The Supreme Court of the United States, in Rotkiske v. Klemm, 140 S.Ct. 355 (2019), held that the Fair Debt Collection Practices Act's one-year statute of limitations "begins to run on the date on which the alleged FDCPA violation occurs, not the date on which the violation is discovered." 15 U.S.C. 1692k(d) Justice Thomas authored the opinion, which strictly construes the statutory text. The Court "simply enforce(d) the value judgments made by Congress" and declined to build the so-called discovery rule into the statutory provision.
Wife Was A “Creditor” In Alleged Fraudulent Transfer Case And Proved The Necessary Fraudulent Intent To Prevail Over Husband In Divorce Case
Lesson. Dumping real estate assets for no value shortly before a judgment, even in a divorce case, could lead to a court order unwinding the transfers under Indiana’s UFTA.
Legal issues. Whether a wife was a “creditor” under Indiana’s Uniform Fraudulent Transfer Act? Whether the subject transfers violated the UFTA?
Vital facts. This dispute arises out of a divorce and involves the husband (Husband), the wife (Wife), the husband’s brother (Brother), and the Brother’s longtime girlfriend (Girlfriend). In connection with a decree of dissolution, there was a property division in which Wife was to receive certain parcels of real estate. Although the facts are pretty dense, in a nutshell, shortly before the divorce was to become final, Husband conveyed a bunch of real estate to Girlfriend.
Procedural history. The trial court set aside the conveyances based upon the UFTA. Husband appealed.
Key rules. Ind. Code § 32-18-2-14 sets out how a transfer becomes voidable under Indiana’s UFTA. One key inquiry is whether the transfer was made with the “intent to hinder, delay, or defraud” the creditor.
The UFTA defines a “creditor” as “a person that has a claim.” I.C. § 32-18-2-2.
Holding. The Indiana Court of Appeals affirmed the trial court ruling in favor of Wife.
Policy/rationale. Husband first contended that Wife was not a creditor because Brother financed the purchase of the subject real estate from Husband and had the right to direct to the conveyances to Girlfriend. However, the evidence showed that Wife contributed to the original purchases of the real estate, which, in part, had been titled in Wife’s name. The Court concluded the properties were part of the marital estate for purposes of the divorce, thereby rendering Wife a “creditor.”
Husband next argued that the transfer of real estate from Husband to Girlfriend was not made with the “intent to hinder, delay, or defraud” Wife. The Court addressed Indiana’s law of fraudulent intent and found that at least five of the eight badges of fraud were present:
First, the record shows that Husband transferred the properties to [Girlfriend] approximately one month before Wife filed for divorce and when the parties' relationship had already begun to deteriorate. Second, the transfer of these properties greatly reduced the marital estate because the rental properties were substantially all of the family's assets. Third, there is evidence that Husband would retain some benefits over the rental properties. That is, Husband, [Brother], and [Girlfriend] would continue to renovate and manage the properties and collect rent from tenants. Fourth, Husband transferred the properties to [Girlfriend] for little or no consideration. That is, he transferred all the properties to [Girlfriend] for ten dollars. Finally, the transfer of these properties from Husband to [Girlfriend] was effectively a transfer between family members. Although [Brother] and [Girlfriend] have never been married, they have been in a relationship for over thirty years and have three children together. All of this together constitutes a pattern of fraudulent intent.
- “Debtor” In Alleged Fraudulent Transfer Must Be Liable For Creditor’s Underlying Claim
- Judgment Creditor Entitled To Recover Entire Value Of Real Estate Fraudulently Conveyed
- 22 Houses Evaporate But Judge Rejects Creditor's Indiana Fraudulent Transfer Claims
Part of my practice is to advise parties in connection with post-judgment collection matters. If you need assistance with a similar matter, please call me at 317-639-6151 or email me at firstname.lastname@example.org. 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.
This article in The Indiana Lawyer predicts a "flood" of COVID-related bankruptcy filings and quotes a number of local BK lawyers. That flood, which many predicted in March and April would have occurred by now, has not happened - yet. But, conventional wisdom suggests it's not a matter of if, but when. I tend to agree.
