debts of the owners of the Corvette.  Those sections are:

    (1): In an action by a vendor to vacate a fraudulent purchase of property or by a creditor to subject any property or fund to the creditor's claim.  [The judgment creditor alleged the Corvette was subject to his claim.]

    (2): In actions between partners or persons jointly interested in any property or fund.  [ The judgment creditor and the Corvette’s co-owners were all jointly interested in the Corvette, and the proceeds from its sale.]

The Court of Appeals affirmed the appointment a receiver. 

However, the Court reversed the trial court for failing to require the receiver to post a bond.  Although the parties apparently had stipulated to a $2.5 million insurance policy on the car, the insurance did not meet the bond obligation. 

The Court held that the insurance policy only protected the receivership property (the Corvette).  The statutory requirement for a bond (Section 3), on the other hand, insures the receiver’s conduct.  The Court expanded on the point of the receiver's personal liability:

When a receiver breaches his duty by acting outside his statutory authority or orders of the appointing court or is guilty of negligence and misconduct in administering the receivership, he is personally liable for any loss to any interested party.  A receiver must therefore post a bond to secure that obligation.

The Court remanded the case to the trial court to amend the receivership order to require the receiver to post “an appropriate bond to secure [the receiver’s] oath to faithfully discharge his duties.”  The Court expressed no opinion on what would be an appropriate amount, however.

See Also:  Standards And Duties Applicable To Indiana Receivers

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I represent parties involved with receiverships, including receivers themselves.  If you need assistance with a similar matter, please call me at 317-639-6151 or email me at john.waller@woodenlawyers.com. Also, don’t forget that you can follow me on Twitter @JohnDWaller or on LinkedIn, or you can subscribe to posts via RSS or email as noted on my home page.

Reminder: Receivership CLE Next Wednesday, April 22nd

I'll be co-presenting (via Zoom) an hour-long continuing legal education program for the IndyBar on Wednesday, 4/22/20, from 4-5 p.m EDT.  For more information, click here:  Vignettes from Receivership Cases and Comparisons to Bankruptcy.  Jason Burke of Blackwell Burke & Ramsey will be joining me.    

Status Of Indiana Sheriff's Sales

For what it's worth, the Marion County (Indianapolis) Civil Sheriff's Office announced last week that its May 2020 sale has been cancelled.  (The sheriff previously cancelled the April sale.)  The email from Marion County indicated that the June 2020 sale is still a go - at least for now.  The Marion County situation seems to be consistent with both our Governor's order and the CARES Act, Sections 4022 and 4023, to the extent those apply to a particular case.  

Always remain mindful that, although the Indiana Code covers the fundamentals of the sheriff's sale process, the specific procedures vary by county.  Local rules, customs, and practices control.  There is a saying in Indiana that there are 92 counties and therefore 92 different sets of rules applicable to sheriff's sales.  My point is that, if you have questions, you should call the local civil sheriff's office to confirm the status of its foreclosure sale activities (publications, notices, sales, etc.)  during the COVID-19 pandemic.  

The Federal CARES Act - Multifamily Properties With Federally Backed Loans

Here is a verbatim quote of Section 4023:

FORBEARANCE OF RESIDENTIAL MORTGAGE LOAN PAYMENTS FOR MULTIFAMILY PROPERTIES WITH FEDERALLY BACKED LOANS

(a) IN GENERAL.—During the covered period, a multifamily borrower with a Federally backed multifamily mortgage loan experiencing a financial hardship due, directly or indirectly, to the COVID–19 emergency may request a forbearance under the terms set forth in this section.

(b) REQUEST FOR RELIEF.—A multifamily borrower with a Federally backed multifamily mortgage loan that  was current on its payments as of February 1, 2020, may submit an oral or written request for forbearance under subsection (a) to the borrower’s servicer affirming that the multifamily borrower is experiencing a financial hardship during the COVID–19 emergency.

(c) FORBEARANCE PERIOD.—

    (1) IN GENERAL.—Upon receipt of an oral or written request for forbearance from a multifamily borrower, a servicer shall—

        (A) document the financial hardship;

        (B) provide the forbearance for up to 30 days; and

        (C) extend the forbearance for up to 2 additional 30 day periods upon the request of the borrower provided that, the borrower’s request for an extension is made during the covered period, and, at least 15 days prior to the end of the forbearance period described under subparagraph (B).

    (2) RIGHT TO DISCONTINUE.—A multifamily borrower shall have the option to discontinue the forbearance at any time.

(d) RENTER PROTECTIONS DURING FORBEARANCE PERIOD.—A multifamily borrower that receives a forbearance under this section may not, for the duration of the forbearance—

    (1) evict or initiate the eviction of a tenant from a dwelling unit located in or on the applicable property solely for nonpayment of rent or other fees or charges; or

    (2) charge any late fees, penalties, or other charges to a tenant described in paragraph (1) for late payment of rent.

(e) NOTICE.—A multifamily borrower that receives a forbearance under this section—

    (1) may not require a tenant to vacate a dwelling unit located in or on the applicable property before the date that is 30 days after the date on which the borrower provides the tenant with a notice to vacate; and

    (2) may not issue a notice to vacate under paragraph (1) until after the expiration of the forbearance.

(f) DEFINITIONS.—In this section:

    (1) APPLICABLE PROPERTY.—The term “applicable property”, with respect to a Federally backed multifamily mortgage loan, means the residential multifamily property against which the mortgage loan is secured by a lien.

    (2) FEDERALLY BACKED MULTIFAMILY MORTGAGE LOAN.—The term “Federally backed multifamily mortgage loan” includes any loan (other than temporary financing such as a construction loan) that—

        (A) is secured by a first or subordinate lien on residential multifamily real property designed principally for the occupancy of 5 or more families, including any such secured loan, the proceeds of which are used to prepay or pay off an existing loan secured by the same property; and

        (B) is made in whole or in part, or insured, guaranteed, supplemented, or assisted in any way, by any officer or agency of the Federal Government or under or in connection with a housing or urban development program administered by the Secretary of Housing and Urban Development or a housing or related program administered by any other such officer or agency, or is purchased or securitized by the Federal Home Loan Mortgage Corporation or the Federal National Mortgage Association.

    (3) MULTIFAMILY BORROWER.—the term “multifamily borrower” means a borrower of a residential mortgage loan that is secured by a lien against a property comprising 5 or more dwelling units.

    (4) COVID–19 EMERGENCY.—The term “COVID–19 emergency” means the national emergency concerning the novel coronavirus disease (COVID–19) outbreak declared by the President on March 13, 2020 under the National Emergencies Act (50 U.S.C. 1601 et seq.).

    (5) COVERED PERIOD.—The term “covered period” means the period beginning on the date of enactment of this Act and ending on the sooner of—

        (A) the termination date of the national emergency concerning the novel coronavirus disease (COVID–19) outbreak declared by the President on March 13, 2020 under the National Emergencies Act (50 U.S.C. 1601 et seq.); or

        (B) December 31, 2020.

A Few Thoughts:

1. Section 4023 applies to a limited set of commercial mortgage loans that are "federally backed" and that essentially are related to apartments.  
2. Borrowers might be entitled to an automatic 30-day "forbearance" and two more automatic 30-day "forbearance" periods upon a written request, which documents a financial hardship.
3. The borrower must have been current as of 2/1/20.
4. The law does not apply to construction loans.
5. "Forbearance" is not defined.