Lesson. The devil’s in the details when looking at fraudulent intent, and various statutory remedies are available in Indiana fraudulent transfer actions.
Legal issue. Whether Defendant’s conversion of cash into real estate, instead of using the cash to pay Plaintiff’s prior money judgment against Defendant, constituted a fraudulent transfer.
Vital facts. Plaintiff brought a fraudulent transfer claim against Defendant on the basis that Defendant transferred her cash assets into the purchase of a house. Plaintiff alleged that the purpose of transaction was for Defendant to avoid paying Plaintiff’s judgment.
Procedural history. The trial court entered judgment for Defendant after concluding that Plaintiff failed to meet his burden of establishing an intent to defraud.
Key rules. Indiana Code 32-18-2-14(a)(1) states that a fraudulent transfer, or a fraudulent obligation incurred, may be subject to Indiana's Uniform Fraudulent Transfer Act if it is made “with actual intent to hinder, delay, or defraud any creditor of the debtor….”
I.C. 32-18-2-14(a)(2) outlines a list of nine nonexhaustive factors that courts may consider when determining whether a pattern of actual intent under subsection (1) exists. Indiana case law identifies three more factors: “any transaction conducted in a manner differing from customary methods; a transaction whereby the debtor retains benefits over the transferred property; and a transfer of property between family members."
Holding. The Court of Appeals reversed the trial court and held that the evidence demonstrated Defendant’s actual intent to hinder, delay, or defraud Plaintiff’s right to payment under the judgment. The Court remanded the case to the trial court to determine the appropriate remedy.
Policy/rationale. As I’ve said here before, these types of cases are highly fact sensitive, and Holland is no different. Please read the opinion to learn more about what happened. The Court walked through all of the pertinent factors - some of which actually weighed in favor of Defendant. It would seem this case was a close call. A key piece of evidence seemed to be Defendant’s admission “that converting the cash into equity in the [real estate] placed it beyond the reach of [Plaintiff] to collect it.” In the end, the Court accepted Plaintiff’s theory that, rather than pay Plaintiff with money Defendant had in hand, Defendant bought a 200k house and claimed it as a homestead.
One of the reasons this case caught my eye was Holland’s discussion of Plaintiff’s remedy. First, the Court stated that “the immediate issuance of an injunction that prohibits [Defendant] from transferring the [real estate] is appropriate while the trial court on remand determines [Plaintiff’s] remedy. The Court then deferred to the trial court to rule in its discretion what the ultimate remedy should be under I.C. 32-18-2-17:
(a) In an action for relief against a transfer or an obligation under this chapter, a creditor . . . may obtain any of the following:
(1) Avoidance of the transfer or obligation to the extent necessary to satisfy the creditor's claim.
(2) An attachment or other provisional remedy against the asset transferred or other property of the transferee in accordance with the procedure prescribed by IC 34-25-2-1 or any other applicable statute providing for attachment or other provisional remedy against debtors generally.
(3) Subject to applicable principles of equity and in accordance with applicable rules of civil procedure, any of the following:
(A) An injunction against further disposition by the debtor or a transferee, or both, of the asset transferred, its proceeds, or of other property.
(B) Appointment of a receiver to take charge of the asset transferred or of the property of the transferee.
(C) Any other relief the circumstances require.
(b) If a creditor has obtained a judgment on a claim against the debtor, the creditor, if the court orders, may levy execution on the asset transferred or its proceeds.
- Judgment Creditor Entitled To Recover Entire Value Of Real Estate Fraudulently Conveyed
- Factual Questions Remain In Indiana Fraudulent Transfer Case
Part of my practice involves post-judgment collection-related 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.