The same goes for COVID-related foreclosure filings, both residential and commercial. Of course the consumer foreclosure moratorium prevented and, in many cases, continues to prevent a tidal wave of residential cases. The interesting thing is that, at least from what I've seen, commercial foreclosures in Indiana have not spiked at all.
My understanding is that, if a commercial flood, is coming, it will start with hotels - unless Congress provides some kind of bail out. Having said that, with the stimulus money, combined with the general attitude of forbearing instead of foreclosing, it's difficult to predict when, or even if, a commercial foreclosure tsunami is near.
In Zelman v. Capital One, 133 N.E.3d 244 (Ind. Ct. App. 2019), the Indiana Court of Appeals reversed the trial court's summary judgment in favor of a credit card lender based upon the lender's failure to "lay a proper foundation to authenticate the Customer Agreement or credit card statements as business records admissible under Evidence Rule 803(6)'s hearsay exception."
Respectfully, I don't entirely agree with the Court's analyis, but admittedly I don't handle credit card collection cases. Nevertheless, the opinion is notable for parties and their counsel who seek summary judgments in debt collection cases. The Court held:
To support its motion for summary judgment, Bank was required to show that Zelman had opened a credit card account with Bank and that Zelman owed Bank the amount alleged in the complaint.
... the Affidavit of Debt did not lay a proper foundation to authenticate the Customer Agreement or credit card statements as business records admissible under [Rule 806].
For the technical details and related law upon which the Court made its decision, please review the opinion. Key problems surrounded the fact that the affiant was an employee of a third party that had acquired the debt and had not personally examined all of the business records related to the loan. Again, bear in mind this was not a mortgage foreclosure action or a suit based upon a promissory note.
Zelman is similar to Holmes v. National Collegiate Student Loan Trust, 94 N.E.3d 722 (Ind. Ct. App. 2018) , which dealt with school loan debt and which I discussed on 1/13/19.
Here are some other posts related to Indiana affidavits and summary judgment procedure:
- Must Indiana Affidavits Be Signed Under The Penalties Of Perjury?
- Conclusory Statements About Payment Default Doom Lender’s Motion For Summary Judgment
- Proving You’re The Holder Of The Note
I represent parties in real estate and loan-related disputes. If you need assistance with a similar matter, please call me at 317-639-6151 or email me at email@example.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.
In the past, I’ve heard things from secured lenders like: “you don’t see any exposure to our bank under the Lender Liability Act, do you?” or “surely the borrower won’t countersue us under Indiana’s lender liability statute.” People are sometimes surprised to learn that the so-called “Indiana Lender Liability Act” (“ILLA”), Ind. Code § 26-2-9, doesn’t list claims or causes of action that can be asserted against a lender. The ILLA primarily deals with the issue of evidence, specifically the inadmissibility of oral testimony about the terms of a loan. (Interestingly, the statute’s official title in the Indiana Code is “Credit Agreements.”) The definitive ILLA case is Sees v. Bank One, 839 N.E.2d 154 (Ind. 2005) (Sees.pdf). Somewhat amusingly, the Indiana Supreme Court itself struggled with the label:
In the first reported opinion discussing the statute since its 2002 re-codification, the Court of Appeals refers to it as the “Indiana Lender Liability Act.” . . . Sees refers to the statute alternatively as the “Indiana Lender Liability Act” and the “Credit Agreement Statute.” . . . Bank One refers to the statute as the “Credit Agreement Statute of Frauds.” . . . We agree with the Court of Appeals’ designation and thus refer to the statute as the Indiana Lender Liability Act.
Lender liability, generally. It is true that “lender liability” is a common phrase used to describe a borrower’s potential claims against a lender due to the conduct of the lender with regard to a particular loan relationship. Capello & Komoroke, Lender Liability Litigation: Undue Control, 42 Am. Jur. Trials 419 § 1 (2005). This body of law comprises a wide variety of both statutory and common law causes of action. One of many examples is the Fair Debt Collection Practices Act. There are, in fact, a multitude of federal and state laws that could form the basis of a lawsuit against a lender. The ILLA is not one of those laws, however.
The ILLA rule. The essence of the ILLA can be found in section 4, which provides that “a [borrower] may assert a claim . . . arising from a [loan document] only if the [loan document] . . .  is in writing;  sets forth all material terms and conditions of the [loan document] . . . ; and  is signed by the [lender] and the [borrower].” The ILLA effectively protects lenders from certain kinds of liability. That’s why the label “Lender Liability Act” seemingly is inconsistent with the law’s true nature.
Statute of frauds. Sees provides an excellent discussion of the statute, its history and its policies. In a broad sense, the legislative intent behind the statute is to protect lenders from lawsuits by borrowers (or guarantors) asserting fraudulent claims. Hence the “in writing” requirement in the ILLA. As such, the ILLA actually is a “statute of frauds,” which at its core is a procedural law about the exclusion of certain testimony of a witness at trial. Black’s Law Dictionary defines “statute of frauds” as “. . . no suit or action shall be maintained on certain classes of contracts or engagements unless there shall be a note or memorandum thereof in writing signed by the party to be charged . . ..” As noted by Judge Posner in Consolidated Services, Inc. v. KeyBank, 185 F.3d 817 (7th Cir. 1999):
[T]he principle purpose of the statute of frauds is evidentiary. It is to protect contracting or negotiating parties from the vagaries of the trial process. A trier of fact may easily be fooled by plausible but false testimony to the existence of an oral contract. This is not because judgment or jurors are particularly gullible, but because it is extremely difficult to determine whether a witness is testifying truthfully. Much pious lore to the contrary notwithstanding, ‘demeanor’ is an unreliable guide to truthfulness.
Be a wise guy. Next time someone asks you whether your commercial lending institution may have exposure to a lawsuit or a counterclaim based on Indiana’s Lender Liability Act, you can explain to them that the ILLA does not really articulate any theories of liability. Rather, the ILLA limits breach of contract actions to the terms of the loan that are memorialized. Again, this is not to say that there is no “lender liability” in Indiana. The generic term “lender liability” is proper when referring to the many possible claims of wrongdoing that exist. In short, lenders can be exposed to liability, but they shouldn’t be held liable in Indiana for any alleged violations of loan terms unless such terms (promises or duties) are in writing, signed by all parties.
Part of my practice includes defending banks in lawsuits. If you need assistance with a similar matter, please call me at 317-639-6151 or email me at firstname.lastname@example.org. 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.
The COVID-related impact upon Indiana sheriff's sales has had a few layers:
1. The first involved Governor Holcomb's moratorium on residential foreclosure activity. Click here for more on that subject. That ended July 31, 2020, and some sheriff’s sales occurred in August. For example, after cancelling its monthly sales from March through July, the Marion County (Indianapolis) civil sheriff held a sale on August 21st. Click here for more information on Marion County sales.
2. The second layer surrounded the federal mandate. Despite the expiration of the state suspension, there still is a moratorium on sales of (and, in fact, foreclosure actions involving) FHA-insured mortgages. This freeze extends to year-end. Click here for a press release and here for my 4/6/20 post about the CARES Act.
3. The third is that neither the federal nor the state orders impacted commercial (business) foreclosures or sales. Nevertheless, it does not appear that any commercial foreclosure sales occurred this Spring or early Summer. I could be wrong, but as a practical matter, my understanding is that sheriff’s sales simply stopped, even for commercial real estate.
4. The fourth and more subtle layer of COVID's impact upon Indiana sheriff’s sales relates, not to economic relief, but to safety and social distancing. (This might explain why no commercial sales happened.) As I’ve written here previously: local rules, customs, and practices control county sheriff’s sales. Thus, there is a certain degree of latitude that each county has, or is taking, with respect to whether to proceed with sales during the pandemic. A quick survey of the websites of SRI and Lieberman, two private companies that hold sheriff’s sales for select counties, shows that several sheriff’s offices in Indiana still are not having sales, despite the termination of the state and federal moratoria. My understanding is that these continued delays are based upon public health reasons and/or a county sheriff's interpretation of local social distincing guidelines.
The upshot is to contact the county sheriff’s office, either by phone or via the internet, to determine exactly what’s going on with your particular case as the COVID situation continues to unfold.
I represent parties in connection with foreclosure cases and sheriff’s sales. If you need assistance with a similar matter, please call me at 317-639-6151 or email me at email@example.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.